Rocky Shoes & Boots, Inc. announced record financial results for the first quarter ended March 31, 2005. Net sales increased 181% to a record $61.5 million compared to $21.9 million for the corresponding period a year ago. Net income rose to a record $1.1 million versus net income of $0.1 million and diluted earnings per share increased to 20 cents per share versus one penny per share last year.
On January 6, 2005, Rocky Shoe & Boots, Inc. completed the acquisition of EJ Footwear Group. The results for the three months ended March 31, 2005 represent the performance of the consolidated company, while the year ago results reflect Rocky Shoe & Boots on a stand-alone basis.
Mike Brooks, chairman and chief executive officer of Rocky Shoes & Boots, stated, “Our record first quarter performance highlights the strength of EJ's portfolio of brands as well as the continued growth of our Rocky branded business. These results reflect our strategic decision to acquire EJ Footwear, which in turn has allowed us to significantly enhance sales and earnings and further reduce the seasonality of our business. We are very pleased with the progress we have made integrating our two organizations and we look forward to taking full advantage of the many synergies that still lie ahead.”
First Quarter Results
Net sales for the first quarter increased 181% to $61.5 million compared to $21.9 million a year ago. The first quarter results reflect the acquisition of EJ Footwear, which contributed $39.9 million in revenue during the three month period ended March 31, 2005.
Gross margin in the first quarter of 2005 increased to $24.2 million, or 39.4% of sales, from $5.6 million or 25.7% of sales, for the same period last year. The 1370 basis point increase was primarily due to sales of EJ Footwear product which carry a higher gross margin than Rocky products, as well as a decrease in shipments to the U.S. military in the first quarter of fiscal 2005 compared to the first quarter of fiscal 2004. Military boots are sold at lower gross margins than branded products.
Selling, general and administrative (SG&A) expenses were $20.7 million, or 33.6% of sales for the first quarter of 2005 compared to $5.3 million, or 24.3% of sales, a year ago. The increase is primarily a result of higher SG&A associated with the EJ Footwear business.
Income from operations increased to $3.5 million or 5.8% of net sales for the period from $0.3 million or 1.3% of net sales in the prior year.
Funded Debt and Interest Expense
The company's funded debt at March 31, 2005 was $98.1 million versus $14.5 million at March 31, 2004. The year-over-year increase was principally due to borrowings under the credit facility to fund the purchase of EJ Footwear. Interest expense increased to $1.9 million for the quarter ended March 31, 2005 versus $0.3 million for same period last year, primarily due to the increase in borrowings.
Inventory
Inventory increased to $69.3 million at March 31, 2005 compared with $35.1 million on the same date a year ago due to the acquisition of EJ Footwear.
Outlook
The company stated it remains comfortable with its previously issued guidance for fiscal 2005 of net sales in the range of $300 million to $305 million and earnings per share in the range of $2.55 to $2.65.
Mr. Brooks concluded, “We have begun fiscal 2005 with positive momentum and solid financial results. We are excited about the opportunities that we have created in the marketplace and move forward dedicated to executing a strategy that will allow us to fully maximize the strength of our assets and expand our business into the future.”
Rocky Shoes & Boots, Inc. and Subsidiaries
Condensed Consolidated Income Statements
Three Months Ended
March 31,
2005 2004
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(Unaudited) (Unaudited)
NET SALES $61,498,084 $21,882,089
COST OF GOODS SOLD 37,290,212 16,263,485
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GROSS MARGIN 24,207,872 5,618,604
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 20,661,683 5,327,691
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INCOME FROM OPERATIONS 3,546,189 290,913
OTHER INCOME AND (EXPENSES):
Interest expense (1,881,210) (258,573)
Other - net (6,630) 74,206
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Total other - net (1,887,840) (184,367)
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INCOME BEFORE INCOME TAX 1,658,349 106,546
INCOME TAX 563,895 34,095
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NET INCOME $1,094,454 $72,451
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NET INCOME PER SHARE
Basic $0.21 $0.02
Diluted $0.20 $0.01
