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 April 3, 1999
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 May 1, 1999: 6,400,449 shares
- ------------------------------------------------------------------------------
<PAGE>
LaCrosse Footwear, Inc.
Form 10-Q Index
For Quarter Ended April 3, 1999
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
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index 15
2
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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. Financial Statements
--------------------
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 3, December 31,
1999 1998
(unaudited)
--------------- --------------
CURRENT ASSETS
Cash and cash equivalents $537,360 $363,966
Accounts receivable, less allowances of
$912,076 and $957,649, respectively 19,446,136 23,150,999
Inventories (2) 43,459,424 39,697,660
Prepaid expenses 2,819,081 2,296,340
Deferred tax assets 1,999,200 1,992,900
--------------- --------------
Total current assets 68,261,201 67,501,865
PROPERTY AND EQUIPMENT, net of
depreciation and amortization 13,643,078 14,001,642
INTANGIBLES 15,327,438 15,528,357
OTHER ASSETS 1,618,148 1,582,648
--------------- --------------
Total assets $98,849,865 $98,614,512
=============== ==============
The accompanying notes are an integral part of the financial statements.
3
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LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (cont'd)
April 3, December 31,
1999 1998
(unaudited)
--------------- --------------
CURRENT LIABILITIES
Current maturities of long-term obligations $ 2,264,815 $ 2,668,565
Borrowings under credit agreement 13,005,000 9,500,000
Accounts payable 4,202,201 3,469,159
Accrued expenses 5,172,100 5,536,163
Dividends payable 0 863,776
Income taxes payable 122,417 662,285
--------------- --------------
Total current liabilities 24,766,533 22,699,948
ACCRUED POSTRETIREMENT BENEFIT COST 1,512,451 1,462,401
LONG-TERM OBLIGATIONS 9,427,732 9,827,182
DEFERRED COMPENSATION 1,580,453 1,589,414
--------------- --------------
Total liabilities 37,287,169 35,578,945
--------------- --------------
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share 67,176 67,176
Additional paid-in capital 26,434,480 27,582,547
Retained earnings 35,891,307 36,041,194
Treasury stock (830,267) (655,350)
--------------- --------------
Total shareholders' equity 61,562,696 63,035,567
--------------- --------------
Total liabilities and
shareholders' equity $98,849,865 $98,614,512
=============== ==============
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended
April 3, March 28,
1999 1998
-------------- --------------
Net sales $27,946,067 $29,935,896
Cost of goods sold 20,474,237 22,168,466
-------------- --------------
Gross profit 7,471,830 7,767,430
Selling and administrative expenses 7,369,362 7,134,172
-------------- --------------
Operating income 102,468 633,258
Non-operating income (expense)
Interest expense (375,525) (410,600)
Miscellaneous 26,523 87,601
-------------- --------------
(349,002) (322,999)
-------------- --------------
Income (loss) before income taxes (246,534) 310,259
Provision for income taxes 96,647 (121,621)
-------------- --------------
Net income (loss) ($149,887) $188,638
============== ==============
Basic earnings (loss) per share ($0.02) $0.03
============== ==============
Diluted earnings (loss) per share ($0.02) $0.03
============== ==============
Weighted average shares outstanding:
Basic earnings per share 6,637,812 6,668,684
Diluted earnings per share 6,637,812 6,705,751
The accompanying notes are an integral part of the financial statements.
5
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LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
April 3, March 28,
1999 1998
-------------- --------------
Net cash provided by (used in)
operating activities $155,469 ($5,345,399)
-------------- ---------------
Cash flows from investing activities
Purchase of property and equipment (497,116) (980,257)
Purchase of minority interest-Rainfair, Inc. 0 (2,364,567)
-------------- ---------------
Net cash used in investing activities (497,116) (3,344,824)
Cash flows from financing activities
Cash dividends paid (863,775) (866,805)
Proceeds from short-term borrowings 3,505,000 10,165,000
Principal payments on long-term obligations (800,000) (800,000)
Purchase of treasury stock (174,917) 0
Settlement of Danner acquisition contingency (1,148,067) 0
Other (3,200) 13,621
-------------- ---------------
Net cash provided by financing activities 515,041 8,511,816
Increase (decrease) in cash and
cash equivalents 173,394 (178,407)
Cash and cash equivalents:
Beginning 363,966 426,165
-------------- ---------------
Ending $537,360 $247,758
============== ===============
Supplemental information--cash payments for:
Interest $327,620 $271,610
============== ===============
Income taxes $530,866 $1,438,637
============== ===============
The accompanying notes are an integral part of the financial statements.
6
<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, 1998.
2. INVENTORIES
Inventories are comprised of the following:
April 3, 1999 December 31, 1998
------------- -----------------
Raw Materials $8,665,818 $8,539,889
Work-in Process 1,947,897 1,535,855
Finished Goods 35,705,552 32,391,759
LIFO Reserve (2,859,843) (2,769,843)
----------- -----------
Total $43,459,424 $39,697,660
=========== ===========
The finished goods inventory values at December 31, 1998 and April 3, 1999
are net of reserves to cover losses incurred in the disposition of slow
moving, markdown and obsolete inventory.
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
7
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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 3, 1999, the Company's Board of Directors granted options
to purchase approximately 110,000 shares of common stock under the 1997
Plan. The exercise price for these options is $8.625 per share, the mean
between the highest and lowest reported selling prices of the common stock
on The Nasdaq Stock Market on December 31, 1998. Because the options vest
in equal increments over a five-year period, none of such options will be
exercisable until January 2000.
8
<PAGE>
ITEM 2
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
The following table sets forth, for the periods indicated, selected financial
information derived from the Company's condensed consolidated financial
statements, expressed as a percentage of net sales. The discussion that follows
the table should be read in conjunction with the condensed consolidated
financial statements.
Percentage of Net sales
-----------------------
Three Months Ended
April 3, March 28,
1999 1998
---- ----
Net Sales 100.0% 100.0%
Cost of Goods Sold 73.3 74.1
---- ----
Gross Profit 26.7 25.9
Selling and Administrative Expenses 26.3 23.8
---- ----
Operating Income 0.4% 2.1%
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 April 3, 1999 should not be considered to be
indicative of results to be reported for the balance of the fiscal year.
Three Months Ended April 3, 1999 Compared to Three Months Ended March 28, 1998
Net Sales
Net sales for the three months ended April 3, 1999 decreased $1,989,829, or 7%,
to $27,946,067 from $29,935,896 for the first three months of 1998. The
reduction in net sales was largely the result of a weather related reduction in
fill-in shipments during February and March and a $.9 million reduction in
shipments to L.L. Bean, the result of their April 1998 decision to discontinue
the use of handcrafted rubber bottoms in their "Bean Boot" line. Also
contributing to the reduction was a lower percentage of Fall advance orders
which shipped during the first quarter of 1999 as compared to 1998. These
reductions were partially offset by an 8% increase in DANNER(R) brand shipments.
9
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Gross Profit
Gross profit for the three months ended April 3, 1999 decreased 4% to
$7,471,830, or 26.7% of net sales, from $7,767,430, or 25.9% of net sales, in
the first quarter of 1998. While gross profit did decrease $295,600 during the
quarter, primarily as a result of lower sales, gross profit as a percent of net
sales increased from 25.9% to 26.7%. The increase in gross profit as a percent
of net sales was primarily the result of reduced shipments of low margin rubber
pac boot bottoms coupled with increased margins on the DANNER(R) brand business
due to higher factory utilization, product mix and a reduction in defective
returns.
Selling and Administrative Expenses
Selling and administrative expenses in the first quarter of 1999 increased 3%,
to $7,369,362, or 26.3% of net sales, from $7,134,172, or 23.8% of net sales in
the first quarter of 1998. The increase in operating expenses for the first
quarter of 1999 compared to the first quarter of 1998 was mainly due to
increased sales and marketing expenses in support of the DANNER(R) brand and the
industrial channel of distribution to take advantage of growth opportunities.
Increases in product development and distribution expenses were offset by
decreases in volume related variable expenses.
Interest Expense
Interest expense for the three months ended April 3, 1999 decreased 8% to
$375,525, or 1.3% of net sales, from $410,600, or 1.4% of net sales, for the
three months ended March 28, 1998. The decrease was the result of lower average
borrowings, primarily as a result of lower levels of accounts receivable and
inventories.
Income Tax Expense
The Company's effective income tax rate was 39.2% in the first quarter of 1999,
the same as the first quarter of 1998.
10
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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 provided by operating activities was $.2 million in the first quarter
of 1999 compared to a $5.3 million usage of cash in the first quarter of 1998.
In the first quarter of 1999, a $3.8 million increase in inventories was
essentially offset by a decrease in accounts receivable; whereas in the first
quarter of 1998, a $7.2 million increase in inventories was only partially
offset by a $2.4 million decrease in accounts receivable. The 1998 increase in
inventories resulted because production levels had not been reduced to
correspond to the level of shipments.
Net cash used in investing activities was $.5 million in the first quarter of
1999 compared to $3.3 million in the first quarter of 1998. During the first
quarter of 1998, $2.4 million of cash was used to purchase all Rainfair, Inc.
common stock held by the former principal owner, which made Rainfair, Inc. a
100% owned subsidiary of the Company, and $.9 million of cash was used for
capital expenditures. The only cash used in investing activities during the
first quarter of 1999 was $.5 million for capital expenditures.
Net cash provided by financing activities was $.5 million in the first quarter
of 1999 compared to $8.5 million in the first quarter of 1998. $3.5 million of
borrowings under the line of credit during the first quarter of 1999 were used
to pay dividends ($.9 million), make principal payments on long-term obligations
($.8 million), purchase treasury stock ($.2 million), pay an obligation related
to the shares issued in the 1994 acquisition of Danner ($1.1 million) and for
capital expenditures ($.5 million). This compares to the first quarter of 1998
when $10.2 million of borrowings under the line of credit were used to pay cash
dividends ($.9 million), make principal payments on long-term obligations ($.8
million), for capital expenditures ($.9 million), purchase shares in Rainfair,
Inc. ($2.4 million) and used to support the growth in working capital, primarily
inventories (balance of borrowings).
In March 1995, the Company announced plans to repurchase up to 130,000 shares of
common stock in the open market. In March 1999, the Board of Directors approved
an additional share repurchase of 375,000, shares bringing the total share
repurchase authorization to 505,000 shares. During the first quarter of 1999,
the Company repurchased 25,600 shares bringing the total shares repurchased to
95,600 shares. An additional 83,200 shares were repurchased during April 1999.
In addition, in April 1999, the Company repurchased, in a private transaction at
the current market price, 135,178 shares of common stock issued in connection
with the Company's 1994 acquisition of Danner Shoe Manufacturing Co. The shares
had been held by Eric E. Merk, Sr., his wife and a minority shareholder. The
transaction was precipitated by the recent untimely
11
<PAGE>
death of Mr. Merk. This repurchase was done under a separate repurchase
authorization approved by the Board of Directors.
Year 2000
---------
The Year 2000 (Y2K) issue is the result of computer programs using a two digit
format, as opposed to four digits, to indicate the year. Such computer systems
may be unable to interpret dates beyond the year 1999, which could cause a
system failure or other computer errors, leading to a disruption in operations.
The Company began work on Y2K issues in early 1997. In early 1998, the Company
established a team of people (Y2K team) to evaluate whether, and to what extent,
the Y2K issue would impact the Company's business. While the Company sells no
products which are impacted by the Y2K issue, the team did review application
programs, operating systems and equipment used in operations. A vendor contact
program was established which to date has uncovered no material issues. The Y2K
team is monitoring the Company's progress in resolving all Y2K issues. To date,
the Company is not aware of any Y2K issues which cannot be resolved in a timely
manner.
The Company is using outside consultants to address the Y2K issue for the
application programs at one subsidiary, otherwise all work is being done
internally. The Company believes it will be Y2K compliant during the third
quarter of 1999. The Company currently estimates that it will spend
approximately $300,000 during the years 1997 through 1999 to address the Y2K
issue, with approximately $125,000 of these funds to be expended during 1999.
These costs include the use of outside consultants, the purchase of new and/or
updated software where required, the purchase of new equipment and the internal
costs to change application programs. The estimated costs of Y2K compliance do
not give effect to any future corporate acquisitions made by the Company or its
subsidiaries.
The Company does not believe that the implementation of its Y2K compliance plan
will have a material effect on the Company's business operations, financial
condition, liquidity or capital resources. Management of the Company believes it
has an effective program in place to address the Y2K issue in a timely manner.
As a component of the Company's Y2K compliance plan, the Company will be
developing contingency plans to mitigate the effects of potential problems
experienced by it or its key vendors or suppliers in the timely implementation
of its Y2K compliance plan. Nevertheless, since it is not possible to anticipate
all future outcomes, especially when third parties are involved, there could be
circumstances in which the Company's operations would be adversely affected.
The estimated costs of, and timetable for, becoming Y2K compliant constitute
"forward looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Shareholders, potential investors and other readers are
cautioned that such estimates are based on numerous assumptions by management,
including assumptions regarding the accuracy of representations made by third
parties concerning their compliance with Y2K issues and other factors. The
estimated costs of Y2K compliance also does not give effect to any future
corporate acquisitions made by the Company or its subsidiaries.
12
<PAGE>
ITEM 3. Quantitative and Qualitative Discloures About Market Risk
---------------------------------------------------------
The Company has not experienced any material changes in its market risk
exposures since December 31, 1998.
PART II - Other Information
---------------------------
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit Number Description
(4) Extension of Term, dated as of March 31, 1999, of the Voting
Trust Agreement, dated as of June 12, 1982, as amended.
(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
April 3, 1999
13
<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 17, 1999 By: /s/ Patrick K. Gantert
--------------------------------------------
Patrick K. Gantert
President and Chief Executive Officer
Date: May 17, 1999 By: /s/ Robert J. Sullivan
--------------------------------------------
Robert J. Sullivan
Vice President-Finance and Administration
And Chief Financial Officer
(Principal Financial and Accounting Officer)
14
<PAGE>
LACROSSE FOOTWEAR, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
for the Quarterly Period ended April 3, 1999
Exhibit
-------
(4) Extension of Term, dated as of March 31, 1999, of the Voting Trust
Agreement, dated as of June 12, 1982, as amended.
(27) Financial Data Schedule (EDGAR) version only)
Exhibit 4
EXTENSION OF TERM
The undersigned Trustees, constituting all of the duly acting Trustees of
that certain Voting Trust Agreement, dated as of June 21, 1982, as amended and
restated as of December 11, 1990 (the "Voting Trust Agreement"), do hereby
irrevocably elect to exercise the option provided in Paragraph 5.1 thereof to
continue the term of such Voting Trust Agreement until April 1, 2005.
Dated and effective as of this 31st day of March, 1999. This instrument may
be executed in counterparts.
/s/ George W. Schneider (SEAL) /s/ Virginia F. Schneider (SEAL)
- --------------------------- --------------------------
George W. Schneider Virginia F. Schneider
/s/ Joseph P. Schneider (SEAL) /s/ Steven M. Schneider (SEAL)
- --------------------------- --------------------------
Joseph P. Schneider Steven M. Schneider
/s/ Patrick E. Greene (SEAL)
- ---------------------------
Patrick E. Greene
1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF LACROSSE FOOTWEAR, INC. AS
OF AND FOR THE PERIOD ENDED APRIL 3, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-03-1999
<CASH> 537,360
<SECURITIES> 0
<RECEIVABLES> 20,358,212
<ALLOWANCES> 385,111
<INVENTORY> 43,459,424
<CURRENT-ASSETS> 68,261,201
<PP&E> 37,877,911
<DEPRECIATION> 24,234,833
<TOTAL-ASSETS> 98,849,865
<CURRENT-LIABILITIES> 24,766,533
<BONDS> 9,427,732
0
0
<COMMON> 67,176
<OTHER-SE> 61,495,520
<TOTAL-LIABILITY-AND-EQUITY> 98,849,865
<SALES> 27,946,067
<TOTAL-REVENUES> 27,946,067
<CGS> 20,474,237
<TOTAL-COSTS> 7,318,362
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 51,000
<INTEREST-EXPENSE> 375,525
<INCOME-PRETAX> (246,534)
<INCOME-TAX> 96,647
<INCOME-CONTINUING> (149,887)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (149,887)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
