Why I like Ironclad More and More

The KONG glove made for the oil and gas industry

Ironclad Performance Wear (ICPW – $0.10), that designs, develops and distributes high-performance task specific work gloves for industrial workers, craftsmen and consumers, announced first quarter results for the period ending March 31. Net sales for the first quarter of 2011 were $3.40 million, compared to $2.48 million in the first quarter of 2010, an increase of 36.8%.

Gross profit increased 27.6% to $1.4 million, or 40.5% of sales, compared to $1.1 million, or 43.4% of sales in the first quarter of 2010. At the same time, operating expenses as a percent of sales decreased to 45.1%, or $1.53 million, compared to 57.6% of sales, or $1.43 million during the same period last year.

All these improvements resulted in a decrease of the net loss to $258,037 for the first quarter of 2011, compared to $373,681 in the first quarter last year. Knowing that Ironclad’s first quarter is usually its weakest, these results aren’t bad at all.

 
First Quarter 2011 Ended March 31
2011
2010
Net Sales
3,397,128
2,482,930
Cost of Goods Sold
2,020,959
1,389,800
S, G & A Expenses
1,205,811
1,189,236
Income From Operations (loss)
(156,479)
(351,068)
Provision for Income Taxes
76,950
1,366
Net Income (loss)
(258,037)
(373,681)
Earnings Per Share
(0.00)
(0.01)
Shares Out. – Diluted
81,207,361
89,634,015
Most important income statement data for the quarters ending March 31, 2011 and March 31, 2010. Source: Company Filings.

Growth in All Segments

As Mr. Scott Jarus, the Chairman and CEO of Ironclad, said a few weeks ago during our audio interview, the Company continues to see strong growth with its existing customers in both the industrial and consumer segments.

ICPW is also successfully entering new markets like automotive and outdoor sporting goods with gloves manufactured for other brands which carry the “Built tough by Ironclad” label. For instance, Ironclad now makes gloves for Snap-on, Redwing, 5.11 Tactical and several other national brands. In fact, just a few days ago a similar agreement with Coleman, one of the best known camping brands in the U.S., was announced.

Partly thanks to these deals, the Company’s distribution network has significantly expanded. Ironclad’s gloves are now available at nearly 4000 Autozone stores, Pep Boys, Costco, Grainger, Lab Safety, Fastenal and many others.

California Net Operating Loss Deduction Suspended

A minor setback facing Ironclad, and all other California based businesses, is that California has extended the suspension of the net operating loss deduction (“NOLD”) to the 2010 and 2011 tax years.

This means that Ironclad can’t use its NOL in 2011 and that it will have to pay state income taxes on its profits this year. Companies are permitted to use the NOL in future years.

Guidance

The Company expects to see growth in all its segments for 2011. As a result, it believes that net sales will increase by 10 to 12% over 2010’s level, and EBITDA, including non-cash stock option expenses (Earnings Before Interest, Taxes, Depreciation, Amortization and ASC 718) will be positive.

I believe these estimates are somewhat on the conservative side, but I’ll have to see just what effect the California tax law has on the bottom line.

Reverse Stock Split

With the low stock, there’s always a possibility that management executes a reverse stock split. However, during the Q1 conference call Mr. Jarus indicated that wasn’t on the agenda.

I believe that’s a good thing. Experience tells me that in many cases the stock declines after a reverse stock split.

Conclusion

We’re getting there. Ironclad’s sales continue to significantly improve quarter over quarter and there’s a strong focus on controlling costs which benefits the bottom line. More products are being brought to the market and distribution is expanding. This is definitely one to keep a close eye on.

2 comments… add one
  • Steven Skalecki May 25, 2011, 8:59 pm

    Thanks for the writeup. I agree with everything you said about Ironclad. These are the facts. Ironclad is making great strides Q after Q thanks to CEO Scott Jarus. The product line and industrial/retail markets continues to expand. I find their product everywhere in my local area. My municipality uses the Ironclad brand gloves through Grainger. I owe two pair myself: the high dexterity and Cold Condition. They are very durable and very comfortable for the work I do. Outstanding product!

    As for the stock, that is a different story. ICPW is a poor performer. It seems that as the Company makes forward progress, its stock goes down. Nobody knows about this great performing company. There are only 155 shareholders and little to no day to day trading action. Why? We need to get the word out to the investment community of the world. We need more follow-up action from other source such as the financial/business media. SmallCaps.us cannot do it alone. But it is a start.

    Thanks again,

    therealstevenskalecki

  • admin May 27, 2011, 7:11 pm

    Hi Steven,

    Many thanks for your comment, I’m glad you liked the article.

    It’s really good to know that Ironclad’s products are so widely distributed. That is of course one of the key factors to be able to sell your products. And I do agree that they make outstanding products. One of the best, if not the best on the market. I have a pair myself for a few years now and I can do whatever I want with it without the gloves losing any of their quality.

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