Exhibit 99

 

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Rocky Brands, Inc. Announces First Quarter 2022 Results

First Quarter Sales Increased to $167.0 Million

 

 

 

NELSONVILLE, Ohio, May 3, 2022 – Rocky Brands, Inc. (NASDAQ: RCKY) today announced financial results for its first quarter ended March 31, 2022.

 

First Quarter 2022 Overview

 

 

Net sales increased 90.5% to $167.0 million

 

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Wholesale segment sales increased 126.2%; Retail segment sales increased 19.3%

 

Operating income increased 100.5% to $13.2 million

Adjusted operating income increased 17.7% to $14.2 million

 

Net income increased 63.4% to $7.3 million, or $0.99 per diluted share

 

Adjusted net income decreased 6.8% 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 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% 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% to $134.0 million compared to $59.2 million for the same period in 2021. Retail sales for the first quarter increased 19.3% 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% of net sales, compared to $35.1 million, or 40.1% 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 $49.6 million, or 29.7% of net sales, for the first quarter of 2022 compared to $28.6 million, or 32.6% 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% of net sales in the current year period and $23.4 million, or 26.7% 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, Nevada. (See below for a reconciliation of GAAP financial measures to all non-GAAP financial measures used in this release).

 

Income from operations for the first quarter of 2022 was $13.2 million, or 7.9% of net sales compared to $6.6 million or 7.5% 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% of net sales compared to adjusted operating income of $12.1 million, or 13.8% 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 first quarter 2022 net income of $7.3 million, or $0.99 per diluted share compared to 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 our Acquisition was not yet determined and therefore was included in Identified Intangible assets. Upon finalizing our purchase price accounting, Goodwill was valued and separated from intangible assets in the balance sheet.

 
Conference Call Information

 

The Company's conference call to review first quarter 2022 results will be broadcast live over the internet today, Tuesday, May 3, 2022 at 4:30 pm Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 704-4453 (domestic) or (201) 389-0920 (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 gain further efficiencies as the year proceeds enabling the Company to translate top-line strength into enhanced profitability (Paragraph 2), the expectation that inventory levels will come down to normalized levels (Paragraph 2), and the Company’s near and long-term prospects (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, 2021 (filed March 15, 2022) 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

 

 

 


 

 

 

 

 

Company Contact:

Tom Robertson

 

Chief Financial Officer

 

(740) 753-9100

   

Investor Relations:

Brendon Frey

 

ICR, Inc.

 

(203) 682-8200

 

 

 

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)

 

   

March 31,

 

December 31,

 

March 31,

   

2022

 

2021

 

2021

ASSETS:

                       

CURRENT ASSETS:

                       

Cash and cash equivalents

  $ 14,950   $ 5,909   $ 8,892

Trade receivables – net

  123,387   126,807   84,050

Contract receivables

  268   1,062   2,171

Other receivables

  260   242   231

Inventories – net

  289,230   232,464   125,133

Income tax receivable

  2,338   4,294   -

Prepaid expenses

  5,875   4,507   4,116

Total current assets

  436,308   375,285   224,593

LEASED ASSETS

  10,696   11,428   1,696

PROPERTY, PLANT & EQUIPMENT – net

  60,958   59,989   51,150

GOODWILL

  50,246   50,641   -

IDENTIFIED INTANGIBLES – net

  125,528   126,315   170,930

OTHER ASSETS

  938   917   715

TOTAL ASSETS

  $ 684,674   $ 624,575   $ 449,084
                         

LIABILITIES AND SHAREHOLDERS' EQUITY:

                       

CURRENT LIABILITIES:

                       

Accounts payable

  $ 156,890   $ 114,632   $ 45,077

Contract liabilities

  268   1,062   2,927

Current Portion of Long-Term Debt

  3,250   3,250   3,250

Accrued expenses:

                       

Salaries and wages

  3,715   3,668   3,005

Taxes - other

  2,054   849   618

Accrued freight

  1,735   1,798   1,479

Commissions

  1,689   2,447   1,185

Accrued duty

  18,873   5,469   6,953

Accrued interest

  -   2,133   -

Income tax payable

  -   -   2,357

Other

  8,014   4,828   5,343

Total current liabilities

  196,488   140,136   72,194

LONG-TERM DEBT

  264,486   266,794   183,019

LONG-TERM TAXES PAYABLE

  169   169   169

LONG-TERM LEASE

  8,200   8,809   1,178

DEFERRED INCOME TAXES

  10,293   10,293   8,271

DEFERRED LIABILITIES

  584   519   386

TOTAL LIABILITIES

  480,220   426,720   265,217

SHAREHOLDERS' EQUITY:

                       

Common stock, no par value;

                       

25,000,000 shares authorized; issued and outstanding March 31, 2022 - 7,311,059; December 31, 2021 - 7,302,199; March 31, 2021 7,280,711

  68,454   68,061   66,856

Retained earnings

  136,000   129,794   117,011

Total shareholders' equity

  204,454   197,855   183,867

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

  $ 684,674   $ 624,575   $ 449,084

 

 

 

Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except share amounts)

 

   

Three Months Ended

   

March 31,

   

2022

 

2021

NET SALES

  $ 167,025   $ 87,667

COST OF GOODS SOLD

  104,198   52,528

GROSS MARGIN

  62,827   35,139
                 

OPERATING EXPENSES

  49,630   28,558
                 

INCOME FROM OPERATIONS

  13,197   6,581
                 

INTEREST EXPENSE AND OTHER EXPENSES

  (3,907 )   (747 )
                 

INCOME BEFORE INCOME TAX EXPENSE

  9,290   5,834
                 

INCOME TAX EXPENSE

  1,951   1,342
                 

NET INCOME

  $ 7,339   $ 4,492
                 

INCOME PER SHARE

               

Basic

  $ 1.00   $ 0.62

Diluted

  $ 0.99   $ 0.61
                 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

               
                 

Basic

  7,306   7,258

Diluted

  7,410   7,348

 

 

 

Rocky Brands, Inc. and Subsidiaries

Reconciliation of GAAP Measures to Non-GAAP Measures

(In thousands, except share amounts)

 

   

Three Months Ended

   

March 31,

   

2022

 

2021

GROSS MARGIN

               

GROSS MARGIN, AS REPORTED

  $ 62,827   $ 35,139

ADD: INVENTORY FAIR VALUE ADJUSTMENT

  -   331

ADJUSTED GROSS MARGIN

  $ 62,827   $ 35,470
                 

OPERATING EXPENSES

               

OPERATING EXPENSES, AS REPORTED

  $ 49,630   $ 28,558

LESS: ACQUISITION-RELATED INTEGRATION EXPENSES

  265   5,193

LESS: ACQUISITION-RELATED AMORTIZATION

  782   -

ADJUSTED OPERATING EXPENSES

  48,583   23,365
                 

INCOME FROM OPERATIONS, ADJUSTED

  $ 14,244   $ 12,105
                 
                 

OTHER EXPENSES

  $ (3,907 )   $ (747 )
                 

NET INCOME

               

NET INCOME, AS REPORTED

  $ 7,339   $ 4,492

ADD: TOTAL NON-GAAP ADJUSTMENTS

  1,047   5,524

LESS: TAX IMPACT OF ADJUSTMENTS

  (236 )   (1,271 )

ADJUSTED NET INCOME

  $ 8,150   $ 8,745
                 

NET INCOME PER SHARE, AS REPORTED

               

BASIC

  $ 1.00   $ 0.62

DILUTED

  $ 0.99   $ 0.61
                 

ADJUSTED NET INCOME PER SHARE

               

BASIC

  $ 1.12   $ 1.20

DILUTED

  $ 1.10   $ 1.19
                 

WEIGHTED AVERAGE SHARES OUTSTANDING

               

BASIC

  7,306   7,258

DILUTED

  7,410   7,348

 

 

 

Use of Non-GAAP Financial Measures

 

In addition to GAAP financial measures, we present the following non-GAAP financial measures: “non-GAAP Non-GAAP Adjusted gross margin,” “Non-GAAP Adjusted operating expenses,”  “Non-GAAP Adjusted net income,” and “Non-GAAP Adjusted earnings 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 management and 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.

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 excluded 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.