UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
     
Date of Report (Date of earliest event reported)
  March 7, 2007
 
   
ROCKY BRANDS, INC.
(Exact name of registrant as specified in its charter)
         
Ohio   0-21026   31-1364046
         
(State or other jurisdiction
of incorporation) 		  (Commission
File Number) 		  (IRS Employer
Identification No.)
     
39 East Canal Street, Nelsonville, Ohio   45764
     
(Address of principal executive offices)   (Zip Code)
     
Registrant’s telephone number, including area code
  (740) 753-1951
 
   
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
Item 2.02. Results of Operations and Financial Condition.
     On March 7, 2007, Rocky Brands, Inc. (the “Company”) issued a press release entitled “Rocky Brands, Inc. Announces Fourth Quarter and 2006 Full Year Results” regarding its consolidated financial results for the fourth quarter and year ended December 31, 2006. A copy of the Company’s press release is furnished as Exhibit 99 to this Form 8-K and is incorporated herein by reference.
     The information in this Form 8-K and accompanying press release is being furnished under Item 2.02 and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
     The information contained or incorporated by reference in this Form 8-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, 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 the accompanying press release regarding future long-term prospects, expected 2007 revenues and earnings, and improvements in the Company’s operating platform (paragraphs 5, 16, and 17 of the press release). 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, 2005 (filed March 16, 2006), and quarterly reports on Form 10-Q for the quarters ended March 31, 2006 (filed May 10, 2006), June 30, 2006 (filed August 9, 2006), and September 30, 2006 (filed November 8, 2006). 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 contained or incorporated by reference in this Form 8-K will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included or incorporated by reference 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 contained or incorporated by reference in this Form 8-K are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.

2

Item 9.01. Financial Statements and Exhibits.
           (c) Exhibits.
     
Exhibit No.   Description
 
   
99*
  Press Release, dated March 7, 2007, entitled “Rocky Brands, Inc. Announces Fourth Quarter and 2006 Full Year Results.”
 
*   Such press release is being “furnished” (not filed) under Item 2.02 of this Current Report on Form 8-K.

3

SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
  Rocky Brands, Inc.
  		 
Date: March 7, 2007  By:   /s/ James E. McDonald    
    James E. McDonald, Executive Vice President and
Chief Financial Officer  		 
       

4

         
EXHIBIT INDEX
 
     
Exhibit No.   Description
 
  99*
  Press Release, dated March 7, 2007, entitled “Rocky Brands, Inc. Announces Fourth Quarter and 2006 Full Year Results.”
 
*   Such press release is being “furnished” (not filed) under Item 2.02 of this Current Report on Form 8-K.

5

Exhibit 99
         
 
  ROCKY BRANDS, INC.  
 
   
 
  Company Contact:   Jim McDonald Chief
 
      Financial Officer
 
      (740) 753-1951
 
       
 
  Investor Relations:   Integrated Corporate Relations, Inc.
 
      Brendon Frey/Chad Jacobs
 
      (203) 682-8200
ROCKY BRANDS, INC. ANNOUNCES FOURTH QUARTER AND 2006 FULL YEAR RESULTS
NELSONVILLE, Ohio, March 7, 2007 — Rocky Brands, Inc. (Nasdaq: RCKY) today announced financial results for its fourth quarter and year ended December 31, 2006.
For the fourth quarter of 2006, net sales were $70.6 million versus net sales of $74.9 million in the fourth quarter of 2005. It is important to note that the fourth quarter of 2005 included $8.7 million of footwear sales to the military compared to zero footwear sales to the military in the fourth quarter of 2006. For the fourth quarter, the Company reported a net loss of $0.1 million, or ($0.01) per diluted share, versus net income of $2.6 million, or $0.46 per diluted share, for the fourth quarter of 2005.
For the full year 2006, the Company reported net sales of $263.5 million versus net sales of $296.0 million in 2005. It is important to note that 2005 included $27.7 million of footwear sales to the military compared to $1.1 million in 2006. Net income for the full year 2006 was $4.8 million, or $0.86 per diluted share, versus net income of $13.0 million, or $2.33 per diluted share in 2005.
Rocky Brands also announced that it recently conducted its annual evaluation of the intangible assets on its balance sheet. Based on the results, the Company recorded a non-cash impairment charge in the fourth quarter of $0.5 million after-tax or $0.09 per diluted share reflecting the write-down of intangible assets related to the Gates trademark.
Mike Brooks, Chairman and Chief Executive Officer, commented, “Our revenues came in slightly below our forecast primarily due to continued weakness in our women’s western footwear category during the fourth quarter. Additionally, our earnings were negatively impacted by higher than anticipated selling, general, and administrative costs and an increase in our interest expense. That said, in the fourth quarter we did witness sales increases in our outdoor footwear and apparel on a year-over-year basis for the first time in 2006 as well as increased sales in our retail business. We continue to be optimistic about the long-term prospects for our established brands while at the same time we are encouraged about the initial product launches for our two newest brands, Zumfoot and Michelin.”
Fourth Quarter Results
Net sales for the fourth quarter of 2006 were $70.6 million compared to $74.9 million a year ago. The decrease in sales was attributable to a decline in footwear sales to the military, which were zero in the fourth quarter of 2006 compared to $8.7 million in the fourth quarter of 2005.
Gross profit in the fourth quarter of 2006 was $28.2 million, or 40.0% of sales, compared to gross profit of $27.2 million or 36.3% of sales, for the same period last year. The 370 basis point increase in gross margin was primarily due to the decrease in shipments to the U.S. military in the fourth quarter of 2006 compared to the fourth quarter of 2005. Military boots are sold at lower gross margins than branded products.

 

Selling, general and administrative (SG&A) expenses were $25.2 million, or 35.7% of sales, for the fourth quarter of 2006 compared to $21.2 million, or 28.3% of sales, a year ago. The increase was primarily a result of higher payroll and healthcare costs, licensing fees, trade show expenses, distribution expenses and the Gates trademark impairment charge.
Income from operations was $3.0 million or 4.2% of net sales for the fourth quarter of 2006, down from $6.0 million or 8.0% of net sales in the prior year period.
2006 Year-End Results
Net sales for the year ended December 31, 2006 were $263.5 million compared to net sales of $296.0 million for the year ended December 31, 2005. The decrease in sales was primarily attributable to weaker than expected results in the outdoor footwear and apparel and women’s western footwear categories and a decline in footwear sales to the military, which were $1.1 million in 2006 compared to $27.7 million in 2005.
Gross profit was $109.3 million, or 41.5% of sales, compared to $111.2 million, or 37.6% of sales, for the same period last year. The 390 basis point increase was primarily due to the decrease in shipments to the U.S. military in 2006 compared to 2005. Military boots are sold at lower gross margins than branded products.
Selling, general and administrative (SG&A) expenses were $90.4 million, or 34.3% of sales, compared to $83.2 million, or 28.1% of sales, a year ago. The increase was primarily a result of higher payroll and healthcare costs, trade show expenses, marketing and advertising expenditures, professional fees and the Gates trademark impairment charge.
Income from operations was $18.9 million or 7.2% of net sales versus $28.1 million or 9.5% of net sales in the prior year.
Funded Debt and Interest Expense
The Company’s funded debt at December 31, 2006 was $110.5 million versus $105.4 million at December 31, 2005. Interest expense increased to $3.3 million for the fourth quarter of 2006 versus $2.7 million for the same period last year, and to $11.6 million for 2006 versus $9.3 million for 2005. These increases were primarily due to an increase in borrowings and higher interest rates versus a year ago.
Inventory
Inventory increased to $77.9 million at December 31, 2006 compared with $75.4 million on the same date a year ago.
Outlook
Based on current information, the Company expects fiscal 2007 revenues to increase approximately 5% over 2006 levels, and diluted earnings per share to increase approximately 35% over 2006 levels.
Mr. Brooks concluded, “We are disappointed in our performance this past year as revenues and profits came in below our original estimates. We have recently taken steps towards improving our operating platform including realigning our sales force and restructuring our commission program in order to better maximize the opportunities for our portfolio of brands. Additionally, we are exploring ways to reduce our fixed costs going forward. As we begin the new year we are committed to better executing our growth strategy and dedicated to returning increased value to our shareholders.”
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 ® , Georgia Boot ® , Durango ® , Lehigh ® , and the licensed brands Dickies ® , Zumfoot ® and Michelin ® .

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 future long-term prospects (paragraph 5), expected 2007 revenues and earnings (paragraph 16) and improvements in the Company’s operating platform (paragraph 17). 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, 2005 (filed March 16, 2006) and quarterly reports on Form 10-Q for the quarters ended March 31, 2006 (filed May 10, 2006), June 30, 2006 (filed August 9, 2006), and September 30, 2006 (filed November 8, 2006). 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
                 
    December 31, 2006     December 31, 2005  
    Unaudited        
ASSETS:
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 3,731,253     $ 1,608,680  
Trade receivables — net
    65,259,580       61,746,865  
Other receivables
    1,159,444       2,455,885  
Inventories
    77,948,976       75,386,732  
Deferred income taxes
    3,902,775       133,783  
Income tax receivable
    3,632,808       1,346,820  
Prepaid expenses
    1,581,303       1,497,411  
 
           
Total current assets
    157,216,139       144,176,176  
FIXED ASSETS — net
    24,349,674       24,342,250  
DEFERRED PENSION ASSET
    13,564       2,117,352  
IDENTIFIED INTANGIBLES & GOODWILL
    61,979,659       62,284,465  
OTHER ASSETS
    2,796,776       3,214,131  
 
           
TOTAL ASSETS
  $ 246,355,812     $ 236,134,374  
 
           
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY:
               
CURRENT LIABILITIES:
               
Accounts payable
  $ 10,162,291     $ 12,721,214  
Current maturities — long term debt
    7,288,474       6,400,416  
Accrued expenses:
               
Taxes — other
    552,782       603,435  
Other
    3,643,503       5,173,442  
 
           
Total current liabilities
    21,647,050       24,898,507  
LONG TERM DEBT — less current maturities
    103,203,107       98,972,190  
DEFERRED INCOME TAXES
    17,009,025       12,567,208  
DEFERRED LIABILITIES
    368,580       603,347  
 
           
TOTAL LIABILITIES
    142,227,762       137,041,252  
SHAREHOLDERS’ EQUITY:
               
Common stock, no par value;
               
25,000,000 shares authorized; issued and outstanding
December 31, 2006 - 5,417,198; December 31, 2005 - 5,351,023
    53,238,841       52,030,013  
 
               
Accumulated other comprehensive loss
    (993,182 )     —  
Retained earnings
    51,882,391       47,063,109  
 
           
Total shareholders’ equity
    104,128,050       99,093,122  
 
           
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 246,355,812     $ 236,134,374  
 
           

 

Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2006     2005     2006     2005  
 
                               
NET SALES
  $ 70,553,986     $ 74,917,107     $ 263,491,380     $ 296,022,614  
 
                               
COST OF GOODS SOLD
    42,342,039       47,692,569       154,173,994       184,793,488  
 
                       
 
                               
GROSS MARGIN
    28,211,947       27,224,538       109,317,386       111,229,126  
 
                               
SELLING, GENERAL AND
                               
ADMINISTRATIVE EXPENSES
    25,219,557       21,198,035       90,386,072       83,164,758  
 
                       
 
                               
INCOME FROM OPERATIONS
    2,992,390       6,026,503       18,931,314       28,064,368  
 
                               
OTHER INCOME AND (EXPENSES):
                               
Interest expense
    (3,272,557 )     (2,739,554 )     (11,567,842 )     (9,256,867 )
Other — net
    110,541       215,788       242,059       464,385  
 
                       
Total other — net
    (3,162,016 )     (2,523,766 )     (11,325,783 )     (8,792,482 )
 
                               
INCOME/(LOSS) BEFORE INCOME TAXES
    (169,626 )     3,502,737       7,605,531       19,271,886  
 
                               
INCOME TAX EXPENSE/(BENEFIT)
    (91,751 )     896,683       2,786,249       6,258,047  
 
                       
 
                               
NET INCOME/(LOSS)
  $ (77,875 )   $ 2,606,054     $ 4,819,282     $ 13,013,839  
 
                       
 
                               
NET INCOME/(LOSS) PER SHARE
                               
Basic
  $ (0.01 )   $ 0.49     $ 0.89     $ 2.48  
Diluted
  $ (0.01 )   $ 0.46     $ 0.86     $ 2.33  
 
                               
WEIGHTED AVERAGE NUMBER OF
                               
COMMON SHARES OUTSTANDING
                               
Basic
    5,410,597       5,326,438       5,392,390       5,257,530  
 
                       
Diluted
    5,410,597       5,626,473       5,578,176       5,584,771