Profits at Rocky Brands Inc. rose 59.5 percent in the second quarter ended June 30 on a 134.2 percent revenue gain.

Second Quarter 2021 Highlights

  • Net sales increased 134.2 percent to $131.6 million;
  • Wholesale segment sales increased 195.0 percent;
  • Retail segment sales increased 36.8 percent;
  • Gross margin increased 280 basis points to 37.4 percent;
  • Net income increased 59.5 percent to $3.9 million, or $0.52 per diluted share; and
  • Adjusted net income increased 129.0 percent to $7.4 million, or $0.99 per diluted share.

“Our business exhibited tremendous strength in the second quarter,” said Jason Brooks, Chairman, President and CEO. “Demand for our Rocky, Georgia and Durango brands has been building over the past year, and recent trends have been particularly strong. The combination of innovative product introductions, enhanced consumer engagement and effective inventory management are fueling market share gains in our Work, Western and Outdoor markets. At the same time, the newest additions to our brand portfolio, in particular, The Original Muck Boot Company and XtraTuf are performing very well, contributing to our exceptional growth. I am confident that we are well-positioned to continue capitalizing on our current momentum and successfully integrating our recent acquisition to unlock even greater earnings power from our operating model in the years ahead.”

Second Quarter Review
Second-quarter net sales increased 134.2 percent to $131.6 million compared with $56.2 million in the second quarter of 2020. Second-quarter 2021 net sales include $50.1 million in net sales from the performance and lifestyle footwear business acquired from Honeywell International, Inc. on March 15, 2021.

Wholesale sales for the second quarter increased 195.0 percent to $101.1 million compared to $34.3 million for the same period in 2020. Retail sales for the second quarter increased 36.8 percent to $22.3 million compared to $16.3 million for the same period last year. Contract Manufacturing segment sales, which now include contract military sales and private label programs, increased 45.6 percent to $8.1 million compared to $5.6 million in the second quarter of 2020.

Gross margin in the second quarter of 2021 was $49.2 million, or 37.4 percent of net sales, compared to $19.5 million, or 34.6 percent of net sales, for the same period last year. Adjusted gross margin in the second quarter of 2021, which excludes a $2.3 million inventory purchase accounting adjustment, was $51.4 million, or 39.1 percent of net sales. Adjusted gross margin in the second quarter of 2020, which excluded approximately $1.0 million in expenses related to the closure of the company’s manufacturing facilities due to COVID-19, was $20.4 million, or 36.4 percent of net sales. The 270 basis point increase to adjusted gross margin was attributable to higher margins in all three operating segments with a 450 basis point improvement in wholesale the largest driver of the year-over-year improvement.

Operating expenses were $40.7 million, or 30.9 percent of net sales, for the second quarter of 2021 compared to $16.4 million, or 29.1 percent of net sales, for the same period a year ago. Excluding $2.3 million in acquisition-related amortization and integration expenses, second-quarter 2021 operating expenses were $38.5 million, or 29.2 percent of net sales. The increase in operating expenses was driven primarily by the expenses associated with the acquired brands.

Income from operations for the second quarter of 2021 increased 172.2 percent to $8.4 million, or 6.4 percent of net sales compared to $3.1 million or 5.5 percent of net sales for the same period a year ago. Adjusted operating income for the second quarter of 2021 was $13.0 million, or 9.9 percent of net sales, compared to adjusted operating income for the second quarter of 2020 of $4.1 million, or 7.3 percent of net sales.

Interest expense for the second quarter of 2021 was $3.5 million compared with $48,000 a year ago. The increase reflected interest payments on the senior term loan and credit facility used to finance the Honeywell footwear acquisition.

The company reported a second-quarter net income of $3.9 million, or $0.52 per diluted share, compared to net income of $2.4 million, or $0.33 per diluted share in the second quarter of 2020. Adjusted net income for the second quarter of 2021, was $7.4 million, or $0.99 per diluted share, compared to an adjusted net income of $3.2 million, or $0.45 per diluted share, in the second quarter of 2020.

Balance Sheet Review
Cash and cash equivalents were $8.4 million at June 30, 2021 compared to $25.8 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 acquisition of the performance and lifestyle footwear business of Honeywell International, Inc.

Total debt at June 30, 2021 was $187.4 million consisting of $130 million senior term loan and borrowings under the company’s senior secured asset-backed credit facility.

Inventory at June 30, 2021 increased to $143.5 million compared to $74.5 million on the same date a year ago. The $69.0 million increase in inventory includes approximately $55.0 million associated with the newly acquired brands.

Brands in the company’s portfolio include Rocky, Georgia Boot, Durango, Lehigh, The Original Muck Boot Company, Xtratuf, Servus, Neos, and Ranger.

Photo courtesy Rocky Brands/Durango