Rocky Brands, Inc. Announces Second Quarter Fiscal 2008 Results

For the second quarter of 2008, net sales increased 2.9% to $60.5 million versus net sales of $58.8 million in the second quarter of 2007. The Company reported net income of $0.7 million, or $0.13 per diluted share versus a net loss of $1.4 million or ($0.25) per diluted share a year ago.

Mike Brooks, Chairman and Chief Executive Officer, commented, "Our second quarter performance was highlighted by the successful execution of our continuing strategy to enhance profitability. Due largely to more favorable sell-in terms with our retail partners and better utilization of our company owned factories, wholesale gross margins increased 250 basis points. At the same time, we were effective at controlling costs evidenced by the nearly $2.0 million reduction in our operating expenses. These improvements allowed us to realize a significant increase in diluted earnings per share versus a year ago with a modest gain in our top-line."

Second Quarter Results

Net sales for the second quarter increased to $60.5 million compared to $58.8 million a year ago. Wholesale sales for the second quarter were $42.5 million compared to $41.9 million for the same period in 2007. Retail sales for the second quarter were $16.2 million compared to $16.6 million for the same period in 2007. Military segment sales for the second quarter were $1.8 million, compared to $0.3 million in the same period in 2007.

Gross margin in the second quarter was $24.4 million, or 40.3% of sales, compared to $23.9 million or 40.7% of sales, for the same period last year. The prior year's results included a $0.5 million reimbursement of expenses incurred in prior periods related to a cancelled military contract. Excluding this one-time reimbursement, second quarter 2007 gross margin would have been 40.0%. Wholesale gross margin for the second quarter was $15.7 million, or 36.9% of net sales, compared to $14.4 million, or 34.4% of net sales, in the same period last year. The 250 basis point increase reflects an increase in sales price per unit, as well as a decrease in manufacturing costs resulting from increased operating efficiencies. Retail gross margin for the second quarter was $8.6 million, or 52.8% of net sales, compared to $8.9 million, or 53.6% of net sales, for the same period in 2007. Military gross margin for the second quarter was $0.2 million, or 8.6% of net sales, compared to $0.6 million for the same period in 2007.

Selling, general and administrative (SG&A) expenses decreased 8.4% or $1.9 million to $20.9 million, or 34.5% of sales, for the second quarter of 2008 compared to $22.8 million, or 38.8% of sales, a year ago. The decrease in SG&A expenses is primarily result of reductions in compensation expense and professional fees.

Income from operations increased $2.4 million or 390 basis points to $3.5 million or 5.8% of net sales, respectively for the period compared to $1.1 million, or 1.9% of net sales, in the prior year.

Funded Debt and Interest Expense

The Company's funded debt at June 30, 2008 was $101.4 million versus $102.7 million at June 30, 2007. Interest expense decreased to $2.4 million for the second quarter of 2008 versus $3.3 million for the same period last year. The decrease in interest expense was primarily due to the write off of prepaid financing costs totaling $0.8 million related to the refinancing of the company's term loans in the second quarter of 2007.

Inventory

Inventory increased $1.5 million, or 1.9%, to $85.5 million at June 30, 2008 compared with $84.0 million on the same date a year ago.

Mr. Brooks concluded, "We feel confident that our recent initiatives will enable us to post continued year-over-year margin improvement and drive increased profitability over the remainder of this year even though our top-line will be challenged. Longer-term, we are optimistic that our portfolio of company owned and licensed brands provide us with compelling growth prospects into the future."

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), Zumfoot(R) and Michelin(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, and include statements in this press release regarding margin improvement, increased profitability and growth prospects (paragraph 10). 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, 2007 (filed March 6, 2008) and the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2008 (filed May 1, 2008). 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 June 30, 2008 December 31, 2007 June 30, 2007 Unaudited Unaudited ------------- ----------------- ------------- ASSETS: CURRENT ASSETS: Cash and cash equivalents $ 3,025,144 $ 6,537,884 $ 1,446,022 Trade receivables - net 59,245,156 65,931,092 60,117,677 Other receivables 1,010,254 674,707 1,368,863 Inventories 85,542,820 75,403,664 83,973,162 Deferred income taxes 1,952,536 1,952,536 3,902,775 Income tax receivable 729,024 719,945 2,561,538 Prepaid expenses 3,117,546 2,226,920 2,118,034 ------------- ----------------- ------------- Total current assets 154,622,480 153,446,748 155,488,071 FIXED ASSETS - net 24,090,519 24,484,050 24,443,562 DEFERRED PENSION ASSET - - 40,432 IDENTIFIED INTANGIBLES & GOODWILL 36,207,210 36,509,690 61,697,893 OTHER ASSETS 1,909,678 2,284,039 2,758,801 ------------- ----------------- ------------- TOTAL ASSETS $216,829,887 $216,724,527 $244,428,759 ============= ================= ============= LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 13,238,830 $ 11,908,902 $ 15,471,858 Current maturities - long term debt 338,314 324,648 311,534 Accrued expenses: Taxes - other 840,751 516,038 673,098 Other 4,703,591 5,421,083 4,090,661 ------------- ----------------- ------------- Total current liabilities 19,121,486 18,170,671 20,547,151 LONG TERM DEBT - less current maturities 101,042,347 103,220,384 102,427,204 DEFERRED INCOME TAXES 12,951,828 13,247,953 17,009,025 DEFERRED LIABILITIES 1,257,606 360,928 324,038 ------------- ----------------- ------------- TOTAL LIABILITIES 134,373,267 134,999,936 140,307,418 SHAREHOLDERS' EQUITY: Common stock, no par value; 25,000,000 shares authorized; issued and outstanding June 30, 2008 - 5,508,278; December 31, 2007 - 5.488,293; June 30, 2007 - 5,482,293 54,168,292 53,997,960 53,802,287 Accumulated other comprehensive loss (1,500,197) (1,051,232) (942,036) Retained earnings 29,788,525 28,777,863 51,261,090 ------------- ----------------- ------------- Total shareholders' equity 82,456,620 81,724,591 104,121,341 ------------- ----------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $216,829,887 $216,724,527 $244,428,759 ============= ================= =============

Rocky Brands, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------------- --------------------------- 2008 2007 2008 2007 ------------ ------------ ------------- ------------- NET SALES $60,507,421 $58,797,664 $120,992,137 $120,454,688 COST OF GOODS SOLD 36,111,328 34,871,210 70,646,379 70,447,548 ------------ ------------ ------------- ------------- GROSS MARGIN 24,396,093 23,926,454 50,345,758 50,007,140 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 20,875,459 22,790,579 43,936,946 45,113,520 ------------ ------------ ------------- ------------- INCOME FROM OPERATIONS 3,520,634 1,135,875 6,408,812 4,893,620 OTHER INCOME AND (EXPENSES): Interest expense (2,409,515) (3,344,076) (4,816,186) (5,842,921) Other - net 15,723 6,994 (2,869) (36,001) ------------ ------------ ------------- ------------- Total other - net (2,393,792) (3,337,082) (4,819,055) (5,878,922) INCOME/(LOSS) BEFORE INCOME TAXES 1,126,842 (2,201,207) 1,589,757 (985,302) INCOME TAX EXPENSE / (BENEFIT) 394,000 (814,000) 556,000 (364,000) ------------ ------------ ------------- ------------- NET INCOME/(LOSS) $ 732,842 $(1,387,207) $ 1,033,757 $ (621,302) ============ ============ ============= ============= NET INCOME/(LOSS) PER SHARE Basic $ 0.13 $ (0.25) $ 0.19 $ (0.11) Diluted $ 0.13 $ (0.25) $ 0.19 $ (0.11) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 5,508,278 5,473,919 5,508,058 5,465,783 ============ ============ ============= ============= Diluted 5,520,625 5,473,919 5,523,265 5,465,783 ============ ============ ============= =============

SOURCE: Rocky Brands, Inc.

Rocky Brands, Inc. Jim McDonald, 740-753-1951 Chief Financial Officer or Integrated Corporate Relations, Inc. Brendon Frey/Chad Jacobs, 203-682-8200