Rocky Brands, Inc. expects to report net sales of approximately $57 million for the second quarter versus record net sales of $65.5 million in the second quarter of 2005. The company noted that the second quarter of 2005 included approximately $5.8 million of footwear sales to the military compared to zero footwear sales to the military in the second quarter of 2006. The company also expects to report a diluted loss per share of between 5 cents to 10 cents, versus diluted earnings per share of 50 cents last year. Management did not mention if this result would impact the guidance of sales in the range of $287 million to $292 million for 2006 with which it was previously “comfortable.”
Mike Brooks, Chairman and Chief Executive Officer, commented, “Our sales for the second quarter were negatively impacted primarily by weaker than expected results in our outdoor business for the month of June. We continue to experience softness in our traditional camouflage hunting apparel, coupled with challenges in our outdoor footwear, including increased competition and a shift in retail buying patterns. We are working hard to enhance our product assortment and improve our merchandising strategy in order to reinvigorate the top-line performance of our entire outdoor category. Importantly, our work, western and duty businesses combined were up double digits on a percentage basis year-over-year.”
The company also announced that it has refinanced the six-year, $30 million term loan it entered into with American Capital Strategies in January 2005. Rocky Brands stated that it has refinanced $15 million of the term loan with GMAC Commercial Finance at an interest rate of LIBOR plus 3.0% and the remaining $15 million of the term loan with American Capital Strategies at an interest rate of LIBOR plus 6.5%. The interest rate on the original $30 million term loan with American Capital Strategies was at an interest rate of LIBOR plus 8.0%. Because of the refinancing, Rocky Brands will incur a charge of approximately $400,000 or 5 cents per diluted share in the second quarter of 2006 relating to the write off of prepaid financing charges incurred in the initial debt agreement. This charge is included in the company’s expectation of a diluted loss per share of between 5 cents to 10 cents for the second quarter of 2006.
Mr. Brooks continued, “We are very pleased to have refinanced a portion of our debt at more favorable terms, particularly as the recent rise in interest rates has significantly increased our interest expense versus a year ago. We expect to realize net savings of approximately $1.0 million over the life of the loan with the majority of the savings coming in the next two years.”