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