Rocky Brands, Inc. Announces First Quarter Fiscal 2009 Results

For the first quarter of 2009, net sales decreased to $50.1 million versus net sales of $60.5 million in the first quarter of 2008. The Company reported a net loss of $1.1 million, or ($0.20) per diluted share versus net income of $0.3 million, or $0.05 per diluted share a year ago.

Mike Brooks, Chairman and Chief Executive Officer, commented, "As we started the year we anticipated that our top-line would remain under pressure due to the challenging economic environment combined with the tough comparisons we were up against in our retail division during the first quarter. Therefore we continue to focus on better aligning our cost structure with lower sales volumes and this was reflected in a 13%, or $3 million reduction in our SG&A versus a year ago. We are also focused on improving the profitability of our retail segment by transitioning a greater percentage of those transactions to the Internet and we are pleased by our initial progress. Looking ahead, we are confident that the strength and diversity of our brand portfolio is intact, and we remain committed to balancing our spending with current growth opportunities until market conditions improve."

First Quarter Review

Net sales for the first quarter decreased to $50.1 million compared to $60.5 million a year ago. Wholesale sales for the first quarter were $36.0 million compared to $39.7 million for the same period in 2008. The decline in wholesale sales was primarily attributable to lower than expected orders as many accounts are choosing to operate with leaner inventory levels during this challenging economy. Retail sales for the first quarter were $13.7 million compared to $18.9 million for the same period last year. Retail sales were down year-over-year as a result of the ongoing transition to more Internet driven transactions and the decision to remove a portion of our Lehigh mobile stores from operations to help lower costs as discussed below. Military segment sales for the first quarter were $0.3 million versus $1.8 million for the same period in 2008.

Gross margin in the first quarter of 2009 was $20.1 million, or 40.1% of sales compared to $25.9 million, or 42.9% for the same period last year. The decrease in gross margin as a percentage of sales was primarily attributable to lower retail sales, which carry a higher gross margin, and to a lesser extent, lower wholesale gross margins due to increased manufacturing costs versus a year ago.

Selling, general and administrative (SG&A) expenses decreased $3.1 million or 13.5% to $19.9, or 39.8% of sales for the first quarter of 2009 compared to $23.1 million, or 38.1% of sales, a year ago. The decrease in SG&A expenses was primarily the result of a reduction in salaries & benefits, advertising, sales commissions, freight, professional fees and Lehigh mobile store expenses.

Income from operations was $0.1 million, or 0.3% of net sales, for the period compared to $2.9 million, or 4.8% of net sales, in the prior year.

Interest expense decreased $0.6 million, or 26.3% to $1.8 million for the first quarter of 2009 versus $2.4 million for the same period last year. The decrease is the result of a reduction in average borrowings combined with lower interest rates compared to the same period last year.

The Company's funded debt decreased $7.9 million, or 8.4% to $86.2 million at March 31, 2009 versus $94.1 million at March 31, 2008.

Inventory decreased $1.4 million, or 1.8%, to $78.4 million at March 31, 2009 compared with $79.8 million on the same date a year ago.

Conference Call Information

The Company's conference call to review first quarter fiscal 2009 results will be broadcast live over the internet today, Tuesday, April 28, 2009 at 4:30 pm Eastern Time. The broadcast will be hosted at www.rockybrands.com.

About Rocky Brands, Inc.

Rocky Brands, Inc. is a leading designer, manufacturer and marketer of premium quality footwear and apparel marketed under a portfolio of well recognized brand names including Rocky Outdoor Gear(R), Georgia Boot(R), Durango(R), Lehigh(R), and the licensed brands Dickies(R), Michelin(R) and Mossy Oak(R).

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding intent, beliefs, expectations, projections, forecasts, and plans of the Company and its management. These forward-looking statements involve numerous risks and uncertainties, including, without limitation, the various risks inherent in the Company's business as set forth in periodic reports filed with the Securities and Exchange Commission, including the Company's annual report on Form 10-K for the year ended December 31, 2008 (filed March 3, 2009). One or more of these factors have affected historical results, and could in the future affect the Company's businesses and financial results in future periods and could cause actual results to differ materially from plans and projections. Therefore there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the Company, or any other person should not regard the inclusion of such information as a representation that the objectives and plans of the Company will be achieved. All forward-looking statements made in this press release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.

Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
                                                                                  March 31, 2009         December 31, 2008    March 31, 2008
                                                                                  Unaudited                                   Unaudited
ASSETS:
CURRENT ASSETS:
               Cash and cash equivalents                                          $    3,321,903         $     4,311,313      $    4,407,629
               Trade receivables - net                                                 47,488,146              60,133,493          56,189,187
               Other receivables                                                       1,806,231               1,394,235           947,296
               Inventories                                                             78,432,082              70,302,174          79,841,429
               Deferred income taxes                                                   2,167,966               2,167,966           1,952,536
               Income tax receivable                                                   1,440,697               75,481              607,910
               Prepaid expenses                                                        2,137,625               1,455,158           3,049,971
                                                Total current assets                   136,794,650             139,839,820         146,995,958
FIXED ASSETS - net                                                                     24,316,954              23,549,319          23,943,273
IDENTIFIED INTANGIBLES & GOODWILL                                                      30,883,011              31,020,478          36,361,267
OTHER ASSETS                                                                           4,005,577               2,452,501           2,099,762
TOTAL ASSETS                                                                      $    196,000,192       $     196,862,118    $    209,400,260
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
               Accounts payable                                                   $    10,443,348        $     9,869,948      $    12,801,456
               Current maturities - long term debt                                     488,271                 480,723             331,411
               Accrued expenses:
               Taxes - other                                                           508,430                 641,670             807,557
               Other                                                                   5,376,723               4,261,689           5,859,974
                                                Total current liabilities              16,816,772              15,254,030          19,800,398
LONG TERM DEBT - less current maturities                                               85,710,049              87,258,939          93,768,649
DEFERRED INCOME TAXES                                                                  9,438,921               9,438,921           12,951,828
DEFERRED LIABILITIES                                                                   3,995,754               3,960,472           1,217,206
TOTAL LIABILITIES                                                                      115,961,496             115,912,362         127,738,081
SHAREHOLDERS' EQUITY:
Common stock, no par value;
               25,000,000 shares authorized; issued and outstanding March 31,          54,380,256              54,250,064          54,144,545
               2009 - 5,547,215; December 31, 2008 - 5,516,898; March 31, 2008 -
               5,508,278
Accumulated other comprehensive loss                                                   (3,142,331  )           (3,222,215  )       (1,538,049  )
Retained earnings                                                                      28,800,771              29,921,907          29,055,683
                                                Total shareholders' equity             80,038,696              80,949,756          81,662,179
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                        $    196,000,192       $     196,862,118    $    209,400,260

Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
                                           Three Months Ended
                                           March 31,
                                           2009                  2008
NET SALES                                  $    50,064,561       $    60,484,716
COST OF GOODS SOLD                              29,972,073            34,535,051
GROSS MARGIN                                    20,092,488            25,949,665
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES                         19,946,128            23,061,487
INCOME FROM OPERATIONS                          146,360               2,888,178
OTHER INCOME AND (EXPENSES):
            Interest expense                    (1,773,930 )          (2,406,671 )
            Other - net                         (124,566   )          (18,592    )
                        Total other - net       (1,898,496 )          (2,425,263 )
INCOME/(LOSS) BEFORE INCOME TAXES               (1,752,136 )          462,915
INCOME TAX EXPENSE/(BENEFIT)                    (631,000   )          162,000
NET INCOME/(LOSS)                          $    (1,121,136 )     $    300,915
NET INCOME/(LOSS) PER SHARE
            Basic                          $    (0.20      )     $    0.05
            Diluted                        $    (0.20      )     $    0.05
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
            Basic                               5,546,541             5,507,839
            Diluted                             5,546,541             5,526,479

SOURCE: Rocky Brands, Inc.

Rocky Brands, Inc. 
Chief Financial Officer 
Jim McDonald, 740-753-1951 
or 
Investor Relations: 
ICR, Inc. 
Brendon Frey or Chad Jacobs, 203-682-8200