Outdoor financials: Rocky military order cancelled, shares drop 16 percent, plus LaCrosse, West Marine, Cabela's, K2, GSI

Rocky military order cancelled, shares drop 16 percent
Citing “termination for convenience,” the U.S. government cancelled a $30 million order for combat boots for the U.S. military with Rocky Shoes & Boots (Nasdaq: RCKY). Translated, termination for convenience means the government has the unilateral right to cancel a contract without cause. As a result, Rocky lowered its 2005 and 2006 outlook.

Rocky said in October it had signed the contract with a third party, Atlantic Diving Supply of Virginia Beach, Va., to supply hot weather boots to the military. The order was to have been completed in December 2006.

The company said it began shipping the boots in the fourth quarter of 2005, and added it is currently evaluating the financial impact of the contract termination, as well as any recovery costs for work already performed. Rocky added that it is entitled to be compensated by the government for the work it performed so far to fulfill the order.

Rocky lowered its outlook for 2005 to earnings between $2.21 to $2.25 per share, adding that its revenue outlook remains between $294 million to $296 million. For 2006, the company said it now expects earnings between $2.35 to $2.45 per share, well below its previous guidance of $3.05 to $3.15 per share. Rocky added it expects revenue to fall in the range of $287 million to $292 million, compared with its prior guidance of $313 million to $318 million. The company said its 2006 guidance does not include footwear sales to the military, which were about $27.5 million in 2005.

Rocky’s shares plunged 16 percent — dropping $3.82 to close at $20.33 on the Nasdaq, below the company’s previous 52-week low of $21.56. Shares dropped another $0.10 in after-hours trading on the INET electronic exchange. Even before the recent news sent shares down, Rocky’s shares have been down 20 percent since mid-October.

In other company news, Rocky said it has withdrawn a registration statement filed last September for a follow-on equity offering of 2.6 million common shares. As a result, the company said it expects to record a non-operational charge of $0.04 per share in 2005 for accounting and legal fees.

Mike Brooks, chairman and CEO, said in a statement the offering would have reduced the company’s outstanding debt sooner, but added the board decided that the offering was not in shareholders’ best interest “in light of the current trading price of the company’s stock.”

New board member elected at LaCrosse
LaCrosse Footwear (Nasdaq: BOOT) has elected William (“Bill”) H. Williams to its board of directors, effective Jan. 3. Williams is president and CEO of Harry & David Holdings, Inc., a multi-channel specialty retailer and producer of branded, gift-quality fruit, gourmet food products and other premium gifts marketed under the Harry and David brand.

Prior to joining Harry & David, he held several senior executive positions at Neiman Marcus, and has also served on the Oregon Economic Development Commission, the Oregon International Trade Commission and the Oregon Board of Higher Education. He has also served on the boards of directors of several corporations and not-for-profit groups and currently serves on the board of Shop.com.

West Marine Q4 beats analysts’ forecast
After an aggressive promotional campaign and price slashing, West Marine’s (Nasdaq: WMAR) fourth-quarter same-store sales rose 3.9 percent, compared with a 3.3 percent sales decline during the same period a year ago. Analysts had expected a 3.1 percent decline.

Total sales were $124.8 million, up 5.7 percent from $118.1 million a year ago — with analysts off the mark again, expecting sales of $116.2 million.

Despite higher sales, the company admitted margins were much lower than expected, due to promotions designed to lure back customers scared off by high fuel prices and the impact of hurricanes Katrina and Rita. As a result, the company slashed its full-year outlook.

West Marine said it now expects 2005 earnings between $0.20 to $0.25 per share, compared with its October estimate of $0.35 to $0.40 per share. Before it cut its guidance in October, the company was expecting earnings of $0.70 to $0.75 per share.

Cabela’s executive vice president retires
Effective immediately, David Roehr, Cabela’s (NYSE: CAB) executive vice president and chairman, president and CEO of World’s Foremost Bank, Cabela’s wholly-owned credit card bank subsidiary, has retired to pursue other interests and spend more time with family.

Orrin Wilson has been named interim chairman of the board of World’s Foremost Bank. Wilson has been a member of the board of directors of the bank since its formation in 2001.

Ralph Castner, Cabela’s vice president and CFO, has been named interim CEO of World’s Foremost Bank. He has been a member of its board since its formation, and served as treasurer and secretary for the bank from 2001 to 2003.

Tom Boatman, World’s Foremost Bank’s current COO and secretary, has been named interim president of the bank. He has been a member of its board since its formation as well.

K2 gets thumbs-up
K2 (NYSE: KTO) was upgraded by Sun Trust Rbsn Humphrey on Jan. 9. The research firm shifted its assessment of K2 from “neutral” to “buy.”

GSI shuffles management
GSI Commerce (Nasdaq: GSIC) has named Michael Conn as the company’s CFO and Jordan Copland to the position of executive vice president, strategic development. Conn, formerly the company’s senior vice president of corporate development, has been a member of the GSI Commerce executive team since 1999. Copland was formerly the company’s CFO, a position he has held since 2000.

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