Rocky Shoes & Boots reported the eighth consecutive quarter that the Company's earnings per diluted share increased compared to the same period of the prior year.

Net income rose 32.1% to $1.4 million for the second quarter of 2004 from $1.1 million in the second quarter of 2003. Net income per diluted share increased 16.0% to $0.29 for the second quarter of 2004 from $0.25 a year ago.

Mike Brooks, Chairman and Chief Executive Officer, stated, “We are pleased with our record second quarter results. They reflect benefits from targeted growth initiatives as well as a positive contribution from the sale of boots for delivery to the U.S. military. ROCKY(R) Work apparel, launched earlier this year as part of our head-to-toe strategy, as well as our GATES(R) products had strong shipments during the quarter. Our strategy includes the introduction of additional footwear, apparel and accessories which leverage the strengths of both brands. We are on target to achieve our business goals for this year and remain focused on profitable growth opportunities.”

Second Quarter 2004

Net sales increased 25.5% to $27.4 million for the second quarter of 2004 from $21.9 million a year ago. This $5.6 million sales gain was attributable to a 13% increase in branded sales, led by GATES(R) products and ROCKY(R) apparel, coupled with sales of boots for delivery to the U.S. military.

Gross profit rose 15.5% to $7.8 million for the second quarter of 2004 from $6.7 million a year ago. Gross profit margin declined to 28.3% for the second quarter versus 30.8% a year ago due to shipments of boots for delivery to the U.S. military and related start-up costs for these boots in 2004 compared to none for the same period last year.

Selling, general and administrative (“SG&A”) expenses declined to 19.7% of net sales for the second quarter of 2004 from 22.6% in 2003. This was primarily due to nominal SG&A expenses related to sales of boots for delivery to the U.S. military.

Operating profit rose to 8.7% of net sales for the second quarter of 2004 from 8.2% a year ago.

Six Month Results

Net sales for the six months ended June 30, 2004 increased 38.5% to $49.3 million from $35.6 million for the same period last year. Gross profit was 27.2% for the first half of 2004 versus 28.6% last year. SG&A expenses declined to 21.7% of net sales for the first six months of 2004 from 25.8% last year. Income from operations rose to 5.4% of net sales for the first six months of 2004 from 2.8% the prior year. Net income per diluted share was $0.31 for the first half of 2004 compared to $0.11 in 2003.

Funded Debt

The Company's funded debt was $22.0 million at June 30, 2004 or $3.7 million below funded debt on the same date last year. Borrowing requirements are generally higher during the months of May through October annually for increased inventory to support the Company's higher sales during this period. At December 31, 2003, funded debt was $18.0 million.

Inventory

At June 30, 2004, inventory was $38.6 million compared to $38.3 million on the same date last year and $38.1 million at December 31, 2003. Inventory is adequate to support sales of ROCKY(R) and GATES(R) products, including recent line extensions of footwear, apparel and accessories. At December 31, 2004, inventory is expected to be lower than on the same date last year.

Outlook

The Company is maintaining its previous guidance regarding net sales and earnings per share for the year 2004. Net sales are anticipated to be approximately $133 million for the year 2004, which is $27 million above net sales for the year 2003. This sales growth is attributable to solid increases in branded products, footwear, apparel and accessories, and shipment of boots for delivery to the U.S. military.

If the Company achieves net sales of at least $133 million for the year 2004, then net income is expected to be approximately $1.75 per diluted share for the year. The Company cautions investors that the net sales and earnings outlook for the year ended December 31, 2004 is based on current market conditions and management's expectations. If net sales do not reach $133 million, then actual earnings may be less than this guidance. 

                 Rocky Shoes & Boots, Inc. and Subsidiaries
                 Condensed Consolidated Income Statements
                               (Unaudited)

                         Three Months Ended        Six Months Ended
                              June 30,                  June 30,
                         2004         2003         2004         2003

  NET SALES          $27,433,987  $21,863,148  $49,316,076  $35,618,089

  COST OF GOODS SOLD  19,657,778   15,128,164   35,921,263   25,417,577

  GROSS MARGIN         7,776,209    6,734,984   13,394,813   10,200,512

  SELLING, GENERAL AND
   ADMINISTRATIVE
   EXPENSES            5,396,376    4,944,319   10,724,067    9,194,925

  INCOME FROM
   OPERATIONS          2,379,833    1,790,665    2,670,746    1,005,587

  OTHER INCOME AND
   (EXPENSES):
    Interest expense    (274,868)    (313,438)    (533,441)    (509,618)
    Other - net           24,182       88,230       98,388      180,103
      Total other - net (250,686)    (225,208)    (435,053)    (329,515)

  INCOME BEFORE
   INCOME TAX          2,129,147    1,565,457    2,235,693      676,072

  INCOME TAX             681,325      469,638      715,420      202,822

  NET INCOME          $1,447,822   $1,095,819   $1,520,273     $473,250

  NET INCOME PER SHARE
    Basic                  $0.32        $0.27         $.34        $0.11
    Diluted                $0.29        $0.25         $.31        $0.11

  WEIGHTED AVERAGE
   NUMBER OF SHARES
   OUTSTANDING
    Basic              4,557,954    4,067,353    4,492,989    4,214,417
    Diluted            5,003,936    4,361,037    4,949,805    4,424,355