Rocky Brands(RCKY) - 2021 Q1 - Quarterly Report

Acquisition and Integration - The company closed the acquisition of Honeywell International, Inc.'s performance and lifestyle footwear business in Q1 2021, incurring significant integration expenses[85] - Cash used in investing activities was primarily related to the acquisition of Honeywell's footwear business, totaling $208.2 million in Q1 2021[106] Financial Performance - Net sales for Q1 2021 reached $87.67 million, a 57.3% increase from $55.72 million in Q1 2020, with wholesale sales up 69.3% and retail sales up 42.0%[90][91] - Gross margin improved to 40.1% in Q1 2021 from 34.7% in Q1 2020, driven by stronger initial margins and better efficiencies in manufacturing[94] - Operating expenses increased by 60.4% to $28.56 million in Q1 2021, including approximately $5.2 million in acquisition-related expenses[98] - Cash provided by operating activities was $2.9 million in Q1 2021, down from $14.1 million in Q1 2020, impacted by changes in accounts payable and inventory[105] Tax and Liquidity - The effective tax rate rose to 23.0% in 2021, reflecting actual results from fiscal year 2020 and preliminary estimates post-acquisition[99] - The company expects adequate liquidity from operations and credit facilities to meet obligations for at least the next twelve months[103] Sales and Market Trends - Military sales increased by 15.7% in Q1 2021, recovering from temporary manufacturing closures due to COVID-19[90][93] - The company anticipates continued growth in e-commerce and direct-to-consumer sales, attributed to investments in traffic and conversion rates[92] Risks and Forward-Looking Statements - Forward-looking statements include expectations regarding future profitability and operating strategies[110] - Risks include dependence on sales forecasts, changes in consumer demand, and competition[110] - Cybersecurity breaches and fluctuations in foreign currency exchange rates are noted as potential risks[110] - The company acknowledges significant uncertainties inherent in forward-looking statements[110] - The report includes a safe harbor statement under the Private Securities Reform Act of 1995[110] - The company emphasizes the importance of understanding risks outlined in the "Item 1A, Risk Factors" section[110] - No material changes to market risk as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020[112] - No new quantitative or qualitative disclosures about market risk have been made since the last report[112] - Company assumes no obligation to update any forward-looking statements[110] - Management's discussion includes intent and beliefs regarding future growth strategies[110]