UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
11319 St. Andrew Street
La Crosse, Wisconsin 54603
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (608) 782-3020
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Common Stock, $.01 par value
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant at February 28, 1997: $34,343,988.
Number of shares of the registrant's common stock outstanding at February
28, 1997: 6,667,627 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December
31, 1996 (incorporated by reference into Parts I, II and IV)
Portions of the Proxy Statement for 1997 Annual Meeting of Shareholders
(to be filed with the Commission under Regulation 14A within 120 days
after the end of the registrant's fiscal year and, upon such filing, to be
incorporated by reference into Part III)
<PAGE>
PART I
Item 1. Business
General
LaCrosse Footwear, Inc. ("LaCrosse" or the "Company") is a leader in
the design, development, marketing and manufacturing of premium quality
protective footwear and rainwear for the sporting, occupational and
recreational markets. The Company markets its products primarily under
the LACROSSE/R/, RED BALL/R/, RAINFAIR/R/ and DANNER/R/ brands through an
employee sales force and, to a lesser extent, through selected
distributors and independent representatives. It also manufactures
private label footwear, footwear components and rainwear. LaCrosse's
products are characterized by innovative design, performance features and
durability, and are relatively unaffected by changing fashion trends.
Historically, LaCrosse has produced footwear primarily of rubber or
vinyl, some of which includes leather or fabric uppers. In March 1994,
the Company acquired the business of Danner Shoe Manufacturing Co.
("Danner"), a producer of premium quality leather footwear for the
sporting and occupational markets, which is sold primarily under the
DANNER/R/ brand. To broaden the base of business in the protective
clothing area, in May 1996, a 50%-owned subsidiary of the Company
purchased the assets of Rainfair, Inc. ("Rainfair") of Racine, Wisconsin.
Rainfair designs and markets rainwear and other protective clothing
generally for the occupational markets, which are sold primarily under the
RAINFAIR/R/ brand. Operations of Rainfair have been included in the
Company's financial statements since the date of acquisition. Also in May
1996, the Company acquired certain operating assets and trademarks of Red
Ball, Inc. ("Red Ball"). Red Ball historically sold products which
competed in many of the same product categories as the LACROSSE/R/ brand.
The Company was incorporated in Wisconsin in 1983 but traces its
history to 1897 when La Crosse Rubber Mills Company was founded. Current
management purchased LaCrosse's predecessor from the heirs of the founding
family and other shareholders in 1982.
Strategy
The Company's business strategy is to continue to (i) build, position
and capitalize on the strength of established brands, (ii) extend its
offerings of footwear, rainwear and other complementary products under the
established brands and (iii) expand and enhance its strong distribution
network of sales representatives, customer service and retail and
industrial customers.
Brand Positioning
Within the retail channels of distribution, the Company markets
footwear and rainwear under the well-established DANNER/R/, LACROSSE/R/
and RED BALL/R/ brands. Each brand is positioned differently in the
marketplace in order to capitalize on differences in end user expectations
for performance. The DANNER/R/ brand represents the highest level of
performance, with a select line of high quality, feature driven leather
footwear products at premium prices. The LACROSSE/R/ brand has a more
extensive product line including rubber, vinyl and leather footwear and
rainwear, distributed to a broad base of independent retailers. The RED
BALL/R/ brand offers a more narrow line of lower priced rubber/vinyl
footwear directed to the brand conscious, mass merchant market.
The Company sells products through the industrial distributor channel
principally under the LACROSSE/R/ and RAINFAIR/R/ brands. The brands are
positioned as complementary, with the LACROSSE/R/ brand including a full
performance range of rubber and vinyl footwear, while the RAINFAIR/R/
brand includes a full line of rainwear and protective clothing.
Products
The Company's brand product offering includes these major categories:
Rubber/Vinyl Footwear
The Company's rubber/vinyl footwear line is the most extensive of the
product categories with product offerings covering the sporting,
recreational and occupational markets. The Company markets rubber/vinyl
footwear mainly under the LACROSSE/R/ and RED BALL/R/ brands. The product
line ranges from low cost vinyl-molded products to high performance, hand-
crafted rubber products directed to specific occupational market niches.
In addition, the Company is a leader in rubber/vinyl bottom,
leather/fabric upper footwear for extreme cold and other high performance
applications. A rubber bottom boot with a leather or fabric upper
combines the waterproofness and flexibility of rubber footwear with the
fit and support of a laced leather boot.
Leather Footwear
The Company markets leather footwear under two brand names, DANNER/R/
and LACROSSE/R/. The DANNER/R/ products consist of premium quality
sporting, occupational and recreational boots available in numerous styles
and usually featuring the stitch-down manufacturing process which provides
outstanding built-in comfort for the owner. Danner was the first footwear
manufacturer to include a waterproof, breathable GORE-TEX/R/ bootie in
leather boots, and it continues to include that bootie in over 80% of its
products. The LACROSSE/R/ brand markets a focused line of indoor and
outdoor work boots appealing to consumers who desire durability and
comfort.
Rainwear and Protective Clothing
Rainwear and footwear are complementary products in many occupational
and outdoor environments. Rainfair offers a broad line of quality
rainwear and protective clothing appealing to those workers in utility,
construction, chemical processing, law enforcement and other groups
traditionally purchasing through industrial distributors. While most of
the garments are developed for general workwear, a number are constructed
for specific applications such as acid environments and flame
environments. The RAINFAIR/R/ brand is recognized in the industry for its
durability, quality and heritage. In recent years, the brand name has
been extended to include other protective garments such as aprons and
extreme cold weather clothing. Recently, a limited line of occupational
and sporting rainwear was introduced under the LACROSSE/R/ brand.
LaCrosse also sells footwear accessories such as liners, wader
suspenders and socks. During 1996, the Company offered approximately 400
styles of footwear and rainwear.
Product Design and Development
The Company's product design and development ideas originate within
the Company and through communication with its customers and suppliers
based upon perceived customer or consumer needs or new technological
developments in footwear, rainwear and materials. Sales personnel and
suppliers provide information to the Company's marketing division, which
oversees the development and testing of new product. New product needs
generally can be related to functional or technical characteristics which
are addressed by the Company's pattern, design and chemistry lab staffs.
The final aesthetics of the product are determined by marketing personnel,
at times in conjunction with outside design consultants. Once a product
design is approved for production, responsibility shifts to manufacturing
for pattern development and commercialization.
Customers, Sales and Distribution
The Company markets its brands and associated products through two
separate channels of distribution: retail and industrial.
Within the retail market, the LACROSSE/R/ brand is marketed through a
sales force comprised of 17 Company-employed sales people and four
independent sales representative groups. The Company's preference is
toward employee sales persons who are generally more focused and
productive. Unless a territory can support a single brand sales person,
the Company's strategy is to use the LaCrosse sales force to represent the
brand providing cost leverage and better service levels. The LaCrosse
sales force currently represents the DANNER/R/ brand in all but one
territory and the RED BALL/R/ brand in all but four territories.
The Company's industrial products are distributed through both
independent representatives and, where the territory justifies it, through
Company employed sales persons. With the addition of Rainfair during
1996, sales representation for territories covering approximately 50% of
the industrial sales for Rainfair have been combined with the LaCrosse
representation.
The Company's products are sold directly to more than 5,500 accounts,
including sporting goods/outdoor retailers, general merchandise and
independent shoe stores, wholesalers, industrial distributors, catalog
operations and the United States government. The Company's customer base
is also diversified as to size and location of customer and markets
served. As a result, the Company is not dependent upon a few customers,
and adverse economic conditions or mild or dry weather conditions in a
specific region are less likely to have a material effect on the Company's
results of operations.
The Company operates three factory outlet stores whose primary
purpose is disposal of slow moving, factory seconds and obsolete
merchandise. Two of these stores are located at the manufacturing
facilities in La Crosse, Wisconsin and Portland, Oregon. The Company also
derives royalty income from Danner Japan Ltd., a Japanese joint venture in
which the Company has a 10% ownership interest, on Danner Japan Ltd.'s
distribution of products in Japan under the DANNER/R/ brand that are
manufactured by others overseas.
Advertising and Promotion
Because a majority of the Company's marketing expenditures are for
promotional materials, cooperative advertising and point-of-sale
advertising designed to assist dealers and distributors in the sale of the
Company's products, the Company is able to customize advertising and
marketing in each of its distribution channels. The Company's marketing
strategy allows it to emphasize those features of its products that have
special appeal to the applicable distribution channel.
The Company advertises and promotes its products through a variety of
methods including national and regional print advertising, public
relations, point-of-sale displays, catalogs and packaging.
Manufacturing
Traditionally, the Company has produced substantially all of its
rubber, leather and vinyl products in its United States manufacturing
facilities in La Crosse, Wisconsin, Portland, Oregon and Claremont, New
Hampshire. Liners are produced at the Company's Hillsboro, Wisconsin
facility. The Hillsboro facility also manufactures a line of waders with
nylon uppers and rubber or vinyl boot bottoms, using a heat-sealing
process. Leather tops for the LACROSSE/R/ brand rubber bottom/leather top
pac boots are produced at the Company's Clintonville, Wisconsin facility.
The Company manufactures a majority of its footwear in the United
States because the Company believes it is able to maintain better control
over quality, inventory production scheduling and inventory levels. "Made
in the USA" is prominently displayed in the Company's advertising,
promotion and marketing materials for the LACROSSE/R/ and DANNER/R/
brands.
Both the RAINFAIR/R/ and RED BALL/R/ brands, which the Company
started distributing during 1996, source a substantial portion of their
product offshore, primarily in the Dominican Republic and Pacific Rim.
The Company intends to continue to outsource these products. The Company
believes that there are adequate sources of supply for these imported
products.
Suppliers
The Company's three principal raw materials used in the production of
the Company's products, based upon dollar value, are leather, crude rubber
and oil-based vinyl compounds for vinyl footwear and rainwear products.
While the Company saw price increases during 1995 for all three of these
raw materials, prices have since stabilized at lower levels and the
Company has no reason to believe that all three of these raw materials
will not continue to be available at competitive prices. The Company also
uses technical components in the Company's products including
THINSULATE/R/, GORE-TEX/R/, CORDURA/R/, DRI-LEX/R/, POLARTEC/R/ and
VIBRAM/R/. No interruption in the supply of any of these components is
anticipated.
The Company purchases GORE-TEX/R/ waterproof fabric directly from
W.L. Gore & Associates ("Gore"), for both LaCrosse and Danner footwear.
Gore has traditionally been Danner's single largest supplier, in terms of
dollars spent on raw materials. Approximately 80% of Danner's footwear,
in terms of number of pairs produced, incorporates GORE-TEX/R/ waterproof
fabric. Agreements with Gore prohibit the Company, directly and through
Danner, from manufacturing any products containing any taped waterproof,
breathable products other than GORE-TEX/R/ products during the term of the
agreements. These agreements with Gore may be terminated by either party
upon 90 days' written notice. The Company considers its relationships
with Gore to be good. Effective January 1, 1997, the majority of Danner's
GORE-TEX/R/ footwear is guaranteed to be waterproof for one year from the
date of purchase compared to two years previously.
Quality Assurance
The Company's quality control programs are important to its
reputation for manufacturing superior footwear. In 1991, the Company
initiated a formal continuous quality improvement program at the La Crosse
plant. This total quality management (TQM) program is directed at
involving employees to participate in assuring the highest practicable
level of efficiency in production and product quality.
The Company's La Crosse plant has a chemistry lab which is
responsible for incoming raw material and in-process quality testing. All
crude rubber is tested to assure that each batch meets the high values
specified by the Company for range of plasticity and rate of cure, both of
which have a direct relationship to the ultimate quality of the product.
Fabrics are sample tested to meet LaCrosse's requirements for strength and
weight. Incoming leather skins are inspected for color, brand and weight.
The Company's Danner operation tests 100% of all GORE-TEX/R/ bootie
liners for leaks prior to sewing them into boots. At least 18% of all
completed waterproof boots are filled with water for testing. Leather is
tested for lasting ability, tear strength, finish and thickness.
Backlog
At December 31, 1996, the Company had unfilled orders from its
customers in the amount of approximately $15.8 million compared to $7.9
million at December 31, 1995. Approximately $6.0 million of the increase
was due to the addition of the Rainfair and Red Ball product lines. All
orders at December 31, 1996 are expected to be filled during 1997.
Because a major portion of the Company's orders are placed in January
through July for delivery in June through October, the Company's backlog
is lowest during the fourth quarter and peaks during the second quarter.
Factors other than seasonality, such as pending large national account
orders or United States government orders, could have a significant impact
on the Company's backlog. Therefore, backlog at any one point in time may
not be indicative of future results. Generally, orders may be cancelled
by customers prior to shipment without penalty.
Competition
The various categories of the protective footwear, rainwear and
protective clothing markets in which the Company operates are highly
competitive. The Company competes with numerous other manufacturers, many
of whom have substantially greater financial, distribution and marketing
resources than the Company. Because the Company has a broad product line,
its competition varies by product category. The Company has two to three
major domestic competitors in most of its rubber and vinyl product lines,
at least four major competitors in connection with the Company's sporting
footwear, at least six major competitors in connection with hiking boots
and at least four major competitors in connection with its occupational
footwear, rainwear and protective clothing. The Company also faces
competition from offshore manufacturers, particularly in the occupational
and children's markets.
LaCrosse believes it maintains a competitive position compared to its
competitors who sell rubber and vinyl footwear through its attention to
quality and the delivery of value, its position as an innovator in common
product segments, its above-average record of delivering products on a
timely basis, its strong customer relationships and, in some cases, the
breadth of its product line. Some of the Company's competitors compete
mainly on the basis of price.
Offshore manufacturers face significantly lower labor costs to
produce rubber and vinyl products. However, shipping costs and times,
requirements for short runs on some items, and unpredictable weather
patterns that would force offshore manufacturers or their distributors to
store large inventories in the United States to be able to meet sudden
increases in demand are some disadvantages the offshore manufacturers
face. Further, because the manufacturing process for vinyl footwear
products is much less labor intensive than for rubber footwear, lower
offshore labor rates are less of a competitive advantage in the production
of vinyl footwear. Moreover, the Company's vinyl footwear products enable
the Company to compete more effectively against offshore manufacturers of
rubber footwear.
Leather boot manufacturers and suppliers, some of which have strong
brand name recognition in the markets they serve, are the major
competitors of the Company's Danner product line. These competitors
manufacture domestically and/or import products from offshore. Danner
products effectively compete with domestically produced products, but are
generally at a price disadvantage against lower cost imported products,
because offshore manufacturers generally pay significantly lower labor
costs. The Company focuses on the premium quality, premium price segment
of the market in which product function, design, comfort and quality,
continued technological improvements, brand awareness, timeliness of
product delivery and product pricing are all important. The Company
believes, by attention to these factors, the Danner protective footwear
line has maintained a strong competitive position in its current market
niches.
Employees
As of December 31, 1996, the Company had approximately 1,400
employees, all located in the United States. Approximately 550 of the
Company's employees at the La Crosse, Wisconsin facility are represented
by the United Steel Workers of America under a three-year collective
bargaining agreement which expires in October 1998, approximately 180 of
the Company's employees at the Portland, Oregon facility are represented
by the United Food & Commercial Workers Union under a collective
bargaining agreement which expires in January 1999 and approximately 60
of the Company's employees at the Racine, Wisconsin facility are
represented by the International Ladies Garment Workers Union under a
collective bargaining agreement which expires in July 1997. The Company
has approximately 350 employees at manufacturing facilities located
outside of La Crosse, Wisconsin, Portland, Oregon and Racine, Wisconsin.
None of these employees are represented by a union. The Company considers
its employee relations to be good.
Trademarks and Trade Names; Patents
The Company owns United States federal registrations for several of
its marks, including LACROSSE/R/, DANNER/R/, RED BALL/R/, LACROSSE and
stylized Indianhead design that serve as the Company's logo, ALLTEMP/R/,
DURALITE/R/, FIRETECH/R/, FLY-LITE/R/, ICE KING/R/, ICECUBE/R/, ICEMAN/R/,
AIRTHOTIC/R/, CROSS-HIKER/R/and RED BALL JETS/R/. LaCrosse also has
registrations for the "L" shape design associated with the lacing system
on the Alltemp Boot Systems, and the stylized Indianhead design associated
with the Company's logo. In addition, the Company owns registrations in
Canada for its marks ALLTEMP/R/, ICEMAN/R/ and stylized Indianhead design
and in Mexico for its mark LACROSSE and stylized Indianhead design. The
Company's 50%-owned subsidiary, Rainfair, also owns United States federal
registrations for certain of its marks, including RAINFAIR/R/ and RAINFAIR
and stylized horse design that serve as Rainfair's logo, and owns a
registration in Canada for its mark AIRBOB/R/. The Company generally
attempts to register a trademark relating to a product's name only where
the Company intends to heavily promote the product or where the Company
expects to sell the product in large volumes. The Company defends its
trademarks and trade names against infringement to the fullest extent
practicable under the law. Other than registrations relating to the
LACROSSE/R/, DANNER/R/, RED BALL/R/ and RAINFAIR/R/ names, the Company
does not believe any trademark is material to its business.
The Company pays a royalty on sales of products carrying the
DANNER/R/ name equal to 0.5% of the price of products sold that applies to
net sales in excess of $4.0 million annually. The royalty agreement
expires December 31, 1998.
The Company is not aware of any material conflicts concerning its
marks or its use of marks owned by other companies.
The Company owns several patents that improve its competitive
position in the marketplace, including patents for a cold cement process
for affixing varying outsole compositions to a rubber upper; a method of
manufacture for attaching a nylon upper to a rubber bottom; a rubber
footwear product in which a heel counter is trapped or embedded within the
rubber boot to improve the support provided to the wearer's foot; the
DANNER BOB/R/ outsole; and a patent for its AIRTHOTIC/R/, which is a
ventilated arch support that fits under the heel.
Seasonality
As has traditionally been the case, the Company's sales in 1996 were
higher in the last two quarters of the year than in the first two
quarters. The Company expects this sales trend to continue. Additional
information about the seasonality of the Company's business is contained
under "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Overview" on page 13 of the Company's 1996 Annual
Report to Shareholders and such information is hereby incorporated herein
by reference.
Foreign Operations and Export Sales
Other than the Company's 10% equity interest in Danner Japan, Ltd.,
the Company does not have any foreign operations. International sales
accounted for less than 5% of the Company's net sales in 1996.
Environmental Matters
The Company and the industry in which it competes are subject to
environmental laws and regulations concerning emissions to the air,
discharges to waterways and the generation, handling, storage,
transportation, treatment and disposal of waste materials. The Company's
policy is to comply with all applicable environmental, health and safety
laws and regulations. These laws and regulations are constantly evolving
and it is difficult to predict accurately the effect they will have on the
Company in the future. Compliance with applicable environmental
regulations and controls has not had, nor are they expected to have in
1997, any material impact on the capital expenditures, earnings or
competitive position of the Company. During 1995 and 1996, the Company
spent approximately $250,000 to cure an air emission problem cited by the
Wisconsin Department of Natural Resources. During 1996, the Company
received a letter from the Wisconsin Department of Natural Resources
indicating that the Company was in compliance. While changes in
manufacturing procedures required as a result of the citation increased
ongoing costs approximately $150,000 per year, the Company believes it has
the potential to reduce these ongoing costs through changes in
manufacturing procedures.
Executive Officers of the Registrant
The following table sets forth certain information, as of March 15,
1997, regarding the executive officers of the Company.
Name Age Position
George W. Schneider 74 Chairman of the Board and Director
Frank J. Uhler, Jr. 66 Vice Chairman of the Board and
Director
Patrick K. Gantert 47 President, Chief Executive Officer
and Director
Eric E. Merk, Sr. 54 Vice President - Danner and
Director
Wayne L. Berger 50 Vice President - Purchasing
Stephen F. Bonner 43 Vice President - Claremont
Operations
Kenneth F. Ducke 53 Treasurer and Assistant Secretary
Joseph F. Fahey 42 Vice President - Retail Sales and
Marketing
D. Keith Fell 45 Vice President - Operations
Peter V. Fiorini 59 Vice President - Industrial Sales
David R. Flaschberger 38 Vice President - Human Resources
David R. Llewellyn 59 Vice President - Marketing and
Business Development
Robert G. Rinehart, Jr. 44 Vice President - Product
Development
Joseph P. Schneider 37 Vice President of the Company and
Executive Vice President and Chief
Operating Officer of Danner
Robert J. Sullivan 50 Vice President - Finance and
Administration and Chief Financial
Officer
John A. Tadewald 58 Vice President - Engineering
George W. Schneider was elected to the Board of Directors of the
Company's predecessor in 1968 and was the principal investor and
motivating force behind the management buyout of the Company's predecessor
in 1982. Since 1982, Mr. Schneider also has served as Chairman of the
Board of the Company.
Frank J. Uhler, Jr., has served as Vice Chairman of the Board of the
Company since December 31, 1994 and as a director since he joined the
Company in June 1978. From June 1978 until 1982, Mr. Uhler served as
President and from 1982 until December 31, 1994 he served as President and
Chief Executive Officer of the Company. Along with Mr. George W.
Schneider, Mr. Uhler was the other principal member of the management
group that acquired the Company's predecessor in 1982.
Patrick K. Gantert has served as President, Chief Executive Officer
and as a director of the Company since December 31, 1994. Prior thereto,
Mr. Gantert served as Executive Vice President and Chief Operating Officer
of the Company since August 1993 and as Executive Vice President since
June 1992. From March 1985, when he joined the Company, until June 1992,
Mr. Gantert was Vice President-Finance.
Eric E. Merk, Sr. has served as Vice President - Danner and as a
director of the Company since the March 1994 completion of the Danner
acquisition. Prior to joining the Company, Mr. Merk was a significant
shareholder and President of Danner since purchasing Danner in 1983.
Wayne L. Berger joined the Company in 1974 and has held various
positions in finance and administration since that time. In June 1988,
Mr. Berger was elected Vice President - Purchasing.
Stephen F. Bonner joined the Company in 1983 and has held various
positions in manufacturing since that time. In June 1991, Mr. Bonner was
elected Vice President - Claremont Operations.
Kenneth F. Ducke joined the Company in 1974 and has held various
positions in finance and administration since that time. In 1982, Mr.
Ducke was elected Treasurer and Assistant Secretary.
Joseph F. Fahey has served as Vice President - Retail Sales and
Marketing since he joined the Company in October 1996. From 1993 until
1996, Mr. Fahey served as Vice President of Sales and Marketing for Stihl,
Incorporated, a manufacturer of premium hand-held power equipment and from
1988 through 1993, Mr. Fahey was the Manager of Dealer Development and
Research for the Power Equipment Division of American Honda Motor Company.
D. Keith Fell has served as Vice President - Operations since he
joined the Company in March 1996. From May 1994 until August 1995, Mr.
Fell was Vice President of Manufacturing for Traco, Inc., a manufacturer
of commercial windows and doors, from October 1993 until May 1994, he was
Vice President of Manufacturing for Hedstrom Corporation, a manufacturer
of outdoor play equipment, and from September 1990 until October 1993, Mr.
Fell was Director of Manufacturing for Hedstrom.
Peter V. Fiorini has served as Vice President - Industrial Sales
since he joined the Company in July 1991. From 1975 until joining the
Company, Mr. Fiorini was general manager of the Ranger Rubber Company
division of Endicott Johnson Shoe Company, Inc.
David R. Flaschberger joined the Company in May 1993 as Human
Resources Manager. He served in such capacity until November 1995, when
he was elected Vice President - Human Resources. From 1990 until joining
the Company, Mr. Flaschberger was the Director of Human Resources of The
Company Store, Inc., a direct mail marketer and manufacturer of down-
filled bedding products.
David R. Llewellyn has served as Vice President - Marketing and
Business Development since he joined the Company in April 1994. From 1989
until joining the Company, Mr. Llewellyn was an independent marketing and
business consultant.
Robert G. Rinehart, Jr. joined the Company in January 1990 as a
territory salesperson. In July 1991, Mr. Rinehart was appointed as the
National Accounts Manager. He served in such capacity until October 1992,
when he was appointed Senior Marketing Manager, and in March 1994 he was
elected Vice President - Product Development.
Joseph P. Schneider joined the Company in 1986 as a territory sales
manager and in January 1990 was appointed as the National Accounts
Manager. From May 1991 until January 1993, Mr. Schneider served as the
National Sales Manager and from January 1993 until June 1996 he was Vice
President - Retail Sales. In June 1996, Mr. Schneider was elected as a
Vice President of the Company and as Executive Vice President and Chief
Operating Officer of Danner.
Robert J. Sullivan joined the Company in November 1992 as Manager of
Finance and Administration, was elected Vice President - Finance and
Administration in March 1994 and was given the additional title of Chief
Financial Officer in March 1997. From 1987 until joining the Company, Mr.
Sullivan was Vice President-Finance of Skipperliner Industries, Inc., a
manufacturer of houseboats.
John A. Tadewald has served as Vice President - Engineering since he
joined the Company in October 1987. From 1963 until joining the Company,
Mr. Tadewald held engineering positions with several industrial companies.
Joseph P. Schneider is the son of George W. Schneider. None of the
other directors or executive officers are related to each other. The term
of office of each of the executive officers expires at the annual meeting
of directors.
Item 2. Properties
The following table sets forth certain information, as of December
31, 1996, relating to the Company's principal facilities.
Properties
Owned Approximate
or Floor Area in Principal
Location Leased Square Feet Uses
La Crosse, WI Leased(1) 6,600 Principal sales,
marketing and executive
offices
La Crosse, WI Owned 400,000 Manufacture rubber
boots
La Crosse, WI Leased(2) 290,000 Main warehouse and
distribution facility
La Crosse, WI Owned 11,000 Retail outlet store
La Crosse, WI Leased(3) 42,000 Warehouse and raw
material storage
Clintonville, WI Owned 42,500 Manufacture leather
components and
construct rubber boots
Clintonville, WI Leased 11,000 Manufacture component
parts
Clintonville, WI Leased 4,000 Warehouse and raw
material storage
Hillsboro, WI Leased(4) 40,000 Manufacture component
parts
Kenosha, WI Leased 3,000 Retail outlet store
Claremont, NH Owned 150,000 Manufacture vinyl
injection-molded
products
Claremont, NH Leased(5) 53,000 Warehouse and
distribution facility
Portland, OR Leased(6) 36,000 Manufacture DANNER/R/
products, offices,
retail outlet store and
warehouse space
Portland, OR Leased(7) 16,000 Warehouse and
distribution facility
Racine, WI Leased(8) 104,700 Manufacturing,
warehousing and offices
for Rainfair
_________________________
(1) This space is leased in a 212,000 square foot building adjacent to
the Company's manufacturing plant in La Crosse, Wisconsin. The lease
expires in 1997 but management anticipates entering into a long-term
lease for the entire facility during 1997. The additional space will
be utilized to replace warehouse space which is currently leased
and/or to provide additional manufacturing capacity.
(2) The lease for 183,000 square feet of this facility expires in 2000.
The Company leases the balance of the space on short-term leases.
(3) This facility is leased by the Company in La Crosse, Wisconsin on a
short-term lease.
(4) There are two facilities leased by the Company in Hillsboro,
Wisconsin with approximately 40,000 square feet.
(5) The lease of this facility expires in 1998. This space is leased in
a facility adjacent to the Company's manufacturing plant in
Claremont, New Hampshire.
(6) The lease for this facility expires in March 2004, but the Company
has the option to extend the term for up to an additional ten years.
The lease includes approximately one acre of adjacent vacant property
that could be used for expansion. Eric E. Merk, Sr., a director,
executive officer and shareholder of the Company, is affiliated with
the lessor of this facility.
(7) The lease for this facility expires in December 1997.
(8) The lease for this facility was entered into in May 1996 and expires
in May 2001.
Based on present plans, management believes that the Company's
current facilities will be adequate to meet the Company's anticipated
needs for production of LaCrosse products for at least the next two years.
Once the manufacturing facilities have reached capacity, the Company can
expand further by leasing or purchasing facilities or by outsourcing some
components.
Item 3. Legal Proceedings
In November 1993, the Company, in order to preserve its legal rights,
instituted litigation against the United States Government in the United
States Court of Federal Claims ("USCFC") seeking a refund of amounts
previously paid to the Internal Revenue Service ("IRS") relating to the
Company's treatment of its LIFO inventory stemming from the Company's 1982
leveraged buyout. If the Government prevails in this litigation, the IRS
has indicated an intention to assess the Company for additional tax,
penalties, interest and other amounts for prior periods as a result of
recalculating the Company's LIFO inventory reserve. The Company is not
currently in a position to predict the outcome of the USCFC litigation.
However, a recent decision of the USCFC in another case (Kohler Co. vs.
United States, Case No. 94-628T, November 3, 1995) supports the principal
positions taken by the IRS and the Government in the USCFC litigation.
The Company believes that its total current exposure to the IRS with
respect to this matter is not material to the Company's financial position
or results of operations.
From time to time, the Company, in the normal course of business, is
also involved in various other claims and legal actions arising out of its
operations. The Company does not believe that the ultimate disposition of
any currently pending claims or actions would have a material adverse
effect on the Company or its financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders during the
quarter ended December 31, 1996.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The portions of page 28 which describe the market for and dividends
declared on the Company's Common Stock and Note 5 of Notes to Consolidated
Financial Statements which describe restrictions on dividends and which
are contained in the Company's 1996 Annual Report to Shareholders are
hereby incorporated herein by reference in response to this Item.
Item 6. Selected Financial Data
The information set forth in the table on page 12 of the Company's
1996 Annual Report to Shareholders under the caption "Five Year Summary of
Selected Financial Data" is hereby incorporated herein by reference in
response to this Item.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information set forth on pages 13 through 16 in the Company's
1996 Annual Report to Shareholders under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
is hereby incorporated herein by reference in response to this Item.
Item 8. Financial Statements and Supplementary Data
The consolidated statements of income, common shareholders' equity
and cash flows for each of the years in the three-year period ended
December 31, 1996, and the related consolidated balance sheets of the
Company as of December 31, 1996 and 1995, together with the related notes
thereto and the independent auditor's report, and the Company's unaudited
quarterly results of operations for the two-year period ended December 31,
1996, all set forth on pages 17 through 28 of the Company's 1996 Annual
Report to Shareholders, are hereby incorporated herein by reference in
response to this Item.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item with respect to directors and
Section 16 compliance is included under the captions "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance",
respectively, in the Company's definitive Proxy Statement for its 1997
Annual Meeting of Shareholders ("Proxy Statement") and is hereby
incorporated herein by reference. Information with respect to the
executive officers of the Company appears in Part I, pages 9 through 12,
of this Annual Report on Form 10-K.
Item 11. Executive Compensation
The information required by this Item is included under the captions
"Board of Directors-Director Compensation" and "Executive Compensation" in
the Proxy Statement and is hereby incorporated herein by reference;
provided, however, that the subsection entitled "Executive Compensation-
Report on Executive Compensation" shall not be deemed to be incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is included under the caption
"Principal Shareholders" in the Proxy Statement and is hereby incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is included under the captions
"Certain Transactions" and "Executive Compensation-Compensation Committee
Interlocks and Insider Participation" in the Proxy Statement and is hereby
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial statements - The financial statements listed in
the accompanying index to financial statements and
financial statement schedules are incorporated by reference
in this Annual Report on Form 10-K.
2. Financial statement schedules - The financial statement
schedules listed in the accompanying index to financial
statements and financial statement schedules are filed as
part of this Annual Report on Form 10-K.
3. Exhibits - The exhibits listed in the accompanying index to
exhibits are filed as part of this Annual Report on Form
10-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on
this 27th day of March, 1997.
LACROSSE FOOTWEAR, INC.
By /s/ Patrick K. Gantert
Patrick K. Gantert
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ George W. Schneider Chairman of the Board and March 27, 1997
George W. Schneider Director
/s/ Patrick K. Gantert President, Chief Executive March 27, 1997
Patrick K. Gantert Officer and Director
(Principal Executive
Officer)
/s/ Robert J. Sullivan Vice President-Finance and March 27, 1997
Robert J. Sullivan Administration (Principal
Financial Officer)
/s/ Frank J. Uhler, Jr. Vice Chairman of the Board March 27, 1997
Frank J. Uhler, Jr. and Director
/s/ Eric E. Merk, Sr. Vice President-Danner and March 27, 1997
Eric E. Merk, Sr. Director
/s/ Richard A. Rosenthal Director March 27, 1997
Richard A. Rosenthal
/s/ Virginia F. Schneider Director March 27, 1997
Virginia F. Schneider
/s/ Luke E. Sims Director March 27, 1997
Luke E. Sims
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULE
Page
Annual Report
Form 10-K to Shareholders
Consolidated Balance Sheets at
December 31, 1996 and 1995 - 17
Consolidated Statements of Income
for each of the three years in the
period ended December 31, 1996 - 18
Consolidated Statements of Common
Shareholders' Equity for each of the
three years in the period ended
December 31, 1996 - 19
Consolidated Statements of Cash
Flows for each of the three years in
the period ended December 31, 1996 - 20
Notes to Consolidated Financial
Statements - 21-26
Independent Auditor's Report - 27
Independent Auditor's Report on
Financial Statement Schedule 21 -
Financial Statement Schedule:
II - Valuation and
Qualifying Accounts 22-23 -
All other financial statement schedules are omitted since the required
information is not present or is not present in amounts sufficient to
require submission of the schedules, or because the information required
is included in the consolidated financial statements and notes thereto.
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders
LaCrosse Footwear, Inc.
La Crosse, Wisconsin
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated
supplemental schedule II is presented for purposes of complying with the
Securities and Exchange Commission's rules and is a part of the basic
consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in our audits of the basic consolidated
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic consolidated financial statements taken
as a whole.
McGLADREY & PULLEN, LLP
La Crosse, Wisconsin
February 3, 1997
<PAGE>
<TABLE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Additions
Balance at Balance
Beginning Charged To Costs Charged To at End
Description of Period and Expenses Other Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Accounts receivable
allowances:
Allowance for returns $ 249,000 $ 915,141 $ -- $ 925,141 $ 239,000
Allowance for cash discounts 96,000 811,603 -- 795,603 112,000
Allowance for doubtful accounts 294,000 137,440 45,000 139,440 337,000
Allowance for uncollectible
interest 30,438 86,397 -- 86,461 30,374
---------- ------------- ------------ ----------- ----------
Total $ 669,438 $ 1,950,581 $ 45,000 $ 1,946,645 $ 718,374
========== ============= ============ =========== ==========
Inventory allowances:
Allowance for obsolescence $ 420,000 $ 9,500 $ -- $ 29,500 $ 400,000
========== ============= ============ =========== ==========
Warranty allowance:
Allowance for warranties $ -- $ 585,137 $ 555,437 $ 353,574 $ 787,000
========== ============= ============ =========== ==========
Year ended December 31, 1995:
Accounts receivable
allowances:
Allowance for returns $ 239,000 $ 762,470 $ -- $ 721,470 $ 280,000
Allowance for cash
discounts 112,000 644,486 -- 642,486 114,000
Allowance for doubtful
accounts 337,000 168,068 -- 123,368 381,700
Allowance for
uncollectible interest 30,374 85,729 -- 78,543 37,560
---------- ------------ ------------ ---------- ---------
Total $ 718,374 $ 1,660,753 $ -- $ 1,565,867 $ 813,260
========== ============ ============ ========== =========
Inventory allowances:
Allowance for obsolescence $ 400,000 $ 718,224 $ -- $ 304,796 $ 813,428
========== ============ ============ ========== =========
Warranty allowance:
Allowance for warranties $ 787,000 $ 856,706 $ -- $ 803,706 $ 840,000
========== ============ ============ ========== =========
Year ended December 31, 1996:
Accounts receivable
allowances:
Allowance for returns $ 280,000 $ 1,234,556 $ -- $ 947,556 $ 567,000
Allowance for cash
discounts 114,000 90,496 -- 15,496 189,000
Allowance for doubtful
accounts 381,700 167,655 335,000 178,855 705,500
Allowance for
uncollectible interest 37,560 92,268 -- 84,026 45,802
---------- ----------- ---------- ---------- ----------
Total $ 813,260 $ 1,584,975 $ 335,000 $ 1,225,933 $1,507,302
========== =========== ========== ========== ==========
Inventory allowances:
Allowance for obsolescence $ 813,428 $ 272,904 350,000 $ 235,332 $1,201,000
========== =========== ========== ========== ==========
Warranty allowance:
Allowance for warranties $ 840,000 $ 1,057,730 $ -- $ 972,730 $ 925,000
========== =========== ========== ========== ==========
The accounts receivable and inventory allowances above were deducted from
the applicable asset account.
</TABLE>
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Page
Number Exhibit Description Number
(2.1) Asset Purchase Agreement, dated as of --
February 11, 1994, between LaCrosse Footwear,
Inc. and Danner Shoe Manufacturing Co.
[Incorporated by reference to Exhibit (2) to
LaCrosse Footwear, Inc.'s Form S-1
Registration Statement (Registration No. 33-
75534)]
(2.2) Asset Purchase Agreement, dated May 16, 1996, --
by and among Rainco, Inc., LaCrosse Footwear,
Inc., Rainfair, Inc. and Craig L. Leipold
[Incorporated by reference to Exhibit (2.1)
to LaCrosse Footwear, Inc.'s Current Report
on Form 8-K dated May 31, 1996 and filed
June 14, 1996]
(3.1) Restated Articles of Incorporation of --
LaCrosse Footwear, Inc. [Incorporated by
reference to Exhibit (3.0) to LaCrosse
Footwear, Inc.'s Form S-1 Registration
Statement (Registration No. 33-75534)]
(3.2) By-Laws of LaCrosse Footwear, Inc., as --
amended to date [Incorporated by reference to
Exhibit (3.2) to LaCrosse Footwear, Inc.'s
Annual Report on Form 10-K for the year ended
December 31, 1994]
(4.1) Credit Agreement, dated as of May 31, 1996, --
by and among LaCrosse Footwear, Inc., Firstar
Bank Milwaukee, N.A., The Northern Trust
Company, Harris Trust and Savings Bank and
Firstar Bank Milwaukee, N.A., as Agent for
the Banks [Incorporated by reference to
Exhibit (4.1) to LaCrosse Footwear, Inc.'s
Quarterly Report on Form 10-Q for the quarter
ended June 29, 1996]
(4.2) Note Purchase Agreement, dated as of June 1, --
1990, between LaCrosse Footwear, Inc. and
Teachers Insurance and Annuity Association of
America [Incorporated by reference to
Exhibit (10.1) to LaCrosse Footwear, Inc.'s
Form S-1 Registration Statement (Registration
No. 33-75534)]
(4.3) Assignment and Assumption Agreement, dated as --
of October 7, 1994, between LaCrosse
Footwear, Inc. and LaCrosse Products, Inc.
[Incorporated by reference to Exhibit (10.2)
to LaCrosse Footwear, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended October 1,
1994]
(4.4) Amendment to Note Purchase Agreement, dated --
as of October 7, 1994, between LaCrosse
Footwear, Inc. and Teachers Insurance and
Annuity Association of America [Incorporated
by reference to Exhibit (10.3) to LaCrosse
Footwear, Inc.'s Quarterly Report on Form 10-
Q for the quarter ended October 1, 1994]
(9) Voting Trust Agreement, dated as of June 21, --
1982, as amended [Incorporated by reference
to Exhibit (9) to LaCrosse Footwear, Inc.'s
Form S-1 Registration Statement (Registration
No. 33-75534)]
(10.1) Lease, dated as of January 7, 1991, between --
LaCrosse Footwear, Inc. and Central States
Warehouse, Inc. [Incorporated by reference
to Exhibit (10.2) to LaCrosse Footwear,
Inc.'s Form S-1 Registration Statement
(Registration No. 33-75534)]
(10.2) Amendment, dated as of June 29, 1995, to --
Lease between LaCrosse Footwear, Inc. and
Central States Warehouse, Inc. [Incorporated
by reference to Exhibit (10.2) to LaCrosse
Footwear, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1995]
(10.3) Lease, dated as of December 19, 1994, between --
Danner Shoe Manufacturing Co. and Specht
Development, Inc. [Incorporated by reference
to Exhibit (10.2) to LaCrosse Footwear,
Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1994]
(10.4)* Employment and Consulting Agreement, dated as --
of October 1, 1990 and as amended as of
October 31, 1992, between Frank J. Uhler, Jr.
and LaCrosse Footwear, Inc. [Incorporated by
reference to Exhibit (10.4) to LaCrosse
Footwear, Inc.'s Form S-1 Registration
Statement (Registration No. 33-75534)]
(10.5)* Amendment No. 1, dated as of December 31, --
1994, to Employment and Consulting Agreement
between Frank J. Uhler, Jr. and LaCrosse
Footwear, Inc. [Incorporated by reference to
Exhibit (10.5) to LaCrosse Footwear, Inc.'s
Annual Report on Form 10-K for the year ended
December 31, 1994]
(10.6)* Phantom Stock Agreement, dated as of --
October 31, 1992, and amended as of December
20, 1993, between Frank J. Uhler, Jr. and
LaCrosse Footwear, Inc. [Incorporated by
reference to Exhibit (10.5) to LaCrosse
Footwear, Inc.'s Form S-1 Registration
Statement (Registration No. 33-75534)]
(10.7)* Amendment No. 1, dated as of December 31, --
1994, to Phantom Stock Agreement between
Frank J. Uhler, Jr. and LaCrosse Footwear,
Inc. [Incorporated by reference to Exhibit
(10.7) to LaCrosse Footwear, Inc.'s Annual
Report on Form 10-K for the year ended
December 31, 1994]
(10.8)* Employment Agreement, dated as of July 1, --
1992, and amended as of May 28, 1993, between
Patrick K. Gantert and LaCrosse Footwear,
Inc. [Incorporated by reference to Exhibit
(10.8) to LaCrosse Footwear, Inc.'s Annual
Report on Form 10-K for the year ended
December 31, 1994]
(10.9)* Employment Agreement, dated as of March 14, --
1994, between LaCrosse Footwear, Inc. and
Eric E. Merk, Sr. [Incorporated by reference
to Exhibit (10.12) to LaCrosse Footwear,
Inc.'s Form S-1 Registration Statement
(Registration No. 33-75534)]
(10.10)* Amendment No. 1, dated as of June 1, 1995, to --
Employment Agreement between LaCrosse
Footwear, Inc. and Eric E. Merk, Sr.
[Incorporated by reference to Exhibit (10.1)
to LaCrosse Footwear, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended September
30, 1995]
(10.11)* Employment Agreement, dated as of June 9, --
1994, between David Llewellyn and LaCrosse
Footwear, Inc. [Incorporated by reference to
Exhibit (10.1) to LaCrosse Footwear, Inc.'s
Quarterly Report on Form 10-Q for the quarter
ended July 2, 1994]
(10.12)* LaCrosse Footwear, Inc. Deferred Compensation --
Plan for Key Employees [Incorporated by
reference to Exhibit (10.14) to LaCrosse
Footwear, Inc.'s Form S-1 Registration
Statement (Registration No. 33-75534)]
(10.13)* LaCrosse Footwear, Inc. Deferred Compensation --
Plan for Directors [Incorporated by
reference to Exhibit (10.15) to LaCrosse
Footwear, Inc.'s Form S-1 Registration
Statement (Registration No. 33-75534)]
(10.14)* LaCrosse Footwear, Inc. Retirement Plan --
[Incorporated by reference to Exhibit (10.18)
to LaCrosse Footwear, Inc.'s Form S-1
Registration Statement (Registration No. 33-
75534)]
(10.15)* LaCrosse Footwear, Inc. Employees' Retirement --
Savings Plan [Incorporated by reference to
Exhibit (10.19) to LaCrosse Footwear, Inc.'s
Form S-1 Registration Statement (Registration
No. 33-75534)]
(10.16)* LaCrosse Footwear, Inc. 1993 Employee Stock --
Incentive Plan [Incorporated by reference to
Exhibit (10.20) to LaCrosse Footwear, Inc.'s
Form S-1 Registration Statement (Registration
No. 33-75534)]
(10.17)* LaCrosse Footwear, Inc. 1997 Employee Stock
Incentive Plan
(10.18) Agreement, dated as of October 2, 1995, --
between Local No. 14, United Steel Workers of
America (AFL-CIO-CLC) and LaCrosse Footwear,
Inc. [Incorporated by reference to Exhibit
(10.20) to LaCrosse Footwear, Inc.'s Annual
Report on Form 10-K for the year ended
December 31, 1995]
(10.19) Lease, dated as of March 14, 1994, between --
Jepco Development Company and LaCrosse
Footwear, Inc. [Incorporated by reference to
Exhibit (10.22) to LaCrosse Footwear, Inc.'s
Form S-1 Registration Statement (Registration
No. 33-75534)]
(10.20) Manufacturing Certification Agreement, dated --
as of October 19, 1993, between W.L. Gore &
Associates, Inc. and Danner Shoe
Manufacturing Co. [Incorporated by reference
to Exhibit (10.23) to LaCrosse Footwear,
Inc.'s Form S-1 Registration Statement
(Registration No. 33-75534)]
(10.21) Trademark License, dated as of October 19, --
1993, between W.L. Gore & Associates, Inc.
and Danner Shoe Manufacturing Co.
[Incorporated by reference to Exhibit (10.24)
to LaCrosse Footwear, Inc.'s Form S-1
Registration Statement (Registration No. 33-
75534)]
(10.22) Registration Rights Agreement, dated as of --
March 14, 1994, between LaCrosse Footwear,
Inc., Danner Shoe Manufacturing Co. and the
shareholders of Danner Shoe Manufacturing Co.
[Incorporated by reference to Exhibit (10.25)
to LaCrosse Footwear, Inc.'s Form S-1
Registration Statement (Registration No. 33-
75534)]
(10.23) Guarantee Agreement, dated as of March 14, --
1994, between LaCrosse Footwear, Inc. and
Danner Shoe Manufacturing Co. [Incorporated
by reference to Exhibit (10.26) to LaCrosse
Footwear, Inc.'s Form S-1 Registration
Statement (Registration No. 33-75534)]
(10.24) Form of Indemnification and Investment --
Agreement to be entered into between LaCrosse
Footwear, Inc. and the shareholders of Danner
Shoe Manufacturing Co. [Incorporated by
reference to Exhibit (10.27) to LaCrosse
Footwear, Inc.'s Form S-1 Registration
Statement (Registration No. 33-75534)]
(10.25) Shareholders' Agreement dated as of May 31, --
1996 by and between Craig L. Leipold,
LaCrosse Footwear, Inc. and Rainco, Inc.
[Incorporated by reference to Exhibit (2.2)
to LaCrosse Footwear, Inc.'s Current Report
on Form 8-K dated May 31, 1996 and filed
June 14, 1996]
(13) Portions of the 1996 Annual Report to
Shareholders that are incorporated by
reference herein
(21) List of subsidiaries of LaCrosse Footwear,
Inc.
(23) Consent of McGladrey & Pullen, LLP
(27) Financial Data Schedule (EDGAR version only)
(99) Proxy Statement for the 1997 Annual Meeting --
of Shareholders
[The Proxy Statement for the 1997 Annual
Meeting of Shareholders will be filed with
the Securities and Exchange Commission under
Regulation 14A within 120 days after the end
of the Company's fiscal year. Except to the
extent specifically incorporated by
reference, the Proxy Statement for the 1997
Annual Meeting of Shareholders shall not be
deemed to be filed with the Securities and
Exchange Commission as part of this Annual
Report on Form 10-K.]
* A management contract or compensatory plan or arrangement.
EXHIBIT (10.17)
LACROSSE FOOTWEAR, INC.
1997 EMPLOYEE STOCK INCENTIVE PLAN
(1) Establishment. LACROSSE FOOTWEAR, INC. (the "Company")
hereby establishes a stock incentive plan for certain officers and other
key employees, as described herein, which shall be known as the "LACROSSE
FOOTWEAR, INC. 1997 EMPLOYEE STOCK INCENTIVE PLAN" (the "Plan"). It is
intended that stock options (including both incentive stock options and
nonstatutory stock options) may be granted under the Plan.
(2) Purpose. The purpose of the Plan is to induce certain
officers and other key employees to remain in the employ of the Company or
its subsidiaries and to encourage such employees to secure or increase on
reasonable terms their stock ownership in the Company. The Board of
Directors of the Company (the "Board") believes that the Plan will promote
continuity of management and increased incentive and personal interest in
the welfare of the Company by those who are primarily responsible for
shaping and carrying out the long-range plans of the Company and securing
its continued growth and financial success.
(3) Effective Date of the Plan. The effective date of the Plan
is the date of its adoption by the Board, November 22, 1996, subject to
the approval and ratification of the Plan by the shareholders of the
Company within twelve months of the effective date, and any and all awards
made under the Plan prior to such approval shall be subject to such
approval.
(4) Stock Subject to Plan. Subject to adjustment in accordance
with the provisions of Section 8, common stock, $.01 par value per share,
not to exceed 300,000 shares, may be issued pursuant to the Plan. Such
shares may be authorized and unissued or treasury shares. If any options
expire, are canceled, or terminate for any reason without having been
exercised in full, the shares subject to the unexercised portion thereof
shall again be available for the purposes of the Plan.
(5) Administration. The Plan shall be administered by the
Board and/or the Compensation Committee (the "Committee") of the Board
consisting of not less than two directors, each of whom shall qualify as a
"non-employee director" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor rule or regulation, and an "outside director" within the meaning
of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), and Treasury Regulation Section 1.162-27 promulgated thereunder.
If at any time the Committee shall not be in existence or not consist of
directors who are qualified as"non-employee directors" and "outside
directors" as defined above, the Board shall administer the Plan. To the
extent permitted by applicable law, the Board may, in its discretion,
delegate to another committee of the Board or to one or more senior
officers of the Company any or all of the authority and responsibility of
the Committee with respect to options to participants other than
participants who are subject to the provisions of Section 16 of the
Exchange Act ("Section 16 Participants"). To the extent that the Board
has delegated to such other committee or one or more officers the
authority and responsibility of the Committee, all references to the
Committee herein shall include such other committee or one or more
officers.
The Committee and the Board each shall have authority to grant
stock options ("Awards") to eligible employees of the Company and its
present and future subsidiaries under the Plan. Subject to the express
provisions of the Plan, the Committee and the Board each shall have
authority to establish such rules and regulations as they deem necessary
or advisable for the proper administration of the Plan, and, in their
discretion, to determine the individuals to whom, and the time or times at
which Awards shall be granted, the type of Awards, the exercise periods,
limitations on exercise, the number of shares to be subject to each Award
and any other terms, limitations, conditions and restrictions on Awards as
the Committee or the Board, in its discretion, deems appropriate;
provided, however, that the maximum number of shares, subject to
adjustment in accordance with the provisions of Section 8, subject to
Award that any one Participant (as hereinafter defined in Section 6
hereof) can be granted under the Plan during its term is 125,000. In
making such determinations, the Committee and the Board may take into
account the nature of the services rendered by the respective employees,
their present and potential contributions to the success of the Company or
its subsidiaries, and such other factors as the Committee or the Board in
its discretion shall deem relevant. Subject to the express provisions of
the Plan, the Committee and the Board each shall also have authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine the terms and provisions of the respective
Award agreements (which need not be identical), to waive any conditions or
restrictions with respect to any Award and to make all other
determinations necessary or advisable for the administration of the Plan.
The Committee and Board determinations on the matters referred to in this
Section 5 shall be conclusive.
(6) Eligibility. Awards may be granted to officers and other
key employees of the Company and of any of its present and future
subsidiaries ("Participants") under the Plan. A director or an officer of
the Company or of a subsidiary who is not also an employee of the Company
or of a subsidiary shall not be eligible to receive an Award.
(7) Grants of Options.
(a) Grant. Subject to the provisions of the Plan, the
Committee and the Board each may grant stock options to Participants in
such amounts as they shall determine. The Committee and the Board each
shall have full discretion to determine the terms and conditions
(including vesting) of all options. The Committee or Board shall
determine whether an option is to be an incentive stock option within the
meaning of Section 422 of the Code or a nonstatutory stock option and
shall enter into option agreements with Participants accordingly.
(b) Option Price. The per share option price, as determined by
the Committee or Board, shall be an amount not less than 100% of the fair
market value of the stock on the date such option is granted (110% in the
case of incentive stock options granted pursuant to Section 422(c)(5) of
the Code), as such fair market value is determined by such methods or
procedures as shall be established from time to time by the Committee or
Board ("Fair Market Value").
(c) Option Period. The term of each option shall be as
determined by the Committee or Board, but in no event shall the term of an
incentive stock option exceed a period of ten (10) years from the date of
its grant.
(d) Maximum Per Participant. The aggregate Fair Market Value
of the stock for which an incentive stock option is exercisable by a
Participant for the first time during any calendar year under the Plan and
any other plans of the Company or its subsidiaries shall not exceed
$100,000.
(e) Exercise of Option. The Committee or Board shall prescribe
the manner in which a Participant may exercise an option which is not
inconsistent with the provisions of this Plan. An option may be
exercised, subject to limitations on its exercise and the provisions of
subparagraph (g), from time to time, only by (i) providing written notice
of intent to exercise the option with respect to a specified number of
shares, and (ii) payment in full to the Company of the option price at the
time of exercise. Payment of the option price may be made (i) by delivery
of cash and/or securities of the Company having a then Fair Market Value
equal to the option price, or (ii) by delivery (including by fax) to the
Company or its designated agent of an executed irrevocable option exercise
form together with irrevocable instructions to a broker-dealer to sell or
margin a sufficient portion of the shares and deliver the sale or margin
loan proceeds directly to the Company to pay for the option price.
(f) Transferability of Option. The options are not
transferable otherwise than by will or the laws of descent and
distribution, and may be exercised during the life of the Participant only
by the Participant, except that a Participant may, to the extent allowed
by the Committee or Board and in a manner specified by the Committee or
Board, (a) designate in writing a beneficiary to exercise the option after
the Participant's death, and (b) transfer any option.
(g) Termination of Employment. In the event a Participant
leaves the employ of the Company and/or its subsidiaries whether
voluntarily or by reason of dismissal, disability or retirement, all
rights to exercise an option shall terminate immediately unless otherwise
determined by the Committee or Board or provided in the option agreement
granted to such Participant.
(8) Capital Adjustment Provisions. In the event of any change
in the shares of common stock of the Company by reason of a declaration of
a stock dividend (other than a stock dividend declared in lieu of an
ordinary cash dividend), stock split, reorganization, merger,
consolidation, spin-off, recapitalization, split-up, combination or
exchange of shares, or otherwise, the aggregate number and class of shares
available under this Plan, the number and class of shares subject to each
outstanding Award, and the exercise price for shares subject to each
outstanding option, shall be appropriately adjusted by the Committee or
Board, whose determination shall be conclusive.
(9) Termination and Amendment of Plan. The Plan shall
terminate on November 22, 2006, unless sooner terminated as hereinafter
provided. The Board may at any time terminate the Plan, or amend the Plan
as it shall deem advisable including (without limiting the generality of
the foregoing) any amendments deemed by the Board to be necessary or
advisable to assure the Company's deduction under Section 162(m) of the
Code for all Awards granted under the Plan, to assure conformity of the
Plan and any incentive stock options granted thereunder to the
requirements of Section 422 of the Code and to assure conformity with any
requirements of other state or federal laws or regulations; provided,
however, that shareholder approval of any amendment of the Plan shall also
be obtained if otherwise required by (i) the Code or any rules promulgated
thereunder (in order to allow for incentive stock options to be granted
under the Plan or to enable the Company to comply with the provisions of
Section 162(m) of the Code) or (ii) the listing requirements of any
principal securities exchange or market on which the shares are then
traded (in order to maintain the listing or quotation of the shares
thereon). No termination or amendment of the Plan may, without the
consent of the Participant, adversely affect the rights of such
Participant under any Award previously granted.
(10) Rights of Employees. Nothing in this Plan or in any Awards
shall interfere with or limit in any way the right of the Company and any
of its subsidiaries to terminate any Participant's or employee's
employment at any time, nor confer upon any Participant or employee any
right to continue in the employ of the Company or any of its subsidiaries.
(11) Rights as a Shareholder. A Participant shall have no
rights as a shareholder with respect to shares covered by any option until
the date of issuance of the stock certificate to such Participant and only
after such shares are fully paid. No adjustment will be made for
dividends or other rights for which the record date is prior to the date
such stock is issued.
(12) Tax Withholding. The Company may deduct and withhold from
any cash otherwise payable to a Participant such amount as may be required
for the purpose of satisfying the Company's obligation to withhold
Federal, state or local taxes in connection with any Award. Further, in
the event the amount so withheld is insufficient for such purpose, the
Company may require that the Participant pay to the Company upon its
demand or otherwise make arrangements satisfactory to the Company for
payment of such amount as may be requested by the Company in order to
satisfy its obligation to withhold any such taxes.
A Participant may be permitted to satisfy the Company's
withholding tax requirements by electing to have the Company withhold
shares of stock otherwise issuable to the Participant. The election shall
be made in writing and shall be made according to such rules and in such
form as the Committee or Board may determine.
(13) Miscellaneous. The grant of any Award under the Plan may
also be subject to other provisions as the Committee or Board determines
appropriate, including, without limitation, provisions for (a) one or more
means to enable Participants to defer recognition of taxable income
relating to Awards, which means may provide for a return to a Participant
on amounts deferred as determined by the Committee or Board; (b) the
purchase of stock under options in installments; and (c) compliance with
federal or state securities laws and stock exchange or Nasdaq National
Market requirements.
(14) Agreements. Awards granted pursuant to the Plan shall be
evidenced by written agreements in such form as the Committee or Board
shall from time to time adopt.
(15) Governing Law. The Plan and all determinations made and
actions taken pursuant thereto shall be governed by and construed in
accordance with the internal laws of the State of Wisconsin.
<PAGE>
EXHIBIT (13)
[Pages 12-28 of 1996 Annual Report to Shareholders]
[Page 12]
<TABLE>
Five Year Summary of Selected Financial Data
<CAPTION>
Selected Income Statement Data
In Thousands - Year Ended
December 31 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net sales $121,997 $98,571 $108,319 $82,422 $68,831
Operating income 10,088 6,662 11,230 7,250 5,771
Net income 5,386 3,328 6,152 3,700 2,707
Selected Balance Sheet Data
In Thousands - Year Ended
December 31 1996 1995 1994 1993 1992
Working capital $ 46,811 $34,537 $ 35,382 $26,725 $26,099
Total assets 92,286 74,862 74,822 46,488 37,849
Long-term obligations 16,002 4,893 7,340 10,751 12,693
Redeemable preferred
stock - 1,957 1,957 1,957 1,957
Shareholders' equity 55,936 51,322 49,154 19,658 15,953
Selected Share Data
Year Ended December 31 1996 1995 1994 1993 1992
Net income per share $ .80 $ .48 $ .98 $ .76 $ .53
Dividends per share $ .11 $ .09 $ .09 $ .08 $ .07
Shares used in per
share calculation (000) 6,674 6,680 6,158 4,694 4,979
</TABLE>
<PAGE>
[Pages 13-16]
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
Net sales generated during the last five months of the year can
account for over 55% of the Company's net sales and have a significant
impact on the Company's results of operations. Because consumers
generally purchase a large percentage of the Company's products from
September through January, retail dealers generally want delivery of
products from June through October for advance orders and from October
through December for restocking (or "fill-in") orders. Generally, mild or
dry weather during the late fall and early winter has a negative impact on
the Company's net sales for the current year, while cold or wet weather
during such time has a favorable impact. Further, weather conditions in
one season can affect future net sales, particularly where weather
contributes to high or low dealer inventory levels at the season's end.
To satisfy demands for its products and to provide for uniform production
levels, the Company generally manufactures its footwear products year-
round. To assist in production scheduling, the Company's sales force
calls on retail dealers from January to June to present the product line,
review inventory levels and prepare an advance order. The Company offers
price discounts for orders placed prior to July, although advance orders
may be canceled at any time. To attempt to balance the flow of shipments
and the need for warehouse space, the Company offers extended terms on
receivables relating to advance orders to induce retail dealers to allow
some shipments of seasonal products prior to the peak shipment period.
The advance order terms provide for payment by December 1 (January 1 in
the case of Southern dealers). Because of seasonal fluctuations,
inventory levels are highest at mid-year and accounts receivable levels
are highest during the fourth quarter.
Each year, the Company introduces a number of new products. A new
product, if successful, often generates growing amounts of net sales
during the first three to five years.
In some cases, net sales of new products will help to offset
adverse factors, such as mild or dry weather or adverse economic
conditions. In addition, the Company's Rainfair, Inc. subsidiary, which
is primarily in the rainwear business, provides products which react
differently to the weather elements than the footwear business.
In May 1996, a Company subsidiary, which is 50% owned by the
Company, purchased the assets of Rainfair, Inc. and then was renamed
Rainfair, Inc. (Rainfair). Rainfair designs, manufacturers and
distributes rainwear, protective clothing and boots. If the acquisition
had occurred on January 1, 1996, net sales and net income reported by the
Company would have been $128.1 million and $5.5 million, respectively.
In May 1996, the Company also acquired certain of the operating
assets and trademarks of Red Ball, Inc. (Red Ball). The Company accounted
for this transaction as a purchase of assets rather than the acquisition
of a business since there is limited continuity of the sale of Red Ball
products, no facility leases were assumed and there is no continuity of
the Red Ball cost structure. During 1996, Red Ball products added $.5
million and $3.0 million to the Company's net sales for the third and
fourth quarters, respectively.
The Company does not anticipate the future seasonality of sales
will be significantly impacted by the net sales of Rainfair and Red Ball.
Results of Operations
The following table shows the percentage relationship to net sales of
items derived from the Consolidated Statements of Income and the
percentage change from year to year.
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Increase
(Decrease)
Year Ended December 31 1996 1995 1994 1996 vs. 1995 1995 vs. 1994
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 24% (9)%
Cost of goods sold 72.3 73.1 71.4 22 (7)
Gross profit 27.7 26.9 28.6 27 (14)
Selling and
administrative expenses (19.4) (20.2) (18.2) 19 1
Operating income 8.3 6.7 10.4 51 (41)
Interest expense (1.4) (1.5) (1.4) 15 (5)
Other income .3 .3 .3 36 (19)
Income before income taxes 7.2 5.5 9.3 60 (45)
Income taxes (2.8) (2.1) (3.6) 61 (45)
Net income 4.4% 3.4% 5.7% 62% (46)%
</TABLE>
Year Ended December 31, 1996 Compared to
Year Ended December 31, 1995
Net Sales. Net sales in 1996 increased $23.4 million, or 24.0%, to $122.0
million from $98.6 million in 1995. The increase in net sales was largely
attributable to the May 1996 acquisitions of Rainfair and certain assets
of Red Ball. These acquisitions added $11.1 million and $3.5 million,
respectively, of net sales in 1996. Net sales of LaCrosse products
increased $7.3 million in 1996 as compared to 1995, as a result of a $4.7
million increase in sales through the retail channel of distribution due
to (i) more favorable weather conditions, (ii) an improved retail climate
and (iii) new product offerings, and a $3.0 million improvement in sales
through the industrial channel of distribution, mainly as a result of new
products. Danner product sales increased $1.5 million in 1996 compared to
1995 resulting mainly from the introduction of the Dri-Foot boot series.
Gross Profit. Gross profit as a percentage of net sales increased to
27.7% in 1996 from 26.9% in 1995. Gross profit margins as a percentage of
net sales on LaCrosse products were up 1.5%, primarily the result of a $.4
million reduction in the LIFO reserve, more favorable pricing on key raw
materials and improved productivity at the La Crosse, Wisconsin factory.
This was partially offset by the lower margin rainwear business and lower
margins on Red Ball brand sales, which were impacted by start-up
inefficiencies.
Selling and Administrative Expenses.
Selling and administrative expenses increased $3.8 million, or 19%, in
1996 as compared to 1995, primarily resulting from the acquisitions of
Rainfair and Red Ball, which added $.6 million and $2.2 million,
respectively, to operating expenses in 1996. As a percent of net sales,
operating expenses decreased from 20.2% of net sales in 1995 to 19.4% of
net sales in 1996. The ability to leverage the LaCrosse operating
expenses across a greater sales base was the primary reason for the
reduction in operating expenses as a percent of net sales. This allowed
for a planned increase in advertising expenses.
Interest Expense. Interest expense increased $223,000, or 15%, in 1996 as
compared to 1995. The increase was the result of a $12.5 million increase
in long-term debt to finance the Rainfair acquisition and the purchase of
Red Ball assets, which was partially offset by lower short-term borrowings
resulting from the reduced inventory levels of LaCrosse products during
the year.
Income Tax Expense. The Company's effective income tax rate in 1996 was
39.2%, the same as the 1995 income tax rate.
Year Ended December 31, 1995 Compared to
Year Ended December 31, 1994
Net Sales. Net sales in 1995 decreased $9.7 million, or 9%, to $98.6
million from $108.3 million in 1994 despite a $2.9 million increase in
reported sales of Danner products due to including Danner results for the
entire year of 1995. The decrease in net sales was primarily due to the
mild winter weather conditions during the 1994/95 winter which reduced the
demand for LaCrosse protective footwear and left dealers with carryover
inventory. The primary products affected were rubber or vinyl
bottom/leather top cold weather boots. Net sales under government
contracts were down $2.4 million, as a result of the completion of a
government contract in 1994.
Gross Profit. Gross profit as a percentage of net sales decreased to
26.9% in 1995 from 28.6% in 1994. Margins on LaCrosse products were down
primarily as a result of lower production levels and increases in raw
material costs (primarily crude rubber) in excess of plan. Margins on
Danner products were down due to lower than planned production levels and
start-up costs associated with new products.
Selling and Administrative Expenses.
Selling and administrative expenses increased $.2 million, or 1%, in 1995
as compared to 1994, primarily due to a $900,000 increase in expenses
reported for Danner in 1995 as compared to 1994 when expenses were
included from the date of acquisition, March 14, 1994. This increase was
partially offset by a $493,000 reduction in phantom stock compensation,
primarily due to the lower level of profitability in 1995 as compared to
1994. As a percent of net sales, operating expenses increased from 18.2%
in 1994 to 20.2% in 1995 primarily due to the reduced sales volume of
LaCrosse products coupled with an additional $300,000 of planned marketing
and advertising expense in support of our dealers.
Interest Expense. Interest expense decreased $72,000, or 5% in 1995 as
compared to 1994. The decrease was primarily the result of lower short-
term interest rates.
Income Tax Expense. The Company's effective income tax rate in 1995
increased to 39.2% from 38.7% in 1994 primarily due to a slight increase
in non-deductible expenses and a higher effective state income tax rate.
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 its line of credit. The Company requires working capital
primarily to support fluctuating accounts receivable and inventory levels
caused by the Company's seasonal business cycle. The Company's working
capital needs are lowest in the first quarter and highest in the third
quarter. The Company invests excess cash balances in short-term
investment grade securities or money market investments.
In May 1996, the Company invested $10.9 million in Rainfair. Of
this investment, approximately $8.0 million was for a secured loan to the
subsidiary to support working capital requirements, consistent with the
Company's intention to fund the working capital requirements of Rainfair
through intercompany loans. It is not anticipated that these loans will
increase substantially during the next two years. Rainfair is a designer,
light manufacturer and distributor of industrial and consumer rainwear,
protective clothing and boots.
In May 1996, the Company also acquired certain of the operating
assets and trademarks of Red Ball for approximately $5.5 million,
including $.3 million paid for equipment leased from a third party and $.5
million for relocation costs. Red Ball was a designer, manufacturer and
distributor of waders, pac boots and children's footwear.
In May 1996, the Company renegotiated its unsecured credit
agreement with Firstar Bank Milwaukee, N.A. as the lead bank. Under the
terms of the revised agreement, the maximum amount of borrowings were
increased to $62.5 million, including a $12.5 million term loan, from the
previous maximum level of $30.0 million. The $12.5 million term loan,
which is outstanding at December 31, 1996, was primarily used to fund the
investment in Rainfair and the acquisition of assets of Red Ball. The
term loan requires quarterly payments of $.4 million commencing in March
1998.
Cash generated by operations amounted to $9.7 million in 1996, an
increase from the $5.7 million and $1.6 million generated in 1995 and
1994, respectively. The improved operating cash flow in 1996 is primarily
attributable to a $2.0 million increase in net income and a $2.1 million
reduction in inventories (excluding the effect of the Rainfair inventories
purchased). The inventory reduction was the result of improved production
planning and accurate sales forecasts. The improvement in inventory
levels was achieved despite adding over $3.0 million of inventory to
support the Red Ball brand. Due to sales growth anticipated in 1997,
further inventory reductions are not anticipated. A $2.1 million increase
in accounts receivable, due to the increased fourth quarter sales volume,
was largely offset by an increase in accrued expenses and depreciation.
Net cash used in investing activities during 1996 was $14.2
million, up significantly from $3.8 million in 1995. The Rainfair
acquisition and the purchase of the Red Ball trademarks, coupled with $3.1
million of capital spending, accounted for the spending during 1996. The
$3.1 million of capital spending was $.7 million below the 1995 level,
however, it is anticipated 1997 capital spending will increase above the
$4.0 million level.
Net cash provided by financing activities amounted to $8.1 million
during 1996. The $12.5 million of long-term debt incurred to finance the
Rainfair and Red Ball acquisitions was partially offset by a $1.7 million
principal payment on long-term debt and the repurchase of 100% of the
outstanding preferred stock for $2.0 million. In addition, the Company
paid cash dividends of $668,000, including $68,000 on the preferred stock,
during 1996.
The March 1994 acquisition agreement for the purchase of the assets
of Danner Shoe Manufacturing, Co. provides that in the event the cash and
aggregate market value of the Company's common stock (valued as of March
1, 1999) delivered in the Danner acquisition is less than $18.0 million,
the Company will be obligated to make an additional cash payment equal to
the difference. To the extent the aggregate market value of the 277,778
shares of the Company's common stock delivered as part of the purchase
agreement equals or exceeds $4.5 million at or prior to March 1, 1999, the
Company's obligation to make such payment can be reduced or eliminated.
This obligation can be reduced or eliminated by the sale of those shares
by the former Danner shareholders under a Company-filed registration
statement or under Rule 144 promulgated under the Securities Act of 1933,
as amended, prior to March 31, 1999.
The Company's debt to total capital ratio was 24.2% at December 31,
1996, 11.5% at December 31, 1995 and 15.6% at December 31, 1994.
Currently available funds, including the line of credit, together
with the anticipated cash flows generated from future operations, are
believed to be adequate to cover the Company's anticipated capital and
working capital needs for 1997 and 1998.
From time to time, the Company evaluates acquisitions of businesses
or product lines that could complement the Company's business, such as the
Rainfair acquisition. The Company has no present understandings,
commitments or agreements with respect to any acquisition. However, if
the Company makes significant future acquisitions, it may be required to
raise funds through additional bank financing or the issuance of debt or
equity securities.
<PAGE>
[Pages 17-27]
Consolidated Balance Sheets
December 31, 1996 and 1995
(In Thousands)
Assets 1996 1995
Current Assets
Cash and cash equivalents $ 6,716 $ 3,036
Trade accounts receivable,
less allowances of $1.5 and $.8 million 20,705 15,563
Inventories (Note 3) 31,549 26,007
Prepaid expenses and deferred tax assets
(Note 4) 4,016 3,281
------- -------
Total current assets 62,986 47,887
------- -------
Property and Equipment
Land and land improvements and buildings 6,501 5,818
Machinery and equipment 23,391 20,994
-------- -------
29,892 26,812
Less accumulated depreciation 17,262 14,964
-------- -------
12,630 11,848
-------- -------
Other Assets
Goodwill, net of amortization of $1.4 and
$.9 million 13,823 13,653
Deferred tax and other assets (Note 4) 2,847 1,474
------- -------
16,670 15,127
------- -------
$92,286 $74,862
======= =======
Liabilities and Common Shareholders' Equity
Current Liabilities
Current maturities of long-term obligations
(Note 5) $ 1,851 $ 1,761
Accounts payable 5,755 4,812
Accrued expenses (Note 7) 8,569 6,777
------- -------
Total current liabilities 16,175 13,350
------- -------
Long-Term Obligations (Note 5) 16,002 4,893
Compensation and Benefits (Note 9) 2,980 3,340
------- -------
Total liabilities 35,157 21,583
------- -------
Commitments and Contingencies
(Notes 6, 8, 9 and 10)
Minority Interest in Subsidiary 1,193 -
Redeemable Preferred Stock, at redemption price - 1,957
Common Shareholders' Equity
Common stock, par value $.01 per share;
authorized 50,000,000 shares;
issued and outstanding, 6,667,627 shares,
respectively (Notes 8 and 10) 67 67
Additional paid-in capital 27,579 27,579
Retained earnings (Note 5) 28,733 24,119
Less cost of 50,000 shares of treasury stock (443) (443)
-------- --------
Total common shareholders' equity 55,936 51,322
-------- --------
$92,286 $74,862
======== ========
See Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Statements of Income
Years Ended December 31, 1996, 1995 and 1994
(In Thousands,
except for share and per share data)
1996 1995 1994
Net sales $121,997 $98,571 $108,319
Cost of goods sold 88,176 72,011 77,386
------- ------- -------
Gross profit 33,821 26,560 30,933
Selling and administrative expenses 23,733 19,898 19,703
------- ------- -------
Operating income 10,088 6,662 11,230
Non-operating income (expense):
Interest expense (1,680) (1,457) (1,529)
Miscellaneous 361 266 330
------- ------- ------
(1,319) (1,191) (1,199)
------- ------- ------
Income before income
taxes 8,769 5,471 10,031
Provision for income taxes (Note 4) 3,440 2,143 3,879
------- ------- ------
Net income before minority
interest 5,329 3,328 6,152
Minority interest in net loss
of subsidiary 57 - -
======= ======= =======
Net income $ 5,386 $ 3,328 $ 6,152
Earnings per common and
common equivalent share $.80 $.48 $.98
======= ======= =======
Weighted average common and
common equivalent shares
outstanding 6,673,539 6,679,545 6,158,175
========= ========= =========
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
Consolidated Statements of Common Shareholders' Equity
Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
(In Thousands, except for share and per share data)
Common Total
Additional Stock Common
Common Paid-In Retained Acquisition Treasury Shareholders'
Stock Capital Earnings Notes Stock Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $47 $3,723 $16,078 $(190) $- $19,658
Net income - - 6,152 - - 6,152
Issuance of common
stock, including
1,725,000 shares
issued to the public
at $13 per share,
net of offering costs 20 23,856 - - - 23,876
Common stock dividends
($.09 per share) - - (605) - - (605)
6% preferred stock
dividends - - (117) - - (117)
Payment received on
stock subscription note - - - 190 - 190
---- -------- -------- -------- -------- --------
Balance, December 31, 1994 67 27,579 21,508 - - 49,154
Net income - - 3,328 - - 3,328
Common stock dividends
($.09 per share) - - (600) - - (600)
6% preferred stock
dividends - - (117) - - (117)
Purchase of 50,000 shares
of treasury stock - - - - (443) (443)
---- -------- -------- -------- -------- --------
Balance, December 31, 1995 67 27,579 24,119 - (443) 51,322
Net income - - 5,386 - - 5,386
Common stock dividends
($.11 per share) - - (733) - - (733)
6% preferred stock
dividends - - (39) - - (39)
---- -------- -------- -------- -------- --------
Balance, December 31, 1996 $67 $27,579 $28,733 $0 $(443) $55,936
==== ======== ======== ======== ======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Consolidated Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994
(In Thousands)
1996 1995 1994
Cash Flows from Operating Activities
Net income $ 5,386 $3,328 $ 6,152
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 2,925 2,523 2,274
Amortization 513 484 362
Other (34) 21 46
Deferred income taxes (62) (62) (239)
Change in assets and
liabilities, net of
effects from acquisition
of Danner Shoe Manufacturing
Co. and Rainfair, Inc.:
Trade accounts receivable (2,145) 93 (1,117)
Inventories 2,136 (936) (4,268)
Accounts payable 279 382 (2,492)
Other 712 (139) 923
------- ------- -------
Net cash provided by
operating activities 9,710 5,694 1,641
Cash Flows from Investing Activities
Acquisition of Rainfair, Inc.,
net of cash acquired (9,597) - -
Purchase of property and equipment (3,060) (3,779) (4,942)
Purchase of trademarks (1,439) - -
Acquisition of Danner Shoe
Manufacturing Co., net of cash
acquired - - (13,569)
Other (67) (13) (35)
------- ------- -------
Net cash (used in) investing
activities (14,163) (3,792) (18,546)
Cash Flows from Financing Activities
Proceeds from long-term obligations 12,500 - -
Principal payments on long-term
obligations (1,742) (2,444) (3,457)
Cash dividends paid (668) (722) (494)
Purchase of redeemable preferred
stock (1,957) - -
Purchase of treasury stock - (443) -
Net proceeds from issuance of
common stock - - 20,265
Proceeds from common stock acquisition
notes - - 190
Other - - (47)
------- ------- -------
Net cash provided by
(used in) financing
activities 8,133 (3,609) 16,457
------- ------- -------
Increase (decrease) in cash
and cash equivalents 3,680 (1,707) (448)
Cash and cash equivalents:
Beginning 3,036 4,743 5,191
------- ------- -------
Ending $ 6,716 $ 3,036 $ 4,743
======= ======= =======
Supplemental Information
Cash payments for:
Interest $ 1,594 $ 1,396 $ 1,542
Income taxes $ 2,939 $ 1,762 $ 3,985
Supplemental Schedule of Noncash
Investing Activity
Issuance of 277,778 shares of
common stock for Danner
acquisition $ - $ - $ 3,611
------- ------- -------
See Notes to Consolidated Financial Statements.
<PAGE>
Notes to Consolidated Financial Statements
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
The Company designs, manufactures, and markets premium quality protective
footwear and rainwear for sale principally throughout the United States.
Significant accounting policies:
Principles of consolidation:
The consolidated financial statements include the accounts of LaCrosse
Footwear, Inc. and its wholly owned and 50% owned subsidiaries (the
"Company"). The Company consolidates 50% owned subsidiaries where it has
board, operating and financial control. All material intercompany
accounts and transactions have been eliminated in consolidation.
Use of estimates in the preparation of financial statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair value of financial instruments:
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
The carrying amount of cash and cash equivalents approximates fair value
because of the short maturity of those investments.
The carrying amount of long-term debt approximates fair value based on the
interest rates, maturities and collateral requirements currently available
for similar financial instruments.
Concentrations of credit risk:
The Company grants credit to its customers, who are primarily domestic
retail stores, direct mail catalog merchants, wholesalers, industrial and
private label customers, based on an evaluation of the customer's
financial condition. Exposure to losses on receivables is principally
dependent on each customer's financial condition. The Company monitors
its exposure for credit losses and maintains an allowance for anticipated
losses.
Cash and cash equivalents:
The Company considers all highly liquid debt instruments (including short-
term investment grade securities and money market instruments) purchased
with maturities of three months or less to be cash equivalents. The
Company maintains its cash in bank deposit accounts which, at times,
exceed federally insured limits. The Company has not experienced any
losses in such accounts.
Inventories:
Inventories are stated at the lower of cost or market. All inventories,
except for vinyl products, boot liners, leather boots, leather boot
components and rainwear are valued using the last-in, first-out (LIFO)
method. Vinyl products, boot liners, leather boots, leather boot
components and rainwear are valued using the first-in, first-out (FIFO)
method.
Property and equipment:
Property and equipment are carried at cost and are being depreciated using
straight-line and accelerated methods over their estimated useful lives as
follows: land improvements, 15 years; buildings and improvements, 20 to 39
years; and machinery and equipment, 3 to 7 years.
Intangible assets:
Goodwill, representing the excess of cost over net assets acquired, is
being amortized on a straight-line basis over 30 years for the Danner
acquisition and 15 years for the Rainfair acquisition. The Red Ball
trademarks are being amortized on a straight-line basis over 15 years.
Impairment of long-lived assets:
The Company was required to adopt SFAS No. 121 "Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of",
effective January 1, 1996. SFAS No. 121 requires that long-lived assets
and certain identified intangibles held and used by a company be reviewed
for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company reviews its long-lived assets and intangibles periodically to
determine potential impairment by comparing the carrying value of these
assets with expected future net cash flows provided by operating
activities of the business. Should the sum of the expected future net
cash flows be less than the carrying value, the Company would determine
whether an impairment loss should be recognized. An impairment loss would
be measured by comparing the amount by which the carrying value exceeds
the fair value of the long-lived assets and intangible based on appraised
market value.
Revenue recognition and product warranty:
Revenue is recognized at the time products are shipped to customers.
Revenue is recorded net of freight, estimated discounts and returns. The
Company warrants its products against defects in design, materials and
workmanship generally for one year. A provision for estimated future
warranty costs is recorded when products are shipped.
Income taxes:
Deferred taxes are provided on a liability method whereby deferred tax
assets and liabilities are recognized for temporary differences.
Temporary differences are the differences between the reported amounts of
assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of enactment.
Stock-based compensation:
SFAS No. 123 "Accounting for Stock-Based Compensation" which the Company
adopted in 1996 encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair
value. The Company has continued to account for stock-based compensation
using the intrinsic value method prescribed in APB Opinion No. 25
"Accounting for Stock Issued to Employees" and related interpretations.
Accordingly, since the exercise price is equal to the market price at the
date of the grant, no compensation costs have been recognized.
Earnings per common and common equivalent share:
Per share earnings are based on the weighted average number of common and
common equivalent shares outstanding during each year, after reducing net
income by dividends on preferred stock. Common equivalent shares consist
of the dilutive effect of common stock options.
Note 2. Acquisitions
In May 1996, the Company and the former principal owner of Rainfair, Inc.
established a new corporation and each purchased one-half of the new
corporation's common stock for $1,250,000. 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 $10.9 million in
cash and approximately $1.4 million in assumed liabilities for an
aggregate purchase price of approximately $12.3 million. The name of the
subsidiary was changed to Rainfair, Inc. (Rainfair) in June 1996 after
completion of the acquisition. The Company loaned Rainfair approximately
$8.0 million (secured by all assets of Rainfair) to fund the portion of
the purchase price which was not funded by the initial capital
contributions. The acquisition has been accounted for as a purchase.
Accordingly, the purchase price was allocated to assets and liabilities
based on 50% of their estimated fair values and 50% of the predecessor's
historical cost as of the date of acquisition. The cost in excess of net
assets acquired of approximately $.7 million is being amortized on a
straight-line basis over a 15-year term.
The value of assets acquired (net of cash of $64,617) and liabilities
assumed is as follows (in thousands):
Current assets $10,774
Leasehold improvements
and equipment 659
Deferred taxes 151
Goodwill 683
Current liabilities (965)
Long-term liabilities (455)
-------
10,847
Less minority interest contribution (1,250)
-------
$9,597
=======
In connection with the purchase, the Company entered into a shareholders'
agreement with the former principal owner which prohibits (1) the
declaration or payment of dividends on Rainfair common stock and (2) the
disposal or transfer of Rainfair stock by either party. The shareholders'
agreement contains a put and call provision which may be exercised after 3
years with the purchase price determined based upon the provision in the
shareholders' agreement.
The Company's consolidated statement of income for the year ended December
31, 1996 includes Rainfair's results of operations since its acquisition
in May, 1996. The following unaudited pro forma information presents the
consolidated results of operations as if the acquisition had occurred as
of the beginning of 1995 and does not purport to be indicative of what
would have occurred had the acquisition been made as of that date or of
results which may occur in the future.
(In Thousands, Except
For Earnings Per Share)
Years Ending December 31,
1996 1995
(Unaudited)
Net sales $128,147 $114,947
Net income 5,465 3,377
Earnings per common and
common equivalent share .81 .49
In May 1996, the Company also acquired trade accounts receivable,
inventories, machinery and equipment and trademarks from Red Ball, Inc.
for a cash price of approximately $5.5 million. The Company has accounted
for the transaction as a purchase of assets rather than the acquisition of
a business. The primary purpose of the transaction was to purchase the
Red Ball trademarks and there is limited continuity of the sale of Red
Ball products, no facility leases were assumed and there is no continuity
of Red Ball's sales, production or cost structure. The purchase price is
being allocated to the assets based on their fair values as of the date of
acquisition. The Company's consolidated statement of income for the year
ended December 31, 1996 includes net sales of Red Ball products of
approximately $3.5 million and the effect on net income is immaterial.
Note 3. Inventories
A summary of inventories is as follows:
(In Thousands)
December 31,
1996 1995
Finished goods $22,188 $18,371
Work-in process 2,222 1,922
Raw materials 7,139 5,714
------- -------
Total inventories $31,549 $26,007
======= =======
If all inventories were valued on the FIFO method, total inventories for
1996 and 1995 would have been $35.3 and $30.1 million, respectively.
Note 4. Income Tax Matters
Net deferred tax assets and liabilities consist of the following
components:
(In Thousands)
December 31,
1996 1995
Deferred tax assets:
Receivable allowances $523 $366
Inventory differences 525 493
Compensation and benefits 1,752 1,661
Insurance reserves and other 500 497
------- -------
3,300 3,017
Deferred tax liabilities,
principally intangibles 597 527
------- -------
$2,703 $2,490
======= =======
The components giving rise to the net deferred tax assets described above
have been included in the accompanying consolidated balance sheets as
follows:
(In Thousands)
December 31,
1996 1995
Current assets $2,017 $1,621
Noncurrent assets 686 869
------- -------
$2,703 $2,490
======= =======
No valuation allowance is required on the deferred tax assets as of
December 31, 1996 and 1995.
The provision for income taxes consists of
the following:
(In Thousands)
Years Ended December 31,
1996 1995 1994
Current:
Federal $2,947 $1,723 $3,539
State 555 482 579
Deferred (62) (62) (239)
------- ------- -------
$3,440 $2,143 $3,879
======= ======= =======
The differences between statutory federal tax rates and the effective tax
rates are as follows:
Years Ending December 31,
1996 1995 1994
Statutory federal
tax rate 35.0% 35.0% 35.0%
State taxes, net
of federal tax
benefit and other 4.2 4.2 3.7
------- ------- -------
Effective tax rate 39.20% 39.2% 38.7%
======= ======= =======
Note 5. Long-Term Obligations
Credit agreement:
The Company has a $62.5 million unsecured credit agreement. Under the
agreement, the Company has (1) a $50 million revolving line of credit
which expires on December 31, 1999 ($10 million of which can be used to
support letters of credit) and (2) a $12.5 million term loan due December
31, 2001. At the Company's option, the interest rate is either the bank's
prime rate or LIBOR plus .75% or 1% for the revolving line of credit and
LIBOR plus 1% or 1.25% for the term loan, depending upon the Company's
leverage ratio. (LIBOR plus .75% and LIBOR plus 1% for the revolving line
of credit and term loan, respectively, as of December 31, 1996). The
credit agreement contains various covenants, including minimum
consolidated tangible net worth, sale of assets, indebtedness, current
ratio, interest coverage ratio and leverage ratio. The revolving line of
credit is used to finance peak inventory and accounts receivable levels
and commitments for letters of credit. At December 31, 1996 and 1995,
there were no amounts outstanding under the revolving line of credit but
there were letter of credit commitments outstanding of $1.0 and $2.7
million, respectively.
Long-term obligations:
(In Thousands)
December 31,
1996 1995
Term loan under credit
agreement, due in quarterly
installments of $.4 million
commencing in March 1998,
interest payable monthly $12,500 $-
10.26% unsecured note
payable, due in annual
installments of $1.4 million
excluding interest, interest
payable semi-annually (a) 3,714 5,143
10.73% unsecured note
payable, due in annual
installments of $.3 million
excluding interest, interest
payable semi-annually (a) 743 1,028
Other 896 483
------- -------
17,853 6,654
Less current maturities 1,851 1,761
------- -------
$16,002 $4,893
======= =======
(a) The loan agreement contains various covenants, including minimum
tangible net worth, working capital, current ratio, permitted
indebtedness, net income before income taxes to interest expense and total
permitted investments and restricted payments. Retained earnings
available for dividends under these agreements amount to approximately
$10.2 million at December 31, 1996.
Maturities of long-term obligations for the next five years are as follows
(in millions): 1997, $1.9; 1998, $3.4; 1999, $2.7; 2000, $1.7; 2001, $7.8
and $.4 thereafter.
Note 6. Lease Commitments and
Total Rental Expense
The Company leases office space, retail stores, a manufacturing facility,
equipment and warehouse space under non-cancelable agreements, which
expire on various dates through 2004, and are recorded as operating
leases. The total rental expense included in the consolidated statements
of income for the years ended December 31, 1996, 1995 and 1994 is
approximately $1.6, $1.2 and $1.0 million, respectively. Approximate
future minimum lease payments, estimated utilities and real estate taxes
are as follows (in millions): 1997, $1.6; 1998, $1.4; 1999, $1.4; 2000,
$1.3; 2001, $.5 and $.7 thereafter.
Note 7. Accrued Expenses
Accrued expenses are comprised of the following:
(In Thousands)
December 31,
1996 1995
Compensation $4,423 $3,301
Workers' compensation insurance 889 1,174
Income taxes payable 1,066 504
Other, including dividends 2,191 1,798
------- -------
Total accrued expenses $8,569 $6,777
======= =======
Note 8. Stock Options
In December 1993, the Board of Directors adopted a 1993 Employee Stock
Incentive Plan pursuant to which options for up to 250,000 shares of
common stock may be granted to officers and key employees of the Company,
of which no more than 125,000 shares may be granted to any one employee.
The option price per share shall not be less than 100% of the fair market
value at the date of grant and the options expire 10 years after grant or
such shorter period as the compensation committee of the Board so
determines. The options vest in equal increments over a five-year period.
The following summarizes all stock options granted under the above plan:
Common Per Share
Shares Option Price
December 31, 1994 87,500 $13.00
Granted 41,500 10.25-11.25
-------
December 31, 1995 129,000 10.25-13.00
Granted 89,125 9.06-10.38
Canceled (10,000) 9.06-13.00
-------
December 31, 1996 208,125 9.06-13.00
Options for 41,100 shares were exercisable at December 31, 1996.
Grants under the plan are accounted for following the provisions of APB
Opinion No. 25 and its related interpretations. Accordingly, no
compensation cost has been recognized for grants made to date. If the
Company had elected to recognize compensation cost based on the fair value
of the options granted at the grant date as prescribed by SFAS No. 123,
pro forma net income would have been reduced by less than $.1 million and
the pro forma earnings per share would have been $.79 and $.48 for the
years ended December 31, 1996 and 1995, respectively.
The fair value of each option is estimated on the date of the grant using
the Black-Scholes option-pricing model with the following assumptions:
Expected dividend yield 1%
Expected stock price volatility 25%
Risk-free interest rate 7.0%
Expected life of options 8 years
The weighted average exercise price of the options granted during 1996 is
$9.29 per share.
Note 9. Compensation and
Benefit Agreements
The Company has defined benefit pension plans covering a majority of its
employees. Eligible employees are entitled to monthly pension benefits
beginning at normal retirement age (65). The monthly benefit payable at
the normal retirement date under the Company's pension plans is equal to a
specified dollar amount or percentage of average monthly compensation, as
defined in the plans, multiplied by years of benefit service (maximum of
38 years). The Company's funding policy is to make not less than the
minimum contribution that is required by applicable regulations, plus such
amounts as the Company may determine to be appropriate from time to time.
The following table sets forth the funded status of the plans and the
amount recognized in the Company's consolidated balance sheets:
(In Thousands)
December 31,
1996 1995
Actuarial present value
of benefit obligations:
Vested benefits $10,543 $8,479
======= =======
Accumulated benefits $11,103 $9,046
======= =======
Projected benefits ($12,574) ($10,757)
Plan assets at fair value
(equity securities and
pooled funds) 12,948 10,469
------- -------
Plan assets in excess of
(less than) projected
benefit obligation 374 (288)
Unrecognized net gain (1,362) (414)
Unrecognized transition
obligation 214 264
Unrecognized prior
service costs 383 415
------- -------
(Accrued) pension cost ($391) ($23)
======= =======
Actuarial assumptions used at December 31, 1996 and 1995 were as follows:
discount rate of 7%, rate of increase in compensation levels of 5.25% and
expected long-term rate of return on plan assets of 8%.
Net pension expense for these plans for each of the years ended December
31, 1996, 1995 and 1994 approximates $.4 million.
The Company sponsors an unfunded defined benefit postretirement medical
and life insurance plan that covers a majority of its employees until they
qualify for Medicare. The plan is contributory for retirees with
contributions established annually as a specified dollar amount. The
Company funds the postretirement benefit obligation as the costs are
incurred. The accrued postretirement benefit cost is approximately $1.4
million and $1.3 million at December 31, 1996 and 1995, respectively and
the related expense is approximately $.2, $.2 and $.4 million for the
years ended December 31, 1996, 1995 and 1994, respectively. The assumed
discount rate and annual rate of increase in cost of covered health care
benefits used by the Company in the determination of postretirement
benefit information was 7.0% as of December 31, 1996 and 1995 and 8% as of
December 31, 1994.
Note 10. Commitments
In March 1994, the Company acquired substantially all of the assets of
Danner Shoe Manufacturing Co. for an aggregate purchase price of
approximately $21.5 million. The acquisition has been accounted for as a
purchase. The acquisition agreement provides that in the event the cash
and aggregate market value of the common stock (valued as of March 1,
1999) delivered in the Danner acquisition is less than $18.0 million, the
Company will make an additional cash payment on March 1, 1999 equal to the
difference. If the Danner shareholders have the opportunity to sell their
common stock under a Company-filed registration statement or under Rule
144 promulgated under the Securities Act of 1933, as amended, and choose
not to sell after receiving a Company request to sell, then the Company's
obligation can be reduced or eliminated to the extent of the number of
shares permitted to be sold based upon the then prevailing market price
for the common stock. The Company has also guaranteed that Danner's
shareholders will realize, by March 31, 1999, after-tax proceeds from this
transaction of not less than $10.0 million.
<PAGE>
Independent Auditor's Report
To the Board of Directors and Shareholders of LaCrosse Footwear, Inc.
We have audited the accompanying consolidated balance sheets of LaCrosse
Footwear, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, common shareholders' equity,
and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
LaCrosse Footwear, Inc. and Subsidiaries as of December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
McGLADREY & PULLEN, LLP
La Crosse, Wisconsin
February 3, 1997
[Page 28]
Quarterly Results of Operations - Unaudited
The Company reports its quarterly results of operations on the basis of
13-week periods for each of the first three quarters with the year ending
on December 31st.
The following tabulation presents the Company's unaudited quarterly
results of operations for 1996 and 1995.
Thousands of dollars
except per share
data - 1996 First Second Third Fourth
Quarter Quarter Quarter Quarter
Net sales $22,131 $23,054 $35,714 $41,098
Gross profit 5,807 6,107 10,315 11,592
Operating income 554 651 3,965 4,918
Net income 297 276 2,125 2,688
Net income per share $.04 $.04 $.32 $.40
Thousands of dollars
except per share
data - 1995 First Second Third Fourth
Quarter Quarter Quarter Quarter
Net sales $19,676 $20,486 $31,092 $27,317
Gross profit 5,092 5,055 8,854 7,559
Operating income 34 389 3,595 2,644
Net income (52) 106 1,958 1,316
Net income per share $(.01) $.01 $.29 $.19
Market Information
The Company's common stock trades on the Nasdaq National Market tier of
The Nasdaq Stock Market under the symbol BOOT. The following table shows
the high and low transaction prices by calendar quarter since the stock
started trading publicly in April 1994. The approximate number of holders
of record of common stock on March 20, 1997 was 400.
<TABLE>
<CAPTION>
1st 2nd 3rd 4th Year end
<S> <C> <C> <C>
1994 $ - $10 7/8-14 3/4 $11 -14 3/16 $10 3/4-14 1/4 $ 11
1995 $ 8-12 $ 8 3/4-11 1/4 $10 1/4-11 3/4 $ 8 1/2-12 $ 8 3/4
1996 $8 3/4-12 $ 9 1/4-11 3/4 $ 9 1/2-10 3/4 $10 -12 1/4 $10 3/4
</TABLE>
Cash Dividends Declared Per Share
It is the Company's policy to pay annual cash dividends. The chart below
shows annual cash dividends declared per share for the past five years:
1996 1995 1994 1993 1992
Dividends declared
per share $.11 $.09 $.09 $.08 $.07
EXHIBIT (21)
SUBSIDIARIES OF LACROSSE FOOTWEAR, INC.
Jurisdiction
Name of Incorporation Percent Ownership
Clintonville Products, Inc. Wisconsin 100%
Hillsboro Footwear, Inc. Wisconsin 100%
Danner Shoe Manufacturing Co. Wisconsin 100%
Rainfair, Inc. Wisconsin 50%
EXHIBIT (23)
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Annual Report
on Form 10-K of LaCrosse Footwear, Inc. of our report dated February 3,
1997, included in the 1996 Annual Report of Shareholders of LaCrosse
Footwear, Inc.
We also consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-77516, 33-77518 and 333-2702) pertaining
to the LaCrosse Footwear, Inc. Employees' Retirement Savings Plan, the
LaCrosse Footwear, Inc. Union Employees' Retirement Savings Plan and the
LaCrosse Footwear, Inc. 1993 Employee Stock Incentive Plan of our report
dated February 3, 1997, with respect to the consolidated financial
statements incorporated herein by reference, and our report dated February
3, 1997, with respect to the financial statement schedule included in this
Annual Report on Form 10-K of LaCrosse Footwear, Inc. for the year ended
December 31, 1996.
McGLADREY & PULLEN, LLP
La Crosse, Wisconsin
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,716,183
<SECURITIES> 0
<RECEIVABLES> 22,212,302
<ALLOWANCES> 705,500
<INVENTORY> 31,549,091
<CURRENT-ASSETS> 62,986,338
<PP&E> 29,891,962
<DEPRECIATION> 17,262,328
<TOTAL-ASSETS> 92,286,019
<CURRENT-LIABILITIES> 16,175,699
<BONDS> 16,002,200
0
0
<COMMON> 67,176
<OTHER-SE> 55,868,071
<TOTAL-LIABILITY-AND-EQUITY> 92,286,019
<SALES> 121,827,105
<TOTAL-REVENUES> 121,996,686
<CGS> 88,176,308
<TOTAL-COSTS> 23,564,931
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 167,655
<INTEREST-EXPENSE> 1,679,994
<INCOME-PRETAX> 8,769,741
<INCOME-TAX> 3,440,000
<INCOME-CONTINUING> 5,386,437
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,386,437
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
