Rocky Brands, Inc. said net sales for the first quarter of 2009 decreased to $50.1 million versus net sales of $60.5 million in the first quarter of 2008. The company reported a net loss of $1.1 million, or (20 cents) per diluted share versus net income of $0.3 million, or 5 cents per diluted share a year ago.


First Quarter Review


Wholesale sales for the first quarter were $36.0 million compared to $39.7 million for the same period in 2008. The company said the decline in wholesale sales was primarily attributable to lower than expected orders as many accounts are choosing to operate with leaner inventory levels during this challenging economy.


Retail sales for the first quarter were $13.7 million compared to $18.9 million for the same period last year. Retail sales were down year-over-year as a result of the ongoing transition to more Internet driven transactions and the decision to remove a portion of our Lehigh mobile stores from operations to help lower costs as discussed below. Military segment sales for the first quarter were $0.3 million versus $1.8 million for the same period in 2008.

Gross margin in the first quarter of 2009 was $20.1 million, or 40.1% of sales compared to $25.9 million, or 42.9% for the same period last year. The decrease in gross margin as a percentage of sales was primarily attributable to lower retail sales, which carry a higher gross margin, and to a lesser extent, lower wholesale gross margins due to increased manufacturing costs versus a year ago.


Selling, general and administrative expenses decreased $3.1 million or 13.5% to $19.9, or 39.8% of sales for the first quarter of 2009 compared to $23.1 million, or 38.1% of sales, a year ago. The decrease in SG&A expenses was primarily the result of a reduction in salaries & benefits, advertising, sales commissions, freight, professional fees and Lehigh mobile store expenses.


Income from operations was $0.1 million, or 0.3% of net sales, for the period compared to $2.9 million, or 4.8% of net sales, in the prior year.


Interest expense decreased $0.6 million, or 26.3% to $1.8 million for the first quarter of 2009 versus $2.4 million for the same period last year. The decrease is the result of a reduction in average borrowings combined with lower interest rates compared to the same period last year.


The company’s funded debt decreased $7.9 million, or 8.4% to $86.2 million at March 31, 2009 versus $94.1 million at March 31, 2008.


Inventory decreased $1.4 million, or 1.8%, to $78.4 million at March 31, 2009 compared with $79.8 million on the same date a year ago.


Mike Brooks, Chairman and Chief Executive Officer, commented, “As we started the year we anticipated that our top-line would remain under pressure due to the challenging economic environment combined with the tough comparisons we were up against in our retail division during the first quarter. Therefore we continue to focus on better aligning our cost structure with lower sales volumes and this was reflected in a 13%, or $3 million reduction in our SG&A versus a year ago. We are also focused on improving the profitability of our retail segment by transitioning a greater percentage of those transactions to the Internet and we are pleased by our initial progress. Looking ahead, we are confident that the strength and diversity of our brand portfolio is intact, and we remain committed to balancing our spending with current growth opportunities until market conditions improve.”

 

 

 










































































































































































































































































































Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations


(Unaudited)

     
Three Months Ended
March 31,
2009   2008
NET SALES $ 50,064,561 $ 60,484,716
 
COST OF GOODS SOLD   29,972,073     34,535,051  
 
GROSS MARGIN 20,092,488 25,949,665
 
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES   19,946,128     23,061,487  
 
INCOME FROM OPERATIONS 146,360 2,888,178
 
OTHER INCOME AND (EXPENSES):
Interest expense (1,773,930 ) (2,406,671 )
Other – net   (124,566 )   (18,592 )
Total other – net (1,898,496 ) (2,425,263 )
 
INCOME/(LOSS) BEFORE INCOME TAXES (1,752,136 ) 462,915
 
INCOME TAX EXPENSE/(BENEFIT)   (631,000 )   162,000  
 
NET INCOME/(LOSS) $ (1,121,136 ) $ 300,915  
 
NET INCOME/(LOSS) PER SHARE
Basic $ (0.20 ) $ 0.05
Diluted $ (0.20 ) $ 0.05
 
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic   5,546,541     5,507,839  
Diluted   5,546,541     5,526,479