Rocky Brands, Inc. Announces Third Quarter 2013 Results Company Signs Definitive Asset Purchase Agreement to Acquire Creative Recreation Business Wire NELSONVILLE, Ohio -- October 30, 2013 Rocky Brands, Inc. (NASDAQ:RCKY) today announced financial results for its third quarter ended September 30, 2013. For the third quarter of 2013, net sales decreased 3.3% to $70.2 million versus net sales of $72.5 million for the third quarter of 2012. The Company reported net income of $2.9 million, or $0.39 per diluted share, for the third quarter of 2013, versus net income of $5.4 million, or $0.72 per diluted share, for the third quarter of 2012. For the first nine months of 2013, net sales increased 7.7% to $183.3 million versus net sales of $170.3 million in the first nine months of 2012. The Company reported net income of $5.6 million, or $0.74 per diluted share, for the first nine months of 2013, versus net income of $6.3 million, or $0.84 per diluted share, for the first nine months of 2012. “While consumers continued to respond favorably to many of our new product innovations, particularly in our western business, sales of our branded work, outdoor and commercial military footwear proved to be more challenging than expected,” said David Sharp, President and Chief Executive Officer. “We remain confident that our wholesale, retail, and military operating segment strategies have us well positioned for the future. That said, despite our execution the combination of macroeconomic headwinds and mild fall temperatures has created a difficult selling environment for areas of our business during the second half of 2013. Therefore we think it is prudent to adopt a more conservative sales outlook for the remainder of this year. As in the past, we will continue to rigorously managing expenses while investing strategically in functions critical to delivering long-term growth and profitability.” Creative Recreation Acquisition In a separate press release issued today, the Company announced that it has signed a definitive asset purchase agreement with Kommonwealth, Inc. to acquire certain assets including the Creative Recreation trademark, a lifestyle footwear brand best known for its popular crossover between athletic sneakers and dress shoes. The total purchase price will be approximately $11 million, subject to a working capital adjustment. The acquisition, which will be funded by Rocky Brands’ existing cash balances and funds available under the Company’s existing revolving credit facility, is expected to be accretive to earnings in 2014. The acquisition is subject to customary closing conditions and is expected to close in the fourth quarter of 2013. Third Quarter Review Net sales for the third quarter decreased 3.3% to $70.2 million compared to $72.5 million a year ago. Wholesale segment sales for the third quarter decreased 8.8% to $57.4 million compared to $62.9 million for the same period in 2012 driven primarily by lower outdoor and commercial military sales, partially offset by higher work and western sales. Retail sales were $9.6 million in both the third quarter of 2013 and 2012. Military segment sales for the third quarter increased to $3.2 million compared to no military sales in the third quarter of 2012. Gross margin for the third quarter of 2013 was $22.7 million, or 32.4% of sales, compared to $26.2 million, or 36.1% of sales, for the same period last year. The 370 basis point decrease in gross margin was primarily driven by increased military segment sales, which carry lower gross margins than our wholesale and retail segments and lower wholesale gross margin than a year ago resulting from lower margin private label sales. Selling, general and administrative (SG&A) expenses were $18.3 million, or 26.1% of net sales, for the third quarter of 2013 compared to $18.2 million, or 25.2% of net sales, a year ago. The 90 basis point increase in SG&A as a percent of net sales was driven by lower sales and approximately $100,000 in expenses related to the acquisition of the Creative Recreation trademark. Income from operations was $4.4 million, or 6.3% of net sales, compared to $7.9 million, or 10.9% of net sales. The Company's funded debt increased 1.2% to $42.4 million at September 30, 2013 versus $41.9 million at September 30, 2012. Inventory increased 8.0% to $78.9 million at September 30, 2013 compared with $73.0 million on the same date a year ago. The inventory increase year over year was attributable to lower than expected sales. The Company remains comfortable with the size and quality of its inventory heading into the fourth quarter. Conference Call Information The Company`s conference call to review third quarter fiscal 2013 results will be broadcast live over the internet today, Wednesday, October 30, 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, and include statements in this press release regarding the proposed acquisition of assets of Kommonwealth, Inc. (paragraph 5). These forward-looking statements involve numerous risks and uncertainties, including, without limitation, whether the proposed acquisition is consummated, the satisfaction of the conditions to closing of the proposed acquisition, the ability to recognize the expected benefits of the acquisition, and 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 reports on Form 10-Q for the quarters ended March 31, 2013 (filed April 25, 2013) and June 30, 2013 (filed July 29, 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 September 30, December 31, September 30, 2013 2012 2012 Unaudited Audited Unaudited ASSETS: CURRENT ASSETS: Cash and cash $ 4,580,425 $ 4,022,579 $ 3,509,973 equivalents Trade receivables 60,620,981 44,555,057 60,648,404 – net Other receivables 358,717 575,984 811,730 Inventories 78,900,140 67,196,245 73,028,601 Deferred income 1,223,479 1,252,030 1,091,657 taxes Prepaid expenses 2,259,419 2,127,726 2,122,697 Total current 147,943,161 119,729,621 141,213,062 assets FIXED ASSETS – net 24,978,962 24,252,465 24,396,719 IDENTIFIED INTANGIBLES 30,511,954 30,498,802 30,485,935 OTHER ASSETS 291,862 363,527 392,565 TOTAL ASSETS $ 203,725,939 $ 174,844,415 $ 196,488,281 LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 13,099,826 $ 9,930,518 $ 13,366,846 Accrued expenses: Taxes - other 654,143 704,064 498,437 Income tax payable 1,027,176 335,210 1,676,590 Other 5,326,055 3,324,668 4,822,690 Total current 20,107,200 14,294,460 20,364,563 liabilities LONG TERM DEBT 42,366,415 23,461,340 41,862,634 DEFERRED INCOME TAXES 11,096,260 11,148,333 10,765,962 DEFERRED LIABILITIES 255,906 303,406 406,323 TOTAL LIABILITIES 73,825,781 49,207,539 73,399,482 SHAREHOLDERS' EQUITY: Common stock, no par value; 25,000,000 shares authorized; issued and outstanding September 30, 2013 - 7,516,448; December 31, 2012 - 69,862,770 69,694,770 69,694,770 7,503,568; September 30, 2012 - 7,503,568 Retained earnings 60,037,388 55,942,106 53,394,029 Total shareholders' 129,900,158 125,636,876 123,088,799 equity TOTAL LIABILITIES AND $ 203,725,939 $ 174,844,415 $ 196,488,281 SHAREHOLDERS' EQUITY Rocky Brands, Inc. and Subsidiaries Condensed Consolidated Statements of Operations Three Months Ended Nine Months Ended September 30, September 30, 2013 2012 2013 2012 NET SALES $ 70,176,216 $ 72,539,400 $ 183,311,443 $ 170,273,676 COST OF GOODS 47,436,546 46,356,820 121,590,516 110,717,388 SOLD GROSS MARGIN 22,739,670 26,182,580 61,720,927 59,556,288 SELLING, GENERAL AND ADMINISTRATIVE 18,341,247 18,244,196 52,947,165 49,879,981 EXPENSES INCOME FROM 4,398,423 7,938,384 8,773,762 9,676,307 OPERATIONS OTHER INCOME AND (EXPENSES): Interest (200,129 ) (192,249 ) (476,881 ) (467,202 ) expense Other – net 73,484 138,757 73,273 143,038 Total other - (126,645 ) (53,492 ) (403,608 ) (324,164 ) net INCOME BEFORE 4,271,778 7,884,892 8,370,154 9,352,143 INCOME TAXES INCOME TAX 1,337,582 2,517,455 2,771,582 3,045,455 EXPENSE NET INCOME $ 2,934,196 $ 5,367,437 $ 5,598,572 $ 6,306,688 INCOME PER SHARE Basic $ 0.39 $ 0.72 $ 0.74 $ 0.84 Diluted $ 0.39 $ 0.72 $ 0.74 $ 0.84 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 7,516,448 7,503,568 7,516,354 7,503,469 Diluted 7,516,448 7,503,568 7,516,354 7,503,469 Contact: Rocky Brands, Inc. Jim McDonald, Chief Financial Officer 740-753-1951 or Investor Relations: ICR, Inc. Brendon Frey, 203-682-8200
Rocky Brands, Inc. Announces Third Quarter 2013 Results
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