Rocky Brands, Inc. reported Q1 sales slid 1.9% to $60.5 million from $61.7 million a year ago. Net income was $0.3 million, or 4 cents a share, versus net income of $0.8 million, or 14 cents, a year ago. The first quarter of fiscal 2007 included a one-time, after-tax reimbursement of expenses from the military of $0.4 million, or 7 cents a share.
Mike Brooks, chairman and chief executive officer, commented, “Our first quarter results were in-line with our internal forecasts. In light of the challenging retail environment here in the U.S. we are encouraged by our recent performance particularly the double digit sales increase for our Lehigh retail business, as well as the continued market share gains for our licensed brand Dickies. We are also pleased with our progress toward controlling production costs and believe we are on track to deliver improved profitability this year. We move ahead focused on achieving our near-term objectives and committed to better positioning our Company for long-term sales and earnings growth.”
First Quarter Results
Net sales for the first quarter decreased to $60.5 million compared to $61.7 million a year ago. The decrease was attributable to a decline in wholesale sales offset by increases in retail sales and sales to the U.S. military.
Gross profit in the first quarter of 2008 was $25.9 million, or 42.9% of sales compared to $26.1 million, or 42.3% for the same period last year. It is important to note that gross profit for the first quarter of last year included a one-time, pre-tax reimbursement of expenses from the military of $0.7 million. Excluding the reimbursement, gross margin was 41.2% in the first quarter of fiscal 2007. The year-over-year improvement in gross margin was primarily due to an increase in sales price per unit and a decrease in manufacturing costs.
Selling, general and administrative (SG&A) expenses were $23.1 million, or 38.1% of sales, for the first quarter of 2008 compared to $22.3 million, or 36.2% of sales, a year ago. The increase in SG&A expenses was driven by additional selling and distribution expenses to support the growth of the retail division.
Income from operations was $2.9 million, or 4.8% of net sales, for the period compared to $3.8 million, or 6.1% of net sales, in the prior year. Excluding the aforementioned pre-tax reimbursement of $0.7 million from the military, income from operations a year ago was $3.1 million, or 5.0% of sales.
Funded Debt and Interest Expense
The Companys funded debt at March 31, 2008 was $94.1 million versus $89.9 million at March 31, 2007. Interest expense decreased to $2.4 million for the first quarter of 2008 versus $2.5 million for the same period last year.
Inventory
Inventory increased $8.0 million, or 11.2%, to $79.8 million at March 31, 2008 compared with $71.8 million on the same date a year ago. The increase in inventory is to support the expected growth in the retail division.
Rocky, based in Nelsonville, OH, makes footwear and apparel marketed under names including Rocky Outdoor Gear, Georgia Boot, Durango, Lehigh, and the licensed brands Dickies, Zumfoot and Michelin.
