Rocky Brands, Inc. Announces Third Quarter Fiscal 2009 Results

Earnings Before Income Taxes (EBIT) Increased 53% to $4.4 million versus $2.9 million Last Year
Funded Debt Decreased $24.1 million, or 22% to $83.4 million

NELSONVILLE, Ohio--(BUSINESS WIRE)-- Rocky Brands, Inc. (Nasdaq: RCKY) today announced financial results for its third quarter ended September 30, 2009.

For the third quarter of 2009, net sales were $66.6 million versus net sales of $72.5 million in the third quarter of 2008. The Company's earnings before income taxes increased 53.4% to $4.4 million in third quarter 2009 compared to $2.9 million in the same period last year. Net earnings increased 17.2% to $2.8 million, or $0.50 per diluted share versus net earnings of $2.4 million, or $0.43 per diluted share a year ago. In the third quarter of 2008, the Company received a one-time prior year tax benefit of approximately $0.6 million, or $0.10 per diluted share. Excluding this one-time benefit, third quarter 2009 diluted EPS increased 51.5% to $.50 compared to $.33 in the third quarter of 2008.

Mike Brooks, Chairman and Chief Executive Officer, commented, "We are very pleased with our third quarter performance. Our recent results reflect the steps we have taken over the last 18 months to reduce expenses and improve efficiency in order to enhance our profitability and strengthen our balance sheet. For the fifth consecutive quarter we lowered our operating expenses double digits on a percentage basis as we continue to remove costs from our retail division by transitioning more customer transactions to the internet. At the same time, our ability to more effectively manage our inventory levels and receivables decreased borrowings under our credit facility and lowered our interest expense by 14%. Equally important, we began to see some stabilization of our sales base with several of our wholesale categories - Hunting, Western, and Duty - reporting positive gains. With inventories at retailers relatively clean, we are optimistic we will continue to benefit from a higher frequency of reorders and we are confident that we can deliver improved profitability year-over-year during the fourth quarter."

Third Quarter Review

Net sales for the third quarter decreased to $66.6 million compared to $72.5 million a year ago. Wholesale sales for the third quarter decreased 2.1% to $54.5 million compared to $55.6 million for the same period in 2008. Retail sales for the third quarter were $11.5 million compared to $15.3 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 operation to help lower costs as discussed below. Military segment sales for the third quarter were $0.6 million versus $1.6 million for the same period in 2008. Third quarter 2009 military sales include the initial shipments of insulated boots under the $29 million blanket purchase agreement the company received from the General Services Administration (GSA) in July 2009.

Gross margin in the third quarter of 2009 was $24.7 million, or 37.1% of sales compared to $27.1 million, or 37.4% for the same period last year.

Selling, general and administrative (SG&A) expenses decreased $3.4 million or 15.4% to $18.6 million, or 27.9% of sales for the third quarter of 2009 compared to $22.0 million, or 30.3% of sales, a year ago. The decrease in SG&A expenses was primarily the result of a reduction in salaries & benefits, freight, Lehigh mobile store expenses and tradeshow expenses.

Income from operations increased $1.0 million, or 19.8% to $6.1 million, or 9.2% of sales for the period compared to income from operations of $5.1 million, or 7.1% sales in the prior year.

Interest expense decreased $0.3 million or 14.4% to $2.0 million for the third quarter of 2009 versus $2.3 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 $24.1 million, or 22.4% to $83.4 million at September 30, 2009 versus $107.6 million at September 30, 2008.

Inventory decreased $15.3 million, or 18.3%, to $68.1 million at September 30, 2009 compared with $83.3 million on the same date a year ago.

The Company's accounts receivable decreased 19.8% to $58.3 million at September 30, 2009 versus $72.7 million at September 30, 2008.

Conference Call Information

The Company's conference call to review third quarter fiscal 2009 results will be broadcast live over the internet today, Thursday, October 22, 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, and include statements in this press release regarding a higher frequency of reorders and improved profitability (paragraph 3). 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) and the Company's quarterly report on Form 10-Q for the quarters ended March 31, 2009 (filed May 4, 2009) and June 30, 2009 (filed July 31, 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

                       September 30, 2009  December 31, 2008  September 30, 2008

                       Unaudited                              Unaudited

ASSETS:

CURRENT ASSETS:

   Cash and cash       $ 4,002,909         $ 4,311,313        $ 4,332,477
   equivalents

   Trade receivables     58,296,661          60,133,493         72,654,591
   - net

   Other receivables     1,598,829           1,394,235          1,289,396

   Inventories           68,065,444          70,302,174         83,320,590

   Deferred income       2,173,391           2,167,966          1,978,946
   taxes

   Prepaid and
   refundable income     247,011             75,481             -
   taxes

   Prepaid expenses      1,949,885           1,455,158          2,366,859

   Total current         136,334,130         139,839,820        165,942,859
   assets

FIXED ASSETS - net       23,132,489          23,549,319         24,254,455

IDENTIFIED               30,627,527          31,020,478         36,044,132
INTANGIBLES

OTHER ASSETS             2,677,353           2,452,501          2,154,179

TOTAL ASSETS           $ 192,771,499       $ 196,862,118      $ 228,395,625

LIABILITIES AND
SHAREHOLDERS' EQUITY:

CURRENT LIABILITIES:

   Accounts payable    $ 7,683,778         $ 9,869,948        $ 14,492,182

   Current maturities    503,841             480,723            464,846
   - long term debt

   Accrued expenses:

   Taxes - other         387,817             641,670            612,445

   Other                 5,987,861           4,261,689          7,076,926

   Total current         14,563,297          15,254,030         22,646,399
   liabilities

LONG TERM DEBT - less    82,940,392          87,258,939         107,115,967
current maturities

DEFERRED INCOME TAXES    9,558,761           9,438,921          12,569,600

DEFERRED LIABILITIES     4,116,613           3,960,472          1,170,026

TOTAL LIABILITIES        111,179,063         115,912,362        143,501,992

SHAREHOLDERS' EQUITY:

Common stock, no par
value;

   25,000,000 shares
   authorized; issued
   and outstanding
   September 30, 2009
   - 5,547,215;          54,387,752          54,250,064         54,193,211
   December 31, 2008
   - 5,516,898;
   September 30, 2008
   - 5,508,398

Accumulated other        (2,982,564  )       (3,222,215  )      (1,462,344  )
comprehensive loss

Retained earnings        30,187,248          29,921,907         32,162,766

   Total
   shareholders'         81,592,436          80,949,756         84,893,633
   equity

TOTAL LIABILITIES AND  $ 192,771,499       $ 196,862,118      $ 228,395,625
SHAREHOLDERS' EQUITY




Rocky Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

                Three Months Ended              Nine Months Ended

                September 30,                   September 30,

                2009            2008            2009             2008

NET SALES       $ 66,572,437    $ 72,500,603    $ 167,825,613    $ 193,492,740

COST OF GOODS     41,856,651      45,414,533      105,299,667      116,060,912
SOLD

GROSS MARGIN      24,715,786      27,086,070      62,525,946       77,431,828

SELLING,
GENERAL AND

ADMINISTRATIVE    18,576,780      21,961,032      56,642,081       65,897,978
EXPENSES

INCOME FROM       6,139,006       5,125,038       5,883,865        11,533,850
OPERATIONS

OTHER INCOME
AND
(EXPENSES):

 Interest         (1,955,485 )    (2,285,051 )    (5,665,905  )    (7,101,237  )
 expense

 Other - net      224,442         34,254          257,899          31,385

  Total other     (1,731,043 )    (2,250,797 )    (5,408,006  )    (7,069,852  )
  - net

INCOME BEFORE     4,407,963       2,874,241       475,859          4,463,998
INCOME TAXES

INCOME TAX        1,626,518       500,000         210,518          1,056,000
EXPENSE

NET INCOME      $ 2,781,445     $ 2,374,241     $ 265,341        $ 3,407,998

NET INCOME PER
SHARE

 Basic          $ 0.50          $ 0.43          $ 0.05           $ 0.62

 Diluted        $ 0.50          $ 0.43          $ 0.05           $ 0.62

WEIGHTED
AVERAGE NUMBER
OF

COMMON SHARES OUTSTANDING

 Basic            5,547,215       5,508,398       5,546,993        5,508,252

 Diluted          5,547,215       5,512,634       5,546,993        5,518,138




    Source: Rocky Brands, Inc.