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Rocky Brands, Inc. Announces Second Quarter Fiscal 2010 Results
Company Returns to Second Quarter Profitability with Diluted EPS of $0.08
Second Quarter Sales Increased 7.9% to $55.2 Million
Funded Debt Decreased $50.6 Million, or 58% to $36.9 Million
Rocky Brands, Inc.
Jim McDonald
(740) 753-1951
Chief Financial Officer |
Investor Relations:
Integrated Corporate Relations, Inc.
Brendon Frey / Chad Jacobs
(203) 682-8200 |
NELSONVILLE, Ohio -- July 27, 2010 – Rocky Brands, Inc. (Nasdaq: RCKY) today announced financial results for its second quarter ended June 30, 2010.
For the second quarter of 2010, net sales increased 7.9% to $55.2 million versus net sales of $51.2 million in the second quarter of 2009. The Company reported net income of $0.5 million, or $0.08 per diluted share versus a net loss of $1.4 million, or ($0.25) per diluted share a year ago. 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 improved to $1.1 million, or $0.17 per diluted share.
Mike Brooks, Chairman and Chief Executive Officer, commented, “There were several highlights from the second quarter, most notably the dramatic improvement in our bottom line. The combination of sales growth, a 370 basis point improvement in wholesale gross margin, and meaningful operating expense leverage, allowed us to recover from a loss in the year ago period and deliver profitability that was well above plan. We also made significant progress in improving our capital structure during the second quarter. We paid off the majority of our high interest, senior term loan using proceeds from our successful equity offering and availability under our existing credit facility. As a result, we cut our debt level at the end of the second quarter by more than half and will considerably reduce our interest expense going forward. We are very pleased with the progress we have made towards building a more efficient organization and we look forward to taking advantage of our improved position to better capitalize on the growth opportunities that are ahead.”
Second Quarter Review
Net sales for the second quarter increased 7.9% to $55.2 million compared to $51.2 million a year ago. Wholesale sales for the second quarter increased to $38.5 million compared to $37.9 million for the same period in 2009. Retail sales for the second quarter were $11.0 million compared to $12.3 million for the same period last year. The modest decline in retail sales was the result of the ongoing transition to more Internet driven transactions and the decision to remove a portion of our Lehigh mobile stores from operations to help lower costs as discussed below. Military segment sales for the second quarter increased to $5.7 million versus $0.9 million for the same period in 2009.
Gross margin in the second quarter of 2010 was $19.1 million, or 34.6% of sales compared to $17.7 million, or 34.6% for the same period last year. Wholesale gross margin was up 370 basis points driven by increased manufacturing efficiencies in the Company’s factories. This was offset by lower retail gross margin as a result of the ongoing transition to more Internet driven transactions and the increase in sales to the Military which carry lower gross margin than the wholesale and retail businesses.
Selling, general and administrative (SG&A) expenses decreased $2.0 million or 10.8% to $16.2 million, or 29.3% of sales for the second quarter of 2010 compared to $18.1 million, or 35.4% of sales a year ago. The decrease in SG&A expenses was primarily the result of a reduction in salaries & benefits, bad debt expense, advertising costs, and Lehigh store expenses.
Income from operations was $2.9 million, or 5.3% of net sales for the period compared to an operating loss of $0.4 million in the prior year.
Interest expense increased to $2.1 million for the second quarter of 2010 versus $1.9 million for the same period last year. The increase was attributable to one-time fees of approximately $0.9 million associated with the early repayment of a portion of the Company’s senior term loan.
The Company’s funded debt decreased $50.6 million, or 57.8% to $36.9 million at June 30, 2010 versus $87.5 million at June 30, 2009.
Inventory decreased $17.5 million, or 22.0%, to $61.8 million at June 30, 2010 compared with $79.3 million on the same date a year ago.
The Company’s accounts receivable decreased $3.7 million, or 8.2% to $40.8 million at June 30, 2010 versus $44.5 million at June 30, 2009.
Conference Call Information
The Company’s conference call to review second quarter fiscal 2010 results will be broadcast live over the internet today, Tuesday, July 27, 2010 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®, Georgia Boot®, Durango®, Lehigh®, and the licensed brands Dickies®, Michelin® and Mossy Oak®.
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 reduction of interest expense and future growth opportunities (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, 2009 (filed March 2, 2010) and the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2010 (filed May 3, 2010). 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.
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Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets |
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June 30, 2010 |
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December 31, 2009 |
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June 30, 2009 |
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Unaudited |
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Unaudited |
| ASSETS: |
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| CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
3,166,143 |
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$ |
1,797,093 |
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$ |
2,865,461 |
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Trade receivables – net |
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40,782,470 |
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45,831,558 |
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44,454,476 |
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Other receivables |
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1,182,335 |
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1,476,643 |
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1,924,195 |
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Inventories |
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61,811,667 |
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55,420,467 |
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79,286,477 |
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Deferred income taxes |
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1,475,695 |
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1,475,695 |
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2,167,966 |
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Income tax receivable |
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325,493 |
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- |
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2,413,523 |
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Prepaid expenses |
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1,876,888 |
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1,309,138 |
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1,983,480 |
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Total current assets |
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110,620,691 |
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107,310,594 |
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135,095,578 |
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| FIXED ASSETS – net |
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22,436,535 |
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22,669,876 |
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23,777,945 |
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| IDENTIFIED INTANGIBLES |
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30,512,822 |
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30,516,910 |
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30,769,248 |
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| OTHER ASSETS |
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2,112,475 |
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2,892,683 |
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3,609,296 |
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| TOTAL ASSETS |
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$ |
165,682,523 |
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$ |
163,390,063 |
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$ |
193,252,067 |
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| LIABILITIES AND SHAREHOLDERS' EQUITY: |
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| CURRENT LIABILITIES: |
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Accounts payable |
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$ |
13,415,750 |
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$ |
6,781,534 |
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$ |
8,504,099 |
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Current maturities – long term debt |
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528,434 |
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511,870 |
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495,976 |
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Accrued expenses: |
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Taxes - other |
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535,101 |
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440,223 |
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502,032 |
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Income Tax Payable |
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- |
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26,242 |
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- |
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Other |
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4,931,764 |
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5,226,749 |
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4,504,202 |
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Total current liabilities |
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19,411,049 |
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12,986,618 |
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14,006,309 |
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| LONG TERM DEBT – less current maturities |
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36,370,863 |
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55,079,776 |
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87,023,125 |
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| DEFERRED INCOME TAXES |
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9,071,639 |
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9,071,639 |
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9,438,921 |
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| DEFERRED LIABILITIES |
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3,875,048 |
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3,774,356 |
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4,056,184 |
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| TOTAL LIABILITIES |
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68,728,599 |
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80,912,389 |
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114,524,539 |
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| SHAREHOLDERS' EQUITY: |
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| Common stock, no par value; |
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25,000,000 shares authorized; issued and outstanding
June 30, 2010 - 7,406,787; December 31, 2009 - 5,576,465;
June 30, 2009 - 5,547,215 |
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68,931,586 |
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54,598,104 |
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54,384,172 |
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| Accumulated other comprehensive loss |
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(3,037,242 |
) |
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(3,217,144 |
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(3,062,448 |
) |
| Retained earnings |
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31,059,580 |
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31,096,714 |
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27,405,804 |
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Total shareholders' equity |
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96,953,924 |
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82,477,674 |
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78,727,528 |
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| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
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$ |
165,682,523 |
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$ |
163,390,063 |
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$ |
193,252,067 |
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Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited) |
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2010 |
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2009 |
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2010 |
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2009 |
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| NET SALES |
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$ |
55,223,054 |
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$ |
51,188,615 |
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$ |
111,302,040 |
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$ |
101,253,176 |
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| COST OF GOODS SOLD |
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36,123,970 |
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33,470,943 |
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73,446,107 |
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63,443,016 |
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| GROSS MARGIN |
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19,099,084 |
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17,717,672 |
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37,855,933 |
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37,810,160 |
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| SELLING, GENERAL AND |
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| ADMINISTRATIVE EXPENSES |
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16,163,354 |
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18,119,173 |
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34,188,041 |
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38,065,301 |
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| INCOME/(LOSS) FROM OPERATIONS |
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2,935,730 |
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(401,501 |
) |
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3,667,892 |
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(255,141 |
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| OTHER INCOME AND (EXPENSES): |
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Interest expense |
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(2,121,552 |
) |
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(1,936,490 |
) |
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(3,766,143 |
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(3,710,420 |
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Other – net |
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3,432 |
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158,023 |
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40,117 |
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33,457 |
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Total other - net |
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(2,118,120 |
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(1,778,467 |
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(3,726,026 |
) |
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(3,676,963 |
) |
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| INCOME/(LOSS) BEFORE INCOME TAXES |
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817,610 |
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(2,179,968 |
) |
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(58,134 |
) |
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(3,932,104 |
) |
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| INCOME TAX EXPENSE/(BENEFIT) |
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294,000 |
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(785,000 |
) |
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(21,000 |
) |
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(1,416,000 |
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| NET INCOME/(LOSS) |
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$ |
523,610 |
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$ |
(1,394,968 |
) |
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$ |
(37,134 |
) |
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$ |
(2,516,104 |
) |
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| INCOME/(LOSS) PER SHARE |
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Basic |
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$ |
0.08 |
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$ |
(0.25 |
) |
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$ |
(0.01 |
) |
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$ |
(0.45 |
) |
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Diluted |
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$ |
0.08 |
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$ |
(0.25 |
) |
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|
$ |
(0.01 |
) |
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$ |
(0.45 |
) |
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| WEIGHTED AVERAGE NUMBER OF |
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| COMMON SHARES OUTSTANDING |
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Basic |
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6,535,812 |
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5,547,215 |
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|
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6,072,045 |
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|
|
|
5,546,880 |
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Diluted |
|
|
|
6,557,289 |
|
|
|
|
5,547,215 |
|
|
|
|
|
|
6,072,045 |
|
|
|
|
5,546,880 |
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