Rocky Brands, Inc. second quarter of 2007 net sales increased 2.6% to $58.8 million versus net sales of $57.3 million in the second quarter of 2006. The Company reported a net loss of $1.4 million, or 25 cents per diluted share versus a net loss of $0.2 million or four cents per diluted share a year ago. The net loss for the second quarter of 2007 includes a one time non-cash charge of approximately $0.8 million, or nine cents per diluted share after tax, due to the required write off of prepaid financing costs related to the refinancing of its term loans as compared to a $0.4 million, or five cents per diluted share after tax, charge for a similar write off in second quarter 2006.

Mike Brooks, Chairman and Chief Executive Officer, commented, “Our second quarter performance was negatively impacted by weaker than expected wholesale revenues, partially offset by a double digit sales gain in our retail division. At the same time, an increase in production costs coupled with a greater level of closeouts further reduced our earnings compared with a year ago. We continue to be confident about our growth prospects during the back half of the year and we remain comfortable with our previously issued guidance for fiscal 2007.”

Military Contract

The Company also announced it has received an order to fulfill a contract to the U.S. Military to produce “Hot Weather” boots for approximately $6.4 million. Shipment of the boots is expected to begin in late 2007 with an estimated completion date of late 2008. The contract includes the option for four additional years at the same amount.

Mike Brooks added, “We are very pleased to have received this order from the military which will allow us to better utilize our Company operated production facilities.”

Second Quarter Results

Net sales for the second quarter increased to $58.8 million compared to $57.3 million a year ago. The increase in sales is primarily attributable to a 16.6% increase in retail revenues offset by a 2.7% decrease in wholesale sales.

Gross margin in the second quarter of 2007 was $23.9 million, or 40.7% of sales, compared to $24.1 million or 42.0% of sales, for the same period last year. The decline was primarily due to a decrease in sales of our western footwear, which carry higher gross margins, combined with higher production costs and an increase in closeout sales versus a year ago.

Selling, general and administrative (SG&A) expenses were $22.8 million, or 38.8% of sales, for the second quarter of 2007 compared to $21.5 million, or 37.4% of sales, a year ago. The increase in SG&A expenses is partially due to additional selling expenses related to increased sales and higher professional fees.

Income from operations was $1.1 million, or 1.9% of net sales, for the period compared to $2.6 million, or 4.6% of net sales, in the prior year.

Funded Debt and Interest Expense

The Company's funded debt at June 30, 2007 was $102.7 million versus $109.7 million at June 30, 2006. Interest expense increased to $3.3 million for the second quarter of 2007 versus $3.0 million for the same period last year. The increase in interest expense was due to the write off of prepaid financing costs related to the refinancing of the company's term loans.

Inventory

Inventory decreased $10.3 million, or 11.0%, to $84.0 million at June 30, 2007 compared with $94.3 million on the same date a year ago. The decrease in inventory is due to our focus on improved inventory management through the scheduling of receipts to more closely coincide with projected shipments and the reduction of discontinued products.

Distribution Consolidation

In an ongoing effort to further reduce costs and improve operating efficiencies, the Company is consolidating its distribution and warehousing. Beginning in 2008, Rocky Brands will distribute products in the U.S. solely from its 196,000 square foot facility in Logan, Ohio, and no longer utilize its leased facility in Tunkhannock, Pennsylvania. At the same time, Rocky Brands has signed a letter of intent with Kane Distribution, which currently manages the Pennsylvania facility, to serve as a third-party logistics partner to manage and operate its combined distribution center in Ohio.

Outlook

The Company stated it remains comfortable with its previously issued guidance and continues to expect fiscal 2007 revenues to increase approximately 5% over 2006 levels, and diluted earnings per share to increase approximately 35% over 2006 levels.