Rocky Shoes & Boots, Inc. reported net income for the three months ended September 30, 2003 increased 45.2% to
$3.5 million for the third quarter 2003 from $2.4 million a year ago. Net income per diluted share was $0.77 for the quarter versus $0.52 for same period last year.
Mike Brooks, Chairman and Chief Executive Officer, commented, “The record
third quarter results reflect strong sales of our branded products as well as
increased benefits from sourced manufacturing. Branded products introduced
during the past year have been well received and have further strengthened
demand for our growing lines of footwear, clothing and accessories.”
Net sales increased 35.8% to $41.3 million for the three months ended
September 30, 2003 from $30.5 million for the same period last year. The
third quarter growth was primarily due to $5.4 million of GATES(R) branded
sales, a 21.0% increase in ROCKY(R) branded footwear sales, and higher sales
of ROCKY(R) Outdoor Gear, which more than doubled, compared to the same period
a year ago.
Gross profit was a record $13.1 million or 31.6% of net sales for the
third quarter 2003 versus $8.9 million or 29.1% of net sales the prior year.
The principal factor contributing to the record gross profit margin was an
increase in sourced products, which were 73% of net sales for the third
quarter 2003 versus 57% for the same period last year.
Selling, general and administrative (“SG&A”) expenses were $7.6 million,
or 18.4% of net sales, for the three months ended September 30, 2003 versus
$5.1 million, or 16.8% of net sales, the prior year. The quarter-over-quarter
difference is primarily attributable to higher incentive compensation accruals
due to increased profits, higher commissions paid as a result of the increase
in net sales, and costs to develop and launch recent product introductions.
Income from operations increased to $5.5 million or 13.2% of net sales for
the third quarter from $3.7 million or 12.3% a year ago.
Funded debt was $41.3 million at September 30, 2003 compared with
$29.5 million on the same date last year. Historically, the Company's funded
debt is highest at the end of the third quarter due to significant shipments
during the quarter for the fall and winter seasons. The increase in funded
debt at September 30, 2003 compared to last year was principally due to
borrowings for the purchase of certain assets of GATES(R) and the Company's
share repurchase program earlier this year, as well as additional inventory to
support sales growth.
Inventory was $42.2 million at September 30, 2003 compared with
$30.3 million on the same date a year ago. The increase in inventory is to
support sales of branded products, including new styles introduced during 2003
and inventory to support sales of GATES(R) branded products. The GATES(R)
brand was purchased in the second quarter of 2003.
Net sales and net income for the nine months ended September 30, 2003 were
a record for the year-to-date period. Net sales increased 21.4% to
$77.0 million compared with $63.4 million for the same period last year led by
a solid increase in branded product sales versus a year ago. Gross margin
rose to 30.3% of net sales for the first nine months of 2003 versus 25.4% a
year ago, due to an increase in sourced product sales to 65.5% of net sales
compared with 46.6% for the same period last year and no sales to the U.S.
military. SG&A expenses were 21.9% of net sales versus 21.4% of net sales the
prior year. The higher SG&A expenses for the year-to-date period are
primarily attributable to higher incentive compensation accruals due to
increased profits and higher commissions paid related to the increase in net
sales. Income from operations more than doubled to 8.4% of net sales from
4.1% of net sales last year. Net income was $3.9 million, or $0.88 per
diluted share, for the 2003 year-to-date period compared with $1.3 million, or
$0.28 per diluted share, in 2002.
Based on the strong year-to-date performance, the Company anticipates that
net sales for the year 2003 will be approximately $105 million, which are
$5 million above previous guidance and $16 million above last year. This
expectation is based on current orders, sell-through at retail, and initial
shipments of military boots in December 2003. The Company's fourth quarter
results are influenced by re-orders, especially for rugged outdoor footwear,
clothing and accessories, which can be significantly affected by weather and
retail conditions.
If the Company achieves net sales of at least $105 million for the year
2003, net income is expected to be approximately $1.23 per diluted share for
the year compared with prior guidance of at least $1.05 per diluted share, and
$0.62 per diluted share for the year 2002. The Company cautions investors
that the fiscal 2003 net sales and earnings outlook is based on present market
conditions. If net sales do not reach $105 million, actual earnings may be
less than this revised guidance.
Rocky Shoes & Boots, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
NET SALES $41,349,824 $30,453,543 $76,967,913 $63,397,202
COST OF GOODS SOLD 28,264,032 21,601,185 53,681,609 47,266,558
GROSS MARGIN 13,085,792 8,852,358 23,286,304 16,130,644
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES 7,628,958 5,119,050 16,823,883 13,535,584
INCOME FROM
OPERATIONS 5,456,834 3,733,308 6,462,421 2,595,060
OTHER INCOME AND
(EXPENSES):
Interest expense (437,241) (422,366) (946,859) (1,038,434)
Other -- net (18,744) 102,168 161,359 269,197
Total other -- net (455,985) (320,198) (785,500) (769,237)
INCOME BEFORE INCOME
TAX BENEFIT 5,000,849 3,413,110 5,676,921 1,825,823
INCOME TAX 1,533,254 1,024,933 1,736,076 547,747
NET INCOME $3,467,595 $2,388,177 $3,940,845 $1,278,076
NET INCOME/(LOSS)
PER SHARE
Basic $0.84 $0.53 $0.94 $0.28
Diluted $0.77 $0.52 $0.88 $0.28
