FORM 10-K
U.S. Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[ x ]ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1943
Commission File Number: 0-21026
ROCKY SHOES & BOOTS, INC.
(Exact name of Registrant as specified in its charter)
OHIO NO. 31-1364046
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
39 EAST CANAL STREET
NELSONVILLE, OHIO 45764
(Address of principal executive offices, including zip code)
(740) 753-1951
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, without par value
Preferred Stock Purchase Rights
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to the filing
requirements for at least the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant was approximately $83,021,381 on March 13,
1998.
There were 5,444,025 shares of the Registrant's Common Stock
outstanding on March 13, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 1997, are incorporated by reference in Part II.
Portions of the Registrant's Proxy Statement for 1998 Annual Meeting of
Shareholders are incorporated by reference in Part III.
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This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
and Section 27A of the Securities Act of 1933, as amended. The words
"anticipate," "believe," "expect," "estimate," and "project" and similar words
and expressions identify forward-looking statements which speak only as of the
date hereof. Investors are cautioned that such statements involve risks and
uncertainties that could cause actual results to differ materially from
historical or anticipated results due to many factors, including, but not
limited to, the factors discussed in "Business - Business Risks." The Company
undertakes no obligation to publicly update or revise any forward-looking
statements.
PART I
ITEM 1. BUSINESS.
Rocky Shoes & Boots, Inc. has two subsidiaries: Five Star Enterprises Ltd.
("Five Star"), a Cayman Islands corporation, which operates a manufacturing
facility in La Vega, Dominican Republic, and Lifestyle Footwear, Inc.
("Lifestyle"), a Delaware corporation, which operates a manufacturing facility
in Aquadilla, Puerto Rico. Unless the context otherwise requires, all references
to "Rocky" or the "Company" include Rocky Shoes & Boots, Inc. and its
subsidiaries.
OVERVIEW
The Company is the successor to the business of The Wm. Brooks Shoe
Company, a company established in 1932 by William Brooks, who was later joined
by F. M. Brooks, the grandfather of the Company's current Chairman, President
and Chief Executive Officer, Mike Brooks. The business was sold in 1959 to a
company headquartered in Lancaster, Ohio. John W. Brooks, the father of Mike
Brooks, remained as an employee of the business when it was sold. In 1975, John
W. Brooks formed John W. Brooks, Inc. (later known as Rocky Shoes & Boots Co.
("Rocky Co.")) as an Ohio corporation, reacquired the Nelsonville, Ohio
operating assets of the original company and moved the business' principal
executive offices back to Nelsonville, Ohio. In 1993, the Company, Rocky Co.,
Lifestyle and Five Star were parties to a reorganization, and in 1996, Rocky Co.
was merged with and into the Company, resulting in the Company's present
corporate structure.
Following completion of the Company's initial public offering in 1993, the
Company began to convert all of its factories to a modular "Team Pass-Through"
manufacturing system. This system substantially increased total manufacturing
capacity and operating efficiencies. Most of the Company's footwear is
manufactured in the Company's facilities located in Nelsonville, Ohio, the
Dominican Republic and Puerto Rico. The Company purchases raw materials from a
number of domestic and foreign sources. The principal raw materials used in the
production of the Company's footwear, in terms of dollar value, are leather,
GORE-TEX waterproof fabric, CORDURA nylon fabric and soling materials. The
Company's footwear is distributed nationwide and in Canada from the Company's
warehouse located in Nelsonville, Ohio. The Company stores finished goods in the
warehouse until they are used to fill an order. If the product ordered is in
inventory, it can be shipped to customers within one week of the order; however,
a majority of the Company's orders for rugged outdoor footwear are placed in
January through April for delivery in July through October.
In the past, the Company has benefited from a relatively low effective tax
rate. The Company receives favorable tax treatment on income earned by its
subsidiary in Puerto Rico and benefits from local tax abatements available to
such subsidiary. During the fourth quarter of Fiscal 1996, the Company elected
to repatriate future earnings of its subsidiary in the Dominican Republic. The
repatriation of earnings from its subsidiary in the Dominican Republic is
subject to federal income tax, but is exempt from state and local taxation.
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ROCKY(R) is a federally registered trademark of Rocky Shoes & Boots, Inc. This
report also refers to trademarks of corporations other than the Company. See
"Business - Patents, Trademarks and Trade Names."
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STRATEGY
The Company's objective is to increase sales within its core product
categories and markets and to leverage the ROCKY brand into new market segments
with products that emphasize the reputation of the Company's footwear for
quality, comfort and durability. Key elements of the Company's strategy are as
follows:
Maintain Innovation and Quality. Innovation and quality are hallmarks of
the ROCKY brand. The Company believes it has developed a competitive advantage
through its ability to produce high quality footwear incorporating premium
materials such as GORE-TEX waterproof breathable fabric. The Company continually
strives to develop new products and to introduce innovations in each of its
footwear market segments. The Company stresses quality control at every stage of
its manufacturing process. Each manufacturing facility is staffed with trained
quality assurance personnel, and a portion of each manufacturing employee's
compensation is based on the level of product quality of each employee's
respective work group.
Increase Awareness of the ROCKY Brand. The Company believes that its
long-term reputation for quality has increased awareness of the ROCKY brand. To
increase the strength of its brand, the Company has reformulated its advertising
strategy by shifting its focus from the retail trade directly to the consumer. A
key component of this new strategy includes advertising through cost-effective
cable broadcasts aimed at audiences which share the demographic profile of the
Company's typical customers. Similarly, the Company is shifting its national
print advertising campaign to more consumer-oriented publications. Management
believes that by directly targeting the consumer it can convey a broader and
more consistent image of the ROCKY brand, thereby increasing demand for its
products at higher retail prices.
Leverage the ROCKY Brand. The Company believes that the ROCKY brand has
become a recognizable and established brand name for quality-conscious consumers
in the rugged outdoor and occupational segments of the men's footwear market.
The Company intends to continue to leverage the ROCKY brand with a major
emphasis on broadening its share of the handsewn casual market segment. The
Company has discontinued private label manufacturing of handsewn casual footwear
in favor of producing a line of ROCKY brand products in this market segment.
Additionally, the Company licenses the ROCKY brand for use on certain
complementary products, such as socks and hats, in an effort to expand brand
recognition.
Develop an Exclusive Rocky-Focused Sales Force. The Company has
historically sold its footwear through manufacturers' representatives who
carried ROCKY brand products as well as other non-competing products. In an
effort to ensure full representation of its complete product line and consistent
support of its customers, late in 1995, the Company began replacing its
manufacturers' representatives with exclusive sales representatives who sell
only ROCKY brand products. Currently, 60% of the Company's sales force is
comprised of exclusive sales representatives. The Company's objective is for at
least 80% sales force to be exclusive sales representatives.
Capitalize on Manufacturing Process. The Company manufactures its products
under a twin-plant concept by producing its labor intensive "upper portion" in
its lower wage rate plants in the Dominican Republic and Puerto Rico and
completing its footwear in Puerto Rico and Nelsonville, Ohio where it uses
state-of-the-art bottoming techniques. The Company utilizes a modular "Team
Pass-Through" manufacturing system in each of its manufacturing facilities. The
Company believes that this system, which allows each person to perform a number
of different tasks, is superior to a traditional assembly line approach, which
requires each person to perform a single repetitive task. This system increases
the number of pairs of footwear produced per square foot of manufacturing space,
reduces work-in-process inventory and direct labor and improves the Company's
production yields. In addition, the Company believes that its manufacturing
process allows it to respond quickly to changes in product demand and consumer
preferences.
Expand Product Sourcing. In 1997 the Company sourced approximately 8.1% of
its products in the Far East. The Company sources products to reach price points
that it cannot obtain with products manufactured in its own facilities. A
greater portion of the Company's products may be sourced in the future if the
Company expands and reaches capacity in its manufacturing facilities. The
Company employs a full-time quality assurance staff to inspect each shipment
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sourced in the Far East. All of the Company's sourced footwear is designed by
the Company's design and engineering team.
PRODUCT LINES
The Company's product lines consist of rugged outdoor, occupational and
handsewn casual footwear. ROCKY brand products emphasize quality, patented
materials, such as GORE-TEX waterproof breathable fabric, CORDURA nylon fabric,
CAMBRELLE cushioned lining and THINSULATE thermal insulation. The following
table summarizes the Company's product lines:
RUGGED OUTDOOR OCCUPATIONAL HANDSEWN CASUAL
-------------- ------------ ---------------
TARGET MARKET....... Hunters and outdoorsmen Law enforcement personnel, Retail customers of premium
security guards, postal workers, casual wear
paramedics and factory and
construction workers
SUGGESTED RETAIL
PRICE RANGE........ $89 - $239 $69 - $179 $79 - $149
DISTRIBUTION
CHANNELS........... Sporting goods stores, outdoor Retail uniform stores, mail Independent retail stores,
specialty stores and mail order order catalogs, specialty safety department store chains, mail
catalogs stores and independent retail order catalogs and sporting
stores goods stores
COMPANY'S LEADING
BRAND NAMES........ BEAR CLAW, SNOW ELIMINATOR, ROCKY 911 TUFF TERRAINERS and
STALKER, SERIES, ALPHA, OUTBACKS
SUPERSTALKERS and CROSSTECH, WORKSMART
MOUNTAIN STALKERS and BEAR CLAW STEEL TOE
Rugged Outdoor Footwear. Rugged outdoor footwear, which is the Company's
largest product line in terms of total net sales, represented $49.8 million, or
52.4%, of fiscal 1997 net sales. The Company's rugged outdoor footwear consists
of all season sport/hunting boots that are typically waterproof and insulated.
These products are designed to keep outdoorsmen comfortable in extreme
conditions. Most of the Company's rugged outdoor footwear have outsoles which
are designed to provide excellent cushioning and traction. Although Rocky's
rugged outdoor footwear is regularly updated to incorporate new camouflage
patterns, the Company believes its products in this category are relatively
insensitive to changing fashion trends. For example, two of the Company's most
popular current boot styles were introduced in 1984 and 1988, respectively.
Occupational Footwear. Occupational footwear, which is the Company's second
largest product line, represented $23.1 million, or 24.3%, of Fiscal 1997 net
sales. All occupational footwear styles are designed to be comfortable,
flexible, lightweight, slip resistant and durable and are typically worn by
people who are required to spend a majority of their time at work on their feet.
The Company recently began to incorporate Gore's CROSSTECH fabric, which is
resistant to blood born pathogens, into certain styles of its occupational
footwear. Several of the Company's occupational footwear products are similar in
design to certain of the Company's rugged outdoor footwear styles, except the
Company's occupational footwear is primarily black in color and features
innersole support systems. This product category includes work/steel toe
footwear designed for industrial, construction and manufacturing workers who
demand leather work boots that are durable, flexible and comfortable. Many
companies require their workers to wear steel toe boots and often provide
purchase programs for their employees' footwear needs.
Handsewn Casual Footwear. Aggregate sales of the Company's handsewn casual
footwear were $7.8 million in Fiscal 1997, accounting for 8.2% of net sales. The
Company's handsewn casual products target the upscale segment of the market and
include well-styled, comfortable leather shoes of a variety of constructions,
including traditional handsewn. Most of the Company's footwear in this segment
is waterproof and highly functional for outdoor activity. The Company has placed
increased emphasis on expanding its market share within the casual segment by
increasing the number of its product offerings and more directly targeting the
retail consumer. The Company currently offers 20
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styles of footwear within this market segment. Prior to Fiscal 1996, the Company
manufactured handsewn casual products primarily on a private label basis. The
Company discontinued manufacturing on a private label basis in order to
manufacture handsewn casual footwear exclusively under the ROCKY brand.
Other. The Company manufactures and/or markets a variety of accessories,
including GORE-TEX waterproof oversocks, GORE-TEX waterproof booties, innersole
support systems, foot warmers, laces and foot powder. GORE-TEX waterproof
oversocks are sold under the ROCKY brand and as private label products.
Additionally, the Company periodically contracts its excess manufacturing
capacity for shoe uppers and bottoms to other shoe manufacturers. Aggregate
sales of other products, including contract manufacturing, were $9.4 million in
Fiscal 1997, representing 9.9% of net sales.
Net Sales Composition. The following table indicates the percentage of net
sales derived from each major product line and the factory outlet store for the
periods indicated. Historical percentages may not be indicative of the Company's
future product mix.
TRANSITION
FISCAL 1995 PERIOD FISCAL 1996 FISCAL 1997
----------- ------ ----------- -----------
Rugged outdoor footwear..................... 57.6% 65.7% 57.8% 52.4%
Occupational footwear....................... 24.0 20.9 23.3 24.3
Handsewn casual footwear.................... 8.1 2.1 5.7 8.2
Factory outlet store........................ 6.1 7.6 6.6 5.2
Other. . ................................... 4.2 3.7 6.6 9.9
--- --- --- ---
100.0% 100.0% 100.0% 100.0%
====== ====== ====== ======
PRODUCT DESIGN AND DEVELOPMENT
Product design and development are initiated both internally by the Company's
development staff and externally by customers and suppliers. The Company's
product development personnel, marketing personnel and sales representatives
work closely to identify opportunities for new styles, camouflage patterns,
design improvements and the incorporation of new materials. These opportunities
are reported to the Company's development staff which oversees the development
and testing of the new footwear. The Company also receives design and product
innovation ideas from tradeshows and from its customers and suppliers who work
with the Company to design footwear incorporating desired features or product
innovations. The Company strives to develop products which respond to the
changing needs and tastes of consumers under time constraints imposed by the
market. As part of the design process, the Company maintains a computer aided
design (CAD) system, which significantly shortens the development period for new
footwear styles. Once the product design has been approved for production, a
last (a reusable form utilized in the manufacture of footwear) is developed by
the Company and then reproduced by a third-party supplier.
SALES, MARKETING AND ADVERTISING
The Company has developed comprehensive marketing and advertising programs to
gain national exposure for its ROCKY brand products in its targeted markets. By
creating strong brand awareness, the Company seeks to increase the general level
of retail prices for its products, expand its customer base and increase brand
loyalty. The Company's footwear is sold by more than 2,600 retail and mail order
companies in the United States and Canada. The Company's largest customers
include: Cabela's, Inc., Bass Pro Shops, Inc. and Dick's Clothing and Sporting
Goods for rugged outdoor footwear; Fecheimer Brothers Uniforms, Inc. and R & R
Uniforms, Inc. for occupational footwear; and J.C. Penney Company, Inc. for
handsewn casual footwear. No single customer accounted for more than 10% of the
Company's revenues in Fiscal 1997.
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The Company's sales and marketing personnel are responsible for developing
and implementing all aspects of advertising and promotion of the Company's
products. In addition, the Company maintains a network of 48 exclusive sales
representatives and manufacturers' representatives, operating in 14 geographic
territories, who sell the Company's products throughout the United States and in
Canada. The Company has historically sold its products through manufacturers'
representatives who carried ROCKY brand products as well as other non-competing
products. In an effort to ensure full representation of its complete product
line and consistent support of its customers, late in 1995, the Company began
replacing its manufacturers' representatives with exclusive sales
representatives who sell only ROCKY brand products. Currently, 60% of the
Company's sales force is comprised of exclusive sales representatives. The
Company's objective is for at least 80% of its sales force to be exclusive sales
representatives. The Company also changed its sales and manufacturing
representatives compensation program by setting performance goals based on sales
growth, development of new accounts and increased penetration of existing
accounts with new products. The Company's exclusive sales representatives and
manufacturers' representatives are paid on a commission basis and are
responsible for sales, service and follow-up.
The Company advertises and promotes the ROCKY brand through a variety of
methods, including product packaging, national print advertising and a
telemarketing operation. In addition, the Company attends numerous tradeshows.
The Company's marketing personnel have developed a product list, product catalog
and dealer support system which includes attractive point-of-sale displays and
co-op advertising programs. In the future, the Company plans to attend a greater
number of tradeshows, which have historically been an important source of new
orders, in response to increasing demand and favorable results received from
attending such shows.
The Company believes that its long-term reputation for quality has increased
awareness of the ROCKY brand. To further increase the strength of its brand, the
Company has reformulated its advertising strategy by shifting its focus from the
retail trade directly to the consumer. A key component of this new strategy
includes advertising through cost-effective cable broadcasts aimed at audiences
which share the demographic profile of the Company's typical customers.
Similarly, the Company is shifting its national print advertising campaign to
more consumer-oriented publications. The Company places full page advertisements
in a number of magazines and other publications having national and
international circulations, including Sports Afield, Field & Stream, North
American Hunter, Outdoor Life, North American Fisherman, Police and Security
News, Rescue and Law and Order. The Company's print advertisements and
television commercials emphasize the waterproof nature of the Company's footwear
as well as its high quality, comfort, functionality and durability. Management
believes that by directly targeting the consumer it can create a more
recognizable, consistent image of the ROCKY brand, thereby increasing demand for
its products at higher retail prices.
All of the Company's advertisements include a toll free number for consumers
to inquire about the Company's products and to locate their nearest retailer.
The Company's national telemarketing operation is a "store-locator" system. A
potential customer calls into the telemarketing center where trained
telemarketing representatives, who are familiar with all styles of ROCKY
footwear, respond to questions and refer the caller to one to three retailers in
or near the caller's area according to ZIP code. The telemarketing
representative records the name, address and telephone number of the caller, and
a letter is sent to the potential customer thanking him or her for the inquiry,
again identifying the nearby retailers and inviting the caller to visit the
stores to try on a pair of ROCKY shoes or boots. An additional letter is sent to
each of the retailers who were recommended to the caller, providing the
retailers with the name, address and telephone number of the caller and
requesting that their staff contact the potential customer and personally invite
them to the store to shop for ROCKY footwear. A ROCKY postcard is provided for
the retailer's convenience. A similar process is used with reader service cards
placed in various publications which advertise the Company's products.
MANUFACTURING AND SOURCING
The Company manufactures its products under a twin-plant concept by producing
the labor intensive "upper portions" in its lower wage rate plants in the
Dominican Republic and Puerto Rico and completing its footwear in Puerto Rico
and Nelsonville, Ohio where it uses state-of-the-art bottoming techniques. The
Company utilizes a modular "Team
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Pass-Through" manufacturing system in each of its manufacturing facilities. The
Company believes that this system, which allows each person to perform a number
of different tasks, is superior to a traditional assembly line approach, which
requires each person to perform a single repetitive task. This system increases
the number of pairs of footwear produced per square foot of manufacturing space,
reduces work-in-process inventory and direct labor and improves the Company's
production yields. In addition, the Company believes that its manufacturing
process allows it to respond quickly to changes in product demand and consumer
preferences.
Quality control is stressed at every stage of the manufacturing process and
is monitored by trained quality assurance personnel at each of the Company's
manufacturing facilities. Every pair of ROCKY footwear, or its component parts,
produced at the Company's facilities is inspected at least five times during the
manufacturing process with some styles inspected up to nine times. Every
GORE-TEX waterproof fabric bootie liner is individually tested by filling it
with compressed air and submerging it in water to verify that it is waterproof.
Quality control personnel at the Nelsonville, Ohio warehouse conduct quality
control testing on incoming sourced finished goods and raw materials and inspect
random samples from the finished goods inventory from each of the Company's
manufacturing facilities to ensure that all items meet the Company's high
quality standards. A portion of each manufacturing employee's compensation is
based on the level of product quality of each employee's respective work group.
Most of the Company's footwear is produced in its own facilities in
Nelsonville, Ohio, the Dominican Republic and Puerto Rico. The Company sources
some footwear from manufacturers in the Far East, primarily China, which in 1997
accounted for approximately 8.1% of its products. A greater portion of the
Company's products may be sourced in the future if the Company expands and
reaches capacity in its manufacturing facilities. The Company sources products
to reach price points that it cannot obtain with products manufactured in its
own facilities. The Company will source products from outside facilities only if
the Company believes that these facilities will maintain the high quality that
has become associated with ROCKY brand footwear. All product sourcing is planned
and implemented under the direction and supervision of the Company's Director of
Sourcing.
Compliance with federal, state and local regulations with respect to the
environment has not had, nor does the Company expect it to have, any material
effect on the earnings, manufacturing process, capital expenditures or
competitive position of the Company.
SUPPLIERS
The Company purchases raw materials from a number of domestic and foreign
sources. The Company does not have any long-term supply contracts for the
purchase of its raw materials, except for limited blanket orders on leather to
protect the Company's wholesale selling prices for an extended period of time.
The principal raw materials used in the production of the Company's footwear, in
terms of dollar value, are leather, GORE-TEX waterproof breathable fabric,
CORDURA nylon fabric and soling materials. The Company believes that these
materials will continue to be available from its current suppliers, and that,
with the exception of GORE-TEX waterproof breathable fabric, there are
acceptable present alternatives to these suppliers and materials.
GORE-TEX waterproof fabric is purchased under license directly from W. L.
Gore & Associates, Inc. A majority of the Company's footwear incorporates
GORE-TEX waterproof breathable fabric. The Company, which has been a customer of
Gore since 1980, was the first footwear manufacturer licensed by Gore to
manufacture, promote, sell and distribute footwear worldwide using GORE-TEX
waterproof breathable fabric. The Company is currently one of the largest
customers of GORE-TEX waterproof breathable fabric for footwear. Although other
waterproofing techniques or materials are available, the Company places a high
value on its GORE-TEX license because the GORE-TEX trade name has high brand
name recognition and the GORE-TEX waterproof breathable fabric used in the
manufacture of ROCKY footwear has a reputation for quality and proven
performance.
Under the Company's licensing agreement with Gore, a prototype or sample of
each style of shoe or boot designed and produced by the Company that
incorporates GORE-TEX waterproof breathable fabric must be tested and approved
by Gore before the Company is permitted to manufacture or sell commercial
quantities of that style of footwear. Gore's
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testing involves immersing the Company's footwear prototype for days in a water
exclusion tester and flexing the prototype 500,000 times, simulating a 500-mile
march through several inches of water. The prototype is then placed in a sweat
absorption and transmission tester to measure "breathability," which is the
amount of perspiration that can escape from the footwear.
All of the Company's GORE-TEX fabric footwear is guaranteed to be waterproof
for one year from the date of purchase. When a customer claims that a product is
not waterproof, the product is returned to the Nelsonville, Ohio manufacturing
facility for further testing. If the product fails this testing process, it is
either replaced or credit is given, at the customer's discretion. The Company
believes that, historically, the claims associated with this guarantee have been
consistent with guarantee claims in the footwear industry.
SEASONALITY AND WEATHER
The Company has historically experienced significant seasonal fluctuations in
the sale of its rugged outdoor footwear. A majority of orders for the Company's
rugged outdoor footwear are placed in January through April for delivery in July
through October. In order to meet demand, the Company must manufacture its
rugged outdoor footwear year round to be in a position to ship advance orders
during the last two quarters of each calendar year. Accordingly, average
inventory levels have been highest during the second and third quarters of each
calendar year and sales have been highest in the last two quarters of each
calendar year. Because of seasonal fluctuations, there can be no assurance that
the results for any particular interim period will be indicative of results for
the full year or for future interim periods.
Many of the Company's products, particularly its rugged outdoor footwear
line, are used by consumers in cold or wet weather. Mild or dry weather can have
a material adverse effect on sales of the Company's products, particularly if
mild or dry weather conditions occur in broad geographical areas during late
fall or early winter. Also, due to variations in weather conditions from year to
year, results for any single quarter or year may not be indicative of results
for any future quarter or year. Due to a relatively mild winter in many areas of
the United States during the last winter season, the Company believes some of
its customers may not have sold a significant portion of their inventory to
retail consumers.
Footwear retailers in general have begun placing orders closer to the selling
season. This increases the Company's business risk because it must produce and
carry inventories for relatively longer periods. In addition, the later
placement of orders may change the historical pattern of orders and sales and
increase the seasonal fluctuations in the Company's business. There can be no
assurance that the results for any particular interim period or year will be
indicative of results for the full year or for any future interim period or
year.
BACKLOG
At June 30, 1997 and June 30, 1996, the Company had unfilled orders from its
customers in the amount of approximately $32.2 million and $25.3 million,
respectively. By comparison, at December 31, 1997 and December 31, 1996, backlog
was $3.7 and $3.3 million, respectively. Because a majority of the Company's
orders are placed in January through April for delivery in July through October,
the Company's backlog is lowest during the October through December period and
peaks during the April through June period. Factors other than seasonality could
have a significant impact on the Company's backlog and, therefore, the Company's
backlog at any one point in time may not be indicative of future results.
Generally, orders may be canceled by customers prior to shipment without
penalty.
PATENTS, TRADEMARKS AND TRADE NAMES
The Company owns eighteen United States patents for shoe upper designs. The
Company has two other United States design patent applications for shoe soles
that have been allowed, but for which patents have not yet been issued. The
Company has eight additional United States design patent applications pending
for shoe soles and two for shoe uppers. The Company is not aware of any
infringement of its patents or that it is infringing any patents owned by third
parties.
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The Company owns United States federal registrations for its marks ROCKY(R),
ROCKY BOOTS(R) (which claims a ram's head Design as part of the mark), BEAR
CLAW(R), CORNSTALKERS(R), COME WALK WITH U.S. and Design(R), ROCKY 911 SERIES
and Design(R), SNOW STALKER(R), 4 WAY STOP and Design(R), and STALKERS(R).
Additional mark variations for ROCKY BOOTS(R) and Design (which claims a ram's
head Design as part of the mark), ROCKY and Design(TM) for cigars, and ROCKY
ROCKY SHOES & BOOTS INC. SINCE 1932 and Design(R) plus a detailed full ram
Design are the subject of pending United States federal applications for
registration. In addition, the Company uses and has common law rights in the
marks ROCKY(R) MOUNTAIN STALKERS(R), and other ROCKY(R) marks. During 1994, the
Company began to increase distribution of its goods in several countries,
including countries in Western Europe, Canada and Japan. The Company has applied
for trademark registration of its ROCKY(R) mark in a number of foreign
countries.
The Company also uses in its advertising and in other documents the following
trademarks owned by corporations other than the Company: GORE-TEX(R) and
CROSSTECH(R) are registered trademarks of W.L. Gore & Associates, Inc.;
CORDURA(R) is a registered trademark of E.I. DuPont de Nemours and Company;
THINSULATE(R) is a registered trademark of Minnesota Mining and Manufacturing
Company; and CAMBRELLE(R) is a trademark of Koppers Industries, Inc. The Company
is not aware of any material conflicts concerning its marks or its use of marks
owned by other corporations.
COMPETITION
The Company operates in a very competitive environment. Product function,
design, comfort, quality, technological improvements, brand awareness,
timeliness of product delivery and pricing are all important elements of
competition in the markets for the Company's footwear. The Company believes
that, based on these factors, it competes favorably in its rugged outdoor
footwear and occupational footwear market niches. Many of the Company's
competitors have greater financial, distribution and marketing resources than
the Company. The Company has at least five major competitors in each of its
markets. All of these competitors have strong brand name recognition in the
markets that they serve.
The footwear industry is subject to rapid changes in consumer preferences.
The Company's handsewn casual product line and certain styles within its rugged
outdoor and occupational product lines are susceptible to fashion trends.
Therefore, the success of these products and styles are more dependent on the
Company's ability to anticipate and respond to changing fashion trends and
consumer demands within its niche market in a timely manner. The Company's
inability or failure to do so could adversely affect consumer acceptance of
these product lines and styles and could have a material adverse effect on the
Company's business, financial condition and results of operations.
EMPLOYEES
At December 31, 1997, the Company had approximately 1,666 full-time employees
and 30 part-time employees. Approximately 1,271 of these full-time employees are
in the Dominican Republic and Puerto Rico, including approximately 1,008 in
production and the balance in managerial and administrative positions. The
production employees at the Nelsonville, Ohio facility are represented by the
Amalgamated Clothing and Textile Workers Union. The current collective
bargaining agreement between the Company and the union was reached in May 1996
and will expire in May 1998. The Company believes the agreement is consistent
with other contracts in the footwear industry. Management considers its
relations with all of its employees, both union and non-union, to be good.
BUSINESS RISKS
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). In addition
to the other information in this report, readers should carefully consider that
the following important factors, among others, in some cases have affected, and
in the future could affect, the Company's actual results and could cause the
Company's actual consolidated results of operations for 1998 and beyond, to
differ materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
- 8 -
Changes in Consumer Demand. The footwear industry is subject to rapid changes
in consumer preferences. Demand for the Company's products, particularly the
Company's handsewn casual product line and certain styles within its rugged
outdoor and occupational product lines, may be adversely affected by changing
fashion trends. The future success of the Company will depend upon the Company's
ability to anticipate and respond to changing consumer preferences and fashion
trends in a timely manner. The Company's failure to adequately anticipate or
respond to such changes could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, sales of
the Company's products may be negatively affected by weak consumer spending as a
result of adverse economic trends or uncertainties regarding the economy. See
"Business -- Competition."
Seasonality. The Company has historically experienced, and expects to
continue to experience, significant seasonal fluctuations in the sale of its
products. The Company's operating results have varied significantly in the past,
and may vary significantly in the future, partly due to such seasonal
fluctuations. A majority of the orders for the Company's rugged outdoor footwear
are placed in January through April for delivery in July through October. To
meet demand, the Company must manufacture its products year-round. Accordingly,
average inventory levels have been highest during the second and third quarters
of each calendar year, and sales have been highest in the last two quarters of
each calendar year. The Company believes that sales of its products will
continue to follow this seasonal cycle. Additionally, the Company does not have
long-term contracts with its customers. Accordingly, there is no assurance that
the results for any particular quarter will be indicative of results for the
full year or for the future. The Company believes that comparisons of its
interim results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. Due to the factors mentioned
above as well as factors discussed elsewhere in this Form 10-K, it is likely
that in some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event, the price
of the Company's Common Stock will likely be adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Seasonality and Weather."
Impact of Weather. Many of the Company's products, particularly its rugged
outdoor footwear line, are used primarily in cold or wet weather. Mild or dry
weather may have a material adverse effect on sales of the Company's products,
particularly if mild or dry weather conditions occur in broad geographical areas
during late fall or early winter. Also, due to variations in weather conditions
from year to year, results for any single quarter or year may not be indicative
of results for any future period. See "Business -- Seasonality and Weather."
Competition. The footwear industry is intensely competitive, and the
Company expects competition to increase in the future. Many of the Company's
competitors have greater financial, distribution and marketing resources than
the Company. The Company's ability to succeed depends on its ability to remain
competitive with respect to the quality, design, price and timely delivery of
its products. Competition could materially adversely affect the Company's
business, financial condition and results of operations. See "Business --
Competition."
Reliance on Suppliers. The Company purchases raw materials from a number of
domestic and foreign sources. The Company does not have any long-term supply
contracts for the purchase of its raw materials, except for limited blanket
orders on leather. The principal raw materials used in the production of the
Company's footwear, in terms of dollar value, are leather, GORE-TEX waterproof
fabric, CORDURA nylon fabric and soling materials. The Company believes that
currently there are acceptable alternatives to these suppliers and materials,
with the exception of the GORE-TEX waterproof fabric.
The Company is currently one of the largest customers of GORE-TEX waterproof
fabric for use in footwear. The Company's licensing agreement with W.L. Gore &
Associates, Inc. may be terminated by either party upon 90 days written notice.
Although other waterproofing techniques and materials are available, the Company
places a high value on its GORE-TEX waterproof breathable fabric license because
GORE-TEX has high brand name recognition and the GORE-TEX waterproof fabric used
in the manufacture of ROCKY footwear has a reputation for quality and proven
performance. Even though the Company does not believe that its supply of
GORE-TEX waterproof fabric will be interrupted in the future, no assurance can
be given in this regard. The Company's loss of its license to use GORE-TEX
- 9 -
waterproof breathable fabric could materially adversely affect the Company's
competitive position, which could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Suppliers."
The Company delivers a majority of shipments to its customers via United
Parcel Service ("UPS"). Possible interruptions of UPS's service in the future
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Changing Retailing Trends. Historically, the Company has chosen not to sell
products to discount mass merchandisers. A continued shift in the marketplace
from traditional independent retailers to large discount mass merchandisers has
increased the pressure on many footwear manufacturers to sell products to large
discount mass merchandisers at less favorable margins. Because of competition
from large discount mass merchandisers, a number of small retailing customers of
the Company have gone out of business, and in the future more of such customers
may go out of business, which could have a material adverse effect on the
Company's business, financial condition and results of operations. Although
progressive independent retailers have attempted to improve their competitive
position by joining buying groups, stressing personal service and stocking more
products that address specific local needs, a continued shift to discount mass
merchandisers could have a material adverse effect on the Company's business,
Financial condition and results of operations and could cause the Company to
reevaluate its strategy. See "Business -- Sales, Marketing and Advertising."
Reliance on Key Personnel. The development of the Company's business has
been, and will continue to be, highly dependent upon Mike Brooks, Chairman,
President and Chief Executive Officer, David Fraedrich, Executive Vice President
and Chief Financial Officer and William S. Moore, Senior Vice President -- Sales
and Marketing. Each of these executive officers has an at-will employment
agreement with the Company. Messrs. Brooks' and Fraedrich's employment
agreements provide that in the event of termination of employment with the
Company, they may not compete with the Company for a period of one year. Mr.
Moore's employment agreement provides that in the event of termination of
employment with the Company, he may not compete with the Company for a period of
three months, which period may be extended an additional six months by the
Company. The Company has obtained key man life insurance on Messrs. Brooks,
Fraedrich and Moore in the amount of $1,146,022, $1,143,602 and $888,989,
respectively. The loss of the services of any of these officers could have a
material adverse effect upon the Company's business, financial condition and
results of operations.
Reliance on Foreign Manufacturing. Most of the Company's rugged outdoor and
handsewn casual footwear uppers are produced in the Dominican Republic.
Therefore, the Company's business is subject to the risks of doing business
offshore, such as: the imposition of additional United States legislation and
regulations relating to imports, including quotas, duties, taxes or other
charges or restrictions; weather conditions in the Dominican Republic; foreign
governmental regulation and taxation; fluctuations in foreign exchange rates;
changes in economic conditions; changes in the political stability of the
Dominican Republic; and changes in relationships between the United States and
the Dominican Republic. If any such factors were to render the conduct of
business in the Dominican Republic undesirable or impracticable, the Company
would have to locate new facilities for its manufacturing operations. There can
be no assurance that additional facilities would be available to the Company or,
if available, that such facilities could be obtained on terms favorable to the
Company. Such a development would have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Manufacturing and Sourcing."
Changes in Tax Rates. In past years, the Company's effective tax rate
typically has been substantially below the United States federal statutory
rates. The Company has paid minimal income taxes on income earned by its
subsidiary in Puerto Rico due to tax credits afforded the Company under Section
936 of the Internal Revenue Code and local tax abatements. However, Section 936
of the Internal Revenue Code has been repealed such that future tax credits
available to the Company will be capped beginning in 2002 and terminate in 2006.
In addition, the Company's local tax abatements in Puerto Rico are due to expire
in 2004. Prior to Fiscal 1996, the Company paid no foreign income tax on the
income generated by its subsidiary in the Dominican Republic. During the fourth
quarter of Fiscal 1996, the
- 10 -
Company elected to repatriate future earnings of its subsidiary in the Dominican
Republic. The Company's future tax rate will vary depending on many factors,
including the level of relative earnings and tax rates in each jurisdiction in
which it operates and the repatriation of any foreign income to the United
States. Accordingly, since October 1, 1996, the Company has accrued taxes on all
amounts repatriated and will accrue taxes on future earnings as they are no
longer deemed permanently invested. The Company cannot anticipate future changes
in such laws. Increases in effective tax rates or changes in tax laws may have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Concentration of Stock Ownership; Certain Corporate Governance Measures. The
directors, executive officers and principal shareholders of the Company
beneficially own approximately 17.1% of the Company's outstanding Common Stock.
As a result, these shareholders are able to exert significant influence over all
matters requiring shareholder approval, including the election of directors and
approval of significant corporate transactions. Such concentration of ownership
may also have the effect of delaying or preventing a change in control of the
Company. The Company has also adopted certain corporate governance measures
which, individually or collectively, could delay or frustrate the removal of
incumbent directors and could make more difficult a merger, tender offer or
proxy contest involving the Company even if such events might be deemed by
certain shareholders to be beneficial to the interest of the shareholders.
Volatility of Market Price. From time to time, there may be significant
volatility in the market price of the Common Stock. The Company believes that
the current market price of its Common Stock reflects expectations that the
Company will be able to continue to market its products profitably and develop
new products with market appeal. If the Company is unable to market its products
profitably and develop new products at a pace that reflects the expectations of
the market, investors could sell shares of the Common Stock at or after the time
that it becomes apparent that such expectations may not be realized, resulting
in a decrease in the market price of the Common Stock.
In addition to the operating results of the Company, changes in earnings
estimates by analysts, changes in general conditions in the economy or the
financial markets or other developments affecting the Company or its industry
could cause the market price of the Common Stock to fluctuate substantially. In
recent years, the stock market has experienced extreme price and volume
fluctuations. This volatility has had a significant effect on the market prices
of securities issued by many companies, including the Company, for reasons
unrelated to their operating performance. See "Market for the Registrant's
Common Equity and Related Matters."
Limited Protection of Intellectual Property. The Company regards certain of
its footwear designs as proprietary and relies on patents to protect those
designs. The Company believes that the ownership of the patents is a significant
factor in its business. Existing intellectual property laws afford only limited
protection of the Company's proprietary rights, and it may be possible for
unauthorized third parties to copy certain of the Company's footwear designs or
to reverse engineer or otherwise obtain and use information that the Company
regards as proprietary. The Company believes its patents provide a measure of
security against competition, and the Company intends to enforce its patents
against infringement by third parties. However, if the Company's patents are
found to be invalid, to the extent they have served, or would in the future
serve, as a barrier to entry to the Company's competitors, such invalidity could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company owns United States federal registrations for a number of its
trademarks, trade names and designs. Additional trademarks, trade names and
designs are the subject of pending federal applications for registration. The
Company also uses and has common law rights in certain trademarks. During 1994,
the Company began to increase distribution of its goods in several foreign
countries. Accordingly, the Company has applied for trademark registrations in a
number of these countries. The Company intends to enforce its trademarks and
trade names against unauthorized use by third parties. However, existing
trademark and trade name laws afford only limited protection, and the laws of
countries other than the United States may not protect the Company's proprietary
rights to as great an extent as do the laws of the United States. Accordingly,
regardless of the legal rights of the Company, it may be possible for
unauthorized third parties to use the Company's trademarks, trade names or
designs and realize monetary gain at the Company's expense. Although such
unauthorized use may be illegal, the Company may be forced to expend substantial
- 11 -
resources to enforce its rights and nonetheless be divested of a portion of its
goodwill as a result of such unauthorized use. See "Business -- Patents,
Trademarks and Trade Names."
RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS. This Annual Report on Form
10-K contains certain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (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
the intent, belief and expectations of the Company and its management, such as
statements concerning the Company's future profitability and its operating and
growth strategy. Investors are cautioned that all forward-looking statements
involve risks and uncertainties including, without limitation, the factors set
forth under the caption "Business Risks" in this Annual Report on Form 10-K and
other factors detailed from time to time in the Company's filings with the
Securities and Exchange Commission. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate. Therefore, there can be
no assurance that the forward-looking statements included in this Annual Report
on Form 10-K will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.
ITEM 2. PROPERTIES.
The Company's executive offices and factory outlet store are located in
Nelsonville, Ohio in a two-story 25,000 square foot building adjacent to the
Company's Nelsonville manufacturing facility. The first floor of this building,
which consists of approximately 12,500 square feet, houses the Company's factory
outlet store which was opened in late 1994. The second floor houses the
Company's executive offices. The Company also owns a 5,000 square foot building,
in Nelsonville, Ohio, subject to a mortgage, which is used to house
administrative staff.
The Company owns a 98,000 square foot distribution warehouse in Nelsonville,
Ohio. This warehouse receives and stores raw materials for all of the Company's
manufacturing facilities. Additionally, under a two-year lease entered into in
January 1997, the Company leases 18,000 square feet of warehouse space in Logan,
Ohio, which it uses to store raw materials.
The Company leases a 41,000 square foot manufacturing facility in
Nelsonville, Ohio, from the William Brooks Real Estate Company, an entity owned
by certain members of the Brooks family, including Mike Brooks and Barbara
Brooks Fuller, who are also executive officers and directors of the Company. The
lease expires in February 2002 and is renewable for one five-year term.
On a temporary basis the Company is leasing a 50,000 square foot facility in
Newark, Ohio to store overflow finished goods inventory and rubber products and
retail inventory. The Company is currently negotiating a permanent lease for
this facility.
Lifestyle leases a 20,500 square foot manufacturing facility and a 22,700
square foot manufacturing facility and warehouse in Puerto Rico from the Puerto
Rico Industrial Development Company under net noncancellable operating leases,
one of which expires in 1998 and one of which expires in 2002. These leases will
automatically renew for additional ten-year periods unless otherwise terminated.
Five Star's manufacturing facility, consisting of three connected buildings
and a stand-alone building, is located in a tax-free trade zone in the Dominican
Republic. Five Star leases 82,600 square feet of this facility from the
Dominican Republic Corporation for Industrial Development (the "DRCID") under a
Consolidation of Lease Contract, dated as of December 13, 1993, the term of
which expires on February 1, 2003. Five Star leases 32,000 square feet of this
facility from the DRCID under a temporary lease. The Company is currently
negotiating a permanent lease for the 32,000 square foot facility.
- 12 -
ITEM 3. LEGAL PROCEEDINGS.
The Company is, from time to time, a party to litigation which arises in the
normal course of its business. Although the ultimate resolution of pending
proceedings cannot be determined, in the opinion of management, the resolution
of such proceedings in the aggregate will not have a material adverse effect on
the Company's financial position, results of operations, or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's Common Stock trades on the Nasdaq National Market under the
symbol "RCKY." The following table sets forth the range of high and low sales
prices for the Common Stock for the periods indicated, as reported by the Nasdaq
National Market:
QUARTER ENDED HIGH LOW
------------- ---- ---
March 31, 1996......................................... 6.75 5.00
June 30, 1996.......................................... 8.50 5.50
September 30, 1996..................................... 8.25 6.75
December 31, 1996...................................... 10.00 6.75
March 31, 1997......................................... 16.25 8.25
June 30, 1997.......................................... 17.38 12.63
September 30, 1997..................................... 19.38 15.88
December 31, 1997...................................... 21.50 14.38
On March 13, 1998, the last reported sales price of the Common Stock on the
Nasdaq National Market was $15.25 per share. As of March 13, 1998, there were
approximately 183 shareholders of record of the Common Stock.
The Company presently intends to retain its earnings to finance the growth
and development of its business and does not anticipate paying any cash
dividends in the foreseeable future. Future dividend policy will depend upon the
earnings and financial condition of the Company, the Company's need for funds
and other factors. Presently, the Line of Credit (as defined below) restricts
the payment of dividends on the Common Stock. At December 31, 1997,
approximately $10,450,439 of retained earnings was available for distribution.
- 13 -
ITEM 6. SELECTED FINANCIAL DATA.
SELECTED FINANCIAL DATA
(in thousands, except for per share data)
TWELVE
MONTHS SIX YEAR ENDED JUNE 30,
YEARS ENDED ENDED MONTHS
12/31/97 12/31/96 12/31/95 ENDED
-------- -------- -------- -----
(UNAUDITED) 12/31/95 1995 1994 1993
----------- -------- ---- ---- ----
INCOME STATEMENT DATA
Net sales............................ $95,027 $73,148 $60,384 $36,124 $60,227 $52,895 $41,205
Income (loss) before extraordinary
loss and cumulative effect of change
in accounting principle........... 4,761 2,806 (537) (490) 1,433 1,820 1,767
Net income (loss).................... $4,761 $2,806 $(537) $(490) $1,433 $1,820 $1,753
BALANCE SHEET DATA
Total assets......................... $80,955 $58,090 $49,081 $49,081 $59,458 $51,943 $38,528
Total long-term debt................. 13,407 19,520 16,554 16,554 15,503 17,357 5,251
Shareholders' equity................. 59,197 26,375 23,569 23,569 24,059 22,627 21,594
PER SHARE
Income (loss) before extraordinary
loss and cumulative effect of change
in accounting principle:
Basic.......................... $1.16 $0.77 $(0.15) $(0.13) $0.39 $0.49 $0.63
Diluted........................ $1.10 $0.74 $(0.15) $(0.13) $0.38 $0.48 $0.60
Net income (loss):
Basic.......................... $1.16 $0.77 $(0.15) $(0.13) $0.39 $0.49 $0.63
Diluted........................ $1.10 $0.74 $(0.15) $(0.13) $0.38 $0.48 $0.60
Weighted average number of
shares outstanding:
Basic.......................... 4,088 3,666 3,666 3,666 3,666 3,707 2,793
Diluted........................ 4,330 3,776 3,666 3,666 3,762 3,831 2,906
Note: During fiscal 1993, the Company retired all outstanding 13.25%
subordinated debentures originally due 2005 resulting in an
extraordinary loss of $148,400. Also in fiscal 1993, the Company
changed its method of accounting for income taxes resulting in the
cumulative effect of an increase in net income of $134,000.
- 14 -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required by this item is included under the caption
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" in the Company's Annual Report to Shareholders and is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's consolidated financial balance sheets as of December 31, 1997
and 1996, and the related consolidated statements of operations, shareholder's
equity, and cash flow for the years ended December 31, 1997 and 1996, the six
months ended December 31, 1995, and the year ended June 30, 1995, together with
the independent auditors' report thereon appear in the Company's Annual Report
to Shareholders and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
- 15 -
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is included under the captions
"ELECTION OF DIRECTORS" and "INFORMATION CONCERNING THE DIRECTORS, EXECUTIVE
OFFICERS, AND PRINCIPAL SHAREHOLDERS - EXECUTIVE OFFICERS" and "SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" in the Company's Proxy Statement for
the 1998 Annual Meeting of Shareholders (the "Proxy Statement") to be held on
May 19, 1998, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is included under the captions
"INFORMATION CONCERNING THE DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
SHAREHOLDERS - MEETINGS, COMMITTEES, AND COMPENSATION OF THE BOARD OF
DIRECTORS," "- EXECUTIVE COMPENSATION," and "- COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION" in the Company's Proxy Statement, and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is included under the caption
"INFORMATION CONCERNING THE DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
SHAREHOLDERS - OWNERSHIP OF COMMON STOCK BY MANAGEMENT" and "- OWNERSHIP OF
COMMON STOCK BY PRINCIPAL SHAREHOLDERS," in the Company's Proxy Statement, and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is included under the caption
"INFORMATION CONCERNING THE DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
SHAREHOLDERS - COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" in
the Company's Proxy Statement, and is incorporated herein by reference.
- 16 -
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(1) The following Financial Statements are included in the Company's Annual
Report to Shareholders and are incorporated herein by reference.
Consolidated Balance Sheets as of December 31, 1997 and
December 31, 1996
Consolidated Statements of Operations for the fiscal years
ended December 31, 1997 and December 31, 1996, the
six months ended December 31, 1995, and the fiscal
year ended June 30, 1995
Consolidated Statements of Shareholders' Equity for the fiscal
years ended December 31, 1997 and December 31, 1996,
the six months ended December 31, 1995, and the
fiscal year ended June 30, 1995
Consolidated Statements of Cash Flows for the fiscal years
ended December 31, 1997 and December 31, 1996, the
six months ended December 31, 1995, and the fiscal
year ended June 30, 1995
Notes to Consolidated Financial Statements for the fiscal
years ended December 31, 1997 and December 31, 1996,
the six months ended December 31, 1995, and the
fiscal year ended June 30, 1995
Independent Auditors' Report
(2) The following financial statement schedule for the fiscal years ended
December 31, 1997, December 31, 1996, the six months ended December 31,
1995, and the fiscal year ended June 30, 1995 is included in this
Annual Report on Form 10-K and should be read in conjunction with the
Consolidated Financial Statements contained in the Annual Report.
Schedule II -- Consolidated Valuation and Qualifying Accounts
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the required
information is included in the Consolidated Financial Statements or the
notes thereto.
- 17 -
(3) Exhibits:
Exhibit
Number Description
------ -----------
3.1 Second Amended and Restated Articles of Incorporation of the Registrant.
3.2 Amended and Restated Code of Regulations of the Registrant (incorporated by
reference to Exhibit 3.2 to the Registration Statement).
4.1 Form of Stock Certificate for the Registrant (incorporated by reference to Exhibit
4.1 to the Registration Statement).
4.2 Articles Fourth, Fifth, Sixth, Seventh, Eighth, Eleventh, Twelfth, and Thirteenth
of the Registrant's Amended and Restated Articles of Incorporation (see Exhibit
3.1).
4.3 Articles I and II of the Registrant's Code of Regulations (see Exhibit 3.2).
10.1 Form of Employment Agreement, dated July 1, 1995, for executive officers
(incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1995 (the "1995 Form 10-K")).
10.2 Information concerning Employment Agreements substantially similar to Exhibit
10.1.
10.3 Deferred Compensation Agreement, dated May 1, 1984, between Rocky Shoes & Boots
Co. and Mike Brooks (incorporated by reference to Exhibit 10.3 to the Registration
Statement).
10.4 Information concerning Deferred Compensation Agreements substantially similar to
Exhibit 10.3.
10.5 Form of Company's amended 1992 Stock Option Plan (incorporated by reference to
Exhibit 10.5 to the 1995 Form 10-K).
10.6 Form of Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the
Registration Statement).
10.7 Revolving Credit Loan Agreement, dated January 28, 1997, among Rocky Shoes &
Boots, Inc., Five Star Enterprises Ltd., Lifestyle Footwear, Inc., Bank One
Columbus, N.A., The Huntington National Bank, and Bank One, Columbus, N.A., as
Agent (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 (the "1996 Form 10- K")).
10.8 Term Loan Agreement and First Amendment to Revolving Credit Loan Agreement, dated
as of April 18, 1997, between the Registrant, Five Star Enterprises Ltd.,
Lifestyle Footwear, Inc., Bank One, Columbus, N.A., the Huntington National Bank,
and Bank One, Columbus, N.A., as Agent (incorporated by reference to Exhibit 10.8
to Form S-2 filed September 11, 1997, registration number 333-35391).
- 18 -
Exhibit
Number Description
------ -----------
10.9 Buy-Sell Agreement, dated December 21, 1992, among the Registrant, Mike Brooks,
Charles Stuart Brooks, Jay W. Brooks, Barbara Brooks Fuller, and Patricia H. Robey
(incorporated by reference to Exhibit 10.8 to the Registration Statement).
10.10 First Amendment to Buy-Sell Agreement, dated as of March 30, 1995, among the
Registrant, Mike Brooks, Barbara Brooks Fuller, Patricia H. Robey, Jay W. Brooks
and Charles Stuart Brooks (incorporated by reference to Exhibit No. 10.7 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 (the
"March 31, 1995 Form 10-Q")).
10.11 Second Amendment to Buy-Sell Agreement, dated as of June 30, 1996, among the
Registrant, Mike Brooks, Barbara Brooks Fuller, Patricia H. Robey, Jay W. Brooks
and Charles Stuart Brooks (incorporated by reference to Exhibit 10.11 to Form S-2
filed September 11, 1997, registration number 333-35391).
10.12 Master Agreement, dated as of February 1, 1996, by and between Bank One, Columbus,
N.A., and Rocky Shoes & Boots Co. (incorporated by reference to Exhibit 10.9 to
the Company's Annual Report on Form 10-K for the transition period ended December
31, 1995).
10.13 Indemnification Agreement, dated December 21, 1992, between the Registrant and
Mike Brooks (incorporated by reference to Exhibit 10.10 to the Registration
Statement).
10.14 Information concerning Indemnification Agreements substantially similar to Exhibit
10.13 (incorporated by reference to Exhibit 10.11 to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1993 (the "1993 Form 10-K")).
10.15 Trademark License Agreement and Manufacturing Certification Agreement, each dated
May 14, 1994, between Rocky Shoes & Boots Co. and W. L. Gore & Associates, Inc.
(incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1994 (the "1994 Form 10-K")).
10.16 Decree of Tax Exemption from the Government of the Commonwealth of Puerto Rico
(incorporated by reference to Exhibit 10.13 to the Registration Statement).
10.16A English Translation of Addendum to Exhibit 10.16 (incorporated by reference to
Exhibit 10.13A to the Registration Statement).
10.17 Lease Agreement, dated March 1, 1987, as amended, between Rocky Shoes & Boots Co.
and William Brooks Real Estate Company regarding Nelsonville factory (incorporated
by reference to Exhibit 10.14 to the Registration Statement).
10.18 Lease Contract, dated August 31, 1988, between Lifestyle Footwear, Inc. and The
Puerto Rico Industrial Development Company regarding factory location 1
(incorporated by reference to Exhibit 10.15 to the Registration Statement).
- 19 -
Exhibit
Number Description
------ -----------
10.19 Lease Contract, undated, between Lifestyle Footwear, Inc. and The Puerto Rico
Industrial Development company regarding factory location 2 (incorporated by
reference to Exhibit 10.16 to the Registration Statement).
10.19A English translation of Exhibit 10.19 (incorporated by reference to Exhibit 10.16A
to the Registration Statement).
10.20 Lease Agreement, dated December 13, 1993, between Five Star Enterprises Ltd. and
the Dominican Republic Corporation for Industrial Development regarding buildings
and annexes of a combined manufacturing surface of 75,526 square feet, located in
the Industrial Free Zone of La Vega (incorporated by reference to Exhibit 10.17 to
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1995 (the "September 30, 1995 Form 10-Q")).
10.20A English translation of Exhibit 10.20 (incorporated by reference to Exhibit 10.2A
to the September 30, 1995 Form 10-Q).
10.21 Continuing Security Agreement, dated January 28, 1997, among Rocky Shoes & Boots,
Inc., Five Star Enterprises Ltd., Lifestyle Footwear, Inc., and Bank One,
Columbus, N.A., as Agent (incorporated by reference to Exhibit 10.18 to the 1996
Form 10-K).
10.22 Loan Purchase, Assignment and Master Amendment Agreement, dated as of February 1,
1996, among Bank One Columbus, N.A., NBD Bank, NBD Bank, as Agent, Rocky Shoes &
Boots, Inc., Rocky Shoes & Boots, Co., Five Star Enterprises Ltd., and Lifestyle
Footwear, Inc. (incorporated by reference to Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the transition period ended December 31, 1995).
10.23 Installment Business Loan Note, dated August 19, 1993, among Rocky Shoes & Boots,
Inc., Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle Footwear,
Inc., and NBD Bank (incorporated by reference to Exhibit 10.20 to the 1994 Form
10-K).
10.24 Second Amendment to Business Loan Note, dated January 28, 1997, among Rocky Shoes
& Boots, Inc., Five Star Enterprises Ltd., and Lifestyle Footwear, Inc.
(incorporated by reference to Exhibit 10.21 to the 1996 Form 10-K).
10.25 Term Lease Master Agreement, dated April 27, 1993, between Rocky Shoes & Boots,
Inc. and IBM Credit Corporation (incorporated by reference to Exhibit 10.22 to the
1993 Form 10-K).
10.26 Fourth Amendment to Promissory Note, dated January 28, 1997, among Rocky Shoes & Boots,
Inc., Five Star Enterprises Ltd., and Lifestyle Footwear, Inc. (incorporated by
reference to Exhibit 10.23 to the 1996 Form 10-K).
10.27 Acceptance Credit Agreement, dated May 4, 1993, among Rocky Shoes & Boots, Inc.,
Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle Footwear, Inc., and
NBD Bank (incorporated by reference to Exhibit 10.24 to the 1994 Form 10-K).
- 20 -
Exhibit
Number Description
------ -----------
10.28 Adjustable Rate Note, dated May 23, 1988, between Nelsonville Home and Savings
Association and Rocky Shoes & Boots Co. (incorporated by reference to Exhibit
10.25 to the Registration Statement).
10.29 First Amendment to Acceptance Credit Agreement, dated October 20, 1993, among
Rocky Shoes & Boots, Inc., Rocky Shoes & Boots Co., Five Star Enterprises Ltd.,
Lifestyle Footwear, Inc., and NBD Bank (incorporated by reference to Exhibit 10.26
to the 1994 Form 10-K).
10.30 Form of Company's 1995 Stock Option Plan (incorporated by reference to Exhibit
10.27 to the 1995 Form 10-K).
10.31 Form of Stock Option Agreement under the 1995 Stock Option Plan (incorporated by
reference to Exhibit 10.28 to the 1995 Form 10-K).
10.32 Open-End Mortgage, Security Agreement and Assignment of Rents and Leases, dated
March 30, 1995, between Rocky Shoes & Boots Co. and NBD Bank, as Agent
(incorporated by reference to Exhibit No. 10.3 to the March 31, 1995 Form 10-Q).
10.33 Installment Business Loan Note, dated May 11, 1994, among Rocky Shoes & Boots,
Inc., Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle Footwear,
Inc., and NBD Bank (incorporated by reference to Exhibit 10.30 to the 1994 Form
10-K).
10.34 Construction and Term Loan Agreement, dated October 27, 1993, among Rocky Shoes &
Boots, Inc., Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle
Footwear, Inc., and NBD Bank (incorporated by reference to Exhibit 10.31 to the
1994 Form 10-K).
10.35 Promissory Note, dated October 27, 1993, among Rocky Shoes & Boots, Inc., Rocky
Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle Footwear, Inc., and NBD
Bank (incorporated by reference to Exhibit 10.32 to the 1994 Form 10- K).
10.36 Open-End Mortgage, Security Agreement and Assignment of Rents and Leases, dated
October 27, 1993, among Rocky Shoes & Boots, Inc., Rocky Shoes & Boots Co., Five
Star Enterprises Ltd., Lifestyle Footwear, Inc., and NBD Bank (incorporated by
reference to Exhibit 10.33 to the 1994 Form 10-K).
10.37 First Amendment to Construction and Term Loan Agreement, dated January 28, 1994,
among Rocky Shoes & Boots, Inc., Rocky Shoes & Boots Co., Five Star Enterprises
Ltd., Lifestyle Footwear, Inc., and NBD Bank (incorporated by reference to Exhibit
10.34 to the 1994 Form 10-K).
10.38 First Amendment to Promissory Note, dated January 28, 1994, among Rocky Shoes &
Boots, Inc., Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle
Footwear, Inc., and NBD Bank (incorporated by reference to Exhibit 10.35 to the
1994 Form 10-K).
- 21 -
Exhibit
Number Description
------ -----------
10.39 First Amendment to Open-End Mortgage, Security Agreement and Assignment of Rents
and Leases, dated January 28, 1994, among Rocky Shoes & Boots, Inc., Rocky Shoes &
Boots Co., Five Star Enterprises Ltd., Lifestyle Footwear, Inc., and NBD Bank
(incorporated by reference to Exhibit 10.36 to the 1994 Form 10-K).
10.40 Letter Agreement between the Registrant and the Kravetz Group, dated August 3,
1994 (incorporated by reference to Exhibit No. 10.6 to the March 31, 1995 Form
10-Q).
10.41 Amended and Restated Master Business Loan Note, dated March 30, 1995, among the
Registrant, Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle
Footwear, Inc. (incorporated by reference to Exhibit No. 10.4 to the March 31,
1995 Form 10-Q).
10.42 Third Amendment to Construction and Term Loan Agreement, dated as of March 30,
1995, among the Registrant, Rocky Shoes & Boots Co., Five Star Enterprises Ltd.,
and Lifestyle Footwear, Inc. (incorporated by reference to Exhibit No. 10.5 to the
March 31, 1995 Form 10-Q).
10.43 Loan Agreement, dated as of October 7, 1994, between the Director of Development
of the State of Ohio and Rocky Shoes & Boots Co. (incorporated by reference to
Exhibit 10.43 to the 1995 Form 10-K).
10.44 Promissory Note, dated October 7, 1994, by Rocky Shoes & Boots Co. to the Director
of Development of the State of Ohio (incorporated by reference to Exhibit 10.44 to
the 1995 Form 10-K).
10.45 Security Agreement, dated as of October 7, 1994, between the Director of
Development of the State of Ohio and Rocky Shoes & Boots Co. (incorporated by
reference to Exhibit 10.45 to the 1995 Form 10-K).
10.46 Form of Employment Agreement, dated September 7, 1995, for executive officers
(incorporated by reference to Exhibit 10.5 to the September 30, 1995 Form 10-Q).
10.47 Information covering Employment Agreements substantially similar to Exhibit 10.46
(incorporated by reference to Exhibit 10.5 to the September 30, 1995 Form 10-Q).
13 Portions of the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1997.
21 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21 to Form
S-2 filed September 11, 1997, registration number 333-35391).
23 Consent of Deloitte & Touche LLP.
24 Powers of Attorney.
27 Financial Data Schedule.
- 22 -
The Registrant agrees to furnish to the Commission upon its request copies
of any omitted schedules or exhibits to any Exhibit filed herewith.
(B) REPORTS ON FORM 8-K
Form 8-K, dated November 5, 1997, filed November 14, 1997, regarding
shareholders rights plan (Item 5.)
(C) EXHIBITS
The exhibits to this report begin on page _____.
(D) FINANCIAL STATEMENT SCHEDULES
The financial statement schedule and the independent auditors' report
thereon are included on the following pages.
- 23 -
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Rocky Shoes & Boots, Inc.
We have audited the consolidated financial statements of Rocky Shoes & Boots,
Inc. and subsidiaries as of December 31, 1997 and 1996, and for the years ended
December 31, 1997 and 1996, the six months ended December 31, 1995, and the year
ended June 30, 1995, and have issued our report thereon dated March 6, 1998;
such financial statements and report are included in your 1997 Annual Report to
Shareholders and are incorporated herein by reference. Our audits also included
the consolidated financial statement schedule of Rocky Shoes & Boots, Inc. and
subsidiaries, listed in Item 14. This consolidated financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such consolidated
financial statements schedule, when considered in relation to the basic
consolidated financial statement taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Deloitte & Touche LLP
March 6, 1998
Columbus, Ohio
- 24 -
ROCKY SHOES & BOOTS, INC. SCHEDULE II
AND SUBSIDIARIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS DECEMBER 31, 1997
and 1996, THE SIX MONTHS ENDED DECEMBER 31, 1995, AND
FISCAL YEAR ENDED JUNE 30, 1995
Column A Column B Column C Column D Column E
Additions Charged To
--------------------
Balance at Balance at
Beginning Costs and Other End of
DESCRIPTION of Period Expenses Accounts Deductions Period
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year ended December 31, 1997 $291,000 $413,678 $(214,678) $490,000
Year ended December 31, 1996 $156,000 $384,813 $(249,813) $291,000
Six months ended December 31, 1995 $285,000 $119,940 $(248,940) $156,000
Fiscal year ended June 30, 1995 $180,000 $189,385 $ (84,385) $285,000
RESERVE FOR OBSOLETE INVENTORY:
Year ended December 31, 1997 $642,000 $291,000 $(642,000) $291,000
Year ended December 31, 1996 $ 0 $642,000 $ 0 $642,000
- 25 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ROCKY SHOES & BOOTS, INC.
Date: March 26, 1998 By: /s/ Dave Fraedrich
-----------------------------------
Dave Fraedrich, Executive Vice
President, Treasurer and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the dates indicated.
Signature Title Date
Chairman, President and Chief March 26, 1997
Executive Officer (Principal
* Mike Brooks Executive Officer)
- --------------------------------------------
Mike Brooks
/s/ Dave Fraedrich Executive Vice President, Treasurer, March 26, 1997
- -------------------------------------------- Chief Financial Officer and Director
Dave Fraedrich (Principal Financial and Accounting
Officer)
* Curtis A. Loveland Secretary and Director March 26, 1997
- --------------------------------------------
Curtis A. Loveland
* Leonard L. Brown Director March 26, 1997
- --------------------------------------------
Leonard L. Brown
* Barbara Brooks Fuller Director March 26, 1997
- --------------------------------------------
Barbara Brooks Fuller
* Stanley I. Kravetz Director March 26, 1997
- --------------------------------------------
Stanley I. Kravetz
* James L. Stewart Director March 26, 1997
- --------------------------------------------
James L. Stewart
* Robert D. Stix Director March 26, 1997
- --------------------------------------------
Robert D. Stix
*By: /s/ Dave Fraedrich
- --------------------------------------------
Dave Fraedrich, Attorney-in-Fact
ROCKY SHOES & BOOTS, INC.
------------------------
EXHIBIT INDEX
TO
ANNUAL REPORT
ON FORM 10-K
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997
---------------------------
- 27 -
Exhibit
Number Description
------ -----------
3.1 Second Amended and Restated Articles of Incorporation of the Registrant.
3.2 Amended and Restated Code of Regulations of the Registrant (incorporated by
reference to Exhibit 3.2 to the Registration Statement).
4.1 Form of Stock Certificate for the Registrant (incorporated by reference to Exhibit
4.1 to the Registration Statement.
4.2 Articles Fourth, Fifth, Sixth, Seventh, Eighth, Eleventh, Twelfth, and Thirteenth
of the Registrant's Amended and Restated Articles of Incorporation (see Exhibit
3.1).
4.3 Articles I and II of the Registrant's Code of Regulations (see Exhibit 3.2).
10.1 Form of Employment Agreement, dated July 1, 1995, for executive officers
(incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1995 (the "1995 Form 10-K")).
10.2 Information concerning Employment Agreements substantially similar to Exhibit
10.1.
10.3 Deferred Compensation Agreement, dated May 1, 1984, between Rocky Shoes & Boots
Co. and Mike Brooks (incorporated by reference to Exhibit 10.3 to the Registration
Statement).
10.4 Information concerning Deferred Compensation Agreements substantially similar to
Exhibit 10.3.
10.5 Form of Company's amended 1992 Stock Option Plan (incorporated by reference to
Exhibit 10.5 to the 1995 Form 10-K).
10.6 Form of Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the
Registration Statement).
10.7 Revolving Credit Loan Agreement, dated January 28, 1997, among Rocky Shoes &
Boots, Inc., Five Star Enterprises Ltd., Lifestyle Footwear, Inc., Bank One
Columbus, N.A., The Huntington National Bank, and Bank One, Columbus, N.A., as
Agent (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 (the "1996 Form 10- K")).
10.8 Term Loan Agreement and First Amendment to Revolving Credit Loan Agreement, dated
as of April 18, 1997, between the Registrant, Five Star Enterprises Ltd.,
Lifestyle Footwear, Inc., Bank One, Columbus, N.A., the Huntington National Bank,
and Bank One, Columbus, N.A., as Agent (incorporated by reference to Exhibit 10.8
to Form S-2 filed September 11, 1997, registration number 333-35391).
10.9 Buy-Sell Agreement, dated December 21, 1992, among the Registrant, Mike Brooks,
Charles Stuart Brooks, Jay W. Brooks, Barbara Brooks Fuller, and Patricia H. Robey
(incorporated by reference to Exhibit 10.8 to the Registration Statement).
- 28 -
Exhibit
Number Description
------ -----------
10.10 First Amendment to Buy-Sell Agreement, dated as of March 30,
1995, among the Registrant, Mike Brooks, Barbara Brooks Fuller,
Patricia H. Robey, Jay W. Brooks and Charles Stuart Brooks
(incorporated by reference to Exhibit No. 10.7 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1995 (the "March 31, 1995 Form 10-Q")).
10.11 Second Amendment to Buy-Sell Agreement, dated as of June 30,
1996, among the Registrant, Mike Brooks, Barbara Brooks Fuller,
Patricia H. Robey, Jay W. Brooks and Charles Stuart Brooks
(incorporated by reference to Exhibit 10.8 to Form S-2 filed
September 11, 1997, registration number 333-35391).
10.12 Master Agreement, dated as of February 1, 1996, by and between
Bank One, Columbus, N.A., and Rocky Shoes & Boots Co.
(incorporated by reference to Exhibit 10.9 to the Company's
Annual Report on Form 10-K for the transition period ended
December 31, 1995).
10.13 Indemnification Agreement, dated December 21, 1992, between the Registrant and
Mike Brooks (incorporated by reference to Exhibit 10.10 to the Registration
Statement).
10.14 Information concerning Indemnification Agreements substantially similar to Exhibit
10.13 (incorporated by reference to Exhibit 10.11 to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1993 (the "1993 Form 10-K")).
10.15 Trademark License Agreement and Manufacturing Certification Agreement, each dated
May 14, 1994, between Rocky Shoes & Boots Co. and W. L. Gore & Associates, Inc.
(incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1994 (the "1994 Form 10-K")).
10.16 Decree of Tax Exemption from the Government of the Commonwealth of Puerto Rico
(incorporated by reference to Exhibit 10.13 to the Registration Statement).
10.16A English Translation of Addendum to Exhibit 10.16 (incorporated by reference to
Exhibit 10.13A to the Registration Statement).
10.17 Lease Agreement, dated March 1, 1987, as amended, between Rocky Shoes & Boots Co.
and William Brooks Real Estate Company regarding Nelsonville factory (incorporated
by reference to Exhibit 10.14 to the Registration Statement).
10.18 Lease Contract, dated August 31, 1988, between Lifestyle Footwear, Inc. and The
Puerto Rico Industrial Development Company regarding factory location 1
(incorporated by reference to Exhibit 10.15 to the Registration Statement).
10.19 Lease Contract, undated, between Lifestyle Footwear, Inc. and The Puerto Rico
Industrial Development company regarding factory location 2 (incorporated by
reference to Exhibit 10.16 to the Registration Statement).
10.19A English translation of Exhibit 10.19 (incorporated by reference to Exhibit 10.16A
to the Registration Statement).
- 29 -
Exhibit
Number Description
------ -----------
10.20 Lease Agreement, dated December 13, 1993, between Five Star Enterprises Ltd. and
the Dominican Republic Corporation for Industrial Development regarding buildings
and annexes of a combined manufacturing surface of 75,526 square feet, located in
the Industrial Free Zone of La Vega (incorporated by reference to Exhibit 10.17 to
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1995 (the "September 30, 1995 Form 10-Q")).
10.20A English translation of Exhibit 10.20 (incorporated by reference to Exhibit 10.2A
to the September 30, 1995 Form 10-Q).
10.21 Continuing Security Agreement, dated January 28, 1997, among Rocky Shoes & Boots,
Inc., Five Star Enterprises Ltd., Lifestyle Footwear, Inc., and Bank One,
Columbus, N.A., as Agent (incorporated by reference to Exhibit 10.18 to the 1996
Form 10-K).
10.22 Loan Purchase, Assignment and Master Amendment Agreement, dated as of February 1,
1996, among Bank One Columbus, N.A., NBD Bank, NBD Bank, as Agent, Rocky Shoes &
Boots, Inc., Rocky Shoes & Boots, Co., Five Star Enterprises Ltd., and Lifestyle
Footwear, Inc. (incorporated by reference to Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the transition period ended December 31, 1995).
10.23 Installment Business Loan Note, dated August 19, 1993, among Rocky Shoes & Boots,
Inc., Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle Footwear,
Inc., and NBD Bank (incorporated by reference to Exhibit 10.20 to the 1994 Form
10-K).
10.24 Second Amendment to Business Loan Note, dated January 28, 1997, among Rocky Shoes
& Boots, Inc., Five Star Enterprises Ltd., and Lifestyle Footwear, Inc.
(incorporated by reference to Exhibit 10.21 to the 1996 Form 10-K).
10.25 Term Lease Master Agreement, dated April 27, 1993, between Rocky Shoes & Boots,
Inc. and IBM Credit Corporation (incorporated by reference to Exhibit 10.22 to the
1993 Form 10-K).
10.26 Fourth Amendment to Promissory Note, dated January 28, 1997, among Rocky Shoes &
Boots, Inc., Five Star Enterprises Ltd., and Lifestyle Footwear, Inc.
(incorporated by reference to Exhibit 10.23 to the 1996 Form 10-K).
10.27 Acceptance Credit Agreement, dated May 4, 1993, among Rocky Shoes & Boots, Inc.,
Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle Footwear, Inc., and
NBD Bank (incorporated by reference to Exhibit 10.24 to the 1994 Form 10-K).
10.28 Adjustable Rate Note, dated May 23, 1988, between Nelsonville Home and Savings
Association and Rocky Shoes & Boots Co. (incorporated by reference to Exhibit
10.25 to the Registration Statement).
10.29 First Amendment to Acceptance Credit Agreement, dated October 20, 1993, among
Rocky Shoes & Boots, Inc., Rocky Shoes & Boots Co., Five Star Enterprises Ltd.,
Lifestyle Footwear, Inc., and NBD Bank (incorporated by reference to Exhibit 10.26
to the 1994 Form 10-K).
- 30 -
Exhibit
Number Description
------ -----------
10.30 Form of Company's 1995 Stock Option Plan (incorporated by reference to Exhibit
10.27 to the 1995 Form 10-K).
10.31 Form of Stock Option Agreement under the 1995 Stock Option Plan (incorporated by
reference to Exhibit 10.28 to the 1995 Form 10-K).
10.32 Open-End Mortgage, Security Agreement and Assignment of Rents and Leases, dated
March 30, 1995, between Rocky Shoes & Boots Co. and NBD Bank, as Agent
(incorporated by reference to Exhibit No. 10.3 to the March 31, 1995 Form 10-Q).
10.33 Installment Business Loan Note, dated May 11, 1994, among Rocky Shoes & Boots,
Inc., Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle Footwear,
Inc., and NBD Bank (incorporated by reference to Exhibit 10.30 to the 1994 Form
10-K).
10.34 Construction and Term Loan Agreement, dated October 27, 1993, among Rocky Shoes &
Boots, Inc., Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle
Footwear, Inc., and NBD Bank (incorporated by reference to Exhibit 10.31 to the
1994 Form 10-K).
10.35 Promissory Note, dated October 27, 1993, among Rocky Shoes & Boots, Inc., Rocky
Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle Footwear, Inc., and NBD
Bank (incorporated by reference to Exhibit 10.32 to the 1994 Form 10- K).
10.36 Open-End Mortgage, Security Agreement and Assignment of Rents and Leases, dated
October 27, 1993, among Rocky Shoes & Boots, Inc., Rocky Shoes & Boots Co., Five
Star Enterprises Ltd., Lifestyle Footwear, Inc., and NBD Bank (incorporated by
reference to Exhibit 10.33 to the 1994 Form 10-K).
10.37 First Amendment to Construction and Term Loan Agreement, dated January 28, 1994,
among Rocky Shoes & Boots, Inc., Rocky Shoes & Boots Co., Five Star Enterprises
Ltd., Lifestyle Footwear, Inc., and NBD Bank (incorporated by reference to Exhibit
10.34 to the 1994 Form 10-K).
10.38 First Amendment to Promissory Note, dated January 28, 1994, among Rocky Shoes &
Boots, Inc., Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle
Footwear, Inc., and NBD Bank (incorporated by reference to Exhibit 10.35 to the
1994 Form 10-K).
10.39 First Amendment to Open-End Mortgage, Security Agreement and Assignment of Rents
and Leases, dated January 28, 1994, among Rocky Shoes & Boots, Inc., Rocky Shoes &
Boots Co., Five Star Enterprises Ltd., Lifestyle Footwear, Inc., and NBD Bank
(incorporated by reference to Exhibit 10.36 to the 1994 Form 10-K).
10.40 Letter Agreement between the Registrant and the Kravetz Group, dated August 3,
1994 (incorporated by reference to Exhibit No. 10.6 to the March 31, 1995 Form
10-Q).
- 31 -
Exhibit
Number Description
------ -----------
10.41 Amended and Restated Master Business Loan Note, dated March 30, 1995, among the
Registrant, Rocky Shoes & Boots Co., Five Star Enterprises Ltd., Lifestyle
Footwear, Inc. (incorporated by reference to Exhibit No. 10.4 to the March 31,
1995 Form 10-Q).
10.42 Third Amendment to Construction and Term Loan Agreement, dated as of March 30,
1995, among the Registrant, Rocky Shoes & Boots Co., Five Star Enterprises Ltd.,
and Lifestyle Footwear, Inc. (incorporated by reference to Exhibit No. 10.5 to the
March 31, 1995 Form 10-Q).
10.43 Loan Agreement, dated as of October 7, 1994, between the Director of Development
of the State of Ohio and Rocky Shoes & Boots Co. (incorporated by reference to
Exhibit 10.43 to the 1995 Form 10-K).
10.44 Promissory Note, dated October 7, 1994, by Rocky Shoes & Boots Co. to the Director
of Development of the State of Ohio (incorporated by reference to Exhibit 10.44 to
the 1995 Form 10-K).
10.45 Security Agreement, dated as of October 7, 1994, between the Director of
Development of the State of Ohio and Rocky Shoes & Boots Co. (incorporated by
reference to Exhibit 10.45 to the 1995 Form 10-K).
10.46 Form of Employment Agreement, dated September 7, 1995, for executive officers
(incorporated by reference to Exhibit 10.5 to the September 30, 1995 Form 10-Q).
10.47 Information covering Employment Agreements substantially similar to Exhibit 10.46
(incorporated by reference to Exhibit 10.5 to the September 30, 1995 Form 10-Q).
13 Portions of the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1997.
21 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21 to Form
S-2 filed September 11, 1997, registration number 333-35391).
23 Consent of Deloitte & Touche LLP.
24 Powers of Attorney.
27 Financial Data Schedule.
- 32 -