Rocky Brands, Inc. reported net sales increased 12.3% to $74.8 million for the third quarter ended Sept. 30 compared to net sales of $66.6 million in the third quarter of 2009. Net income for the third quarter of 2010 increased $1.9 million to $4.7 million, or 63 cents per diluted share versus net income of $2.8 million, or 50 cents per diluted share a year ago.

“During the third quarter we continued to experience positive business trends similar to the first six months of 2010 which allowed us once again deliver improved profitability versus the year ago period,” said Mike Brooks, Chairman and Chief Executive Officer. “This included higher sales levels in both our wholesales and military segments, a 40 basis point increase in wholesale gross margin, and better operating expense leverage. We are particularly pleased with our wholesale growth which is being driven by demand for our work footwear. We also recently secured a new credit facility that will further reduce our interest expense approximately $2 million next year and free up capital to expand our business.”

Wholesale sales for the third quarter increased 9.0% to $59.4 million compared to $54.5 million for the same period in 2009. The increase was driven primarily by growth of our work category. Retail sales for the third quarter were $11.1 million compared to $11.5 million for the same period last year. Military segment sales for the third quarter increased to $4.3 million versus $600,000 for the same period in 2009.
Gross margin in the third quarter of 2010 was $27.2 million, or 36.4% of sales compared to $24.7 million, or 37.1% for the same period last year. The 70 basis point decline in gross margin was due to an increase in sales to the Military which carry lower gross margin than the wholesale and retail businesses.
Selling, general and administrative (SG&A) expenses were $19.2 million, or 25.6% of sales for the third quarter of 2010 compared to $18.6 million, or 27.9% of sales a year ago. The increase in SG&A expenses is primarily due to additional selling expenses and incentive accruals, which were partially offset by decreases in other expenses.
Income from operations increased 31.1% to $8.0 million, or 10.7% of net sales for the period compared to operating income of $6.1 million, or 9.2% of net sales in the prior year.
 
Interest expense decreased $1.0 million, or 50.0% to $1.0 million for the third quarter of 2010. The decrease is the result of debt reductions over the past 12 months combined with lower interest rates compared to the same period last year.
The company's funded debt decreased $30.0 million, or 36.0% to $53.4 million at Sept. 30, 2010 versus $83.4 million at Sept. 30, 2009.
Inventory decreased 7.6% to $62.9 million at Sept. 30, 2010 compared with $68.1 million on the same date a year ago.

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

 
Three Months Ended Nine Months Ended
September 30, September 30,
2010   2009 2010   2009
NET SALES $ 74,760,244 $ 66,572,437 $ 186,062,284 $ 167,825,613
 
COST OF GOODS SOLD   47,575,649     41,856,651     121,021,756     105,299,667  
 
GROSS MARGIN 27,184,595 24,715,786 65,040,528 62,525,946
 
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES   19,159,541     18,576,780     53,347,582     56,642,081  
 
INCOME/(LOSS) FROM OPERATIONS 8,025,054 6,139,006 11,692,946 5,883,865
 
OTHER INCOME AND (EXPENSES):
Interest expense (955,033 ) (1,955,485 ) (4,721,176 ) (5,665,905 )
Other – net   246,334     224,442     286,451     257,899  
Total other – net (708,699 ) (1,731,043 ) (4,434,725 ) (5,408,006 )
 
INCOME/(LOSS) BEFORE INCOME TAXES 7,316,355 4,407,963 7,258,221 475,859
 
INCOME TAX EXPENSE/(BENEFIT)   2,634,000     1,626,518     2,613,000     210,518  
 
NET INCOME/(LOSS) $ 4,682,355   $ 2,781,445   $ 4,645,221   $ 265,341  
 
INCOME/(LOSS) PER SHARE
Basic $ 0.63 $ 0.50 $ 0.71 $ 0.05
Diluted $ 0.63 $ 0.50 $ 0.71 $ 0.05