Rocky Shoes & Boots, Inc. Business Information, Profile, and History

Company Perspectives:

Innovativeness, quality, and durability are hallmarks of the Rocky brand name. The company continually monitors the development of innovative raw materials and has distinguished its branded products by incorporating new fabric technologies into the design of its footwear. Rocky places an emphasis on the manufacture of waterproof footwear and is currently the largest customer of Gore-Tex waterproof fabric for footwear. The company was also the first footwear manufacturer to market an all-Cordura nylon fabric hunting boot.

History of Rocky Shoes & Boots, Inc.

Rocky Shoes & Boots, Inc. is one of the few remaining shoemakers in the United States with a domestic manufacturing facility. The company designs, develops, manufactures, and markets premium quality men's and women's footwear. The company's product line includes such rugged outdoor footwear as waterproof hunting and hiking boots, nonmilitary occupational footwear, and hand-sewn casual footwear. The company also markets, through several distribution channels, accessories, such as socks and inner sole supports under a number of brand names, including Rocky, Stalkers, Cornstalkers, Safari, Bear Claw, Snow/Stalkers, and Outback.

The company's product line is organized into three primary categories: rugged outdoor footwear, including hunting and hiking boots, with suggested retail prices generally ranging from $60 to $190 per pair; nonmilitary occupational footwear, with suggested retail prices generally ranging from $40 to $160; and hand-sewn casual footwear, with suggested retail prices generally ranging from $90 to $150 per pair. The company's products also include Thinsulate thermal insulation; Cambrelle cushioned linings, which are manufactured from a material that breathes, absorbs perspiration, and resists mildew and odors; Vibram rubber outsoles, which are long-wearing, flexible, and slip-resistant and incorporate Air-O-Magic air-cushioned footbeds. The company maintains a factory outlet store in Nelsonville, Ohio, but its products are also sold in department stores, sporting goods stores, and through mail-order catalogs in the United States and Canada. Manufacturing facilities are located in Ohio, Puerto Rico, and the Dominican Republic.

The William Brooks Shoe Company, 1932-59

In 1932, William Brooks founded The William Brooks Shoe Company in Nelsonville, Ohio, about 60 miles southeast of Columbus, joined by his brother F. M. "Mike" Brooks. Both men had lost their jobs during the Great Depression when Godman Shoe Co. of Columbus went bankrupt. In 1937, Mike's 17-year-old son, John W. Brooks, joined the company, taking a break only to serve four years in the U.S. Army during World War II. The two brothers ran the business until the mid-1950s when they had a falling out. Bill, the original founder, bought out Mike, and the two never spoke again.

The Irving Drew Shoe Co., 1959-74

In 1959, convinced that the U.S. shoe industry was going under, Bill began looking for a buyer for the business. Mike's son, John, offered to buy it, but his uncle refused, saying he was doing him a favor, and pointing to the hundreds of other domestic shoe companies, and the first imports, which were a lot cheaper, starting to come from Japan. Bill sold the business to The Irving Drew Shoe Co., a women's-shoe company, headquartered in Lancaster, Ohio, and John remained in the company as an employee.

For 25 years, ownership was out of the Brooks family. John remained on through the entire Irving Drew ownership period, eventually rising to plant manager. Eventually, Irving Drew began to struggle as offshore shoe manufacturing boomed and competitors lowered their margins and, concurrently, their prices. After losing money for three years running, The Irving Drew Shoe Co. announced its closing in 1974. John, realizing that his dream of owning his own company might finally come to fruition, with five children to raise and a modest salary, put a meager $500 of his own money into the venture, and borrowed $640,000 from various banks to purchase the company, worth about $1.3 million, from Irving Drew.

John W. Brooks Inc. and the Return of The William Brooks Shoe Co., 1975-93

After the purchase in 1975, John formed John W. Brooks, Inc. as an Ohio corporation, reacquired the operating assets of the original company, and moved the principal executive offices back to Nelsonville, renaming the company The William Brooks Shoe Co. in honor of his uncle. Then he called his son Mike.

Against John's worry that the business might not work out, Mike, who had left college early and went to Milan, Italy, where he spent a year studying shoe design at the well-known Ars Satoria trade school, and had already worked at U.S. Shoe Corp. and at two tanning companies, quit his job at a tannery in Milwaukee, Wisconsin, the very next day, taking a huge pay cut, and moving his family back to Nelsonville. There, Mike found disaster ... no bank financing yet, aging machinery, three years of losses, the plant in disarray, morale at an all-time low because of layoffs, meager raises, and workers' medical insurance in a bad state.

Mike turned things around quickly, designing a new pair of hiking boots, and going out on the road to sell them. He worked to speed up production and ease the company's cash needs and spent time roaming the factory floor, attempting to buoy the spirits of a demoralized workforce. Then the cavalry arrived. Dave Fraedrich, hired by John right out of college, came aboard as a financial guru and Bob Hollenbaugh, a childhood friend of Mike, became manager of shipping, personnel, and purchasing. The three became a triad and worked together, plotting company strategies over beer in the evenings.

The father-and-son team quarreled for years about the way to run their business. Mike began to think about taking the company public right away, because the company was always highly leveraged and never had enough capital to do anything properly. But John, a bitter survivor of the Great Depression and the stock market crash of the 1930s, refused to expand, wanting to keep control of the company in the family. The two were at an impasse for nearly a year and a half. Their options were: sell a piece of the business to raise funds, continue running the company undercapitalized, or sell it outright. Business continued as well as possible.

In 1975, the United States was emerging from the worst downturn since the 1930s. Meanwhile, imports from steel to semiconductors flooded into the U.S. market. The Midwest was hit hard, with so many manufacturing facilities closed down that it was named the Rustbelt. Furthermore, the shoe industry went from its plateau of the 1950s into a steep dive. In 1970, imported shoes accounted for 30 percent of the market. By 1980, imports had climbed to 50 percent and were still going up. During those ten years, over 300 domestic shoe plants shut their doors for good.

The company's regular customers, Sears and J.C. Penney, bought nearly 80 percent of the company's output. The company was bringing in nearly $8 million a year, but could not continue to run things the way they were. Plummeting import prices were killing the U.S. shoemaker, salaries were dropping, the plant was decrepit, the machinery was failing, and something had to be done. In 1979, during a meeting in Chicago with a buyer for Sears, Mike finally realized the battle was being lost. He had asked for a 50 cent per pair increase in the purchase price. The buyer balked and asked to speak with John. John drove out with Mike the following week, 400 miles, since he hated to fly, and the meeting degenerated from the start. John, worried about losing the account, waffled on the price; Mike stuck to his story. Sears agreed to the price increase, but only until it could find a cheaper alternative, probably a Korean shoemaker.

As the company struggled in the early 1980s, the shoe market bounced back. Numerous upstart companies entered the fray; others began to prosper. Distinctive products with brand names and premium prices became the rage. Shoes were sold through new retail channels, not just the old shoe stores and department stores. Advertising costs soared. "Athletic" shoes became a new rage. Nike led in athletic shoes; Timberland led in boots. However, old-time manufacturers in the Midwest and elsewhere in the United States kept going under, and another 300 manufacturers closed up shop.

Back when Mike created his new red-laced hiking boots to sell to Sears, he called them "Rocky," thinking it sounded strong and bold and All-American. He had a new box designed, with a picture of a bighorn sheep on it, put the boots in it, and put Bob Hollenbaugh out on the streets to sell them. Approaching independent dealers in the Ohio and surrounding areas, Hollenbaugh made sales at margins far higher than Sears would give.

In 1983 the company began marketing "occupational" shoes, such as those worn by police officers and mail carriers, under the Rocky brand. It opened up new markets and new distribution methods. Mike was also watching Timberland. He knew he had to reinvent the wheel, by making a new and distinctive product and then selling it through the path of least resistance. The company also had to broaden and deepen its line past just the four Rocky boots it was then offering.

Slowly, the company continued to build, shoe by shoe. In 1984, the company introduced the Rocky Stalkers boots. In 1987, Five Star Enterprises Ltd., a Cayman Islands corporation, was formed by John and Mike, two other executive officers of the company, and Eric M. Beraza, a retired executive officer of the company, to produce shoe and boot uppers at a manufacturing facility located in La Vega, The Dominican Republic. The following year, Lifestyle Footwear, Inc., a Delaware corporation, was established as a subsidiary of Rocky Co. and commenced operations at a manufacturing facility in Aquadilla, Puerto Rico. Also that year, the company released its Rocky Cornstalkers boots.

A strategic victory was created by Hollenbaugh as he beat the bushes out on the road, lining up hundreds of reps, meeting hundreds of buyers, creating a distribution network unparalleled by any other U.S. shoemaker. Hunting and sporting goods stores, mostly in the Midwest, carried the "Made in the USA"-labeled, waterproof boots, and were willing to pay a bit more for them. Hollenbaugh developed catalogs, learned the advertising industry, and spearheaded campaigns in outdoor magazines. Sales rose as the company, in 1988, reached $20 million in annual revenue.

The following year, Mike created a new line of products that could hold its own against Korean and Taiwanese imports when he found Gore-Tex, a patented membrane which allowed moisture escape, but kept water droplets out, created by W.L. Gore & Associates. Mike quickly created Gore-Tex boots, which everyone loved and no one could duplicate without serious money being put into the project, because Gore & Associates asked for all footwear customers to fork over a $25,000 licensing fee. Other manufacturers became furious; Mike Brooks loved it and showed up the next day with a $25,000 check and a bottle of champagne he shared with CEO Bob Gore, knowing his investment in the latter company had paid off.

In August 1991, John walked into Mike's office and said he was retiring, and walked out, leaving $11.25 million in debt to Mike and his four siblings and their spouses. He gave up his controlling interest in the family business and divided it equally among Mike and his two brothers and two sisters, all of whom worked for the company, retaining a small interest in the Dominican plant. It cleared the way for Mike to take the company public. That year, as he struggled to do so, total sales reached $29.8 million, with a net income of $577,000. Total sales for 1992 climbed to $32.5 million, with net sales nearly tripling over the previous year, to $1.6 million.

Rocky Shoes & Boots, 1993 On

In February 1993, Mike Brooks did take the company public, spending nearly three-quarters of a million dollars in the process, changing the name to Rocky Shoes & Boots and initiating the company's initial public offering. Selling approximately 1.9 million shares at $10 apiece on the NASDAQ under the symbol RCKY, and bringing in nearly $14 million, the company was able to help pay off its debt and add a bit of working capital. The five family members, along with three longtime employees, retained a 47 percent interest in the company, and John cashed in his interest shortly thereafter, remaining with the company as a semi-retired employee. Net income for 1993 nearly reached $1.8 million on net sales of $41.2 million.

In 1994, the company released the "4 Way Stop" line of occupational shoes designed for food service workers, who often encounter wet, slippery conditions, featuring an exclusive "downspout" design sole that causes liquid to flow through the sole and out the sides, increasing traction and exceeding the U.S. government's standards for slip-resistance by a factor of two. In August of that year, the company opened a 25,000-square-foot building in Nelsonville, Ohio, adjacent to the company's manufacturing facilities, which included 12,500 square feet of office space and a 12,500-square-foot factory outlet store, to replace a 3,000 square foot one. Opened in September, the expanded store primarily sells first-quality, irregular, and closeout Rocky footwear and accessories, as well as footwear and apparel from other manufacturers. Other achievements that year included the company investing $2.7 million in new equipment and changeover to modular manufacturing, and adding six lines of boots to the Rocky Safari series of lightweight hiking boots. The company achieved records that year, with net sales increasing 28 percent to $52.9 million, and sales of Rocky rugged outdoor footwear increasing 42 percent to $28.7 million. Net income for 1994 repeated at just above $1.8 million.

In January 1995, both Rocky Shoes and competitor Wolverine World Wide entered the apparel business, launching workwear lines of clothing. The company also signed a licensing agent, The Kravetz Group, to help it market and license its products. The company also introduced the Rocky Professionals line of occupational shoes, with dress-shoe-styling designed for safety forces and general occupational markets. This line featured waterproof leather uppers, lightweight soles and materials, slip-resistant polyurethene-injected soles, breathable linings, and superior lateral stability. The retail market for shoes struggled in 1995, as footwear stocks dipped. Rocky attributed a fourth-quarter 1995 sales drop to a decrease in hand-sewn casual shoe sales for a private-label customer, among other things. Retail sales from the factory outlet store were approximately $2.7 million, making up some 7.6 percent of net sales for the year. In fiscal 1995, the company ended the year with $60.2 million in total revenue, with net income dropping slightly to $1.4 million.

John W. Brooks, the consummate shoemaker, passed away in February 1996, ending a nearly 60-year career in the shoe industry. His company continued as three new styles were introduced by mid-1996, including Snow Stalkers, Sidewinders, and Tuff Terrainers. The company also changed its fiscal year from June 30th to December 31st. Total revenue for 1996 reached $73.2 million, with a net income of $2.8 million. During the first quarter of 1997, sales were especially strong in the Outdoor and Handsewn categories.

In January 1998, the company installed a System 21 Style enterprise resource planning (ERP) system from JBA International, as part of an effort to improve the company's reporting and tracking capabilities. Also early that year, the company discontinued the sale of footwear uppers to a private label customer. By June, the company, with its Nelsonville, Ohio-based facility, employing some 250 people, was one of the last remaining U.S. footwear companies with a domestic production plant. In August, the company announced it would repurchase up to 300,000 shares of stock in the following year. In September, Hurricane Georges affected the company's manufacturing facilities in Puerto Rico and the Dominican Republic when production was interrupted for approximately one week, and Hurricane Mitch hammered Puerto Rico, the Caribbean, and Central America again. But the company continued into the end of 1998, expecting to post new record income and sales, and continuing on into the 21st century as a venerable leader in the U.S. shoe industry.

Principal Subsidiaries: Five Star Enterprises Ltd.; Lifestyle Footwear, Inc.