Rocky Brands, Inc. said net sales for the third quarter ended Sept. 30 were $66.6 million versus net sales of $72.5 million in the third quarter of 2008. The company’s earnings before income taxes increased 53.4% to $4.4 million in third quarter 2009 compared to $2.9 million in the same period last year.


Net earnings increased 17.2% to $2.8 million, or 50 cents per diluted share versus net earnings of $2.4 million, or 43 cents per diluted share a year ago. In the third quarter of 2008, the company received a one-time prior year tax benefit of approximately $0.6 million, or 10 cents per diluted share. Excluding this one-time benefit, third quarter 2009 diluted EPS increased 51.5% to 50 cents compared to 33 cents in the third quarter of 2008.

Mike Brooks, Chairman and CEO, commented, “We are very pleased with our third quarter performance. Our recent results reflect the steps we have taken over the last 18 months to reduce expenses and improve efficiency in order to enhance our profitability and strengthen our balance sheet. For the fifth consecutive quarter we lowered our operating expenses double digits on a percentage basis as we continue to remove costs from our retail division by transitioning more customer transactions to the internet. At the same time, our ability to more effectively manage our inventory levels and receivables decreased borrowings under our credit facility and lowered our interest expense by 14%. Equally important, we began to see some stabilization of our sales base with several of our wholesale categories – Hunting, Western, and Duty – reporting positive gains. With inventories at retailers relatively clean, we are optimistic we will continue to benefit from a higher frequency of reorders and we are confident that we can deliver improved profitability year-over-year during the fourth quarter.”


Third Quarter Review


Net sales for the third quarter decreased to $66.6 million compared to $72.5 million a year ago. Wholesale sales for the third quarter decreased 2.1% to $54.5 million compared to $55.6 million for the same period in 2008. Retail sales for the third quarter were $11.5 million compared to $15.3 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 third quarter were $0.6 million versus $1.6 million for the same period in 2008. Third quarter 2009 military sales include the initial shipments of insulated boots under the $29 million blanket purchase agreement the company received from the General Services Administration (GSA) in July 2009.

Gross margin in the third quarter of 2009 was $24.7 million, or 37.1% of sales compared to $27.1 million, or 37.4% for the same period last year.


Selling, general and administrative (SG&A) expenses decreased $3.4 million or 15.4% to $18.6 million, or 27.9% of sales for the third quarter of 2009 compared to $22.0 million, or 30.3% of sales, a year ago. The decrease in SG&A expenses was primarily the result of a reduction in salaries & benefits, freight, Lehigh mobile store expenses and tradeshow expenses.


Income from operations increased $1.0 million, or 19.8% to $6.1 million, or 9.2% of sales for the period compared to income from operations of $5.1 million, or 7.1% sales in the prior year.


Interest expense decreased $0.3 million or 14.4% to $2.0 million for the third quarter of 2009 versus $2.3 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 $24.1 million, or 22.4% to $83.4 million at September 30, 2009 versus $107.6 million at September 30, 2008.


Inventory decreased $15.3 million, or 18.3%, to $68.1 million at Sept. 30, 2009 compared with $83.3 million on the same date a year ago.


The company’s accounts receivable decreased 19.8% to $58.3 million at September 30, 2009 versus $72.7 million at Sept. 30, 2008.