Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial
results for its fourth quarter and year ended December 31,
2021.
Fourth Quarter 2021
Overview
- Net sales increased 93.4% to $169.5 million
- Wholesale segment sales increased 124.9%; Retail segment sales
increased 12.6%
- Operating income increased 41.1% to $18.2 million
- Net income increased 29.1% to $12.5 million, or $1.69 per
diluted share
- Adjusted net income increased 34.3% to $13.8 million, or $1.86
per diluted share
Full Year 2021 Overview
- Net sales increased 85.4% to $514.2 million
- Wholesale segment sales increased 110.8%; Retail segment sales
increased 29.9%
- Operating income increased 32.4% to $36.0 million
- Net income of $20.6 million, or $2.77 per diluted share
- Adjusted net income increased 40.9% to $32.5 million, or $4.39
per diluted share
“There were many highlights from 2021 led by sustained demand
for our brands and products and a transformational acquisition that
significantly enhanced our size and brand portfolio,” said Jason
Brooks, Chairman, President and Chief Executive Officer. “For the
majority of the year, we were able to fully meet demand and expand
our share in multiple footwear categories including western, work
and outdoor. While we encountered fulfillment challenges starting
in the third quarter that pressured margins and hindered our
ability to deliver a portion of orders on time, we have since made
good progress regaining efficiencies in our Ohio distribution
center and bringing our new Reno, Nevada distribution center
online. We also accomplished the critical step of migrating the
acquired business to our ERP system. With the integration of our
two organizations complete, our focus now shifts to identifying
synergies and cost saving opportunities and driving operational
excellence throughout our newly combined Company. We move forward
in a solid position to take better advantage of our enviable
inventory position and leverage our North American-based
manufacturing facilities to drive profitable growth and generate
greater shareholder value.”
Fourth Quarter Review
Fourth quarter net sales increased 93.4% to $169.5 million
compared with $87.6 million in the fourth quarter of 2020. Fourth
quarter 2021 net sales include $79.3 million in Boston Group net
sales. The Boston Group is defined as The Original Muck Boot
Company, XTRATUF, Servus, NEOS and Ranger brands acquired from
Honeywell International Inc. on March 15, 2021.
Wholesale sales for the fourth quarter increased 124.9% to
$134.8 million compared to $59.9 million for the same period in
2020. Retail sales for the fourth quarter increased 12.6% to $26.5
million compared to $23.5 million for the same period last year.
Contract Manufacturing segment sales, which now include contract
military sales and private label programs, increased 95.5% to $8.1
million compared to $4.2 million in the fourth quarter of 2020.
Gross margin in the fourth quarter of 2021 was $63.3 million, or
37.3% of net sales, compared to $36.1 million, or 41.2% of net
sales, for the same period last year. The decrease in gross margin
was mainly attributable to the increase in inbound freight costs
coupled with the delayed impact of our price increases and a lower
mix of retail segment sales compared with the year ago period,
which carry higher gross margins than the wholesale and contract
manufacturing segments.
Operating expenses were $45.1 million, or 26.6% of net sales,
for the fourth quarter of 2021 compared to $23.2 million, or 26.5%
of net sales, for the same period a year ago. Excluding $1.6
million in acquisition related amortization and integration
expenses, fourth quarter 2021 operating expenses were $43.5
million, or 25.7% of net sales. The increase in operating expenses
was driven primarily by the expenses associated with the acquired
brands. (See below for a reconciliation of GAAP financial measures
to all non-GAAP financial measures used in this release).
Income from operations for the fourth quarter of 2021 was $18.2
million, or 10.7% of net sales compared to $12.9 million or 14.7%
of net sales for the same period a year ago. Adjusted operating
income for the fourth quarter of 2021 was $19.8 million, or 11.7%
of net sales compared to adjusted operating income of $13.6
million, or 15.5% of net sales a year ago.
Interest expense for the fourth quarter of 2021 was $3.2 million
compared with $95,000 a year ago. The increase reflected interest
payments on the senior term loan and credit facility used to
finance the Boston Group acquisition.
The Company reported fourth quarter net income of $12.5 million,
or $1.69 per diluted share compared to net income of $9.7 million,
or $1.33 per diluted share in the fourth quarter of 2020. Adjusted
net income for the fourth quarter of 2021, was $13.8 million, or
$1.86 per diluted share compared to adjusted net income of $10.3
million, or $1.41 per diluted share in the fourth quarter of
2020.
Full Year Review
Full year 2021 net sales increased 85.4% to $514.2 million
compared with $277.3 million in 2020. Full year 2021 net sales
include $179.0 million, or just over nine months, in net sales from
the Boston Group.
Wholesale sales for 2021 increased 110.8% to $391.1 million
compared to $185.6 million in 2020. Retail sales for the year
increased 29.9% to $94.7 million compared to $72.9 million for the
same period last year. Contract Manufacturing segment sales, which
now include contract military sales and private label programs,
increased 51.0% to $28.5 million compared to $18.9 million in
2020.
Gross margin in 2021 was $194.5 million, or 37.8% of net sales,
compared to $104.7 million, or 37.8% of net sales, for 2020.
Adjusted gross margin for 2021, which excludes a $3.5 million
inventory purchase accounting adjustment, was $198.0 million, or
38.5% of net sales. Adjusted gross margin for 2020, which excluded
approximately $1.9 million in expenses related to the closure of
the Company’s manufacturing facilities due to COVID-19, was $106.7
million, or 38.5% of net sales. While gross margins were consistent
year-over-year, 2021 wholesale gross margins were negatively
impacted by an increase in inbound freight costs coupled with the
delayed impact of our price increases.
Operating expenses were $158.6 million, or 30.8% of net sales,
for 2021 compared to $77.6 million, or 28.0% of net sales, for
2020. Excluding $11.9 million in acquisition related amortization
and integration expenses, 2021 operating expenses were $146.6
million, or 28.5% of net sales. The increase in operating expenses
was driven primarily by the expenses associated with the acquired
brands.
Income from operations for 2021 was $36.0 million, or 7.0% of
net sales compared to $27.2 million or 9.8% of net sales for 2020.
Adjusted operating income for 2021 was $51.4 million, or 10.0% of
net sales compared to adjusted operating income of $29.8 million,
or 10.8% of net sales a year ago.
Interest expense for 2021 was $10.6 million compared with $0.2
million in 2020. The increase reflected interest payments on the
senior term loan and credit facility used to finance the Boston
Group acquisition.
The effective tax rate for 2021 decreased to 19.0% compared to
22.3% for the full year 2020.
The Company reported 2021 net income of $20.6 million, or $2.77
per diluted share compared to net income of $21.0 million, or $2.86
per diluted share in 2020. Adjusted net income for 2021, was $32.5
million, or $4.39 per diluted share compared to adjusted net income
of $23.1 million, or $3.14 per diluted share in 2020.
Balance Sheet Review
Cash and cash equivalents were $5.9 million at December 31, 2021
compared to $28.4 million on the same date a year ago. The change
in cash and cash equivalents was driven primarily by the use of
cash to fund a portion of the Boston Group acquisition.
Total debt at December 31, 2021 was $270.0 million consisting of
$127.6 million senior term loan and borrowings under the Company's
senior secured asset-backed credit facility.
Inventory at December 31, 2021 increased to $232.5 million
compared to $77.6 million on the same date a year ago. The $154.9
million increase includes approximately $101.1 million in inventory
related to the Boston Group.
Conference Call
Information
The Company's conference call to review fourth quarter 2021
results will be broadcast live over the internet today, Tuesday,
March 1, 2022 at 4:30 pm Eastern Time. Investors and analysts
interested in participating in the call are invited to dial (855)
327-6837 (domestic) or (631) 891-4304 (international). The
conference call will also be available to interested parties
through a live webcast at www.rockybrands.com. Please visit the
website and select the “Investors” link at least 15 minutes prior
to the start of the call to register and download any necessary
software.
About Rocky Brands, Inc.
Rocky Brands, Inc. is a leading designer, manufacturer and
marketer of premium quality footwear and apparel marketed under a
portfolio of well recognized brand names. Brands in the portfolio
include Rocky®, Georgia Boot®, Durango®, Lehigh®, The Original Muck
Boot Company®, XTRATUF®, Servus®, NEOS® and Ranger®. More
information can be found at RockyBrands.com.
Safe Harbor Language
This press release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of
1934, as amended, which are intended to be covered by the safe
harbors created thereby. Those statements include, but may not be
limited to, all statements regarding intent, beliefs, expectations,
projections, forecasts, and plans of the Company and its management
and include statements in this press release regarding the ability
of the Company to identify synergies and cost-saving opportunities
(Paragraph 2), the ability of the Company to drive operational
excellence throughout the organization (Paragraph 2), and the
Company’s ability to take advantage of inventory position and to
leverage its North American-based manufacturing facilities to drive
profitable growth and generate greater shareholder value (Paragraph
2). These forward-looking statements involve numerous risks and
uncertainties, including, without limitation, the various risks
inherent in the Company’s business as set forth in periodic reports
filed with the Securities and Exchange Commission, including the
Company’s annual report on Form 10-K for the year ended December
31, 2020 (filed March 16, 2021) and quarterly reports on Form 10-Q
for the quarters ended March 31, 2021 (filed May 6, 2021), June 30,
2021 (filed August 9, 2021) and September 30, 2021 (filed November
9, 2021). One or more of these factors have affected historical
results, and could in the future affect the Company’s businesses
and financial results in future periods and could cause actual
results to differ materially from plans and projections. Therefore
there can be no assurance that the forward-looking statements
included in this press release will prove to be accurate. In light
of the significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information
should not be regarded as a representation or warranty by the
Company or any other person that the objectives and plans of the
Company will be achieved. All forward-looking statements made in
this press release are based on information presently available to
the management of the Company. The Company assumes no obligation to
update any forward-looking statements.
Rocky Brands, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(In thousands, except share
amounts)
December 31,
December 31,
2021
2020
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents
$
5,909
$
28,353
Trade receivables – net
126,807
48,010
Contract receivables
1,062
5,170
Other receivables
242
364
Inventories – net
232,464
77,576
Income tax receivable
4,294
-
Prepaid expenses
4,507
3,713
Total current assets
375,285
163,186
LEASED ASSETS
11,428
1,572
PROPERTY, PLANT & EQUIPMENT – net
59,989
33,750
GOODWILL
50,641
-
IDENTIFIED INTANGIBLES – net
126,315
30,209
OTHER ASSETS
917
374
TOTAL ASSETS
$
624,575
$
229,091
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable
$
114,632
$
20,090
Contract liabilities
1,062
5,582
Current Portion of Long-Term Debt
3,250
-
Accrued expenses:
Salaries and wages
3,668
4,463
Taxes - other
849
893
Accrued freight
1,798
911
Commissions
2,447
712
Accrued duty
5,469
4,270
Accrued interest
2,133
-
Income tax payable
-
1,019
Other
4,828
2,043
Total current liabilities
140,136
39,983
LONG-TERM DEBT
266,794
-
LONG-TERM TAXES PAYABLE
169
169
LONG-TERM LEASE
8,809
944
DEFERRED INCOME TAXES
10,293
8,271
DEFERRED LIABILITIES
519
219
TOTAL LIABILITIES
426,720
49,586
SHAREHOLDERS' EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and
outstanding December 31, 2021 - 7,302,199; December 31, 2020 -
7,247,631
68,061
65,971
Retained earnings
129,794
113,534
Total shareholders' equity
197,855
179,505
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
$
624,575
$
229,091
Rocky Brands, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(In thousands, except share
amounts)
Three Months Ended
Year Ended
December 31,
December 31,
2021
2020
2021
2020
NET SALES
$
169,452
$
87,618
$
514,227
$
277,309
COST OF GOODS SOLD
106,169
51,497
319,691
172,574
GROSS MARGIN
63,283
36,121
194,536
104,735
OPERATING EXPENSES
45,082
23,221
158,564
77,565
INCOME FROM OPERATIONS
18,201
12,900
35,972
27,170
OTHER EXPENSES
(3,238
)
(95
)
(10,603
)
(205
)
INCOME BEFORE INCOME TAXES
14,963
12,805
25,369
26,965
INCOME TAX EXPENSE
2,417
3,084
4,810
6,001
NET INCOME
$
12,546
$
9,721
$
20,559
$
20,964
INCOME PER SHARE
Basic
$
1.72
$
1.34
$
2.82
$
2.87
Diluted
$
1.69
$
1.33
$
2.77
$
2.86
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
Basic
7,300
7,248
7,283
7,304
Diluted
7,405
7,296
7,409
7,337
Rocky Brands, Inc. and
Subsidiaries
Reconciliation of GAAP
Measures to Non-GAAP Measures
(In thousands, except share
amounts)
Three Months Ended
Year Ended
December 31,
December 31,
2021
2020
2021
2020
GROSS
MARGIN
GROSS MARGIN, AS REPORTED
$
63,283
$
36,121
$
194,536
$
104,735
ADD: INVENTORY FAIR VALUE ADJUSTMENT
-
-
3,504
-
ADD: MANUFACTURING EXPENSES RELATED TO
COVID-19 CLOSURES/SUPPLIES
-
-
-
1,974
ADJUSTED GROSS MARGIN
$
63,283
$
36,121
$
198,040
$
106,709
OPERATING
EXPENSES
OPERATING EXPENSES, AS REPORTED
$
45,082
$
23,221
$
158,564
$
77,565
LESS: ACQUISITION RELATED EXPENSES
803
705
9,445
705
LESS: ACQUISITION RELATED AMORTIZATION
782
-
2,476
-
ADJUSTED OPERATING EXPENSES
43,497
22,516
146,643
76,860
INCOME FROM
OPERATIONS, ADJUSTED
$
19,786
$
13,605
$
51,397
$
29,849
OTHER
EXPENSES
$
(3,238
)
$
(95
)
$
(10,603
)
$
(205
)
NET
INCOME
NET INCOME, AS REPORTED
$
12,546
$
9,721
$
20,559
$
20,964
ADD: TOTAL NON-GAAP ADJUSTMENTS
1,585
705
15,425
2,679
LESS: TAX IMPACT OF ADJUSTMENTS
(357
)
(170
)
(3,471
)
(574
)
ADJUSTED NET INCOME
$
13,774
$
10,256
$
32,513
$
23,069
NET INCOME PER SHARE, AS REPORTED
BASIC
$
1.72
$
1.34
$
2.82
$
2.87
DILUTED
$
1.69
$
1.33
$
2.77
$
2.86
ADJUSTED NET INCOME PER SHARE
BASIC
$
1.89
$
1.42
$
4.46
$
3.16
DILUTED
$
1.86
$
1.41
$
4.39
$
3.14
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC
7,300
7,248
7,283
7,304
DILUTED
7,405
7,296
7,409
7,337
- The non-GAAP adjustments primarily
relate to our U.S. business and as such, the income tax charge is
calculated using the statutory rate of 22.5% for all U.S. non-GAAP
items for all periods presented.
Use of Non-GAAP Financial
Measures
In addition to GAAP financial measures, we present the following
non-GAAP financial measures: “adjusted gross margin,” “adjusted
operating expenses,” “adjusted operating income,” “adjusted net
income,” and “adjusted net income per share.” Adjusted results
exclude the impact of items that management believes affect the
comparability or underlying business trends in our consolidated
financial statements in the periods presented. We believe that
these non-GAAP measures are useful to investors and other users of
our consolidated financial statements as an additional tool for
evaluating operating performance. We believe they also provide a
useful baseline for analyzing trends in our operations.
Investors should not consider these non-GAAP measures in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. See “Reconciliation of GAAP
Measures to Non-GAAP Measures” accompanying this press release.
Non-GAAP adjustment or
measure
Definition
Usefulness to management and
investors
Inventory fair value adjustments
Inventory fair value adjustments are costs
related to the fair value markup of inventory purchased with the
acquisition of the performance and lifestyle footwear business of
Honeywell International, Inc. as required by business combination
accounting rules.
We excluded adjustments related to the
inventory fair value markup for purposes of calculating certain
non-GAAP measures because these costs do not reflect the
manufactured or sourced cost of the inventory of the acquired
business. These adjustments facilitate a useful evaluation of our
current operating performance and comparisons to past operating
results and provide investors with additional means to evaluate
cost trends.
Manufacturing expenses related to
COVID-19
Manufacturing expenses related to COVID-19
are costs related to the overhead, payroll expenses and supplies
incurred during the temporary closure of our manufacturing
facilities due to COVID-19.
We excluded manufacturing expenses related
to COVID-19 for purposes of calculating certain non-GAAP measures
because these costs do not reflect our core operating performance.
These adjustments facilitate a useful evaluation of our core
operating performance and comparisons to past operating results and
provide investors with additional means to evaluate cost
trends.
Acquisition-related integration
expenses
Acquisition-related integration expenses
are expenses including investment banking fees, legal fees,
transaction fees, integration costs and consulting fees tied to the
acquisition of the performance and lifestyle footwear business of
Honeywell International, Inc.
We exclude acquisition-related integration
expenses for purposes of calculating certain non-GAAP measures
because these costs do not reflect our current operating
performance. These adjustments facilitate a useful evaluation of
our current operating performance and comparisons to past operating
results and provide investors with additional means to evaluate
expense trends.
Acquisition-related amortization
Amortization of acquisition-related
intangible assets consists of amortization of intangible assets
such as brands and customer relationships acquired in connection
with the acquisition of the performance and lifestyle footwear
business of Honeywell International, Inc. Charges related to the
amortization of these intangibles are recorded in operating
expenses in our GAAP financial statements. Amortization charges are
recorded over the estimated useful life of the related acquired
intangible asset, and thus are generally recorded over multiple
years.
We excluded amortization charges for our
acquisition-related intangible assets for purposes of calculating
certain non-GAAP measures because these charges are inconsistent in
size and are significantly impacted by the valuation of our
acquisition. These adjustments facilitate a useful evaluation of
our current operating performance and comparison to past operating
performance and provide investors with additional means to evaluate
cost and expense trends.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220301006112/en/
Company Contact: Tom Robertson Chief Financial Officer (740)
753-9100
Investor Relations: Brendon Frey ICR, Inc. (203) 682-8200
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