UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 0-21026

39 E. Canal Street, Nelsonville, Ohio 45764
(Address of Principal Executive Offices, Including Zip Code)

(740) 753-1951
(Registrant’s Telephone Number, Including Area Code)

Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o           Accelerated filer þ           Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

As of May 4, 2007, 5,466,663 shares of Rocky Brands, Inc. common stock, no par value, were outstanding.

FORM 10-Q

ROCKY BRANDS, INC.

TABLE OF CONTENTS

		PAGE
		NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets March 31, 2007 and 2006 (Unaudited), and December 31, 2006			3
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and 2006 (Unaudited)			4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006 (Unaudited)			5
Notes to Interim Unaudited Condensed Consolidated Financial Statements			6–14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15–19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			21
Item 4. Controls and Procedures			21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			22
Item 1A. Risk Factors			22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			22
Item 3. Defaults Upon Senior Securities			22
Item 4. Submission of Matters to a Vote of Security Holders			22
Item 5. Other Information			22
Item 6. Exhibits			22
SIGNATURE			24
EX-10.1
EX-31.A
EX-31.LB
EX-32.A
EX-32.B

PART 1 — FINANCIAL INFORMATION

See notes to the interim unaudited condensed consolidated financial statements.

ROCKY BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

		Three Months Ended
		March 31,
		2007				2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	765,905			$	893,230
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,371,353				1,294,075
Deferred compensation and other			(43,899	)			579,713
Loss (gain) on disposal of fixed assets			2,080				(571,159	)
Stock compensation expense			170,443				164,020
Change in assets and liabilities
Receivables			6,243,102				8,409,949
Inventories			6,117,787				(7,609,756	)
Other current assets			260,717				(685,281	)
Other assets			380,419				(43,412	)
Accounts payable			2,598,945				10,035,665
Accrued and other liabilities			1,329,001				(1,401,627	)
Net cash provided by operating activities			19,195,853				11,065,417
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets			(734,363	)			(1,375,830	)
Investment in trademarks and patents			(27,265	)			(35,205	)
Proceeds from sale of fixed assets			—				1,851,584
Net cash (used in) provided by investing activities			(761,628	)			440,549
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility			54,594,784				59,587,351
Repayment of revolving credit facility			(73,380,198	)			(68,351,929	)
Repayments of long-term debt			(1,843,641	)			(2,498,562	)
Proceeds from exercise of stock options			240,470				231,041
Net cash used in financing activities			(20,388,585	)			(11,032,099	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(1,954,360	)			473,867
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			3,731,253				1,608,680
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	1,776,893			$	2,082,547

See notes to the interim unaudited condensed consolidated financial statements.

ROCKY BRANDS, INC.
AND SUBSIDIARIES

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2007 AND 2006

1.		INTERIM FINANCIAL REPORTING
		In the opinion of management, the accompanying interim unaudited condensed consolidated financial statements reflect all adjustments that are necessary for a fair presentation of the financial results. All such adjustments reflected in the unaudited interim consolidated financial statements are considered to be of a normal and recurring nature. The results of the operations for the three-month periods ended March 31, 2007 and 2006 are not necessarily indicative of the results to be expected for the whole year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2006.
		The components of total comprehensive income are shown below:

For the three-month period ended March 31, 2006, net income was equal to comprehensive income.

		Included in raw materials, at December 31, 2006 and March 31, 2006, is $1.6 million of purchases associated with the U.S. military. These raw material purchases were made exclusively for production under a subcontract for the U.S. military. Subsequent to the purchase of raw materials, the subcontract was cancelled for convenience by the U.S. military. In March 2007, we received a partial settlement of the contract. As a result of this settlement, the value of the raw material inventory will be realized either through the settlement or by other third-party sales, and a reduction of cost of goods sold of approximately $0.7 million was recognized in the first quarter of 2007, which represents a reimbursement of contract related expenses incurred in prior periods.
3.		SUPPLEMENTAL CASH FLOW INFORMATION
		Supplemental cash information including, cash paid for interest and Federal, state and local income taxes was as follows:

		Three-Months Ended
		March 31,
		2007				2006
Interest		$	1,033,000			$	2,092,000
Federal, state and local income taxes		$	97,000			$	317,000
Fixed asset purchases in accounts payable		$	21,250			$	—

4.		PER SHARE INFORMATION
		Basic earnings per share (“EPS”) is computed by dividing net income applicable to common shareholders by the weighted average number of common shares outstanding during each period. The diluted earnings per share computation includes common share equivalents, when dilutive. There are no adjustments to net income necessary in the calculation of basic and diluted earnings per share.
		A reconciliation of the shares used in the basic and diluted income per common share computation for the three months ended March 31, 2007 and 2006 is as follows:

5.		RECENT FINANCIAL ACCOUNTING STANDARDS
		In June 2006, the FASB ratified the Emerging Issues Task Force (“EITF”) position EITF 06-3, “ How Taxes Collected from Customers and Remitted to Governmental Authorities Should be Presented in the Income Statement (that is Gross versus Net Presentation )” (“EITF 06-3”), that addresses disclosure requirements for taxes assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, and may include, but is not limited to, sales, use, value-added, and some excise taxes. EITF 06-3 requires disclosure of the method of accounting for the applicable assessed taxes, and the amount of assessed taxes that are included in revenues if they are accounted for under the gross method. The provisions of EITF 06-3 are effective for interim and annual reporting periods beginning after December 15, 2006, with earlier application permitted. We report sales, net of sales tax remittance. Adoption on January 1, 2007 did not have a material effect on our financial statements.
		In September 2006, the FASB issued a Statement of Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, rather it applies under existing accounting pronouncements that require or permit fair value measurements. The provisions of SFAS 157 are effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of adopting SFAS 157 on our financial statements.

		Also in September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefits Pension and Other Postretirement Plans, an Amendment of FASB Statements 87, 88, 106, and 132(R)” (“SFAS 158”). SFAS 158, requires an employer to recognize in its statement of financial position the funded status of its defined benefit plans and to recognize as a component of other comprehensive income, net of tax, any unrecognized transition obligations and assets, the actuarial gains and losses and prior service costs and credits that arise during the period. The recognition provisions of Statement No. 158 were effective for fiscal years ending after December 15, 2006. In addition, Statement No. 158 requires a fiscal year end measurement of plan assets and benefit obligations, eliminating the use of earlier measurement dates currently permissible. However, the new measurement date requirement will not be effective until fiscal years ended after December 15, 2008. We utilize a measurement date of September 30th and will be required to change to December 31st. The adoption of Statement No. 158 as of December 31, 2006 resulted in a write-down of our pension asset by $1.6 million, increased accumulated other comprehensive loss by $1.0 million, and decreased deferred income tax liabilities by $0.6 million.
		In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The standard also establishes presentation and disclosure requirements designed to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective for annual periods in fiscal years beginning after November 15, 2007. If the fair value option is elected, the effect of the first remeasurement to fair value is reported as a cumulative effect adjustment to the opening balance of retained earnings. In the event we elect the fair value option promulgated by this standard, the valuations of certain assets and liabilities may be impacted. The statement is applied prospectively upon adoption. We are currently evaluating the impact of adopting SFAS 159 on our financial statements.

6.		INCOME TAXES
		We adopted the provisions of FASB Interpretation No. 48, “ Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”), on January 1, 2007. We did not have any unrecognized tax benefits and there was no effect on our financial condition or results of operations as a result of implementing FIN 48.
		We file income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. An examination of our 2004 Federal income tax return is in process and the examination of the 2003 Federal income tax return resulted in no changes. We are no longer subject to U.S. Federal tax examinations for years before 2003. State jurisdictions that remain subject to examination range from 2003 to 2006. Foreign jurisdiction (Canada and Puerto Rico) tax returns that remain subject to examination range from 2001 to 2006. We do not believe there will be any material changes in our unrecognized tax positions over the next 12 months.
		Our policy is that we recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption of FIN 48, accrued interest or penalties were not material, and no such expenses were recognized during the quarter.

		Amortization expense for intangible assets was $165,705 and $143,332 for the three-months ended March 31, 2007 and 2006, respectively. The weighted average amortization period for patents is six years and for customer relationships is five years.
		Estimate of Aggregate Amortization Expense:

12-months ending March 31, 2008		$	663,423
12-months ending March 31, 2009			663,422
12-months ending March 31, 2010			528,397
12-months ending March 31, 2011			122,990
12-months ending March 31, 2012			121,955

8.		CAPITAL STOCK
		On May 11, 2004, our shareholders approved the 2004 Stock Incentive Plan. This Stock Incentive Plan includes 750,000 of our common shares that may be granted for stock options and restricted stock awards. As of March 31, 2007, we were authorized to issue approximately 499,000 shares under our existing plans.
		The plans generally provide for grants with the exercise price equal to fair value on the date of grant, graduated vesting periods of up to five years, and lives not exceeding ten years. The following summarizes stock option transactions from January 1, 2007 through March 31, 2007:

During the three months ended March 31, 2007, we issued 7,595 shares of common stock to members of our Board of Directors. We recorded compensation expense of $122,500, which was the fair market value on the grant date. The shares are fully vested but cannot be sold for one year.

9.		RETIREMENT PLANS
		We sponsor a noncontributory defined benefit pension plan covering non-union workers in our Ohio and Puerto Rico operations. Benefits under the non-union plan are based upon years of service and highest compensation levels as defined. On December 31, 2005, we froze the noncontributory defined benefit pension plan for all non-U.S. territorial employees. As a result of freezing the plan, we recognized a $0.4 million charge in the first quarter of 2006 for previously unrecognized service costs. Net pension cost of the Company’s plan is as follows: