Rocky Brands, Inc. Announces Fourth Quarter and Fiscal 2013 Results

  Rocky Brands, Inc. Announces Fourth Quarter and Fiscal 2013 Results

Business Wire

NELSONVILLE, Ohio -- February 25, 2014

Rocky Brands, Inc. (NASDAQ:RCKY) today announced financial results for its
fourth quarter and fiscal year ended December 31, 2013.

Fourth Quarter 2013 Sales and Income

Fourth quarter net sales increased 5.7% to $61.6 million, which included zero
revenue from the Creative Recreation acquisition that closed on December 13,
2013, versus net sales of $58.3 million in the fourth quarter of 2012. The
Company reported fourth quarter net income of $1.8 million, or $0.24 per
diluted share compared with net income of $2.5 million, or $0.34 per diluted
share in the fourth quarter of 2012. The fourth quarter of 2013 included a
one-time expense of $1.0 million and a one-time gain of $0.6 million related
to the acquisition of Creative Recreation. Also included in the fourth quarter
of 2013 were expenses of $172,000 associated with the ongoing operations of
Creative Recreation. Excluding all expenses and income related to Creative
Recreation, fourth quarter 2013 net income was $2.2 million, or $0.29 per
diluted share. (See below for a reconciliation of fourth quarter 2013 income
per diluted share on a GAAP basis to a non-GAAP basis).

Fiscal Year 2013 Sales and Income

For fiscal year 2013, net sales increased 7.1% to $244.9 million versus net
sales of $228.5 million in fiscal year 2012. The Company reported net income
of $7.4 million, or $0.98 per diluted share, for fiscal year 2013, compared
with net income of $8.9 million, or $1.18 per diluted share, for fiscal 2012.
Excluding the aforementioned expenses and income related to Creative
Recreation, fiscal year 2013 net income was $7.9 million, or $1.04 per diluted
share. (See below for a reconciliation of fiscal year 2013 income per diluted
share on a GAAP basis to a non-GAAP basis).

David Sharp, President and Chief Executive Officer, commented, “We finished
2013 with a strong performance from our work category which benefited from
cold, snowy conditions across much of the U.S. during the fourth quarter.
Despite a difficult holiday season for less weather sensitive footwear
categories, we experienced solid demand for the Durango brand as consumers
continue to respond positively to our broader product offering. While the
overall retail environment remains challenging, we are optimistic about our
prospects in 2014. The addition of Creative Recreation is an exciting new
growth vehicle that we are confident will over time benefit from our
operational and supply chain capabilities. At the same time, we believe there
are opportunities to expand our market share in work, western and outdoor
through compelling new product introductions and further evolving our direct
to consumer channel.”

Fourth Quarter Review

Net sales for the fourth quarter increased 5.7% to $61.6 million compared to
$58.3 million a year ago. Wholesale sales for the fourth quarter were $47.7
million compared to $46.2 million for the same period in 2012. The $1.5
million increase was driven by a $3.8 million or 9.0% increase in footwear
sales partially offset by a $2.3 million decrease in apparel sales. The
decrease in apparel sales was the result of the Company’s decision to
transition some apparel to a licensing model in early 2013. Retail sales for
the fourth quarter increased to $12.9 million compared to $12.0 million for
the same period last year. Military segment sales for the fourth quarter
increased to $1.0 million compared to no military sales in the fourth quarter
of 2012.

Gross margin in the fourth quarter of 2013 was $21.8 million, or 35.4% of
sales, compared to $20.9 million, or 36.0% of sales, for the same period last
year. The 60 basis point decrease was driven by increased military sales
versus the year ago period, which carry lower gross margins.

Selling, general and administrative (SG&A) expenses, excluding the
aforementioned expense associated with the ongoing operations of Creative
Recreation, were $18.4 million, or 29.9% of net sales, for the fourth quarter
of 2013 compared to $16.8 million, or 28.8% of net sales, a year ago. The 110
basis point increase in SG&A as a percent of net sales was driven primarily by
the reversal of incentive compensation accruals in the fourth quarter of 2012.

Income from operations, excluding the aforementioned expenses associated with
the acquisition and ongoing operations of Creative Recreation was $3.4
million, or 5.6% of net sales, compared to $4.1 million, or 7.1% of net sales,
a year ago.

Interest expense was $0.2 million for the fourth quarter of 2013, versus $0.2
million for the same period last year.

The Company’s funded debt was $38.4 million at December 31, 2013 versus $23.5
million at December 31, 2012, with the majority of the increase related to
additional borrowings to fund the acquisition of Creative Recreation.

Inventory increased 16.3% or $11.0 million to $78.2 million at December 31,
2013 compared with $67.2 million on the same date a year ago. Inventory at
December 31, 2013 included approximately $1.0 million associated with the
acquisition of Creative Recreation.

Conference Call Information

The Company’s conference call to review fourth quarter and fiscal 2013 results
will be broadcast live over the internet today, Tuesday, February 25, 2014 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®, Creative
Recreation®, and the licensed brand Michelin®.

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 market
share (paragraph 4). 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 reports on Form 10-Q for the quarters
ended March 31, 2013 (filed April 25, 2013), June 30, 2013 (filed July 29,
2013) and September 30, 2013 (filed November 6, 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
                                                        
                                       December 31, 2013     December 31, 2012
                                       Unaudited             Audited
ASSETS:
                                                             
CURRENT ASSETS:
Cash and cash equivalents              $   4,215,617         $   4,022,579
Trade receivables – net                    49,069,668            44,555,057
Other receivables                          325,888               575,984
Inventories                                78,171,670            67,196,245
Income tax receivable                      242,228               -
Deferred income taxes                      1,104,050             1,252,030
Prepaid expenses                          2,529,407            2,127,726
Total current assets                       135,658,528           119,729,621
FIXED ASSETS – net                         26,205,080            24,252,465
IDENTIFIED INTANGIBLES                     36,807,099            30,498,802
OTHER ASSETS                              354,051              363,527
TOTAL ASSETS                           $   199,024,758       $   174,844,415
                                                             
                                                             
LIABILITIES AND SHAREHOLDERS'
EQUITY:
CURRENT LIABILITIES:
Accounts payable                       $   11,486,473        $   9,930,518
Accrued expenses:
Taxes - other                              901,116               704,064
Income tax payable                         -                     335,210
Other                                     5,028,850            3,324,668
Total current liabilities                  17,416,439            14,294,460
                                                             
LONG TERM DEBT                             38,388,198            23,461,340
DEFERRED INCOME TAXES                      11,750,718            11,148,333
DEFERRED LIABILITIES                      255,906              303,406
                                                             
TOTAL LIABILITIES                          67,811,261            49,207,539
                                                             
SHAREHOLDERS' EQUITY:
Common stock, no par value;
                                                             
25,000,000 shares authorized;
issued and outstanding
December 31, 2013 - 7,536,448;             70,153,570            69,694,770
December 31, 2012 - 7,503,568
                                                             
Retained earnings                         61,059,927           55,942,106
                                                             
Total shareholders' equity                131,213,497          125,636,876
                                                             
TOTAL LIABILITIES AND                  $   199,024,758       $   174,844,415
SHAREHOLDERS' EQUITY
                                                                 

Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
               
                 Three Months Ended                  Year Ended
                 December 31,                          December 31,
                 2013             2012               2013              2012
                 Unaudited          Unaudited          Unaudited           Audited
                                                                                         
NET SALES        $ 61,559,288       $ 58,263,374       $ 244,870,731       $ 228,537,050
                                                                           
COST OF GOODS     39,737,764       37,313,685       161,328,280       148,031,073 
SOLD
                                                                           
GROSS MARGIN       21,821,524         20,949,689         83,542,451          80,505,977
                                                                           
OPERATING
EXPENSES
Selling,
general and        18,548,044         16,799,780         71,351,688          66,679,761
administrative
expenses
Acquisition
related           1,028,526        -                1,172,047         -           
expenses
Total
operating          19,576,570         16,799,780         72,523,735          66,679,761
expenses
                                                                           
INCOME FROM        2,244,954          4,149,909          11,018,716          13,826,216
OPERATIONS
                                                                           
OTHER INCOME
AND
(EXPENSES):
Interest           (211,621   )       (183,671   )       (688,502    )       (650,873    )
expense
Gain on
bargain            601,975                               601,975
purchase
Other – net       (189,938   )      (230,962   )      (116,665    )      (87,924     )
Total other -      200,416            (414,633   )       (203,192    )       (738,797    )
net
                                                                           
INCOME BEFORE      2,445,370          3,735,276          10,815,524          13,087,419
INCOME TAXES
                                                                           
INCOME TAX        671,186          1,187,199        3,442,768         4,232,654   
EXPENSE
                                                                           
NET INCOME       $ 1,774,184       $ 2,548,077       $ 7,372,756        $ 8,854,765   
                                                                           
INCOME PER
SHARE
Basic            $ 0.24             $ 0.34             $ 0.98              $ 1.18
Diluted          $ 0.24             $ 0.34             $ 0.98              $ 1.18
                                                                           
WEIGHTED
AVERAGE NUMBER
OF
COMMON SHARES
OUTSTANDING
Basic             7,520,361        7,503,568        7,517,364         7,503,494   
Diluted           7,520,361        7,503,568        7,517,364         7,503,494   
                                                                                         

Reconciliation of Income per Diluted Share on a GAAP Basis to a Non-GAAP Basis
                                                                
                 Three Months Ended December 31, 2013
                 (Unaudited)
                                    Acquisition        Creative
                                    Related            Recreation
                                    Expenses and       December
                 GAAP Basis         Income             Operations       Non GAAP Basis
NET SALES        $ 61,559,288       $ -                $ -              $ 61,559,288
                                                                        
COST OF GOODS     39,737,764       -                -              39,737,764 
SOLD
                                                                        
GROSS MARGIN       21,821,524         -                  -                21,821,524
                                                                        
OPERATING
EXPENSES
Selling,
general and        18,548,044         -                  172,418          18,375,626
administrative
expenses
Acquisition
related           1,028,526        1,028,526        -              -          
expenses
Total
operating          19,576,570         1,028,526          172,418          18,375,626
expenses
                                                                        
INCOME FROM        2,244,954          (1,028,526 )       (172,418 )       3,445,898
OPERATIONS
                                                                        
OTHER INCOME
AND
(EXPENSES):
Interest           (211,621   )       -                  -                (211,621   )
expense
Gain on
bargain            601,975            601,975            -                -
purchase
Other – net       (189,938   )      -                -              (189,938   )
Total other -      200,416            601,975            -                (401,559   )
net
                                                                        
INCOME BEFORE      2,445,370          (426,551   )       (172,418 )       3,044,339
INCOME TAXES
                                                                        
INCOME TAX        671,186          (149,293   )      (60,346  )      880,825    
EXPENSE
                                                                        
NET INCOME       $ 1,774,184       $ (277,258   )     $ (112,072 )     $ 2,163,514  
                                                                        
INCOME PER       $ 0.24             $ (0.04      )     $ (0.01    )     $ 0.29
DILUTED SHARE
                                                                                     

Reconciliation of Income per Diluted Share on a GAAP Basis to a Non-GAAP Basis
                                                                 
                 Year Ended December 31, 2013
                 (Unaudited)
                                     Acquisition        Creative
                                     Related            Recreation
                                     Expenses and       December         Non GAAP
                 GAAP Basis          Income             Operations       Basis
NET SALES        $ 244,870,731       $ -                $ -              $ 244,870,731
                                                                         
COST OF GOODS     161,328,280       -                -              161,328,280 
SOLD
                                                                         
GROSS MARGIN       83,542,451          -                  -                83,542,451
                                                                         
OPERATING
EXPENSES
Selling,
general and        71,351,688          -                  172,418          71,179,270
administrative
expenses
Acquisition
related           1,172,047         1,172,047        -              -           
expenses
Total
operating          72,523,735          1,172,047          172,418          71,179,270
expenses
                                                                         
INCOME FROM        11,018,716          (1,172,047 )       (172,418 )       12,363,181
OPERATIONS
                                                                         
OTHER INCOME
AND
(EXPENSES):
Interest           (688,502    )       -                  -                (688,502    )
expense
Gain on
bargain            601,975             601,975            -                -
purchase
Other – net       (116,665    )      -                -              (116,665    )
Total other -      (203,192    )       601,975            -                (805,167    )
net
                                                                         
INCOME BEFORE      10,815,524          (570,072   )       (172,418 )       11,558,014
INCOME TAXES
                                                                         
INCOME TAX        3,442,768         (199,525   )      (60,346  )      3,702,639   
EXPENSE
                                                                         
NET INCOME       $ 7,372,756        $ (370,547   )     $ (112,072 )     $ 7,855,375   
                                                                         
INCOME PER       $ 0.98              $ (0.05      )     $ (0.01    )     $ 1.04
DILUTED SHARE
                                                                                       

Contact:

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