Rocky Brands Inc. reported earnings catapulted 278.1 percent on significantly higher margins and a 57 percent revenue gain.
Jason Brooks, president and chief executive officer, commented, “It has been an excellent start to the year for Rocky Brands as we delivered a strong first-quarter performance and completed a highly transformative acquisition. We experienced robust demand for our Rocky, Georgia and Durango brands across our wholesale and direct-to-consumer channels, which when combined with an easier comparison due to the impact on our business from COVID-19 in the year-ago period, resulting in a dramatic improvement in revenue and earnings per share. The multi-year initiatives we’ve been executing in product innovation, fulfillment, consumer engagement and inventory management enhanced our ability to capture market share during the pandemic while creating a strong foundation to support long-term growth. The recent addition of The Original Muck Boot company, Xtratuf, Servus, Neos, and Ranger brands has further bolstered our powerful portfolio and provided our business model with compelling new opportunities to drive profitable, top-line expansion and increased shareholder value for years to come.”
First Quarter Review
First-quarter net sales increased 57.3 percent to $87.7 million compared with $55.7 million in the first quarter of 2020. First-quarter 2021 net sales include $6.5 million in net sales from the performance and lifestyle footwear business acquired from Honeywell International, Inc. on March 15, 2021.
Wholesale sales for the first quarter increased 69.1 percent to $59.2 million compared to $35.0 million for the same period in 2020. Retail sales for the first quarter increased 42.0 percent to $24.0 million compared to $16.9 million for the same period last year. Military segment sales for the first quarter were $4.4 million compared to $3.8 million in the first quarter of 2020.
Gross margin in the first quarter of 2021 was $35.1 million, or 40.1 percent of net sales, compared to $19.3 million, or 34.7 percent of net sales, for the same period last year. Adjusted gross margin in the first quarter of 2021, which excludes a $0.3 million inventory purchase accounting adjustment, was $35.5 million, or 40.5 percent of net sales. Adjusted gross margin in the first 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 $20.3 million, or 36.4 percent of net sales. The 410 basis point increase was attributable to higher margins in all three operating segments, with the largest gain coming from wholesale.
Operating expenses were $28.6 million, or 32.6 percent of net sales, for the first quarter of 2021 compared to $17.8 million, or 32.0 percent of net sales, a year ago. Excluding $5.2 million in expenses associated with the acquisition, the first quarter 2021 operating expenses were $23.4 million, or 26.7 percent of net sales. The improvement in operating expenses as a percent of net sales was driven by leverage on higher net sales.
Income from operations for the first quarter of 2021 increased 335.0 percent to $6.6 million, or 7.5 percent of net sales compared to $1.5 million for the same period a year ago, or 2.7 percent of net sales. Adjusted operating income for the first quarter of 2021 was $12.1 million, or 13.8 percent of net sales, compared to adjusted operating income for the first quarter of 2020 of $2.5 million, or 4.5 percent of net sales.
The company reported a first-quarter net income of $4.5 million, or $0.61 per diluted share compared to net income of $1.2 million, or $0.16 per diluted share in the first quarter of 2020. Adjusted net income for the first quarter of 2021, was $8.7 million, or $1.19 per diluted share, compared to an adjusted net income of $2.0 million, or $0.27 per diluted share, in the first quarter of 2020.
Balance Sheet Review
Cash and cash equivalents were $8.9 million at March 31, 2021 compared to $44.2 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 March 31, 2021 was $186.3 million consisting of a $130 million senior term loan and borrowings under the company’s senior secured asset-backed credit facility.
Inventory at March 31, 2021 increased to $125.1 million compared to $77.2 million on the same date a year ago. The $47.9 million increase in inventory includes approximately $41 million associated with the newly acquired brands.
Photo courtesy Rocky Brands