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Item 9A. Controls and Procedures

2021-03-16 compared with 2020-03-06 · 60 added, 51 removed, 127 unchanged (47% of the section changed)

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Schneider Downs & Co., Inc., our independent registered public accounting firm has issued an attestation report on the effectiveness of our internal controls over financial reporting which is included within this report.

OTHER INFORMATION.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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and Subsidiaries’

(the Company) internal control over financial reporting as of December 31, 201 9 , based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

(the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework (2013) issued by the COSO.

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Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 

We conducted our audit in accordance with the standards of the PCAOB. 

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. 

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. 

Our audit also included performing such other procedures as we considered necessary in the circumstances. 

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

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and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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March 16, 2021

OTHER INFORMATION.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE .

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The information required by this item is included under the caption “PRINCIPAL HOLDERS OF VOTING SECURITIES - OWNERSHIP OF COMMON STOCK BY MANAGEMENT,”

‑ OWNERSHIP OF COMMON STOCK BY PRINCIPAL SHAREHOLDERS,”

“- OWNERSHIP OF COMMON STOCK BY PRINCIPAL SHAREHOLDERS,”

and “EQUITY COMPENSATION PLAN INFORMATION,”

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

The information required by this item is included under the caption “COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION”, “INFORMATION CONCERNING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE”

The information required by this item is included under the caption “INFORMATION CONCERNING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE”

and “TRANSACTIONS WITH RELATED PERSONS”

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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:

(a)         THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:

(1) The following Financial Statements are included in this Annual Report on Form 10-K in Item 8:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2019 and 2018

Consolidated Statements of Operations for the years ended December 31, 2019 and 2018

Consolidated Statements of Shareholders' Equity for the years ended December 31, 2019 and 2018

Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018

Notes to Consolidated Financial Statements for the years ended December 31, 2019 and 2018

●  Report of Independent Registered Public Accounting Firm

●  Consolidated Balance Sheets as of December 31, 2020 and 2019

●  Consolidated Statements of Operations for the years ended December 31, 2020 and 2019

●  Consolidated Statements of Shareholders' Equity for the years ended December 31, 2020 and 2019

●  Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019

●  Notes to Consolidated Financial Statements for the years ended December 31, 2020 and 2019

(2) The following financial statement schedule for the years ended December 31, 2020 and 2019 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.

See Appendix A.

Schedule II ‑ ‑ Consolidated Valuation and Qualifying Accounts.

●  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.

(3) Exhibits:

Second Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006).

Amendment to Second Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006).

Purchase Agreement, dated January 24, 2021, by and among Honeywell Safety Products USA, Inc., North Safety Products Limited, Honeywell Safety Products (UK) Limited, North Safety de Mexicali S de R.L.

de C.V., Honeywell (China) Co.

and Rocky Brands, Inc.

(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated January 24, 2021, and filed on January 26, 2021).

Amended and Restated Code of Regulations of the Company (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1, registration number 33-56118 (the “Registration Statement”)).

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Articles I and II of the Company's Code of Regulations (see Exhibit 3.3).

Description of Common Stock .

Description of Common Stock (incorporated by reference to Exhibit 4.4 to the Company ’

s Annual Report on Form 10-K for the fiscal year ended December 31, 2020) .

Form of Indemnification Agreement entered into between the Company and its directors and executive officers.

(incorporated by reference to Exhibit 10.01 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018)

Schedule of directors and executive officers who have entered into the form of Indemnification Agreement.

Amended and Restated Lease Agreement, dated March 1, 2002, between Rocky Shoes & Boots Co.

and William Brooks Real Estate Company regarding Nelsonville factory (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002).

Lease Contract dated December 16, 1999, between Lifestyle Footwear, Inc.

and The Puerto Rico Industrial Development Company (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004).

Company’s 2014 Omnibus Incentive Plan (incorporated by reference to the Company’s Definitive Proxy Statement for the 2015 Annual Meeting of Shareholders, held on May 7, 2015, filed on April 7, 2014).

Renewal of Lease Contract, dated June 24, 2004, between Five Star Enterprises Ltd.

and the Dominican Republic Corporation for Industrial Development (incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004).

Second Amendment to Lease Agreement, dated as of July 26, 2004, between Rocky Shoes & Boots, Inc.

and the William Brooks Real Estate Company (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).

Amended and Restated Revolving Credit, Term Loan, Guaranty, and Security Agreement dated as of December 19, 2014 among Rocky Brands, Inc., Lehigh Outfitters, LLC, Lifestyle Footwear, Inc., Rocky Brands Wholesale LLC, Rocky Brands International, LLC, Rocky Brands Canada, Inc., Creative Recreation, LLC, Creative Recreation Retail, LLC, Creative Recreation International, LLC, the lenders party thereto, and PNC Bank, National Association, as agent for lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 19, 2014, filed with the Securities and Exchange Commission on December 23, 2014).

Amended and Restated Lease Agreement, dated March 1, 2002, between Rocky Shoes & Boots Co.

Lease Contract dated December 16, 1999, between Lifestyle Footwear, Inc.

and The Puerto Rico Industrial Development Company (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004).

Renewal of Lease Contract, dated June 24, 2004, between Five Star Enterprises Ltd.

and the Dominican Republic Corporation for Industrial Development (incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004).

Second Amendment to Lease Agreement, dated as of July 26, 2004, between Rocky Shoes & Boots, Inc.

and the William Brooks Real Estate Company (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).

Company’s Incentive Compensation Plan (incorporated by reference to the Company’s Definitive Proxy Statement for the 2017 Annual Meeting of Shareholders).

Form of Option Award Agreement under the Company’s 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014) .

Form of Restricted Stock Unit Award Agreement under the Company’s 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014) .

Form of Performance Stock Unit Award Agreement under the Company’s 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014) .

Amendment No.

1 to Amended and Restated Revolving Credit, Term Loan, Guaranty, and Security Agreement dated as of December 19, 2014 among Rocky Brands, Inc., Lehigh Outfitters, LLC, Lifestyle Footwear, Inc., Rocky Brands Wholesale LLC, Rocky Brands International, LLC, Rocky Brands Canada, Inc., Creative Recreation, LLC, Creative Recreation Retail, LLC, Creative Recreation International, LLC, the lenders party thereto, and PNC Bank, National Association, as agent for lenders (incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015).

Amendment No.

2 to Amended and Restated Revolving Credit, Term Loan, Guaranty, and Security Agreement dated as of December 21, 2017 among Rocky Brands, Inc., Lehigh Outfitters, LLC, Lifestyle Footwear, Inc., Rocky Brands Wholesale LLC, Rocky Brands International, LLC, Rocky Brands Canada, Inc., Creative Recreation, LLC, Creative Recreation Retail, LLC, Creative Recreation International, LLC, the lenders party thereto, and PNC Bank, National Association, as agent for lenders.

Employment Agreement, dated January 1, 2019, by and between the Company and Jason Brooks (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 31, 2018, filed January 7, 2019).

Employment Agreement, dated January 1, 2019, by and between the Company and T homas Robertson (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 31, 2018, filed January 7, 2019).

Employment Agreement, dated January 1, 2019, by and between the Company and Thomas Robertson (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 31, 2018, filed January 7, 2019).

Employment Agreement, dated January 1, 2019, by and between the Company and David Dixon (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K dated December 31, 2018, filed January 7, 2019).

Employment Agreement, dated January 1, 2019, by and between the Company and R ichard Simms (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated December 31, 2018, filed January 7, 2019).

Employment Agreement, dated January 1, 2019, by and between the Company and Byron Wortham (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated December 31, 2018, filed January 7, 2019).

Employment Agreement, dated January 1, 2019, by and between the Company and Richard Simms (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K dated December 31, 2018, filed January 7, 2019).

Employment Agreement, dated January 1, 2019, by and between the Company and Byron Wortham 

(incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated December 31, 2018, filed January 7, 2019).

Revolving Credit, Guaranty, and Security Agreement, dated February 13, 2019, among Rocky Brands, Inc., Lehigh Outfitters, LLC, Lifestyle Footwear, Inc., Rocky Brands US, LLC, Rocky Brands International, LLC, and Rocky Outdoor Gear Store, LLC, as borrowers, the financial institutions party thereto as lenders, and The Huntington National Bank, as agent for the lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 13, 2019, filed February 19, 2019).

First Amendment to Revolving Credit, Guaranty and Security Agreement dated November 15, 2019 among Rocky Brands, Inc., Lehigh Outfitters, LLC, Lifestyle Footwear Inc., Rocky Brands US, LLC, Rocky Brands International, LLC, and Rocky Outdoor Gear Store, LLC, as borrowers, the financial institutions party thereto as lenders, and The Huntington National Bank, as agent for the lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 13, 2019, filed February 19, 2019).

Revolving Credit, Guaranty, and Security Agreement dated March 15, 2021 between the Company and Bank of America, N.A.

(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated March 15, 2021 and filed on March 16, 2021).

Term Credit and Security Agreement dated March 15, 2021 between the Company and The Direct Lending Group of TCW Asset Management Company, LLC.

(incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated March 15, 2021 and filed on March 16, 2021).

Subsidiaries of the Company .

Independent Registered Public Accounting Firm’s Consent of Schneider Downs & Co., Inc.

Powers of Attorney .

Power of Attorney.

Rule 13a-14(a) Certification of Principal Executive Officer.

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Section 1350 Certification of Principal Executive Officer/Principal Financial Officer.

Attached as Exhibits 101 to this report are the following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 formatted in XBRL (“eXtensible Business Reporting Language”):

Attached as Exhibits 101 to this report are the following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 formatted in Inline eXtensible iXBRL (“eXtensible Business Reporting Language”):

(i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (vi) related notes to these financial statements.

Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101

* Filed with this Annual Report on Form 10-K.

** Furnished with this Annual Report on Form 10-K.

*** Exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

The registrant hereby undertakes to furnish copies of any of the omitted schedules or exhibits upon request of the U.S.

Securities and Exchange Commission.

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.

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March 16, 2021

* TracIE WINBIGLER________

* Trac IE WINBIGLER

March 16, 2021

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Consolidated Valuation and Qualifying Accounts for the Years Ended December 31, 2020 and 2019

Balance at Beginning of Period

Additions Charged to Costs and Expenses

Balance at End of Period

($ in thousands)

Charged to Costs

Balance at End

ALLOWANCE FOR DOUBTFUL ACCOUNTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures