/2 HQd 1$&%*%'PART 1 - FINANCIAL INFORMATION$'ITEM 1 - FINANCIAL STATEMENTS1'ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES,'CONDENSED CONSOLIDATED BALANCE SHEETS"June 30, 1998"Dec. 31,1997"(Unaudited)"-----------"------------ 'ASSETS: 'Current Assets: 'Cash and Cash Equivalents "$ 1,367,642 "$ 8,556,883 'Trade Receivables "21,419,037 "17,789,329'Other Receivables"922,741"475,593'Inventories"44,615,892"32,894,236'Deferred Taxes"1,474,799"1,474,799'Other Current Assets"1,926,908"850,018"------------"-----------'Total Current Assets"71,727,019"62,040,858'Fixed Assets - Net"18,811,036"17,608,454'Other Assets"1,340,897"1,305,526"------------"-----------'Total Assets"$ 91,878,952"$80,954,838"============"===========,'LIABILITIES AND SHAREHOLDERS' EQUITY:'Current Liabilities: 'Accounts Payable "$ 2,422,748 "$ 2,414,936*!'Current Maturities - Long Term Debt!"1,082,879!"1,173,840"'Accrued Liabilities""2,366,460""2,464,511#"------------#"----------- $'Total Current Liabilities$"5,872,087$"6,053,287-&'Long-Term Debt-less current maturities&"22,798,863&"13,406,962('Deferred Liabilities("2,428,791("2,298,059)"------------)"-----------+'Total Liabilities+"31,099,741+"21,758,308-'Shareholders' Equity:/.'Preferred Stock, Series A, no par value;,/'1997 -90,000 shares issued and 82,8570'shares outstanding 0"5,40031'Common Stock, no par value;10,000,000 shares02'authorized; issued 1998-5,462,165 shares;,3'1997-5,476,620 shares and outstanding34'1998-5,462,165 shares; 1997-5,359,668 shares4"41,567,3614"42,604,658-6'Common Stock held in Treasury, at cost6"(1,226,059)7'Retained Earnings7"19,211,8507"17,812,5318"------------8"-----------!:'Total Shareholders' Equity:"60,779,211:"59,196,530;"------------;"-----------1='Total Liabilities and Shareholders' Equity="$ 91,878,952="$80,954,838>"============>"===========N@'The accompanying notes are an integral part of the financial statements B1D'ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES2E'CONDENSED CONSOLIDATED STATEMENTS OF INCOMEF'(UNAUDITED)H"Three Months EndedH"Three Months EndedH"Six Months EndedH"Six Months EndedI"June 30,I"June 30,I"June 30,I"June 30, K"1998 K"1997 K"1998 K"1997 L"---- L"---- L"---- L"----N'Net SalesN"$ 21,487,803N"$ 22,006,185N"$ 34,444,733N"$ 34,268,258P'Cost of Goods SoldP"15,588,467P"15,724,912P"25,047,865P"24,710,110Q"------------Q"------------Q"------------Q"------------S'Gross MarginS"5,899,336S"6,281,273S"9,396,868S"9,558,148*U'Selling, General and AdministrativeV'ExpensesV"4,161,856V"4,141,606V"7,233,463V"6,718,144W"------------W"------------W"------------W"------------Y'Income From OperationsY"1,737,480Y"2,139,667Y"2,163,405Y"2,840,004['Other Income (Expense):\'Interest Expense\"(331,044)\"(641,031)\"(523,536)\"(1,106,298)]'Other - net]"114,850]"(23,566)]"277,024]"(9,135)^"------------^"------------^"------------^"------------_'Total other - net_"(216,194)_"(664,597)_"(246,512)_"(1,115,433)`"------------`"------------`"------------`"------------!b'Income Before Income Taxesb"1,521,286b"1,475,070b"1,916,893b"1,724,571d'Income Taxesd"413,654d"457,980d"517,574d"518,502e"------------e"------------e"------------e"------------g'Net Incomeg"$ 1,107,632g"$ 1,017,090g"$ 1,399,319g"$ 1,206,069h"============h"============h"============h"============j'Net Income Per Share k'Basick"$ .20k"$ .27k"$ .26k"$ .33l"------------l"------------l"------------l"------------m'Dilutedm"$ .20m"$ .26m"$ .25m"$ 31n"------------n"------------n"------------n"------------(p'Weighted Average Number of Commonq'Shares Outstanding r'Basicr"5,450,414r"3,719,014r"5,432,112r"3,703,024s"============s"============s"============s"============t'Dilutedt"5,602,723t"3,960,388t"5,606,901t"3,928,331u"============u"============u"============u"============Nw'The accompanying notes are an integral part of the financial statements y1{'ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES6|'CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS}'(UNAUDITED)"Six Months Ended"Six Months Ended"June 30,"June 30, "1998 "1997 "---- "----'CASH FLOWS FROM'OPERATING ACTIVITIES'Net Income"$1,399,319 $"1,206,069*'Adjustments to Reconcile Net Income'To Net Cash Used In'Operating Activities:$'Depreciation and Amortization"2,033,080"1,362,973,'Deferred compensation & pension - net"130,732 "55,473('Change in Assets and Liabilities:'Receivables"(4,076,856)"(8,023,455)'Inventories"(11,721,656)"(15,326,057)'Other current assets"(1,076,890)"(429,787)'Other Assets"(45,023)"(34,583)'Accounts payable"(50,375)"9,452,128$'Accrued and Other Liabilities"(98,051)"(383,341)"-----------"-----------,'Net Cash Used In Operating Activities"(13,505,720)"(12,120,580)"-----------"-----------'CASH FLOWS FROM'INVESTING ACTIVITIES:'Purchase of Fixed Assets"(3,167,823)"(1,453,902)"-----------"-----------'CASH FLOWS FROM'FINANCING ACTIVITIES:#'Proceeds from Long Term Debt"24,205,000"20,392,250!'Payments on Long Term Debt"(14,904,060)"(7,089,322).'Proceeds from exercise of stock options*'including related income tax effect"183,362"724,044"-----------"-----------'Net Cash Provided By'Financing Activities"9,484,302"14,026,972"-----------"-----------"'INCREASE (DECREASE) IN CASH'AND CASH EQUIVALENTS"(7,189,241)"452,490!'CASH AND CASH EQUIVALENTS,'BEGINNING OF PERIOD"8,556,883"349,637"-----------"-----------!'CASH AND CASH EQUIVALENTS,'END OF PERIOD"$1,367,642"$ 802,127"-----------"-----------N'The accompanying notes are an integral part of the financial statements