UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number 0-238001
LaCrosse Footwear, Inc.
(Exact name of Registrant as specified in its charter)
Wisconsin 39-1446816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1319 St. Andrew Street, La Crosse, Wisconsin 54603
(Address of principal executive offices) (Zip Code)
(608) 782-3020
(Registrant's telephone number, including area code)
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 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 90 days. Yes X
No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 par value, outstanding as of April 15, 1997: 6,667,727
shares
<PAGE>
LaCrosse Footwear, Inc.
Form 10-Q Index
For Quarter Ended March 29, 1997
Page
PART I. Financial Information
Item 1. Condensed Consolidated Balance
Sheets 3-4
Condensed Consolidated Statements
of Income 5
Condensed Consolidated Statements
of Cash Flows 6
Notes to Condensed Consolidated
Financial Statements 7-9
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 10-12
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index 15
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 29, December 31,
1997 1996
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $2,172,798 $6,716,183
Accounts receivable, less allowances of
$1,372,023 and $1,507,302 respectively 21,686,726 20,705,000
Inventories (2) 35,412,808 31,549,091
Prepaid expenses 2,015,219 1,999,464
Deferred tax assets 1,896,600 2,016,600
---------- ----------
Total current assets 63,184,151 62,986,338
PROPERTY AND EQUIPMENT, net of
depreciation and amortization 12,252,013 12,629,634
INTANGIBLES (4) 15,218,378 15,388,011
OTHER ASSETS 1,083,927 1,282,036
---------- ----------
Total assets $91,738,469 $92,286,019
========== ==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (cont'd)
March 29, December 31,
1997 1996
(unaudited)
CURRENT LIABILITIES
Current maturities of long-term
obligations $1,747,000 $1,850,666
Accounts payable 5,955,659 5,754,793
Accrued expenses 6,957,669 6,770,456
Dividends payable 0 733,439
Income taxes payable 310,609 1,066,352
---------- ----------
Total current liabilities 14,970,937 16,175,706
ACCRUED POSTRETIREMENT BENEFIT COST 1,440,400 1,390,400
LONG-TERM OBLIGATIONS 15,999,525 16,002,200
DEFERRED COMPENSATION 1,433,901 1,589,162
---------- ----------
Total liabilities 33,844,763 35,157,468
---------- ----------
MINORITY INTEREST 1,413,381 1,193,304
---------- ----------
COMMON SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share 67,176 67,176
Additional paid-in capital 27,579,128 27,579,128
Retained earnings 29,277,771 28,732,693
Treasury stock (443,750) (443,750)
---------- ----------
Total common shareholders'
equity 56,480,325 55,935,247
---------- ----------
Total liabilities and
shareholders' equity $91,738,469 $92,286,019
========== ==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended
March 29, March 30,
1997 1996
Net sales $32,698,478 $22,130,971
Cost of goods sold 24,412,018 16,323,933
---------- ----------
Gross profit 8,286,460 5,807,038
Selling and administrative expenses 6,721,557 5,252,663
---------- ----------
Operating income 1,564,903 554,375
Non-operating income (expense)
Interest expense (393,941) (180,185)
Miscellaneous 87,517 112,590
---------- ----------
(306,424) (67,595)
Income before income taxes 1,258,479 486,780
Provision for income taxes 493,324 189,847
---------- ----------
Net income before minority interest 765,155 296,933
---------- ----------
Minority interest in net income of
subsidiary (220,077) 0
---------- ----------
Net income $545,078 $296,933
========== ==========
Net income available to common
shareholders $545,078 $267,572
========== ==========
Earnings per common and common
equivalent share $0.08 $0.04
========== ==========
Weighted average number of common and
common equivalent shares outstanding 6,691,895 6,676,543
========== ==========
Dividends declared per preferred share
$0.00 $1.50
========== ==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 29, March 30,
1997 1996
Net cash used in operating activities $(3,329,337) ($1,473,664)
---------- -----------
Cash flows from investing activities
Purchase of property and equipment (466,903) (705,552)
Other 13,110 0
---------- -----------
Net cash used in investing activities (453,793) (705,552)
---------- -----------
Cash flows from financing activities
Cash dividends paid (733,439) (633,947)
Proceeds from short-term borrowings 0 817,000
Principal payments on short-term
borrowings 0 (817,000)
Payments on long-term debt (26,816) 0
---------- -----------
Net cash used in financing activities (760,255) (633,947)
---------- -----------
Decrease in cash and cash equivalents (4,543,385) (2,813,163)
Cash and cash equivalents:
Beginning 6,716,183 3,035,777
---------- -----------
Ending $2,172,798 $222,614
========== ===========
Supplemental information---cash payments
for:
Interest $129,295 $9,343
========== ==========
Income taxes $890,117 $572,568
========== ==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
LaCrosse Footwear, Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements
1. INTERIM FINANCIAL REPORTING
The Company reports its quarterly interim financial information based
on 13 week periods. In the opinion of management, the unaudited
condensed consolidated financial statements include all adjustments
(consisting only of normal recurring adjustments) considered
necessary for a fair presentation of financial position, results of
operations and cash flows in accordance with generally accepted
accounting principles.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These
condensed consolidated financial statements should be read in
conjunction with the financial statements and the applicable notes
thereto that are included in the Company's Annual Report on Form 10-
K for the year ended December 31, 1996.
2. INVENTORIES
Inventories are comprised of the following:
March 29, 1997 December 31, 1996
Raw Materials $ 8,491,097 $ 7,727,042
Work-in Process 2,415,365 2,580,870
Finished Goods 28,129,475 24,974,308
LIFO Reserve (3,623,129) (3,733,129)
---------- ----------
Total $35,412,808 $31,549,091
========== ==========
3. STOCK INCENTIVE PLANS
In December 1993, the Board of Directors and shareholders adopted the
LaCrosse Footwear, Inc. 1993 Employee Stock Incentive Plan (the "1993
Plan") pursuant to which options for up to 250,000 shares of common
stock may be granted to officers and other key employees of the
Company. In November 1996, the Board of Directors adopted the
LaCrosse Footwear, Inc. 1997 Employee Stock Incentive Plan (the "1997
Plan"), subject to approval by the shareholders at the Company's 1997
annual meeting, pursuant to which options for up to 300,000 shares of
common stock may be granted to officers and other key employees of
the Company.
Effective January 2, 1997 the Company's Board of Directors granted
options to purchase 43,500 shares of common stock under the 1993 Plan
and the 1997 Plan. The exercise price for these options is $10.875
per share, the mean between the highest and lowest reported selling
prices of the common stock on The Nasdaq Stock Market on December 31,
1996. Because the options vest in equal increments over a five-year
period, none of such options will be exercisable until January 1998.
4. ACQUISITIONS
RAINFAIR, INC.
In May 1996, Craig Leipold, the former principal owner of Rainfair,
Inc., and the Company established a new corporation and each
purchased one-half of the new corporation's common stock, in each
case for $1,250,000, and the Company also purchased all of the new
corporation's outstanding preferred stock for $500,000. On May 31,
1996, this 50% owned subsidiary of the Company purchased
substantially all of the assets of Rainfair, Inc. for approximately
$10.8 million in cash and approximately $1.5 million in liabilities
for an aggregate purchase price of approximately $12.3 million. The
name of the subsidiary was changed to Rainfair, Inc. in June 1996
after completing the asset purchase.
The Company loaned the 50% owned subsidiary approximately $8.0
million to fund the purchase price of the net assets of Rainfair,
Inc. which was not funded by the initial capital contributions. The
Company used long-term borrowings of approximately $9.5 million as
the source of funds to make its initial capital contribution and the
loan to the subsidiary.
The acquisition has been accounted for as a purchase. Accordingly,
the purchase price is being allocated to assets and liabilities based
on their estimated fair values as of the date of acquisition. The
approximately $.7 million of the purchase price in excess of the
estimated fair value of the net assets is being amortized on a
straight-line basis over a 15-year term. The Company's condensed
consolidated statements of income for the three months ended March
29, 1997 includes Rainfair's results of operations. The following
unaudited pro forma summary represents the consolidated results of
operations as if the acquisition of Rainfair, Inc. had occurred at
the beginning of the periods presented and does not purport to be
indicative of what would have occurred had the acquisition been made
as of those dates or of results which may occur in the future:
Three Months Ended March
March 29, March 30,
1997 1996
(in thousands, except per share amounts)
Net Sales $32,698 $26,573
Net Income 545 313
Net Income Per Common Share $.08 $.04
RED BALL, INC.
On May 20, 1996, the Company acquired trade accounts receivable,
inventories, certain machinery and equipment and trademarks of Red
Ball, Inc. for a cash purchase price of approximately $5.0 million
which included $.3 million for equipment leased from a third party.
The Company spent an additional $.5 million in relocating and staging
the inventory and installing the equipment. The total purchase price
has been allocated to the accounts receivable, inventory, fixed
assets and trademarks. The Company used short-term borrowings under
its credit agreement to finance the acquisition, which borrowings
were subsequently replaced in part by long-term debt. Shipments of
RED BALL/R/ products commenced during the third quarter of 1996. In
the first quarter of 1997, net sales of Red Ball products were
approximately $2.0 million.
In 1995, Red Ball had net sales of approximately $23.0 million which
included $3 to $4 million of closeouts. In February 1996, Red Ball,
Inc. filed for protection under Chapter 11 of the Bankruptcy Code.
The assets were purchased from Red Ball with the approval of the
Bankruptcy court. Financial statements were not available for Red
Ball for 1995 because it was operated as a division of its parent
until the middle of 1995. Management does not believe the historical
statements of Red Ball, Inc. are relevant to the future performance
of this brand.
<PAGE>
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, selected
financial information derived from the Company's condensed consolidated
financial statements, expressed as a percentage of net sales. The
discussion that follows the table should be read in conjunction with the
condensed consolidated financial statements.
Percentage of Net Sales
Three Months Ended
March 29, March 30,
1997 1996
Net Sales 100.0% 100.0%
Cost of Goods Sold 74.7 73.8
----- -----
Gross Profit 25.3 26.2
Selling and Administrative
Expenses 20.5 23.7
----- -----
Operating Income 4.8% 2.5%
The Company's business is seasonal with lower revenues historically being
generated during the first six months of the year. As a result, revenue
for the three-month period ending March 29, 1997 should not be considered
to be indicative of results to be reported for the balance of the fiscal
year.
Three Months Ended March 29, 1997 Compared to Three Months Ended March 30,
1996
Net Sales
Net sales for the three months ended March 29, 1997 increased $10,567,507,
or 48%, to $32,698,478 from $22,130,971 for the first three months of
1996. The growth in net sales was primarily due to the contribution of
the Rainfair, Inc. subsidiary and the RED BALL/R/ product line which
contributed $7.9 million and $2.0 million, respectively, to net sales
during the quarter. Rainfair's sales were impacted by $2.5 million of
shipments on a spring order to a major national account. LACROSSE/R/
product net sales during the quarter were even with 1996, while DANNER/R/
product shipments increased 16%, the result of strong demand for DANNER/R/
hiking and work boots.
Gross Profit
Gross profit for the three months ended March 29, 1997 increased 43% to
$8,286,460, or 25.3% of net sales, from $5,807,038 or 26.2% of net sales
in the first quarter of 1996. Lower margins on the Rainfair business,
impacted by lower margins on a $2.5 million national account shipment,
were the primary reason for the decline.
Selling and Administrative Expense
Selling and administrative expenses in the first quarter of 1997 increased
28%, to $6,721,557, or 20.5% of net sales, from $5,252,663, or 23.7% of
net sales in the first quarter of 1996. The increase in operating
expenses was primarily a result of the additional expenses incurred to
operate the Rainfair, Inc. subsidiary and the expenses associated with
sales of the RED BALL/R/ product line. Operating expenses decreased as a
percentage of net sales primarily as the result of a lower level of
expenses associated with sales of the Rainfair subsidiary, partially as a
result of the shipment of a $2.5 million order to a national account, and
the ability to leverage the LaCrosse operating expenses with the
additional volume contributed by Red Ball.
Interest Expense
Interest expense for the three months ended March 29, 1997 increased 119%
to $393,941 or 1.2% of net sales, from $180,185 or .8% of net sales for
the three months ended March 30, 1996. The increase in long-term
obligations, primarily as a result of the $12.5 million borrowed to
finance the investment in the Rainfair, Inc. subsidiary and the
acquisition of certain assets of Red Ball, Inc., was the primary reason
for the increase in interest expense.
Income Tax Expense
The Company's effective income tax rate was 39.2% in the first quarter of
1997 compared to 39.0% in the first quarter of 1996.
Net Income
As a result of the increased sales, the net income for the first quarter
of 1997 increased to $545,078 from $296,933 in the first quarter of 1996.
<PAGE>
Liquidity and Capital Resources
The Company has historically financed its operations with cash generated
from operations, long-term lending arrangements and short-term borrowings
under an unsecured revolving credit agreement. The Company requires
working capital primarily to support fluctuating accounts receivable and
inventory levels caused by the Company's seasonal business cycle. The
Company invests excess cash balances in short-term investment grade
securities or money market investments.
Net cash used in operating activities was $3.3 million in the first
quarter of 1997 compared to $1.5 million in the first quarter of 1996. A
$3.9 million increase in inventories in the first quarter of 1997 compared
to a $2.0 million increase in the first quarter of 1996 was the primary
reason for the higher level of cash used in operating activities in the
first quarter of 1997 compared to 1996. Higher production levels for
LACROSSE/R/ inventories, mainly as a result of lower inventories at the
beginning of 1997 compared to 1996, coupled with increases in inventories
to support RED BALL/R/ product shipments, were the primary reasons for the
increase in inventories.
Net cash used in investing activities was $454,000 in the first quarter of
1997 compared to $706,000 in the first quarter of 1996. Reduced
expenditures for property and equipment in the first quarter of 1997,
primarily due to timing, was the reason for the reduction.
Net cash used in financing activities increased to $760,000 in the first
quarter of 1997 compared to $634,000 in the first quarter of 1996. An
increase in the common stock dividend and a payment on a capitalized lease
which was terminated during the quarter accounted for the increase.
<PAGE>
PART II - Other Information
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibit Number Description
(27) Financial Data Schedule (EDGAR version
only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended March 29, 1997
<PAGE>
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.
LACROSSE FOOTWEAR, INC.
(Registrant)
Date: May 12, 1997 By:/s/ Patrick K. Gantert
Patrick K. Gantert
President and Chief Executive Officer
Date: May 12, 1997 By:/s/ Robert J. Sullivan
Robert J. Sullivan
Vice President-Finance and Administration
(Principal Financial Officer)
<PAGE>
LACROSSE FOOTWEAR, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
for the Quarterly Period ended March 29, 1997
Exhibit
(27) Financial Data Schedule (EDGAR version only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LACROSSE FOOTWEAR, INC. AS OF AND FOR THE THREE
MONTHS ENDED MARCH 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-29-1997
<CASH> 2,172,798
<SECURITIES> 0
<RECEIVABLES> 23,058,749
<ALLOWANCES> 644,281
<INVENTORY> 35,412,808
<CURRENT-ASSETS> 63,184,151
<PP&E> 30,143,662
<DEPRECIATION> 17,891,649
<TOTAL-ASSETS> 91,738,469
<CURRENT-LIABILITIES> 14,970,937
<BONDS> 15,999,525
0
0
<COMMON> 67,176
<OTHER-SE> 56,413,149
<TOTAL-LIABILITY-AND-EQUITY> 91,738,469
<SALES> 32,698,478
<TOTAL-REVENUES> 32,698,478
<CGS> 24,412,018
<TOTAL-COSTS> 6,647,652
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 73,905
<INTEREST-EXPENSE> 393,941
<INCOME-PRETAX> 1,258,479
<INCOME-TAX> 493,324
<INCOME-CONTINUING> 545,078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 545,078
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
