Rocky Brands, Inc., the parent of the Rocky, Georgia Boot, Durango and Lehigh footwear brands, reported sales the second quarter increased 33.8 percent to $59.4 million versus net sales of $44.4 million for the second quarter of 2012. The company reported net income of $1.8 million, or 24 cents per diluted share, for the second quarter of 2013, versus net income of $0.2 million, or 3 cents per diluted share, for the second quarter of 2012.
For the first six months of 2013, net sales increased 15.8 percent to $113.1 million versus net sales of $97.7 million in the first half of 2012. The company reported net income of $2.7 million, or $0.35 per diluted share, for the first half of 2013, versus net income of $0.9 million, or $0.13 per diluted share, for the first half of 2012.
In the second quarter of 2012, severe storms knocked out power to the company's distribution center in Logan, OH. As a result, approximately $2.5 million of sales shifted from the second quarter of 2012 into the third quarter of 2012 which had a negative impact of approximately $0.06 per share in the second quarter and in the first half of 2012.
“We had a tremendous second quarter with sales and earnings that were well ahead of plan,” said David Sharp, President and Chief Executive Officer. “Our strong performance included sales gains in each of our reporting segments – Wholesale, Retail and Military. In Wholesale, it was especially gratifying to see our work and hunting categories post strong double digit sales increases after successfully navigating through a second consecutive mild winter. At the same time, Durango's momentum accelerated during the second quarter as the brand's western and lifestyle collections collectively were up 68 percent year over year while our commercial military business reversed recent trends to post a high single digit sales gain. In Retail, we continued to see steady progress in transitioning our Lehigh customers to our web based solution. Increased business-to-consumer e-commerce sales also contributed to the improvement in our Retail business. And our Military segment sales increased significantly in the quarter as production ramped up on our current U.S. military contract. With our top-line firing on all cylinders, we were able to drive 410 basis points of operating expense leverage and deliver earnings per share that were up eightfold from a year ago.”
Second Quarter Review
Net sales for the second quarter increased 33.8 percent to $59.4 million compared to $44.4 million a year ago. Wholesale segment sales for the second quarter increased 32.1 percent to $45.8 million compared to $34.7 million for the same period in 2012 driven by strong gains in our work, hunting and western categories. Retail segment sales for the second quarter increased 7.0 percent to $9.8 million compared to $9.1 million for the same period last year with the increase driven by a significant gain in our business-to-consumer e-commerce sales. Military segment sales for the second quarter increased to $3.8 million compared to $0.6 million in the second quarter of 2012.
Gross margin for the second quarter of 2013 was $20.3 million, or 34.2 percent of sales, compared to $15.4 million, or 34.6 percent of sales, for the same period last year. The 40 basis point decrease in our gross margin was driven by increased military segment sales, which carry lower gross margins, partially offset by increased gross margins in our wholesale and retail segments which were up 130 basis points and 20 basis points, respectively.
Selling, general and administrative (SG&A) expenses were $17.4 million, or 29.4 percent of net sales, for the second quarter of 2013 compared to $14.9 million, or 33.5 percent of net sales, a year ago. The 410 basis point improvement in SG&A as a percent of net sales was driven by higher sales. The dollar increase in SG&A was driven by an increase in advertising expenses as well as increases in selling & distribution expenses associated with additional sales.
Income from operations was $2.9 million, or 4.8 percent of net sales, compared to $0.5 million, or 1.0 percent of net sales. The 380 basis point improvement in operating margin was driven by SG&A expense leverage on higher sales, partially offset by the decline in gross margin.
The company's funded debt increased 5.1 percent to $31.4 million at June 30, 2013 versus $29.9 million at June 30, 2012. The increase is primarily due to increased working capital to support increased sales.
Inventory increased 9.6 percent to $81.2 million at June 30, 2013 compared with $74.0 million on the same date a year ago. The increase is primarily attributable to additional inventory to support increased sales.
Rocky Brands makes footwear and apparel marketed under a portfolio of well recognized brand names including Rocky, Georgia Boot, Durango, Lehigh, and the licensed brand Michelin Footwear.
