Rocky Brands Inc. reported fourth-quarter net sales increased 2.6 percent to $67 million versus net sales of $65.3 million in the fourth quarter of 2015.

The company reported a fourth-quarter net loss of $0.6 million, or 9 cents a share, compared to fourth-quarter net income of $1.4 million, or 18 cents per diluted share, in the year-ago period. The fourth quarter of 2016 included a non-cash impairment charge related to the Creative Recreation brand of $3 million. Excluding this charge, fourth-quarter 2016 net income was $1.3 million, or 18 cents per diluted share.

Fiscal Year 2016 Sales And Income
For fiscal year 2016, net sales decreased 3.4 percent to $260.3 million versus net sales of $269.3 million in fiscal year 2015. The company reported a net loss of $2.1 million, or 29 cents a share, for fiscal year 2016, compared with net income of $6.6 million, or 87 cents per diluted share, for fiscal 2015. Excluding the $1.2 million reorganizational charge the company recorded in the third quarter 2016 and the aforementioned non-cash impairment charge related to the Creative Recreation brand, fiscal 2016 net income was $0.6 million, or 8 cents per diluted share.

Mike Brooks, chief executive officer, commented, “The fundamentals of our business continued to improve in the fourth quarter following a difficult start to 2016. While our full year results were disappointing, we’ve taken a number of actions that we believe will improve our earnings power going forward. These include reorganizing our sales teams and reducing headcount in order to lower our expense structure. We also improved the efficiency of our expanded domestic manufacturing facility which allows us to more profitably capitalize on the growing demand for military footwear. In addition, we recently signed a licensing agreement for the Creative Recreation brand in Europe that will help enhance our overall margins. As 2017 gets underway, I’m confident that the changes we’ve made to our operating strategies and leadership team in response to the challenges of the past 12-months have made us a stronger organization and better positions Rocky Brands to return greater value to its shareholders over the long-term.”

Fourth Quarter Review
Net sales for the fourth quarter increased 2.6 percent to $67 million compared to $65.3 million a year ago. Wholesale sales for the fourth quarter decreased 8.9 percent to $42.4 million compared to $46.5 million for the same period in 2015. Retail sales for the fourth quarter were $13.7 million compared to $13.5 million for the same period last year. Military segment sales for the fourth quarter increased 106.4 percent to $10.9 million compared to $5.3 million in the fourth quarter of 2015.

Gross margin in the fourth quarter of 2016 was $21.8 million, or 32.5 percent of sales, compared to $22.2 million, or 33.9 percent of sales, for the same period last year. The 140 basis point decrease was driven by the higher percentage of military sales, which carry lower gross margins than wholesale and retail.

Selling, general and administrative (SG&A) expenses were $19.9 million compared to $20.2 million a year ago. The $0.3 million decrease in SG&A expenses was due primarily to lower compensation and lower advertising expenses, offset primarily by a $1.8 million increase in bad debt expense compared to a year ago. As a percent of sales, SG&A decreased 120 basis points to 29.8 percent of net sales compared to 31 percent sales last year.

Income from operations, excluding the aforementioned non-cash impairment charge, was $1.8 million, or 2.8 percent of net sales, compared to $1.9 million, or 3 percent of net sales, a year ago.

Interest expense was $157,000, compared to $167,000 for the fourth quarter of 2015.

The company’s funded debt decreased 38.5 percent, or $9.1 million, to $14.6 million at December 31, 2016 versus $23.7 million at December 31, 2015.

Inventory decreased 10.2 percent, or $7.8 million, to $69.2 million at December 31, 2016 compared with $77 million on the same date a year ago.

Photo courtesy Rocky Braqnds