Rocky Brands, Inc. said sales for second quarter ended June 30, 2009 decreased 15.4% to $51.2 million versus net sales of $60.5 million in the second quarter of 2008. The company reported a net loss of $1.4 million, or 25 cents per diluted share, versus net income of $700,000, or 13 cents per diluted share a year ago.



Mike Brooks, Chairman and CEO, commented, “Our operating performance continued to be affected by the difficult retail environment during the second quarter. Sales were down as retailers remained cautious with inventory commitments as the result of decreases in consumer spending and store traffic. Our gross margin was also negatively impacted due to higher closeout sales versus a year ago combined with the deleveraging of our manufacturing costs from lower sales volumes. Importantly, our operating expenses are down over 13%, or nearly $6 million year-to-date and we move forward a much leaner, more efficient organization. Looking ahead, the combination of lower SG&A levels, our current order book, and easier comparisons, has us optimistic that we can deliver improved profitability year-over-year during the second half of 2009.”

Second Quarter Review


Net sales for the second quarter decreased to $51.2 million compared to $60.5 million a year ago. Wholesale sales for the second quarter were $37.9 million compared to $42.5 million for the same period in 2008. The decline in wholesale sales was primarily attributable to lower than expected orders as many accounts are choosing to operate with leaner inventory levels during this challenging economy.


Retail sales for the second quarter were $12.3 million compared to $16.2 million for the same period last year. Retail sales were down year-over-year as a result of the ongoing transition to more internet driven transactions and the decision to remove a portion of our Lehigh mobile stores from operation to help lower costs as discussed below. Military segment sales for the second quarter were $0.9 million versus $1.8 million for the same period in 2008.

Gross margin in the second quarter of 2009 was $17.7 million, or 34.6% of sales compared to $24.4 million, or 40.3% for the same period last year. The decrease in gross margin as a percentage of sales was primarily attributable to higher closeout sales, lower retail sales, which carry a higher gross margin, and increased manufacturing costs versus a year ago.


Selling, general and administrative (SG&A) expenses decreased $2.8 million or 13.4% to $18.1 million, or 35.4% of sales for the second quarter of 2009 compared to $20.9 million, or 34.5% of sales, a year ago. The decrease in SG&A expenses was primarily the result of a reduction in salaries & benefits, freight, sales commissions and Lehigh mobile store expenses.


Loss from operations was $400,000 for the period compared to income from operations of $3.5 million in the prior year.


Interest expense decreased $500,000 or 20.8% to $1.9 million for the second quarter of 2009 versus $2.4 million for the same period last year. The decrease is the result of a reduction in average borrowings combined with lower interest rates compared to the same period last year.


The company’s funded debt decreased $13.9 million, or 13.7% to $87.5 million at June 30, 2009 versus $101.4 million at June 30, 2008.


Inventory decreased $6.2 million, or 7.3%, to $79.3 million at June 30, 2009 compared with $85.5 million on the same date a year ago.

































































































































































































































































































































Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations


(Unaudited)

   
Three Months Ended Six Months Ended
June 30, June 30,
2009   2008 2009   2008
NET SALES  $51,188,615  $60,507,421  $101,253,176  $120,992,137
 
COST OF GOODS SOLD 33,470,943 36,111,328 63,443,016 70,646,379
 
GROSS MARGIN 17,717,672 24,396,093 37,810,160 50,345,758
 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

18,119,173 20,875,459 38,065,301 43,936,946
 
(LOSS)/INCOME FROM OPERATIONS (401,501) 3,520,634 (255,141) 6,408,812
 
OTHER INCOME AND (EXPENSES):
Interest expense (1,936,490) (2,409,515) (3,710,420) (4,816,186)
Other – net 158,023 15,723 33,457 (2,869)
Total other – net (1,778,467) (2,393,792) (3,676,963) (4,819,055)
 
(LOSS)/INCOME BEFORE INCOME TAXES (2,179,968) 1,126,842 (3,932,104) 1,589,757
 
INCOME TAX (BENEFIT)/EXPENSE (785,000) 394,000 (1,416,000) 556,000
 
NET (LOSS)/INCOME  $(1,394,968) $ 732,842 $ (2,516,104) $ 1,033,757
 
NET (LOSS)/INCOME PER SHARE
Basic $ (0.25) $ 0.13 $ (0.45) $ 0.19
Diluted $ (0.25) $ 0.13 $ (0.45) $ 0.19
 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic 5,547,215 5,508,278 5,546,880 5,508,058
Diluted 5,547,215 5,520,625 5,546,880 5,523,265