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) November 6, 2006
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 November 6, 2006, Rocky Brands, Inc. (the “Company”) issued a press release entitled “Rocky Brands, Inc. Reports Third Quarter Revenues and Earnings” regarding its consolidated financial results for the third quarter and nine-month period ended September 30, 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 are 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 prospects for the Company’s entire portfolio of brands, commitment to enhancing the Company’s operating platform, focus on improving the Company’s position in the marketplace and returning increased value to the Company’s shareholders, and expected net sales and expected earnings per share (paragraphs 3 and 10 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), quarterly report on Form 10-Q for the quarter ended March 31, 2006 (filed May 10, 2006), and quarterly report on Form 10-Q for the quarter ended June 30, 2006 (filed August 9, 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 November 6, 2006, entitled “Rocky Brands, Inc. Reports Third Quarter Revenues and Earnings.”
 
*   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: November 6, 2006  By:   /s/ James E. McDonald    
    James E. McDonald, Executive Vice President and Chief Financial Officer   

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EXHIBIT INDEX
     
Exhibit No.   Description
 
   
99*
  Press Release, dated November 6, 2006, entitled “Rocky Brands, Inc. Reports Third Quarter Revenues and Earnings.”
 
*   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. REPORTS THIRD QUARTER REVENUES AND EARNINGS
— Company Reiterates Fiscal 2006 Guidance —
NELSONVILLE, Ohio, November 6, 2006 — Rocky Brands, Inc. (Nasdaq: RCKY) today announced financial results for the third quarter ended September 30, 2006.
For the three months ended September 30, 2006, net sales were $78.1 million compared to $94.1 million for the corresponding period a year ago. Net income was $4.2 million versus net income of $6.5 million and diluted earnings per share was $0.76 versus $1.15 last year. Net income for the third quarter of fiscal 2006 includes approximately $0.1 million in stock compensation expense required by current accounting standards compared with no stock compensation expense in the third quarter of fiscal 2005.
Mike Brooks, Chairman and Chief Executive Officer of Rocky Brands, stated, “Our year-over-year comparisons reflect the ongoing challenges in our outdoor segment and a slowdown in our fashion-oriented western footwear business, coupled with minimal footwear sales to the military. While we are clearly disappointed with our overall performance in 2006, we continue to be optimistic about the future prospects for our entire portfolio of brands. We are committed to enhancing our operating platform in order to reinvigorate our top-line results and drive long-term profitable growth. Our entire organization is focused on improving our position in the marketplace and returning increased value to our shareholders.”
Third Quarter Results
Net sales for the third quarter decreased 17.0% to $78.1 million compared to $94.1 million a year ago. The decrease in sales is attributable to weaker than expected results in outdoor footwear and apparel, a slowdown in sales of our western footwear, and a decline in footwear sales to the military, which were $0.2 million in the third quarter compared to $9.4 million in the third quarter of 2005.
Gross profit in the third quarter of 2006 was $32.1 million, or 41.1% of sales, compared to $34.1 million or 36.2% of sales, for the same period last year. The 490 basis point increase in gross margin was primarily due to the decrease in shipments to the U.S. military in the third quarter of 2006 compared to the third quarter of 2005. Military boots are sold at lower gross margins than branded products.
Selling, general and administrative (SG&A) expenses were $22.6 million, or 28.9% of sales for the third quarter of 2006 compared to $21.8 million, or 23.2% of sales, a year ago. The increase of $0.8 million is the result of a shift in the timing of certain advertising and professional expenses.
Income from operations was $9.5 million or 12.2% of net sales, compared to income from operations of $12.3 million or 13.0% of net sales in the prior year.
Funded Debt and Interest Expense
Funded debt at September 30, 2006 was $127.3 million versus $127.5 million at September 30, 2005. Interest expense increased to $2.9 million for the third quarter of 2006, versus $2.5 million for same period last year, primarily due to higher interest rates than a year ago.
Inventory
Inventory increased to $87.7 million at September 30, 2006 compared with $77.3 million on the same date a year ago.
Outlook
Rocky Brands remains comfortable with its previously issued guidance for net sales of approximately $265 million for the year ended December 31, 2006. If the Company achieves net sales of at least $265 million for fiscal 2006, then net earnings are anticipated to be approximately $1.25 per diluted share for the year ended December 31, 2006, including a non-cash charge of approximately $0.07 per share related to stock options expensing.
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 prospects for the Company’s entire portfolio of brands, commitment to enhancing the Company’s operating platform, focus on improving the Company’s position in the marketplace and returning increased value to the Company’s shareholders, and expected net sales and expected earnings per share (paragraphs 3 and 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, 2005 (filed March 16, 2006), quarterly report on Form 10-Q for the quarter ended March 31, 2006 (filed May 10, 2006), and quarterly report on Form 10-Q for the quarter ended June 30, 2006 (filed August 9, 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
                         
    September 30, 2006             September 30, 2005  
    Unaudited     December 31, 2005     Unaudited  
ASSETS:
                       
CURRENT ASSETS:
                       
Cash and cash equivalents
  $ 2,327,977     $ 1,608,680     $ 2,050,120  
Trade receivables — net
    81,054,978       61,746,865       83,711,308  
Other receivables
    987,939       2,455,885       1,629,606  
Inventories
    87,710,315       75,386,732       77,322,005  
Deferred income taxes
    133,783       133,783       1,297,850  
Income tax receivable
    10,873       1,346,820       —  
Prepaid expenses
    2,320,048       1,497,411       1,339,103  
 
                 
Total current assets
    174,545,913       144,176,176       167,349,992  
FIXED ASSETS — net
    24,245,710       24,342,250       23,690,488  
DEFERRED PENSION ASSET
    1,563,639       2,117,352       1,347,824  
IDENTIFIED INTANGIBLES & GOODWILL
    62,844,903       62,284,465       67,737,189  
OTHER ASSETS
    2,815,654       3,214,131       4,072,999  
 
                 
TOTAL ASSETS
  $ 266,015,819     $ 236,134,374     $ 264,198,492  
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY:
                       
CURRENT LIABILITIES:
                       
Accounts payable
  $ 16,290,173     $ 12,721,214     $ 13,242,936  
Current maturities — long term debt
    7,282,374       6,400,416       6,389,559  
Accrued expenses:
                       
Income Taxes
    —       —       3,222,774  
Taxes — other
    255,598       603,435       596,460  
Other
    3,606,520       5,173,442       5,373,305  
 
                 
Total current liabilities
    27,434,665       24,898,507       28,825,034  
LONG TERM DEBT — less current maturities
    120,040,154       98,972,190       121,111,944  
DEFERRED INCOME TAXES
    13,477,939       12,567,208       18,527,196  
DEFERRED LIABILITIES
    379,144       603,347       1,472,442  
 
                 
TOTAL LIABILITIES
    161,331,902       137,041,252       169,936,616  
SHAREHOLDERS’ EQUITY:
                       
Common stock, no par value;
                       
25,000,000 shares authorized; issued and outstanding September 30, 2006 — 5,405,098; December 31, 2005 — 5,351,023; September 30, 2005 — 5,295,845
    52,723,651       52,030,013       50,694,385  
 
                       
Accumulated other comprehensive loss
    —       —       (889,564 )
Retained earnings
    51,960,266       47,063,109       44,457,055  
 
                 
Total shareholders’ equity
    104,683,917       99,093,122       94,261,876  
 
                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 266,015,819     $ 236,134,374     $ 264,198,492  
 
                 

Rocky Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2006     2005     2006     2005  
 
                               
NET SALES
  $ 78,114,725     $ 94,087,786     $ 192,937,394     $ 221,105,507  
 
                               
COST OF GOODS SOLD
    45,998,535       60,014,309       111,831,955       137,100,919  
 
                       
 
                               
GROSS MARGIN
    32,116,190       34,073,477       81,105,439       84,004,588  
 
                               
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    22,606,038       21,820,251       65,166,515       61,966,723  
 
                       
 
                               
INCOME FROM OPERATIONS
    9,510,152       12,253,226       15,938,924       22,037,865  
 
                               
OTHER INCOME AND (EXPENSES):
                               
Interest expense
    (2,883,656 )     (2,523,143 )     (8,295,285 )     (6,517,313 )
Other — net
    73,056       130,958       131,518       248,597  
 
                       
Total other — net
    (2,810,600 )     (2,392,185 )     (8,163,767 )     (6,268,716 )
 
                               
INCOME BEFORE INCOME TAXES
    6,699,552       9,861,041       7,775,157       15,769,149  
 
                               
INCOME TAX EXPENSE
    2,480,000       3,352,605       2,878,000       5,361,364  
 
                       
 
                               
NET INCOME
  $ 4,219,552     $ 6,508,436     $ 4,897,157     $ 10,407,785  
 
                       
 
                               
NET INCOME PER SHARE
                               
Basic
  $ 0.78     $ 1.23     $ 0.91     $ 1.99  
Diluted
  $ 0.76     $ 1.15     $ 0.88     $ 1.86  
 
                               
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
                               
Basic
    5,400,647       5,289,736       5,386,254       5,232,964  
 
                       
Diluted
    5,553,028       5,646,161       5,588,616       5,585,224