Profits at Rocky Brands, Inc. grew 63.4 percent for its first quarter ended March 3 on a 90.5 percent revenue gain. The sales gains were boosted by the acquisition of Muck Boot, Xtratuf, Servus, Neos, and Ranger brands.

First Quarter 2022 Overview

  • Net sales increased 90.5 percent to $167.0 million;
    • Wholesale segment sales increased 126.2 percent. Retail segment sales increased 19.3 percent;
  • Operating income increased 100.5 percent to $13.2 million;
  • Adjusted operating income increased 17.7 percent to $14.2 million;
  • Net income increased 63.4 percent to $7.3 million, or $0.99 per diluted share; and
  • Adjusted net income decreased 6.8 percent to $8.2 million, or $1.10 per diluted share.

“The year has started off well with demand for our brands remaining very strong,” said Jason Brooks, chairman, president and chief executive officer. “We have built a powerful brand portfolio featuring innovative footwear that is resonating with consumers across multiple categories led by work, western and outdoor. To better support growth and improve the organization’s ability to capitalize on market opportunities, we have invested in additional distribution and fulfillment capacity and hired more personnel to help execute these critical functions. The combination of the current cost environment and the tight labor market has resulted in higher temporary spending to bring our new facility up to speed. We are making good progress and anticipate gaining further efficiencies as the year proceeds, enabling us to translate our top-line strength into enhanced profitability. At the same time, we expect to manage inventories down to more normalized levels, which will be another source of cash utilized to reduce debt. We are excited about the near and long-term prospects for Rocky Brands and are focused on continuing to create value for all of our stakeholders.”

First Quarter Review
First-quarter net sales increased 90.5 percent to $167.0 million compared with $87.7 million in the first quarter of 2021. First-quarter 2022 net sales include $64.0 million in Boston Group net sales compared with $6.5 million in the same period last year. 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 first quarter increased 126.2 percent to $134.0 million compared to $59.2 million for the same period in 2021. Retail sales for the first quarter increased 19.3 percent to $28.6 million compared to $24.0 million for the same period last year. Contract manufacturing segment sales, which include contract military sales and private label programs, were $4.4 million in the first quarter of 2022 and 2021.

Gross margin in the first quarter of 2022 was $62.8 million, or 37.6 percent of net sales, compared to $35.1 million, or 40.1 percent 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 carries higher gross margins than the wholesale and contract manufacturing segments.

Operating expenses were $49.6 million, or 29.7 percent of net sales, for the first quarter of 2022 compared to $28.6 million, or 32.6 percent of net sales, for the same period a year ago. Excluding $1.0 million in acquisition-related amortization and integration expenses in the first quarter of 2022 and $5.2 million in acquisition-related expenses in the first quarter of 2021, operating expenses were $48.6 million or 29.1 percent of net sales in the current year period and $23.4 million, or 26.7 percent of net sales in the year-ago period. The increase in operating expenses was driven primarily by the expenses associated with the acquired brands and higher logistics and fulfillment costs including temporary spending associated with the opening of the new distribution facility in Reno, NV. 

Income from operations for the first quarter of 2022 was $13.2 million, or 7.9 percent of net sales compared to $6.6 million or 7.5 percent of net sales for the same period a year ago. Adjusted operating income for the first quarter of 2022 was $14.2 million, or 8.5 percent of net sales compared to adjusted operating income of $12.1 million, or 13.8 percent of net sales a year ago.

Interest expense for the first quarter of 2022 was $3.9 million compared with $0.7 million 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 a first-quarter 2022 net income of $7.3 million, or $0.99 per diluted share compared to a net income of $4.5 million, or $0.61 per diluted share in the first quarter of 2021. Adjusted net income for the first quarter of 2022, was $8.2 million, or $1.10 per diluted share compared to adjusted net income of $8.7 million, or $1.19 per diluted share in the first quarter of 2021.

Balance Sheet Review
Cash and cash equivalents were $15.0 million at March 31, 2022 compared to $8.9 million on the same date a year ago.

Total debt at March 31, 2022 was $267.7 million which includes $126.8 million of senior term loan and borrowings under the company’s senior secured asset-backed credit facility.

Inventories at March 31, 2022 increased to $289.2 million compared to $125.1 million on the same date a year ago. The change in inventories was driven by overall cost increases and strong sales growth, combined with additional inventory on hand as the result of increased transit times and the distribution and fulfillment challenges experienced in the second half of 2021. The company plans to realign inventory levels with sales growth and inventory purchasing strategies by the end of 2022.

As of March 31, 2021 the amount of goodwill arising from its acquisition was not yet determined and therefore was included in identified intangible assets. Upon finalizing its purchase price accounting, goodwill was valued and separated from intangible assets on the balance sheet.

Photo courtesy Rocky Brands/Durango