Rocky Brands, Inc. reported earnings in its second quarter slumped to $218,000, or 3 cents a share, from $2.3 million, or 30 cents, a year ago. Revenues were down 15.1 percent to $44.4 million from $52.3 million. Rocky Brands noted that on June 29, severe storms knocked out power to more than 660,000 homes and businesses in Ohio including its distribution center in Logan, OH. As a result of this power outage, Rocky Brands’ shipping capabilities were temporarily suspended which caused approximately $2.5 million of shipments to move from the second quarter into the third quarter.

This had a negative impact of approximately 6 cents per share in the second quarter of 2012.

David Sharp, President and Chief Executive Officer, commented, “We faced a significant challenge at the end of the quarter with the shutdown of our distribution center. Our teams did a great job to ensure that all orders were shipped as soon as possible once power was restored early in July. Excluding the impact from this disruption, our business for the most part performed in-line with expectations however we did experience some softness in our hunting category. We believe this was primarily attributable to retailers buying closer to season and operating with leaner inventory positions compared with past years. Our work, western, and commercial military product lines continue to gain traction with the key retailers in their respective channels as new product introductions are resonating with our target consumers. Equally important, our balance sheet is in good shape with clean inventory levels and funded debt down 24% from a year ago.”

Second Quarter Review

Wholesale sales for the second quarter were $34.7 million compared to $40.8 million for the same period in 2011. The decrease is primarily the result of a reduction in sales in the hunting category as well as the temporary impact from the aforementioned power outage. The decrease in the hunting category is due to retailers buying closer to the season. Retail sales for the second quarter were $9.1 million compared to $10.9 million for the same period last year. Military segment sales for the second quarter were $0.6 million for both the second quarter of 2012 and 2011.

Gross margin in the second quarter of 2012 was $15.4 million, or 34.6% of sales compared to $20.6 million, or 39.4% for the same period last year. The decrease in gross margin was primarily due to an increase in product costs as a result of manufacturing variances in the Company’s production facility.

Selling, general and administrative (SG&A) expenses decreased 11.6% to $14.9 million or 33.5% of net sales, for the second quarter of 2012 compared to $16.9 million, or 32.2% of net sales a year ago. The $2.0 million decrease is primarily due to lower compensation expense, operating costs of our retail business, and lower advertising expenses.

Income from operations was $0.5 million, or 1.0% of net sales, compared to $3.8 million, or 7.2% of net sales, in the prior year period.

Interest expense decreased to $0.1 million for the second quarter of 2012 versus $0.3 million due to lower borrowings versus the same period a year ago.

The Company’s funded debt decreased 24.3% or $9.6 million to $29.9 million at June 30, 2012 versus $39.5 million at June 30, 2011.

Inventory at June 30, 2012 was $74.0 million compared with $74.4 million on the same date a year ago. On a year over year basis footwear units decreased 13.5%.

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, and the licensed brands Michelin and Mossy Oak.