2020
ANNUAL
REPORT
halves. The impact COVID-19 had on physical retail during
spring and early summer was substantial, and we were not
immune as partners cancelled orders and reduced receipts
across their account base to preserve liquidity. However,
as the country started to reopen midway through the year,
the strong appeal of our product offering was evident by
how quickly demand rebounded. Our work category led
by Georgia Boot and our western category led by Durango
posted double-digit percentage gains in the third quarter
and that momentum carried through to the end of the year,
while the Rocky brand in total grew at similar rates over the
last six months of 2020.
es•sen•tial
/ə’sen(t)SHəl/
adjective
1. absolutely necessary;
extremely omprotant.
Similar: crucial, key, vital, needed,
indispensible, required
noun
1. a thing tht is absolutely
necessary
Similar: necessity, prerequisite,
requirement
Dear Shareholders:
It is truly a pleasure to be addressing you once again.
Much has happened over the past year as the global health
pandemic brought on by COVID-19 created challenges
and opportunities for our business. As significant parts of
the U.S. economy were required to start shutting down in
late March to help stop the spread of the virus, there was
a tremendous amount of uncertainly about our near-term
future. Fortunately, we soon found out that our operations
were deemed essential to keeping the country running.
Essential is a great way to describe our people, as they are
the reason we were able to deliver record financial results
in 2020. I am incredible proud of what we accomplished,
especially as we faced significant changes in consumer
behavior and dealt with unfamiliar working conditions. Our
outstanding performance underscores the fortitude of our
organization and speaks to the powerful portfolio of brands
and enhanced fulfillment capabilities we have developed
over the past several years.
We came into 2020 with good momentum resulting from
many operational initiatives in digital, distribution, marketing
and manufacturing in 2019. We had a sound plan in place
to build on our success but as COVID
hit the U.S. those plans were initially
disrupted, and all things pointed to
2020 potentially being one of the
worst years in our Company’s 89 year
history. That clearly did not end up
being the case as we quickly pivoted
and leaned heavily into our ecommerce
channel and our distribution center
remaining open to capitalize on the
accelerated shift to online spending.
As the year progressed, and brick and
mortar retail reopened and store traffic
picked up, we relied on the strength of
our internal manufacturing capabilities
and inventory investments in order to
get product to our wholesale partners
quickly. The speed at which we were
able to execute fulfillment resulted in additional shelf space
for our brands, strong sell-through at retail and ultimately
market share gains.
“ESSENTIAL
is a great way to
describe our people,
as they are the
reason we were able
to deliver record
financial results
in 2020.”
Our focus on our long-term strategic initiatives was a constant
in a year of significant change. While the way we went about
our business in 2020 was different due to government and
health related restrictions and regulations, we didn’t lose
sight of what put the company in such a strong position
prior to the pandemic. This meant exciting our consumers
with great product and increasing brand awareness and
stimulating demand through improved marketing with an
emphasis on digital. It also involved providing excellent retail
support and expanding distribution with our key brick and
mortar and e-tail partners, accelerating expansion of our
direct businesses through investments in technology and
personnel, and taking advantage of our internal production
to capitalize on the growing number of commercial military
opportunities and improve the efficiency of our factories.
Our e-commerce channel had a fantastic 2020, propelling
our retail division to double digit growth for the third
consecutive year. The upgrades we made to the front and
backend of our branded desktop and mobile sites and our
growing presence on e-marketplaces, particularly Amazon,
put us in a great position to capitalize on the surge in
digital commerce that was initially fueled by widespread
lockdowns and store closures. We’ve been building more
direct relationships between our brands and consumers for
some time and the events of the past
year have helped further strengthen
these
important connections. Not
surprisingly, our business-to-business
Lehigh Custom Fit division struggled
at times this past year as many of
its customers slowed spending and
operated with reduced workforces
early in the pandemic. The good news
is that sales trends picked up as the
year progressed as did new account
acquisition, providing the business
with good momentum for 2021.
to
response
Rocky Brands
the
challenges of 2020 reinforced my
belief that our people are as reliable
and durable as the footwear we make.
I want to thank our employees for their dedication and
determination in supporting each other during a year of
uncertainty. We should all be very proud of what we have
been able to accomplish. The result of our collective efforts
meant we began 2021 in a very strong financial position,
which allowed us the execute the transformative acquisition
of Honeywell’s lifestyle footwear business early in the new
year. We are incredibly excited about the near and long-
term prospects for our combined entities and I’m confident
we have the right teams in place to execute on the many
opportunities that lie ahead.
On behalf of the entire Rocky organization, including the
Board of Directors, I thank you for your investment and
ongoing support.
Sincerely,
We delivered extremely solid growth across our brands,
categories and channels in 2020. For wholesale, the
largest segment of our business, it was truly a year of two
Jason Brooks
Chief Executive Office
2
ROCKY BRANDS ANNUAL REPORT 2020
LETTER TO SHAREHOLDERS
ESSENTIAL
ROCKY BRANDS ANNUAL REPORT 2020
3
FINANCIAL HIGHLIGHTS
2020 WAS THE BEST EPS YEAR EVER
$277.3
$270.4
$1.29
$260.3
$253.2
$252.7
$2.86
$2.35
$1.95
INCOME STATEMENT DATA
($000, except per share data)
2020
2019
2018
2017
2016
2016
2017
2018
2019
2020
Net sales
Gross margin
Income from Operations
Net income
$277,309
$270,408
$252,694
$253,197
$ 260,259
37.8%
9.8%
36.1%
8.2%
34.4%
7.1%
31.9%
4.7%
29.5%
-1.2%
$20,964
$17,462
$14,553
$9,586
$ (2,139)
Net Sales ($millions)
Net Income Per Diluted Share
9.8%
8.2%
7.1%
$(0.29)
2016
2017
2018
2019
2020
Net income per diluted share
$2.86
$2.35
$1.95
$1.29
$ (0.29)
4.7%
BALANCE SHEET
Inventories
Total assets
Total debt
$77,576
$76,731
$72,822
$65,622
$ 69,168
229,091
205,826
184,663
173,479
178,939
-
-
-
2,199
14,584
-1.2%
2016
2017
2018
2019
2020
2016
2017
2018
2019
$14.6
$2.2
$-
$-
$-
2020
Shareholders’ equity
179,505
164,656
151,575
141,093
135,093
Income from operations as a % of net sales
Total Debt ($millions)
3.4%
INCREASE IN
WHOLESALE
12.4%
INCREASE IN RETAIL
The expansion of our Distribution Center in Logan, Ohio
took our capacity from 1.2m pairs to 1.8m pairs.
260
BPS
INCREASE IN
*ADJUSTED GROSS
MARGIN
39.7%
INCREASE IN *ADJUSTED
OPERATING INCOME
38.3%
INCREASE IN
*ADJUSTED DILUTED EPS
4
ROCKY BRANDS ANNUAL REPORT 2020
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
ROCKY BRANDS ANNUAL REPORT 2020
5
*Adjusted Gross Margin, Operating Income and Diluted EPS include approximately $2 million dollars in manufacturing expenses related to COVID-19 facility closures and approximately
$.7 million in operating expenses related to entering a definitive agreement to acquire the performance and lifestyle footwear business of Honeywell International, Inc.
15.2%
GROWTH
focused on sell-through
We
with retailer specific POP and
social media, introduced a new
WorkSmart apparel
line, and
increased our online presence
during COVID with sponsorships
and compelling content.
LEA S
P
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R
E
E
S TAND
H
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•
P
L
EAS
H
STAND
E
21.2%
GROWTH
In a year filled with adversity,
Georgia Boot had a unique
opportunity to engage with our
core consumers on a much
deeper level and strengthen our
unity as a team.
1 Removable Comfort Core® Next Gen memory foam
insole with individual shock absorbing pillars
2 EVA cushion layer molds to the contours of your foot
3 Non-Woven inner sole provides great lateral stability
and support
4 Fiberglass shank for all day comfort and stability
5 Compression molded EVA midsole absorbs the
shock of each step to guard against foot fatigue
6 TPU Anchor Disk provides added arch support and
stability
7 Heat, chemical, abrasion and slip-resistant
dual-density EVA and Carbo-Tec rubber outsole
1
2
3
4
5
6
7
6
ROCKY BRANDS ANNUAL REPORT 2020
ROCKY
GEORGIA BOOT
ROCKY BRANDS ANNUAL REPORT 2020
7
u
41%
GROWTH
The record increase is due to a
combination of a lot of moving
parts working
to
provide
increased experience,
brand perception, access, and
value to our consumers.
together
The Lehigh Safety Pledge follows all health
guidelines for Ordering & Wellness Events
with our 3D foot scanner.
The initiation of enhanced
provision programs and
communication
channels
ensured continued essential
service to all accounts, while
also opening our Program
to companies whose other
options had shut down.
Initiation of new email and SMS service
platform to communicate directly with
our account’s employees.
8
ROCKY BRANDS ANNUAL REPORT 2020
DURANGO
LEHIGH
ROCKY BRANDS ANNUAL REPORT 2020
9
Virtual Ordering Events will utilize kiosks and a live online customer service assistant.
BOARD OF DIRECTORS
Mike Brooks
Chairman of the Board
Glenn E. Corlett
Retired Dean and Philip J. Gardner, Jr. Leadership
Professor, College of Business at Ohio University
Michael L. Finn
Chairman, Power Distributors, LLC
President, Chesapeake Realty Company
G. Courtney Haning
Former Chairman and Chief Executive Officer
Peoples National Bancshares, Inc.
Curtis A. Loveland
Secretary
Partner, Porter, Wright, Morris & Arthur LLP
James L. Stewart
Proprietor, Rising Wolf Ranch, Inc.
William L. Jordan
Chief Growth Officer, DSW Inc.
Robert B. Moore, Jr.
Former CEO, Bhartiya International, Ltd.
Tracie Winbigler
Executive Vice President and
Chief Financial Officer, Amtrack
Robyn R. Hahn
President, Westfield Insurance,
Small Business Division
OFFICERS
Jason Brooks
President and Chief Executive Officer
Tom Robertson
EVP, Chief Financial Officer and Treasurer
Richard Simms
President, Operations
Byron Wortham
President, Core Brands Sales, Marketing,
and Product Development
David Dixon
President, Manufacturing/Sourcing Operations
Corporate Offices
39 East Canal Street, Nelsonville, Ohio 45764
(740) 753-1951
Independent Registered Public Accounting Firm
Schneider Downs & Co., Inc.
Columbus, Ohio
Legal Counsel
Porter, Wright, Morris & Arthur LLP Columbus, Ohio
Transfer Agent and Registrar
Communications regarding changes of address,
transfer of shares, and lost certificates should be
directed to the company’s stock transfer and registrar:
Computershare Investor Services
Attn: Shareholder Services
P.O. Box 30170
College Station, TX 77842-3170
(800) 962-4284
www-us.computershare.com/investor/Contact
Stock Listing
NASDAQ Stock Market
Symbol: RCKY
Form 10-K
Copies of the signatures, exhibit index and exhibits
contained therein as filed with the Securities and
Exchange Commission are available without charge
upon written request to:
Tom Robertson
EVP, Chief Financial Officer and Treasurer
Rocky Brands, Inc.
39 East Canal Street
Nelsonville, Ohio 45764
Investor Information
Corporate and investor information is available on
the company’s website at www.rockybrands.com