Selling, general and administrative expenses increased modestly in 2002 compared with the  prior year. During the first half of the year we responded to weak market conditions through  increased emphasis of controllable costs, while continuing to support the ROCKY brand through  targeted advertising and related efforts. Additionally, we proceeded with development of our  western work boot line. In April of this past year David Sharp was appointed Executive Vice President and Chief  Operating Officer. He joined the company in June 2000 and during this period David has made  solid contributions to our improved results, sales and marketing strategy and long-term growth  performance. More recently, John Maser joined the company as Vice President-Apparel Business Development in March 2003. He is an experienced industry professional who is  leading our extension of the ROCKY brand beyond footwear into additional categories that  complement our growth strategy. As a result, our management team is stronger today and  focused on achieving increased growth and profitability. We completed a two-year extension of our credit facility in the fourth quarter of 2002. This new  $45 million agreement replaces the previous credit facility and includes terms more favorable to  the company as well as lower interest rates. In September 2002, the Board of Directors authorized the repurchase of up to 500,000 shares of  the company’s common shares, which represented approximately 11% of the shares outstanding. This authorization was based on the Board’s determination that the company’s stock is a good  investment and that repurchasing the shares could benefit shareholder value. These purchases  were made through open market and privately negotiated transactions. Earlier this month we  completed this share repurchase program. The average purchase price was $6.38 per share. Book value at December 31, 2002 was $11.67 per share. Strong sell-through of ROCKY products at retail and more favorable weather conditions  occurred in the fourth quarter of 2002. This contributed to a solid increase in branded product  sales for the quarter. As a result, we entered 2003 with increased optimism regarding sales  growth this year. Initial bookings for the upcoming fall and winter seasons are substantially  ahead of the same period last year. While the sluggish economy, war, and homeland security  issues may impact consumer behavior, our customers are motivated buyers following their  improved performance this past year. The 2002 results reflect the progress we have made to  improve our manufacturing operations, control costs, and increase profitability. We are well- positioned for growth compared with 2002 and optimistic about the prospects for improved  results this year. Your continued interest in our company is appreciated. Sincerely, Mike Brooks Chairman and CEO