Rocky Brands, Inc. Announces Third Quarter Fiscal 2008 Results
Company Reports Third Quarter Diluted Earnings Per Share of $0.43 Wholesale Gross Margin Increased 410 Basis Points SG&A Expenses Decreased Approximately $3.1 million Company's Funded Debt Decreased 12.4% Year-over-Year
NELSONVILLE, Ohio--(BUSINESS WIRE)--
Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial results for its third quarter ended September 30, 2008.
For the third quarter of 2008, net sales were $72.5 million versus net sales of $82.3 million in the third quarter of 2007. The Company reported net income of $2.4 million, or $0.43 per diluted share versus net income of $1.1 million or $0.21 per diluted share a year ago.
Mike Brooks, Chairman and Chief Executive Officer, commented, "We are pleased with our third quarter results, particularly the significant increase in our bottom line. While the current macroeconomic conditions have created a challenging sales environment, we have continued to focus on areas of our business that we can control such as cost containment and manufacturing efficiencies. Our ability to successfully execute our strategy is reflected in the 410 basis point increase in wholesale gross margins and the $3.1 million or 12.5% reduction in our operating expenses compared with a year ago. We move ahead optimistic about our opportunity to drive improved profitability on a year-over-year basis during the fourth quarter."
Third Quarter Results
Net sales for the third quarter were $72.5 million compared to $82.3 million a year ago. Wholesale sales for the third quarter were $55.6 million compared to $64.1 million for the same period in 2007. The decline in wholesale sales is primarily attributable to supply chain disruptions combined with the difficult economic conditions. Retail sales for the third quarter were $15.3 million compared to $18.2 million for the same period in 2007. Retail sales were negatively impacted by customer decisions to close plants, reduce headcount, and defer safety shoe purchases as the result of the challenging economy. Military segment sales for the third quarter were $1.6 million, versus no comparable sales in the same period in 2007.
Gross margin in the third quarter was $27.1 million, or 37.4% of sales, compared to $29.3 million or 35.6% of sales, for the same period last year. Wholesale gross margin for the third quarter was $19.7 million, or 35.4% of net sales, compared to $20.0 million, or 31.3% of net sales, in the same period last year. The 410 basis point increase reflects an increase in sales price per unit, as well as a decrease in manufacturing costs resulting from increased operating efficiencies. Retail gross margin for the third quarter was $7.3 million, or 47.5% of net sales, compared to $9.2 million, or 50.8% of net sales, for the same period in 2007. Military gross margin for the third quarter was $0.1 million, or 8.2% of net sales.
Selling, general and administrative (SG&A) expenses decreased 12.5% or $3.1 million to $22.0 million, or 30.3% of sales, for the third quarter of 2008 compared to $25.1 million, or 30.5% of sales, a year ago. The decrease in SG&A expenses is primarily the result of reductions in compensation, distribution and advertising expenses.
Income from operations increased 200 basis points to $5.1 million or 7.1% of net sales compared to $4.2 million, or 5.1% of net sales, in the prior year.
Income tax expense for the third quarter included a $0.6 million benefit compared to a $0.3 million benefit in the same period last year.
Funded Debt and Interest Expense
The Company's funded debt decreased $15.2 million, or 12.4% to $107.6 million at September 30, 2008 versus $122.8 million at September 30, 2007. Interest expense decreased to $2.3 million for the third quarter of 2008 versus $2.9 million for the same period last year. The decrease in interest expense was due to reduced borrowings under the Company's line of credit as well as lower interest rates compared to the same period last year.
Inventory
Inventory decreased $1.8 million to $83.3 million at September 30, 2008 compared with $85.1 million on the same date a year ago.
Mr. Brooks concluded, "We have worked extremely hard over the past year to improve the overall efficiency of our Company and we are pleased with our recent accomplishments. Given the uncertainty in the marketplace we will continue to operate in a conservative manner and will look to capitalize on cost containment opportunities until our growth prospects improve. Importantly, we have reduced our debt levels, which has improved our balance sheet."
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 Outdoor Gear(R), Georgia Boot(R), Durango(R), Lehigh(R), and the licensed brands Dickies(R), Zumfoot(R) and Michelin(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 improved profitability (paragraph 3) and our continued conservative manner of operating (paragraph 10). 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, 2007 (filed March 6, 2008), the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2008 (filed May 1, 2008), and the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2008 (filed August 6, 2008). 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
September December 31, September
30, 2008 2007 30, 2007
Unaudited Unaudited
------------ ------------ ------------
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $4,332,477 $6,537,884 $2,707,273
Trade receivables - net 72,654,591 65,931,092 81,279,819
Other receivables 1,289,396 674,707 1,064,827
Inventories 83,320,590 75,403,664 85,081,978
Deferred income taxes 1,978,946 1,952,536 3,902,775
Income tax receivable - 719,945 2,743,633
Prepaid expenses 2,780,959 2,226,920 1,494,045
------------ ------------ ------------
Total current assets 166,356,959 153,446,748 178,274,350
FIXED ASSETS - net 24,254,455 24,484,050 25,233,363
DEFERRED PENSION ASSET - - 53,866
IDENTIFIED INTANGIBLES &
GOODWILL 36,044,132 36,509,690 61,548,322
OTHER ASSETS 1,740,079 2,284,039 2,618,442
------------ ------------ ------------
TOTAL ASSETS $228,395,625 $216,724,527 $267,728,343
============ ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY:
CURRENT LIABILITIES:
Accounts payable $14,492,182 $11,908,902 $15,514,243
Current maturities - long
term debt 464,846 324,648 318,024
Accrued expenses:
Income taxes payable 96,666 - -
Taxes - other 612,445 516,038 571,718
Other 6,980,260 5,421,083 6,150,386
------------ ------------ ------------
Total current
liabilities 22,646,399 18,170,671 22,554,371
LONG TERM DEBT - less current
maturities 107,115,967 103,220,384 122,438,442
DEFERRED INCOME TAXES 12,569,600 13,247,953 17,009,025
DEFERRED LIABILITIES 1,170,026 360,928 335,534
------------ ------------ ------------
TOTAL LIABILITIES 143,501,992 134,999,936 162,337,372
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares
authorized; issued and
outstanding September 30,
2008 - 5,508,278; December
31, 2007 - 5,488,293;
September 30, 2007 -
5,488,293 54,193,211 53,997,960 53,897,100
Accumulated other
comprehensive loss (1,462,344) (1,051,232) (916,463)
Retained earnings 32,162,766 28,777,863 52,410,334
------------ ------------ ------------
Total shareholders'
equity 84,893,633 81,724,591 105,390,971
------------ ------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $228,395,625 $216,724,527 $267,728,343
============ ============ ============
Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30,
-------------------------
2008 2007
------------ ------------
NET SALES $72,500,603 $82,308,547
COST OF GOODS SOLD 45,414,533 53,030,023
------------ ------------
GROSS MARGIN 27,086,070 29,278,524
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 21,961,032 25,108,505
------------ ------------
INCOME FROM OPERATIONS 5,125,038 4,170,019
OTHER INCOME AND (EXPENSES):
Interest expense (2,285,051) (2,943,139)
Other - net 34,254 131,365
------------ ------------
Total other - net (2,250,797) (2,811,774)
INCOME/(LOSS) BEFORE INCOME TAXES 2,874,241 1,358,245
INCOME TAX EXPENSE/(BENEFIT) 500,000 209,000
------------ ------------
NET INCOME/(LOSS) $ 2,374,241 $ 1,149,245
============ ============
NET INCOME/(LOSS) PER SHARE
Basic $ 0.43 $ 0.21
Diluted $ 0.43 $ 0.21
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic 5,508,278 5,484,923
============ ============
Diluted 5,512,514 5,594,707
============ ============
Nine Months Ended
September 30,
---------------------------
2008 2007
------------- -------------
NET SALES $193,492,740 $202,763,235
COST OF GOODS SOLD 116,060,912 123,477,571
------------- -------------
GROSS MARGIN 77,431,828 79,285,664
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 65,897,978 70,222,025
------------- -------------
INCOME FROM OPERATIONS 11,533,850 9,063,639
OTHER INCOME AND (EXPENSES):
Interest expense (7,101,237) (8,786,060)
Other - net 31,385 95,364
------------- -------------
Total other - net (7,069,852) (8,690,696)
INCOME/(LOSS) BEFORE INCOME TAXES 4,463,998 372,943
INCOME TAX EXPENSE/(BENEFIT) 1,056,000 (155,000)
------------- -------------
NET INCOME/(LOSS) $ 3,407,998 $ 527,943
============= =============
NET INCOME/(LOSS) PER SHARE
Basic $ 0.62 $ 0.10
Diluted $ 0.62 $ 0.09
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic 5,508,132 5,472,233
============= =============
Diluted 5,518,018 5,590,879
============= =============
Source: Rocky Brands, Inc.
Released October 28, 2008
