Rocky boots stock gets kick from military contract, cost c

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Orange and Brown
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Rocky boots stock gets kick from military contract, cost c

Post by Orange and Brown »

WRITTEN BY JIM PHILLIPS
MONDAY, 16 NOVEMBER 2009 10:39

After spending much of this year hovering at around $3 a share, the stock of the Nelsonville-based Rocky Brands shoe and boot company has recently surged upwards to two or three times that price.

Part of the bump can be attributed to a big military contract the company announced in August, in which Rocky agreed to supply up to $29 million worth of insulated boots to the U.S. General Services Administration.

Some of it, however, according to Rocky Chief Financial Officer Jim McDonald, also stems from Rocky’s improved earnings in recent months, due partly to cost-cutting measures, and to the overall recovery in the performance of the stock market. (Rocky trades on NASDAQ under the ticker RCKY.)

“I think there have been a few things that have helped,” McDonald said Friday. “Part of it is attributable to our third-quarter performance this year… It appears that the market has responded favorably to that.”

McDonald also pointed out, however, that stocks in general seem to be on an upward trend in the last six to nine months.

He noted that the company had a rough time financially in 2006 and 2007, and only began to recover somewhat last year.

“Our financial performance, particularly in 2007, was not what we would have liked it to be,” he admitted.

Though the recent surge in stock price is welcome, McDonald suggested, it should be remembered that the improvement is coming on a price that was fairly low in historic terms for the company.

In late October, Rocky announced its financial performance for the quarter that ended Sept. 30.

Though its net sales for the quarter were down compared to the same quarter in 2008 — $66.6 million compared to $72.5 million — the company’s earnings were up.

Based partly on cost-cutting and efficiency measures, Rocky’s earnings before taxes went up from $2.9 million in third-quarter 2008 to $4.4 million in 2009, while its net earnings increased from $2.4 million to $2.8 million.

McDonald said that historically, Rocky Stock has traded as low as around $2, and as high as $36. For much of 2009, the stock appears to have held around the $3 level.

Around the middle of September, however, it began climbing, getting to around $6 by early November. McDonald noted that the stock got up to $9.65 at close of trading about two weeks ago, which was a 12-month high. It has since dropped back a bit, he reported.

“It’s actually around nine ($9) right now,” McDonald said Friday afternoon.

According to NASDAQ’s Web site Sunday, the most recent closing price for the stock was $7.82.

When Rocky announced its third-quarter 2009 performance, Chairman and CEO Mike Brooks attributed some of its improvement to cost-saving measures.

In a news release, Brooks cited “steps we have taken over the last 18 months to reduce expenses and improve efficiency in order to enhance our profitability and strengthen our balance sheet.”

Brooks noted that for five straight quarters, Rocky had been lowering its operating expenses by “double digits,” partly by moving more of its sales to the Internet.

The company’s improved ability to manage inventory and billing meant that it had less need to borrow money, Brooks stated, “and lowered our interest expense by 14 percent.”

Another big factor, however, was obviously the GSA contract.

In a release Aug. 5, the company announced that it had received a blanket purchase agreement from GSA – essentially a buyer for the federal government. Under its terms, the agency has the right to purchase approximately $29 worth of insulated boots from Rocky through July 2014.

The company has already gotten an initial order to produce 205,000 pairs of boots, at a cost of about $14.5 million. All of the production, however, will take place at Rocky’s factory in Puerto Rico.

The company has long since moved its production jobs offshore, and its remaining Nelsonville facilities are devoted to administrative and retail sales.

The Web site learningmarkets.com noted in October that Rocky’s third-quarter performance had beaten analysts’ expectations. Whereas the consensus was that the company would post earnings of about 33 cents a share, the site said, Rocky actually reported 50 cents.

The site noted that for the same quarter last year, Rocky’s earnings were at 45 cents per share.


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