Rocky Brands, Inc. Announces Second Quarter 2013 Results

Rocky Brands, Inc. Announces Second Quarter 2013 Results

Net Sales Increased 34% to $59.4 Million

Net Income Increased to $1.8 Million from $200,000


Earnings Per Share Increased to $0.24 from $0.03

NELSONVILLE, Ohio--(BUSINESS WIRE)-- Rocky Brands, Inc. (NAS: RCKY) today announced financial results for its second quarter ended June 30, 2013.

For the second quarter of 2013, net sales increased 33.8% to $59.4 million versus net sales of $44.4 million for the second quarter of 2012. The Company reported net income of $1.8 million, or $0.24 per diluted share, for the second quarter of 2013, versus net income of $0.2 million, or $0.03 per diluted share, for the second quarter of 2012.

For the first six months of 2013, net sales increased 15.8% to $113.1 million versus net sales of $97.7 million in the first half of 2012. The Company reported net income of $2.7 million, or $0.35 per diluted share, for the first half of 2013, versus net income of $0.9 million, or $0.13 per diluted share, for the first half of 2012.

In the second quarter of 2012, severe storms knocked out power to the Company's distribution center in Logan, OH. As a result, approximately $2.5 million of sales shifted from the second quarter of 2012 into the third quarter of 2012 which had a negative impact of approximately $0.06 per share in the second quarter and in the first half of 2012.

"We had a tremendous second quarter with sales and earnings that were well ahead of plan," said David Sharp, President and Chief Executive Officer. "Our strong performance included sales gains in each of our reporting segments- Wholesale, Retail and Military. In Wholesale, it was especially gratifying to see our work and hunting categories post strong double digit sales increases after successfully navigating through a second consecutive mild winter. At the same time, Durango's momentum accelerated during the second quarter as the brand's western and lifestyle collections collectively were up 68% year over year while our commercial military business reversed recent trends to post a high single digit sales gain. In Retail, we continued to see steady progress in transitioning our Lehigh customers to our web based solution. Increased business-to-consumer e-commerce sales also contributed to the improvement in our Retail business. And our Military segment sales increased significantly in the quarter as production ramped up on our current U.S. military contract. With our top-line firing on all cylinders, we were able to drive 410 basis points of operating expense leverage and deliver earnings per share that were up eightfold from a year ago."

Second Quarter Review

Net sales for the second quarter increased 33.8% to $59.4 million compared to $44.4 million a year ago. Wholesale segment sales for the second quarter increased 32.1% to $45.8 million compared to $34.7 million for the same period in 2012 driven by strong gains in our work, hunting and western categories. Retail segment sales for the second quarter increased 7.0% to $9.8 million compared to $9.1 million for the same period last year with the increase driven by a significant gain in our business-to-consumer e-commerce sales. Military segment sales for the second quarter increased to $3.8 million compared to $0.6 million in the second quarter of 2012.

Gross margin for the second quarter of 2013 was $20.3 million, or 34.2% of sales, compared to $15.4 million, or 34.6% of sales, for the same period last year. The 40 basis point decrease in our gross margin was driven by increased military segment sales, which carry lower gross margins, partially offset by increased gross margins in our wholesale and retail segments which were up 130 basis points and 20 basis points, respectively.

Selling, general and administrative (SG&A) expenses were $17.4 million, or 29.4% of net sales, for the second quarter of 2013 compared to $14.9 million, or 33.5% of net sales, a year ago. The 410 basis point improvement in SG&A as a percent of net sales was driven by higher sales. The dollar increase in SG&A was driven by an increase in advertising expenses as well as increases in selling & distribution expenses associated with additional sales.

Income from operations was $2.9 million, or 4.8% of net sales, compared to $0.5 million, or 1.0% of net sales. The 380 basis point improvement in operating margin was driven by SG&A expense leverage on higher sales, partially offset by the decline in gross margin.

The Company's funded debt increased 5.1% to $31.4 million at June 30, 2013 versus $29.9 million at June 30, 2012. The increase is primarily due to increased working capital to support increased sales.

Inventory increased 9.6% to $81.2 million at June 30, 2013 compared with $74.0 million on the same date a year ago. The increase is primarily attributable to additional inventory to support increased sales.

Conference Call Information

The Company's conference call to review second quarter fiscal 2013 results will be broadcast live over the internet today, Tuesday, July 23, 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®, Lehigh®, and the licensed brand Michelin® Footwear.

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. 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, 2012 (filed March 4, 2013 and amended on March 5, 2013) and quarterly report on Form 10-Q for the quarter ended March 31, 2013 (filed April 25, 2013). 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, 2013

December 31, 2012

June 30, 2012

Unaudited

Audited

Unaudited

ASSETS:

CURRENT ASSETS:

Cash and cash equivalents

$

2,855,524

$

4,022,579

$

1,850,905

Trade receivables - net

46,429,928

44,555,057

36,729,487

Other receivables

496,669

575,984

760,596

Inventories

81,159,941

67,196,245

74,048,921

Income tax receivable

270,878

-

933,293

Deferred income taxes

1,252,030

1,252,030

1,154,040

Prepaid expenses

2,862,360

2,127,726

2,240,461

Total current assets

135,327,330

119,729,621

117,717,703

FIXED ASSETS - net

24,418,143

24,252,465

24,822,919

IDENTIFIED INTANGIBLES

30,503,659

30,498,802

30,490,861

OTHER ASSETS

330,743

363,527

436,525

TOTAL ASSETS

$

190,579,875

$

174,844,415

$

173,468,008

LIABILITIES AND SHAREHOLDERS' EQUITY:

CURRENT LIABILITIES:

Accounts payable

$

15,252,448

$

9,930,518

$

10,740,705

Accrued expenses:

Taxes - other

793,439

704,064

595,214

Income tax payable

-

335,210

-

Other

3,972,681

3,324,668

3,024,938

Total current liabilities

20,018,568

14,294,460

14,360,857

LONG TERM DEBT

31,438,173

23,461,340

29,909,957

DEFERRED INCOME TAXES

11,148,333

11,148,333

10,987,395

DEFERRED LIABILITIES

255,906

303,406

488,437

TOTAL LIABILITIES

62,860,980

49,207,539

55,746,646

SHAREHOLDERS' EQUITY:

Common stock, no par value;

25,000,000 shares authorized; issued and outstanding

June 30, 2013 - 7,516,448; December 31, 2012 -

7,503,568; June 30, 2012 - 7,503,568

69,862,770

69,694,770

69,694,770

Retained earnings

57,856,125

55,942,106

48,026,592

Total shareholders' equity

127,718,895

125,636,876

117,721,362

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

190,579,875

$

174,844,415

$

173,468,008

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

NET SALES

$

59,419,751

$

44,408,358

$

113,135,227

$

97,734,276

COST OF GOODS SOLD

39,109,264

29,056,731

74,153,970

64,360,568

GROSS MARGIN

20,310,487

15,351,627

38,981,257

33,373,708

SELLING, GENERAL AND

ADMINISTRATIVE EXPENSES

17,441,736

14,893,727

34,605,918

31,635,785

INCOME FROM OPERATIONS

2,868,751

457,900

4,375,339

1,737,923

OTHER INCOME AND (EXPENSES):

Interest expense

(147,194

)

(130,606

)

(276,752

)

(274,953

)

Other - net

4,723

13,270

(211

)

4,281

Total other - net

(142,471

)

(117,336

)

(276,963

)

(270,672

)

INCOME BEFORE INCOME TAXES

2,726,280

340,564

4,098,376

1,467,251

INCOME TAX EXPENSE

954,000

122,000

1,434,000

528,000

NET INCOME

$

1,772,280

$

218,564

$

2,664,376

$

939,251

INCOME PER SHARE

Basic

$

0.24

$

0.03

$

0.35

$

0.13

Diluted

$

0.24

$

0.03

$

0.35

$

0.13

WEIGHTED AVERAGE NUMBER OF

COMMON SHARES OUTSTANDING

Basic

7,516,448

7,503,568

7,516,306

7,503,419

Diluted

7,516,448

7,503,568

7,516,306

7,503,419



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

KEYWORDS: United States North America Ohio

INDUSTRY KEYWORDS:

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