<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended Commission File Number:
MARCH 31, 1996 0-21026
ROCKY SHOES & BOOTS, INC.
-------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-1364046
---- ----------
(State of Incorporation) (IRS Employer Identification Number)
39 E. CANAL STREET
NELSONVILLE, OHIO 45764
-----------------------
(Address of principal executive offices)
(614) 753-1951
--------------
(Registrant's telephone number, including area code)
(Former name, former address, and former Fiscal year if
changed since last report.)
Indicate by check mark 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 twelve (12) months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes X No
--- ---
3,665,548 common shares, no par value, outstanding at February 3, 1996.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,1996 Dec. 31, 1995
(Unaudited)
------------- -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 325,115 $ 1,853,974
Trade Receivables 7,496,293 9,842,909
Other Receivables 1,098,774 1,464,847
Inventories 23,319,925 18,336,892
Other Current Assets 1,006,327 876,569
------------ ------------
Total Current Assets 33,246,434 32,375,191
Fixed Assets - Net 14,553,031 14,534,176
Other Assets 2,155,483 2,171,207
------------ ------------
Total Assets $ 49,954,948 $ 49,080,574
============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts Payable $ 6,605,002 $ 1,429,217
Current Maturities - Long Term Debt 1,659,390 4,392,341
Accrued Liabilities 975,748 1,099,539
------------ ------------
Total Current Liabilities 9,240,140 6,921,097
Long-Term Debt-less current maturities 16,110,449 16,553,890
Deferred Liabilities 1,235,424 2,036,457
------------ ------------
Total Liabilities 26,586,013 25,511,444
Shareholders' Equity:
Preferred Stock, Series A, no par value;
100,000 shares issued and 92,857 6,000 6,000
shares outstanding
Common Stock, no par value;
10,000,000 shares authorized;
3,782,500 shares issued and
3,665,548 shares outstanding 14,543,947 14,543,947
Common Stock in Treasury, at cost (1,226,059) (1,226,059)
Retained Earnings 10,045,047 10,245,242
------------ ------------
Total Shareholders' Equity 23,368,935 23,569,130
------------ ------------
Total Liabilities and Shareholders' Equity $ 49,954,948 $ 49,080,574
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE> 3
ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
------------ ------------
<S> <C> <C>
Net Sales $ 10,260,665 $ 12,045,932
Cost of Goods Sold 7,434,072 9,393,796
------------ ------------
Gross Margin 2,826,593 2,652,136
Selling, General and Administrative
Expenses 2,616,115 1,970,898
------------ ------------
Income From Operations 210,478 681,238
Other Income And (Expenses):
Interest Expense (345,517) (634,309)
Other - net (115,204) 43,832
------------ ------------
Total other - net (460,721) (590,477)
------------ ------------
Income (Loss) Before Income Taxes (250,243) 90,761
Income Taxes (Benefit) (50,048) 18,152
------------ ------------
Net Income (Loss) ($ 200,195) $ 72,609
============ ============
Net Income (Loss) Per Share ($ 0.05) $ 0.02
============ ============
Weighted Average Number of Common Shares
and Equivalents Outstanding 3,665,548 3,758,405
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE> 4
ROCKY SHOES & BOOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Income (Loss) $ (200,195) $ 72,609
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 575,057 500,736
Loss on Sale of Fixed Assets 89,414
Deferred Taxes and Other (801,033) (174,098)
Change in Assets and Liabilities:
Receivables 2,712,689 (126,473)
Inventories (4,983,033) (5,183,687)
Other Assets (114,034) 756,023
Accounts Payable 5,175,785 3,012,611
Accrued and Other Liabilities (123,791) 197,197
----------- -----------
Net Cash Provided By (Used In)
Operating Activities 2,330,860 (945,082)
----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of Fixed Assets (683,326) (1,186,107)
----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from Long Term Debt 2,033,395 1,242,475
Payments on Long Term Debt (5,199,787) (235,758)
----------- -----------
Net Cash Provided By (Used In)
Financing Activities (3,176,392) 1,006,717
----------- -----------
(DECREASE) IN CASH AND CASH (1,528,859) (1,124,472)
EQUIVALENTS
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,853,974 1,628,988
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 325,115 $ 504,516
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE> 5
ROCKY SHOES & BOOTS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL REPORTING
In the opinion of management, the unaudited financial statements
include all normal recurring adjustments the Company considers
necessary for a fair presentation of such financial statements in
accordance with generally accepted accounting principles.
2. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 31, 1996 Dec. 31, 1995
-------------- -------------
<S> <C> <C>
Raw materials $ 5,431,228 $ 3,437,802
Work-in Process 4,574,399 2,359,778
Manufactured finished goods 11,148,810 10,085,634
Factory outlet finished goods 2,165,488 2,453,678
----------- -----------
Total $23,319,925 $18,336,892
=========== ===========
</TABLE>
3. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and Federal, state and local income taxes was as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------- --------
<S> <C> <C>
Interest $379,291 $609,483
======== ========
Federal, state and local
income taxes $ 76,500 $ - 0 -
======== ========
</TABLE>
<PAGE> 6
4. Effective July 1, 1995, the Company changed its Fiscal Year from June
30 to December 31.
5. Recently Issued Accounting Standards - In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation," which was effective
for the Company beginning January 1, 1996. SFAS No. 123 requires expanded
disclosures of stock-based compensation arrangements with employees and
encourages, but does not require, compensation costs to be measured based on the
fair value of the equity instrument awarded. Companies are permitted, however,
to continue to apply Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," which recognizes compensation costs
based on the intrinsic value of the equity instrument awarded. The Company will
continue to apply APB Opinion No. 25 to its stock based compensation awards to
employees and will disclose annually the required pro forma effect on net
earnings and earnings per share in a note to the financial statements.
In addition, the Company adopted SFAS No.121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of" beginning January 1, 1996.
The adoption of this statement had no impact on the consolidated financial
statements.
<PAGE> 7
PART 1 - FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information derived
from the Company's Consolidated Financial Statements, expressed as a percentage
of net sales. The discussion that follows the table should be read in
conjunction with the Consolidated Financial Statements of the Company.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-----------------------
Three months
Ended
March 31,
1996 1995
----- -----
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of Goods Sold 72.4 78.0
----- -----
Gross Margin 27.6 22.0
Selling, General and
Administrative Expenses 25.5 16.4
----- -----
Income from Operations 2.1% 5.6%
===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31,1996 COMPARED TO THREE MONTHS ENDED MARCH 31,1995
Net Sales
Net sales decreased $1,785,267 or 14.8% to $10,260,665 for the quarter ended
March 31, 1996, from $12,045,932 for the same period a year ago. The decrease in
net sales was principally due to a $1,128,000 decrease in shipments resulting
from the termination of a contract in June 1995 to manufacture handsewn casual
footwear for a private label customer. In addition, sales to two of the
Company's larger customers decreased due to a generally difficult retail
environment during the quarter. Sales prices were approximately 3% higher than a
year ago.
<PAGE> 8
Gross Margin
Gross margin increased $174,457, or 6.6%, to $2,826,593, for the period ended
March 31, 1996, versus $2,652,136 for the same period a year ago. As a
percentage of net sales, gross margin was 27.6% for the quarter ended March 31,
1996 compared to 22.0% in 1995. Gross margin and gross margin as a percentage of
sales increased in part due to the termination in June 1995 of the Company's
contract to manufacture casual handsewn footwear, a product with a low margin,
for a private label customer. In addition, gross margin was favorably impacted
in the current quarter due to a decrease in sales to two large customers that
are generally at lower margins. Also, production levels of the Company's plants
in the Dominican Republic and Puerto Rico were higher than a year ago and closer
to capacity during the quarter ended March 31, 1996.
Selling, General and Administrative Expenses
Selling, general and administrative expense increased $645,217 or 32.7%, to
$2,616,115 for the period ended March 31, 1996, versus $1,970,898 for the same
period a year ago. As a percentage of net sales, selling, general and
administrative expense was 25.5% for the period ended March 31, 1996, versus
16.4% for the same period a year ago. Selling, general and administrative
expenses increased primarily due to increased sales management salaries and
advertising, and to a lesser extent increased professional expenses related to
the change of the fiscal year.
Interest Expense
Interest expense decreased $288,792 or 45.5%, to $345,517 for the period ended
March 31, 1996, versus $634,309 for the same period a year ago. Most of the
decrease in interest expense is a result of lower rates and lower outstanding
balances on the Company's revolving line of credit.
Income Taxes
Income Taxes decreased $68,200 to an income tax benefit of $50,048 for the
quarter ended March 31, 1996, versus an income tax expense of $18,152 for the
same period a year earlier. The Company's relatively low effective tax rate of
20% for both periods resulted from no foreign income taxes being assessed on the
income of its subsidiary in the Dominican Republic; to the favorable income tax
treatment afforded under the Internal Revenue Code for income earned by the
Company's subsidiary in Puerto Rico; and local tax abatements available to the
Company's subsidiary in Puerto Rico.
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
The Company has primarily funded its working capital requirements and capital
expenditures through borrowings under its line of credit and other indebtedness.
Working capital is used primarily to support changes in accounts receivable and
inventory as a result of the Company's seasonal business cycle and business
expansion. These requirements are generally lowest in January through March of
each year and highest in April through September of each year. In addition, the
Company requires financing to support additions to machinery, equipment, and
facilities, as well as the introduction of new styles of footwear.
At March 31, 1996, the Company had working capital of $24,006,294, versus
$25,454,094, at December 31, 1995. The Company has a revolving line of credit
with its bank which provides for advances based on a percentage of eligible
accounts receivable and inventory with maximum borrowings of $25,000,000, from
January 1, 1996, through May 31, 1996. On June 1, 1996, the maximum amount
increases to $35,000,000 until January 1, 1997, when the line again decreases to
$25,000,000. The changes in the line of credit match the Company's seasonal
requirements for working capital. As of March 31, 1996, the Company had borrowed
$13,765,000 against its available line of credit of $15,302,089 (based upon the
level of eligible accounts receivable and inventory).
Cash paid for capital expenditures during the quarter ended March 31, 1996 was
$683,000 which expenditures were funded through operating cash flows and through
long-term debt financing. The Company anticipates capital expenditures of less
than $1,200,000 for the next year as the Company has sufficient manufacturing
capacity to handle additional production needs. Capital expenditures for the
next year will be primarily for lasts, dies, and patterns for new styles of
footwear, retail in-store displays, and replacement machinery and equipment. The
Company believes it will be able to finance such additions through additional
long-term borrowings or through operating cash flows as appropriate.
Except for the historical information in this report , it includes
forward-looking statements that involve risks and uncertainties, including, but
not limited to, quarterly fluctuations in results, the management of growth, and
other risks detailed from time to time in the Company's Securities and Exchange
Commission filings, including the Company's Form 10-K for the Transition Period
ended December 31,1995. Actual results may differ materially from management
expectations.
<PAGE> 10
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The exhibits to this report begin at page___.
(b) Reports on Form 8-K.
None.
<PAGE> 11
SIGNATURES
Pursuant to the requirements 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: May 10, 1996 /s/ Mike Brooks
------------- --------------------------------------------------
Mike Brooks, President and Chief Executive Officer
(Principal Executive Officer)
Date: May 10, 1996 /s/ David Fraedrich
------------- --------------------------------------------------
David Fraedrich, Executive Vice President,
Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE> 12
ROCKY SHOES & BOOTS, INC.
AND SUBSIDIARIES
FORM 10-Q
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Exhibit
Number Description Page
Number
<S> <C> <C>
10.1 Schedule identifying material details of stock option agreements
substantially identical to Exhibit 10.28 of the Registrant's Annual
Report on Form 10-K for the Transition Period ended December
31, 1995. ------
10.2 First Amended and Restated Revolving Credit Agreement, dated as of
September 22, 1996, among the Registrant, Rocky Shoes & Boots, Co.,
Five Star Enterprises, Ltd., Lifestyle Footwear, Inc., NBD Bank,
Bank One Columbus, NA, and NBD Bank, as Agent. ------
10.3 Second Amended and Restated Revolving Credit Agreement, dated as
of April 2, 1996, among the Registrant, Rocky Shoes & Boots, Co.,
Five Star Enterprises, Ltd., Lifestyle Footwear, Inc., Bank One
Columbus, NA, and Bank One Columbus, NA, as Agent. ------
</TABLE>
<PAGE> 1
EXHIBIT 10.1
ROCKY SHOES & BOOTS, INC.
OPTIONS GRANTED UNDER
1995 STOCK OPTION PLAN
400,000 SHARES
<TABLE>
<CAPTION>
Name of Optionee No. of Date Date Date Price
Shares Issued Exercisable Expires Per Share
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William S. Moore 25,000(1) 09/07/95 09/07/96 09/06/2003 $ 5.75
William S. Moore 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
David S. Fraedrich 4,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Robert A. Hollenbaugh 3,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Theodore A. Kastner 3,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Allen Sheets 3,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Barbara Brooks Fuller 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Jason Brooks 1,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Charles S. Brooks 1,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Alex Cruz 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Gene Diaco 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Rinaldo Diaz 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
David Dixon 1,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Andy Grindstead 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Ann Henderschott 1,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Jerry Linn 1,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Jim McCumber 1,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Joe Nudo 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Becky Oliver 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Patricia H. Robey 1,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Roger Schultz 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Bud Simpson 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Kitty Soto 1,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Mike Steele 1,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Tim Thayne 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Alan Young 2,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Diana Wurfbain 1,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
Curtis A. Loveland 3,000(2) 01/01/96 01/01/97 01/01/2001 $ 6.00
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C> <C> <C> <C>
Stanley I. Kravetz 3,000(2) 01/01/96 01/01/97 01/01/2001 $ 6.00
Leonard L. Brown 3,000(2) 01/01/96 01/01/97 01/01/2001 $ 6.00
Mike Brooks 5,000(1) 01/01/96 01/01/97 01/01/2004 $ 6.00
</TABLE>
(1) Shares vest 25% per year beginning on first anniversary.
(2) Shares vest 100% one year from date of grant.
<PAGE> 1
Exhibit 10.2
FIRST AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT
This First Amendment to Amended and Restated Revolving Credit Loan
Agreement (the "Amendment"), dated as of September 20, 1995, is made and
entered into by and among Rocky Shoes & Boots, Inc., an Ohio corporation
("Rocky Inc."), Rocky Shoes & Boots Co., an Ohio corporation ("Rocky Co."),
Five Star Enterprises Ltd., a Cayman Islands corporation ("Five Star"), and
Lifestyle Footwear, Inc., a Delaware corporation ("Lifestyle") (the foregoing
parties being referred to herein individually as a "Borrower" and collectively
as the "Borrowers"), NBD Bank, an Ohio banking corporation ( "NBD"), Bank One,
Columbus, NA, a national banking association ("Bank One") (NBD and Bank One
being referred to herein individually as a "Bank" and collectively as the
"Banks"), and NBD Bank, as Agent (the "Agent"), acting in the manner and to the
extent described in Article IX of the Agreement (as defined herein).
BACKGROUND INFORMATION
----------------------
A. The Borrowers, the Banks and the Agent entered into a certain
Amended and Restated Revolving Credit Loan Agreement, dated as of March 30,
1995 (the "Agreement"), pursuant to which the Banks agreed to provide revolving
credit loans to the Borrowers, upon and subject to the terms and conditions as
set forth in the Agreement.
B. The Borrowers have requested a waiver and amendment of the
Agreement, and the Banks are willing to give such waiver and to amend the
Agreement, upon and subject to the terms and conditions as hereinafter set
forth.
PROVISIONS
----------
NOW, THEREFORE, in consideration of the foregoing, the provision of
the agreements and covenants hereinafter contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Banks, the Agent and the Borrowers hereby agree as follows
(capitalized terms not defined herein shall have the meanings set forth in the
Agreement):
SECTION 1. WAIVER. Without giving effect to the amendment of
the Agreement set forth in Section 2(c) below, the Banks hereby waive
compliance by the Borrowers with respect to the covenant regarding Capital
Expenditures set forth in Section 7.2(l)(v)(x) of the Agreement, specifically
that the Borrowers shall not permit Capital Expenditures to exceed $5,500,000
in Fiscal Year 1995.
SECTION 2. AMENDMENT OF THE AGREEMENT.
(a) The definition of "FISCAL YEAR" set forth in Section
1.1 of the Agreement is amended in its entirety to provide as follows:
<PAGE> 2
"FISCAL YEAR" shall mean, as to the Borrowers, (a)
any period of twelve consecutive calendar months ending on June 30
through and including June 30, 1995, and (b) any period of twelve
consecutive calendar months ending on December 31 beginning with
December 31,1996.
(b) Section 7.2(l)(ii) of the Agreement shall be amended
in its entirety to provide as follows:
(ii) CONSOLIDATED TANGIBLE NET WORTH. Permit
Consolidated Tangible Net Worth to be less than $22,400,000, which
amount shall increase (x) annually on the last day of each Fiscal Year
by 75% of Consolidated Earnings for such Fiscal Year (but not
decreased by any losses), commencing with the Fiscal Year ending June
30, 1995, and (y) by 75% of Consolidated Earnings for the six-month
interim period ending December 31, 1995 (but not decreased by any
losses).
(c) Without affecting the waiver given in Section 1
above, Section 7.2(l)(v) of the Agreement shall be amended in its entirety to
provide as follows:
(v) CAPITAL EXPENDITURES. Permit Capital
Expenditures to exceed (w) $5,500,000 in Fiscal Year 1995, (x)
$1,000,000 in the interim six-month period from July 1, 1995 through
and including December 31, 1995, (y) $1,500,000 in the Fiscal Year
ending December 31, 1996, and (z) $2,000,000 in each Fiscal Year
thereafter.
SECTION 3. TRUTH OF REPRESENTATIONS AND WARRANTIES; NO DEFAULTS.
The Borrowers hereby represent and warrant that the following shall be true and
correct as of the date of this Amendment:
(a) The representations and warranties of the Borrower
contained in Article V of the Agreement are true and correct on and as
of the date of this Amendment as if made on and as of such date unless
stated to relate to a specific earlier date;
(b) No event or condition exists which constitutes a
Default or an Event of Default;
(c) All financial information heretofore provided to the
Banks and the Agent is true, accurate and complete in all material
respects; and
(d) Neither this Amendment nor any other document,
certificate or written statement furnished to the Banks or to the
Agent by or on behalf of the Borrowers in connection with the
transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements contained herein and therein not misleading.
-2-
<PAGE> 3
SECTION 4. REAFFIRMATION OF LIABILITY. The Borrowers hereby
reaffirm their respective liability to the Banks under the Agreement and all
other agreements and instruments executed by the Borrowers for the benefit of
the Banks in connection with the Agreement (the "Bank Documents"). In
addition, the Borrowers agree that the Banks and the Agent have performed all
of their respective obligations under the Agreement and the Bank Documents and
that neither the Banks are, nor the Agent is, in default under any obligation
they have or it has or any of them ever did have to the Borrowers under the
Agreement, the Bank Documents or any other agreement.
SECTION 5. EFFECTIVENESS OF AMENDMENT. All of the terms,
covenants and conditions of, and the obligations of the Borrowers under, the
Agreement and the Bank Documents shall remain in full force and effect as
amended hereby.
SECTION 6. PRESERVATION OF EXISTING SECURITY INTERESTS. Each
mortgage, security interest, pledge, assignment, lien or other conveyance or
encumbrance of any right, title, or interest in any Collateral or other
property of any kind delivered to the Banks and/or the Agent at any time by the
Borrowers or any Person in connection with the Agreement or the Bank Documents
or to secure the performance of the obligation of the Borrowers under the
Agreement and the Bank Documents shall remain in full force and effect
following the execution of this Amendment.
SECTION 7. RESERVATION OF RIGHTS; EFFECTIVE INSOLVENCY
PROCEEDING. Nothing herein shall be construed to release, waive, relinquish,
discharge, or in any other manner modify or affect the ability of any party
hereto to contest to the discharge or dischargeability in bankruptcy of the
obligation of any Person or entity in connection with the Agreement and the
Bank Documents.
SECTION 8. GOVERNING LAW. This Amendment is being delivered,
and is intended to be performed in, the State of Ohio and shall be construed
and enforced in accordance with, and governed by, the laws of the State of
Ohio.
SECTION 9. SEVERABILITY. Any provision of this Amendment which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 10. COUNTERPARTS. This Amendment may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 11. HEADINGS. The headings of the sections of this
Amendment are for convenience only and shall not affect the construction or
interpretation of this Amendment.
-3-
<PAGE> 4
SECTION 12. INTERPRETATION. This Amendment is to be deemed to
have been prepared jointly by the parties hereto, and any uncertainty or
ambiguity existing herein shall not be interpreted against any party but shall
be interpreted according to the rules for the interpretation of arm's length
agreements.
SECTION 13. WAIVER OF JURY TRIAL. THE BANKS, THE AGENT AND EACH
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWING, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY
HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AMENDMENT OR ANY RELATED INSTRUMENT OF AGREEMENT, OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN), OR ACTIONS OF ANY OF THEM. THIS WAIVER SHALL NOT IN ANY WAY
AFFECT THE AGENT'S OR THE BANKS' ABILITY TO PURSUE REMEDIES PURSUANT TO ANY
CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN, IN THE AGREEMENT
OR ANY RELATED INSTRUMENT OR AGREEMENT. NEITHER THE BANKS, THE AGENT NOR THE
BORROWER SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN
WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN
MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE BANKS, THE AGENT OR THE
BORROWERS EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized officers as of the date first
above written.
<TABLE>
<S> <C>
BORROWERS: BANKS:
ROCKY SHOES & BOOTS, INC., NBD BANK,
an Ohio corporation an Ohio banking corporation
By: /s/ Mike Brooks By: /s/ Kathleen T. Coleman
----------------------------------- -----------------------------------
Title: President & CEO Title: Second Vice President
-------------------------------- --------------------------------
ROCKY SHOES & BOOTS CO., BANK ONE, COLUMBUS, NA,
an Ohio corporation a national banking association
By: /s/ David Fraedich By: /s/ Elizabeth E. Cadwallader
----------------------------------- -----------------------------------
Title: Executive Vice President & CFO Title: Vice President
-------------------------------- --------------------------------
</TABLE>
-4-
<PAGE> 5
<TABLE>
<S> <C>
FIVE STAR ENTERPRISES, LTD., AGENT:
a Cayman Islands corporation
NBD BANK, AS AGENT,
By: /s/ Mike Brooks an Ohio banking corporation
-----------------------------------
Title: President & CEO By: /s/ Kathleen T. Coleman
-------------------------------- -----------------------------------
Title: Second Vice President
--------------------------------
LIFESTYLE FOOTWEAR, INC.,
a Delaware corporation
By: /s/ David Fraedrich
-----------------------------------
Title: Executive Vice President & CFO
--------------------------------
</TABLE>
-5-
<PAGE> 1
Exhibit 10.3
SECOND AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT LOAN AGREEMENT
This Second Amendment to Amended and Restated Revolving Credit Loan
Agreement (the "Amendment"), dated as of April 2, 1996 and to be effective as of
January 1, 1996, is made and entered into by and among Bank One, Columbus, NA, a
national banking association ("Bank One"), Bank One, as Agent (the "Agent"),
acting in the manner and to the extent described in Article IX of the Agreement
(as defined herein), Rocky Shoes & Boots, Inc., an Ohio corporation ("Rocky
Inc."), Rocky Shoes & Boots Co., an Ohio corporation ("Rocky Co."), Five Star
Enterprises Ltd., a Cayman Islands corporation ("Five Star"), and Lifestyle
Footwear, Inc., a Delaware corporation ("Lifestyle") (Rocky Inc., Rocky Co.,
Five Star and Lifestyle shall be referred to herein individually as a "Borrower"
and collectively as the "Borrowers"),
BACKGROUND INFORMATION
A. The Borrowers, Bank One and NBD Bank, individually and as agent,
entered into a certain Amended and Restated Revolving Credit Loan Agreement,
dated as of March 30, 1995, as amended by a certain First Amendment to Amended
and Restated Revolving Credit Loan Agreement, dated as of September 22, 1995
(such agreement, as so amended, the "Agreement"), pursuant to which Bank One and
NBD Bank agreed to provide revolving credit loans to the Borrowers, upon and
subject to the terms and conditions as set forth in the Agreement.
B. Bank One (i) assumed all rights, interests and obligations of NBD
Bank, individually and as agent, under the Agreement, and (ii) purchased the
revolving credit loan of NBD Bank to the Borrowers made under the Agreement,
pursuant to a certain Loan Purchase, Assignment and Master Amendment Agreement,
dated as of February 1, 1996.
C. The Borrowers have requested that the Agreement be amended, and Bank
One is willing to amend the Agreement, upon and subject to the terms and
conditions as hereinafter set forth.
PROVISIONS
NOW, THEREFORE, in consideration of the foregoing, the provision of the
agreements and covenants hereinafter contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank One, the Agent and the Borrowers hereby agree as follows (capitalized terms
not defined herein shall have the meanings set forth in the Agreement):
SECTION 1. Amendment of the Agreement.
(a) Section 7.2(l)(ii) of the Agreement shall be amended in its
entirety to provide as follows:
<PAGE> 2
(ii) Consolidated Tangible Net Worth. Permit Consolidated
Tangible Net Worth to be less than (x) $23,250,000 through and
including June 29, 1996, and (y) $23,750,000 thereafter, which amount
shall increase annually on the last day of each Fiscal Year by 75% of
Consolidated Earnings for such Fiscal Year (but not decreased by any
losses), commencing with the Fiscal Year ending December 31, 1996.
(b) Section 7.2(l)(iv) of the Agreement shall be amended in its
entirety to provide as follows:
(iv) Cash Flow Coverage. Permit Cash Flow Coverage (based on
the last four (4) Fiscal Quarters) to be less than (x) 1.1:1.0 through
and including June 29, 1996, and (y) 1.3:1.0 thereafter.
SECTION 2. Truth of Representations and Warranties; No Defaults. The
Borrowers hereby represent and warrant that the following shall be true and
correct as of the date of this Amendment:
(a) The representations and warranties of the Borrower
contained in Article V of the Agreement are true and correct on and as
of the date of this Amendment as if made on and as of such date unless
stated to relate to a specific earlier date;
(b) No event or condition exists which constitutes a Default
or an Event of Default;
(c) All financial information heretofore provided to Bank One
and the Agent is true, accurate and complete in all material respects;
and
(d) Neither this Amendment nor any other document, certificate
or written statement furnished to Bank One or to the Agent by or on
behalf of the Borrowers in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
SECTION 3. Reaffirmation of Liability. The Borrowers hereby reaffirm
their respective liability to Bank One under the Agreement and all other
agreements and instruments executed by the Borrowers for the benefit of Bank One
in connection with the Agreement (the "Bank Documents"). In addition, the
Borrowers agree that Bank One and the Agent have performed all of their
respective obligations under the Agreement and the Bank Documents and that
neither Bank One nor the Agent is in default under any obligation either of them
have or ever did have to the Borrowers under the Agreement, the Bank Documents
or any other agreement.
SECTION 4. Effectiveness of Amendment. All of the terms, covenants and
conditions of, and the obligations of the Borrowers under, the Agreement and the
Bank Documents shall remain in full force and effect as amended hereby.
- 2 -
<PAGE> 3
SECTION 5. Preservation of Existing Security Interests. Each mortgage,
security interest, pledge, assignment, lien or other conveyance or encumbrance
of any right, title, or interest in any Collateral or other property of any kind
delivered to Bank One and/or the Agent at any time by the Borrowers or any
Person in connection with the Agreement or the Bank Documents or to secure the
performance of the obligation of the Borrowers under the Agreement and the Bank
Documents shall remain in full force and effect following the execution of this
Amendment.
SECTION 6. Reservation of Rights; Effective Insolvency Proceeding.
Nothing herein shall be construed to release, waive, relinquish, discharge, or
in any other manner modify or affect the ability of any party hereto to contest
to the discharge or dischargeability in bankruptcy of the obligation of any
Person or entity in connection with the Agreement and the Bank Documents.
SECTION 7. Governing Law. This Amendment is being delivered, and is
intended to be performed in, the State of Ohio and shall be construed and
enforced in accordance with, and governed by, the laws of the State of Ohio.
SECTION 8. Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability,
without invalidating the remaining provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
SECTION 9. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 10. Headings. The headings of the sections of this Amendment
are for convenience only and shall not affect the construction or interpretation
of this Amendment.
SECTION 11. Interpretation. This Amendment is to be deemed to have been
prepared jointly by the parties hereto, and any uncertainty or ambiguity
existing herein shall not be interpreted against any party but shall be
interpreted according to the rules for the interpretation of arm's length
agreements.
SECTION 12. Waiver of Jury Trial. BANK ONE, THE AGENT AND EACH
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWING, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY
HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AMENDMENT OR ANY RELATED INSTRUMENT OF AGREEMENT, OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN), OR ACTIONS OF ANY OF THEM. THIS WAIVER SHALL NOT IN ANY WAY
AFFECT THE AGENT'S OR BANK ONE'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY
CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN, IN THE
- 3 -
<PAGE> 4
AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT. NEITHER BANK ONE, THE AGENT
NOR ANY BORROWER SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO
HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK ONE, THE AGENT OR THE
BORROWERS EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first above written.
BANK ONE:
BANK ONE, COLUMBUS, NA, individually
and as Agent,
a national banking association
By: /s/ Elizabeth Cadwallader
---------------------------------
Title: Vice President
------------------------------
BORROWERS:
ROCKY SHOES & BOOTS, INC. ROCKY SHOES & BOOTS CO.,
an Ohio corporation an Ohio corporation
By: /s/ David Fraedrich By: /s/ David Fraedrich
--------------------------- ---------------------------
Title: Exec. V.P. and C.F.O. Title: Exec. V.P. and C.F.O.
------------------------ ------------------------
FIVE STAR ENTERPRISES, LTD. LIFESTYLE FOOTWEAR, INC.
a Cayman Islands corporation a Delaware corporation
By: /s/ David Fraedrich By: /s/ David Fraedrich
--------------------------- ---------------------------
Title: Exec. V.P. and C.F.O. Title: Exec. V.P. and C.F.O.
------------------------ ------------------------
- 4 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND IN
THE COMPANY'S FORM 10-Q FOR THE YEAR TO DATE, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000895456
<NAME> ROCKY SHOES & BOOTS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 325,115
<SECURITIES> 0
<RECEIVABLES> 8,969,239
<ALLOWANCES> 374,672
<INVENTORY> 23,319,925
<CURRENT-ASSETS> 33,246,434
<PP&E> 22,732,240
<DEPRECIATION> 8,179,209
<TOTAL-ASSETS> 49,954,948
<CURRENT-LIABILITIES> 9,240,140
<BONDS> 16,110,449
<COMMON> 14,543,947
0
6000
<OTHER-SE> 8,818,988
<TOTAL-LIABILITY-AND-EQUITY> 49,954,948
<SALES> 10,260,665
<TOTAL-REVENUES> 10,260,665
<CGS> 7,434,072
<TOTAL-COSTS> 7,434,072
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 29,926
<INTEREST-EXPENSE> 345,517
<INCOME-PRETAX> (250,243)
<INCOME-TAX> (50,048)
<INCOME-CONTINUING> (200,195)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (200,195)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
