Rocky Brands, Inc. announced financial results for its fourth quarter and fiscal year ended December 31, 2013.
Fourth Quarter 2013 Sales and Income
Fourth quarter net sales increased 5.7% to $61.6 million, which included zero revenue from the Creative Recreation acquisition that closed on December 13, 2013, versus net sales of $58.3 million in the fourth quarter of 2012. The Company reported fourth quarter net income of $1.8 million, or $0.24 per diluted share compared with net income of $2.5 million, or $0.34 per diluted share in the fourth quarter of 2012.
The fourth quarter of 2013 included a one-time expense of $1.0 million and a one-time gain of $0.6 million related to the acquisition of Creative Recreation. Also included in the fourth quarter of 2013 were expenses of $172,000 associated with the ongoing operations of Creative Recreation. Excluding all expenses and income related to Creative Recreation, fourth quarter 2013 net income was $2.2 million, or $0.29 per diluted share.
Fiscal Year 2013 Sales and Income
For fiscal year 2013, net sales increased 7.1% to $244.9 million versus net sales of $228.5 million in fiscal year 2012. The Company reported net income of $7.4 million, or $0.98 per diluted share, for fiscal year 2013, compared with net income of $8.9 million, or $1.18 per diluted share, for fiscal 2012. Excluding the aforementioned expenses and income related to Creative Recreation, fiscal year 2013 net income was $7.9 million, or $1.04 per diluted share.
David Sharp, President and Chief Executive Officer, commented, “We finished 2013 with a strong performance from our work category which benefited from cold, snowy conditions across much of the U.S. during the fourth quarter. Despite a difficult holiday season for less weather sensitive footwear categories, we experienced solid demand for the Durango brand as consumers continue to respond positively to our broader product offering.
While the overall retail environment remains challenging, we are optimistic about our prospects in 2014. The addition of Creative Recreation is an exciting new growth vehicle that we are confident will over time benefit from our operational and supply chain capabilities. At the same time, we believe there are opportunities to expand our market share in work, western and outdoor through compelling new product introductions and further evolving our direct to consumer channel.”
Fourth Quarter Review
Net sales for the fourth quarter increased 5.7% to $61.6 million compared to $58.3 million a year ago. Wholesale sales for the fourth quarter were $47.7 million compared to $46.2 million for the same period in 2012. The $1.5 million increase was driven by a $3.8 million or 9.0% increase in footwear sales partially offset by a $2.3 million decrease in apparel sales. The decrease in apparel sales was the result of the Company’s decision to transition some apparel to a licensing model in early 2013.
Retail sales for the fourth quarter increased to $12.9 million compared to $12.0 million for the same period last year. Military segment sales for the fourth quarter increased to $1.0 million compared to no military sales in the fourth quarter of 2012.
Gross margin in the fourth quarter of 2013 was $21.8 million, or 35.4% of sales, compared to $20.9 million, or 36.0% of sales, for the same period last year. The 60 basis point decrease was driven by increased military sales versus the year ago period, which carry lower gross margins.
Selling, general and administrative (SG&A) expenses, excluding the aforementioned expense associated with the ongoing operations of Creative Recreation, were $18.4 million, or 29.9% of net sales, for the fourth quarter of 2013 compared to $16.8 million, or 28.8% of net sales, a year ago. The 110 basis point increase in SG&A as a percent of net sales was driven primarily by the reversal of incentive compensation accruals in the fourth quarter of 2012.
Income from operations, excluding the aforementioned expenses associated with the acquisition and ongoing operations of Creative Recreation was $3.4 million, or 5.6% of net sales, compared to $4.1 million, or 7.1% of net sales, a year ago.
Interest expense was $0.2 million for the fourth quarter of 2013, versus $0.2 million for the same period last year.
The Company’s funded debt was $38.4 million at December 31, 2013 versus $23.5 million at December 31, 2012, with the majority of the increase related to additional borrowings to fund the acquisition of Creative Recreation.
Inventory increased 16.3% or $11.0 million to $78.2 million at December 31, 2013 compared with $67.2 million on the same date a year ago. Inventory at December 31, 2013 included approximately $1.0 million associated with the acquisition of Creative Recreation.
