Rocky Brands, Inc. today announced financial results for its second quarter ended June 30, 2008. For the second quarter of 2008, net sales increased 2.9% to $60.5 million versus net sales of $58.8 million in the second quarter of 2007. The company reported net income of $700,000, or 13 cents per diluted share versus a net loss of $1.4 million or 25 cents per diluted share a year ago.
Mike Brooks, Chairman and Chief Executive Officer, commented, “Due largely to more favorable sell-in terms with our retail partners and better utilization of our company owned factories, wholesale gross margins increased 250 basis points. At the same time, we were effective at controlling costs evidenced by the nearly $2.0 million reduction in our operating expenses. These improvements allowed us to realize a significant increase in diluted earnings per share versus a year ago with a modest gain in our top-line.”
Second Quarter Results
Net sales for the second quarter increased to $60.5 million compared to $58.8 million a year ago. Wholesale sales for the second quarter were $42.5 million compared to $41.9 million for the same period in 2007. Retail sales for the second quarter were $16.2 million compared to $16.6 million for the same period in 2007. Military segment sales for the second quarter were $1.8 million, compared to $0.3 million in the same period in 2007.
Gross margin in the second quarter was $24.4 million, or 40.3 percent of sales, compared to $23.9 million or 40.7 percent of sales, for the same period last year. The prior years results included a $0.5 million reimbursement of expenses incurred in prior periods related to a cancelled military contract. Excluding this one-time reimbursement, second quarter 2007 gross margin would have been 40.0 percent. Wholesale gross margin for the second quarter was $15.7 million, or 36.9 percent of net sales, compared to $14.4 million, or 34.4 percent of net sales, in the same period last year. The 250 basis point increase reflects an increase in sales price per unit, as well as a decrease in manufacturing costs resulting from increased operating efficiencies. Retail gross margin for the second quarter was $8.6 million, or 52.8 percent of net sales, compared to $8.9 million, or 53.6 percent of net sales, for the same period in 2007. Military gross margin for the second quarter was $0.2 million, or 8.6 percent of net sales, compared to $0.6 million for the same period in 2007.
Selling, general and administrative (SG&A) expenses decreased 8.4 percent or $1.9 million to $20.9 million, or 34.5 percent of sales, for the second quarter of 2008 compared to $22.8 million, or 38.8 percent of sales, a year ago. The decrease in SG&A expenses is primarily result of reductions in compensation expense and professional fees.
Income from operations increased $2.4 million or 390 basis points to $3.5 million or 5.8 percent of net sales, respectively for the period compared to $1.1 million, or 1.9 percent of net sales, in the prior year.
Funded Debt and Interest Expense
The Companys funded debt at June 30, 2008 was $101.4 million versus $102.7 million at June 30, 2007. Interest expense decreased to $2.4 million for the second quarter of 2008 versus $3.3 million for the same period last year. The decrease in interest expense was primarily due to the write off of prepaid financing costs totaling $0.8 million related to the refinancing of the companys term loans in the second quarter of 2007.
Inventory increased $1.5 million, or 1.9 percent, to $85.5 million at June 30, 2008 compared with $84.0 million on the same date a year ago.