Rocky Brands, Inc. Announces Third Quarter 2013 Results

  Rocky Brands, Inc. Announces Third Quarter 2013 Results

    Company Signs Definitive Asset Purchase Agreement to Acquire Creative

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

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

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

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
      Cash and cash        $  4,580,425      $  4,022,579      $  3,509,973
      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
      Prepaid expenses       2,259,419        2,127,726        2,122,697
           Total current      147,943,161       119,729,621       141,213,062
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
      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
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
Common stock, no par
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
           shareholders'     129,900,158      125,636,876      123,088,799
TOTAL LIABILITIES AND      $  203,725,939    $  174,844,415    $  196,488,281

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 
GROSS MARGIN     22,739,670       26,182,580       61,720,927        59,556,288
ADMINISTRATIVE  18,341,247     18,244,196     52,947,165      49,879,981  
INCOME FROM      4,398,423        7,938,384        8,773,762         9,676,307
   Interest      (200,129   )     (192,249   )     (476,881    )     (467,202    )
   Other – net  73,484         138,757        73,273          143,038     
       other -   (126,645   )     (53,492    )     (403,608    )     (324,164    )
INCOME BEFORE    4,271,778        7,884,892        8,370,154         9,352,143
INCOME TAX      1,337,582      2,517,455      2,771,582       3,045,455   
NET INCOME     $ 2,934,196     $ 5,367,437     $ 5,598,572      $ 6,306,688   
   Basic       $ 0.39           $ 0.72           $ 0.74            $ 0.84
   Diluted     $ 0.39           $ 0.72           $ 0.74            $ 0.84
   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   


Rocky Brands, Inc.
Jim McDonald, Chief Financial Officer
Investor Relations:
ICR, Inc.
Brendon Frey, 203-682-8200
Press spacebar to pause and continue. Press esc to stop.