Rocky Shoes & Boots, Inc. posted a 128% net sales increase for the fourth quarter to a record $74.9 million compared to $32.9 million for the corresponding period a year ago. Net income rose 19% to a record $2.6 million versus net income of $2.2 million last year while diluted earnings per share increased to 46 cents from 43 cents a year ago.
For the full year ended December 31, 2005, net sales increased 124% to a record $296.0 million compared to net sales of $132.2 million for the year ended December 31, 2004. Net income rose 51% to $13.0 million versus net income of $8.6 million a year ago, and diluted earnings per share rose 34% to $2.33 versus $1.74 for the corresponding period last year.
On January 6, 2005, Rocky Shoes & Boots, Inc. completed the acquisition of EJ Footwear Group. The results for the three month and twelve month period ended December 31, 2005 represent the performance of the consolidated company, while the year ago results reflect Rocky Shoes & Boots on a stand-alone basis.
Mike Brooks, Chairman and Chief Executive Officer of Rocky Shoes & Boots, stated: “Fiscal 2005 was an historic period for our company, highlighted by our record sales and profits. During the past 12-months we have made important strides expanding our position in the industry, diversifying our product mix, and broadening our channels of distribution. We also made key investments to our infrastructure and enhanced our operating platform in order to better support our future growth plans. Today, we operate a powerful portfolio of leading brands and we are dedicated to maximizing the prospects for each of them.”
Fourth Quarter Results
Net sales for the fourth quarter increased 128% to $74.9 million compared to $32.9 million a year ago. The fourth quarter results reflect the acquisition of EJ Footwear, which contributed $41.8 million in revenue during the three month period ended December 31, 2005. Wholesale revenues, which include footwear and apparel sales of the company's owned brands, Rocky, Gates, Georgia Boot, and Durango, and footwear sales of the licensed brand Dickies, increased 104% to $51.9 million compared to $25.4 million a year ago. Retail sales, which consist of the company's Lehigh business and company owned store in Nelsonville, Ohio, were $14.3 million compared to $1.7 million of retail sales a year ago. Sales of footwear to the U.S. military increased to $8.7 million compared to $5.7 million in the corresponding period of 2004.
Gross profit in the fourth quarter of 2005 increased to $28.7 million, or 38.4% of sales, from $9.3 million or 28.1% of sales, for the same period last year. The 1030 basis point increase was primarily due to sales of EJ Footwear product which carry a higher gross margin than Rocky products.
Selling, general and administrative (SG&A) expenses were $22.7 million, or 30.3% of sales for the fourth quarter of 2005 compared to $6.6 million, or 20.0% of sales, a year ago. The increase was primarily a result of higher SG&A associated with the EJ Footwear business.
Income from operations increased to $6.0 million or 8.0% of net sales for the period from $2.7 million or 8.2% of net sales in the prior year.
Fiscal 2005 Year-End Results
Net sales for the fiscal year ended December 31, 2005 increased 124 % to $296.0 million compared to $132.2 million a year ago. The fiscal 2005 results reflect the acquisition of EJ Footwear, which contributed $163.4 million in revenue during the 12-month period ended December 31, 2005. Wholesale revenues, which include footwear and apparel sales of the Company's owned brands, Rocky, Gates, Georgia Boot, and Durango, and footwear sales of the licensed brand Dickies, increased 91% to $209.9 million in fiscal 2005 compared to $109.7 million in fiscal 2004. Retail sales, which consist of the Company's Lehigh business and company owned store in Nelsonville, Ohio, were $58.4 million compared to $4.0 million of retail sales last year. Sales of footwear to the U.S. military increased to $27.7 million compared to $18.5 million in the corresponding period of 2004.
Gross profit increased to $112.2 million, or 37.9% of sales, from $38.6 million or 29.2% of sales, for the same period last year. The 870 basis point increase was primarily due to sales of EJ Footwear product which carry a higher gross margin than Rocky products.
Selling, general and administrative (SG&A) expenses were $84.1million, or 28.4% of sales compared to $25.6 million, or 19.4% of sales, a year ago. The increase was primarily a result of higher SG&A associated with the EJ Footwear business.
Income from operations increased to $28.1 million or 9.5% of net sales versus $13.0 million or 9.8% of net sales in the prior year.
Funded Debt and Interest Expense
The company's funded debt at December 31, 2005 was $105.4 million versus $16.5 million at December 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 $2.7 million for the fourth quarter of fiscal 2005, versus $0.4 million for same period last year and to $9.3 million for the 12-month period ended December 31, 2005, versus $1.3 million for the same period last year. These increases were primarily due to the increase in borrowings.
Inventory
Inventory increased to $75.4 million at December 31, 2005 compared with $33.0 million on the same date a year ago, primarily due to the acquisition of EJ Footwear.
Outlook
The company stated it remains comfortable with its previously updated guidance for fiscal 2006. The company expects revenues to be in the range of $287 million to $292 million, and diluted earnings per share to be in the range of $2.28 to $2.38, including a non-cash charge of approximately 7 cents per share related to stock option expensing. Excluding stock option expensing, the company expects diluted earnings per share to be in the range of $2.35 to $2.45. It is important to note that the company's guidance for fiscal 2006 does not include any footwear sales to the military compared to approximately $27.7 million in fiscal 2005.
Mr. Brooks concluded, “As we begin fiscal 2006, our entire organization is completely focused on successfully executing our strategic plan. While we are pleased with our recent achievements, we believe we have just begun to scratch the surface in terms of our full potential. We move forward with a management team committed to capitalizing on the many opportunities we have created and returning significant value to our shareholders.”
Rocky Shoes & Boots, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- --------------------------
2005 2004 2005 2004
------------ ---------- ------------- ------------
(Unaudited) (Unaudited) (Unaudited)
NET SALES $74,917,107 $32,879,993 $296,022,614 $132,248,963
COST OF GOODS
SOLD 46,170,755 23,628,933 183,820,868 93,606,600
----------- ----------- ----------- -----------
GROSS MARGIN 28,746,352 9,251,060 112,201,746 38,642,363
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES 22,719,849 6,570,413 84,137,378 25,617,944
----------- ----------- ----------- -----------
INCOME FROM
OPERATIONS 6,026,503 2,680,647 28,064,368 13,024,419
OTHER INCOME AND
(EXPENSES):
Interest expense (2,739,554) (375,524) (9,256,867) (1,328,575)
Other - net 215,788 333,074 464,385 374,548
----------- ----------- ----------- -----------
Total other -
net (2,523,766) (42,450) (8,792,482) (954,027)
INCOME BEFORE
INCOME TAXES 3,502,737 2,638,197 19,271,886 12,070,392
INCOME TAX EXPENSE 896,683 451,437 6,258,047 3,476,000
----------- ----------- ----------- -----------
NET INCOME $2,606,054 $2,186,760 $13,013,839 $8,594,392
=========== =========== =========== ===========
NET INCOME PER
SHARE
Basic $0.49 $0.47 $2.48 $1.89
Diluted $0.46 $0.43 $2.33 $1.74
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING
Basic 5,326,438 4,635,958 5,257,616 4,557,283
=========== =========== =========== ===========
Diluted 5,626,473 5,035,424 5,584,857 4,953,529
=========== =========== =========== ===========
