UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number 0-238001
LaCrosse Footwear, Inc.
(Exact name of Registrant as specified in its charter)
Wisconsin 39-1446816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1319 St. Andrew Street, LaCrosse, Wisconsin 54603
(Address of principal executive offices) (Zip Code)
(608) 782-3020
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 par value, outstanding as of April 15, 1998: 6,669,427
shares
<PAGE>
LaCrosse Footwear, Inc.
Form 10-Q Index
For Quarter Ended March 28, 1998
Page
PART I. Financial Information
Item 1. Condensed Consolidated Balance Sheets 3-4
Condensed Consolidated Statements of Income 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial
Statements
7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 28,
1998 December 31,
(unaudited) 1997
CURRENT ASSETS
Cash and cash equivalents $247,758 $426,165
Accounts receivable, less allowances of
$1,510,467 and $1,677,116, respectively 24,957,216 27,390,134
Inventories (2) 46,253,034 39,073,368
Prepaid expenses 2,328,831 2,537,648
Deferred tax assets 2,283,500 2,131,500
------------ ------------
Total current assets 76,070,339 71,558,815
PROPERTY AND EQUIPMENT, net of
depreciation and amortization 13,386,924 13,275,445
INTANGIBLES (4) 16,089,235 15,430,341
OTHER ASSETS 1,530,920 1,654,919
------------ ------------
Total assets $107,077,418 $101,919,520
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (cont'd)
March 28,
1998 December 31,
(unaudited) 1997
CURRENT LIABILITIES
Current maturities of long-term obligations $2,549,000 $3,349,000
Borrowings under credit agreement 14,165,000 4,000,000
Accounts payable 5,834,603 6,384,876
Accrued expenses 6,831,113 7,031,115
Dividends payable 0 866,805
Income taxes payable 205,745 1,513,674
------------ ------------
Total current liabilities 29,585,461 23,145,470
ACCRUED POSTRETIREMENT BENEFIT COST 1,414,451 1,364,401
LONG-TERM OBLIGATIONS 12,496,358 12,499,035
DEFERRED COMPENSATION 1,527,754 1,556,275
------------ ------------
Total liabilities 45,024,024 38,565,181
------------ ------------
MINORITY INTEREST 0 1,505,879
------------ ------------
COMMON SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share 67,176 67,176
Additional paid-in capital 27,580,355 27,579,147
Retained earnings 34,833,638 34,645,000
Treasury stock (427,775) (442,863)
------------ ------------
Total common shareholders' equity 62,053,394 61,848,460
------------ ------------
Total liabilities and shareholders' equity $107,077,418 $101,919,520
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended
March 28, March 29,
1998 1997
Net sales (4) $29,935,896 $32,698,478
Cost of goods sold 22,168,466 24,412,018
----------- -----------
Gross profit 7,767,430 8,286,460
Selling and administrative expenses 7,134,172 6,721,557
----------- -----------
Operating income 633,258 1,564,903
Non-operating income (expense)
Interest expense (410,600) (393,941)
Miscellaneous 87,601 87,517
----------- -----------
(322,999) (306,424)
----------- -----------
Income before income taxes 310,259 1,258,479
Provision for income taxes 121,621 493,324
----------- -----------
Net income before minority interest $188,638 $765,155
----------- -----------
Minority interest in net income
of subsidiary 0 (220,077)
----------- -----------
Net income $188,638 $545,078
=========== ===========
Basic earnings per share $0.03 $0.08
=========== ===========
Diluted earnings per share $0.03 $0.08
=========== ===========
Weighted average shares outstanding:
Basic earnings per share 6,668,684 6,667,627
Diluted earnings per share 6,705,751 6,691,895
The accompanying notes are an integral part of the financial statements.
<PAGE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 28, March 29,
1998 1997
Net cash used in operating activities ($5,345,399) ($3,329,337)
----------- -----------
Cash flows from investing activities
Purchase of property and equipment (980,257) (466,903)
Purchase of minority interest-Rainfair,
Inc. (2,364,567) 0
Other 0 13,110
----------- -----------
Net cash used in investing activities (3,344,824) (453,793)
Cash flows from financing activities
Cash dividends paid (866,805) (733,439)
Proceeds from short-term borrowings 10,165,000 0
Principal payments on long-term
obligations (800,000) 0
Other 13,621 (26,816)
----------- -----------
Net cash provided by (used in)
financing activities 8,511,816 (760,255)
Decrease in cash and cash equivalents (178,407) (4,543,385)
Cash and cash equivalents:
Beginning 426,165 6,716,183
----------- -----------
Ending $247,758 $2,172,798
=========== ===========
Supplemental information--cash payments
for:
Interest $271,610 $129,295
=========== ===========
Income taxes $1,438,637 $890,117
=========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
LaCrosse Footwear, Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements
1. INTERIM FINANCIAL REPORTING
The Company reports its quarterly interim financial information based
on 13 week periods. In the opinion of management, the unaudited
condensed consolidated financial statements include all adjustments
(consisting only of normal recurring adjustments) considered
necessary for a fair presentation of financial position, results of
operations and cash flows in accordance with generally accepted
accounting principles.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These
condensed consolidated financial statements should be read in
conjunction with the financial statements and the applicable notes
thereto that are included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
2. INVENTORIES
Inventories are comprised of the following:
March 28, 1998 December 31, 1997
Raw Materials $9,435,904 $8,217,160
Work-in Process 2,492,183 1,966,916
Finished Goods 37,522,888 32,007,233
LIFO Reserve (3,197,941) (3,117,941)
----------- -----------
Total $46,253,034 $39,073,368
=========== ===========
The finished goods inventory values at December 31, 1997 and
March 28, 1998 are net of reserves to cover losses incurred in the
disposition of slow moving, markdown and obsolete inventory. During
March 1998, the Company decided to rationalize the RED BALL/R/ and
LAKE OF THE WOODS/R/ product lines, which will result in somewhat
higher levels of markdown inventory in the second half of 1998.
However, any additional markdown expense associated with the
rationalization is not expected to be material at this time.
3. STOCK INCENTIVE PLANS
In November 1996, the Board of Directors adopted, and in June 1997
the shareholders of the Company approved, the LaCrosse Footwear, Inc.
1997 Employee Stock Incentive Plan (the "1997 Plan"), pursuant to
which options for up to 300,000 shares of common stock may be granted
to officers and other key employees of the Company. The Company also
has in effect the LaCrosse Footwear, Inc. 1993 Employee Stock
Incentive Plan, pursuant to which options for approximately 232,000
shares of common stock (out of a maximum of 250,000) have been
granted to, or executed by, officers and other key employees of the
Company.
Effective January 2, 1998 the Company's Board of Directors granted
options to purchase approximately 50,000 shares of common stock under
the 1997 Plan. The exercise price for these options is $14.25 per
share, the mean between the highest and lowest reported selling
prices of the common stock on The Nasdaq Stock Market on December 31,
1997. Because the options vest in equal increments over a five-year
period, none of such options will be exercisable until January 1999.
4. ACQUISITIONS
In July 1997, the Company acquired all of the outstanding shares of
capital stock of Pro-Trak Corporation, which operates under the Lake
of the Woods tradename. The purchase price, including the assumption
of liabilities, was approximately $7.3 million. The acquisition has
been accounted for as a purchase. Accordingly, the purchase price
has been allocated to assets and liabilities based on their estimated
fair value as of the date of acquisition.
The Company's condensed consolidated statement of income for the
three months ended March 28, 1998 includes the sales of LAKE OF THE
WOODS/R/ products. The following unaudited pro forma summary
represents the consolidated results of operations as if the
acquisition of Pro-Trak Corporation had occurred at the beginning of
the periods presented and does not purport to be indicative of what
would have occurred had the acquisition been made as of those dates
or of results which may occur in the future:
Three Months Ended
March 28, March 29,
1998 1997
(in thousands, except per share amounts)
Net Sales $29,936 $34,328
Net Income $189 $608
Basic Earnings Per Share $.03 $.09
Diluted Earnings Per Share $.03 $.09
ITEM 2
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
The following table sets forth, for the periods indicated, selected
financial information derived from the Company's condensed consolidated
financial statements, expressed as a percentage of net sales. The
discussion that follows the table should be read in conjunction with the
condensed consolidated financial statements.
Percentage of Net sales
Three Months Ended
March 28, March 29,
1998 1997
Net Sales 100.0% 100.0%
Cost of Goods Sold 74.1 74.7
------ ------
Gross Profit 25.9 25.3
Selling and Administrative Expenses 23.8 20.5
------ ------
Operating Income 2.1% 4.8%
The Company's business is seasonal with lower revenues historically being
generated during the first six months of the year. As a result, revenue
for the three-month period ending March 28, 1998 should not be considered
to be indicative of results to be reported for the balance of the fiscal
year.
Three Months Ended March 28, 1998 Compared to Three Months Ended March 29,
1997
Net Sales
Net sales for the three months ended March 28, 1998 decreased $2,762,582,
or 8%, to $29,935,896 from $32,698,478 for the first three months of 1997.
The reduction in net sales was largely the result of a $2.5 million
rainwear shipment to a large national chain which occurred in the first
quarter of 1997 but is not expected to occur until the second and third
quarters of 1998. Otherwise, the continued growth in DANNER/R/ brand
sales and the addition of $1.6 million of sales from the LAKE OF THE
WOODS/R/ brand acquired in July 1997 were largely offset by a weather-
related decline in "fill-in" order demand for LACROSSE/R/ and RED BALL/R/
cold weather products.
Gross Profit
Gross profit for the three months ended March 28, 1998 decreased 6% to
$7,767,430, or 25.9% of net sales, from $8,286,460, or 25.3% of net sales,
in the first quarter of 1997. While gross profit did decrease $519,000
during the quarter, primarily as a result of lower sales, gross profit as
a percent of net sales increased from 25.3% to 25.9%. The increase in
gross profit as a percent of net sales was primarily the result of changes
in product mix (i) for sales through the Rainfair, Inc. subsidiary and
(ii) of the DANNER/R/ brand sales.
Selling and Administrative Expenses
Selling and administrative expenses in the first quarter of 1998 increased
6%, to $7,134,172, or 23.8% of net sales, from $6,721,557, or 20.5% of net
sales in the first quarter of 1997. The increase in operating expenses
for the first quarter of 1998 compared to the first quarter of 1997 is
mainly due to a planned increase in sales and marketing (advertising)
expense in support of the growth of the DANNER/R/ brand and the continued
development of the RED BALL/R/ brand. As a percent of net sales, the
ratio for the first quarter of 1997 was favorably impacted by the $2.5
million rainwear shipment to a large national retail chain account which
is not expected to occur until the second and third quarters of 1998.
Interest Expense
Interest expense for the three months ended March 28, 1998 increased 4% to
$410,600 or 1.4% of net sales, from $393,941 or 1.2% of net sales for the
three months ended March 29, 1997. The increase was the result of higher
average borrowings to support increased working capital which was
partially offset by lower effective interest rates.
Income Tax Expense
The Company's effective income tax rate was 39.2% in the first quarter of
1998, the same as the first quarter of 1997.
Net Income
As a result of the decreased sales and the higher operating expenses, net
income for the first quarter of 1998 decreased to $188,638 from $545,078
in the first quarter of 1997.
Liquidity and Capital Resources
The Company has historically financed its operations with cash generated
from operations, long-term lending arrangements and short-term borrowings
under an unsecured revolving credit agreement. The Company requires
working capital primarily to support fluctuating accounts receivable and
inventory levels caused by the Company's seasonal business cycle. The
Company invests excess cash balances in short-term investment grade
securities or money market investments.
Net cash used in operating activities was $5.3 million in the first
quarter of 1998 compared to $3.3 million in the first quarter of 1997. A
$7.2 million increase in inventories in the first quarter of 1998 compared
to a $3.9 million increase in inventories during the first quarter of 1997
was the primary reason for the higher level of cash used in operating
activities in the first quarter of 1998 compared to 1997. Lower than
planned sales in December 1997 and the first quarter of 1998 were the
primary reason for the increase in inventories. Production levels and
purchases have been reduced, which should result in inventory levels being
close to last year's levels by the fourth quarter of 1998.
Net cash used in investing activities was $3.3 million in the first
quarter of 1998 compared to $.5 million in the first quarter of 1997. The
primary reason for the increase in cash used in investing activities was
the January 1998 purchase of all Rainfair, Inc. common stock held by the
former principal owner for approximately $2.4 million, which made
Rainfair, Inc. a 100% owned subsidiary of the Company. This purchase was
financed with borrowings from the revolving line of credit.
Net cash provided by financing activities was $8.5 million in the first
quarter of 1998 compared to a usage of $.8 million in the first quarter of
1997. Borrowings of approximately $10.2 million under the revolving line
of credit to finance increases in working capital and the Rainfair, Inc.
common stock purchase were partially offset by a $.8 million payment of
quarterly term loan payments due in March 1998 and June 1998.
PART II Other Information
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibit Number Description
(27) Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K
There were no reports on Form 8-K during the quarter ended
March 28, 1998
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LACROSSE FOOTWEAR, INC.
(Registrant)
Date: May 8, 1998 By: /s/ Patrick K. Gantert
Patrick K. Gantert
President and Chief Executive Officer
Date: May 8, 1998 By: /s/ Robert J. Sullivan
Robert J. Sullivan
Vice President-Finance and Administration
And Chief Financial Officer
(Principal Financial Officer)
<PAGE>
LACROSSE FOOTWEAR, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
for the Quarterly Period ended March 28, 1998
Exhibit
(27) Financial Data Schedule (EDGAR version only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LACROSSE FOOTWEAR, INC. AS OF AND FOR THE
PERIOD ENDED MARCH 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-28-1998
<CASH> 247,758
<SECURITIES> 0
<RECEIVABLES> 26,221,683
<ALLOWANCES> 740,354
<INVENTORY> 46,253,034
<CURRENT-ASSETS> 76,070,339
<PP&E> 34,554,629
<DEPRECIATION> 21,167,705
<TOTAL-ASSETS> 107,077,418
<CURRENT-LIABILITIES> 29,585,461
<BONDS> 12,496,358
0
0
<COMMON> 67,176
<OTHER-SE> 62,413,993
<TOTAL-LIABILITY-AND-EQUITY> 107,077,418
<SALES> 29,935,896
<TOTAL-REVENUES> 29,935,896
<CGS> 22,168,466
<TOTAL-COSTS> 7,055,678
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 78,494
<INTEREST-EXPENSE> 410,600
<INCOME-PRETAX> 310,259
<INCOME-TAX> 121,621
<INCOME-CONTINUING> 188,638
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,638
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
