Rocky Brands Inc. (RCKY, Financial) filed Quarterly Report for the period ended 2009-03-31.
Rocky Brands Inc. is a leading designer manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including Rocky Outdoor Gear Georgia Boot Durango Lehigh and the licensed brand Dickies. Rocky Brands Inc. has a market cap of $23.2 million; its shares were traded at around $4.2 with a P/E ratio of 8.6 and P/S ratio of 0.1. Rocky Brands Inc. had an annual average earning growth of 0.8% over the past 5 years.
Gross margin. Gross margin for the three months ended March 31, 2009 was $20.1 million, or 40.1% of net sales, compared to $25.9 million, or 42.9% of net sales, in the same period last year. Wholesale gross margin for the three months ended March 31, 2009 was $13.3 million, or 36.9% of net sales, compared to $16.3 million, or 41.0% of net sales, in the same period last year. The 410 basis point decrease reflects a decrease in sales price per unit for competitive reasons, as well as an increase in manufacturing costs from our company operated facilities. Retail gross margin for the three months ended March 31, 2009 was $6.8 million, or 49.3% of net sales, compared to $9.5 million, or 50.2% of net sales, for the same period in 2008. Military gross margin for the three months ended March 31, 2009 was less than $0.1 million, or 6.7% of net sales, compared to $0.2 million or 10.0% of net sales for the same period in 2008.
SG&A expenses. SG&A expenses were $19.9 million, or 39.8% of net sales, for the three months ended March 31, 2009, compared to $23.1 million, or 38.1% of net sales for the same period in 2008. The net change primarily reflects decreases in compensation and benefits expenses of $1.4 million, advertising expenses of $0.7 million, professional fees of $0.3 million, shipping expenses of $0.3 million and Lehigh mobile store expenses of $0.3 million, partially offset by a $0.3 million increase in bad debt expense.
Interest expense. Interest expense was $1.8 million in the three months ended March 31, 2009, compared to $2.4 million for the same period in the prior year. The decrease of $0.6 million resulted from a reduction in average borrowings combined with lower interest rates compared to the same period last year.
In March 2009, we amended the terms of our revolving credit facility with GMAC Commercial Finance (“GMAC”) which was set to expire on January 5, 2010. The size of the facility was reduced to $85 million from $100 million and the maturity date was extended to April 30, 2012. The financing costs associated with this amendment totaled approximately $1.5 million. The interest rates for the term of this amendment are LIBOR plus 3.75% or prime plus 2.25%, at our option.
Financing Activities. Cash used in financing activities for the three months ended March 31, 2009 was $3.1 million and reflects a decrease in net borrowings under the revolving credit facility of $1.4 million, debt financing costs associated with the amendment of our credit facility with GMAC of $1.5 million and repayments on long-term debt of $0.1 million. Cash used in financing activities for the three months ended March 31, 2008 was $9.4 million and reflects a decrease in net borrowings under the revolving credit facility of $9.3 million and repayments on long-term debt of $0.1 million.
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Rocky Brands Inc. is a leading designer manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including Rocky Outdoor Gear Georgia Boot Durango Lehigh and the licensed brand Dickies. Rocky Brands Inc. has a market cap of $23.2 million; its shares were traded at around $4.2 with a P/E ratio of 8.6 and P/S ratio of 0.1. Rocky Brands Inc. had an annual average earning growth of 0.8% over the past 5 years.
Highlight of Business Operations:
Net sales. Net sales for the three months ended March 31, 2009 were $50.1 million compared to $60.5 million for the same period in 2008. Wholesale sales for the three months ended March 31, 2009 were $36.0 million compared to $39.7 million for the same period in 2008. The $3.7 million decrease in wholesale sales was the result of decreased sales in the majority of our footwear categories and apparel. Retail sales for the three months ended March 31, 2009 were $13.7 million compared to $18.9 million for the same period in 2008. The $5.2 million decrease in retail sales resulted from plant closings and layoffs in the manufacturing sector as the current economic conditions have impacted a significant portion of our retail customer base. In addition, retail sales were negatively impacted by our ongoing transition to more Internet driven transactions and the decision to remove a portion of our Lehigh mobile stores from operations to help lower costs. Military segment sales for the three months ended March 31, 2009, were $0.3 million, compared to $1.8 million in the same period in 2008. Shipments in 2009 were under the $6.4 million contract issued in July 2007.Gross margin. Gross margin for the three months ended March 31, 2009 was $20.1 million, or 40.1% of net sales, compared to $25.9 million, or 42.9% of net sales, in the same period last year. Wholesale gross margin for the three months ended March 31, 2009 was $13.3 million, or 36.9% of net sales, compared to $16.3 million, or 41.0% of net sales, in the same period last year. The 410 basis point decrease reflects a decrease in sales price per unit for competitive reasons, as well as an increase in manufacturing costs from our company operated facilities. Retail gross margin for the three months ended March 31, 2009 was $6.8 million, or 49.3% of net sales, compared to $9.5 million, or 50.2% of net sales, for the same period in 2008. Military gross margin for the three months ended March 31, 2009 was less than $0.1 million, or 6.7% of net sales, compared to $0.2 million or 10.0% of net sales for the same period in 2008.
SG&A expenses. SG&A expenses were $19.9 million, or 39.8% of net sales, for the three months ended March 31, 2009, compared to $23.1 million, or 38.1% of net sales for the same period in 2008. The net change primarily reflects decreases in compensation and benefits expenses of $1.4 million, advertising expenses of $0.7 million, professional fees of $0.3 million, shipping expenses of $0.3 million and Lehigh mobile store expenses of $0.3 million, partially offset by a $0.3 million increase in bad debt expense.
Interest expense. Interest expense was $1.8 million in the three months ended March 31, 2009, compared to $2.4 million for the same period in the prior year. The decrease of $0.6 million resulted from a reduction in average borrowings combined with lower interest rates compared to the same period last year.
In March 2009, we amended the terms of our revolving credit facility with GMAC Commercial Finance (“GMAC”) which was set to expire on January 5, 2010. The size of the facility was reduced to $85 million from $100 million and the maturity date was extended to April 30, 2012. The financing costs associated with this amendment totaled approximately $1.5 million. The interest rates for the term of this amendment are LIBOR plus 3.75% or prime plus 2.25%, at our option.
Financing Activities. Cash used in financing activities for the three months ended March 31, 2009 was $3.1 million and reflects a decrease in net borrowings under the revolving credit facility of $1.4 million, debt financing costs associated with the amendment of our credit facility with GMAC of $1.5 million and repayments on long-term debt of $0.1 million. Cash used in financing activities for the three months ended March 31, 2008 was $9.4 million and reflects a decrease in net borrowings under the revolving credit facility of $9.3 million and repayments on long-term debt of $0.1 million.
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