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.
Rocky Brands, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
June 30, 2010 December 31, 2009 June 30, 2009 Unaudited
Unaudited ASSETS: CURRENT ASSETS: Cash and cash
equivalents $ 3,166,143 $ 1,797,093 $ 2,865,461 Trade receivables –
net 40,782,470 45,831,558 44,454,476 Other receivables 1,182,335
1,476,643 1,924,195 Inventories 61,811,667 55,420,467 79,286,477
Deferred income taxes 1,475,695 1,475,695 2,167,966 Income tax
receivable 325,493 - 2,413,523 Prepaid expenses 1,876,888
1,309,138 1,983,480 Total
current assets 110,620,691 107,310,594 135,095,578 FIXED ASSETS –
net 22,436,535 22,669,876 23,777,945 IDENTIFIED INTANGIBLES
30,512,822 30,516,910 30,769,248 OTHER ASSETS 2,112,475
2,892,683 3,609,296 TOTAL ASSETS
$ 165,682,523 $ 163,390,063 $ 193,252,067
LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT
LIABILITIES: Accounts payable $ 13,415,750 $ 6,781,534 $ 8,504,099
Current maturities – long term debt 528,434 511,870 495,976 Accrued
expenses: Taxes - other 535,101 440,223 502,032 Income Tax Payable
- 26,242 - Other 4,931,764 5,226,749
4,504,202 Total current liabilities 19,411,049
12,986,618 14,006,309 LONG TERM DEBT – less current
maturities 36,370,863 55,079,776 87,023,125 DEFERRED INCOME TAXES
9,071,639 9,071,639 9,438,921 DEFERRED LIABILITIES 3,875,048
3,774,356 4,056,184 TOTAL
LIABILITIES 68,728,599 80,912,389 114,524,539 SHAREHOLDERS'
EQUITY: Common stock, no par value;
25,000,000 shares authorized;
issued and outstandingJune 30, 2010 - 7,406,787; December 31, 2009
- 5,576,465;June 30, 2009 - 5,547,215
68,931,586 54,598,104 54,384,172 Accumulated other
comprehensive loss (3,037,242 ) (3,217,144 ) (3,062,448 ) Retained
earnings 31,059,580 31,096,714
27,405,804 Total shareholders' equity
96,953,924 82,477,674 78,727,528
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 165,682,523
$ 163,390,063 $ 193,252,067
Rocky Brands, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 2010
2009 2010 2009 NET SALES $ 55,223,054 $
51,188,615 $ 111,302,040 $ 101,253,176 COST OF GOODS SOLD
36,123,970 33,470,943 73,446,107
63,443,016 GROSS MARGIN 19,099,084
17,717,672 37,855,933 37,810,160 SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 16,163,354 18,119,173
34,188,041 38,065,301
INCOME/(LOSS) FROM OPERATIONS 2,935,730 (401,501 ) 3,667,892
(255,141 ) OTHER INCOME AND (EXPENSES): Interest expense
(2,121,552 ) (1,936,490 ) (3,766,143 ) (3,710,420 ) Other – net
3,432 158,023 40,117
33,457 Total other - net (2,118,120 ) (1,778,467 )
(3,726,026 ) (3,676,963 ) INCOME/(LOSS) BEFORE INCOME TAXES
817,610 (2,179,968 ) (58,134 ) (3,932,104 ) INCOME TAX
EXPENSE/(BENEFIT) 294,000 (785,000 )
(21,000 ) (1,416,000 ) NET INCOME/(LOSS) $ 523,610
$ (1,394,968 ) $ (37,134 ) $ (2,516,104 )
INCOME/(LOSS) PER SHARE Basic $ 0.08 $ (0.25 ) $ (0.01 ) $ (0.45 )
Diluted $ 0.08 $ (0.25 ) $ (0.01 ) $ (0.45 ) WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 6,535,812
5,547,215 6,072,045
5,546,880 Diluted 6,557,289 5,547,215
6,072,045 5,546,880
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