Outdoor financials: Rocky snares $21 million boot order amidst record 4Q, plus Cabela's, Wellman, K2, West Marine

Rocky snares $21 million boot order amidst record 4Q
Rocky Shoes & Boots (Nasdaq: RCKY) had a good week reporting record fourth-quarter sales and a $21 million order from the U.S. military.

Fourth-quarter net sales increased 12.6 percent to a record $32.9 million compared to $29.2 million for the corresponding period a year ago. Net income rose 4.2 percent to a record $2.2 million versus net income of $2.1 million last year. Diluted earnings per share decreased to $0.43 versus $0.44 a year ago due to an increase in diluted shares outstanding in the fourth quarter of fiscal 2004 as compared to the fourth quarter of fiscal 2003.

For FY 2004, net sales increased 24.6 percent to a record $132.2 million compared to net sales of $106.2 in 2003. Net income rose 42.3 percent to $8.6 million versus net income of $6.0 million a year ago, and diluted earnings per share rose 31.8 percent to $1.74 versus $1.32 for the corresponding period last year.

“Fiscal 2004 was truly an historic year for our company highlighted by our announcement to acquire EJ Footwear,” said CEO Mike Brooks. “By combining forces with EJ we have more than doubled the size of our current business, diversified our operations, and significantly enhanced our prospects for growth.”

Inventory was $33.0 million on Dec. 31, compared with $38.1 million on the same date a year ago. The decrease in inventory is primarily due to the implementation of improved inventory control systems, Rocky said.

Additionally, Rocky also snagged a $21 million order from the U.S. Military for infantry combat boots, which it will start shipping in the second quarter until December. The boots will be made at the company’s Moca, Puerto Rico, plant.

“While our military footwear remains a small percentage of our overall business, it represents an ideal compliment to our core outdoor and occupational categories,” said Brooks. “We are committed to capitalizing on the many opportunities that lie ahead and are dedicated to returning value to our shareholders.”

Rocky said for fiscal 2005 it now expects to report net sales in the range of $300 million to $305 million compared its previous guidance of $280 million to $285 million.

Cabela’s reports 4Q and FY 2004
Cabela’s (NYSE: CAB) ended 2004 with record fourth-quarter results that included total of $579.1 million compared to $548.1 million in 2003. Net income increased 9.9 percent to $38.5 million, or $0.58 per diluted share, compared to $35.0 million, or $0.60 per diluted share, for 2003. As a result of its IPO, weighted average diluted shares outstanding increased 13.4 percent to 66.4 million for the fourth quarter compared to 58.6 million last year.

During the fourth quarter of 2004: direct revenue increased 5.3 percent to $378.0 million; retail revenue increased 0.1 percent to $171.6 million; and financial services revenue increased 41.4 percent to $24.4 million, each over the fourth quarter of 2003. The company stated that on a like calendar basis (13 weeks versus 13 weeks), direct revenue would have increased 11.2 percent; retail revenue would have increased 9.1 percent; and same stores sales would have declined 1.2 percent in the fourth quarter of 2004 compared to the corresponding period a year ago, as detailed in the table at the end of this release.

Total revenue for 2004 edged up slightly to $1.56 billion over FY 2003’s $1.4 billion. 2004 net income increased 26.5 percent to $65.0 million compared to $51.4 million in 2003. Cabela’s reported diluted earnings per share growth of 10.8 percent to $1.03 on 63.3 million weighted average diluted shares outstanding for the year ended Jan. 1, 2005, compared to $0.93, on 55.3 million weighted average diluted shares outstanding for the year ended Jan. 3, 2004.

“The positive sales momentum we experienced during the holiday season continues, giving us a heightened degree of confidence as we head into the New Year,” said Dennis Highby, Cabela’s president and CEO.

Wellman beats analysts’ expectations
Wellman Inc. (NYSE: WLM) posted a narrower loss for the fourth quarter on increased sales, marking its highest quarterly operating income in 2004.

The company reported a net loss of $4.7 million, or 15 cents a share, compared with a net loss of $105.2 million, or $3.33 a share, a year earlier. Analysts had predicted a loss of 22 cents a share. Fourth-quarter net sales rose to $372.2 million from 2003’s $274.0 million. Net sales for the year were $1.3 billion.

“Wellman’s fourth-quarter results benefited from improved PET resin volumes and margins,” said Tom Duff, chairman and CEO of the company. “Strong industry utilization allowed for the successful implementation of PET resin price increases during what is typically a seasonally weak quarter. Domestic fiber margins declined in the fourth quarter, to historic lows, as fiber selling prices failed to keep pace with the escalation in raw material costs. However, we were able to offset some margin deterioration by substantially reducing our controllable costs.”

He added that for 2005, “We expect PET resin capacity utilization to be very high this year. Industry expectations are for continued strong demand growth while capacity is expected to remain at current levels. We are well positioned for margin improvement in both businesses in the first quarter of 2005.”

Wellman’s board of directors also declared a quarterly dividend of $0.05 per share on the outstanding shares of its common stock. It’s payable on March 15, 2005, to stockholders of record on March 1, 2005.

K2 updates senior management contracts
K2 Inc. (NYSE: KTO) has entered into employment agreements with and instituted a severance benefit plan for the following executives: Richard Heckmann, chairman and CEO; J. Wayne Merck, president and COO; John Rangel, president of European operations; Dudley Mendenhall, senior vice president of finance; and Monte Baier, vice president and general counsel. Under the terms of the new employment agreements, if Heckmann (current salary and bonus listed as $475,000), Merck (current salary and bonus listed as $430,000), or Rangel (current salary and bonus listed as ($360,000) is terminated without cause or the company changes hands, K2 will pay each of them 2.99 times their salary and bonus. Mendenhall (current salary and bonus listed as $295,400) and Baier (current salary and bonus not listed) would be paid two times their salary and bonus. Also, if terminated by K2 without cause, Heckmann’s severance package would be two-and-a-half times his salary and bonus, and fully vest his stock options, among other things. Merck and Rangel would receive two times their salary and bonus.

In other news, K2 Inc. has elected sports broadcaster Ann Meyers to its board of directors. Prior to her reporting career, Meyers was a college and professional basketball athlete.

West Marine delays 4Q filing
West Marine (WMAR) is delaying the release of its fourth-quarter financial results until March 3 as it reviews its lease accounting practices. The retailer had planned to report its earnings on from Feb. 17. The company said it is still backing its previous forecast for 2004 at the lower end of $1.25 to $1.28 per share, excluding non-cash expense adjustments due to two lease accounting issues.

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