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 June 28, 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 August 1, 1997:
6,667,727 shares
<PAGE>
LaCrosse Footwear, Inc.
Form 10-Q Index
For Quarter Ended June 28, 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 10-13
PART II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 28, December 31,
1997 1996
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $373,101 $6,716,183
Accounts receivable, less allowances of
$1,356,716 and $1,507,302 respectively 23,480,656 20,705,000
Inventories (2) 39,812,736 31,549,091
Prepaid expenses 1,851,170 1,999,464
Deferred tax assets 1,888,600 2,016,600
---------- ----------
Total current assets 67,406,263 62,986,338
PROPERTY AND EQUIPMENT, net of
depreciation and amortization 12,653,481 12,629,634
INTANGIBLES (3) 15,050,447 15,388,011
OTHER ASSETS 1,495,927 1,282,036
---------- ----------
Total assets $96,606,118 $92,286,019
=========== ===========
CURRENT LIABILITIES
Current maturities of long-term obligations $2,147,000 $1,850,666
Borrowings under credit agreement 8,575,000 0
Accounts payable 3,719,430 5,754,793
Accrued expenses 6,938,722 6,770,456
Dividends payable 0 733,439
Income taxes payable 17,471 1,066,352
---------- ----------
Total current liabilities 21,397,623 16,175,706
ACCRUED POSTRETIREMENT BENEFIT COST 1,490,400 1,390,400
LONG-TERM OBLIGATIONS 13,882,563 16,002,200
DEFERRED COMPENSATION 1,417,414 1,589,162
---------- ----------
Total liabilities 38,188,000 35,157,468
---------- ----------
MINORITY INTEREST 1,397,999 1,193,304
COMMON SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share 67,176 67,176
Additional paid-in capital 27,579,147 27,579,128
Retained earnings 29,816,659 28,732,693
Treasury stock (442,863) (443,750)
---------- ----------
Total common shareholders' equity 57,020,119 55,935,247
---------- ----------
Total liabilities and shareholders'
equity $96,606,118 $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 Six Months Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
Net sales (3) $28,420,198 $23,054,257 $61,118,676 $45,185,228
Cost of goods sold 20,768,943 16,947,172 45,180,961 33,271,105
---------- ----------- ----------- -----------
Gross profit 7,651,255 6,107,085 15,937,715 11,914,123
Selling and
administrative 6,550,063 5,455,740 13,271,620 10,708,403
---------- ----------- ----------- -----------
Operating income 1,101,192 651,345 2,666,095 1,205,720
Non-operating
income (expense)
Interest expense (378,094) (407,413) (772,035) (587,598)
Miscellaneous 137,937 91,196 225,454 203,786
---------- ----------- ----------- -----------
(240,157) (316,271) (546,581) (383,812)
Income before
income taxes 861,035 335,128 2,119,514 821,908
Provision for
income taxes 337,529 132,126 830,853 321,973
---------- ----------- ----------- -----------
Net income
before minority
interest $523,506 $203,002 $1,288,661 $499,935
---------- ----------- ----------- -----------
Minority interest
in net income
(loss) of
subsidiary (15,382) (73,493) 204,695 (73,493)
---------- ----------- ----------- -----------
Net income $538,888 $276,495 $1,083,966 $573,428
========== =========== =========== ===========
Net income
available to common
shareholders $538,888 $266,842 $1,083,966 $534,414
========== =========== =========== ===========
Earnings per
common and common
equivalent share $0.08 $0.04 $0.16 $0.08
========== =========== =========== ===========
Weighted average
number of common
and common
equivalent shares
outstanding 6,707,718 6,680,859 6,696,134 6,671,943
========== =========== =========== ===========
Dividends declared
per preferred share $0.00 $0.49 $0.00 $1.99
========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Six Months Ended
June 28, June 29,
1997 1996
Net cash used in operating activities $(10,339,579) ($10,703,789)
------------ ------------
Cash flows from investing activities
Purchase of property and equipment (1,640,302) (1,853,652)
Purchase of intangibles 0 (1,630,314)
Purchase of Rainfair, Inc., net of
cash acquired 0 (10,846,861)
Security deposit (450,000) 0
Escrow deposit for Lake of the Woods (25,000) 0
Other 13,110 0
------------ ------------
Net cash used in investing activities (2,102,192) (14,330,827)
------------ ------------
Cash flows from financing activities
Cash dividends paid (733,439) (668,462)
Proceeds from long-term borrowings 0 12,500,000
Principal payments on long-term
borrowings (1,743,778) (1,718,589)
Proceeds from short-term borrowings 8,575,000 14,039,000
Proceeds from sale of treasury stock 906 0
Purchase of redeemable preferred stock 0 (1,957,400)
Contribution from minority interest 0 1,250,000
------------ ------------
Net cash provided by financing
activities 6,098,689 23,444,549
------------ ------------
Decrease in cash and cash equivalents (6,343,082) (1,590,067)
Cash and cash equivalents:
Beginning 6,716,183 3,035,777
------------ ------------
Ending $373,101 $1,445,710
============ ============
Supplemental information---cash
payments for:
Interest $579,759 $439,528
============ ============
Income taxes $1,325,327 $844,157
============ ============
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:
June 28, 1997 December 31, 1996
Raw Materials $ 8,184,610 $ 7,727,042
Work-in Process 2,276,295 2,580,870
Finished Goods 33,134,960 24,974,308
LIFO Reserve (3,783,129) (3,733,129)
----------- -----------
Total $39,812,736 $31,549,091
=========== ===========
3. 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 and six months
ended June 28, 1997 include 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 Six Months Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
Net Sales $28,420 $24,762 $61,119 $51,335
Net Income 539 340 1,084 653
Net Income Per Common Share $.08 $.05 $.16 $.09
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
will be 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 half of 1997, net sales of Red Ball products were approximately
$3.7 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.
4. SUBSEQUENT EVENTS
On July 2, 1997, the Company acquired all of the outstanding shares
of capital stock of Pro-Trak Corporation, the company that owns and
operates the Lake of the Woods business. The purchase price,
including the assumption of liabilities, was approximately $6.5
million. The bulk of the assets of the Lake of the Woods business is
comprised of accounts receivable and inventories.
Pro-Trak Corporation is a Wisconsin corporation with its headquarters
in Prentice, Wisconsin. Pro-Trak Corporation sources product from
its 100% owned subsidiary in Virginia and several offshore sources.
Lake of the Woods is a designer, manufacturer and marketer of branded
leather footwear for both the outdoor and occupational segments of
the market. The LAKE OF THE WOODS/R/ product line includes a full
range of sporting, hiking and work boots including the recently
announced CYBER-SYSTEM/R/ (which is designed to provide maximum
inner space comfort in the work boot line) and the CYBER-PAC/R/ high
performance insulation package in sporting boots.
The Company does not anticipate this acquisition will have a material
impact on 1997 results.
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 Six Months Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 73.1 73.5 73.9 73.6
----- ----- ----- -----
Gross Profit 26.9 26.5 26.1 26.4
Selling and Administrative
Expenses 23.0 23.7 21.7 23.7
----- ----- ----- -----
Operating Income 3.9 2.8 4.4 2.7
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 six-month period ending June 28, 1997 should not be considered to
be indicative of results to be reported for the balance of the fiscal
year.
Three Months Ended June 28, 1997 Compared to Three Months Ended June 29,
1996
Net Sales
Net sales for the three months ended June 28, 1997 increased $5,365,941,
or 23%, to $28,420,198 from $23,054,257 for the three months ended June
29, 1996. The growth in net sales was primarily due to the contribution
of the Rainfair, Inc. subsidiary and the RED BALL/R/ product line, both of
which were acquired during the second quarter of 1996. Together, these
two product lines accounted for $3.1 million of the increased sales.
LACROSSE/R/ and DANNER/R/ product line net sales during the second quarter
of 1997 both increased 11% over 1996 levels reflecting the increase in
advance orders during the fall selling season.
Gross Profit
Gross profit for the three months ended June 28, 1997 increased 25% to
$7,651,255, or 26.9% of net sales, from $6,107,085 or 26.5% of net sales
in the second quarter of 1996. Stronger DANNER/R/ product margins,
primarily due to increased sales and production levels, was the primary
reason for the improvement.
Selling and Administrative Expense
Selling and administrative expenses in the second quarter of 1997
increased 20%, to $6,550,063, or 23.0% of net sales, from $5,455,740, or
23.7% of net sales in the second quarter of 1996. The increase in
operating expenses was primarily a result of the additional expenses
incurred to operate the Rainfair, Inc. subsidiary for a full quarter and
the volume related variable expenses incurred as a result of increased
sales. Operating expenses decreased as a percentage of net sales
primarily as the result of the Company's ability to leverage the LaCrosse
operating expenses with the additional LACROSSE/R/ net sales and the
volume contributed by Red Ball.
Interest Expense
Interest expense for the three months ended June 28, 1997 decreased 7% to
$378,094 or 1.3% of net sales, from $407,413 or 1.8% of net sales for the
three months ended June 29, 1996. Lower average borrowings, primarily as
a result of lower inventories, was the primary reason for the decrease in
interest expense.
Income Tax Expense
The Company's effective income tax rate was 39.2% in the second quarter of
1997 compared to 39.4% in the second quarter of 1996.
Net Income
Primarily as a result of the increased net sales, the net income for the
second quarter of 1997 increased to $538,888 from $276,495 in the second
quarter of 1996.
Six Months Ended June 28, 1997 Compared to Six Months Ended June 29, 1996
Net Sales
Net sales for the six months ended June 28, 1997 increased $15,933,448, or
35%, to $61,118,676 from $45,185,228 for the first six months of 1996.
The inclusion of net sales of RAINFAIR/R/ and RED BALL/R/ products, both
of which were acquired during the second quarter of 1996, accounted for
$13.0 million of increased net sales. Rainfair's sales during the first
half of 1997 were impacted by $2.8 million of shipments on a spring order
to a major national account. The balance of the increase in net sales was
due to increased shipments of LACROSSE/R/ and DANNER/R/ products during
the second quarter, primarily as a result of the increase in advance
orders.
Gross Profit
Gross profit for the six months ended June 28, 1997 increased 34% to
$15,937,715, or 26.1% of net sales, from $11,914,123 or 26.4% of net sales
in the first six months of 1996. The increase in gross profit was
primarily due to the increase in net sales. The decrease in gross profit
as a percentage of net sales was primarily due to the inclusion of the
additional rainwear sales which tend to be at lower gross margin
percentages.
Selling and Administrative Expenses
Selling and administrative expenses in the first half of 1997 increased
24%, to $13,271,620, or 21.7% of net sales, from $10,708,403, or 23.7% of
net sales the first half of 1996. The increase in operating expenses was
primarily the result of including the Rainfair business for the entire
first half of 1997 versus two months of the first half of 1996 and the
volume related variable expenses associated with the increased net sales.
Operating expenses decreased as a percentage of net sales primarily as the
result of the Company's ability to leverage the LaCrosse operating
expenses with the additional LACROSSE/R/ product net sales and the volume
contributed by RED BALL/R/ product sales.
Interest Expense
Interest expense in the first half of 1997 increased 31% to $772,035 or
1.3% of net sales, from $587,598 or 1.3% of net sales for the first half
of 1996. An increase in interest expense in the first quarter of 1997,
primarily as a result of increased long-term debt 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 during the first half of 1997.
Income Tax Expense
The Company's effective income tax rate was 39.2% in the first half of
both 1997 and 1996.
Net Income
As a result of the increased net sales and lower operating expenses as a
percent of net sales, net income for the first half of 1997 increased to
$1,083,966 from $573,428 in the first half of 1996.
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 $10.3 million in the first half
of 1997 compared to $10.7 million in the first half of 1996. Slower
growth in inventories and the higher level of profitability was the
primary reason for the decrease.
Net cash used in investing activities was $2.1 million in the first half
of 1997 compared to $14.3 million in the first half of 1996. The 1996
investing activities included $12.5 million related to the Rainfair, Inc.
and Red Ball, Inc. acquisitions.
Net cash provided by financing activities was $6.1 million in the first
half of 1997 compared to $23.4 million in the first half of 1996. In the
second quarter of 1996, the Company invested approximately $14.7 million
in two acquisitions, Rainfair, Inc. and Red Ball, Inc. and also
repurchased 100% of its outstanding redeemable preferred stock for
approximately $2.0 million. These transactions were supported by long-
term and short-term borrowings. There was no activity of this nature in
the first half of 1997.
On July 2, 1997, the Company completed the purchase of Pro-Trak
Corporation for approximately $6.5 million. Funding was provided by
short-term bank borrowings. The Company anticipates that the maximum
investment in this business during 1997 will be approximately $8.0
million.
PART II - Other Information
ITEM 4 Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on June 12,
1997. At such meeting, (a) Patrick K. Gantert, Virginia F.
Schneider and Luke E. Sims were elected as directors of the
Company for terms to expire at the 2000 annual meeting of
shareholders and until their successors are duly elected and
qualified pursuant to the following votes: Patrick K. Gantert -
6,159,959 shares voted for, 132,220 shares withholding
authority, 0 abstentions and 0 broker non-votes; Virginia F.
Schneider - 6,158,595 shares for, 133,584 shares withholding
authority, 0 abstentions and 0 broker non-votes; Luke E. Sims -
6,159,696 shares for, 132,483 shares withholding authority, 0
abstentions and 0 broker non-votes; and (b) the LaCrosse
Footwear, Inc. 1997 Employee Stock Incentive Plan was approved
pursuant to the following vote: 6,240,486 shares voted for,
33,576 shares voted against, 16,916 shares abstained from voting
and 1,201 broker non-votes. The other directors of the Company
whose terms of office continued after the 1997 annual meeting of
shareholders are as follows: terms expiring at the 1998 annual
meeting - George W. Schneider and Eric E. Merk, Sr.; terms
expiring at the 1999 annual meeting - Frank J. Uhler, Jr. and
Richard A. Rosenthal.
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 June 28, 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: August 8, 1997 By: /s/ Patrick K. Gantert
Patrick K. Gantert
President and Chief Executive Officer
Date: August 8, 1997 By: /s/ Robert J. Sullivan
Robert J. Sullivan
Vice President-Finance and Administration
and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
LACROSSE FOOTWEAR, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
for the Quarterly Period ended June 28, 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 SIX
MONTHS ENDED JUNE 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-28-1997
<CASH> 373,101
<SECURITIES> 0
<RECEIVABLES> 24,837,372
<ALLOWANCES> 686,607
<INVENTORY> 39,812,736
<CURRENT-ASSETS> 67,406,263
<PP&E> 31,317,060
<DEPRECIATION> 18,663,579
<TOTAL-ASSETS> 96,606,118
<CURRENT-LIABILITIES> 21,397,623
<BONDS> 13,882,563
0
0
<COMMON> 67,176
<OTHER-SE> 56,952,943
<TOTAL-LIABILITY-AND-EQUITY> 96,606,118
<SALES> 61,118,676
<TOTAL-REVENUES> 61,118,676
<CGS> 45,180,961
<TOTAL-COSTS> 13,118,194
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 153,426
<INTEREST-EXPENSE> 772,035
<INCOME-PRETAX> 2,119,514
<INCOME-TAX> 830,853
<INCOME-CONTINUING> 1,083,966
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,083,966
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
