Rocky Brands, Inc. Announces Second Quarter 2012 Results

NELSONVILLE, Ohio--(BUSINESS WIRE)-- Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial results for its second quarter ended June 30, 2012.

Second quarter 2012 net income was $0.2 million compared with $2.3 million in the second quarter of 2011 and diluted earnings per share were $0.03 compared to $0.30 during the same period last year. Second quarter net sales were $44.4 million versus net sales of $52.3 million a year ago.

On June 29, 2012, severe storms knocked out power to more than 660,000 homes and businesses in Ohio including Rocky Brand’s distribution center in Logan, OH. As a result of this power outage, Rocky Brands’ shipping capabilities were temporarily suspended which caused approximately $2.5 million of shipments to move from the second quarter into the third quarter. This had a negative impact of approximately $0.06 per share in the second quarter of 2012.

David Sharp, President and Chief Executive Officer, commented, “We faced a significant challenge at the end of the quarter with the shutdown of our distribution center. Our teams did a great job to ensure that all orders were shipped as soon as possible once power was restored early in July. Excluding the impact from this disruption, our business for the most part performed in-line with expectations however we did experience some softness in our hunting category. We believe this was primarily attributable to retailers buying closer to season and operating with leaner inventory positions compared with past years. Our work, western, and commercial military product lines continue to gain traction with the key retailers in their respective channels as new product introductions are resonating with our target consumers. Equally important, our balance sheet is in good shape with clean inventory levels and funded debt down 24% from a year ago.”

Second Quarter Review

Wholesale sales for the second quarter were $34.7 million compared to $40.8 million for the same period in 2011. The decrease is primarily the result of a reduction in sales in the hunting category as well as the temporary impact from the aforementioned power outage. The decrease in the hunting category is due to retailers buying closer to the season. Retail sales for the second quarter were $9.1 million compared to $10.9 million for the same period last year. Military segment sales for the second quarter were $0.6 million for both the second quarter of 2012 and 2011.

Gross margin in the second quarter of 2012 was $15.4 million, or 34.6% of sales compared to $20.6 million, or 39.4% for the same period last year. The decrease in gross margin was primarily due to an increase in product costs as a result of manufacturing variances in the Company’s production facility.

Selling, general and administrative (SG&A) expenses decreased 11.6% to $14.9 million or 33.5% of net sales, for the second quarter of 2012 compared to $16.9 million, or 32.2% of net sales a year ago. The $2.0 million decrease is primarily due to lower compensation expense, operating costs of our retail business, and lower advertising expenses.

Income from operations was $0.5 million, or 1.0% of net sales, compared to $3.8 million, or 7.2% of net sales, in the prior year period.

Interest expense decreased to $0.1 million for the second quarter of 2012 versus $0.3 million due to lower borrowings versus the same period a year ago.

The Company’s funded debt decreased 24.3% or $9.6 million to $29.9 million at June 30, 2012 versus $39.5 million at June 30, 2011.

Inventory at June 30, 2012 was $74.0 million compared with $74.4 million on the same date a year ago. On a year over year basis footwear units decreased 13.5%.

Conference Call Information

The Company’s conference call to review second quarter fiscal 2012 results will be broadcast live over the internet today, Tuesday, July 24, 2012 at 4:30 pm Eastern Time. The broadcast will be hosted at http://www.rockybrands.com.

About Rocky Brands, Inc.

Rocky Brands, Inc. is a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including Rocky®, Georgia Boot®, Durango®, Lehigh®, and the licensed brands Michelin® and Mossy Oak®.

Safe Harbor Language

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding intent, beliefs, expectations, projections, forecasts, and plans of the Company and its management, and include statements in this press release regarding new product introductions (paragraph 4). These forward-looking statements involve numerous risks and uncertainties, including, without limitation, the various risks inherent in the Company’s business as set forth in periodic reports filed with the Securities and Exchange Commission, including the Company’s annual report on Form 10-K for the year ended December 31, 2011 (filed February 28, 2012) and the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2012 (filed April 25, 2012). One or more of these factors have affected historical results, and could in the future affect the Company’s businesses and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the Company, or any other person should not regard the inclusion of such information as a representation that the objectives and plans of the Company will be achieved. All forward-looking statements made in this press release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.

               

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 
June 30, 2012 December 31, 2011 June 30, 2011
Unaudited Audited Unaudited
ASSETS:
 
CURRENT ASSETS:
Cash and cash equivalents $ 1,850,905 $ 3,650,291 $ 3,194,944
Trade receivables – net 36,729,487 45,008,793 41,965,418
Other receivables 760,596 946,686 770,106
Inventories 74,048,921 65,019,048 74,391,866
Income tax receivable 933,293 1,164,664 -
Deferred income taxes 1,154,040 1,154,040 1,218,101
Prepaid expenses   2,240,461   2,561,941   2,783,290  
Total current assets 117,717,703 119,505,463 124,323,725
FIXED ASSETS – net 24,822,919 23,557,102 23,501,917
IDENTIFIED INTANGIBLES 30,490,861 30,493,107 30,504,268
OTHER ASSETS   436,525   510,293   931,133  
TOTAL ASSETS $ 173,468,008 $ 174,065,965 $ 179,261,043  
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
 
CURRENT LIABILITIES:
Accounts payable $ 10,740,705 $ 5,696,363 $ 13,000,426
Current maturities – long term debt - - 6,865
Accrued expenses:
Taxes - other 595,214 609,992 714,528
Income tax payable - - 836,171
Other   3,024,938   4,624,167   4,194,173  
Total current liabilities 14,360,857 10,930,522 18,752,163
LONG TERM DEBT – less current maturities 29,909,957 35,000,000 39,517,005
DEFERRED INCOME TAXES 10,987,395 10,987,395 9,374,685
DEFERRED LIABILITIES   488,437   488,437   3,151,262  
TOTAL LIABILITIES 55,746,646 57,406,354 70,795,115
 
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and outstanding June 30, 2012 - 7,503,568; December 31, 2011 - 7,489,995; June 30, 2011 - 7,489,995

69,694,770

69,572,270

69,546,028

 
Accumulated other comprehensive loss - - (2,681,862 )
Retained earnings   48,026,592   47,087,341   41,601,762  
 
Total shareholders' equity   117,721,362   116,659,611   108,465,928  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 173,468,008 $ 174,065,965 $ 179,261,043  
 
               

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

 
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012     2011
NET SALES $ 44,408,358 $ 52,282,632 $ 97,734,276 $ 104,588,907
 
COST OF GOODS SOLD   29,056,731     31,665,304     64,360,568     64,705,634  
 
GROSS MARGIN 15,351,627 20,617,328 33,373,708 39,883,273
 
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES   14,893,727     16,853,029     31,635,785     35,082,380  
 
INCOME FROM OPERATIONS 457,900 3,764,299 1,737,923 4,800,893
 
OTHER INCOME AND (EXPENSES):
Interest expense (130,606 ) (292,454 ) (274,953 ) (507,986 )
Other – net   13,270     34,855     4,281     47,409  
Total other - net (117,336 ) (257,599 ) (270,672 ) (460,577 )
 
INCOME BEFORE INCOME TAXES 340,564 3,506,700 1,467,251 4,340,316
 
INCOME TAX EXPENSE   122,000     1,227,000     528,000     1,519,000  
 
NET INCOME $ 218,564   $ 2,279,700   $ 939,251   $ 2,821,316  
 
INCOME PER SHARE
Basic $ 0.03 $ 0.30 $ 0.13 $ 0.38
Diluted $ 0.03 $ 0.30 $ 0.13 $ 0.38
 
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic   7,503,568     7,489,995     7,503,419     7,483,259  
Diluted   7,503,568     7,489,995     7,503,419     7,484,341  

Rocky Brands, Inc.
Jim McDonald, 740-753-1951
Chief Financial Officer
or
Investor Relations:
ICR, Inc.
Brendon Frey, 203-682-8200

Source: Rocky Brands, Inc.