UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 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, La Crosse, Wisconsin 54603
(Address of principal executive offices) (Zip Code)
(608) 782-3020
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X
No ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 par value, outstanding as of August 1, 1998:
6,669,427 shares
<PAGE>
LaCrosse Footwear, Inc.
Form 10-Q Index
For Quarter Ended June 27, 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 9-12
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index 15
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 27, December 31,
1998 1997
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $83,813 $426,165
Accounts receivable, less allowances of
$1,418,373 and $1,677,116,
respectively 26,458,129 27,390,134
Inventories (2) 49,854,804 39,073,368
Prepaid expenses 2,379,061 2,537,648
Deferred tax assets 2,611,600 2,131,500
---------- ----------
Total current assets 81,387,407 71,558,815
PROPERTY AND EQUIPMENT, net of
depreciation and amortization 13,759,190 13,275,445
INTANGIBLES (3) 15,889,340 15,430,341
OTHER ASSETS 1,433,020 1,654,919
----------- -----------
Total assets $112,468,957 $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)
June 27, December 31,
1998 1997
(unaudited)
CURRENT LIABILITIES
Current maturities of long-term
obligations $2,663,565 $3,349,000
Borrowings under credit agreement 22,100,000 4,000,000
Accounts payable 4,464,846 6,384,876
Accrued expenses 7,624,410 7,031,115
Dividends payable 0 866,805
Income taxes payable 10,719 1,513,674
---------- ----------
Total current liabilities 36,863,540 23,145,470
ACCRUED POSTRETIREMENT BENEFIT COST 1,339,501 1,364,401
LONG-TERM OBLIGATIONS 10,664,831 12,499,035
DEFERRED COMPENSATION 1,535,603 1,556,275
---------- ----------
Total liabilities 50,403,475 38,565,181
---------- ----------
MINORITY INTEREST 0 1,505,879
---------- ----------
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 34,845,726 34,645,000
Treasury stock (427,775) (442,863)
---------- ----------
Total shareholders' equity 62,065,482 61,848,460
----------- -----------
Total liabilities and
shareholders' equity $112,468,957 $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)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales (3) $29,460,746 $28,420,198 $59,396,642 $61,118,676
Cost of goods sold 21,771,933 20,768,943 43,940,399 45,180,961
----------- ----------- ----------- -----------
Gross profit 7,688,813 7,651,255 15,456,243 15,937,715
Selling and
administrative expenses 7,205,949 6,550,063 14,340,121 13,271,620
------------ ----------- ----------- -----------
Operating income 482,864 1,101,192 1,116,122 2,666,095
Non-operating income
(expense)
Interest expense (532,491) (378,094) (943,091) (772,035)
Miscellaneous 69,501 137,937 157,102 225,454
----------- ----------- ----------- -----------
(462,990) (240,157) (785,989) (546,581)
Income before
income taxes 19,874 861,035 330,133 2,119,514
Provision for income
taxes 7,786 337,529 129,407 830,853
---------- ----------- ----------- -----------
Net income before
minority interest $12,088 $523,506 $200,726 $1,288,661
Minority interest
in net income
(loss) of
subsidiary 0 (15,382) 0 204,695
---------- ----------- ----------- -----------
Net income $12,088 $538,888 $200,726 $1,083,966
Basic earnings per share $0.00 $0.08 $0.03 $0.16
========== =========== =========== ============
Diluted earnings per
sharen $0.00 $0.08 $0.03 $0.16
========== =========== =========== ============
Weighted average shares
outstanding
Basic earnings per
share 6,669,427 6,667,727 6,669,064 6,667,677
Diluted earnings per
share 6,692,665 6,707,718 6,699,186 6,696,134
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
June 27, June 28,
1998 1997
Net cash used in operating activities ($10,471,008) ($10,339,579)
----------- -----------
Cash flows from investing activities
Purchase of property and equipment (2,245,731) (1,640,302)
Purchase of minority interest-
Rainfair, Inc. (2,364,567) 0
Security deposit 0 (450,000)
Other 9,100 (11,890)
----------- -----------
Net cash used in investing
activities (4,601,198) (2,102,192)
Cash flows from financing activities
Cash dividends paid (866,805) (733,439)
Proceeds from short-term borrowings 18,100,000 8,575,000
Principal payments on long-term
obligations (2,514,287) (1,743,778)
Other 10,946 906
----------- -----------
Net cash provided by financing
activities 14,729,854 6,098,689
Decrease in cash and cash
equivalents (342,352) (6,343,082)
Cash and cash equivalents:
Beginning 426,165 6,716,183
----------- -----------
Ending $83,813 $373,101
=========== ===========
Supplemental information--cash
payments for:
Interest $826,231 $579,759
=========== ============
Income taxes $1,792,565 $1,325,327
=========== ============
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:
June 27, 1998 December 31, 1997
Raw Materials $9,309,445 $8,217,160
Work-in Process 2,648,661 1,966,916
Finished Goods 41,019,139 32,007,233
LIFO Reserve (3,122,441) (3,117,941)
---------- ----------
Total $49,854,804 $39,073,368
========== ==========
The finished goods inventory values at December 31, 1997 and June 27,
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 and change the method of distributing the
products. This has resulted in higher levels of markdown
inventories, a portion of which were disposed of during the second
quarter of 1998. While it is not expected that losses in excess of
the reserves will be incurred in the disposition of this markdown
inventory, the sales of these goods at lower margins may impact
margins reported in the second half of 1998.
3. ACQUISITIONS
In July 1997, the Company acquired all of the outstanding shares of
capital stock of Pro-Trak Corporation, which operated under the Lake
of the Woods trade-name. 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 statements of income for the
three months and six months ended June 27, 1998 include 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 Six Months Ended
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
(in thousands, except per share amounts)
Net Sales $29,461 $30,569 $59,397 $64,898
Net Income 12 566 201 1,174
Basic Earnings Per
Share $.00 $.08 $.03 $.17
Diluted Earnings Per
Share $.00 $.08 $.03 $.17
ITEM 2
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
The following table sets forth, for the periods indicated, selected
financial information derived from the Company's condensed consolidated
financial statements, expressed as a percentage of net sales. The
discussion that follows the table should be read in conjunction with the
condensed consolidated financial statements.
Percentage of Net Sales
Three Months Ended Six Months Ended
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 73.9 73.1 74.0 73.9
---- ---- ---- ----
Gross Profit 26.1 26.9 26.0 26.1
Selling and
Administrative Expenses 24.5 23.0 24.1 21.7
---- ---- ---- ----
Operating Income 1.6 3.9 1.9 4.4
The Company's business is seasonal with lower revenues historically being
generated during the first six months of the year. As a result, revenue
for the six-month period ending June 27, 1998 should not be considered to
be indicative of results to be reported for the balance of the fiscal
year.
Three Months Ended June 27, 1998 Compared to Three Months Ended June 28,
1997
Net Sales
Net sales for the three months ended June 27, 1998 increased $1,040,548,
or 4%, to $29,460,746 from $28,420,198 for the three months ended June 28,
1997. The increase in net sales was primarily the result of continued
growth in shipments of DANNER/R/ products, up 20% for the quarter, a $1.4
million consumer rainwear shipment to a large national chain, $1.7 million
of incremental LAKE OF THE WOODS/R/ shipments and an increase in sales of
closeout shipments. The LAKE OF THE WOODS/R/ brand was acquired in July
1997. These increases were largely offset by lower LACROSSE/R/ and RED
BALL/R/ shipments of cold weather products, which were impacted by the
mild 1997-98 winter weather that left dealers with carryover inventory
which resulted in reduced fill-in order volumes during the second quarter
and smaller advance orders for fall delivery.
Gross Profit
Gross profit for the three months ended June 27, 1998 increased 1% to
$7,688,813, or 26.1% of net sales, from $7,651,255, or 26.9% of net sales,
in the second quarter of 1997. The reduction in gross profit as a percent
of sales was primarily the result of increased closeout shipments at
reduced margins combined with lower production levels at several plants
reducing the overhead absorption.
Selling and Administrative Expenses
Selling and administrative expenses in the second quarter of 1998
increased 10%, to $7,205,949, or 24.5% of net sales, from $6,550,063, or
23.0% of net sales in the second quarter of 1997. The increase in
operating expenses was primarily a result of a planned increase in
consumer media advertising, increased selling and marketing expense in
support of the growth of the DANNER/R/ brand, increased distribution cost
in support of the LAKE OF THE WOODS/R/ brand and additional product
development personnel. A new product research and development center was
opened in La Crosse, Wisconsin during May 1998.
Interest Expense
Interest expense for the three months ended June 27, 1998 increased 41% to
$532,491, or 1.8% of net sales, from $378,094, or 1.3% of net sales, for
the three months ended June 28, 1997. Higher average borrowings,
primarily as a result of higher inventories, was the primary reason for
the increase in interest expense.
Net Income
Primarily as a result of the increased operating expense and interest
expense, the net income for the second quarter of 1998 decreased to
$12,088 from $538,888 in the second quarter of 1997.
Six Months Ended June 27, 1998 Compared to Six Months Ended June 28, 1997
Net Sales
Net sales for the six months ended June 27, 1998 decreased $1,722,034, or
3%, to $59,396,642 from $61,118,676 for the first six months of 1997. A
weather-related decline for fill-in and advance orders for LACROSSE/R/ and
RED BALL/R/ cold weather products was partially offset by the continued
growth in DANNER/R/ brand sales (up 19% in the first half) and the
addition of $3.0 million of net sales from the LAKE OF THE WOODS/R/ brand
which was acquired in July 1997.
Gross Profit
Gross profit for the six months ended June 27, 1998 decreased 3% to
$15,456,243, or 26.0% of net sales, from $15,937,715, or 26.1% of net
sales, in the first six months of 1997. The decrease in gross profit was
primarily due to the decrease in net sales. The decrease in gross profit
as a percentage of net sales was primarily due to increased closeout
shipments at reduced margins combined with lower production levels at
several plants reducing the overhead absorption.
Selling and Administrative Expenses
Selling and administrative expenses in the first half of 1998 increased
8%, to $14,340,121, or 24.1% of net sales, from $13,271,620, or 21.7% of
net sales, the first half of 1997. The increase in operating expenses was
primarily the result of a planned increase in consumer media advertising,
increased selling and marketing expense in support of the growth of the
DANNER/R/ brand, increased distribution cost in support of the LAKE OF THE
WOODS/R/ brand and additional product development personnel.
Interest Expense
Interest expense in the first half of 1998 increased 22% to $943,091, or
1.6% of net sales, from $772,035, or 1.3% of net sales, for the first half
of 1997. The increase in interest expense was primarily the result of
higher average borrowings to support the increased working capital.
Income Tax Expense
The Company's effective income tax rate was 39.2% in the first half of
both 1998 and 1997.
Net Income
As a result of the lower sales and higher operating expenses and interest
expense, net income for the first half of 1998 decreased to $200,726 from
$1,083,966 in the first half 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 $10.5 million in the first half
of 1998 compared to $10.3 million in the first half of 1997. A $10.8
million increase in inventories in the first half of 1998 compared to a
$8.3 million increase in the first half of 1997 was the primary reason for
the higher level of cash used in operating activities in the first half of
1998 compared to 1997. Lower than planned orders and sales in the first
half 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 December 1998.
Net cash used in investing activities was $4.6 million in the first half
of 1998 compared to $2.1 million in the first half 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 $14.7 million in the first
half of 1998 compared to $6.1 million in the first half of 1997.
Borrowings under the revolving line of credit were $9.1 million higher in
the first half of 1998 compared to the first half of 1997. These
borrowings were primarily used to finance the increase in inventories and
the Rainfair, Inc. common stock purchase. This increase in borrowings was
partially offset by $.8 million of quarterly term loan payments due in
March 1998 and June 1998.
PART II Other Information
ITEM 4 Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on May
14, 1998. At such meeting, George W. Schneider, Eric E.
Merk, Sr. and Craig L. Leipold were elected as directors of
the Company for terms to expire at the 2001 annual meeting of
shareholders and until their successors are duly elected and
qualified pursuant to the following votes: George W.
Schneider 5,791,128 shares voted for, 128,612 shares
withholding authority, 0 abstentions and 0 broker non-votes;
Eric E. Merk, Sr. 5,783,728 shares for, 136,012 shares
withholding authority, 0 abstentions and 0 broker non-votes;
Craig L. Leipold 5,783,687 shares for, 136,053 shares
withholding authority, 0 abstentions and 0 broker non-votes.
The other directors of the Company whose terms of office
continued after the 1998 annual meeting of shareholders are
as follows: terms expiring at the 1999 annual meeting
Frank J. Uhler, Jr. and Richard A. Rosenthal; and terms
expiring at the 2000 annual meeting Patrick K. Gantert,
Luke E. Sims and John D. Whitcombe.
ITEM 5 Other Information
Proposals which shareholders of the Company intend to present
at and have included in the Company's proxy statement for the
1999 annual meeting of shareholders pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended
("Rule 14a-8"), must be received by the Company by the close
of business on December 15, 1998. Additionally, if the
Company receives notice of a shareholder proposal submitted
otherwise than pursuant to Rule 14a-8 (i.e., proposals
shareholders intend to raise at the 1999 annual meeting of
shareholders but do not intend to have included in the
Company's proxy statement for such meeting) after
February 28, 1999, the persons named in proxies solicited by
the Board of Directors of the Company for the 1999 annual
meeting of shareholders may exercise discretionary voting
power with respect to such proposal.
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibit Number Description
(27) Financial Data Schedule (EDGAR version
only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the
quarter ended June 27, 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: August 7, 1998 By: /s/ Patrick K. Gantert
Patrick K. Gantert
President and Chief Executive Officer
Date: August 7, 1998 By: /s/ Robert J. Sullivan
Robert J. Sullivan
Vice President-Finance and
Administration and Chief Financial
Officer (Principal Financial and
Accounting Officer)
<PAGE>
LACROSSE FOOTWEAR, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
for the Quarterly Period ended June 27, 1998
Exhibit
(27) Financial Data Schedule (EDGAR) version only)
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0
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