Rocky Brands, Inc. Announces Second Quarter 2014 Results

  Rocky Brands, Inc. Announces Second Quarter 2014 Results

       Second Quarter Net Sales Increased 16% to a Record $68.8 Million

Business Wire

NELSONVILLE, Ohio -- July 23, 2014

Rocky Brands, Inc. (NASDAQ:RCKY) today announced financial results for its
second quarter ended June 30, 2014.

Second Quarter 2014 Sales and Income

Second quarter net sales increased 15.8% to $68.8 million versus net sales of
$59.4 million in the second quarter of 2013. The Company reported second
quarter net income of $1.5 million, or $0.20 per diluted share compared with
net income of $1.8 million, or $0.24 per diluted share in the second quarter
of 2013.

David Sharp, President and Chief Executive Officer, commented, “The
investments we’ve made towards growing our brands and overall business
continue to fuel record top-line results. For the second consecutive quarter
each of our major wholesale categories, Work, Western, and Hunting, generated
double digit sales increases on a percentage basis while the momentum in our
commercial military and duty businesses accelerated following a solid start to
the year. As we move into the back half of 2014, we believe we can continue to
drive growth through compelling and innovative product introductions and begin
delivering improved profitability through gross margin expansion and increased
operating expense leverage. Our plans include capitalizing on the
opportunities we believe exist for Creative Recreation within the broader
casual footwear market. We are pleased with our recent accomplishments and
look forward to building on our success in the quarters and years ahead.”

Second Quarter Review

Net sales for the second quarter increased 15.8% to $68.8 million compared to
$59.4 million a year ago. Wholesale sales for the second quarter increased
23.7% to $56.7 million compared to $45.8 million for the same period in 2013.
This included a 16.8% increase in wholesale sales of the Company’s legacy
brands. Retail sales for the second quarter increased to $10.1 million
compared to $9.8 million for the same period last year. Military segment sales
for the second quarter decreased to $2.0 million compared to $3.8 million in
the second quarter of 2013.

Gross margin in the second quarter of 2014 was $22.6 million, or 32.8% of
sales, compared to $20.3 million, or 34.2% of sales, for the same period last
year. The 140 basis point decrease was driven by the combination of lower
wholesale margins due primarily to costs associated with the seeding program
with a key retail partner we announced in the first quarter of 2014 and lower
retail gross margin than a year ago resulting from the completed transition to
a web based retail platform which carries lower gross margin and lower
operating expenses compared to the previous mobile store structure.

Selling, general and administrative (SG&A) expenses were $20.0 million, or
29.1% of net sales, for the second quarter of 2014 compared to $17.4 million,
or 29.4% of net sales, a year ago. The $2.6 million increase in SG&A expenses
was due largely to the additional expenses associated with the Creative
Recreation brand, which was acquired in December 2013, and higher compensation
expense related to a new mid-year bonus program that wasn’t in place a year
ago. The 30 basis point improvement in SG&A as a percent of net sales was
driven by leveraging expenses on higher sales.

Income from operations was $2.5 million, or 3.7% of net sales, compared to
$2.9 million, or 4.8% of net sales, a year ago.

Interest expense was $0.2 million for the second quarter of 2014, versus $0.1
million for the same period last year.

The Company’s funded debt was $43.4 million at June 30, 2014 versus $31.4
million at June 30, 2013. The majority of the increase was related to
additional borrowings to fund the acquisition of Creative Recreation in the
fourth quarter of 2013.

Inventory increased 6.5%, or $5.3 million, to $86.4 million at June 30, 2014
compared with $81.2 million on the same date a year ago. Inventory at June 30,
2014 included approximately $2.8 million associated with the acquisition of
Creative Recreation. Based on current sales trends and the fall order book,
the Company remains comfortable with its current inventory position.

Conference Call Information

The Company’s conference call to review second quarter 2014 results will be
broadcast live over the internet today, Wednesday, July 23, 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 sales and
profitability (paragraph 3) and inventory (paragraph 10). 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, 2013 (filed March 6, 2014) and quarterly report on
Form 10-Q for the quarter ended March 31, 2014 (filed May 1, 2014). 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, 2014       December 31,        June 30, 2013
                                             2013
                         Unaudited           Audited             Unaudited
ASSETS:
CURRENT ASSETS:
Cash and cash            $ 3,960,134         $  4,215,617        $ 2,855,524
equivalents
Trade receivables          54,088,664           49,069,668         46,429,928
– net
Other receivables          754,889              325,888            496,669
Inventories                86,438,290           78,171,670         81,159,941
Income tax                 7,039                242,228            270,878
receivable
Deferred income            1,104,050            1,104,050          1,252,030
taxes
Prepaid expenses          2,657,619           2,529,407         2,862,360
Total current              149,010,685          135,658,528        135,327,330
assets
FIXED ASSETS – net         27,641,771           26,205,080         24,418,143
IDENTIFIED                 36,741,214           36,807,099         30,503,659
INTANGIBLES
OTHER ASSETS              348,958             354,051           330,743
TOTAL ASSETS             $ 213,742,628       $  199,024,758      $ 190,579,875
                                                                 
                                                                 
LIABILITIES AND
SHAREHOLDERS'
EQUITY:
CURRENT
LIABILITIES:
Accounts payable         $ 18,433,803        $  11,486,473       $ 15,252,448
Accrued expenses:
Taxes - other              539,919              901,116            793,439
Other                     7,272,867           5,028,850         3,972,681
Total current              26,246,589           17,416,439         20,018,568
liabilities
LONG TERM DEBT             43,359,640           38,388,198         31,438,173
DEFERRED INCOME            11,750,718           11,750,718         11,148,333
TAXES
DEFERRED                  293,823             255,906           255,906
LIABILITIES
TOTAL LIABILITIES          81,650,770           67,811,261         62,860,980
SHAREHOLDERS'
EQUITY:
Common stock, no
par value;
25,000,000 shares
authorized; issued
and outstanding
June 30, 2014 -
7,543,210;                 70,304,984           70,153,570         69,862,770
December 31, 2013
- 7,536,448; June
30, 2013 -
7,516,448
Retained earnings         61,786,874          61,059,927        57,856,125
                                                                 
Total
shareholders'             132,091,858         131,213,497       127,718,895
equity
                                                                 
TOTAL LIABILITIES
AND SHAREHOLDERS'        $ 213,742,628       $  199,024,758      $ 190,579,875
EQUITY
                                                                 

                                                    
Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations
                                                         
                   Three Months Ended                    Six Months Ended
                   June 30,                              June 30,
                    2014           2013             2014            2013        
NET SALES          $ 68,822,520       $ 59,419,751       $ 134,605,804       $ 113,135,227
                                                                             
COST OF GOODS       46,236,858       39,109,264       90,166,993        74,153,970  
SOLD
                                                                             
GROSS MARGIN         22,585,662         20,310,487         44,438,811          38,981,257
                                                                             
SELLING,
GENERAL AND
ADMINISTRATIVE      20,041,283       17,441,736       40,556,822        34,605,918  
EXPENSES
                                                                             
INCOME FROM          2,544,379          2,868,751          3,881,989           4,375,339
OPERATIONS
                                                                             
OTHER INCOME
AND
(EXPENSES):
Interest             (225,299   )       (147,194   )       (443,972    )       (276,752    )
expense
Other – net         6,381            4,723            232               (211        )
Total other -        (218,918   )       (142,471   )       (443,740    )       (276,963    )
net
                                                                             
INCOME BEFORE        2,325,461          2,726,280          3,438,249           4,098,376
INCOME TAXES
                                                                             
INCOME TAX          814,000          954,000          1,203,000         1,434,000   
EXPENSE
                                                                             
NET INCOME         $ 1,511,461       $ 1,772,280       $ 2,235,249        $ 2,664,376   
                                                                             
INCOME PER
SHARE
Basic              $ 0.20             $ 0.24             $ 0.30              $ 0.35
Diluted            $ 0.20             $ 0.24             $ 0.30              $ 0.35
                                                                             
WEIGHTED
AVERAGE NUMBER
OF
COMMON SHARES
OUTSTANDING
Basic               7,543,173        7,516,448        7,541,462         7,516,306   
Diluted             7,543,173        7,516,448        7,541,462         7,516,306   

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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