Rocky Brands, Inc. Announces Fourth Quarter and Fiscal 2012 Results

Rocky Brands, Inc. Announces Fourth Quarter and Fiscal 2012 Results

Funded Debt Decreased 33% to $23.5 Million

Company Announces New Order to Fulfill a Contract to the U.S. Military


NELSONVILLE, Ohio--(BUSINESS WIRE)-- Rocky Brands, Inc. (NAS: RCKY) today announced financial results for its fourth quarter and fiscal year ended December 31, 2012.

Fourth Quarter 2012 Income and Sales

The Company reported fourth quarter net income of $2.5 million, or $0.34 per diluted share compared with net income of $0.3 million, or $0.04 per diluted share in the fourth quarter of 2011. The fourth quarter of 2011 included a one-time, non-operational charge of $3.7 million, net of tax, associated with the termination of its defined benefit pension plan. Excluding the charge, fourth quarter 2011 net income was $3.9 million, or $0.52 per diluted share. (See below for a reconciliation of fourth quarter 2011 income per diluted share on a GAAP basis to a non-GAAP basis). Fourth quarter 2012 net sales were $58.0 million versus net sales of $64.0 million a year ago.

Fiscal Year 2012 Income and Sales

The Company reported net income of $8.9 million, or $1.18 per diluted share, for fiscal year 2012, compared with net income of $8.3 million, or $1.11 per diluted share, for fiscal 2011. Excluding the aforementioned charge, fiscal year 2011 net income was $12.0 million, or $1.60 per diluted share. (See below for a reconciliation of fiscal year 2011 income per diluted share on a GAAP basis to a non-GAAP basis). For fiscal year 2012, net sales were $228.3 million versus net sales of $239.6 million in fiscal year 2011.

Military Contract

The Company also announced it has received an order to fulfill a contract to the U.S. Military to produce "Hot Weather" combat boots. The first year of the contract includes a minimum purchase amount of $3.0 million and a maximum of $15.0 million. Shipment of the boots is expected to begin in March 2013. The contract includes an option for four additional years with the same terms.

David Sharp, President and Chief Executive Officer, commented, "Our fourth quarter performance reflects the challenges facing the more weather sensitive areas of our business as a second consecutive winter of mild temperatures tapered demand for insulated, waterproof boots. In an effort to mitigate the impact of weather and further diversify our operations, we've been developing new product lines with good success evidenced by the increase in Durango lifestyle and western sales which were both up 44% in 2012. Based on the momentum of these two categories, combined with other growth vehicles, including a private label program with one of our largest wholesale accounts and a recently awarded military contract, we believe we are well positioned to generate solid top-line expansion in the first half of 2013. Looking further out, we remain confident that the adjustments we're making to the business will allow us to grow sales annually on a consistent basis and leverage costs to drive improved profitability and greater shareholder value."

Fourth Quarter Review

Net sales for the fourth quarter were $58.0 million compared to $64.0 million a year ago. Wholesale sales for the fourth quarter were $46.0 million compared to $51.7 million for the same period in 2011. Retail sales for the fourth quarter increased to $12.0 million compared to $11.8 million for the same period last year. There were no military segment sales for the fourth quarter compared to $0.4 million in the fourth quarter of 2011.

Gross margin in the fourth quarter of 2012 was $20.7 million, or 35.7% of sales, compared to $22.5 million, or 35.1% of sales, for the same period last year. The 60 basis point increase was driven by higher retail gross margins versus the year ago period.

Selling, general and administrative (SG&A) expenses were $16.8 million, or 28.9% of net sales, for the fourth quarter of 2012 compared to $16.7 million, or 26.2% of net sales, a year ago.

Income from operations was $3.9 million, or 6.8% of net sales, compared to $5.7 million, or 8.9% of net sales, excluding the aforementioned charge associated with the termination of the defined benefit pension plan, in the prior year period.

Interest expense was $0.2 million for the fourth quarter of 2012, versus $0.2 million for the same period last year.

The Company's funded debt decreased 33.0% to $23.5 million at December 31, 2012 versus $35.0 million at December 31, 2011.

Inventory increased 3.3% to $67.2 million at December 31, 2012 compared with $65.0 million on the same date a year ago.

Reconciliation of Income per Diluted Share on a GAAP Basis to a Non-GAAP Basis

Three Months Ended

Year Ended

December 31, 2011

December 31, 2011

GAAP

Pension Plan

Non-GAAP

GAAP

Pension Plan

Non-GAAP

Basis

Termination

Basis

Basis

Termination

Basis

Income before income taxes

$

276,881

$

5,280,998

$

5,557,879

$

12,034,464

$

5,280,998

$

17,315,462

Income tax expense/(benefit)

3,569

(1,628,495

)

1,632,064

3,727,569

(1,628,495

)

5,356,064

Net income

$

273,312

$

3,652,503

$

3,925,815

$

8,306,895

$

3,652,503

$

11,959,398

Income per share - Diluted

$

0.04

$

0.49

$

0.52

$

1.11

$

0.49

$

1.60

Conference Call Information

The Company's conference call to review fourth quarter and fiscal 2012 results will be broadcast live over the internet today, Thursday, February 21, 2013 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® and Lehigh® and the licensed brands Michelin® and Mossy Oak®. Rocky Brands is proud to supply footwear to the United States military. For more information, visit www.RockyBrands.com.

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 the expected shipment of boots under the contract with the U.S. Military (paragraph 4) and sales growth and profitability (paragraph 5). 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 reports on Form 10-Q for the quarters ended March 31, 2012 (filed April 25, 2012), June 30, 2012 (filed July 27, 2012 and amended August 6, 2012), and September 30, 2012 (filed and amended on October 31, 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

December 31, 2012

December 31, 2011

Unaudited

Audited

ASSETS:

CURRENT ASSETS:

Cash and cash equivalents

$

4,022,579

$

3,650,291

Trade receivables - net

44,555,057

45,008,793

Other receivables

575,984

946,686

Inventories

67,196,245

65,019,048

Income tax receivable

-

1,164,664

Deferred income taxes

1,252,030

1,154,040

Prepaid expenses

2,127,726

2,561,941

Total current assets

119,729,621

119,505,463

FIXED ASSETS - net

24,252,465

23,557,102

IDENTIFIED INTANGIBLES

30,498,802

30,493,107

OTHER ASSETS

363,527

510,293

TOTAL ASSETS

$

174,844,415

$

174,065,965

LIABILITIES AND SHAREHOLDERS' EQUITY:

CURRENT LIABILITIES:

Accounts payable

$

9,930,518

$

5,696,363

Accrued expenses:

Taxes - other

704,064

609,992

Income tax payable

335,210

-

Other

3,324,668

4,624,167

Total current liabilities

14,294,460

10,930,522

LONG TERM DEBT

23,461,340

35,000,000

DEFERRED INCOME TAXES

11,148,333

10,987,395

DEFERRED LIABILITIES

303,406

488,437

TOTAL LIABILITIES

49,207,539

57,406,354

SHAREHOLDERS' EQUITY:

Common stock, no par value;

25,000,000 shares authorized; issued and outstanding December

31, 2012 - 7,503,568; December 31, 2011 - 7,489,995

69,694,770

69,572,270

Retained earnings

55,942,106

47,087,341

Total shareholders' equity

125,636,876

116,659,611

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

174,844,415

$

174,065,965

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Three Months Ended

Year Ended

December 31,

December 31,

2012

2011

2012

2011

Unaudited

Unaudited

Unaudited

Audited

NET SALES

$

58,043,987

$

63,989,643

$

228,317,663

$

239,599,096

COST OF GOODS SOLD

37,313,685

41,532,318

148,031,073

151,668,341

GROSS MARGIN

20,730,302

22,457,325

80,286,590

87,930,755

OPERATING EXPENSES

Selling, general and administrative expenses

16,799,780

16,744,251

66,679,761

69,852,696

Pension termination charges

-

5,280,998

-

5,280,998

Total operating expenses

16,799,780

22,025,249

66,679,761

75,133,694

INCOME FROM OPERATIONS

3,930,522

432,076

13,606,829

12,797,061

OTHER INCOME AND (EXPENSES):

Interest expense

(183,671

)

(218,667

)

(650,873

)

(979,511

)

Other - net

(11,575

)

63,472

131,463

216,914

Total other - net

(195,246

)

(155,195

)

(519,410

)

(762,597

)

INCOME BEFORE INCOME TAXES

3,735,276

276,881

13,087,419

12,034,464

INCOME TAX EXPENSE

1,187,199

3,569

4,232,654

3,727,569

NET INCOME

$

2,548,077

$

273,312

$

8,854,765

$

8,306,895

INCOME PER SHARE

Basic

$

0.34

$

0.04

$

1.18

$

1.11

Diluted

$

0.34

$

0.04

$

1.18

$

1.11

WEIGHTED AVERAGE NUMBER OF

COMMON SHARES OUTSTANDING

Basic

7,503,568

7,489,995

7,503,494

7,486,655

Diluted

7,503,568

7,489,995

7,503,494

7,487,196



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