Ironclad Raises Guidance After Strong Second Quarter Results

The Snap-on glove

Ironclad Performance Wear (ICPW – $0.09), manufacturer leader in high-performance task-specific work gloves and apparel for industrial workers, professional craftsmen and consumers, had a strong second quarter as its sales, earnings and balance sheet significantly improved compared with the same period last year. A broader distribution, thanks to partnerships with several leading brands, and continued strength in the Company’s brand recognition for gloves sold under its own brand, are the main drivers for the Company’s growth. As a result, ICPW raised its guidance for fiscal year 2011.

Second Quarter And Six Months 2011 Results

Net sales for the second quarter of 2011 were $4.62 million, compared with $3.44 million in the second quarter of 2010, an increase of 34.3%. This increase is primarily the result of Ironclad’s continued strength in the industrial/safety sales channel, increased penetration in the automotive sector and the growth of specialty-branded glove styles.

Net income increased to $230,430, or $0.00 per share, in the second quarter 2011, compared to $1,256 in the same period last year.

 
Three Months Ended
June 30
Six Months Ended
June 30
2011
2010
2011
2010
Net Sales
4,615,861
3,435,904
8,012,989
5,918,834
Cost of Goods Sold
2,845,579
2,097,497
4,866,538
3,501,925
S, G & A Expenses
1,223,875
1,044,529
2,429,686
2,219,137
Income (loss) From Operations
266,942
19,538
110,463
(331,530)
Other Income (Expense)
(21,512)
(18,282)
(46,120)
(39,529)
Pre-Tax Income (loss)
245,430
1,256
64,343
(371,059)
Income Tax Expense
15,000
91,950
1,366
Net Income (loss)
230,430
1,256
(27,607)
(372,425)
Earnings Per Share
0.00
0.00
(0.00)
(0.01)
Shares Out. – Diluted
73,561,458
90,029,918
73,287,842
90,029,918
Most important income statement data for the quarters and six months ending June 30, 2011 and June 30, 2010. Source: Company Filings

For the first six months of 2011, Ironclad reported net sales of $8.01 million, compared with $5.92 million in the first half of 2010, an increase of 35.4%. Net loss decreased by 92.6% to ($27,607) in the first six months of 2011, compared to a net loss of ($372,425) in the same period last year.

The balance sheet also benefited from the improved results. Cash and investments at June 30, 2011 was $1,011,050 compared to $592,974 in the prior year. Accounts receivable were $1.41 million compared to $0.80 million in the prior year, reflecting increased sales volume. And net working capital was $3.99 million at June 30, 2011 compared to $3.25 million in the prior year.

Partnerships

Part of Ironclad’s success is due to the cooperation with several strategic partners. No matter how good your products are, it’s hard to build a broad distribution network as a small Company. So, since 2006, ICPW has partnered with brands that already have a wide distribution and a solid reputation. For example, Ironclad sells gloves under the Redwing, Snap-on, 5-11 Tactical, RealTree and Coleman brand.

This strategy clearly works. Costco, for instance, had a 2-pack Snap-on glove promotion during the holiday buying season in 2010. This year, the retailer doubled its order.

Guidance Raised

Ironclad’s performance exceeded expectations during the first half of 2011 and because management believes that there are significant opportunities ahead, it raised the Company’s guidance for fiscal year 2011. Management expects net sales to increase by 16% to 17% over 2010’s level (revised upwards from 10% to 12% in previous guidance). EBITDA, including non-cash stock option expenses (Earnings Before Interest, Taxes, Depreciation, Amortization and ASC 718) is expected to be between $500,000 and $750,000 (revised upwards from ‘expected to be positive’ in previous guidance).

Ironclad’s only minor setback is that this year it isn’t allowed to use its net operating loss carry-forward (NOL) in California, the Company’s home State. This means that Ironclad will be paying State income taxes on its profits during 2011. The Company will be allowed to use the NOL in future years though and it also doesn’t affect the use of the NOL for federal income tax purposes.

Conclusion

Ironclad continues to produce very successful results, it’s strengthening its balance sheet and increasing its market penetration each quarter. We like this positive evolution and will continue to track the Company’s performance.

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