Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Rocky Brands Second Quarter Fiscal 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be given at that time for you to queue up for questions. (Operator Instructions) I would like to remind everyone that this conference call is being recorded. And, we’ll now turn the conference over to Brendon Frey of ICR. Thank you. You may begin.

Thanks. Before we begin, please note that today’s discussion, including the Q&A period, may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such statements are based on information and assumptions available at this time, and are subject to change, risk and uncertainties, which may cause actual results to differ materially. We assume no obligation to update such statements. For a complete discussion of the risks and uncertainties, please refer to today’s press release, and the reports filed with the Securities and Exchange Commission, including Rocky’s Form 10-K for the year-ended December 31, 2010. I’ll now turn the conference over to Mr. David Sharp, President and Chief Executive Officer of Rocky Brands.

Good afternoon, and thanks for joining us. With me on the call is Jim McDonald, our Chief Financial Officer. Today, for the first time, since the company entered the public market in 1993, Mike Brooks will not be joining us on the call. As we previously announced, Mike transitioned to the role of Chairman of the Board on July 1. While he is not involved directly with this earnings call he is still very much a part of our company, just as he is been for almost 40 years. And the management team here at Rocky Brands is looking forward to benefit from Mike’s guidance and wisdom in the years ahead. Now to the second quarter, which represented our 8th consecutive quarter of increased earnings on a year-over-year basis. We’re particularly pleased with our recent results as a significant increase in net income on a non-GAAP basis was achieved through improved operating performance highlighted by a 6% rise in wholesale sales or 11% increase from continuing operations, which excludes Dickies and higher gross margins in both the wholesale and retail divisions. If you look at our current profitability turnaround in stages, the first stage was driven primarily by reductions in operating expenses because we trim costs from all areas especially in our retail business as part of that division’s restructuring. In 2010, selling, general and administrative expenses were down more than $24 million, compared with 2007. The next stage of our earnings growth was fueled by a significant reduction in interest expense. We improved our balance sheet during 2009 and 2010 by retiring our high interest term loan. We retired the loan with cash flow from operations, proceeds of our successful follow-on offering and funds from a new lower interest credit facility. Our debt level at the end of last…

Thanks, David. Net sales for the second quarter were $52.3 million, compared to $55.2 million for the corresponding period a year ago. Wholesale sales for the second quarter increased 6% to $40.8 million, compared to $38.5 million last year. The sales increase was driven by a 17% gain in our western category offset by a decline in our work category due primarily to the discontinuation of our license agreement with Dickies at the end of 2010. We also experienced a significant increase in our commercial military business versus a year ago. Retail sales for the second quarter were $10.9 million, compared to $11 million last year and military segment sales were $0.6 million versus $5.7 million for the same period in 2010. The decrease in military sales was attributable to the completion of our initial order under our contract with the GSA before the start of this year. Gross profit in the second quarter was $20.6 million, or 39.6% of sales, compared to $19.1 million, or 34.6% of sales for the same period last year. The 480 basis point improvement in gross margin as a percentage of sales was primarily attributable to the decrease in sales in our military segment, which carry lower gross margins than our retail, and wholesale segments. We also benefited from 290 basis point increase in our wholesale segment and 250 basis point increase in our retail segment driven by higher averaging selling prices and improved manufacturing efficiencies. Selling, general and administrative expenses were $16.9 million, or 32.2% of sales in the second quarter of 2011, compared to $16.2 million, or 29.3% of sales a year ago. The increase was primarily attributable to an increase in planned advertising expenses. Income from operations increased $3.8 million, or 7.2% of sales for the period, compared to $2.9 million,…

Thank you. (Operator instructions) Our first question comes from the line of Mitch Kummetz with Robert W. Baird & Company. Please proceed with your question. Mitch Kummetz – Robert W. Baird: Yeah. Thanks, and congratulations on a good quarter. Few questions, Jim, I’ll start with you. On the gross margin, I know you talked about mix and military dropping as a percentage of your overall sales, first of all, could you just remind us what the military gross margin was in the quarter? Was it kind of in that 13% range like it’s trended historically or?

Yeah, it was 12.9% for the quarter. Mitch Kummetz – Robert W. Baird: Okay 12.9%. And then when you look at the benefit or the improvement that you saw both on the wholesale, and the retail side, could you maybe speak to some of the benefits that you saw there in terms of Dickies coming out of the mix, and then some of the things you are doing on the Dominican and in terms of production? And then maybe what the impact is kind of the net impact of cost increases versus what you’re doing on the pricing side?

Yes, I think that Dickies – the mix certainly with Dickies on the wholesale is at about a substantial play there where we – we were net – we were recognizing about net 20% gross margins on the Dickies business versus approximately 40%, almost double on the other business, our own company-owned brands. And so that definitely played a role in it and were fairly significant, as well as our improved efficiencies down at the factory, where we’ve increased production quite a bit. And we’ve been able to offset by moving some of our production from our factories in China, our third-party factories in China we’ve been able to increase the margins on those by lowering the prices, by lowering the cost on those. So, I would say that would be the second piece. And then the third would be that we’ve had better transactions, as David talked about with the way we’re doing – having our customers order and have it be less promotional. So, I think that’s the ranking of how they affected this quarter. Mitch Kummetz – Robert W. Baird: Okay. And so – and then can you just remind us where you guys stand in terms of your price increases? I know you took some in the first half of the year, I know you are contemplating taking some in the back half. And I mean, to start that, could you just say kind of what was the net impact of costs versus the price increases in the first half, and how you are viewing that in the back half?

Well, I think our – we raised our prices approximately 5%, which was in line with our cost increases that we saw. We headed into the beginning of this year and that price increase was effective mid-December of last year. We’re reevaluating now because cost have gone up from the beginning of the year on our source products, so we are reevaluating that and looking at a potential price increases we move to the back half of this year. Mitch Kummetz – Robert W. Baird: And what are the price increases – I’m sorry – the cost increases on the back half? Are they up like 10%?

No. I think we’re looking more in the 3% to 5% range. Mitch Kummetz – Robert W. Baird: Okay.

In the back half. Mitch Kummetz – Robert W. Baird: Got it. And then, David, in your prepared remarks, you talked a little bit about what you’re doing on the international side. I know it’s still a small part of your overall business, but can you maybe talk about where you are in terms of where you’ve built out your international business? What distributors are online now? What’s in the pipeline? Where’s that 40% growth coming from year-over-year?

Yeah. I think we’re pretty well distributed now in hunting in Europe, and the Baltic and Balkan states. And now we’ve really turned our focus to work boots and western boots. And we seem to be getting some traction in South America and Central America there. And in fact, we are currently in discussions with a manufacturer in Brazil that would be licensing our brands. So, depending on the region of the world, Mitch, we’re looking for the business transaction that would bring the consumers the best value. So, in some cases, it might be a licensing arrangement or a distributorship arrangement. But we’re on track to deliver what we have planned – pretty aggressive plan for international sales through the end of this year. Mitch Kummetz – Robert W. Baird: Okay. And then lastly, on the retail business, I know you’ve been going through that transition there in terms of shifting out of the mobile stores to the web. Could you just remind us where you are, how many mobile stores you still have, where’s that headed to the end of this year? And then how much of your – what percentage of your revenues, maybe Q2, were on the web, and what the plan is for – by year-end?

We’re running – currently close to 30% of our revenues are coming through – the rest are coming through the trucks and through direct sales. We’re operating about 60... 48 mobile stores right now, trucks. And we’re in a position now that we’re able to know just how profitable they are through our investments in technology. And when they become – if they become that unprofitable, they’ll be retired. Obviously, our plan is to leverage this investment we’ve made in the web just as much as we can. So, that’s where we’re focused now. Mitch Kummetz – Robert W. Baird: Okay. All right. Thanks a lot. Good luck.

Thanks.

Thanks.

Thank you. Our next question comes from the line of Reed Anderson with D.A. Davidson & Company. Please proceed with your question. Reed Anderson – D. A. Davidson: Good afternoon, and let me also add my congratulations. A couple of questions. David, you’ve talked about, or just in the last questions, you had mentioned again the licensing opportunity in footwear. You’ve done some other things in accessories. We’ve seen some recent announcements. But clearly, there’s more of an emphasis on licensing. And I’m just curious, I don’t know if you want to quantify it, but just give us a sense of how that might play out here over the next year? Or what the opportunity is for that to boost sales and profits, et cetera.

Well, here in the U.S., we’ve been working with a third party and trying to leverage particularly in what Rocky stands for in outdoor market. So, you saw some of those announcements we made. And we’re in discussions now for more licenses in some other consumer products categories that will bring more revenue this year. I think that that’s a little speculative though, I don’t think we’d want to put a number on that right now, Reed. Reed Anderson – D. A. Davidson: Sure, no that makes sense. But clearly, it’s kind of a new avenue you’re pursuing to get some additional growth, it sounds like?

Yes, it is.

Reed, just the licensing revenues we report as other income, so we don’t report those as top line sales. Reed Anderson – D. A. Davidson: Okay, that was going to be my next question, so that’s – so we’ll kind of watch it there. That’s good. I think that’s a good development, though. And secondly, David, in your prepared remarks, you kind of articulated some of the strategic focus, et cetera, and talked about acquisitions. And I guess my question there is when you’re thinking about what’s a good fit, would you want something that’s all in and would run itself or stands alone? Or would you just look be more – be looking to get a brand or something like that, that you could just strap onto your existing platform and existing channels, that kind of thing? What would be – give us some thoughts there, please.

Well, I think what we’re looking to do is to not do more of what we’re doing to get into the casual markets. And obviously, we’ve developed a pretty nice sourcing and manufacturing and distribution capability. And if there was a company that would be a good fit with us that had the front-end pretty well accomplished. I think that would be a good fit for us. Reed Anderson – D. A. Davidson: Okay. That makes sense. On the western business, I think, Jim, you said that was up about – it was 17% in the quarter?

Correct. Reed Anderson – D. A. Davidson: And I guess my question there is does that reflect just a lot of some of the newer products and some of the demand or excitement around that? Or is it more distribution? A combination of both? Just clarify that, please.

That was almost entirely attributable to new products in the Rocky line, a new product called Long Range. Reed Anderson – D. A. Davidson: Okay.

– Which has been very well-received. And now is at retail and retailing really well, too. We’re getting nice reorders. Reed Anderson – D. A. Davidson: That’s great. And then my last question is just, thinking about the timing, now you’re coming up, or you’re in your big quarter of the year, if you will. We’ve got probably got an early read on that outdoor channel. That’s going to be more important. I’m just curious, David, what your thoughts are. I mean, a lot of the people in that area seem to be performing well. Are you seeing that look equally good at this point? I’m obviously just a little ways out yet, but I’m just curious, your initial thoughts here.

Yes, I think that we are cautiously optimistic. Last year was a very good year, which produced very strong comps. We had weather early in the season was sustained throughout the season. So, we think that we – the back half wholesale will – can hold about the same trend that we’ve achieved in the first half, there is no surprises in the economy. Reed Anderson – D. A. Davidson: That’s great. Best of luck. Thank you.

Thank you.

Thank you. (Operator Instructions) Our next question comes from the line of Mark Cooper with Pacific Ridge Capital Partners. Please proceed with your question. Mark Cooper – Pacific Ridge Capital Partners LLC: Hello, I wanted to come back to the inventory comment that you mentioned, I think inventories – you suggested they were up entirely due to pricing, not to actually units held, is that correct?

I think – Mark, this is Jim, we – it was primarily a result of that. Probably about 75% of the increase is because the as we’ve been talking about, cost per unit have gone up pretty substantially over the last year, which we offset with a price increase. So, that’s about 75% of the increase. The other 25% is related to more units. At this time, last year, we were still in a position where we – two things, we were in a position where we didn’t have really an adequate supply in our wholesale and retail businesses. And then the other thing we were shipping a substantial amount of military business last year, which is basically you make it and ship it, so you don’t carry any inventory. So, although our overall sales are down, our wholesale, particularly, business is up, so we need some more inventory to support that. Mark Cooper – Pacific Ridge Capital Partners LLC: Okay. All right. Thank you.

Thank you. (Operator Instructions) It appears there are no further questions at this time. I’d like to turn the call back to management for any closing comments.

Okay. Well, thanks for joining us on the call this quarter. We look forward to speaking to you again in 90 days. Thank you.

Thank you. Ladies and gentlemen this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.