Good afternoon, everyone. Thank you for your patience. Welcome to the Rocky Brands Fourth Quarter Fiscal 2021 Earnings Conference Call. I want to remind everyone that this call is being recorded.

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 nine months of the year, demand for our brands remained 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 aided 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 shortages in our 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 enhance the functionality of our sites and expanding our direct-to-consumer efforts on the 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 two years now, continues to improve steadily, while our new email 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, logistical and distribution challenges continued in the 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 at 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 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 2022 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 as 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 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 the 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 on 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 2021. 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 work with such a great team, and I really look forward to what we will 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 rose by $81.8 million or 93.4% to reach $169.5 million compared to the same quarter last year. This quarter includes $79.3 million in net sales from the Boston Group, which we acquired in March 2021. By segment, wholesale sales grew by 124.9% to $134.8 million, retail sales increased by 12.6% to $26.5 million, and military sales went up by 95.5% to $8.1 million. From the $79.3 million in Boston Group sales, about $72.8 million was in our wholesale segment and $6.5 million was in retail. Gross profit for the fourth quarter rose by 75.2% to $63.3 million, which is 37.3% of sales, compared to $36.1 million or 41.2% of sales from the same period last year. The 390 basis point decline in gross margin is primarily due to lower wholesale segment margins caused by rising inbound container costs and a smaller proportion of higher-margin retail sales compared to last year. Wholesale gross margins for the quarter were 34.9%, down from 39.1% the previous year. Retail gross margins improved to 53.8% from 48.7%, fueled by increased sales of our owned brands versus third-party brands, while contract manufacturing gross margins decreased to 24.8% from 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 the previous year. Excluding $1.6 million related to acquisition amortization and integration costs, operating expenses were $43.5 million or 25.7% of net sales. The rise in operating expenses was mainly linked to costs from the acquired brands. Income from operations increased by 41.1% to $18.2 million or 10.7% of net sales, up from $12.9 million or 14.7% of net sales over the last year. On an adjusted basis, operating margins were 11.7% compared to 15.5% previously. This quarter, interest expense was $3.2 million, significantly higher than $95,000 a year ago, reflecting interest on the senior term loan and the credit facility for funding the Honeywell footwear acquisition. On a GAAP basis, net income for the quarter was $12.5 million or $1.69 per diluted share, a 29.1% increase from net income of $9.7 million or $1.33 per diluted share in the prior year. Adjusted net income for this quarter, excluding acquisition-related expenses, was $13.8 million or $1.86 per diluted share. 2021 was a pivotal year for Rocky Brands. Even with short-term fulfillment challenges from the acquisition integration, demand remained very strong, and we effectively managed industry-wide inventory issues. For the full year, net sales rose by 85.4% to a record $514.2 million, driven by robust double-digit growth in Ohio Group sales and a $179 million contribution from the Boston Group acquisition. By segment, wholesale sales increased by 110.8%, retail sales went up 29.9%, and contract manufacturing increased by 51%. Operating income rose by 32.4% to $36 million. Adjusted net income grew by 40.9% to $32.5 million, and adjusted EPS increased by 39.8% to $4.39. As for our balance sheet, by the end of 2021, cash and cash equivalents stood at $5.9 million, and our total debt was $270 million, made up of a $127.6 million secured term loan and borrowings from our secured asset-backed credit facility. Year-end inventory was $232.5 million, up from $77.6 million a year ago, with the increase of $154.9 million largely tied to the acquired brands. We are confident about our inventory quality, and given the nature of our products, we foresee minimal risk of excessive markdowns. We expect inventory levels to decline and generate cash as they normalize by the end of Q3 this year. Looking ahead to 2022, we anticipate another year of solid growth, with sales expected to rise between 16% and 19% compared to 2021. With the acquired brands under our ownership for an additional 75 days in Q1, we expect the strongest growth in the first quarter, with moderation in the second quarter due to comparisons with our first full quarter of the combined businesses. In the latter half of 2022, we anticipate a reacceleration of year-over-year growth from Q2 levels as we capture the sales lost from fulfillment delays in 2021. Regarding gross margins, wholesale margins in the first half are expected to be similar to those of Q4 2021, improving from Q3 as our price increases take effect and reflect on the income statement. Considering the outlook for wholesale margins and our anticipated sales mix by segment, we expect overall gross margins to reach around 39% to 40% by Q4 this year. As mentioned earlier, now that the integration of the two organizations is completed, we will focus on identifying synergies and cost-saving opportunities throughout the year, aiming to achieve an average of 75 basis points in expense reduction compared to 2021 adjusted levels. Finally, our projected tax rate for the year is about 21%. That concludes our prepared remarks. Operator, we're now ready for questions.

Our first question comes from Jonathan Komp of Baird.

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. I think we are really watching and looking at this inflation situation. 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. Tom, could you provide a bit more detail on the revenue outlook you mentioned, specifically regarding the underlying growth you're projecting? I understand that you benefited in the first quarter since you didn’t own the Boston brands for the entire quarter last year. What assumptions are you making about underlying growth, particularly for the Boston business compared to the other brands, or however it makes sense to present this information?

As we look ahead to 2022, you'll notice a shift in our messaging, and we will present ourselves as one Rocky Brands. Therefore, we will likely move away from providing specific guidance for the Boston Group or Ohio Group. The expected growth rate of 16% to 19% will primarily come from the wholesale category, especially in the first quarter, with significant contributions also anticipated in the third quarter. We discussed in the previous earnings call the challenges we faced due to fulfillment issues, and we aim to recover many of those sales, which we estimated to be between $40 million and $50 million for Q3 last year. Retail sales will also see a boost as we enhance our distribution, particularly for our owned and operated websites. In 2022, we expect to have more inventory ready for shipment, especially for the Boston Group, enabling us to deliver products more efficiently. Regarding contract manufacturing, we expect some contracts to expire and there may be opportunities to bid on them. However, our main focus is on expanding our wholesale and retail operations. With the success of our Made in the USA marketed products, we plan to increase production of these items, which yield higher margins than our contract military business. Consequently, I anticipate the contract manufacturing segment might reduce by about half 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. 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, regarding our adjusted operating expenses, this year we will focus on being efficient and optimizing our organization where possible. In 2021, our priority was to get our products on the shelves at any cost to protect our shelf space. We believe that in 2022, we will be able to achieve better efficiency in fulfilling orders.

Our next question comes from Susan Anderson of B. Riley.

Can you clarify how the Honeywell brands will affect the gross margin once the distribution is established? Additionally, could you share what factors you anticipate will influence gross margin from a freight perspective, especially considering the distribution challenges you experienced last year?

Sure, I'll address that. Historically, the margin for the Boston Group, especially the Muck brand, has been better than the margins we typically see for the Ohio Group, and that continues to hold true. However, they have been significantly affected by rising inbound freight container costs since a larger portion of their products is sourced from Asia compared to the Ohio Group. We have implemented price increases for both groups, and we anticipate a slight improvement in margins by the end of the fourth quarter. This will largely depend on the timing of our price increases. We announced a price hike at the beginning of Q3, and while we started shipping some products at the new prices in the fourth quarter, many backordered items were still shipped at the previous prices. We have also announced another price increase effective January 1. As a result, the timing of these price increases could pressure gross margins in the first half of the year but we expect them to gradually improve by the fourth quarter, returning to where we believe margins should be based on historical performance.

Got it. Okay. And then regarding the new distribution center, is it fully operational now, or should we expect it to continue ramping up throughout the year?

Yes. I will take this one, Susan. The distribution center in Reno has been operational, but we faced some delays in acquiring equipment and racking. It is expected to ramp up during March, and we believe it will be fully functional by the end of the first quarter. This should allow us to see more benefits from it for the remainder of the year. We have been shipping shoes from there, but it's been somewhat sporadic and consists more of 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-saving 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 two 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 will 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 the weeks to come.

Our next question comes from Camilo Lyon of BTIG.

I have a couple of questions. First, regarding the shelf space gains, it's encouraging to see that you're expanding your shelf space and utilizing your manufacturing locations effectively. Could you discuss the visibility you have about the sustainability of these shelf space gains? I'm interested to know how discussions are progressing with your retail partners about solidifying this more permanent presence you've established.

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-pop stores, 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 are 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 pairs of these from you last year. I've got back into my whatever brand, I'll give you 600 pairs.' 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 a shift in the retailers' behavior, right? And 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 five 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 would like to add that the industry is aware of the duty changes and the significant reduction in duties related to moving rubber boots to various locations in North America, Central America, or South America. However, these changes take time and must be approached gradually and carefully, as Jason mentioned. We are collaborating with our partners to enhance their presence in the Dominican Republic or Central America. From the Ohio Group and our leather product perspective, we have acknowledged this shift. The cost calculations for producing leather boots in Asia compared to the Dominican Republic or Puerto Rico have altered due to the new inbound container prices. Consequently, we expect to see a strong increase in production in both the Dominican Republic and Puerto Rico in 2022 compared to 2021. We are making adjustments where possible, but we are being cautious to maintain quality and fit standards for our products.

Great insights. My final question is about the expected 75 basis points of SG&A leverage for this year. Would you view this as the initial step in recognizing synergies? If so, do you expect the additional synergies to be greater or less than that 75 basis points as you continue to identify and realize them?

Yes, as we consider the 75 basis points in 2022, there are a few factors at play. Firstly, we are not operating as efficiently as we should, especially in our distribution, whether in Ohio or Logan. We see opportunities for improvement in Ohio, but with the new distribution center in Reno, being new comes with reduced initial efficiency. We are also relying on more expensive temporary labor, which is naturally less efficient. As we continue to hire new associates in Reno, we will start to see improvements. Internally, we will keep looking for efficiencies, focusing on our operating leverage as well. Additionally, we've previously mentioned our capability to do factory direct shipments for the Boston Group, which they didn't have before the acquisition. Given their relationships with key accounts, their lower SKU counts, and shorter lead times, they are well-positioned for factory direct shipments. This approach will be a significant operational advantage for us since it bypasses our distribution centers and goes directly to retail partners. We’re already making progress on factory direct shipments in 2022 and feel optimistic about it. While we won’t provide specific guidance for 2023, you can look at Rocky's history over the past five years to see our ability to leverage top-line sales growth. Our goal is to capitalize on the growth we are seeing with our five core brands and Lehigh within our leaner operating structure, but it will take time, particularly in the first half of 2022.

Our next question comes from Rob Shapiro of Singular Research.

I noticed that long-term debt actually increased this quarter. Is that connected to the ongoing fulfillment issues, or did you require some additional debt this quarter?

Yes, our fulfillment center challenges have hindered our capacity to ship boots, even though we had inventory arriving to meet demand. This increase in inventory significantly affected our overall business leverage. We highlighted in our prepared remarks that our strategy is to adjust the inventory levels over the next few quarters. We intend to utilize that as a source of cash to reduce leverage. Additionally, the EBITDA results will generate free cash flows that will help us pay down our debt in 2022.

Great. I might have missed it, but I heard you mention modest growth in the second and fourth quarters. Did you talk about the first quarter? If I missed it, could you please reiterate what you mentioned regarding 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.

This concludes the question-and-answer session. I would like to turn the conference back over to Jason Brooks for any closing remarks.

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.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.