Rocky Brands, Inc. Announces Second Quarter Fiscal 2011 Results
Second Quarter Diluted EPS Increased 275% to $0.30 on 14% More Shares Outstanding
Second Quarter Wholesale Sales Increased 6.0% to $40.8 Million
Gross Margin Increased 480 Basis Points to 39.4%
NELSONVILLE, Ohio--(BUSINESS WIRE)-- Rocky Brands, Inc. (Nasdaq: RCKY) today announced financial results for its second quarter ended June 30, 2011.
Second quarter 2011 net income improved to $2.3 million or $0.30 per diluted share versus net income of $0.5 million, or $0.08 per diluted share in the year ago period. Excluding one-time charges of $0.6 million, net of tax, associated with the early repayment of a portion of the Company's senior term loan, second quarter 2010 net income was $1.1 million, or $0.17 per diluted share. The earnings per share improvement was attained even with 933,000, or 14.2% more weighted average common shares outstanding as a result of the Company's follow-on common stock offering in May 2010. Gross margin improved 480 basis points to 39.4% compared to 34.6% last year. Net sales were $52.3 million for the second quarter versus net sales of $55.2 million in the second quarter of 2010, due to reduced sales under military contracts.
David Sharp, President and Chief Executive Officer, commented, "We are very pleased to report our eighth consecutive quarter of improved profitability on a year-over-year basis. The increase in our bottom line over the past 24 months has primarily been achieved through increased operating efficiencies, higher gross margins and more recently reduction in interest expense. As a result of our stronger balance sheet and the restructuring of our retail division behind us, we are positioned to drive future earnings gains through top-line growth in our wholesale and retail segments. We continue to be confident that our portfolio of brands has the potential to expand into other categories and new markets internationally and we are pursuing strategies to capitalize on these opportunities. We will also look to take further advantage of our internal manufacturing capabilities to improve in-stock positions on popular styles, increase our speed to market, and reduce costs."
Second Quarter Review
Net sales for the second quarter were $52.3 million compared to $55.2 million a year ago. Wholesale sales for the second quarter increased 6.0% to $40.8 million compared to $38.5 million for the same period in 2010. Retail sales for the second quarter were $10.9 million compared to $11.0 million for the same period last year. Military segment sales for the second quarter decreased $5.1 million to $0.6 million compared to $5.7 million in the same period in 2010.
Gross margin in the second quarter of 2011 was $20.6 million, or 39.4% of sales compared to $19.1 million, or 34.6% for the same period last year. The 480 basis point improvement in gross margin as a percentage of sales was primarily attributable to the decrease in sales in our military segment which carry lower gross margins than our retail and wholesale segments coupled with higher average selling prices. In addition, we benefited from a 290 basis point increase in our wholesale segment and a 250 basis point increase in our retail segment driven by higher average selling prices and improved manufacturing efficiencies.
Selling, general and administrative (SG&A) expenses were $16.9 million or 32.2% of sales, for the second quarter of 2011 compared to $16.2 million, or 29.3% of sales a year ago. The increase was primarily attributable to an increase in planned advertising expenses.
Income from operations was $3.8 million, or 7.2% of net sales, compared to 2.9 million, or 5.3% of net sales, in the prior year period.
Interest expense decreased $1.8 million to $0.3 million for the second quarter of 2011 versus $2.1 million for the same period last year which included one-time fees of approximately $0.9 million, pre-tax, associated with the early repayment of a portion of the Company's senior term loan. Excluding the one-time fees from a year ago, the decrease is attributable to lower interest rates as the result of the new $70 million revolving credit facility signed in October 2010.
The Company's funded debt was $39.5 million at June 30, 2011 versus $36.9 million at June 30, 2010.
Inventory increased 20.4% to $74.4 million at June 30, 2011 compared with $61.8 million on the same date a year ago. The increase in inventory was primarily the result of an increase in cost per unit.
Conference Call Information
The Company's conference call to review second quarter fiscal 2011 results will be broadcast live over the internet today, Tuesday, July 26, 2011 at 4:30 pm Eastern Time. The broadcast will be hosted at 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(R), Georgia Boot(R), Durango(R), Lehigh(R), and the licensed brands Michelin(R) and Mossy Oak(R).
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
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 future growth opportunities and internal manufacturing capabilities (paragraph 3). 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, 2010 (filed March 2, 2011) and the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2011 (filed May 3, 2011). 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, 2011 December 31, 2010 June 30, 2010
Unaudited Audited Unaudited
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 3,194,944 $ 4,362,531 $ 3,166,143
Trade receivables - net 41,965,418 47,593,807 40,782,470
Other receivables 770,106 911,103 1,182,335
Inventories 74,391,866 58,852,556 61,811,667
Deferred income taxes 1,218,101 1,218,101 1,475,695
Prepaid expenses 2,783,290 1,793,852 2,202,381
Total current 124,323,725 114,731,950 110,620,691
assets
FIXED ASSETS - net 23,501,917 22,129,282 22,436,535
IDENTIFIED INTANGIBLES 30,504,268 30,495,485 30,512,822
OTHER ASSETS 931,133 1,222,712 2,112,475
TOTAL ASSETS $ 179,261,043 $ 168,579,429 $ 165,682,523
LIABILITIES AND
SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 13,000,426 $ 9,024,851 $ 13,415,750
Current maturities - long 6,865 487,480 528,434
term debt
Accrued expenses:
Taxes - other 714,528 590,217 535,101
Income tax payable 836,171 422,229 -
Other 4,194,173 6,050,964 4,931,764
Total current 18,752,163 16,575,741 19,411,049
liabilities
LONG TERM DEBT - less 39,517,005 34,608,338 36,370,863
current maturities
DEFERRED INCOME TAXES 9,374,685 9,374,685 9,071,639
DEFERRED LIABILITIES 3,151,262 3,017,107 3,875,048
TOTAL LIABILITIES 70,795,115 63,575,871 68,728,599
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares
authorized; issued and
outstanding June 30, 2011
- 7,489,995; 69,546,028 69,052,101 68,931,586
December 31, 2010 -
7,426,787; June 30,
2010 - 7,406,787
Accumulated other (2,681,862 ) (2,828,989 ) (3,037,242 )
comprehensive loss
Retained earnings 41,601,762 38,780,446 31,059,580
Total shareholders' 108,465,928 105,003,558 96,953,924
equity
TOTAL LIABILITIES AND $ 179,261,043 $ 168,579,429 $ 165,682,523
SHAREHOLDERS' EQUITY
Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended Six Months Ended
June 30, June 30,
2011 2010 2011 2010
NET SALES $ 52,282,632 $ 55,223,054 $ 104,588,907 $ 111,302,040
COST OF GOODS 31,665,304 36,123,970 64,705,634 73,446,107
SOLD
GROSS MARGIN 20,617,328 19,099,084 39,883,273 37,855,933
SELLING,
GENERAL AND
ADMINISTRATIVE 16,853,029 16,163,354 35,082,380 34,188,041
EXPENSES
INCOME FROM 3,764,299 2,935,730 4,800,893 3,667,892
OPERATIONS
OTHER INCOME
AND (EXPENSES):
Interest (292,454 ) (2,121,552 ) (507,986 ) (3,766,143 )
expense
Other - net 34,855 3,432 47,409 40,117
Total other - (257,599 ) (2,118,120 ) (460,577 ) (3,726,026 )
net
INCOME/(LOSS)
BEFORE INCOME 3,506,700 817,610 4,340,316 (58,134 )
TAXES
INCOME TAX
EXPENSE/ 1,227,000 294,000 1,519,000 (21,000 )
(BENEFIT)
NET INCOME/ $ 2,279,700 $ 523,610 $ 2,821,316 $ (37,134 )
(LOSS)
INCOME/(LOSS)
PER SHARE
Basic $ 0.30 $ 0.08 $ 0.38 $ (0.01 )
Diluted $ 0.30 $ 0.08 $ 0.38 $ (0.01 )
WEIGHTED
AVERAGE NUMBER
OF
COMMON SHARES OUTSTANDING
Basic 7,489,995 6,535,812 7,483,259 6,072,045
Diluted 7,489,995 6,557,289 7,483,259 6,072,045
Source: Rocky Brands, Inc.
Released July 26, 2011
