Good afternoon ladies and gentlemen, and thank you for standing by. Welcome to the Rocky Brands second quarter fiscal 2010 earnings conference call. At this time all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. (Operator Instructions). I would like to remind everyone that this conference call is being recorded and we'll now turn the conference over to Brendon Frey of ICR. Before we begin, please note that today's discussion including the Q period may contain forward looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such statements are based on information and assumptions available at this time and are subject to change, risk and uncertainties which may cause actual results to differ materially. We assume no obligation to update such statements. For a complete discussion of the risks and uncertainties, please refer to today's press release and the reports filed at Securities and Exchange Commission including Rocky's Form 10 K for the year ended December 31st 2009. I will now turn the conference over to Mr. Mike Brookes, Chairman and Chief Executive Officer of Rocky brand. Thank you and thanks for everyone for joining us this afternoon. With me on today's call are David Sharp, President and Chief Operating Officer and Jim McDonald, Chief Financial Officer and Treasurer. We're very pleased with our second quarter performance, particularly the dramatic improvement in our bottom line versus the same period a year ago. During the past two years, we've undertaken several strategic initiative to right size our infrastructure and better position the company to deliver profitable growth on a consistent basis. This is enabled, this is entailed lower in our corporate overhead improving the efficiency of our supply chain, which includes our company operated manufacture facilities, restructuring our retail operations and reducing our debt levels. While we still have work to do, our second quarter non GAAP EPS of $0.17 is evident of the positive progress we have made, toward achieving our objectives. Specific to the second quarter, our wholesale business which makes up roughly approximately 70 % of sales contributed much higher profitability versus a year ago, driven by lower manufacturing costs on a per pair basis at our facilities in the Caribbean. We currently produce about 25%of our annual inventory needs. However, this number could increase in the future as we explore additional manufacturing options in the region in order to offset potential cost increases coming from our China suppliers. And while they carry a much lower gross margin compared to our wholesale and retail business, the increase in sales for the US military helped us better leverage the fixed cost in our factories during the second quarter. At the same time, our operating expenses are down approximately 11% from a year ago and we are down nearly 30% from the second quarter of 2008. A good portion of the decrease is attributed to the ongoing overhaul of our retail business as we move to a more flexible less capital intensive order and delivery method. Finally, and perhaps most importantly, we continue to significantly reduce our debt levels during the second quarter. Using all the proceeds from our successful equity offerings that we completed in May along with availability under our credit facility, we paid off $29 million of our $40 million senior term loan which carries an annual interest rate of 11.5%. Not only did we end the second quarter with debt levels down $51 million or 58% from a year ago, but we project, we will save approximately $3 million in interest expense per year going forward. Jim will now review the financials in more detail and then David will discuss our growth plans for the remainder of the year. Thanks Mike. Net sales for the second quarter increased 7.9% to $55.2 million compared to $51.2 million for the corresponding period a year ago. Wholesale sales for the second quarter increased 1.6% to $38.5 million compared to $37.9 million last year. The sales increase was driven by a 10.5% gain in our work categories with our own brands, Georgia Boot and Rocky, increasing 13% and 15% respectively, partially offset by a 25% decline in our licensed brand Dickies. At the same time, 13% sales increases in both our hunting and duty categories helped more than offset a 15% decline in western sales. Retail sales for the second quarter were $11 million, down $1.3 million from the sales of $12.3 million a year ago. The modest decline was a result of our ongoing transition to a more direct order, direct ship program and the decision to remove a portion of our Lehigh mobile stores from operation to help lower costs. Military segment sales were $5.7 million versus $900,000 for the same period in 2009. Gross profit in the second quarter was $90.1 million or 34.6% of sales compared to $17.7 million or 34.6% of sales for the same period last year. Gross margins in our wholesale segment rose 370 basis points driven by the increased manufacturing efficiencies that Mike discussed earlier. However, this is offset by lower retail gross margin as a result of our ongoing transition to more internet based transactions and the increase in sales to the military. Selling, general and administrative expenses decreased 10.8% or $2 million to $16.2 million or 29.3% of sales for the second quarter 2010 compared to $18.1 million or 35.4% of sales a year ago. The decrease is primarily the result of reductions in salaries and benefits, bad debt expense, advertising costs and Lehigh mobile store expenses. Income from operations increased to $2.9 million or 5.3% of sales for the period, compared to an operating loss of $400,000 in the prior year. Interest expense for the second quarter increased to $2.1 million from $1.9 million in the second quarter of 2009 as a result of one time fees of approximately $900,000 associated with the early repayment of $29 million on our $40 million senior term note. On a GAAP basis, we reported net income of $0.5 million or $0.08 per diluted share versus a net loss of $1.4 million or $0.25 per diluted share. On a non GAAP basis, excluding the aforementioned one time fees, net income for the second quarter of 2010 improved to $1.1 million or $0.17 per diluted share. Now turning to the balance sheet, funded debt as of June 30th 2010 decreased to 57.8% or $50.6 million to $36.9 million compared to $87.5 million as of June 30th 2009. Our accounts receivable decreased 8.2% to $40.8 million versus $44.5 million last year. This is particularly important as the decrease came during the period when sales increased 8% highlighting the improvement we have made in managing our receivables. Our inventory decreased $17.5 million or 22% to $61.8 million at the end of second quarter compared to $79.3 million on the same date a year ago. David will now update us on our growth initiatives. Thanks, Jim. While we have made good progress actually on the cost side of the business, we have also been busy implementing growth initiatives, but we are confident we will expand our market share and broaden our consumer appeal. Let me update everyone how these are tracking and what we are anticipating will drive our top line at the back half of this year and over the longer term. As we discussed in our previous earnings calls, we currently have four distinct growth initiatives. The first involves the brand and line extension of our Georgia, Durango and Rocky brands. The second involves capitalizing on the growing popularity of our military boots, the third involves customer segmentation and the fourth involves leveraging our brand equity worldwide. So first, brand and line extension; about a year ago, we adopted a new calendar for rollout of new products. In the past, we along with the rest of the industry in the western work segments had one product launch per year at the beginning of each year. Now at Rocky Brands, we have four per year and this is paying off. Because of this new tactic, for three consecutive quarters, we have been able to manage mid teen sales increases over the prior year in our Rocky and Georgia work boot lines and this trend will accelerate for the balance of this year and into the first half of 2011. For example, in the third quarter, we will shift some 21 new styles of Rocky work products expanding the breadth of the line by approximately 19%. These new products have been well received, they currently constitute $3.5 million of open orders. During the last quarter call, we reported that in March we delivered new lightweight and flexible western influenced boots by Durango. And that early sellthrough for some retailers were favorable. We are pleased that these early reports are continuing frequency and strength. In fact, the good problems to have, reorder demand is currently outstripping supply. We anticipate that we will be back in business on this collection by September and cash the important fall and winter seasons. Many key retailers from around the United States are reporting weekly sellthrough of 10% and better on these products. We have expanded this collection in both men's and women's ranges and will deliver six new styles in December. Nike Kobe 9 Low EM XDR Black Red ,Air Jordan 7 Olympic Gold Medal Pack Air Jordan 5 3Lab5 Air Jordan 6 Rings Venom Green Nike Kobe 9 Low EM XDR Black Red Air Jordan 5 Retro Black Varsity Red Metallic Silver Air Jordan 6 Olympic Gold Medal Pack Air Jordan 14 Low Light Graphite Air Jordan 7 Retro Year of the Rabbit 2011 Air Jordan 6 Rings Black Dark Charcoal CLEVELAND Roberto Perez knows how to make a good first impression. Called up from the minors Tuesday, Perez hit a two run homer in his major league debut to help spark a late rally and lead the Cleveland Indians to a 9 3 win over the New York Yankees on Thursday night. The Indians scored nine runs in the last two innings. Asdrubal Cabrera's bases loaded triple and Michael Brantley's sacrifice fly highlighted a four run seventh that erased a 3 0 deficit. Brantley, a first time All Star this season, added an RBI single in a five run eighth, when Perez and Carlos Santana homered. Carlos Carrasco (2 3) pitched a scoreless seventh to help the Indians gain a four game split. The 25 year old Perez, called up from Triple A Columbus to be Cleveland's backup catcher, singled in the seventh for his first major league hit. His drive to left field in the eighth was originally ruled a double, but the call was changed to a home run after a replay review. "That was nice," Indians manager Terry Francona. "You just have to take a minute to enjoy that." Left fielder Chris Dickerson, acquired from Pittsburgh on Monday, was 3 for 4 and enjoyed Perez's home run. "It's cool being around a kid getting his first major league home run," Dickerson said. "I said to him 'Could you hit a more dramatic homer?' " Perez was batting .305 with eight homers and 43 RBIs in 53 games when he got the call to the majors. "I wasn't nervous going into the game, but I was anxious," he said. "I just tried to put the ball in play." Perez overcame an obstacle during the game when he broke all of his bats. "I didn't have any left and Cabrera gave me his," Perez said. "It's a lighter one that I normally use, but the ball went out. I'm going to ask him for some more." Yankees starter David Phelps took a shutout into the seventh before Dickerson and Perez singled. Jason Kipnis singled off the glove of reliever Matt Thornton (0 3) to load the bases. Cabrera hit the next pitch into the right field corner, scoring all three runners and tying the game. Brantley hit a liner to centre field, where Jacoby Ellsbury made a diving catch, but Cabrera tagged up and scored the go ahead run. Dickerson is hitting .467 (7 for 15) in four games. "It's one thing to come in and get settled on a new team, but to come in and start contributing right away, that's a big deal," he said. House allowed three runs in 4 2 3 innings, including Zelous Wheeler's two run homer in the fourth. Carrasco, Vinnie Pestano, Kyle Crockett, Scott Atchison and Nick Hagadone combined to pitch 4 1 3 scoreless innings. Derek Jeter, playing his final regular season game in Cleveland, went 2 for 4 in the 1,000th multihit game of his career. Ichiro Suzuki had a pinch hit single in the eighth for his 2,800th major league hit. NOTES: The Indians presented Jeter with an electric guitar before the game. The white guitar with blue Yankees pinstripes was inscribed with Jeter's No. 2 and the words, "The Captain." . Carlos Beltran was placed on the seven day concussion list before the game. He broke his nose when he was hit in the face by a ball that caromed off the batting cage Wednesday. . The Yankees are 5 3 on an 11 game road trip that takes them to Baltimore this weekend for three games before the All Star break. RHP Hiroki Kuroda (6 6) faces Orioles RHP Miguel Gonzalez (4 5) on Friday night. . Yangervis Solarte, who was called up when Beltran was hurt, played third base and had an RBI single in the fifth. . Cleveland begins a three game series at home against the White Sox on Friday night. RHP Corey Kluber (8 6) faces Chicago RHP Hector Noesi (3 5). Nike Kobe 9 Low EM XDR Black Red,A total of 40 per cent of patients still paid the prescription fee for 90 per cent of the medicines they received, despite being exempt. Photo / ThinkstockMany New Zealanders are not getting free prescriptions they are entitled to and the most vulnerable are likely to be hardest hit when charges rise next year, researchers warn.Most people pay $3 per medicine at the pharmacy, and after members of a family have paid for 20 prescription items in a year, all of them should be exempt from the charge.But Pharmac data show 180,000 people pay for prescriptions after becoming exempt, costing them about $2.5 million a year.A study into prescription use by researchers at Otago University and Wellington's Victoria University, led by Professor Pauline Norris, shows those affected are likely to include the country's most vulnerable people.Using anonymous data from community pharmacy computers, researchers identified individuals who had more than 20 items dispensed in a year and found most were from socio economically deprived areas.A total of 40 per cent of patients still paid the prescription fee for 90 per cent of the medicines they received, despite being exempt.Standard charges for prescription medicines are due to rise from $3 to $5 in January. Professor Norris said the exemption meant families should not be required to pay more than $100 a year after the increase comes in.
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