| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Ohio (State or Other Jurisdiction of Incorporation or Organization) |
31-1364046 (I.R.S. Employer Identification No.) |
2
| June 30, 2005 | December 31, 2004 | June 30, 2004 | ||||||||||
| Unaudited | Unaudited | |||||||||||
ASSETS: |
||||||||||||
CURRENT ASSETS: |
||||||||||||
Cash and cash equivalents |
$ | 1,015,645 | $ | 5,060,859 | $ | 492,408 | ||||||
Trade
receivables — net |
56,654,184 | 27,182,198 | 27,422,370 | |||||||||
Other receivables |
1,365,390 | 1,114,959 | 863,709 | |||||||||
Inventories |
85,410,975 | 32,959,124 | 38,641,868 | |||||||||
Deferred income taxes |
1,297,850 | 230,151 | 959,810 | |||||||||
Income tax receivable |
2,264,531 | |||||||||||
Prepaid expenses |
1,530,587 | 588,618 | 1,105,070 | |||||||||
Total current assets |
147,274,631 | 69,400,440 | 69,485,235 | |||||||||
FIXED ASSETS
— net |
23,139,177 | 20,179,486 | 19,055,324 | |||||||||
DEFERRED PENSION ASSET |
1,347,824 | 1,347,824 | 1,499,524 | |||||||||
IDENTIFIED INTANGIBLES |
47,232,076 | 2,561,427 | 2,677,892 | |||||||||
GOODWILL |
20,432,550 | 1,557,861 | 1,557,861 | |||||||||
OTHER ASSETS |
4,293,066 | 1,658,616 | 436,929 | |||||||||
TOTAL ASSETS |
$ | 243,719,324 | $ | 96,705,654 | $ | 94,712,765 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: |
||||||||||||
CURRENT LIABILITIES: |
||||||||||||
Accounts payable |
$ | 17,626,282 | $ | 4,349,248 | $ | 6,829,747 | ||||||
Current
maturities — long term debt |
6,384,242 | 6,492,020 | 518,226 | |||||||||
Accrued expenses: |
||||||||||||
Income taxes |
814,831 | 45,064 | ||||||||||
Taxes — other |
587,405 | 422,692 | 491,828 | |||||||||
Salaries and wages |
2,094,912 | 1,295,722 | 988,107 | |||||||||
Plant closing costs |
63,228 | |||||||||||
Other |
4,338,834 | 1,228,708 | 636,805 | |||||||||
Total current liabilities |
31,846,506 | 13,788,390 | 9,573,005 | |||||||||
LONG TERM DEBT – less current maturities |
104,336,905 | 10,044,544 | 21,493,872 | |||||||||
DEFERRED INCOME TAXES |
18,527,196 | 1,205,814 | 262,907 | |||||||||
DEFERRED LIABILITIES |
1,326,347 | 296,108 | 1,962,160 | |||||||||
TOTAL LIABILITIES |
156,036,954 | 25,334,856 | 33,291,944 | |||||||||
SHAREHOLDERS’ EQUITY: |
||||||||||||
Common stock, no par value;
10,000,000 shares authorized; issued and
outstanding June 30, 2005 - 5,284,725; December
31, 2004 - 4,694,670; June 30, 2004 - 4,587,476 |
50,623,315 | 38,399,114 | 36,396,070 | |||||||||
Accumulated other comprehensive loss |
(889,564 | ) | (1,077,586 | ) | (1,950,400 | ) | ||||||
Retained earnings |
37,948,619 | 34,049,270 | 26,975,151 | |||||||||
Total shareholders’ equity |
87,682,370 | 71,370,798 | 61,420,821 | |||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 243,719,324 | $ | 96,705,654 | $ | 94,712,765 | ||||||
3
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
NET SALES |
$ | 65,519,637 | $ | 27,433,987 | $ | 127,017,721 | $ | 49,316,076 | ||||||||
COST OF GOODS SOLD |
39,796,398 | 19,657,778 | 77,086,610 | 35,921,263 | ||||||||||||
GROSS MARGIN |
25,723,239 | 7,776,209 | 49,931,111 | 13,394,813 | ||||||||||||
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES |
19,484,789 | 5,396,376 | 40,146,472 | 10,724,067 | ||||||||||||
INCOME FROM OPERATIONS |
6,238,450 | 2,379,833 | 9,784,639 | 2,670,746 | ||||||||||||
OTHER INCOME AND (EXPENSES): |
||||||||||||||||
Interest expense |
(2,115,578 | ) | (274,868 | ) | (3,994,170 | ) | (533,441 | ) | ||||||||
Other — net |
126,887 | 24,182 | 117,639 | 98,388 | ||||||||||||
Total other — net |
(1,988,691 | ) | (250,686 | ) | (3,876,531 | ) | (435,053 | ) | ||||||||
INCOME BEFORE INCOME TAXES |
4,249,759 | 2,129,147 | 5,908,108 | 2,235,693 | ||||||||||||
INCOME TAX EXPENSE |
1,444,864 | 681,325 | 2,008,759 | 715,420 | ||||||||||||
NET INCOME |
$ | 2,804,895 | $ | 1,447,822 | $ | 3,899,349 | $ | 1,520,273 | ||||||||
NET INCOME PER SHARE |
||||||||||||||||
Basic |
$ | 0.53 | $ | 0.32 | $ | 0.75 | $ | 0.34 | ||||||||
Diluted |
$ | 0.50 | $ | 0.29 | $ | 0.70 | $ | 0.31 | ||||||||
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING |
||||||||||||||||
Basic |
5,244,395 | 4,557,954 | 5,204,107 | 4,492,989 | ||||||||||||
Diluted |
5,625,169 | 5,003,956 | 5,589,643 | 4,949,805 | ||||||||||||
4
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2005 | 2004 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 3,899,349 | $ | 1,520,273 | ||||
Adjustments to reconcile net income to net cash used
in operating activities: |
||||||||
Depreciation and amortization |
2,523,105 | 1,558,687 | ||||||
Deferred compensation and pension |
553,158 | |||||||
Deferred income taxes |
(16,118 | ) | 334,567 | |||||
Loss on disposal of fixed assets |
37,431 | |||||||
Stock issued as directors’ compensation |
60,000 | 50,000 | ||||||
Change in assets and liabilities, (net of effect of acquisition): |
||||||||
Receivables |
(290,197 | ) | (7,923,661 | ) | ||||
Inventories |
(17,778,307 | ) | (573,681 | ) | ||||
Other current assets |
2,048,502 | (59,832 | ) | |||||
Other assets |
166,897 | (214,951 | ) | |||||
Accounts payable |
7,721,322 | 3,837,559 | ||||||
Accrued and other liabilities |
42,425 | (2,845,538 | ) | |||||
Net cash used in operating activities |
(1,032,433 | ) | (4,316,577 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchase of fixed assets |
(2,660,940 | ) | (2,782,106 | ) | ||||
Acquisition of business |
(92,916,237 | ) | ||||||
Net cash used in investing activities |
(95,577,177 | ) | (2,782,106 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Proceeds from revolving credit facility (net) |
47,988,443 | 4,241,638 | ||||||
Proceeds from long-term debt |
48,000,000 | |||||||
Repayments of long-term debt |
(1,803,860 | ) | (275,468 | ) | ||||
Debt financing costs |
(2,310,550 | ) | ||||||
Proceeds from exercise of stock options |
690,363 | 1,465,871 | ||||||
Net cash provided by financing activities |
92,564,396 | 5,432,041 | ||||||
DECREASE IN CASH AND CASH EQUIVALENTS |
(4,045,214 | ) | (1,666,642 | ) | ||||
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD |
5,060,859 | 2,159,050 | ||||||
CASH AND CASH EQUIVALENTS,
END OF PERIOD |
$ | 1,015,645 | $ | 492,408 | ||||
5
| 1. | INTERIM FINANCIAL REPORTING | |
| In the opinion of management, the accompanying interim unaudited condensed consolidated financial statements reflect all adjustments which are necessary for a fair presentation of the financial results. All such adjustments reflected in the unaudited interim consolidated financial statements are considered to be of a normal and recurring nature. The results of the operations for the three-month periods and six-month periods ended June 30, 2005 and 2004 are not necessarily indicative of the results to be expected for the whole year. Accordingly, these consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. | ||
| The Company accounts for its stock option plans in accordance with APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for all stock option plans been determined consistent with the SFAS No. 123, “Accounting for Stock Based Compensation,” the Company’s net income and earnings per share would have resulted in the pro forma amounts as reported below. |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Net income as reported |
$ | 2,804,895 | $ | 1,447,822 | $ | 3,899,349 | $ | 1,520,273 | ||||||||
Deduct: Stock based employee
compensation expense
determined under fair
value based method for
all awards, net of tax |
231,708 | 276,830 | 463,416 | 429,845 | ||||||||||||
Pro forma net income |
$ | 2,573,187 | $ | 1,170,992 | $ | 3,435,933 | $ | 1,090,428 | ||||||||
Earnings per share: |
||||||||||||||||
Basic — as reported |
$ | 0.53 | $ | 0.32 | $ | 0.75 | $ | 0.34 | ||||||||
Basic — pro forma |
$ | 0.49 | $ | 0.26 | $ | 0.66 | $ | 0.24 | ||||||||
Diluted — as reported |
$ | 0.50 | $ | 0.29 | $ | 0.70 | $ | 0.31 | ||||||||
Diluted — pro forma |
$ | 0.46 | $ | 0.23 | $ | 0.61 | $ | 0.22 | ||||||||
| The pro forma amounts are not representative of the effects on reported net income for future years. |
6
| 2. | INVENTORIES | |
| Inventories are comprised of the following: |
| June 30, 2005 | December 31, 2004 | June 30, 2004 | ||||||||||
Raw materials |
$ | 10,865,761 | $ | 4,711,014 | $ | 6,949,144 | ||||||
Work-in-process |
1,191,299 | 564,717 | 1,469,094 | |||||||||
Finished goods |
72,955,072 | 26,565,240 | 28,878,360 | |||||||||
Factory outlet finished goods |
1,383,191 | 1,268,153 | 1,570,270 | |||||||||
Reserve for obsolescence or
lower of cost or market |
(984,348 | ) | (150,000 | ) | (225,000 | ) | ||||||
Total |
$ | 85,410,975 | $ | 32,959,124 | $ | 38,641,868 | ||||||
| 3. | SUPPLEMENTAL CASH FLOW INFORMATION | |
| Cash paid for interest and federal, state and local income taxes was as follows: |
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2005 | 2004 | |||||||
Interest |
$ | 3,701,000 | $ | 503,000 | ||||
Federal, state and local
income taxes |
$ | 952,000 | $ | 2,580,000 | ||||
| The Company issued 484,261 common shares valued at $11,473,838, as part of the purchase of the EJ Footwear LLC, Georgia Boot LLC, and HM Lehigh Safety Shoe Co. LLC (the “EJ Footwear Group”) from SILLC Holdings LLC. | ||
| 4. | PER SHARE INFORMATION | |
| Basic earnings per share (EPS) is computed by dividing net income applicable to common shareholders by the basic weighted average number of common shares outstanding during each period. The diluted earnings per share computation includes common share equivalents, when dilutive. There are no adjustments to net income necessary in the calculation of basic and diluted earnings per share. | ||
| A reconciliation of the shares used in the basic and diluted income per common share computation for the three months and six months ended June 30, 2005 and 2004 is as follows: |
7
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Basic weighted average
shares outstanding |
5,244,395 | 4,557,954 | 5,204,107 | 4,492,989 | ||||||||||||
Diluted stock options: |
380,774 | 445,982 | 385,536 | 456,816 | ||||||||||||
Diluted weighted average
shares outstanding |
5,625,169 | 5,003,936 | 5,589,643 | 4,949,805 | ||||||||||||
Anti-diluted weighted average
shares outstanding |
100,000 | 85,000 | 0 | 5,000 | ||||||||||||
| 5. | RECENT FINANCIAL ACCOUNTING STANDARDS | |
| In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” The statement supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” and SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123.” The statement requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. SFAS 123(R) establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair value based measurement method in accounting for share-based payment transactions with employees, except for equity instruments held by employee share ownership plans. SFAS 123(R) applies to all awards granted after the required effective date (the beginning of the first annual reporting period that begins after June 15, 2005 in accordance with the Securities and Exchange Commission’s delay of the original effective date of SFAS 123(R)) and to awards modified, repurchased or canceled after that date. As a result, beginning January 1, 2006, the Company will adopt SFAS 123(R) and begin reflecting the stock option expense determined under fair value based methods in our income statement rather than as pro forma disclosure in the notes to the financial statements. | ||
| In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin Number 107 (“SAB 107”) that provided additional guidance to public companies relating to share-based payment transactions and the implementation of SFAS 123(R), including guidance regarding valuation methods and related assumptions, classification of compensation expense and income tax effects of share-based payment arrangements. | ||
| The Company has not completed its assessment of the impact or method of adoption of SFAS 123(R) and SAB 107. | ||
| 6. | ACQUISITION | |
| On January 6, 2005, the Company completed the purchase of 100% of the issued and outstanding voting limited interests of the EJ Footwear Group from SILLC Holdings LLC. |
8
| The EJ Footwear Group was acquired to expand the Company’s branded product lines, principally occupational products, and provide new channels for the Company’s existing product lines. The aggregate purchase price for the interests of EJ Footwear Group, including closing date working capital adjustments, was $91.3 million in cash plus 484,261 shares of the Company’s common stock valued at $11,473,838. Common stock value was based on the average closing share price during the three days preceding and three days subsequent to the date of the acquisition agreement. | ||
| On January 6, 2005, to fund the acquisition of EJ Footwear Group, the Company entered into a loan and security agreement with GMAC Commercial Finance LLC, refinancing its former $45,000,000 revolving line of credit, for certain extensions of credit (the “Credit Facility”). The Credit Facility is comprised of (i) a five-year revolving credit facility up to a principal amount of $100,000,000 with an interest rate of LIBOR plus two and a half percent (2.5%) or prime plus one percent (1.0%) and (ii) a three-year term loan in the principal amount of $18,000,000 with an interest rate of LIBOR plus three and a quarter percent (3.25%) or prime plus one and three quarters percent (1.75%). The Credit Facility is secured by a first priority perfected security interest in all presently owned and hereafter acquired domestic personal property, subject to specified exceptions. Also, on January 6, 2005, the Company entered into a note agreement (the “Note Purchase Agreement”) with American Capital Financial Services, Inc., as agent, and American Capital Strategies, Ltd., as lender (collectively, “ACAS”), regarding $30,000,000 in six-year Senior Secured Term B Notes with an interest rate of LIBOR plus eight percent (8.0%). The Note Purchase Agreement provides, among other terms, that (i) the ACAS Senior Secured Term B Notes will be senior indebtedness of the Company, secured by essentially the same collateral as the Credit Facility, (ii) such note facility will be “last out” in the event of liquidation of the Company and its subsidiaries, and (iii) principal payments on such note facility will begin in the fourth year of such note facility. | ||
| The purchase price has been allocated to the Company’s tangible and intangible assets and liabilities acquired based upon the fair values and income tax basis as determined by independent appraisals. Goodwill resulting from the transaction can not practicably be allocated between business segments and will not be tax deductible. The purchase price has been allocated as follows: |
Purchase price allocation: |
||||
Cash |
$ | 91,298,435 | ||
Common
shares — 484,261 shares |
11,473,838 | |||
Transaction costs |
1,617,802 | |||
| $ | 104,390,075 | |||
Allocated to: |
||||
Current assets |
$ | 65,899,403 | ||
Fixed assets and other assets |
3,220,733 | |||
Identified intangibles |
44,800,000 | |||
Goodwill |
18,874,689 | |||
Liabilities |
(11,067,250 | ) | ||
Deferred
taxes — long term |
(17,337,500 | ) | ||
| $ | 104,390,075 | |||
9
| Estimated amounts of identified intangibles and goodwill and the related allocation by segment are subject to final allocation based on independent appraisals of fair value of assets acquired and final determination of income tax basis of assets and liabilities. During the second quarter, the Company paid the final adjustment of purchase price of $1,795,435. |
| Gross | Accumulated | Carrying | ||||||||||
| June 30, 2004 (unaudited) | Amount | Amortization | Amount | |||||||||
Trademarks (Wholesale) |
$ | 2,225,887 | $ | 2,225,887 | ||||||||
Patents |
570,227 | $ | 118,221 | 452,006 | ||||||||
Goodwill |
1,649,732 | 91,871 | 1,557,861 | |||||||||
Total Intangibles |
$ | 4,445,846 | $ | 210,092 | $ | 4,235,754 | ||||||
| Gross | Accumulated | Carrying | ||||||||||
| December 31, 2004 | Amount | Amortization | Amount | |||||||||
Trademarks (Wholesale) |
$ | 2,225,887 | $ | 2,225,887 | ||||||||
Patents |
467,336 | $ | 131,796 | 335,540 | ||||||||
Goodwill |
1,649,732 | 91,871 | 1,557,861 | |||||||||
Total Intangibles |
$ | 4,342,955 | $ | 223,667 | $ | 4,119,288 | ||||||
| Gross | Accumulated | Carrying | ||||||||||
| June 30, 2005 (Unaudited) | Amount | Amortization | Amount | |||||||||
Trademarks: |
||||||||||||
Wholesale |
$ | 28,702,080 | $ | 28,702,080 | ||||||||
Retail |
15,100,000 | 15,100,000 | ||||||||||
Patents |
2,905,660 | $ | 375,664 | 2,529,996 | ||||||||
Customer Relationships |
1,000,000 | 100,000 | 900,000 | |||||||||
Goodwill |
20,524,421 | 91,871 | 20,432,550 | |||||||||
Total Intangibles |
$ | 68,232,161 | $ | 567,535 | $ | 67,664,626 | ||||||
| Amortization expense for intangible assets was $170,267 and $6,517 for the three months ended June 30, 2005 and 2004, respectively, and $343,868 and $12,639 for the six months ended June 30, 2005 and 2004, respectively. The weighted average amortization period for patents is six years and for customer relationships is five years. |
Estimate of Aggregate Amortization Expense: |
||||
Year ending December 31, 2005 |
$ | 688,000 | ||
Year ending December 31, 2006 |
688,000 | |||
Year ending December 31, 2007 |
688,000 | |||
Year ending December 31, 2008 |
688,000 | |||
Year ending December 31, 2009 |
688,000 |
| The results of operations of EJ Footwear Group are included in the results of operations of the Company effective January 1, 2005, as management determined that results of operations were not significant and no material transactions occurred during the period from January 1, 2005 to January 6, 2005. |
10
| The following table reflects the unaudited consolidated results of operations on a pro forma basis had EJ Footwear been included in operating results from January 1, 2004. There are no material non-recurring items in the pro forma results of operations. |
| Three Months | Six Months | |||||||
| Ended | Ended | |||||||
| June 30, 2004 | June 30, 2004 | |||||||
Net Sales |
$ | 63,678,760 | $ | 122,964,212 | ||||
Operating Income |
5,013,085 | 8,736,483 | ||||||
Net Income |
$ | 1,936,915 | $ | 2,899,327 | ||||
Net Income Per Share |
||||||||
Basic |
$ | 0.38 | $ | 0.59 | ||||
Diluted |
$ | 0.35 | $ | 0.53 | ||||
| 7. | CAPITAL STOCK | |
| On May 11, 2004, the Company’s shareholders approved the 2004 Stock Incentive Plan. This Stock Incentive Plan includes 750,000 of the Company’s common shares that may be granted for stock options and restricted stock awards. As of June 30, 2005, the Company was authorized to issue 525,935 shares under its existing plans. | ||
| For the six months ended June 30, 2005, options for 103,449 of the Company’s common stock were exercised at an average price of $6.67. | ||
| 8. | RETIREMENT PLANS | |
| Net pension cost of the Company’s plans is as follows: |
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Service cost |
$ | 130,966 | $ | 128,080 | $ | 261,932 | $ | 256,159 | ||||||||
Interest |
132,265 | 90,758 | 264,530 | 252,271 | ||||||||||||
Expected return on assets |
(170,931 | ) | (86,391 | ) | (341,862 | ) | (257,465 | ) | ||||||||
Amortization of unrecognized net loss |
21,404 | 32,141 | 42,808 | 67,552 | ||||||||||||
Amortization of unrecognized transition obligation |
4,077 | 4,076 | 8,154 | 8,153 | ||||||||||||
Amortization of unrecognized prior service cost |
33,848 | 33,849 | 67,696 | 67,697 | ||||||||||||
Net pension cost |
$ | 151,629 | $ | 202,513 | $ | 303,258 | $ | 394,367 | ||||||||
11
| The Company’s unrecognized benefit obligations existing at the date of transition for the non-union plan is being amortized over 21 years. Actuarial assumptions used in the accounting for the plans were as follows: |
| June 30, | ||||||||
| 2005 | 2004 | |||||||
Discount rate |
5.75 | % | 5.75 | % | ||||
Average rate of increase in compensation levels |
3.0 | % | 3.0 | % | ||||
Expected long-term rate of return on plan assets |
8.0 | % | 8.0 | % | ||||
| The Company’s desired investment result is a long-term rate of return on assets that is at least 8%. The target rate of return for the plans have been based upon the assumption that returns will approximate the long-term rates of return experienced for each asset class in the Company’s investment policy. The Company’s investment guidelines are based upon an investment horizon of greater than five years, so that interim fluctuations should be viewed with appropriate perspective. Similarly, the Plan’s strategic asset allocation is based on this long-term perspective. |
| The Company expects to make contributions to the plan in 2005 of approximately $1.0 million. At June 30, 2005, no Company contribution had been made. |
| The Company also sponsors 401(k) savings plans for substantially all of its employees. The Company provides contributions to the plans on a discretionary basis for workers covered under the defined benefits pension plan, and matches eligible employee contributions up to 4% of applicable salary for qualified employees not covered by the defined benefits pension plan. Total Company contributions to 401(k) plans were $0.2 million in 2005 and none in 2004. |
12
| 9. | SEGMENT INFORMATION |
| The Company has identified three reportable segments: Wholesale, Retail and Military. Wholesale includes sales of footwear and accessories to several classifications of retailers including sporting goods stores, outdoor specialty stores, mail order catalogs, independent retailers, mass merchants, retail uniform stores, and specialty safety shoe stores. Retail includes all sales from the Company’s stores and all sales in the Company’s Lehigh division, which includes sales via shoemobiles to individual customers. Military includes sales to the U.S. Military. The following is a summary of segment results for the Wholesale, Retail, and Military segments. |
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
NET SALES: |
||||||||||||||||
Wholesale |
$ | 45,520,269 | $ | 23,981,465 | $ | 87,383,197 | $ | 40,089,142 | ||||||||
Retail |
14,216,418 | 691,143 | 30,111,095 | 1,499,331 | ||||||||||||
Military |
5,782,950 | 2,761,379 | 9,523,429 | 7,727,603 | ||||||||||||
Total Net Sales |
$ | 65,519,637 | $ | 27,433,987 | $ | 127,017,721 | $ | 49,316,076 | ||||||||
GROSS MARGIN: |
||||||||||||||||
Wholesale |
$ | 17,322,197 | $ | 7,194,641 | $ | 32,679,481 | $ | 12,155,897 | ||||||||
Retail |
7,668,139 | 210,631 | 16,026,272 | 416,713 | ||||||||||||
Military |
732,903 | 370,937 | 1,225,358 | 822,203 | ||||||||||||
Total Gross Margin |
$ | 25,723,239 | $ | 7,776,209 | $ | 49,931,111 | $ | 13,394,813 | ||||||||
| For reporting purposes, the Wholesale segment aggregates our footwear manufacturing, sourcing, and Wildwolf operating segments with our apparel, glove, and other operating segments. Segment asset information is not prepared or used to assess segment performance. |
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| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
NET SALES: |
||||||||||||||||
Wholesale |
$ | 45,520,269 | $ | 23,981,465 | $ | 87,383,197 | $ | 40,089,142 | ||||||||
Retail |
14,216,418 | 691,143 | 30,111,095 | 1,499,331 | ||||||||||||
Military |
5,782,950 | 2,761,379 | 9,523,429 | 7,727,603 | ||||||||||||
Total Net Sales |
$ | 65,519,637 | $ | 27,433,987 | $ | 127,017,721 | $ | 49,316,076 | ||||||||
GROSS MARGIN: |
||||||||||||||||
Wholesale |
$ | 17,322,197 | $ | 7,194,641 | $ | 32,679,481 | $ | 12,155,897 | ||||||||
Retail |
7,668,139 | 210,631 | 16,026,272 | 416,713 | ||||||||||||
Military |
732,903 | 370,937 | 1,225,358 | 822,203 | ||||||||||||
Total Gross Margin |
$ | 25,723,239 | $ | 7,776,209 | $ | 49,931,111 | $ | 13,394,813 | ||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Net Sales |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost Of Goods Sold |
60.7 | % | 71.7 | % | 60.7 | % | 72.8 | % | ||||||||
Gross Margin |
39.3 | % | 28.3 | % | 39.3 | % | 27.2 | % | ||||||||
Selling, General and
Administrative Expenses |
29.7 | % | 19.7 | % | 31.6 | % | 21.7 | % | ||||||||
Income From Operations |
9.6 | % | 8.6 | % | 7.7 | % | 5.5 | % | ||||||||
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15
16
17
18
19
20
21
| None |
| The Company recently became aware that the continuous offering of certain units in the Company’s Stock Fund (the “Stock Fund”) of the Company’s 401(k) Plan (the “Retirement Plan”) representing approximately 16,514 shares of the Company’s common stock purchased by the trustee of the Retirement Plan on the open market from time to time had not been registered under the Securities Act of 1933, as amended (the “Act”). Participants in the Retirement Plan had the option to invest defined contributions into the Stock Fund. The Company received no consideration for units purchased by participants in the Stock Fund of the Retirement Plan. While the Company cannot predict the possible effect of federal or state regulatory action, the Company does not believe that the failure to register the offering and sale of these units and the shares will have a material adverse effect on the Company’s financial position or results of operation. |
| None |
| The 2005 Annual Meeting of Shareholders was held on May 17, 2005, and the following proposal was acted upon: |
| Proposal: To elect four Class I Directors of the Company, each to serve for a two-year term expiring at the 2007 Annual Meeting of Shareholders |
| Number of Shares Voted | ||||||||||||
| FOR | WITHHOLD | TOTAL | ||||||||||
| AUTHORITY | ||||||||||||
Mike Brooks |
4,235,040 | 93,009 | 4,328,049 | |||||||||
Glenn E. Corlett |
4,131,068 | 196,981 | 4,328,049 | |||||||||
Harley E. Rouda, Jr. |
4,231,267 | 96,782 | 4,328,049 | |||||||||
James L. Stewart |
4,103,992 | 224,057 | 4,328,049 | |||||||||
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| None |
| EXHIBIT | EXHIBIT | |
| NUMBER | DESCRIPTION | |
10(a)*
|
Executive Employment Agreement, dated as of December 1, 2004, between Georgia Boot LLC and Thomas R. Morrison. | |
31 (a)*
|
Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Chief Executive Officer. | |
31 (b)*
|
Certification pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Chief Financial Officer. | |
32 (a)+
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer. | |
32 (b)+
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer. |
| * | Filed with this report. | |
| + | Furnished with this report. |
23
| ROCKY SHOES & BOOTS, INC. | ||||
Date: August 9, 2005
|
/s/ James E. McDonald | |||
| James E. McDonald, Executive Vice President and | ||||
| Chief Financial Officer* |
| * | In his capacity as Executive Vice President and Chief Financial Officer, Mr. McDonald is duly authorized to sign this report on behalf of the Registrant. |
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