Thank you, and thanks to everyone joining us today. Before we begin, please note that today's session, including the Q&A period, may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995.

Such statements are based on information and assumptions available at this time and are subject to changes, risks and uncertainties, which may cause actual results to differ materially. We assume no obligation to update such statements.

For a complete discussion of the risks and uncertainties, please refer to today's press release and our reports filed with the Securities and Exchange Commission, including our 10-K for the year ended December 31, 2020.

And I'll now turn the conference over to Jason Brooks, Chief Executive Officer of Rocky Brands.

Thank you, Brendon. With me on today's call is Tom Robertson, our Chief Financial Officer.

As you saw in our earnings release, 2021 was another very good year for Rocky Brands, driven by sustained demand for our brands and products. Coupled with a healthy inventory level, we capitalized on numerous market opportunities to strengthen our wholesale relationships and meaningfully expand our retail presence.

2021 was also a year in which we significantly enhanced our brand portfolio and nearly doubled our sales through the acquisition of Honeywell's performance and lifestyle footwear business in March. Since closing the transition, we've mitigated their inventory onto our distribution platform, and during the fourth quarter, we accomplished the critical step of moving the business onto our ERP system.

Admittedly, the inventory and distribution integration didn't go as seamlessly as we had hoped. We experienced some temporary challenges in the second half of the year that limited our ability to fully capitalize on demand for this year.

That said, the internal issues that hampered our recent performance have improved each month, and we achieved record net revenue and record adjusted profitability for the year, reflecting the positive impact of the acquired business and the underlying strength of our brands and the benefits of our vertically integrated manufacturing.

Today, our Ohio distribution center is processing more shipments than ever before and continues to gain efficiencies. While our new distribution center in Reno, Nevada, which has nearly doubled our square footage to over 650,000 feet, is on track to be fully functional by the end of the first quarter.

And despite industry-wide sourcing challenges, we finished 2021 in a very strong inventory position.

With 40% of our manufacturing coming from our North American operated facilities, we have ample supply to capitalize on the strong momentum that has carried into 2022. And especially as many of our competitors are still struggling to procure products.

Shifting to a review of our fourth quarter, like the first 9 months of the year, demand for our brands remain strong while we, again, were unable to completely fulfill demand unlike last quarter where we were able to drive results in line with our revised expectations. Fourth quarter sales increased 93% over Q4 2020 to $169.5 million with our guidance range established during last quarter's call.

Overall, I am pleased with our results, and I'm excited about our potential as we begin to put our distribution challenges fully behind us. Let's now take a look at some of the drivers of our recent performance.

Similar to our last call, I'm going to discuss our Ohio and Boston Group separately.

Starting with our Ohio Group, full year sales increased 21%, while sales in the fourth quarter increased 3%, reflecting the impact from delayed fulfillment. Our performance has been driven by strong demand, particularly in our Wholesale segment.

Beginning with Wholesale. Demand for the Durango brand remains at an all-time high.

Several key customers across traditional Western and farm and ranch retail contributed to Durango's performance as strong holiday demand and the resumption of rodeos throughout the country provided nice tailwinds. Overall, the brand finished up strong double digits for the year, and up low double digits for the fourth quarter.

While shipments did slow over the second half of the year, we were able to fulfill orders at a better rate than the majority of the industry competition. This market dynamic helped fuel an acceleration in demand for our historical top western sellers and allowed many of our new products to gain added shelf space.

The pace of Durango's business picked up as the quarter progressed with near-record shipments for the brand in December.

Turning to Georgia Boot. Fourth quarter sales were added by a record-breaking fall booking season, resulting in several million dollars of new business for the brand this year.

While results were constrained as demand exceeded distribution center output, much like the western category, competition continued to experience delivery woes, allowing us to take advantage of our Dominican Republic production capabilities to help reduce our dependency on third-party Asian suppliers and expand shelf space.

The Rocky brand, which spans work, outdoor, western and commercial military was able to generate solid gains over 2020 despite distribution and supply chain headwinds. Starting with our outdoor segment in what has been traditionally a strong quarter for e-commerce business, disruption challenges shifted that focus to brick-and-mortar.

Availability of traditional best sellers with a nice injection of new products resulted in increased shelf space at some of the largest retailers this holiday season. You'll remember that last quarter, we began prioritizing seasonal product distribution, and that paid off in a big way for outdoor.

Our availability inventory positions on several key styles helped Rocky take advantage of strong market trends, coupled with many vendors struggling to keep up with demand due to supply chain challenges. Rocky Western continued its strong trend upward with mid-teen increases in the U.S.

wholesale business this quarter. Solid sell-through with key retailers and new distribution with large box stores drove the increased sales.

As has been the theme this quarter, competitor sourcing struggles created opportunities and Rocky Western was well-positioned to capitalize.

Being in stock was also key for Rocky Work. As retailers look for a product to fill strong consumer demand that is still outpacing supply.

And while still early, the exclusive product partnership with Zappos we unveiled during the third quarter continued its strong start in the fourth quarter. Rocky's commercial military business was up against a tough comparison in the fourth quarter as it laps some large contract sales a year ago.

On top of this, we were low on inventory of very compliant boots as a result of some staffing shortage in Puerto Rico manufacturing facility.

Despite the tough finish for the year, we are optimistic the business is poised to rebound. Rocky commercial military has a very loyal and avid following.

The demand for the ever-popular S2V collection has not diminished and the new product being developed and produced for 2022 will meet mission requirements in areas Rocky has not participated in before. And the addition of newly hired talent in both the sales and marketing teams should help drive future market share wins.

Turning to our retail segment. Following a 33% increase in total e-commerce sales in Q4 of 2020, this channel was down 38%, reflecting the combination of a tough comparison and our delay in processing a portion of the online orders on time.

As comparisons further ease and we return to a normalized shipping state, we expect to see e-commerce sales resume growth fueled by the work we've done to enhancing the functionality of our sites and expanding our direct-to-consumer efforts on marketplace.

Meanwhile, the spike in COVID cases late in the year slowed Lehigh's recent recovery from the height of the pandemic, while third-party product delays and internal distribution challenges related to the acquisition also pressured sales. Absent these temporary headwinds, the business continues to display many positive signs, led by higher account retention, new account growth, including ADM, James Hardy and Republic Services that all launched in Q4.

At the same time, our cruise line business, nearly dormant for 2 years now, continues to improve steadily, while our new e-mail and SMS strategy is helping drive account participation rates and revenue per account higher.

Shifting now to our Boston Group. Demand for Muck and XTRATUF is high and continues to grow.

While the situation improved, logistics and distribution challenges continued fourth quarter, resulting in a sales increase of 3%. The team worked closely with the DC and operations team to maximize productivity and leverage alternative shipping opportunities, such as selling full containers, shipping full case packs.

Although shipments were stronger in Q4, a good portion of deliveries to our strategic accounts arrived to their stores after the key selling season. The good news is the product is performing extremely well once arriving at retail, further underscoring the growing popularity of Muck and XTRATUF.

Both brands experienced record organic website traffic and engagement across our digital communities in the fourth quarter.

Specific to Muck, core styles remain in high demand and are selling through extremely well, even in areas where the climate was mild this season. The first quarter started off with a large backlog and pent-up demand, but we are working to return to normal retail inventory positions and the plan to see sales increase with most of our retail partners in the new year.

The XTRATUF brand continues to gain momentum and robust fourth quarter demand is further proof that XTRATUF has become a year-round brand versus a one-season spring business. The brand is positioned for a strong 22 with a record backlog and tremendous new product launches upcoming.

Before I turn the call over to Tom to review the financials, I'd like to leave you with some thoughts on 2022. Demand for our Durango, Georgia Rocky, Muck and XTRATUF brands have been solid early in the new year.

With our enviable inventory position and increased fulfillment capacity combined with our ongoing industry-wide sourcing and shipping delays, we are in a good position to regain some of the momentum at retail we lost during the second half of 2021 when we struggled to get enough product to market.

In terms of our own retail division, Lehigh is off to a good start, and we feel good about the business prospects for growth in 2022. The same is true for our branded e-commerce websites, especially our DCs are now back in rhythm, and we are able to fulfill consumer demand in a timely manner.

While our own manufacturing facilities in Puerto Rico and the Dominican Republic helped insulate us from what the global supply chain issues, we are not immune as we still source more than half of our inventory from Asia. Therefore, we expect pressure on margins to persist in the first half of the year until most recent round of price increases we have announced take effect and help offset the sharp increase in shipping container rates the industry experienced throughout 2021.

In terms of the integration, all the heavy lifting is now behind us following the ERP system migration in the fourth quarter. In the coming year, our focus is identifying synergies and cost savings and driving operational excellence throughout our new combined company.

Though we were tested by supply chain and distribution issues this year, new market opportunities and the successful expansion of current programs combined with our transformational acquisition allowed Rocky to reach new heights in '21.

As the market continues to look for answers to the strong demand and limited supply in 2022, we are well-positioned to take full advantage of our brands and manufacturing strengths to further grow market share across channels. I'm incredibly proud of our results, but more importantly, the resiliency and dedication of the entire Rocky team throughout a challenging year.

I'm incredibly grateful to the work with such a great team, and I really look forward to what we accomplish in 2022.

I'll now turn the call over to Tom to cover the financials. Tom?

Thanks, Jason.

Net sales for the fourth quarter of 2021 increased $81.8 million or 93.4% to $169.5 million compared to the year ago period. 2021's fourth quarter includes $79.3 million in net sales from the Boston Group, which was acquired in March of 2021.

By segment, as reported. Wholesale sales increased 124.9% to $134.8 million.

Retail sales increased 12.6% to $26.5 million, and military sales increased 95.5% to $8.1 million. Of the $79.3 million in Boston Group sales, approximately $72.8 million was in our Wholesale segment and $6.5 million was in retail.

Gross profit in the fourth quarter increased 75.2% to $63.3 million or 37.3% of sales compared to $36.1 million or 41.2% of sales in the same period last year. The 390 basis point decrease in gross margin was primarily attributable to lower wholesale segment gross margins due to increases in inbound container costs and a lower mix of higher-margin retail segment sales compared to a year ago period.

Wholesale gross margins for the quarter were 34.9% compared to 39.1% in the prior year. Retail gross margins were 53.8%, up from 48.7%, driven by higher sales of our owned versus third-party brands and contract manufacturing gross margins were 24.8% versus 30% in the fourth quarter of 2020.

Selling, general and administrative expenses were $45.1 million or 26.6% of net sales in the fourth quarter of 2021 compared to $23.2 million or 26.5% of net sales last year. Excluding $1.6 million in acquisition-related amortization and integration expenses for the fourth quarter of 2021, operating expenses were $43.5 million or 25.7% of net sales.

The increase in operating expenses was driven primarily by the expenses associated with the acquired brands.

Income from operations increased 41.1% to $18.2 million or 10.7% of net sales compared to $12.9 million or 14.7% of net sales in the year ago period. On an adjusted basis, operating margins were 11.7% versus 15.5%.

For the fourth quarter of this year, interest expense was $3.2 million compared with just $95,000 a year ago. The increase reflects interest payments on the senior term loan and the credit facility we used to fund the Honeywell footwear acquisition.

On a GAAP basis, net income for the quarter increased 29.1% to $12.5 million or $1.69 per diluted share compared to net income of $9.7 million or $1.33 per diluted share in the year ago period.

Adjusted net income for the fourth quarter of this year, which excludes the acquisition-related expenses, was $13.8 million or $1.86 per diluted share.

2021 was a transformational year for Rocky Brands. Despite the short-term fulfillment issues stemming from the acquisition integration, demand was very strong, and we navigated industry-wide inventory challenges adeptly.

For the full year, net sales increased 85.4% to a record $514.2 million, reflecting strong double-digit growth in the Ohio Group sales and the $179 million contribution to our top line from the acquired Boston Group.

By segment, wholesale sales increased 110.8%, retail sales were up 29.9% and contract manufacturing increased 51%. In terms of profitability, operating income increased 32.4% to $36 million.

Adjusted net income increased 40.9% to $32.5 million and adjusted EPS improved 39.8% to $4.39.

Turning to our balance sheet. At the end of 2021, cash and cash equivalents stood at $5.9 million, and our total debt -- and our debt totaled $270 million, consisting of our $127.6 million senior secured term loan facility and borrowings under our senior secured asset-backed credit facility.

Inventory at the year-end was $232.5 million compared to $77.6 million a year ago. The $154.9 million increase includes approximately $101 million associated with the acquired brands.

We feel very good about the quality of our inventory. And given the functional nature of our product, we see low -- little risk for above-average markdowns.

We expect inventory levels to decrease and be a source of cash as inventory normalizes by the end of the third quarter of this year. With respect to 2022, we are planning another year of solid growth with sales projected to increase between 16% and 19% over 2021 levels.

With owning the acquired brands for an additional 75 days in the first quarter of this year, growth will be strongest in the first quarter and then moderate in the second quarter as we are up against our first full quarter of the combined businesses. As we move into the back half of 2022, year-over-year growth should reaccelerate from Q2 levels as we recapture the lost sales from delayed fulfillment in 2021.

In terms of gross margins, wholesale margins in the first half will be similar to that of the fourth quarter of 2021 and then improve starting in the third quarter as our price increases go into effect and start flowing through the income statement. Based on the outlook for the wholesale margins and our projected sales mix by segment, we expect we'll move towards overall gross margins of approximately 39% to 40% by the fourth quarter of this year.

As Jason said earlier, now that the integration of the two organizations is complete, we are shifting our attention to identify synergies and cost-saving opportunities. This will work to take place over the course of the year, and our goal is to drive 75 basis points of expense average over 2021 adjusted levels.

Finally, our tax rate for the year is projected to be approximately 21%.

With that, it concludes our prepared remarks. Operator, we are now ready for questions.

I want to ask just first a broader question on your read of the demand trends you're seeing across the various industries that you service and just broader thoughts on the health of the consumer, especially in an inflationary and volatile macro environment.

Jon, yes, great question. At this point in time, we have not seen any particular slowdown, right?

I think we are really watching and looking about this inflation thing going on. But our customer base, the consumer base is still shopping, they're still going in.

The shelves are not really completely full yet, either at the retail level. And so I think that there's some things happening around that.

I think that we're probably pretty good for 2022 and that we will be more cautious as we go into 2023.

Okay. Great.

And then, Tom, if I could follow up on the revenue outlook you provided, could you just help on a little bit more detail how much underlying growth you're assuming? I know you get the benefit in the first quarter since you did not own the Boston brands the whole quarter last year.

So just -- what are you assuming for the underlying growth maybe both for the Boston business versus the other brands? Or however it might make sense to give it.

Yes. So I think as we look out into 2022, I think you'll start hearing the messaging change a little bit, and we'll then be one Rocky Brands.

And so we're probably stray away from giving Boston Group or Ohio Group-specific guidance. But that 16% to 19%, obviously, the biggest driver there is going to be from the wholesale category, particularly in the first quarter.

And then also the other big quarters, as we tried to call out, is going to be in the third quarter. I mean we spent a lot of time talking at the last earnings call about the miss that we had because of the fulfillment issues.

And so we hope to recover a lot of those sales, which we kind of illustrated was somewhere in that $40 million to $50 million range in Q3 of last year.

So the retail sales will also benefit as well as we are focusing our distribution as it's getting stood back up in the way it should be on shipping our owned and operated websites. And so we think that there'll be a lot more inventory that we'll be available to ship, particularly for the Boston Group in 2022, and we'll be able to focus on getting that product out the door in a timely fashion.

From a contract manufacturing standpoint, we have -- we are anticipating that some of the contracts will expire. There are some opportunities to potentially bid on those.

But the reality of it is, is we are focused on growing our wholesale and retail businesses. And with the success, I think Jason noted on some of our Made in the USA marketed product, we're going to drive production to produce that product, which has carried a higher margin than our contract military business.

So I would anticipate the contract manufacturing segment to, I don't know, cut in half, maybe in 2022.

And just to clarify, should we be thinking growth in total revenue in Q2 and then the fourth quarter? I just want to make sure I'm understanding your commentary.

Yes. So if we look at the second quarter, the growth is going to be more modest, right?

If you think back to this year, that was right after we closed on the acquisition. We did not have the distribution hiccups that we had in the third quarter because in the second quarter, Honeywell was still shipping the product and our own distribution center was still operating as efficiently as it had in years past.

Some modest growth in the second quarter. And then the fourth quarter, probably even a little bit more modest growth.

I don't anticipate that we'll carry over nearly backorders in the Q4 of 2022 as we did in the Q4 of 2021 given we hope to get all the product out the door in the third quarter of this year.

Yes. Great.

And last one for me. Sorry, I missed part of this, but the expense leverage you're talking about, was that a comment on the SG&A ratio or were you talking about overall operating margin leverage?

And that's it for me then.

Yes, so that's on our operating expenses on an adjusted basis. So as we go into this year, we're going to be very focused on doing things efficiently and leaning up the organization where we can, which in 2021, we took the approach to get the boots on the shelves that really -- any and all costs to defend our shelf space, and we think that we'll be able to find some leverage in 2022 as we're able to fill the orders more efficiently.

Okay. Understood.

Thanks again for all the detail.

Just really quick on the gross margin. I guess it sounds like you're guiding a little bit above 2021 and 2020.

Can you just remind us what impact the Honeywell brands, I guess once the distribution is in place, will have on the gross margin. And then also the puts and takes you're expecting there from like a freight -- extra freight perspective versus also cycling the issues you had with distribution last year.

Susan, yes, I'll take this one. So just to unpack that a little bit.

So historically, the Boston Group margin, particularly for the Muck brand, has been stronger than our historical Ohio Group margins. That has -- that is still the case.

However, they've been more greatly impacted by the inbound freight container cost as more of their product comes out of Asia than our average for the Ohio Group. And so we've done price increases for both the Ohio Group and the Boston Group.

And so we were guiding margins up slightly by the end of the fourth quarter. And really, that's more of a relation of our price increases going into effect.

So if we recall, we announced a price increase kind of in the beginning of Q3, of which we started shipping some of the items at the new price in the fourth quarter, but we were still shipping a lot of back order product in the fourth quarter of this year -- of 2021 and then we've announced another price increase that went into effect January 1.

And so that lag or that timing for when those price increases are actually realized will be some pressure as we called out on the gross margins in the first quarter -- or the first half of the year, I apologize. And they will slowly improve into the fourth quarter and get back to kind of where we think historically those margins should be on a combined basis.

Got it. Okay.

And then just on the new DC. So is that, I guess, fully up and running now?

Or is that still -- or should we expect that to still be ramping as we go throughout the year?

Yes. So I'll take this one, Susan.

The DC and Reno has been up and running. We have had to -- we've had some delays in getting equipment and getting racking and equipment.

And so it is going to be ramping up here in the month of March, and we believe that it will be fully functional by the end of Q1 and that we'll be able to see more benefits from that -- from it for the rest of the year. But we have been shipping shoes out of there.

It's just been pretty sporadic and more case packs than sort to case.

Got it. Okay.

That's helpful. So I guess you would expect also, as we kind of go throughout the year, increased efficiencies and positive margin impacts as that ramps?

Yes. I mean, I think the goal really is to, from an operational excellence standpoint, is to fine-tune once we get that up and running to really evaluate the operations both here in Logan and in Reno, and fine-tune that throughout the rest of this year and really into 2023 to find those efficiencies and make it more cost savings where we can.

Great. And then just on the Boston Group brands, Muck and XTRATUF, and I guess maybe mainly Muck too, I guess, how much opportunity is there?

Last year, it was obviously hindered by the distribution issues and now you're kind of talking about getting some of that back. But if I remember right, I think when you bought it from Honeywell, they also had some pretty bad inefficiencies in terms of sharing inventory between e-com and wholesale and so forth, and really not capturing all of the sales possible.

So I guess as we look forward, how much more opportunity do you think there is to grow that brand?

Yes. Another great question.

I kind of chuckled because the one area that we knew they were struggling with, we thought we would be able to resolve quickly and we stumbled a little bit. So we still think there's a good opportunity there.

I think between the 2 DCs and what we were able to do, we should be able to see some upside there. As I indicated, the traction and communication that we get on our websites for both those brands, in particularly the XTRATUF brand right now, I think there is some pretty good upside as we continue to refine this and get back to where we used to be and the capabilities that we used to have.

Yes. Just to add on there, Susan.

I think once Reno is up and fully automated and as Jason said, it's weeks, if not days away from happening, we'll be able to flip a switch and essentially make all the inventory that's in Reno available on any of our websites, but also very importantly, available for drop shipment with a lot of our key retail partners. And so that's a very meaningful part of our business.

And really, over the last few months, because of our inability to ship single pairs out of Reno, we've been a little handcuffed there. So we're very excited to see the capabilities of Reno and our ability to fulfill, not only our own e-commerce but our drop shipments as well in weeks to come.

I got a couple of questions. I guess, first on the shelf space gains.

It's great to see that you're taking some shelf space and taking advantage of your manufacturing locations and leveraging that. Maybe if you could talk about the visibility that you have into the durability of the those shelf gain -- those shelf space gains.

I'm curious to know how are those conversations unfolding with your retail partners, with having that be a more permanent presence that you've now gained?

Yes. Camilo, that's a really great question that we are digging into every day here, really as we started into January.

And I would tell you that it is hit or miss. So our more sophisticated retail partners are able to very clearly show us and talk to us about what shelf space we have today and what shelf space they're willing to give us in the future.

And we are not seeing a lot of reduction there. So we feel good that we will continue to see that shelf space.

Particularly, if you look at the categories that we are in, western boots, work boots, hunting boots, those marketplaces were really strong. The smaller independent mom-and-pops, it's harder to get a feel for it, but our bookings are staying pretty strong.

So we believe that we are holding on to that shelf space.

Where we have seen some shelf space start to slip is in some areas that is not our expertise, right? And so if you think about a Rocky outdoor hiking boot, we do a good business there.

But when you look at the brands in the marketplaces like the Merrells and the Keens of the world, our brand is much lower and not as recognized. So that is the area that we are starting to see that retailer to be like, "Look, I bought 1,200 pair of these from you last year.

I've got back into my whatever brand, I'll give you a 600 pair." So we are seeing a little bit of reduction there.

But in our core big business brands, we're not seeing much reduction.

Yes. Real quick, just to add on there.

Sorry. Jason touched on it a little bit.

So we're seeing strong bookings for 2022. And so in my mind, I do not think we'd be seeing the bookings if we were going to be losing shelf space come Q3 and Q4 of next year.

But I think it also signals maybe a little bit of shift in the retailers' behavior, right? And then they are taking a more aggressive approach to inventory.

They want to get their orders in early to make sure they have the boots for the third and fourth quarter of this year. So we feel good about our bookings.

The other thing to call out, too, is that we've had a lot of conversations with our retail partners, particularly on the Boston Group side of, "Hey, look, you need to prove it this year. You need to prove you can get us the boots on time and have the inventory."

We clearly have the inventory to do that. And then after Reno was up and running here at full capacity in March, we'll have the ability to fulfill those orders.

So we're feeling pretty good as we roll into Q2, Q3 or Q4 of 2022.

That's great. That's great to hear.

I guess sticking on the topic of the Boston Group, I'm sure you've had these discussions, but I would love to get an update on how you're thinking about the potential or the opportunity to shift that production from Asia to either Puerto Rico or Dominican Republic.

Man, really great question. I would tell you that it is definitely on our radar, but it is not going to be probably in the top 5 priorities for 2022.

We will slow play that. I cannot stress enough to you and anybody in the marketplace, if a boot fits and performs and you move it, and it doesn't fit and doesn't perform the same way, it is the fastest way to lose that product.

And so we will be very careful about this, but we do know and do see and do feel that there's opportunity for both the Muck and XTRATUF and maybe the Servus product in the Dominican. So it is on our radar, but we will take our time to make that happen.

Yes, I think to add on a little bit there, too. I mean everybody in the industry can see the duty change -- the significant reduction in duties by moving rubber boots to whether it's somewhere else in North America or Central America or in South America.

But those don't happen overnight. Those changes need to be slow and methodical, as Jason pointed out.

And so we will work with our partners to expand their presence, whether it be in the Dominican or Central America, really.

The other important color out here is that from the Ohio Group standpoint or really our leather product standpoint, we've recognized this. And so the math has changed on the cost of getting a boot -- a leather boot from Asia versus the Dominican or Puerto Rico with these new inbound container prices.

And so we anticipate and we've forecasted that our production in both the Dominican and Puerto Rico production will be up pretty strongly in 2022 from 2021. So we are shifting what we can, but we were trying to do it methodically and not jeopardize any quality or fit issues with the product.

Great color. Last one for me is on the comments of the 75 basis points of SG&A leverage anticipated for this year.

Is that -- would you consider that the first step of synergy recognition? And if it is, do you anticipate the further synergies thereafter to be greater or less than that 75 basis points as you recognize and identify more of them?

Yes. So as we think about the 75 basis points in 2022, there's a couple of things driving that.

One is we're still not doing things as efficiently as we should be, particularly in our distribution, whether it be in Ohio or Logan. So there's improvements to make in Ohio, but with a brand-new distribution center in Reno, just like anything else you do for the first time, you're not going to be as efficient.

But we're also having to supplement our staff and employees with more expensive temp labor. They are not as efficient naturally.

And so as we continue to hire our folks, our new associates out in Reno, that will -- we will benefit from that.

But then looking internally too, I mean, we will continue to find efficiencies and kind of, one, our operating leverage, but also we had talked about before, our ability to do factory direct shipments for the Boston Group, which is a capability they didn't have before the acquisition. And so we think that the Boston Group, again, given their business with key accounts and their smaller -- their lower SKU counts and shorter lead times for that matter, will add factory times, that they are better suited for factory direct shipments.

And so we will focus on that, which can be a big operating win for Rocky Brands. Because we don't have to run that product through either of our distribution centers and it goes straight to the retail partner.

So that will be another thing that we work on throughout the rest of 2022. We've already started 2022 off of factory directs, but with a great start.

So we're optimistic from that standpoint.

But further to your point, I think as we go into 2023, and we won't give any guidance, but I think that you can probably look back in Rocky's history over the last 5 years and see our ability to leverage top line sales growth. And so that will be our goal is to really leverage the growth that we're experiencing with our 5 core brands and Lehigh on our leaner operating structure.

So it's going to take some time to do so, particularly in the first half of 2022.

I did see -- so long-term debt actually went up this quarter. Is that related to the fulfillment issues still impacting the -- did you need some additional debt this quarter?

Yes, yes, absolutely, Rob. So yes, our fulfillment center issues slowed down our ability to get boots out the door, and we had inventory coming in to meet the demand that we saw.

And so that increase in inventory really drove up the cost -- or I'm sorry, the total leverage of the business. And we tried to call out in the prepared remarks that our plan is to rightsize the inventory over the next few quarters.

And so we'll use that as a source of cash to pay down leverage. But also the EBITDA results of the business will help -- will give us free cash flows to pay down the debt in 2022 as well.

Great. And I did hear -- I might have missed this, but I did hear you mention -- talk about the second and fourth quarter, that you expect modest growth.

Did you mention -- did you talk about the first quarter? And I missed it, I just wanted to see if you could reiterate what happened, what you mentioned on the first quarter.

Yes. So on the first quarter, if you think about 2021, we only owned the Boston Group for 15 days.

So the 75 days additional of having the Boston Group will certainly give you a significant increase on the results of last year. And then in the third quarter, we talked about our fulfillment center issues.

That was kind of the peak of our issues from a distribution standpoint. And so we left a lot of sales on the table going into the fourth quarter.

And so we hope to recoup those sales in the third quarter of 2022.

Great. Thank you.

I would just like to reiterate one more time my and Tom's real appreciation of the Rocky Brands' employees. The boys really have stepped up in 2021 during a crazy year, with all the things happening and the integration of a company.

And I really feel like the employees did an exceptional job and worked hard to get us where we are. And that's where we came from, and that's where we will continue to move forward with in 2022 and '23 and '24.

And so I just want to say one more time to the employees all over the world, thank you for your efforts and look forward to a great 2022.