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, 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 (I.R.S. Employer
of incorporation or organization) Identification No.)
1319 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 and non-voting common equity held by
nonaffiliates of the registrant at February 26, 1999: $21,079,885.
Number of shares of the registrant's common stock outstanding at February 26,
1999: 6,634,827 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
1998 (incorporated by reference into Parts I, II and IV)
Portions of the Proxy Statement for 1999 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)
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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 clothing for the sporting and outdoor, farm and general utility,
occupational and children's markets. The Company markets its products primarily
under the LACROSSE(R), RED BALL(R), LAKE OF THE WOODS(R), RAINFAIR(R) and
DANNER(R) brands through an employee sales force and also through selected
distributors and independent representatives. It also manufactures private label
footwear, footwear components and protective clothing. 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. In January 1998, the Company
acquired the remaining 50% of Rainfair that it did not own, thereby making it a
100%-owned subsidiary. 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. In July 1997, the Company acquired all of the outstanding
shares of Pro-Trak Corporation, the company that operated under the Lake of the
Woods tradename. Lake of the Woods is a designer, manufacturer and marketer of
branded leather footwear for both the outdoor and occupational markets.
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.
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Brand Positioning
Within the retail channels of distribution, the Company markets footwear
and rainwear under the well-established DANNER(R), LACROSSE(R), RED BALL(R) and
LAKE OF THE WOODS(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) and LAKE OF THE WOODS(R)
brands offer a more narrow line of lower price and performance footwear directed
to a broad consumer 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 an extensive 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 three brand names, DANNER(R),
LACROSSE(R) and LAKE OF THE WOODS(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 90% 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. The LAKE OF
THE WOODS(R) brand markets a broad line of utility, steel toe and sporting boots
and recreational hikers.
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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 1998, the Company offered approximately 500 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. Consumers, sales personnel and suppliers
provide information to the Company's marketing division, which interacts with
product development during 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), RED BALL(R) and LAKE OF THE
WOODS(R) brands are marketed through a sales force comprised of 17
Company-employed sales people and six independent sales representative groups.
The DANNER(R) brand is marketed through independent sales representative groups,
some of which are dedicated independent agents and some of which are multi-line
representative groups. A national account sales team complements the sales
activities for the brands.
The Company's industrial products are distributed through the LaCrosse
Rainfair Safety Products Division using a combination of Company employed field
sales persons, independent representatives and a national account team.
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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 for each of
its brands 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 targeted consumer.
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
The Company produces the majority of its rubber, leather and vinyl
products in its United States manufacturing facilities in La Crosse, Wisconsin,
Portland, Oregon and Claremont, New Hampshire. The Company's Hillsboro,
Wisconsin facility manufactures a line of waders with nylon uppers and rubber or
vinyl boot bottoms, using a heat-sealing process. Leather tops and liners for
the LACROSSE(R) brand rubber bottom/leather top pac boots and some leather boots
are produced at the Company's Clintonville, Wisconsin facility.
The Company manufactures a majority of its LACROSSE(R) and DANNER(R)
brand 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.
The RAINFAIR(R), RED BALL(R) and LAKE OF THE WOODS(R) brands, which the
Company started distributing during 1996 and 1997, source a substantial portion
of their product offshore, primarily in the Pacific Rim. The Company also
sources a portion of the
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LACROSSE(R) brand leather products and rubber bottom/leather upper pac boots
from the 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 90% of Danner's footwear, in terms of number of
pairs produced, incorporates GORE-TEX(R) waterproof fabric. 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. The Company is currently in the process of
becoming ISO 9001 certified, with certification planned for the fourth quarter
of 1999.
The Company's La Crosse, Wisconsin 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 10% of all completed
waterproof boots are filled with water for testing. Leather is tested for
lasting ability, tear strength, finish and thickness.
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Backlog
At December 31, 1998, the Company had unfilled orders from its customers
in the amount of approximately $13.7 million compared to $14.2 million at
December 31, 1997. The decrease in backlog is primarily the result of a consumer
rainwear order from a large mass merchant which was included in the December 31,
1997 backlog. All orders at December 31, 1998 are expected to be filled during
1999. 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 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 offer 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 and LaCrosse leather product line. These competitors
manufacture domestically and/or import
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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. Danner 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. In leather boots, the LACROSSE(R) and
LAKE OF THE WOODS(R) brands, because of their market position, source product
both domestically and from offshore. Therefore, they compete with other
distributors with products sourced from offshore locations.
Employees
As of December 31, 1998, the Company had approximately 1,250 employees,
all located in the United States. Approximately 450 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
September 2001, 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 2002 and
approximately 55 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 2000. The Company has
approximately 260 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), LAKE OF THE WOODS(R),
RAINFAIR(R), LACROSSE and stylized Indianhead design that serve as the Company's
logo, RAINFAIR and stylized horse design that serve as Rainfair's logo,
ALLTEMP(R), DURALITE(R), FIRETECH(R), FLY-LITE(R), ICE KING(R), ICECUBE(R),
ICEMAN(R), TERRAIN KING(R), AIRTHOTIC(R), CROSS-HIKER(R), THERMONATOR(R) and RED
BALL JETS(R). The Company 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), AIRBOB(R) and
stylized Indianhead design and in Mexico for its mark LACROSSE and stylized
Indianhead design. 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), LAKE OF THE
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WOODS(R) and RAINFAIR(R) names, the Company does not believe any trademark is
material to its business.
Prior to 1999, the Company paid 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 expired on
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; a neoprene
wader upper with an expandable chest; and a patent for its AIRTHOTIC(R), which
is a ventilated arch support that fits under the heel.
Seasonality/Working Capital
As has traditionally been the case, the Company's sales in 1998 were
higher in the last two quarters of the year than in the first two quarters and,
in order to satisfy shipping requirements, the Company builds inventory during
the first half of the year and offers customers price discounts and extended
terms during such time. The Company expects these trends to continue. Additional
information about the seasonality and working capital requirements of the
Company's business is contained under "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview" on page 5 of the
Company's 1998 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 1998.
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 1999, any material impact on the capital expenditures,
earnings or competitive position of the Company.
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Executive Officers of the Registrant
The following table sets forth certain information, as of March 15, 1999,
regarding the executive officers of the Company.
Name Age Position
---- --- --------
George W. Schneider 76 Chairman of the Board and Director
Frank J. Uhler, Jr. 68 Vice Chairman of the Board and Director
Patrick K. Gantert 49 President, Chief Executive Officer and
Director
Wayne L. Berger 52 Vice President - Purchasing
Stephen F. Bonner 45 Vice President - Claremont Operations
Kenneth F. Ducke 55 Treasurer and Assistant Secretary
Joseph F. Fahey 44 Vice President - Retail Sales and Marketing
Peter V. Fiorini 61 Vice President - Special Markets
David F. Flaschberger 40 Vice President - Human Resources
David R. Llewellyn 61 Vice President - Marketing and Business
Development
Robert G. Rinehart, Jr. 46 Vice President - Product Development
Joseph P. Schneider 39 Vice President of the Company and President
and Chief Executive Officer of Danner
Robert J. Sullivan 52 Vice President - Finance and Administration
and Chief Financial Officer
John A. Tadewald 60 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.
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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.
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 1989 through 1993,
Mr. Fahey was the Manager of Dealer Development and Research for the Power
Equipment Division of American Honda Motor Company.
Peter V. Fiorini joined the Company in July 1991 as Vice President -
Industrial Sales. He served in such capacity until May 1998, when he was elected
Vice President - Special Markets.
David F. 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.
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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 has served as a Vice President of the Company since
June 1996 and as President and Chief Executive Officer of Danner since October
1998. Prior thereto, Mr. Schneider served as President and Chief Operating
Officer of Danner since December 1997, as Executive Vice President and Chief
Operating Officer of Danner since June 1996 and as Vice President - Retail Sales
of the Company from January 1993 until June 1996. From 1985, when he joined the
Company, until January 1993, Mr. Schneider held various sales management
positions.
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,
1998, relating to the Company's principal facilities.
<TABLE>
<CAPTION>
Properties
Owned Approximate Floor
or Area in Square
Location Leased Feet Principal Uses
<S> <C> <C> <C>
La Crosse, WI Leased(1) 212,000(1) Principal sales, marketing and executive
offices and warehouse space
La Crosse, WI Owned 400,000 Manufacture rubber boots
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La Crosse, WI Leased(2) 264,000 Main warehouse and distribution facility
La Crosse, WI Owned 11,000 Retail outlet store
Clintonville, WI Owned 42,500 Manufacture leather components and
construct rubber boots
Clintonville, WI Leased 4,000 Warehouse and raw material storage
Hillsboro, WI Leased(3) 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(4) 68,000 Warehouse and distribution facility
Portland, OR Leased(5) 36,000 Manufacture DANNER(R)products, offices,
retail outlet store and warehouse space
Portland, OR Leased(6) 16,000 Warehouse and distribution facility
Prentice, WI Leased(7) 24,000 Warehouse and distribution facility
Racine, WI Leased(8) 104,700 Manufacturing, warehousing and offices for
Rainfair
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(1) The lease for this 212,000 square foot building adjacent to the Company's
manufacturing plant in La Crosse, Wisconsin expires in 2007.
Approximately 50% of this building is currently sublet to the former
owner. Of the portion occupied by the Company, 6,600 square feet is used
for office space and the balance is used for warehouse space.
(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.
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(3) There are two facilities leased by the Company in Hillsboro, Wisconsin
with approximately 40,000 square feet.
(4) The lease of this facility expires in 2000. This space is leased in a
facility adjacent to the Company's manufacturing plant in Claremont, New
Hampshire.
(5) The lease for this facility expires in March 2009, but the Company has
the option to extend the term for an additional five years.
(6) The lease for this facility expires in December 2000.
(7) The lease for this facility expires in 1999.
(8) The lease for this facility was entered into in May 1996 and expires in
May 2001.
</TABLE>
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 products or 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 received a favorable decision, dated May 15, 1998, from the USCFC,
which resulted in a judgment awarded to the Company. However, the Government
appealed the decision and the appeal is currently being heard in the U.S.
Federal Circuit Court of Appeals. The Company is not currently in a position to
predict the outcome of the appeal. However, a decision by the U.S. Federal
Circuit Court of Appeals in another case (Kohler Co. v. United States, Case No.
96-5043, September 17, 1997) supports one of 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.
-14-
<PAGE>
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, 1998.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The portions of page 20 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 1998 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 4 of the Company's 1998
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 5 through 8 in the Company's 1998
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 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company enters into interest rate swap agreements ("Swap Agreements")
to reduce its exposure to interest rate fluctuations on its floating rate debt.
The Swap Agreements exchange floating rate for fixed rate interest payments
periodically over the life of the agreements without exchange of the underlying
notional amounts. The notional amounts of interest rate agreements are used to
measure interest to be paid or received and do not represent an amount of
exposure to credit loss. For interest rate instruments that effectively hedge
interest rate exposures, the net cash amounts paid or received on the agreements
are accrued and recognized as an adjustment to interest expense. As of December
31, 1998, the Company had Swap Agreements in effect totaling $11.0 million
notional amount, of which $7.0 million will mature in 2002 with another $4.0
million maturing in 2003. The variable rate borrowings not offset by Swap
Agreements at December 31, 1998 totaled $9.4 million. Swap Agreement rates are
based on the three-month LIBOR rate. Based on average floating rate borrowings
outstanding throughout fiscal year 1998, a 100-basis point change in LIBOR would
have caused the Company's monthly interest expense to change by approximately
-15-
<PAGE>
$16,000. The Company believes that these amounts are not material to the
earnings of the Company.
Item 8. Financial Statements and Supplementary Data
The consolidated statements of income, shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1998,
and the related consolidated balance sheets of the Company as of December 31,
1998 and 1997, 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, 1998, all set forth on pages 9
through 20 of the Company's 1998 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.
-16-
<PAGE>
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 1999 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
10 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 DirectorsCDirector Compensation" and "Executive Compensation" in the
Proxy Statement and is hereby incorporated herein by reference; provided,
however, that the subsection entitled "Executive CompensationCReport 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 CompensationCCompensation Committee
Interlocks and Insider Participation" in the Proxy Statement and is hereby
incorporated herein by reference.
-17-
<PAGE>
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, 1998.
-18-
<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 29th day of
March, 1999.
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 29, 1999
- ------------------------ Director
George W. Schneider
/s/ Patrick K. Gantert President, Chief Executive March 29, 1999
- ------------------------ Officer and Director (Principal
Patrick K. Gantert Executive Officer)
/s/ Robert J. Sullivan Vice President-Finance and March 29, 1999
- ------------------------ Administration and Chief Financial
Robert J. Sullivan Officer (Principal Financial and
Accounting Officer)
/s/ Frank J. Uhler, Jr. Vice Chairman of the Board March 29, 1999
- ------------------------ and Director
Frank J. Uhler, Jr.
-19-
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Craig L. Leipold Director March 29, 1999
- ------------------------
Craig L. Leipold
/s/ Richard A. Rosenthal Director March 29, 1999
- ------------------------
Richard A. Rosenthal
/s/ Luke E. Sims Director March 29, 1999
- ------------------------
Luke E. Sims
/s/ John D. Whitcombe Director March 29, 1999
- ------------------------
John D. Whitcombe
-20-
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULE
Page
--------------------------------
Annual Report
Form 10-K to Shareholders
Consolidated Balance Sheets at
December 31, 1998 and 1997 - 9
Consolidated Statements of Income for
each of the three years in the
period ended December 31, 1998 - 10
Consolidated Statements of Shareholders'
Equity for each of the three
years in the period ended December 31, 1998 - 11
Consolidated Statements of Cash Flows
for each of the three years in
the period ended December 31, 1998 - 12
Notes to Consolidated Financial Statements - 13-19
Independent Auditor's Report - 19
Independent Auditor's Report on
Financial Statement Schedule 22 -
Financial Statement Schedule:
II - Valuation and Qualifying
Accounts 23-24 -
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.
-21-
<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 5, 1999
-22-
<PAGE>
<TABLE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Additions
-------------------------------------
Balance at Beginning Balance
of Period Charged To Costs Charged To at End
Description And Expenses Other Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
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
=========== ========== =========== ========== =========
[continued]
-23-
<PAGE>
<CAPTION>
Additions
-------------------------------------
Balance at Beginning Balance
of Period Charged To Costs Charged To at End
Description And Expenses Other Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Accounts receivable allowances:
Allowance for returns $ 567,000 $ 1,142,866 $ 280,700 $ 1,152,866 $ 837,700
Allowance for cash discounts 189,000 63,345 65,000 217,345 100,000
Allowance for doubtful accounts 705,500 161,524 -- 292,069 574,955
Allowance for uncollectible interest 45,802 106,290 -- 95,631 56,461
---------- ---------- ---------- ---------- ----------
Total $ 1,507,302 $ 1,474,025 $ 345,700 $ 1,757,911 $ 1,569,116
========== ========== ========== ========== ==========
Inventory allowances:
Allowance for obsolescence $ 1,201,000 $ 586,560 $ -- $ 561,140 $ 1,226,420
========== ========== ========== ========== ==========
Warranty allowance:
Allowance for warranties $ 925,000 $ 769,322 $ -- $ 1,084,197 $ 610,125
========== ========== ========== ========== ==========
Year ended December 31, 1998:
Accounts receivable allowances:
Allowance for returns $ 837,700 $ 961,211 $ -- $ 1,290,911 $ 508,000
Allowance for cash discounts 100,000 470,090 -- 482,090 88,000
Allowance for doubtful accounts 574,955 91,562 -- 289,517 377,000
Allowance for uncollectible interest 56,461 131,812 -- 128,624 59,649
---------- ---------- ---------- ---------- ----------
Total $ 1,569,116 $ 1,654,675 $ -- $ 2,191,142 $ 1,032,649
========== ========== ========== ========== ==========
Inventory allowances:
Allowance for obsolescence $ 1,226,420 $ 607,472 $ -- $ 533,892 $ 1,300,000
========== ========== ========== ========== ==========
Warranty allowance:
Allowance for warranties $ 610,125 $ 866,268 $ -- $ 1,004,952 $ 471,441
========= ========== ========== ========== ==========
The accounts receivable and inventory allowances above were deducted from the applicable asset account.
</TABLE>
-24-
<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) 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]
(9.1) 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)]
-25-
<PAGE>
Sequential
Exhibit Page
Number Exhibit Description Number
(9.2) Amendment No. 9 to Voting Trust Agreement, dated --
June 30, 1997. [Incorporated by reference to Exhibit
(9.2) to LaCrosse Footwear, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1997]
(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)* 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)]
(10.4)* 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]
(10.5)* 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]
(10.6)* 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)]
- ------------
* A management contract or compensatory plan or arrangement.
-26-
<PAGE>
Sequential
Exhibit Page
Number Exhibit Description Number
(10.7) 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]
(10.8)* 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]
(10.9)* LaCrosse Footwear, Inc. Deferred Compensation Plan --
for Key Employees, as amended and restated.
[Incorporated by reference to Exhibit (10.9) to
LaCrosse Footwear, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1997]
(10.10)* 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)]
(10.11)* 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)]
(10.12)* 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)]
(10.13)* 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)]
(10.14)* LaCrosse Footwear, Inc. 1997 Employee Stock --
Incentive Plan [Incorporated by reference to
Exhibit (10.17) to LaCrosse Footwear, Inc.'s
Annual Report on Form 10-K for the year ended
December 31, 1996]
(10.15) Agreement, dated as of September 15, 1998,
between Local No. 14L, United Steel Workers of
America, AFL-CIO, and LaCrosse Footwear, Inc.
- ------------
* A management contract or compensatory plan or arrangement.
-27-
<PAGE>
Sequential
Exhibit Page
Number Exhibit Description Number
(10.16) Lease, dated as of March 14, 1994, between --
JEPCO Development Co. 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)]
(10.17) Amendment, dated as of March 17, 1998, to Lease
between JEPCO Development Co., LLC and LaCrosse
Footwear, Inc.
(10.18) 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)]
(10.19) 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)]
(10.20) 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)]
(10.21) 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)]
(10.22) 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)]
-28-
<PAGE>
Sequential
Exhibit Page
Number Exhibit Description Number
(10.23)* Employment Agreement, dated as of May 31, 1996, --
by and between Craig L. Leipold, Rainco, Inc. and
LaCrosse Footwear, Inc. [Incorporated by reference
to Exhibit (10.22) to LaCrosse Footwear, Inc.'s
Annual Report on Form 10-K for the year ended
December 31, 1997]
(10.24)* Amendment Agreement, dated as of August 23, 1997, --
by and between LaCrosse Footwear, Inc., Rainfair,
Inc. (f/k/a Rainco, Inc.) and Craig L. Leipold
[Incorporated by reference to Exhibit (10.1) to
LaCrosse Footwear, Inc.'s Quarterly Report on Form
10-Q for the quarter ended September 27, 1997]
(13) Portions of the 1998 Annual Report to Shareholders
that are incorporated by reference herein
(21) List of subsidiaries of LaCrosse Footwear, Inc.
(23) Consent of McGladrey & Pullen, LLP
(27.1) Financial Data Schedule (EDGAR version only)
(99) Proxy Statement for the 1999 Annual Meeting --
of Shareholders
[The Proxy Statement for the 1999 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 1999
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.
-29-
AGREEMENT
Local No. 14L
UNITED STEELWORKERS
OF AMERICA
AND
LA CROSSE FOOTWEAR, INC.
LA CROSSE, WISCONSIN
September
1998
<PAGE>
TABLE OF CONTENTS
AGREEMENT 1
ARTICLE I ESTABLISHMENT 1
ARTICLE II MANAGEMENT'S RIGHT CLAUSE 1
ARTICLE III RECOGNITION 2
Section 1 - Bargaining Unit...........................................2
Section 2 - Union Security and Dues Check Off.........................2
Section 3 - Probationary Period.......................................4
ARTICLE IV GRIEVANCE AND ARBITRATION PROCEDURE 4
Section 1 - First Step................................................4
Section 2 - Current Grievances........................................5
Section 3 - Second Step, Etc..........................................5
Section 4 - Time Extension............................................7
Section 5 - Time Extension Agreement..................................7
Section 6 - Meeting Arrangements......................................7
Section 7 - Interruption of Work......................................7
Section 8 - Union Representation......................................7
ARTICLE V HOURS OF WORK, OVERTIME PAY, HOLIDAY PAY 8
Section 1 - Regular Work Week.........................................8
Section 2 - Overtime..................................................8
Section 3 - Overtime Distribution.....................................9
Section 4 - Holiday Pay..............................................11
ARTICLE VI WAGES.13
Section 1 - Incentive Emissions......................................13
Section 2 - Incentive Standards......................................15
Section 3 - Miscellaneous Wage Policies..............................18
Section 4 - Wage Increase............................................20
ARTICLE VII SENIORITY 21
Section 1 - Departments..............................................21
Section 2 - Master Seniority List....................................21
Section 3 - Qualifications...........................................21
Section 4 - Employee Placement.......................................22
Section 5 - Job Openings.............................................22
Section 6 - Shift Preference.........................................24
Section 7- Transfers..................................................26
Section 8- Interruption of Work.......................................28
Section 9- Elimination of Departments.................................29
Section 10- Disability Transfers......................................29
Section 11- Temporary Layoff..........................................29
Section 12 - Short Term Layoff........................................30
Section 13 - RegularLayoff and Long Term Layoff.......................32
Section 14- Home Department...........................................34
Section 15- Recall....................................................34
Section 16- Promotions................................................36
Section 17- Loss of Seniority.........................................36
ARTICLE VIII LEAVE OF ABSENCE 38
Section 1 - Retention of Rights......................................38
Section 2 - Eligibility for Leaves...................................38
i
<PAGE>
Section 3 - Return From Leave........................................38
Section 4 - Military Service.........................................39
ARTICLE IX SANITATION AND SAFETY 39
Section 1 - Reasonable Measures......................................39
Section 2 - Medical Care.............................................40
ARTICLE X MISCELLANEOUS 41
Section 1 - Replacing Tools..........................................41
Section 2 - Clothing Provision.......................................41
Section 3 - Drinking Water...........................................42
Section 4 - Union Posting............................................42
Section 5 - Supervisor Working.......................................42
Section 6 - Rest Period..............................................42
Section 7 - Absenteeism..............................................43
Section 8 - Suspension...............................................43
Section 9 - Jury Duty................................................43
Section 10 - Funeral Pay..............................................43
Section 11 - Paid Meetings............................................44
Section 12 - Derogatory Notations.....................................45
ARTICLE XI VACATIONS/ANNIVERSARY PAY 46
Section 1 - Vacations................................................46
Section 2 - Anniversary Pay..........................................47
CONCLUSION 49
EXHIBITS 54
LETTERS OF AGREEMENT 61
INSURANCE AGREEMENT 66
MEMORANDUM PENSION AGREEMENT 74
Section I - Agreement Clarification................................74
Section II - Pension Plan...........................................74
Section III - Retirement Savings Plan - 401K.........................77
Section IV - Administration.........................................79
Section V - Amendment or Termination...............................79
Section VI - Agreement and Approval.................................79
Section VII - Effective Date.........................................80
BY-LAWS.....84
ARTICLE I - Principles.............................................84
ARTICLE II - Objectives.............................................84
ARTICLE III - Officers...............................................85
ARTICLE IV - Committees.............................................87
ARTICLE V - Grievance Procedure....................................89
ARTICLE VI - Standing Committees....................................89
ARTICLE VII - Finances...............................................89
ARTICLE VIII - Membership Dues........................................90
ARTICLE IX - Meetings...............................................90
ARTICLE X - Delegates and Directors................................91
ARTICLE XI - Convention Delegates Pay...............................91
ARTICLE XII - Amendments.............................................92
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AGREEMENT
This agreement is made and entered into this fifteenth day of September,
1998, by and between LaCrosse Footwear, Inc., of La Crosse, Wisconsin,
hereinafter referred to as the Company and the United Steelworkers of America,
AFL-CIO, on behalf of Local No. 14L, La Crosse, Wisconsin, hereinafter referred
to as the Union.
ARTICLE I
ESTABLISHMENT
All previous agreements and contracts are hereby revoked by this
agreement. This agreement must be honored for its duration by any successor to
the owners of LaCrosse Footwear, Inc., which occupies the property owned by the
Company on, October, 1998, in La Crosse County, and primarily engages in
substantially the same type of manufacturing business.
ARTICLE II
MANAGEMENT'S RIGHT CLAUSE
The Company's right, in its discretion to direct and control its
employees, to locate production and facilities and to introduce new and improved
methods of production and any matters within the responsibility of management or
relating to the general business or operating practices of the Company shall not
be arbitrated. However, this will not be used in any manner inconsistent with
the provisions of this Agreement.
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ARTICLE III
RECOGNITION
Section 1. Bargaining Unit Local 14L of the United Steel Workers of
America is recognized as the sole collective bargaining agent for all production
and maintenance employees of the Company, in respect to rates of pay, wages,
hours of employment or other conditions of employment not including executives,
their assistants, foremen, foreladies, office clerical help, sales persons and
watchmen.
Section 2. Union Security and Dues Checkoff
1. Each employee who on the effective date of this provision is a member
of the Union and each employee who becomes a member after that date shall, as a
condition of employment, maintain membership in the Union to the extent of
tendering the uniform initiation fee (if any) and periodic dues. Each employee
who is not a member of the Union on the effective date of this provision and
each employee who is hired thereafter shall, as a condition of employment,
beginning with the conclusion of their probationary period, or beginning on the
30th day following the beginning of such employment or the effective date of
this provision, whichever is later, acquire and maintain membership in the Union
to the extent of tendering the uniform initiation fee (if any) and periodic
dues.
2. The Union may demand the discharge of any employee who, as of the
tender date specified in (1), is delinquent in payments required under that
Section by serving written notice of such demand on the Employer, provided that
the Union has provided the employee at least thirty (30) days written notice of
the delinquency. Promptly after receipt of such demand from the International
Union Secretary-Treasurer, including verification of notice to the employee, the
Employer shall discharge the
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employee for failure to comply with the obligations set forth in (1).
3. Upon receipt by the Employer of a checkoff authorization form, dated
and executed by the employee, and in conformity with law, the Employer will
deduct each week from the wages of each bargaining unit employee who has a
current valid authorization, the Union dues as specified in writing to the
Employer by the International Secretary-Treasurer. Such authorization shall be
irrevocable for one year from the date of authorization, and revocable during
the period commencing fifteen (15) days before and ending on the anniversary
date of the authorization. The International Secretary-Treasurer will certify to
the Employer, in writing, the amount of dues, and that the dues have been
properly established by the Union in accordance with applicable law and the
Union's constitution and bylaws as required of all employees as a condition of
acquiring or retaining membership in the Union. The total of such sums so
deducted will be remitted with appropriate forms to the International
Secretary-Treasurer of the Union and copies to the Local Financial Secretary no
later than the 15th of the month following the month in which each deduction is
made. In addition, the International Secretary-Treasurer may designate to the
Employer periodic assessments, which shall be deducted by the Employer and
remitted to the International Secretary-Treasurer only for those employees who
execute individual assignments to such effect.
4. Within seven (7) days of hiring, the Employer will notify the
financial secretary of the Local Union of the name and hiring date of the
employee.
5. The Union shall comply with all obligations under federal law and
adopt appropriate procedures for members and non-
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members with respect to union security and dues checkoff. The Union shall
defend, indemnify, and hold the Employer harmless against any and all legal
claims or actions relating to the union security and dues checkoff provisions of
this Agreement.
"IN WITNESS WHEREOF I have hereunto set my hand and seal this ___ day of _____.
___________________________________
(SEAL) Employee's Signature
___________________________________
Witness Section 3. Probationary Period . In order to secure the increased
production which will result from greater harmony between workers and employers
in the interest of increased cooperation between Union and Management, which
cannot exist without a stable and responsible Union, the parties hereto agree as
follows:
A probationary period of sixty working days (60 working days) is
established for all new employees. During this probationary period, all new
employees shall be judged for aptness and fitness for employment and only at the
end of this period shall they exercise any seniority rights. There will be a
joint Union/Company advisory committee formed to review the performance of
probationary employees in the skilled trades area.
ARTICLE IV
GRIEVANCE AND ARBITRATION
PROCEDURE
Section 1. First Step: Any aggrieved employee shall, with or without the
Department Steward, present their grievance at any time to their foreperson,
provided such grievance does not affect other employees.
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Section 2. Current Grievances: Only current grievances may be submitted
to the grievance procedure. A grievance submitted fifteen (15) working days
after the date of the grievance arose shall not be deemed current.
Section 3. Second Step, Etc.: All grievances and complaints not settled
by application of Section 1 above, shall be presented through the Union in the
following order:
First: By the chief shop steward to the department Foreperson.
Second: By the employee accompanied by the chief shop steward to Human
Resources. Grievances or complaints submitted to Human Resources must be reduced
to writing and signed by the aggrieved employee if the grievance is individual
and does not affect others or signed by the chief shop steward if affecting a
group of two or more employees.
Grievances submitted to the Human Resources Department must be answered
within five working days following submission.
Third: By the bargaining committee to top management or its designated
representatives.
Fourth: In the case of a grievance or grievances which concern more than
one department, the bargaining committee shall take the matter up directly with
top management or its designated representative.
Fifth: Any grievance by the Company shall be submitted directly to the
bargaining committee by top management or its designated representatives.
Sixth: Any grievance not appealed within five (5) working days after
answer, if given in the preceding step, shall be deemed settled and further
appeal waived.
Seventh: Any grievance involving a discharge must be presented to the
Company in writing within five (5) successive working days after discharge. If
it is determined that such employee was unjustly discharged they will be
reinstated without loss of seniority and with back pay less the aggregate of any
compensation received during the period of the discharge. The union will be
notified in writing with reason at the time of either suspension or discharge.
On any discharge the Company
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shall meet with the Bargaining Committee if requested within one working day
after the request.
Eighth: Should the Company and the Union fail to settle a grievance,
either party may, not later than thirty (30) days after submission of said
grievance under this Section 3, refer said grievance to arbitration by notifying
the other party in writing setting forth in detail the matter to be arbitrated.
If a monthly Union Bargaining Committee/Company meeting (Step #3) is not held
within 30 days of the date of the written grievance, then any grievance except
discharge, shall remain open until the next Union Bargaining Committee/Company
meeting. Discharge grievances shall be handled within contractual time limits
unless extended per Article 3, Section 5. Within five (5) days after receipt of
notice to arbitrate, the parties shall jointly request the American Arbitration
Association to submit a panel of five names from which the parties will make a
selection of one arbitrator in the following manner: The Union shall strike out
two names and the Company shall strike out two names, and the one remaining
shall be designated as the arbitrator and the arbitrators decision shall be
binding upon all parties. Costs associated with the selection of the arbitrator
shall be paid by the Company. The arbitration shall be conducted in accordance
with the rules of the American Arbitration Association then applicable insofar
as such rules are not inconsistent with the provisions of this Agreement. All
cost and expenses of arbitration shall be paid in equal proportions by the Union
and the Company. The only grievances which may be submitted for arbitration are
those confined to the meaning and interpretation of this agreement, and the
Arbitrator may only rule on the specific issue or issues presented to it.
The Arbitrator shall have no authority to rule on any questions not
specifically covered by this Agreement and they shall not add to, subtract from
or otherwise modify the terms of the Agreement.
The terms of any contract or agreement to be entered into upon the
termination, expiration, renewal or reopening of this agreement or the terms of
any insurance pension or welfare agreement entered into by the Company and the
Provider of the
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benefits will not be arbitrated. The determination of a general wage increase or
general wage decrease or general hours of work will not be arbitrated.
Section 4. Time Extension Grievances in connection with an indefinite
layoff must be presented within 24 hours.
Grievances in connection with a recall following the layoff must be
presented within 48 hours.
Section 5. Time Extension Agreement The parties may upon mutual consent
extend the time limit specified in any of the above steps of the grievance and
arbitration procedure.
Section 6. Meeting Arrangement Meetings between the Company and the Union
will be held at mutually agreeable times.
Section 7. Interruption of Work In the event there is an interruption in
plant operations because of a strike, slow down, picketing or other action in
violation of this Agreement, no arbitration procedure shall be instigated or
continued regarding the dispute that caused the interruption until such time as
the interruption has been terminated.
Section 8. Union Representation The Union shall designate to the Company
the representatives which are to represent the Union in the presentation of any
grievance. It is understood that said representatives shall have the right to
bring into the conference with top management the aggrieved person or persons
and a representative of the international union.
ARTICLE V
HOURS OF WORK, OVERTIME PAY, HOLIDAY PAY
Section 1. Regular Work Week (a) The regular work week shall begin at
11:00 P.M. Sunday and ending at 11:00 P.M. the following Sunday, and shall be
continuous except for recognized or agreed holidays. This shall not be construed
so as to prevent
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adjustment of schedules of firepersons and general help employees for the
purpose of getting their assistance on production jobs.
(b) Eight hours shall constitute a regular day's work and five days shall
constitute a regular week's work. All hours in any one day shall be consecutive
except a lunch period shall be provided of not less than thirty minutes nor more
than one hour. All work days shall be consecutive except in case of breakdown,
shortage of stock, damage from storm or other emergency over which the Company
has no control or except by weeks broken by recognized holidays, unless
otherwise agreed by the Union and Company.
(c) It is agreed that the time for starting of the employees' shift may
be changed at any time by the Company. However, employees shall be given
twenty-four (24) hours' notice in cases where regular starting hours are
changed. It is understood that the present working hours will be maintained
insofar as possible.
(d) The Company will try to maintain a forty (40) hour week as far as it
is practical to maintain. In case the hours are to be reduced, a twenty-four
(24) hour's advance notice will be given.
Section 2. Overtime (a) Any time work in excess of eight hours in any one
day or forty (40) in any one week, shall be paid at the rate of time and
one-half.
(b) Time and one-half compensation shall be paid for work performed on
any Saturday worked in any regularly scheduled work week, regardless of the
total number of hours worked the preceding five days, provided, however, that
the employee affected has not had an unexcused absence during the work week.
When the third shift work week begins at 11:00 P.M. Monday, the hours worked on
the shift beginning 11:00 P.M. Friday, will not be counted as Saturday in that
week for the purpose of paying overtime. Third shift regular hours on Sunday
will not be considered overtime.
(c) Time and one-half will not be paid for hours worked in excess of
eight, when the hours worked were caused by a permanent shift change for
employee's convenience.
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(d) All Sunday work shall be paid for at the rate of double time. The
present boilerperson's schedule will be maintained as is (Monday through
Friday). Boilerpersons will be paid the appropriate overtime rate for Saturday,
Sunday and Holiday work.
(e) Time lost by a designated Union Representative during his regular
shift for authorized union business, shall be considered as hours worked for the
purpose of computing overtime payment.
Section 3. Overtime Distribution (a) Overtime (includes double time and
triple time pay) will be distributed as equally as possible among employees who
are qualified and who want overtime work in the following manner:
(1) To the employee on their own job which overtime is required. All
hours worked or refused will be accounted for.
(2) To the employee who has signed the voluntary department overtime
sheet. Said overtime sheet will be posted on the 15th day of the
last month of the quarter. An employee may remove their name from
the list at anytime by informing their foreperson. An employee may
add their name only while the overtime sheet is posted (except for
employees called back from layoff, returned from leave or
transferred from another department).
(3) When a department has need for overtime help and if it cannot fill
its requirements from its own overtime lists, then the overtime
lists of other departments may be used, based on the similarity of
the work involved. Offer or work outside home department will be
charged.
(4) Overtime charts will be posted within the department weekly.
(5) In the application of paragraph one where overtime is assigned to
the wrong employee, the Company, when notified of the error, shall
pay the affected employee equivalent wages for the overtime
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lost. Overtime will not be paid when the proper employee wasn't available
when the overtime was assigned.
(b) In the event of Saturday overtime the Company reserves the right to
combine operations of less than 4 hours within the department.
(c) Those employees who voluntarily accept Saturday overtime must notify
the Company prior to the overtime if they cannot work the overtime, or they will
be given an unexcused absence, unless they provide a legitimate reason why they
could not notify the Company. If they don't show up and did not have a
legitimate reason, they will be ineligible for overtime for two (2) Saturdays.
(d) If an employee is scheduled by the Company to work overtime, by
starting work before their normal starting time, and if for reasons within the
control of the Company, the employee is sent home before the end of their normal
shift (and not offered other work) then the employee will be paid time and one
half for the period of time worked prior to their normal starting time.
(6.) All overtime hours worked for each employee will be charged
and recorded. Employee overtime accounts will start over every calendar
quarter (3 months).
Section 4. Holiday Pay
(a) The Company recognizes the following holidays: New Year's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving, the day after
Thanksgiving, Christmas Day, the day before Christmas, and December 31, the day
before New Year's Day, and one floating holiday. The date for the floating
holiday to be mutually agreed to between the Company, and the Union Bargaining
Committee on a yearly basis. When Christmas or New Year's Day falls on Sunday or
Monday, the one-day Holiday before Christmas and the one-day holiday before New
Year's Day shall be considered the Friday preceding Christmas or New Year's Day
and shall be observed on said Friday. All employees who work on
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above Holidays will be paid holiday pay plus earnings accumulated for that day
at the rate of double time.
(b) Any employee shall be paid for holidays listed in Section 4 provided:
1. The Employee has completed their probationary period as of the
date of the holiday and worked their last scheduled shift
immediately prior to, and their first scheduled shift immediately
following such holiday.
2. An employee who is laid off for lack of work within ten (10)
working days prior to a holiday, or is called back from lay-off
within five (5) working days of the holiday will receive holiday
pay provided they work their last scheduled shift prior to said
holiday.
3. An employee who is out for sickness (Doctor's Slip) and has worked
within ten (10) working days prior to or ten (10) working days
after the holiday will receive holiday pay on an approved sick
leave (Doctor's Slip). The holiday will not be counted in the
count of ten.
4. Any employee who is out on a leave of absence or not on approved
sick leave, or who did not work their last scheduled shift prior
to, or their first scheduled shift following a holiday is not
eligible for holiday pay.
5. Any active employee who is required to go on active duty in a
military reserve or National Guard training period will receive
holiday pay if a holiday falls during the training period provided
that they make proper application to the Company and work the
scheduled work day prior to and the scheduled work day following
the training period and providing further that such training
period is not less than two consecutive weeks or more than four
weeks in any year.
6. An employee who can give sufficient proof that there has been a
death in their immediate family
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which necessitated them to be out the day before or the day after
and returns to work within ten (10) days after date of funeral
shall receive holiday pay. By "immediate family" is meant, father
and mother of the employee and father and mother of the wife or
husband of the employee, sons and daughters of the employee, and
spouse, brothers and sisters and grandchildren, step-brother,
step-sister, sons-in-law, daughters-in-law, step-mother,
step-fathers, grandparents, and dependents who live in the
household of the employees.
7. If any of the above holidays fall within the vacation period, an
employee will receive holiday pay, provided they worked their last
scheduled shift prior to said vacation period and their first
scheduled shift following the end of the vacation period.
8. If a holiday falls within a planned vacation shutdown, the Company
and the Union Bargaining Committee can by mutual agreement
transfer that holiday to a different date; exceptions can be made,
by mutual agreement.
9. Any employee who has been injured in the plant and is out on
compensation shall receive holiday pay.
10. Holiday pay shall be computed as follows: All employees shall
receive eight (8) hours' pay based on their average hourly
earnings (exclusive of overtime) for the weekly payroll period
ending prior to the holiday.
11. An employee who has accepted a holiday work assignment and then
fails to report and perform such work without reasonable cause
acceptable to the management shall not receive pay for the
holiday.
12. Hours not worked on any of the eleven (11) designated holidays,
but compensated under the holiday provision shall be considered as
hours of work when computing overtime in excess of forty (40)
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hours per week providing such holidays fall within the first five
(5) days of the work week.
ARTICLE VI
WAGES
Section 1. Incentive Emissions (a) Under certain conditions, experienced
employees normally working on an incentive operation may be limited for
temporary periods in their opportunity to maintain their normal incentive
earnings. Whenever employees continue to put forth additional effort for which
incentive payment is designed to compensate, they shall be paid as provided
herein.
(b) In the event of absenteeism or unexpected openings, the Company will
fill the job openings in the following order:
1. (a) By the most senior qualified employee without a job (on the
floor) provided that the employee is not the only qualified
employee for another unfilled job. (b) By an employee without a
job (on the floor) with previous satisfactory experience.
2. By the most senior qualified volunteer with a job. These volunteer
employees will be paid their average pay or the rate of the job,
whichever is higher, plus $.20 per hour.
3. If items No. 1 and No. 2 have not filled the open job, the Company
will temporarily transfer the least senior qualified employee (by
department or plant wide). The transferred employee will be paid
their average wage or the rate of the job, whichever is higher,
plus $.20 per hour.
The employees involved in this provision No. 3 can be transferred no more
than 8 working days in a twenty day period or not more than 5 consecutive
working days within a 20 working day period or no more than 20 working days
within a 120 working day period. When an employee is temporarily transferred by
provision No. 3 to another department, the Union Shop Steward will be notified.
Any exceptions required for Item No. 1 through 3 can
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be mutually agreed between the Company and the Union Bargaining Committee.
(c) If a Unit is shut down by the Company to allow for the transfer of a
member of that unit to another job to fill in for absenteeism, the unit thus
shut down by such transfer will receive their average hourly earnings, for the
period of shutdown.
(d) If an employee is assigned to a different job due to lack of work,
they shall receive the rate of pay in effect on the job assigned to them.
(e) Payment for Lost Time will be made in the following manner: their
average rate not less than 16 percent over base nor more than 30 percent over
base.
It is understood and agreed that an employee who experiences any of the
delays mentioned above, must notify their forepersons immediately when such
delay period begins and ends as a condition to their receiving their wage
allowance.
The Company reserves the right to utilize lost time with work wherever
practicable. Lost time due directly to work stoppage, slow down or strikes with
the plant shall not be paid for by the Company.
(f) All employees who are currently being paid incentive wages and who
bid for jobs which presently are not incentive, will receive 120 percent of the
base rate of that job until new incentives are set or it is determined that the
job shall be a day work job in which event day work rates only shall be paid.
While this rate is being established, all employees on this job will be paid in
a like manner. This has no bearing on incentive workers who accept regular day
work jobs.
Section 2. Incentive Standards (a) When new jobs are developed, old jobs
revised, or jobs are consolidated, the Industrial Engineering Department will
take time studies, and evaluate the jobs to determine whether the job will be on
an incentive basis or fixed rate.
When new or revised jobs are being established, the company's job
evaluation procedure will be used. The Union has a right to review and challenge
the new rate within 60 days.
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Each party shall have five (5) evaluators on their job evaluation
committee. The parties agree to continue the current job evaluation process in
which each committee's high and low score is disregarded.
Grievances challenging a rate established through the job evaluation
procedure shall be resolved as follows:
1. The parties' job evaluation committees shall meet and review
each factor of the disputed job to determine the areas of disagreement.
2. The job evaluation committees shall pursue resolution for each
disputed factor.
3. In the event the job evaluation committees are unable to agree
at which degree each disputed factor should be evaluated, the parties
agree to engage a mutually agreeable third party selected for their
ability to evaluate jobs.
4. The third party shall mediate the differences on the disputed
factor only.
5. In the event the third party is unable to obtain agreement
between the committees through mediation, the third party shall serve as
arbitrator and render a final and binding decision as to which degree
each disputed factor shall be evaluated.
6. The scope of the third party's authority shall be limited to
selecting either party's position on each (as opposed to all) of the
disputed factors.
The cost of the third party shall be shared equally by the parties to this
agreement.
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Employees shall be encouraged to develop a natural job rotation.
When consolidating jobs or developing new ones, the company may elect to
use a temporary rate not to exceed six months.
When a permanent rate has been developed, the company will make up any
difference, if the rate is higher than the temporary rate. If the rate is lower,
the new rate will become the rate of pay. Temporary rates can not be grieved.
(b) When a piecework rate is instituted, the union will be advised in
writing of the standard for load factors for each operator. It is understood in
the event of only partial loading, the realignment job duties may be made to
more fully utilize the employee's work day. In the event of such realignment,
the union will be notified in writing, of this change. In all cases, time study
records will be made available in writing to the Union if requested.
(c) It is agreed that present incentive standards on a job will not be
changed unless there is a change in the elements resulting from such things as a
change in method, material, operation or equipment on such job. Then the
incentive standard shall be increased or decreased only to the extent of such
changes in the element or elements.
When piecework jobs are revised, existing elemental time may not be
combined with other elements except by mutual consent and only when the time is
too small to read using acceptable time study standards. If changes are made,
the employees so affected may exercise their seniority rights after a 3 day
trial period.
(d) When a job content change is made, the union will be notified in
writing, specifying the change made. In such event the Company will endeavor to
install piecework rates covering this change, as in accordance with Section
2.(c) within 60 days following such change. In the event of intermittent jobs,
the Company would install a piecework rate within 60 days of actual operation of
the intermittent job. This period may be extended because of extenuating
circumstances by mutual agreement.
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(1) When a job content is changed and it affects the peak load, the
persons affected will be paid their average pay until the new rate is set.
(2) Employees currently working on incentive operations undergoing
construction or method change will be guaranteed their average wage until new
piece work rates are set.
(e) When new or revised jobs are studied and incentive standards are set,
an average qualified operator working at a normal incentive pace shall have the
opportunity of earning twenty-five percent (25%) over the established base rate
for the actual hours worked on incentive.
This paragraph is a guarantee of earnings opportunity only and shall not
in any way be construed as to the amount or rate of piecework earnings. It is
understood that employee's performance will vary with effort and proficiency and
some will perform at greater than the above percentage and some at less.
(f) When new incentive rates are established, the only guarantee is the
base rate of the operation. A protest period of six days will begin after a 6
day trial period. If protested during this time and an adjustment is made it
will be made retroactive to the date the new rates were set.
If a protest is made after the six day period and an adjustment is made
it will be retroactive to the date the protest was filed.
If not protested within six (6) days after trial period, the rate will be
considered as acceptable provided all elements of the job remain unchanged.
If the jobs are not on for the full six days after the rate is set, the
days will be accumulated and the union can use these days in the six day trial
period when the job appears on the schedule again.
In the event of a grievance concerning new or changed rates, the Company
will excuse the Local Union Time Study person from their job at mutually
convenient times to time study the job or jobs in question.
(g) All rates shall be available to workers on their respective jobs. Any
new rates not in the department at time
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employees start to work shall not be in effect until the next day.
(h) Average hourly earnings will be determined in the following manner:
1. Dayworker - Daywork rate.
2. Combination Daywork-Piecework - All daywork hours and piecework hours
with all cards having more than 10 percent downtime excluded.
3. Pieceworkers - All time worked with cards having more than 10 percent
downtime excluded.
All calculations will be made on cards from the previous week that
contain no more than 10 percent downtime. In those instances where a rate is
being protested, the calculation will be made on the week immediately prior to
the week in which the rate was effective.
Section 3. Miscellaneous Wage Policies (a) Any employee who reports for
work and is willing and able to perform any work assigned to him but is sent
home because no work is available, shall be paid four (4) hours' time at his
average pay unless such employee has been previously notified not to report for
duty.
This shall not apply if such lack of work is beyond the control of the
Company. Lack of work will be defined as follows: Major electrical, or
mechanical failures, floods, snowstorms, etc., affecting the majority of the
operations of the plant.
If the employee has started to work, such employee shall be paid four (4)
hours' time at his average pay provided such employee shall perform such work as
may be assigned to them.
In the event an employee lays off without notice for any cause, said
employee shall not be entitled to resume work except on a call in to the Company
before 1:30 P.M. the day prior to resuming work.
However, if employee fails to call in and reports to work, the foreperson
will place worker on job if work is available, otherwise employee will be sent
home.
Employees scheduled on 2nd and 3rd shifts will be expected where possible
to report off 3 hours prior to their scheduled starting time. In any event,
employees are expected to report off by notice to the Human Resources
Department.
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(b) A job will be held for tardy employees for one hour after their
normal shift starting time, provided they call prior to the start of the shift.
(c) All production employees, except maintenance, who are called back to
work after completing their scheduled day's work, and have left the plant, shall
be paid a minimum of four (4) hours at a base rate of the job. Time and one half
shall be paid for hours actually worked over eight hours.
(d) Maintenance employees who are called back after completing their
scheduled day's work and have left the plant, shall be paid a minimum of three
(3) hours at straight time for each call back. Time and one half shall be paid
for hours actually worked over eight hours. Maintenance employees who are called
in on days they are not scheduled, will be paid a minimum of four (4) hours.
(e) In the event of industrial accident, an employee will receive
immediate medical attention. An employee with time lost while receiving medical
care for an industrial accident will receive make up pay for the day of the
accident for his full eight (8) hours at average hourly earnings.
Any subsequent visits for further medical attention in connection with
this Industrial Accident will be compensated for at the employees average hourly
earnings. Each employee should attempt to make their additional visits as near
to the end of their shift as possible.
(f) Any employee who starts work on the second shift, shall be paid
twenty cents ($.20) per hour additional shift differential.
(g) Any employee who starts to work on the third shift shall be paid
twenty-five cents ($.25) per hour additional shift differential. The shift
schedule will be designated by the Company and notification will be given to the
Union.
(h) Differential will be paid for overtime hours directly involved with
regular scheduled second or third shift operations. Differential will be paid if
overtime hours are for four (4) or more hours.
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Section 4. Wage Increase The following wage increases will be "placed on
the outside":
Wage Increase
9/14/1998 9/13/1999 9/11/2000
0.15/hr. 0.10/hr. 0.10/hr.
ARTICLE VII
SENIORITY
Section 1. Departments Seniority shall be according to the departments as
now established and as follows:
10. Mixing, Milling and Calendering.
11. Gum and Fabric Cutting.
16. Quarter and Stitching.
60. Shoe Making.
20. Last and Lacquer, Stripping and Vulcanizing.
14. Inspecting, Cartoning and Packing.
19. Shipping.
17. General Plant.
18. Engineering and Power Plant.
24. Plastics.
Seniority rights begin as of last entry into respective departments and
such rights hold only in the respective departments except as hereafter set
forth.
Section 2. Master Seniority List The Company will maintain a copy of the
master (plant wide) seniority list, with one copy given to the Shop Steward. The
Company will maintain copies of the department seniority lists and will furnish
copies to the Foreperson. These copies will be available for inspection by
employees, and these copies will be posted and will be subject to correction
only in case of typographical error.
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The master seniority list will be posted in the following group departments:
Mill and Fabric Cutting, Gum Cutting, Quarter and Stitching, Shoe Room, Last and
Lacquer, Packing, Maintenance, Shipping and Plastics.
Section 3. Qualifications In the operation of all seniority provisions in
this contract, these qualifications shall be considered namely:
1. Length of service.
2. Skill.
3. Ability.
Length of service shall control in all cases as between employees, unless
one of the employees clearly has greater skill and ability than the other, in
which case the employee with such clearly greater skill and ability may be given
preference over the other employee. Skill and ability shall be based upon a
standard production of quality work within a standard production day.
Section 4. Employee Placement Every effort will be made to place
employees on jobs for which they are qualified in line with their seniority. In
the event an employee is or has been assigned to any job and such employee
believes that the assignment is unjust, they shall perform the job assigned to
the best of their ability. However, upon making a complaint the department
steward and department forepersons shall immediately undertake to satisfactorily
settle the complaint. Upon failure to satisfactorily settle the complaint, Human
Resources and the Chief Steward shall immediately undertake to resolve the
complaint satisfactorily before referring it to the regular grievance procedure.
Section 5. Job Openings When new jobs or vacancies occur they will be
posted if they are scheduled for more than 5 days. All job postings will be up
by 11:00 A.M. and remain up until 3:00 P.M. the following work day.
Senior employees who have applied shall be given first consideration in
selection of such jobs or vacancies. It is understood that such jobs or
vacancies may be temporarily filled pending permanent assignment.
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Job postings will be filled in the following manner:
(a) By the successful bidder.
(b) In the event of no bidder, by a qualified employee without a job.
(c) If an unfilled job posting cannot be filled by a qualified person
without a job then the least senior employee with previous
satisfactory experience, whose job can be filled by a qualified
person without a job, will be assigned to train the least senior
employee that is without a job for a period of up to 10 working
days. These employees will be paid the rate of the job or their
previous average, whichever is greater.
(d) If there is no qualified employee available, employees who have
transferred departments and have special skills may be assigned work to use
their skills for a short duration not to exceed 25 work days in a 6 month
period. Employees so transferred will get the rate of the job or their average
earnings, whatever is higher, plus $.30/hr. providing the employee is making an
adequate effort to maintain average efficiency and quality.
(e) In the event of a shift change, by the least senior employee in that
department that is without a job.
An employee will leave for their new job when a trained replacement is
available. The maximum time allowed to get a trained replacement will be five
(5) working days in all departments except in the Cutting, Mill, and Pedatainer
Carton Unit in Packing which will be 7 days; Leather Sewing will be 20 days and
Wader Production 30 days. Those so affected will be paid average or the rate of
the job, whichever is higher.
Employees on jobs requiring 6 or more days training, who have abnormal
absenteeism records, may after reasonable counseling and at least one written
warning, be assigned work until they have demonstrated for at least 3 calendar
months, the ability to be at work the same as an average employee. (For purposes
of this provision only, abnormal absenteeism shall mean at least 30 days absence
from 8 different occasions within a 1 year period.)
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When an employee has established themselves on a job in accordance with
the above procedure, they shall not be removed from that job except upon their
own request, or upon permanent elimination of the job, except as otherwise
provided for in this contract.
The Company will provide 24 hours written notice to employees whose jobs
will be eliminated. Employees who are not given 24 hours notice will be paid 8
hours at their average hourly earnings, provided they work.
Employees whose jobs are eliminated for any reason must apply themselves
to another job within twenty-four (24) hours after their jobs are terminated. In
the event that it is impossible to make application to the new job within
twenty-four (24) hours, such application must be made as soon as possible.
An employee who fails to make application shall be placed on any job
available or sent home pending permanent assignment. These employees may be
assigned work in another department on a temporary basis.
Employees with seniority will have unlimited job bidding rights
(postings) provided they have had previous satisfactory experience on the job
they are applying for.
Employees with seniority will have unlimited bumping rights if (1) their
job is eliminated, (2) they are bumped or (3) if the job move is caused by
sickness or accident, providing they have had previous satisfactory experience
on the job they are applying for. Employees whose jobs have been eliminated, due
to a category change, will be given their option, by seniority, to exercise
their job movement rights or stay within their making unit.
Job categories are attached and are a part of this agreement but are
subject to revision and change from time to time upon mutual consent of the
parties.
All employees may sign job postings for which they are not experienced
and wish to be trained. The number of trainees, per this section, will not
exceed two (2) per schedule, per department except that the Mixing, Milling and
Calendering Department and Fabric Cutting Department will not exceed three (3)
per schedule and the Shoe Making Department will not exceed
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five (5) per schedule. Employees with previous satisfactory experience on a job
will be given up to 2 working days to refamiliarize themselves with the elements
of the job.
Section 6 - Shift Preference
Employees shall be allowed to align shifts according to departments. Procedures
will be followed as listed below:
Manufacturing & Distribution
o Two shift change alignments per calendar year.
o All alignments must be within their home department.
o May be exercised on people who have less seniority.
o The shift change will not take affect until ten days after the notice is
submitted and will take affect at the beginning of the following workweek.
The ten days maybe extended upon mutual agreement for operational needs.
Maintenance
o Two shift change alignments per calendar year.
o All alignments must be within their home department.
o May be exercised on people who have less seniority.
o The shift change will not take affect until ten days after the notice is
submitted and will take affect at the beginning of the following workweek.
The ten days maybe extended upon mutual agreement for operational needs.
o Exception to the ten-day notice would be for the training and orientation of
new employees who can be held until they complete the following schedule:
o Training and orientation:
Grade 1 & Master - 20 working days
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Grades 2-3 - 40 working days
Grade 4 - 60 working days
Helper - 60 working days
o Grades 1 - 4 may displace one grade up or one grade down.
o Masters may only displace Masters.
o Helpers may only displace Helpers.
o Management shall determine maintenance labor grade level shift needs. If
after posting, the position remains unfilled the least senior employee in
the labor grade or adjacent labor grade shall be assigned the shift.
(Electro-mechanical and Maintenance Machinist shall be considered separate
classifications for this provision until such time as the number of
employees in either classification falls below five.)
Section 7. Transfers
1. Requested transfers from one department to another by employees
who are full time permanent employees (except those on leave of
absence) shall be done in the following manner:
a. Employees shall sign the requested transfer slip and return
it to Human Resources where the transfer list will be
maintained.
b. Employees shall be given the opportunity of a 1st and 2nd
choice of departments.
c. Requested transfers will be effective for the balance of
the year in which signed, plus one year.
d. Transferred employees will carry their full seniority and
retain no further seniority in the department from which
they transfer. This provision will be retroactive to cover
any previously made transfers.
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e. Employees may change their departmental preference on the
transfer list twice in regard to paragraph 1.c.
2. When there is a permanent opening in a department caused through
death, discharge, quit, retirement, hiring new employees, or new machinery, the
first requested employee (plant seniority) who requested a transfer to this
department will be given the opportunity to fill the opening. (Openings created
by personal leaves, sick leaves, military leaves, and time lost by union
personnel shall not be considered a permanent opening.) New Machinery means a
new process. It does not include replacement or modification of current
equipment or additions of the same or similar equipment already in use.
a. Transferred employees must attain satisfactory quality and
efficiency standards within a reasonable training period.
If the employee is disqualified by the above sentence, they
will return to their previous department by replacing the
least senior employee in that department, but will carry
their full seniority.
b. Transfers shall be based on date and time of request. If
this employee turns the job down, the next oldest request,
and so on, until the list is exhausted or the opening is
filled.
c. Employees turning down their first and second choice
transfers must wait one year from date of refusal before
signing job transfer slips.
Employees transferring to a department which they have had previous
experience shall be allowed to use their seniority rights to sign or bump for a
job. However, such employees who exercise their seniority shall not be allowed
to use the provision of #3.
3. Employees may elect to return to their previous home department
within ten (10) working days. The employee will replace the least
senior employee in that department. The next senior employee on
the transfer list shall be given the opportunity to fill this
opening.
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4. A person can make one transfer per year. Items No. 2(a) and No. 3
shall be considered a transfer.
5. Employees who have completed more than one year of their skilled
trades apprenticeship program can request a job transfer, but such
transfer will not be valid until one year after such transfer is
requested. The one year waiting period may be waived upon mutual
agreement between both the Company and the Union.
6. Female employees will be given the opportunity for at least 50
percent of the job openings in the skilled trades apprenticeship
program.
7. The employee must have more than 12 months seniority to be
eligible for a transfer request.
8. The open job created by a requested transfer shall be posted and
filled as provided for in the present contract.
9. Requested transfers must be on file in the Human Resources Office
for 60 calendar days before they become valid.
10. The department to which the employee is transferred is considered
the employee's "home department" if the employee accepts and
qualifies for the job.
Section 8. Interruption of Work Employees whose jobs are shut down or
scheduled off for more than three days, but less than six days, will be given
the option of exercising their job movement rights as per terms of this
contract, electing temporary layoff, or accepting a temporary job. Employees
accepting a temporary job will be paid the rate of the job or 130 percent of
base rate, whichever is higher.
This shall not apply to temporary production requirements or temporary
lack of work, in which case employee may be assigned to a different job. The
employees affected by such a temporary production requirement or temporary lack
of work and so assigned shall be paid their average hourly earnings or the rate
of the job to which they are assigned, whichever is the higher.
When an employee is off work due to a medical leave, personal leave,
leave for Union business, Military Reserve or National Guard training, trying a
new job and vacations, they
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will have their job filled on a temporary basis (up to a period of 2 weeks).
Upon their return from such leave (within the temporary period), they
shall return to their respective job if available.
When an employee is off over 5 days due to a suspension, their job will
be posted on a permanent basis. Upon their return, they may sign a job posting
after which they follow the provisions of the contract.
When an employee returns from sick leave or injury with a doctor's slip
to do light work if available for a given time, and when the doctor O.K.'s
employee to return to their regular job or comparable job, employee shall
exercise his or her seniority.
Employees who are on light duty work because of illness or injury and
cannot find work in the home department can displace a less senior employee on a
job that they are medically qualified for starting with the least senior
employee plant wide.
This employee cannot be replaced as long as they are medically restricted
except by a more senior employee on light duty or a more senior employee being
laid off when the medically restricted employee is the least senior in the
plant.
Section 9. Elimination of Departments In the event of a termination of a
department or the transfer of jobs out of a department, the employees so
affected in that department will be transferred to other departments into such
jobs as they are qualified to handle, and will carry their established seniority
into their new department.
Section 10. Disability Transfers Employees who have given faithful
service to the Company and who has become incapacitated on any operation due to
injury, sickness or any cause not the result of misconduct of such employee,
will be entitled to special consideration for lighter or more suitable work in
any department and if transferred will carry their established seniority.
Section 11. Temporary Layoff In the event of a temporary layoff no longer
than one day in any one week caused by breakdown of equipment, shortages of raw
materials or other matters beyond the control of the Company, only those
affected by such conditions shall be so temporarily laid off. The Company will
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make every effort in scheduling to maintain equal hours of work among the
employees.
Any employee who has accumulated a total of one day lost time in any one
week, as a result of the operation of the above paragraph, will be given
preference for overtime of other scheduling in order that an equality of hours
and/or earnings can be maintained.
Employees whose jobs are shut down or scheduled off for more than three
days, but less than six days, may elect a temporary layoff in accordance with
Section 8 of this Article.
Section 12. Short Term Layoff (six months or less) If it is determined the
layoff will be short term, employees in the department with less than one year
of seniority will be first laid off. If such layoff exceeds the number of
employees in the department with less than one year of seniority, the senior
employees in the department may elect a voluntary layoff.
An employee can take one voluntary layoff and voluntary return during the
term of this contract unless there are voluntary layoff positions open, which no
one wants. Total time off not to exceed 6 months, during the term of this
contract unless at a later date voluntary layoff positions again open, and no
one else wants a voluntary layoff. Employees recalled from voluntary layoff
prior to completion of six months shall be allowed to elect voluntary layoff on
any subsequent layoff.
Any employee electing voluntary layoff must notify their department
foreperson no later than 1:00 P.M. three days prior to the date of the layoff.
Senior employees accepting a voluntary layoff would remain on the job
until a satisfactory replacement has been trained.
When an employee wants to return to work, they must give the Company four
(4) week's notice. Once they give notice, they can not change it. Employee must
be out on voluntary layoff before
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they notify the Company of their intent to return to work. Employees returning
can exercise their seniority.
Employees electing to return to work from voluntary short-term layoff may
be replaced on voluntary layoff by other eligible department employees provided
the voluntary layoff positions do not exceed six months.
Employees on voluntary layoff must return to work before the Company
hires any new employees in their home department. Employees who do not return to
work after notification of a job opening or expiration of the six (6) month
layoff period will be considered a quit.
Any voluntary laid off employee who returns to work by Company request,
can subsequently use, if eligible, the remainder of the allowed maximum 6 month
layoff period, per terms of this contract.
If it is determined during any short term layoff that such layoff will
exceed six months, employees on voluntary layoff from the department who have
been on voluntary layoff in excess of two months will be returned to work and a
regular layoff procedure will be instituted. If it is determined during any
short term layoff that such layoff will exceed six months, employees on
voluntary layoff from the department who have been on voluntary layoff less than
two months shall upon completion of two months on voluntary layoff be returned
to work and a regular layoff procedure will be instituted.
When a short-term layoff is converted to a long-term layoff, it shall not
be considered a new layoff unless additional positions are reduced. If
additional positions are reduced employees shall be allowed to exercise their
rights to select
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voluntary layoff, but only with respect to the additional positions being
reduced.
Section 13. Regular Layoff and Long Term (six months or longer) Layoff
If it is determined the layoff will be long term, employees in the department
with less than one year of seniority will be first laid off. If such layoff
exceeds the number of employees in the department with less than one year of
seniority, the senior employees in the department may elect a voluntary layoff
not to exceed two months. All time spent on voluntary layoff shall count towards
that employees six months allowed on voluntary layoff under Section 11. With
each layoff, management shall designate the number of positions that shall be
considered short term and the number of positions that shall be considered long
term.
When a long-term layoff is converted during the first sixty days to a
short-term layoff, the employee currently on the long-term voluntary layoff
shall be given the option of converting to a short-term voluntary layoff.
In the event of a layoff for the purpose of reducing the work force, a
list of those to be laid off shall be posted in each department at least three
days prior to the layoff and such layoff shall become effective at the end of
the work shift on the day set forth in the notice or at the end of the work
shift expiring three days after posting of such notice, whichever occurs later.
The above three days notification requirement shall not apply where
indefinite layoffs are caused by machinery breakdown,
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act of God, or other emergency conditions beyond the control of the Company.
Employees with the least seniority shall be the first to be laid off from
the affected departments.
1. Employees being laid off may sign a job posting in any department
(limit one posting bid/employee) consistent with the provisions of
this contract or
2. Employees being laid off may displace a less senior employee, in
any department, if they have previous satisfactory experience on
that job or
3. Employees being laid off may elect to apply for transfer to any
other department or departments and will be immediately eligible
for subsequent job openings based on their seniority and the
department transfer provisions of this contract. After all
requests of laid off employees, made at the time of layoff, by
those employees electing to transfer departments, have been
honored, a department's layoff list will have first priority to
fill subsequent openings in that department.
4. If no work is available under the forenamed provision (1, 2, and
3), then the employee will be laid off.
5. Management will displace the least senior employee in the plant
with the most senior laid off employee who has elected to work
elsewhere when the layoff is for an indefinite duration or will
exceed 10 working days. The displacement procedure will be made in
the shortest possible time but generally should not exceed 3
workdays per department per employee.
6. When a laid off employee elects to work only in a specific
department or departments, their displacement procedure would
apply when the specific department or departments of their choice
has the least senior plant employee.
7. When the least senior employee has a job which will be eliminated
in next month's schedule or the training
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time exceeds 5 working days according to the category book, the
next least senior employee in the plant will be displaced in the
application of paragraph 5 and 6.
Section 14. Home Department
1. The department to which the employee displaces a less senior
employee or the department to which an employee is recalled to,
shall be the employee's home department if the employee qualifies
by attaining satisfactory quality and efficiency standards in a
reasonable training period. If disqualified, they will either be
asked by the Human Resources Department to work in another
department or may be laid off.
2. Employees who replace the least senior employees in the plant or
employees who elect to be recalled into another department will be
returned to their original department if that department recalls
or hires, and the job opening is not temporary. (Temporary means
20 work days or less.)
3. The employee after 10 working days, paragraphs 1 and 2, has the
option to return to their original home department, if employee
elects not to do so then the current department will become the
home department.
Section 15. Recall Seniority for employees who have not completed their
probationary period and are recalled shall, upon completion of the probationary
period, revert to the original date of hire. Employees with seniority shall have
recall rights for a period equal to 1/2 their seniority, but no less than 48
months.
Employees will be recalled to their home department according to
seniority unless there is a valid reason for their not being able to perform the
available job or jobs. A constant effort will be made to get the senior employee
back to work. A copy of all call backs and comments of all call backs will be
given to the union upon a reasonable request. Before any new
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employees are hired, laid off employees shall fill open jobs unless they have a
legitimate reason.
1. In the event of recall the Union shall be given a list of those
intended to be recalled at least twenty-four (24) hours prior to recall. An
employee shall be notified by telephone of the date they are to return. In the
event Management is unable to contact the employee by telephone, a written
notice shall be mailed to the employee not less than forty-eight (48) hours
before resumption of work to the last address listed by said employee with the
Company. A copy of said notice shall be delivered to or mailed to the Union at
the time of mailing. If an employee fails to return following such notice, a
second 48 hour notice shall be mailed and a copy provided to the Union. The
Company shall have the right to call another available worker; provided,
however, the person by passed shall have the right to return to work if they
give the Company notice of their intention to return within twenty-four (24)
hours of their receipt of notice.
2. In the event it is necessary to recall immediately from the laid off
list because of a change in schedule, absenteeism, leave of absence, etc.,
employees will be recalled in line of seniority within their department. If it
is impossible for the one with the greatest seniority to report for immediate
work, the next in line shall be called.
If a department has temporary need for employees, this department's
employees on lay-off shall have priority to fill these temporary jobs (temporary
means 20 work days or less).
3. Employees on voluntary layoff will be subject to recall to their home
department in reverse order of seniority on three (3) days notice. In cases of
production necessity, employees on voluntary layoff may be recalled out of line
of seniority because of their skill and ability. Employees on voluntary layoff
must return to work before the Company hires any new employees in their home
department. Employees who have exhausted their six months or two months of
voluntary layoff under the short term or long term layoff provision, may, at the
conclusion of their
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voluntary period, elect to move to the regular layoff list and await recall in
accordance with their seniority.
Section 16. Promotions Employees assigned a non-bargaining unit job, on a
involuntary basis because of medical restrictions shall retain their union
seniority. Employees accepting non-bargaining unit jobs, on a voluntary basis
may return one time to their former department within a 30 day period. There
will be no accumulation of seniority beyond the 30 day period. Management may
return a non-bargaining unit employee to the bargaining unit within 12 months.
Employees who have been out of the bargaining unit in excess of 12 months may
not be returned.
On return to the Bargaining Unit, said employees will return to their
former department and will displace the least senior in the department.
Exceptions by mutual agreement with the Union Bargaining Committee.
There will be established a four-person committee (two from the Company
and two from the Union) to investigate complaints concerning supervisors. Such
four-person committee will meet within 7 calendar days following the Company
receiving such a written complaint. The four person committee can request that
both the employee and supervisor meet with the committee. This committee would
obtain facts concerning any supervisory problems and report them to both the
Union Committee and to Company Management.
Section 17. Loss of Seniority An employee shall lose their seniority if:
a. They quit.
b. They are discharged for just cause.
c. If an employee is absent four consecutive working days and
fails to notify the Company as to the reason of absence.
The employee will be given a chance to explain why they did
not notify the Company.
d. Failure to return from layoff.
e. Failure to return from leave of absence.
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f. Employees who are eligible for work but who are not working
because of work restrictions must initiate a review of
their potential job opportunities by a visit to the Human
Resources Office at least once every 60 calendar days. The
lack of a visit for a 120 calendar day period may be cause
for termination unless WAIVED by mutual agreement. These
employees will be notified by registered mail.
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ARTICLE VIII
LEAVE OF ABSENCE
Section 1. Retention of Rights Employees given leave of absence by the
Company will not lose any rights during such leave of absence except as
otherwise set forth herein.
Section 2. Eligibility for Leaves The Company shall grant leaves of
absence in the following cases:
(a) Maternity cases will be treated as any other illness. This will
include the provision to grant a maternity leave for up to one year if
circumstances so warrant.
(b) Incapacitation by illness or injury.
(c) Serving as full-time office of Local No. 14L, or as representatives
of the International Union with which the Local is affiliated, where such office
entails responsibilities in labor relations.
(d) Full-time employees of the AFL-CIO-CLC Building Association (not to
exceed two in number) for the duration of this agreement, but in no case to
exceed two years.
(e) Serving in political or public office, appointed or elective shall
retain seniority during term of office.
(f) To qualify for Civil Service positions, such leave being of same
length of time as qualifying period specified by law for such positions, but not
to exceed ninety (90) days.
(g) A two week leave of absence will be granted to an employee in order
to take a new job outside of the Company provided that prior approval and
satisfactory arrangements have been made with the Human Resources Department.
Upon returning from a leave of absence, employees must verify the taking of a
new job or they will be considered a quit. An employee will be granted only one
leave of absence in each three year period under this subparagraph (g).
Section 3. Return From Leave In all cases leave of absence shall be
granted and allowed only upon prior notice to the Company. In the event of
illness or injury, any employee unable to report for work shall notify the
Company as soon as possible, they do not need a leave of absence to retain their
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rights. In case of absence for other causes, they must give satisfactory
explanation acceptable to the Company. Employees granted a leave of absence
shall be permitted to return to work before the expiration of such period, if
agreeable to the Company.
A person who requests an indefinite leave of absence for medical reasons
and who has received a doctor's slip for such indefinite leave, will be granted
a sixty day leave. Thereafter a written medical extension will be needed every
thirty days, unless waived by mutual agreement.
Section 4. Military Service Any employee who is called into service or in
time of war or a state of emergency as per Selective Training Service Act
volunteers their service in the Armed Forces of the United States shall be given
a leave of absence and will continue to accumulate seniority during such period
of service and upon termination of such service will be reinstated to their
former position or to a position of like seniority status and pay, unless the
Company's circumstances have so changed as to make it impossible or unreasonable
to do so and providing, further that such employee makes application for
reemployment within ninety (90) days after they are relieved from such training
service.
Any employee who is suffering from a service incurred disability may (in
order to rehabilitate themselves) have an additional leave of absence of at
least one year from date of discharge.
ARTICLE IX
SANITATION AND SAFETY
Section 1. Reasonable Measures The employer agrees to adopt all
reasonable measures to insure safe and sanitary conditions in the factory. The
Union and Management agree to cooperate to that end.
Section 2. Medical Care (a) In case of serious injury an employee shall
have prompt medical attention by a qualified physician of their own choosing
listed on the Physicians' panel
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as published by the La Crosse County Medical Society. It shall not be necessary
for the employee to secure an accident report before receiving medical
attention, but such report shall be furnished the Company as soon as
circumstances permit.
(b) The Company shall make every effort to get an injured person to
medical attention as soon as possible.
(c) One employee shall be assigned from management and one employee from
union to constitute a safety committee, which shall meet once a month
(approximately two hours in the week prior to the local union's regular business
meeting), in which they shall review and make recommendations for safety
standards.
Management and the Union may each assign alternate employees to the
Safety Committee.
(d) In the event of an accident which required medical emergency outside
medical attention, the SafetyCommittee shall make a personal inspection of the
equipment and area prior to the resumption of work.
(e) In compliance with the Occupational Safety and Health Act of 1970,
the Union will keep on file in the Personnel Office the name of their
representative who will accompany the OSHA inspector during any of their plant
tours.
(f) During the term of this contract the Company and the Local Union
Bargaining Committee may by mutual agreement develop and implement programs that
strive to improve qualify, safety and attendance.
(g) If an identified problem related to health and safety remains
unresolved for more than 30 days, the Union may request the assistance of the
USWA Industrial Hygiene Department, provided the Company is given 1 weeks notice
prior to the request.
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ARTICLE X
MISCELLANEOUS
Section 1. Replacing Tools The Company will pay the following amounts
each year toward the replacement of broken or worn out tools for the following
maintenance employees:
Grade 4 technician to Master ($200.00), Apprentices $150.00, and
Maintenance Helper $110.00. This will be paid on the first Friday in October.
Tools purchased with these monies will be registered with the Maintenance
Supervisor. During the next three years (October 1998 through October 2001) all
Maintenance Personnel will be required to build their tool set to the basic
required tools which includes those listed as metric.
By the first day of November thereafter, each employee of the Machine
Shop will be evaluated. At that time, they will be told what training or work
experience will be provided in order to reach the next grade level.
The Company will pay a bonus of $160.00 at the end of the employee
apprenticeship period or promotion to Grade 4.
Section 2. Clothing Provision The Company will provide a change of
clothing each working day for the three compounders and banbury operators,
rubber knife operator and upper calendar operators. The dirty clothing must be
returned to the Company before new ones are issued.
The Company will provide ten (10) T-shirts per year to each of the
permanent full time calendar operators, extruder operators, millmen, and
pedatainer carton machine operators.
Eye glasses broken on the job if not covered under Workmen's Compensation
will be replaced in kind at company expense upon application to either the
Safety Department or the Plant Nurse. The glasses must be repaired with
prescription Safety Lens to be eligible for this benefit.
Prescription safety glasses will be replaced when broken, damaged on the
job or for correction of eye sight, for those employees who are required to wear
them.
Section 3. Drinking Water Good, cool drinking water shall be furnished in
sufficient quantities.
Section 4. Union Posting A bulletin board shall be provided in each
department for the use of the Union. All bulletins must be approved by the
Company before posting.
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Section 5. Supervisor Working The Company shall designate in writing who
are supervisors. No supervisors are permitted to do any work. Work performed by
supervisors who would take away employment from an employee or affect the
employees' earnings in any manner is prohibited.
The only work the supervisor can do is instruction, experimental work, or
in case of extreme emergency (extreme emergency shall be defined as follows):
1. A. Absenteeism, the period of time not to exceed one hour at
the beginning of each shift, unless the replacement is in
route, then the time allowed will be extended 1/2 hours.
B. Sickness, the period of time not to exceed one-half hour.
C. Bathroom, telephone calls, nurses office, etc.
2. Absenteeism coverage by supervision will be paid to the called in
employee, but not to the tardy employee.
Instructors shall not do production or service work other than what is
required for the teaching process.
Section 6. Rest Period
REST PERIOD SCHEDULE
Work Time Min # Max # Total Time
8 Hours 2 3 25
10 Hours 3 4 30
12 Hours 4 5 37
The time between rest breaks shall be reasonable. The rest period time to
be determined by management to eliminate lost production time and other
conflicts.
Employees on continuous operation will receive one (1) 10 minute paid
break during the forepart of their shift, and an eighteen (18) minute paid lunch
break.
Section 7. Absenteeism It is the employee's responsibility to maintain
regular attendance. Employees will be eligible for a bonus for perfect
attendance and tardiness. The employee will earn a bonus of 1-1/3 hours per
month for perfect
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attendance and not being tardy. The bonus may be used in two hour increments and
must be scheduled and approved in advance.
Section 8. Suspension An individual who fails to report to their job
following their lunch hour, without proper notification to their foreperson,
plant nurse, or Human Resources Department shall be subject to the following
disciplinary procedure.
a. 1/2 day off - 1 week's suspension and a warning in the event of
repetition, the next action would be discharge.
b. 1-1/2 days off - 30 days suspension and a warning that in the
event of a repeated violation, the result would be discharge.
c. More than 1-1/2 days off - discharge.
The Company will provide adequate means for reporting. Violation of a and
b above not repeated within 9 months, will not be used in determining the
penalty under this policy.
Section 9. Jury Duty Employees who lose time from their regular shift
hours due to required jury duty will be paid for such time lost at average pay
less amount received for such required jury duty.
Section 10. Funeral Pay In the event of the death of an employee's
mother, father, child, spouse, brothers and sisters, step mother, step father,
step brothers, step sisters, or step children, funeral pay will be awarded in
the following manner:
1. Three consecutive working days will be paid for eight hours at the
employee's straight time average hourly earnings.
2. Payment will be made for Saturday and Sunday at straight time average
hourly earnings only in cases where the employee would have been scheduled to
work.
The day of the funeral will be paid for eight (8) hours at the employee's
average hourly earnings for the following: grandparents, grandchildren,
mother-in-law, father-in-law, son-in-law, daughter-in-law.
If a funeral occurs during the vacation shutdown:
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A. Employees ineligible for vacation pay will, upon proper notification,
receive funeral pay in accordance with the current contract language (employees
are not eligible for unemployment benefits when paid for funeral days).
B. Employees eligible for vacation pay will be able to take three (3)
additional paid days at the end of the annual vacation shut down.
Section 11. Paid Meetings and Reimbursed Union Business
a). The Company will pay 85% and the Union 15% of the cost of the contract
books.
b). The Company will pay for 24 hours per year for each member of the Local
Union Bargaining Committee to cover union called meetings (not to exceed 7
members). c). There will be one member from Management and one member from the
Union who will meet once every 2 months for 1 hour to review the apprenticeship
training program. The Company will pay the one-hour for the Union
Representative.
d). Hours eligible for reimbursement by the Union are those additional hours
incurred by Bargaining Committee Members, Union Stewards, Executive Board
Members, Job Evaluation Committee Members, and other Union members who have
Union approval due to special situations. The amount of time incurred by the
above will not be more than has been normal and customary.
e). The Union will reimburse the Company for all wages and benefits paid
relating to "Reimbursed Union Business". This includes wages, 401K employer
match, employer share of Medicare and FICA, associated vacation pay, overtime
premium if incurred, and any other benefits, which may be incurred.
f). The Company will provide the Union Bargaining Committee with a copy of the
Master Insurance Policies.
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g). The Company and the Union Bargaining Committee can mutually agree to special
conditions that will facilitate new processes, products or special situations.
h). The Company agrees to pay the Shop Steward one hour per day at their average
pay.
Section 12. Derogatory Notations
The Company will remove and destroy all derogatory notations from an
employee's file, if not repeated within a 12 month period, except for notations
related to:
- Substance Abuse.
- Fighting.
- Gross Insubordination (time off).
- Sexual Harassment.
- Work Place Discrimination.
- Permanent Disqualification.
The following items will be removed after a 24 month period:
- Fighting.
- Gross Insubordination (time off).
ARTICLE XI
VACATIONS/ANNIVERSARY PAY
Section 1. Vacations
(a) The general policy will continue to be that all employees will be
paid their total vacation pay immediately prior to the annual summer shutdown.
The vacation period shall be between June 15 and September 15 of each year. The
exact date
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shall be determined by negotiations between the Company and the Union.
(b) An employee with one (1) through two (2) years service with the
Company on May 31st of any year shall be entitled to one weeks' vacation with
pay during the vacation period for such year. Pay for such vacation, shall be
equal to 2 percent of the employee's earnings for the twelve month period ending
May 31st of such year.
(c) An employee with three (3) through six (6) years of service with the
Company on May 31st of any year, shall be entitled to two (2) weeks' vacation
with pay during the vacation period for such year. Pay for such vacation shall
be equal to 4 percent of the employee's earnings for the twelve month period
ending May 31st of such year.
(d) An employee with seven (7) through eleven (11) years of service with
the Company on May 31st of any year, shall be entitled to three (3) weeks'
vacation with pay during the vacation period for such year. Pay for such
vacation shall be equal to 6 percent of the employee's earnings for the twelve
month period ending May 31st of such year.
(e) An employee with twelve (12) through fifteen (15) years of service
with the Company on May 31st of any year, shall be entitled to three and one
half (3 1/2) weeks' vacation period for such year. Pay for such vacation shall
be equal to 7 percent of the employee's earnings for the 12 month period ending
May 31st of such year.
(f) An employee with sixteen (16) through twenty-one (21) years of
service with the Company on May 31st of any year, shall be entitled to four (4)
weeks' vacation period for such year. Pay for such vacation shall be equal to 8
percent of the employee's earnings for the twelve month period ending May 31st
of such year.
(g) An employee with twenty-two (22) through twenty-nine (29) years of
service with the Company on May 31st of any year, shall be entitled to five (5)
weeks' vacation pay during the vacation period for such year. Pay for such
vacation shall be equal to 10 percent of the employee's earnings for the twelve
month period ending May 31st of such year.
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(h) An employee with thirty (30) years of service with the Company on May
31st of any year, shall be entitled to six (6) week's vacation pay during the
vacation period for such year. Pay for such vacation shall be equal to 12
percent of the employee's earnings for the twelve month period ending May 31st
of such year.
It is agreed, however, that the third, fourth, fifth, and sixth week of
time off for employees with seven or more years of service shall be granted only
if production necessities permit, or may be granted at the Company's discretion
on a staggered basis, or if there is a plant shutdown, at the time of such
shutdown. In any event, the vacation pay to which an employee with seven or more
years of service is entitled under this section shall be paid to such employee
on or before September 15th of the year in which they are entitled to receive
such vacation pay, regardless of whether the third, fourth, fifth, and sixth
weeks of time off has been granted or not.
Employees with more than 3 weeks of vacation may take a maximum of ten
(10) vacation days, one day at a time, providing prior and satisfactory mutual
agreeable arrangements have been made.
Section 2. Anniversary Pay
Anniversary pay is to be based on an employee's anniversary date, as
follows:
An employee hired subsequent to May 31st in any year will be eligible to
receive anniversary pay equal to 2 percent of their earnings from the date of
their employment to the following May 31st. This amount shall be calculated for
the employee on May 31st following their first anniversary date and shall be in
addition to the regular vacation pay.
In like manner, an employee will be eligible to receive anniversary pay
equal to 2 percent of their earnings from their second anniversary to the
following May 31st, and this amount shall be calculated on May 31st following
their third anniversary.
An employee will be eligible also to receive anniversary pay equal to 2
percent of their earnings from their sixth anniversary
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date to the following May 31st, and this amount shall be calculated on May 31st
following their seventh anniversary.
An employee will be eligible also to receive anniversary pay equal to 1
percent of their earnings from their eleventh anniversary date to the following
May 31st, and this amount shall be calculated on May 31st following their
twelfth anniversary.
An employee also will be eligible to receive anniversary pay equal to 1
percent of their earnings from their fifteenth anniversary date to the following
May 31st and this amount shall be calculated on May 31st, following their
sixteenth anniversary.
An employee also will be eligible to receive anniversary pay equal to 2
percent of their earnings from their twenty-first anniversary date to the
following May 31st and this amount shall be calculated on May 31st following
their twenty-second anniversary.
An employee also will be eligible to receive anniversary pay equal to 2
percent of their earnings from their twenty-ninth anniversary date to the
following May 31st, and this amount shall be calculated on May 31st following
their thirtieth anniversary.
An employee retired under the Pension Plan or on leave or laid off and
maintaining or accumulating service on the payable date above referred to will
be paid their anniversary pay for which they are eligible. Employees retiring
with less than 5 years of service will be eligible for accumulated vacation pay.
The estate or the heirs of an employee who is eligible and who dies
before the payable date will be paid their anniversary pay.
An employee who quits or is discharged prior to the payable dates will be
paid anniversary pay, or regular vacation pay.
An employee who dies or retired (under the Company's Pension Plan) prior
to May 31st is eligible to receive vacation pay for the year in which they die
or retire. Payment for the vacation time shall be paid to the employee or their
heirs.
An employee who is on leave of absence or laid off, and is maintaining or
accumulating service, is eligible for vacation pay.
Employees who work during the summer shutdown period and employees with
more than 3-1/2 weeks vacation pay may request to
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their department foreperson 15 working days prior to the summer shutdown, that
all or a portion of their vacation pay be held for distribution to them at a
later date. Thereafter, they will receive their held vacation pay in minimum of
one day increments by notifying their foreperson one week in advance of when
they want their vacation pay. Vacation pay will be included in the employees
regular paycheck following the vacation day. This exception to the general
vacation pay policy will not apply if it would generate unemployment or
workmens' compensation payments.
CONCLUSION
The Company and the Union agree that there shall be no lockouts, strikes,
slowdowns, or other interferences with production during the life of this
Agreement.
In the event of any interference with production by individual employees
or groups of employees, the local Union and the International Union, their
officers, Stewards, and other representatives will immediately cooperate with
the Company to their full effort and ability and take every possible means to
correct the situation and to cause the employees to return or remain at work.
In any such cases the Union recognizes the Company's right to take
disciplinary action against any employee participating in such interference with
production. In consideration of this agreement, the union, on behalf of
themselves, their members, officers, agents, and representatives agree not to
sue the Company, its officers or representatives, and the Company agrees not to
sue the Union or their respective officers, agents, or representatives in any
court of law or equity for any act or omission of the other party or its agents
or representatives which occurs during the life of the Agreement.
The parties agree to the principle that there will be no discrimination
in regard to wage rates or working condition by reason of sex, color, race,
veterans, handicap, religion or national origin.
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It is further understood that where the masculine pronoun is used in this
agreement, it shall refer to both genders. There shall be no wage reopening
during the life of this Agreement.
This Agreement shall become effective September 14, 1998, and shall
remain in effect until 11:59 P.M., September 15, 2001. Thereafter it shall renew
itself for yearly periods unless written notice is given by either party to the
other not less than sixty (60) days but not more than seventy-five (75) days
prior to the expiration date or any extension thereof that it is desired to
terminate or amend the Agreement.
Effective Date: September 14, 1998
LOCAL NO. 14L
UNITED STEELWORKERS OF AMERICA
/s/Harold Geary /s/Sue Ames
Harold Geary Sue Ames
President Secretary
/s/Rita Christianson /s/Donna Coady
Rita Christianson Donna Coady
Bargaining Committee Bargaining Committee
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/s/Randy Sharp /s/Thomas Sullivan
Randy Sharp Thomas Sullivan
Bargaining Committee Bargaining Committee
/s/Karen Fisher /s/David Martin
Karen Fisher David Martin
Bargaining Committee International Rep.
Countersigned at Pittsburgh, PA this _____________day of ________________, 1998.
/s/George Becker /s/Leo Gerard
George Becker Leo Gerard
President Secretary-Treasurer
/s/Richard Davis /s/Leon Lynch
Richard Davis Leon Lynch
Vice President Vice President
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/s/Harry E. Lester
Harry E. Lester
District 2 Director
LA CROSSE FOOTWEAR, INC.
/s/Patrick Gantert /s/David Flaschberger
Patrick Gantert David Flaschberger
President & C.E.O. V.P. Human Resources
/s/Edward F. Mettille /s/Ronald Dalton
Edward F. Mettille Ronald Dalton
Human Resources Manager V.P. Manufacturing
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/s/Wayne Lorek /s/Darla Bingham
Wayne Lorek Darla Bingham
Plant Manager Payroll/Retirement Administrator
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EXHIBIT 1
To: Local 14L Bargaining Committee
As agreed during the 1980 contract negotiations, the Company and the
Union Bargaining Committee will review and can mutually agree to increase base
rates for certain key or critical jobs.
LA CROSSE FOOTWEAR, INC.
EXHIBIT 2
To: Local 14L Bargaining Committee
In the event the Company proposes to terminate its total operations for
economic reasons, not associated with the relationship between the Company and
the Union, acts of God, or other events or factors beyond its control, the
company will, in good faith, attempt to give the Union a six (6) month notice of
such termination so as to allow the Union to suggest alternative remedies to
such termination; provided, that neither said notice nor such suggestions will
necessarily require the Company to continue its operations, extend said
termination date, or accept any suggestion nor in any manner to effect its
responsibilities and right to manage or terminate its business. This letter may
not be used in any manner involving any dispute, whether in arbitration or
otherwise arising under the Contract between the Company and the Union.
LA CROSSE FOOTWEAR, INC.
EXHIBIT 3
To: Local 14L Bargaining Committee
Red Circling - Fixed Hourly Wage Rates
We would "red circle" those employees who are currently working on jobs
designated for "red circling" as long as they continue to demonstrate similar
levels of performance (within 10% over a four week average and anything outside
of an employee's
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control would not be held against them). A six month average will be used to
establish the "red circle" rate (1/1/95 - 6/30/95).
An employee who is eliminated, bumped or is transferred because of a work
related or non-work related injury/illness from his/her "red circled" job will
be paid the rate of the job they go on and if they return to their original "red
circled" job within a 12 month period, they once again will be paid the "red
circle" hourly wage.
Returning after a 12 month period would result in their being paid at the
current hourly rate of the job.
Employees who voluntarily sign off their "red circled" job will not be
paid the "red circled" hourly rate if they return to the original "red circled"
job. If an employee is place back on a job they have signed off from, refer to
paragraph 2.
The amount that an employee would be "red circled" at would be the
efficiency the machine is capable of producing (if operation is machine
controlled) or the employee's six month average hourly earnings, which ever is
less unless other circumstances, issues or variables exist. If it can be
determined the efficiency of the job/operation is inflated, the company will use
the efficiency the machine or operation is capable of doing.
An employee's "red circled" rate shall be increased by the amount of any
general wage increase.
The conversion from a piece rate to fixed rate system is intended to be
accomplished by 9/30/96.
LA CROSSE FOOTWEAR, INC.
EXHIBIT 4
To: Local 14L Bargaining Committee
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Drug and Alcohol Testing
LaCrosse Footwear recognizes that the wide spread use of illegal drugs
and abuse of alcohol in today's society poses a very serious problem. Since our
employees are our most valuable resource and the safety and well-being of our
employees and the general public are of paramount concern to us, we have
developed a Substance Abuse Policy to help us contribute to the solution of this
very difficult health and social problem.
I. Voluntary Rehabilitation
The Company/Union encourages employees who have a problem with substance
abuse, including alcoholism, to come forward confidentially and work to
resolve the problem before it leads to disciplinary action. Such
employees will be evaluated by the Employee Assistance Program and are
encouraged to comply with any recommendations of the program and
successfully complete any recommended treatment and continue with an
after-care program where recommended.
II. Circumstances For Testing
1. Random testing will start 1/1/96. 2.5% of all LaCrosse Footwear
employees will be tested annually divided over a 12 month period.
2. Accident/Injuries on the job. When there is a work related injury
that requires outside medical attention, the health and safety
department will determine whether testing is appropriate. In most
cases, all involved in the accident/injury will be tested.
3. Probable Cause. As a means to detect probable cause as accurately
as possible, training will be provided for both management and
stewards to help detect probable cause situations.
4. Referral Agreement. In a probable cause situation, management and
the appropriate steward are encouraged
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to agree upon referral to the Safety Manager. If agreement cannot
be reached, two members of management must agree upon referral to
the Safety Manager. The Safety Manager or Company nurse may refer
a probable cause case without any such agreement.
The Chief Union Steward or Union President will be notified of all retests to
Bargaining Unit members.
III. Confidentiality
The Company respects the confidentiality and privacy rights of all of its
employees. Accordingly, the results of any tests administered under this
policy or the identities of any employee participating in a
rehabilitation program will not be revealed to anyone without the express
written consent of the employee, except where otherwise privileged. Any
employee desiring to obtain and/or review the results of any drug/alcohol
screen required by the company of that employee may do so by making a
written request for the same within sixty (60) days of the employee's
receipt of the notification of the test results. All such requests must
be in writing and signed by the employee tested. Any such request may
only be made by the employee tested.
IV. Drug/Alcohol Testing
1. Union/Management joint drawing for random testing.
A. Split Samples
1. Urine test will be the testing method.
2. Independent testing at employee's expense for a
second opinion.
3. If the second test is negative, the employee will be
given the benefit of the doubt and reimbursement for
the test.
B. Drug/Alcohol Levels
1. Certified standards for minimum levels.
a. Alcohol - .10
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b. Drugs - Federal Standards.
C. Employees will be paid for lost time when testing.
D. To offset the feelings of invasion of privacy, those
randomly tested will receive a $50.00 bonus if
tested negative.
V. Discipline
1. Refusal will be treated as an offense.
2. First Offense - Discharge or treatment (employee's choice).
3. Second Offense - Discharge (if within 3 years). If not within 3
years, it will be considered, on a one time basis, a first
offense.
VI. Rehabilitation
1. If after evaluation by the Company-approved program, following an
employee's positive test result, the program representative
determines that treatment is required, a medical leave of absence
will be granted pending proof of the following: (1) admission into
the program; (2) regular attendance in the program; and (3)
successful completion of the program.
If after evaluation by the Company-approved program, the program
representative determines that treatment is required but need not
be on an inpatient basis, and it is determined by the company that
an employee's chemical dependency does not render the employee
unqualified to perform his/her job, the employee may be allowed to
return to work with no loss in seniority. The employee will be
expected to meet existing performance levels and established work
rules and policies while participating in the program.
2. In any situation, upon successful participation in and completion
of recommended treatment, the employee will be required to undergo
an additional drug/alcohol screen. If the confirmed test results
are negative, the
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employee will be returned to work, if on leave of absence and if
work is available, or allowed to continue working if not on leave
of absence. Additionally, employees not on leave of absence and
undergoing treatment will be required to submit to a reasonable
number of drug/alcohol screens without notice and without cause.
[An employee having participated in and successfully completing
recommended treatment, will be required, without notice, to
undergo up to four (4) additional drug/alcohol screens in a three
(3) year period following successful completion of recommended
treatment.] If the results of the screens are negative, the
employee will not be required to undergo any additional test,
except in instances covered by this substance abuse program. If
the results are positive, the employee will be discharged.
LaCrosse Footwear, Inc.
Exhibit 5
(Fixed Hourly Wage Rates - Pay Policy For Average Pay)
We will pay employees their current employee fixed hourly wage rate for all
situations that were paid at their "average" under the incentive (piecework) pay
system. The current employee fixed hourly wage rate is the one assigned to the
employee at the time the special pay situation occurred. This provision will
supercede other provisions in this contract that concern "average" wage payments
as long as employees are paid based on a fixed hourly wage rate system. Should
we return to an incentive (piecework) pay system, we would return to "average"
wage payments on the operations affected.
Special wage payment issues included in the provision include:
Holiday Pay Temporary Work Safety Inspections
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Funeral Pay Quality Meetings No Work
Union Business Safety Meetings Attendance Bonus
Factory Mtgs. Shop Steward Samples
Drug Testing Sent to Nurse Reimbursed Union Hrs
Training Factory Mgr.'s Mtg. Fire Ext. Training
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LETTERS OF AGREEMENT
o Supervisory Personnel Returning to the Bargaining Unit
Management and the Union agree with respect to the changes made in
Article VII, Section 16, "Current non-bargaining unit personnel who were
once members of the bargaining unit shall be allowed to return to the
bargaining unit provided they have not exhausted their rights which were
contained in the 1991 collective bargaining agreement."
o Continuous Improvement
Because there is a mutual interest in the La Crosse facility remaining a
viable facility built upon a quality heritage, and because there is a
mutual interest in utilizing employee input to achieve productivity and
quality gains, the following initiatives are endorsed;
Quality
o Support ISO registration
o Support of a Quality Standard
o Union involvement in ISO project
o Improved communication of quality levels
Productivity
o Support education in productivity measurement
o Union /management participation in productivity improvement
o Joint union/management development of system for utilizing employee
ideas
o Improved communication of productivity levels
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Modular manufacturing
o Continued efforts toward modular manufacturing with fixed pay rates
o Continued consolidation of jobs and natural job rotation in order to
meet safety, productivity, and quality objectives
o Continued movement toward a self-managed workforce
The continued effort in the areas of quality, productivity, and modular
manufacturing will improve the long term viability of the facility, enhance
long term security for all employees, and provide opportunities for
employees to share in the benefits of cost reduction.
o Safety
The present test used for assessing the skills needed to handle electrical
power of 150 volts or more will be evaluated for it's adequacy by all
parties involved.
o Fixed Hourly Rates
- ---------------------------------------------------------------------------
Fixed Hourly Fixed Hourly Rate Fixed Hourly
Rate as of as of Rate as of
Point Range 9/14/98 9/13/99 9/11/00
- ---------------------------------------------------------------------------
514 to 536 $11.00 $11.10 $11.20
- ---------------------------------------------------------------------------
475 to 513 $10.75 $10.85 $10.95
- ---------------------------------------------------------------------------
385 to 474 $10.50 $10.60 $10.70
- ---------------------------------------------------------------------------
343 to 384 $10.25 $10.35 $10.45
- ---------------------------------------------------------------------------
297 to 342 $10.00 $10.10 $10.20
- ---------------------------------------------------------------------------
257 to 296 $9.75 $9.85 $9.95
- ---------------------------------------------------------------------------
223 to 256 $9.50 $9.60 $9.70
- ---------------------------------------------------------------------------
197 to 222 $9.25 $9.35 $9.45
- ---------------------------------------------------------------------------
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The above point range shall be used in the establishment of fixed hourly
rates using the job evaluation procedure referred to in Article VI,
Section 2, Paragraph (a) of the agreement.
o Shop Steward Pay and Company/Union Meetings
The Company agrees to pay the Shop Steward one hour per day at their
average pay. The Company agrees to pay the Bargaining Committee for all
lost time for Union Business and the Union shall reimburse the Company
for this payment. (This will enable the employees who are Union
Representatives to maintain their 401K contribution rate.)
o Safety Footwear Reimbursement Program
Where safety footwear is required by the Company and/or the Occupation
Safety Health Administration (OSHA) guidelines, the following
reimbursement program shall be available to employees:
- LaCrosse branded leather safety footwear ANSI/steel toe approved
- Fifty (50) percent off of the standard cost.
- Leather safety footwear eligible for reimbursement will not be
unreasonably restricted by the Company
- Purchased through Retail Outlet Store
- Non-LaCrosse branded leather safety footwear ANSI/steel toe
approved
- Reimbursement of twenty-five percent to a maximum of $20.00 off of
retail cost. Documentation required.
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- Eligible employees are eligible for one pair of leather safety
footwear ANSI/steel toe approved on an annual (calendar) basis.
o Gainsharing
LaCrosse Footwear, Inc. and the United Steelworkers Of America, Local 14L
recognize that the long term viability of the La Crosse operations, depends on
our ability to remain competitive and cost effective in the changing global
market.
Gainsharing is a system that shares with employees the benefits of improved
performance, productivity, quality and material usage.
DISRAT (Design, Implementation, Steering, Review, Appeals, Training) Team. The
team will be comprised of equal members of management and union. The team has
the responsibility to oversee the gainsharing program.
Key Elements of Gainsharing:
o Any gains achieved through this program will be shared on a 50/50 basis with
the employees.
o Gainsharing performance will be determined by an actual to standard ratio
using predetermined elements. The baseline productivity level will be
1.3250.
o Actual productivity levels will be calculated every six (6) months using a
twelve (12) month rolling average.
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o Payouts will be calculated by matching the actual productivity level to the
gainsharing table, and multiplying the hourly savings by the compensated
hours each employee was paid during the preceding six (6) month period.
o Payouts will be made within 60 days of the end of the six (6) month period.
o The Company will continue to make standards changes as in the past, but such
changes shall not adversely impact gains achieved through the gainsharing
program.
o The Union will have the right to bring in a third party auditor to review
gainsharing calculations.
o Red Circle - An employee whose job has been eliminated through Gainsharing
and is currently red circled can carry their red circle rate to their next
direct labor job. Also any employee who has a red circle rate and is
displaced by another employee whose job was eliminated through the
Gainsharing process can carry their red circle rate to their next direct
labor job.
o Ideas should be submitted to your immediate supervisor in writing. A copy
will be given to the DISRAT team and the employee. The DISRAT team and
supervision will be responsible for communicating responses back to the
employee.
o Two Year Gainsharing Guarantee
Minimum guaranteed per hour payouts. These amounts are minimum payouts in lieu
of real gainsharing improvements and are not to be added to real gainshare
amounts.
Period
9/14/98 - End of June 1999 Accounting Period .20
End of December 1999 - Six Month Accounting Period .15
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End of June 2000 - Six Month Accounting Period .10
End of December 2000 - Six Month Accounting Period .05
o Sub-Committee on Health Care
The parties agreed that a sub-committee would be formed on health care
and consist of 3 Union representatives and 3 Management representatives.
The purpose of the committee is to review the performance and the
projected costs for the duration of the contract on a quarterly basis.
The sub-committee shall act in an advisory capacity in the selection of
third party administrators, health care insurance carriers and meet with
the parties as needed. The group would attempt to identify changes to
the existing health care plan that would result in reducing health care
costs. Any changes to the plan would need to result in more health care
cost savings not merely the transfer of costs to another area.
INSURANCE AGREEMENT
This agreement made and entered into this 14th day of September, 1998 by and
between Local No. 14L, United Steelworkers of America, hereinafter referred to
as the Union, and LaCrosse Footwear, Inc., hereinafter referred to as the
Company, witnesseth:
It is agreed that the Company will provide employees who are actively
employed and covered by this agreement with Group Health Insurance (Company may
be self insured), benefits in accordance with those contained in the summary
GROUP BENEFIT PLAN booklet.
Employees may elect annually either of the following Provider Plans:
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PLAN 1 - (Traditional Health Care Plan)
The plan allows the employee full choice of physicians and providers
(clinics, hospitals). The employee contribution is:
PER WEEK
Single $19.08
Family $48.15
PLAN II - (Managed Health Care Plan)
The plan requires that primary initial care be delivered by specified
primary care specialists. The employee contribution is:
PER WEEK
Single $12.62
Family $30.53
Employees are entitled to change their selection one time during each calendar
year.
It is further agreed that the Company will provide employees who are
actively employed and covered by this agreement with a Prescription Drug Plan
(Company may be self insured) effective as of the contract date, benefits as
contained in the summary GROUP BENEFIT PLAN booklet.
Non-working employees for whom the Company is paying medical insurance
(except retirees) will have their insurance paid for the first 60 days.
Thereafter, they will pay the current working employee's contribution.
Eligibility for said plan will be based on the active employee's
qualifications for either a single or a family plan. The coordination or
non-duplication of benefit clause will become a part of this insurance
agreement.
If an employee's status changed during the term of the agreement, then
upon their given written notice to the Company of
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such changed status, such employee will be eligible for coverage in the
appropriate category.
Group Health Insurance shall cover employees while actively employed:
provided, however, that in cases where sick leave has been granted (doctor's
slip), Group Health Insurance will be extended by 180 days from the last day of
the month that active employment occurred.
Other benefits and coverages provided under the program shall be, namely
for all employees actively employed.
GROUP DEATH AND
LIFE DISMEMBERMENT
INSURANCE INSURANCE
---------------- -------------------
Effective 10-1-98 $ 20,000.00 $ 20,000.00
----------------- ---------------- --------------------
Accidental Disability Coverage will be effective the first day of the
period and the sickness disability will be effective either the first day of
hospitalization or the eighth day of the period, whichever occurs first in the
following amount per week:
Effective 10/1/98 - Increased from $150.00 to $175.00 per week
Effective 10/1/00 - Increased from $175.00 to $200.00 per week
Coverage is up to 26 weeks for those on Accidental Disability and
recognized sick leave as well as for those on sickness leave for nervous or
mental disorders. One period per 12 months.
Employees laid off, who have one or more years seniority, will have their
Hospital and Surgical Insurance extended 30 days from the last day of the month
that active employment occurred; not to exceed one in each twelve month period.
A. An employee who is laid off may continue in the group plan for
Hospitalization for a period of 18 months provided they pay the
group insurance rate each month in the Human Resources Department
and the first payment is made before the first of the month after
the month in which they are laid off.
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B. An employee who is out on leave of absence may continue their
Hospitalization Surgical and Group Life Insurance for a period of
18 months provided they pay the group insurance rate each month in
the Human Resources Department and the first payment is made
before the first of the month after the month in which leave
begins.
C. Persons who retire under I.B. of the current Pension Agreement
will be carried under this Insurance Agreement at Company expense,
for a period of 180 days past the day on which they retire.
Employees retiring under the Pension Plan between the ages of 55
to 65 may stay under the Group Health Insurance Plan at their own
expense, at the present rate in effect at that time.
D. In the event of total disability prior to age 60, the waiver of
premium provision of the current Group Life Policy contract or
similar policy contract will apply. If disability continues after
an employee retires under the Pension Plan, then such employee
will receive coverage under the $3,500.00 Special Retirement Death
Benefit. Employees, who retired prior to October 1, 1998, would
have received the benefit at the rate, which was in effect at the
time of their retirement. Disability will be subject to proof
satisfactory to the Company and the insurer at periodic times.
E. The following death benefit shall be payable to the designated
beneficiary of former members of the bargaining unit who retired
under the Pension Plan:
1. If after having thirteen years of service an EMPLOYEE'S
service is terminated after September 30, 1998 - $3,500.00
2. EMPLOYEES who retired prior to October 1, 1998 would
receive benefits at the rate which was in effect at the
time of their retirement.
F. In addition to other rights described above, employees and
dependents who lose group health benefits will have
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the right to continue coverage (at their own expense) if and to
the extent provided by State or Federal Law.
The Company will establish a medical reimbursement plan and/or a
dependent care reimbursement plan as defined by Section 105 and 129 of the
Internal Revenue Code. After the reimbursement plan is established, individual
health care RA's and dependent care RA's will be set up for participating
employees.
This agreement shall continue in force until 11:59 P.M. September 15,
2001. This Agreement shall thereafter renew itself for yearly periods unless a
written notice of desire to amend or terminate the Agreement is given by either
the Union or the Company to the other not less than sixty (60) days nor more
than seventy-five (75) days prior to the expiration date, unless otherwise
mutually agreed. If negotiations are not satisfactorily concluded prior to the
expiration date, nevertheless this Agreement may, by mutual consent, continue in
full force and effect subject to the right of either the Union or the Company
after the expiration date, to terminate.
It is agreed that the insurance program, date effective September 14,
1998, and expiring September 15, 2001, shall continue in force for a period of
60 days beyond expiration date.
IN WITNESS WHEREOF this Agreement has been signed the day and year above
written. This agreement is subject to the approval of the International Union in
accordance with U.S.W.A. Constitution.
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LOCAL NO. 14L
UNITED STEELWORKERS OF AMERICA
/s/Harold Geary /s/Sue Ames
Harold Geary Sue Ames
President Secretary
/s/Rita Christianson /s/Donna Coady
Rita Christianson Donna Coady
Bargaining Committee Bargaining Committee
/s/Randy Sharp /s/Thomas Sullivan
Randy Sharp Thomas Sullivan
Bargaining Committee Bargaining Committee
/s/Karen Fisher /s/David Martin
Karen Fisher David Martin
Bargaining Committee International Rep.
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Countersigned at Pittsburgh, PA this ___________day of __________________, 1998.
/s/George Becker /s/Leo Gerard
George Becker Leo Gerard
President Secretary-Treasurer
/s/Richard Davis /s/Leon Lynch
Richard Davis Leon Lynch
Vice President Vice President
/s/Harry E. Lester
Harry E. Lester
District 2 Director
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LA CROSSE FOOTWEAR, INC.
/s/Patrick Gantert /s/David F. Flaschberger
Patrick Gantert David F. Flaschberger
President & C.E.O. V.P. Human Resources
/s/Edward F. Mettille /s/Ronald Dalton
Edward F. Mettille Ronald Dalton
Human Resources Manager V.P. Manufacturing
/s/Wayne Lorek /s/Darla Bingham
Wayne Lorek Darla Bingham
Plant Manager Payroll/Benefits Administrator
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BRIEF DESCRIPTION OF THE LACROSSE FOOTWEAR, INC. PENSION PLAN AND UNION
EMPLOYEES' RETIREMENT SAVINGS PLAN (401K PLAN) AGREEMENT
It is agreed that the Company will provide eligible employees covered by this
agreement with a benefit under both the LaCrosse Footwear, Inc. Pension Plan and
the LaCrosse Footwear, Inc. Union Employees' Retirement Savings Plan (401k Plan)
in accordance with the official Plan documents.
Section I. Agreement Clarification
The Plans are summarized here to provide generalized information. A summary
cannot deal with every possible future set of circumstances. It is the formal
Plan documents that control all of the rights of Participants and Beneficiaries.
If the summary is inconsistent with the Plan documents, the documents will
control.
Section II. LaCrosse Footwear, Inc. Pension Plan
A. Eligibility.
An employee is eligible to participate in the Pension Plan once
employed by the Company and becoming a member of the Union.
B. Benefits.
1. Normal Retirement Benefit.
Participants retiring on or after normal retirement age
(age 65) will receive a monthly benefit amount equal to his
or her years of credited service times the benefit rate.
2. Early Retirement Benefit.
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Vested participants who have reached age 55 may retire and
begin receiving a monthly benefit based on his or her years
of credited service times the benefit rate. Retirement
benefits are reduced for those electing this option.
3. Disability Benefit.
A participant who becomes disabled (as defined by the terms
of the Plan document) while employed by the Company, who is
at least age 40 and fully vested, will be entitled to a
disability benefit based on his or her years of credited
service at the time his or her disability was incurred
times the benefit rate.
4. Death Benefit.
A spouse of a participant who is vested will be entitled to
survivor benefits under the Pension Plan unless such
benefit is waived by the spouse. The spouse will be
entitled to 50% of the benefit based on his or her years of
credited service times the benefit rate reduced for Joint
and Survivor Coverage.
5. Benefits upon Termination of Employment for Reasons other
than Retirement, Death or Disability. A vested participant
terminating employment prior to Retirement, Death or
Disability will be eligible for a deferred vested benefit
at normal retirement age based on his or her years of
credited service at the time his or
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her service is terminated times the benefit rate.
C. Pension Benefit Rates.
1. Effective benefit rate for those retiring or terminating
employment after: September 30, 1998 $11.25
2. Employees who have retired or terminated under the Pension
Plan prior to October 1, 1998, shall receive benefits at
the rate and in accordance with the provisions of the
Pension Plan which was in effect at the time of the
person's retirement or termination.
D. Commencement of Benefit.
Provided the Company is timely notified, a participant's benefit
will begin the first day of the month following his or her
termination date. In general, benefits will be paid monthly.
E. Funding.
1. The Pension Plan is funded by the Company.
2. The Company will contribute to the Pension Plan an amount
certified by a qualified actuary engaged by the Company, to
be not less than that required to maintain the Plan as a
qualified retirement plan under the Internal Revenue Code.
F. Credited Service/Vesting.
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1. Service.
After December 31, 1975, an employee will receive one
year's credited service if the Employee works 1200 hours
(as defined by the Plan document) or more in the year. If
the Employee works less than 1200 hours, the employee will
receive credit for 1/12th of the year for each 100 hours of
work up to a maximum of 1 year per calendar year.
2. Vesting.
After December 31, 1975, an employee will receive one
year's service towards vesting if the Employee works 1000
hours or more. If the Employee works less than 1000 hours,
the Employee will receive credit towards vesting of 1/12th
of a year for 100 hours worked up to a maximum of 1 year
per calendar year. To be 100% vested a participant must
have 5 years of vested service.
3. Prior to January 1, 1976, credited service and vesting will
be credited according to provisions in effect at such time.
Section III. LaCrosse Footwear, Inc. Union Employees' Retirement Savings Plan
(401k Plan)
A. Eligibility.
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An employee is eligible to participate in the Union 401k Plan on
the first day of the calendar quarter following the first
anniversary of his or her start date, provided that the employee
became a member of the Union in good standing and was still
employed as of such date.
B. Funding.
The 401k Plan enables eligible participants to save a portion of
his or her current wages, on a tax deferred basis, in order to
supplement his or her retirement income.
1. A participant is eligible to defer between 1% and 15% of
his or her eligible compensation through salary reduction.
2. Effective January 1, 1999, the Company will increase the
matching contribution from 40% of the first 1% to 50% of
the first 2% contributed by the participant.
C. Vesting.
A participant will always be 100% vested in the amount deferred
through salary reduction. However, not until a participant has
attained 5 years of vested service (refer to vesting under Section
I. F. 2 of this Agreement) will a participant be 100% vested in
the employer match contribution.
D. Benefits.
A participant will be eligible to receive a benefit upon
retirement, death, 100% disability, or termination of employment.
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E. Investment Election Changes.
401k Plan participants have the ability to change their investment
elections effective the first of any calendar quarter.
F. Administration Fees.
Effective January 1, 1997, all administrative fees will be paid by
the 401k Plan.
Section IV. Administration
The Plans are sponsored and administered by the Company, LaCrosse Footwear, Inc.
Section V. Plan Amendment or Termination
It is understood and agreed that the Plans shall not be amended or terminated
for the duration of this Agreement with the exception of Section VI. Although
these Plans have been established with the expectation that the Plans will be
permanent, circumstances may arise not now foreseen, and make it impossible or
inadvisable to continue the Plans, and the Company therefore reserves the right
to amend or terminate the Plans at any time after the expiration of the term of
this Agreement.
Section VI. Agreement Approval
It is understood that this Agreement is subject to approval of the Board of
Directors of the Company. The Company shall have the right to make such changes
in the Plans as may be required during the term hereof to continue the Plans as
qualified
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retirement plans. The Company shall provide the Union thirty (30) days advance
copy of any Plan amendments.
No amendments can be made to the Plans which will result in changes in benefits
or funding status without the agreement of the Union.
Section VII. Effective Date
This Agreement as amended shall become effective September 14, 1998, and shall
constitute a settlement for the duration of this Agreement of all issues with
respect to the subject matters covered hereby; while this Agreement continues in
effect, the Company shall have no obligation to negotiate or bargain with the
Union with respect to any such matter covered hereby. This Agreement supersedes
all former Agreements and all such former Agreements are hereby terminated.
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LOCAL NO. 14L
UNITED STEELWORKERS OF AMERICA
/s/Harold Geary /s/Sue Ames
Harold Geary Sue Ames
President Secretary
/s/Rita Christianson /s/Donna Coady
Rita Christianson Donna Coady
Bargaining Committee Bargaining Committee
/s/Randy Sharp /s/Thomas Sullivan
Randy Sharp Thomas Sullivan
Bargaining Committee Bargaining Committee
/s/Karen Fisher /s/David Martin
Karen Fisher David Martin
Bargaining Committee International Rep.
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Countersigned at Pittsburgh, PA this ___________day of __________________, 1998.
/s/George Becker /s/Leo Gerard
George Becker Leo Gerard
President Secretary-Treasurer
/s/Richard Davis /s/Leon Lynch
Richard Davis Leon Lynch
Vice President Vice President
/s/Harry E. Lester
Harry E. Lester
District 2 Director
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LA CROSSE FOOTWEAR, INC.
/s/Patrick Gantert /s/David LFlaschberger
Patrick Gantert David Flaschberger
President & C.E.O. V.P. Human Resources
/s/Edward F. Mettille /s/Ronald Dalton
Edward F. Mettille Ronald Dalton
Human Resources Manager V.P. Manufacturing
/s/Wayne Lorek /s/Darla Bingham
Wayne Lorek Darla Bingham
Plant Manager Payroll/Retirement Administrator
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BY-LAWS
OF
LOCAL 14L
United Steelworkers
Of America
A.F.L. - C.I.O. - C.L.C.
La Crosse, Wisconsin
1995
FOREWORD
Local No. 14L, United Steel Workers of America pledges itself to labor
united to cultivate industrial solidarity and good fellowship among it's
members, and all other members of organized Labor, to bring a higher standard of
living for the working masses.
ARTICLE I
The intent of principles is to bring about a better understanding of
organization work and duties of Union Members. These principles shall not in any
way conflict with the laws in the International Constitution of the United Steel
Workers of America.
ARTICLE II
The objectives of Local Union No. 14L are:
(a) To organize all production workers employed by LaCrosse Footwear,
Inc.
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(b) To cooperate with other Labor organizations in securing the rights of
Labor.
(c) To work for the establishment of Legislation beneficial to the
protection of all labor.
(d) To insure all members have the opportunity to vote in the
ratification of the contract.
ARTICLE III
Section 1. Officers
(a) The officers of Local 14L shall be President, Vice President,
Secretary, Treasurer, three Trustees and an Executive Board of eleven members
including the first four Executive Officers first named above.
(b) The Executive Board shall hold regular meetings on the third Saturday
of each month.
(c) A majority of its Members shall constitute a quorum.
(d) The Executive Board shall not spend more than $60.00 for any one
purpose without approval of the Membership.
Section 2. Nominations and elections.
(a) Nominations and election of Union Officers shall be conducted at the
regular union meeting in the month of October.
(b) Nominations and elections of Officers shall be conducted according to
International Constitution.
(c) Vacancies in office shall be filled in accordance with the
Constitution.
(d) No member shall hold office until he or she has been a member in good
standing for at least one year.
(e) No member shall hold office unless he or she has attended at least
three regular meetings in the twelve months previous to the election period.
This includes all Elective Officers, Department Stewards, Bargaining Committee
Members, AFL-CIO-CLC Council Members.
(f) All Elective Officers, Department Stewards, Bargaining Committee
Members, and AFL-CIO-CLC Council Members must be
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present at Regular Meetings when roll call is taken, or he/she shall be
considered absent, unless an excuse has been given.
(g) Any elected Officer who misses two consecutive regular meetings
without a valid excuse shall be subject to removal. All excuses shall be
reviewed by the Executive Board. The Board shall recommend what action is to be
taken. All excuses shall be in writing.
(h) Representatives who accept a job in a supervisory capacity shall
forfeit his office upon acceptance of this kind of a job from the company.
Section 3. Duties of Officers
(a) The duties of all elective Officers shall be as set forth in the
International Constitution.
Section 4. Salaries
(a) The monthly salary of the Local Union Officers and Committeemen shall
be as follows:
(1) President $105.00 per month.
(2) Vice President $60.00 per month.
(3) Secretary $105.00 per month.
(4) Treasurer $160.00 per month.
(5) Trustees $25.00 per month plus $5.00 per meeting for auditing
Treasurer's books each quarter.
(6) Guide and Sentinel $25.00 per month, plus $5.00 per meeting
for work performed at the regular and special membership meetings.
(7) Shop Steward $75.00 per month, plus pay for working time lost.
(8) Department Stewards $35.00 per month.
(9) Executive Board Members $25.00 per month.
(10) Bargaining Board Members $25.00 per month.
(11) AFL-CIO-CLC Council Members $25.00 per month.
(12) Safety Committee $25.00 per month.
(13) Rapid Response Coordinator $25.00 per month
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(b) An additional $5.00 per meeting will be allowed for regular and
special meetings for Officers and Committeemen above, not to exceed two special
meetings per month.
(c) All Committee and Delegate meetings held, shall be paid at the rate
of $5.00 per meeting, not to exceed two meetings per month.
(d) All Executive Officers and Stewards who serve on other committees or
in other capacities are to receive a salary for each office, but only $5.00 per
pay meeting is allowed for attendance at meetings.
(e) No Officer or Committeemen is to receive $5.00 pay for attending
regular or special membership meetings; Guide and Sentinel excepted as stated
above.
(f) Any member appointed to take the place of an Officer or Committeemen
shall be paid the salary of the office he or she fills for the actual time spent
on the job.
(g) All lost time shall be paid by the Local 14L when properly
authorized.
ARTICLE IV
Section 1. Stewards and Bargaining Committees.
(a) All Officers and Committees will be elected every three (3) years.
(b) A Shop Steward shall be selected by the membership at the regular
election of officers to serve for three (3) years.
(c) The Shop Steward shall use his/her best effort to settle grievances
and perform other duties assigned to him or her by the Local Union.
(d) The Shop Steward shall be chairman at all Department Steward
meetings, and shall make a report to the Membership at regular meetings.
(e) The Bargaining Committee minutes shall be taken by the Secretary.
(f) A record shall be kept on how individual members of the Executive
Board and Bargaining Committee vote on all issues except where a secret ballot
is involved.
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Section 2. Stewards
(a) Each Department shall elect a Department Steward. Department Stewards
are to serve for a term of three years. Elections are to take place in the
Departments in the same month in which we hold our regular election of Officers.
(b) The Steward shall represent his or her department in all grievances,
and assist in other Union activities.
(c) Each Department Steward shall make a daily report to the Shop
Steward.
(d) The Shop Steward shall call meetings of Department Stewards to
discuss matters pertaining to their respective Departments.
(e) Department Stewards shall meet with the Bargaining Committee before
they enter into Contract negotiations with the Company.
Section 3. Bargaining Committee.
(a) Five members shall constitute the Bargaining Committee, including the
Shop Steward.
(b) They shall do the bargaining and settle grievances with the
Management, pertaining to Local 14L, in accordance with the wishes of the
Membership and Executive Board.
(c) Members to serve on the Bargaining Committee shall be elected at the
regular election of Officers. They shall serve for a 3 year term.
ARTICLE V
Section 1. Grievance Procedure
(a) Grievance procedure shall be carried out in accordance with procedure
outlined in the agreement between the Management and Local No. 14L.
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(b) All lost time shall be paid by the Local when properly authorized.
ARTICLE VI
Section 1. Committees.
(a) The President shall appoint all committees not otherwise provided for
by the virtue of their office.
(b) The Auditing Committee shall consist of three Trustees.
(c) The Trustees shall audit the books of Local 14L every three months,
and present to the Membership a written report of their findings at the next
regular meeting following the audit.
(d) They shall be responsible for all property belonging to Local 14L,
and keep a complete record of same. Any known irregularities must be reported to
the Executive Board.
Section 2. By-Laws Committee.
(a) Five members will constitute the by-laws committee.
(b) Changes or additions proposed by Local Union Members shall be
referred to the By-Laws Committee for their consideration.
(c) Upon membership approval of a by-laws change, they shall be submitted
to the International for their approval.
ARTICLE VII
Section 1. Finances.
(a) The elected Treasurer shall handle all monies belonging to Local 14L,
in accordance with the International Constitution.
ARTICLE VIII
Section 1. Membership Dues.
(a) Membership dues shall be set forth by the Local Union in accordance
with the International Constitution.
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Section 2. Membership Standing.
(a) No member shall be considered to be in good standing when his or her
dues are more than 3 months in arrears.
(b) A Member not in good standing shall be considered delinquent, and
subject to suspension.
(c) A suspended Member shall be required to pay a rejoining fee in
accordance with the International Constitution.
ARTICLE IX
Section 1. Regular Meetings.
(a) Local 14L shall convene for the purpose of transacting business on
the 3rd Saturday of each month.
(b) The meeting date may be changed by action of the Membership and the
Executive Board.
Section 2. Special Meetings
(a) Should any business or action require special attention of the
Membership, a Special Meeting may be called by the President or the Executive
Board, or by the majority of the Members present at any Regular Meeting.
(b) Notice of Special meetings must be given to the Membership at least
24 hours before such Meeting convenes. Notice must state clearly the purpose of
said Meeting. No other business shall be transacted at said Meeting.
Section 3. Quorum
(a) Nineteen Members shall constitute a quorum at any Regular or Special
Meeting. All business transacted shall be considered legal and binding upon the
Membership.
(b) Meetings maybe adjourned to a later date should the Members present
deem it advisable due to lack of Members present.
(c) It is the duty of the President to maintain order at all meetings. No
Member shall be permitted to leave a Meeting before receiving permission from
the President. Members leaving shall be stopped by the Sentinel.
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(d) Members attending Regular Meetings shall be required to sign the
register book provided at the door of the Meeting Place.
(e) Members signing the register book and then leaving the Meeting
without securing permission from the President, shall not be considered as being
present at the meeting.
ARTICLE X
Section 1. Local Deligates.
(a) Five members shall be elected by the Membership to serve as Delegates
to the La Crosse AFL-CIO-CLC Council. They shall also serve as the Local's COPE
Delegates.
ARTICLE XI
Section 1. Convention Delegates Pay.
(a) Members of Local 14L, chosen as Delegates to attend the Conventions
of the International Union and conferences, etc., shall receive $40.00 per day,
plus pay for itemized and receipted hotel or motel bills, plus transportation by
rail or air, to the Convention or Conference city and return. It is permissible
to by car as long as no more expenses or lost time are claimed than would be
involved by going by train.
(b) Delegates attending a Convention or Conference within the City, shall
be compensated for time lost, and expenses incurred. These expenses are not to
exceed $15.00 per day.
ARTICLE XII
Section 1. By-Laws Amendments
(a) These By-Laws may be amended by a two-thirds majority vote of the
Members present at the Meeting.
(b) Amendments must be read at two consecutive Meetings.
(c) Amendments shall be voted on by Members present at the second
Meeting.
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President: Harold Geary
Vice-President: Randy Sharp
Bargaining Board Committee: Tom Sullivan
Sue Ames
Karen Fisher
Rita Christianson
Paula Craig
This AGREEMENT made and entered into as of this 17th day of March, 1998, by and
between JEPCO Development Co., LLC, an Oregon Limited Liability Corporation as
Lessor (herein called "Lessor"), and LaCrosse Footwear, Inc., a Wisconsin
Corporation, as Lessee (herein called "Lessee"):
WITNESSETH
1. ORIGINAL LEASE. Lessor is the successor in interest to JEPCO
Development Co., an Oregon General Partnership ("JEPCO Partnership"),
the lessor under a lease dated the 14th day of March, 1994, between
Lessee and JEPCO Partnership ("Lease"). The Lease covers the Danner
building and grounds at 12722 N.E.
Airport Way, Portland, Oregon.
2. EXERCISE OF OPTION. The Lessee hereby exercises its option under the
Lease to extend the lease five years from March 13, 2004, until March
13, 2009. Lessor hereby accepts the exercise of such option. The
parties acknowledge that the term of the lease has now been extended
until March 13, 2009.
3. RENTAL
a) Parking Lot Improvement. Lessor agrees to expand the parking lot
in accordance with the drawings of V8LMK engineering firm,
attached hereto as Exhibit A. The parking lot improvement shall
be undertaken in accordance with applicable zoning and land use
regulations. It is currently estimated that the cost will be
$120,000 excluding the Code Updates described in "C" below. The
useful life is assumed to be 15 years.
b) Basic Rental Adjustment. On substantial completion of the
parking lot, or upon its first use by Lessee, whichever first
occurs, the annual rent shall be increased by the Amortizable
Cost of Parking Lot, as defined below. The Amortizable Cost
shall be the Total Actual Cost divided by 15. The Total Actual
Cost shall be the sum of all monies spent on building and
developing the Parking Lot, including but not limited to
engineering fees, permit fees, and amounts paid to contractors
and subcontractors for actually building and landscaping the
parking lot.
c) Code Updated. Lessee will, in the process of making the
currently planned internal tenant improvements on the Danner
Building, work with Lessor so that these improvements will be
counted as the 1020 code updates required by the government as
part of the Parking Lot Improvement.
4. ORIGINAL LEASE TERMS. All other terms of conditions of the original
Lease shall remain in full force and effect.
IN WITNESS WHEREOF, Lessor and Lessee have executed this instrument under seal,
as of the day and year first above written.
LESSOR: JEPCO DEVELOPMENT CO. LESSEE: LACROSSE FOOTWEAR, INC.
By: /s/John H. Herman By: /s/ Patrick K. Gantert
John H. Herman Patrick K. Gantert
<PAGE>
Exhibit A
[Drawing of Parking lot]
Exhibit 13
<TABLE>
Five-Year Summary of Selected Financial Data
<CAPTION>
Selected Income Statement Data
- -------------------------------------------------------------------------------------------------------------------
In Thousands - Year Ended December 31 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $133,405 $145,503 $121,997 $98,571 $108,319
Operating income 5,598 13,156 10,088 6,662 11,230
Net income 2,260 6,779 5,386 3,328 6,152
Selected Balance Sheet Data
- -------------------------------------------------------------------------------------------------------------------
In Thousands - Year Ended December 31 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
Working capital $44,801 $48,413 $46,811 $34,537 $35,382
Total assets 98,615 101,920 92,286 74,862 74,822
Long-term obligations 9,827 12,499 16,002 4,893 7,340
Shareholders' equity 63,035 61,848 55,936 51,322 49,154
Selected Share Data
- -------------------------------------------------------------------------------------------------------------------
Year Ended December 31 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
Basic earnings per share $.34 $1.02 $.80 $.48 $.98
Diluted earnings per share $.34 $1.01 $.80 $.48 $.98
Dividends per share $.13 $.13 $.11 $.09 $.09
Shares used in
basic per share calculation (000's) 6,662 6,668 6,668 6,680 6,158
Shares used in
diluted per share calculation (000's) 6,676 6,713 6,674 6,680 6,158
</TABLE>
4
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Forward-Looking Statements
Certain matters discussed below in this 1998 Annual Report (and, thereby, the
1998 Form 10-K) are "forward-looking statements" intended to qualify for the
safe harbors from liability established by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements can generally be identified
as such because the context of the statement includes phrases such as the
Company "believes," "expects" or other words of similar import. Similarly,
statements that describe the Company's future plans, objectives or goals, as
well as the estimated costs and timetable for Year 2000 compliance, are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which could cause actual results or outcomes to
differ materially from those currently anticipated. Factors that could affect
actual results or outcomes include, without limitation, adverse weather
conditions, dealer inventory levels, actions of companies that compete with the
Company, changes in consumer buying patterns, loss of a material customer and
the success of third parties regarding compliance with Year 2000 issues.
Shareholders, potential investors and other readers are urged to consider these
factors in evaluating the forward-looking statements and are cautioned not to
place undue reliance on such forward-looking statements. The forward-looking
statements included are only made as of the date of this 1998 Annual Report and
the Company undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.
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.
The Company is gradually shifting its retail product mix to become less
dependent on winter weather. This is being accomplished through the growth of
the Danner leather product line and the addition of leather and protective
clothing product offerings under the LaCrosse brand.
The Company markets and distributes its products through both the
industrial and retail channels of distribution. The less weather-sensitive
industrial distribution accounts for approximately 30% of total net sales and
serves the food processing, mining, construction and industrial end use markets
with protective footwear and clothing. In order to build the less
weather-dependent industrial business, the Company in 1996 acquired Rainfair,
Inc., a manufacturer and marketer of rainwear and protective clothing.
Each year, the Company introduces a number of new products. A new product,
if successful, can generate growing amounts of net sales during the first two to
four 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.
5
<PAGE>
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 1998 1997 1996 1998 vs. 1997 1997 vs. 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% (8)% 19%
Cost of goods sold 74.1 72.0 72.3 (6) 19
Gross profit 25.9 28.0 27.7 (15) 21
Selling and administrative expenses (21.7) (19.0) (19.4) 5 17
Operating income 4.2 9.0 8.3 (57) 30
Interest expense (1.7) (1.4) (1.4) 11 22
Other income .3 .4 .3 (36) 64
Income before income taxes 2.8 8.0 7.2 (68) 33
Income taxes (1.1) (3.1) (2.8) (68) 33
Minority interest - (.2) -
Net income 1.7% 4.7% 4.4% (67)% 26%
</TABLE>
Year Ended December 31, 1998
Compared to Year Ended December 31, 1997
Net Sales. Net sales in 1998 decreased $12.1 million, or 8.3%, to $133.4 million
from $145.5 million in 1997. The mild winter weather across most of the country
from December 1997 through the first quarter of 1998 significantly reduced
fill-in orders in early 1998 and reduced advance orders for shipment in the
third quarter. In addition, the extremely warm and dry weather from mid-November
through December 1998 lowered retail demand and nearly eliminated late 1998
fill-in orders. While the Company's dealers ended 1998 with excessive inventory,
it is believed the favorable weather conditions in January 1999 reduced
inventory levels below last year's levels. Shipments to L.L. Bean were also down
approximately $1.3 million as compared to 1997, the result of a decision by L.L.
Bean effective July 1998 to replace their handcrafted rubber bottoms purchased
from the Company with molded bottoms from another vendor. A full year impact of
the L.L. Bean decision will reduce 1999 net sales an additional $.7 to $1.0
million. Further, consumer rainwear shipments were down approximately $1.0
million, primarily as a result of lower shipments to a large discount mass
merchant. These decreases were partially offset by a 10% increase in shipments
of our less weather-sensitive Danner brand leather products, largely as a result
of new products.
Gross Profit. Gross profit as a percentage of net sales decreased to 25.9% in
1998 from 28.0% in 1997. Gross profit margins were adversely affected by
unabsorbed factory overhead (the result of lower production levels in response
to lower demand), a higher level of closeout sales (primarily related to the
transition of the Lake of the Woods(R) brand product line to the LaCrosse(R)
brand) and a reduced volume of higher margin fill-in orders in both the first
and fourth quarters. The Company believes that shipments of discontinued
products will be lower in 1999 and that reserves are adequate to cover any
potential losses on discontinued products. In addition, production was
discontinued at the Company's factory in Virginia, and transferred to another
Company facility, which negatively impacted margins by approximately .2%.
Selling and Administrative Expenses. Selling and administrative expenses
increased $1.3 million, or 5%, in 1998 as compared to 1997. The increase in
selling and administrative expenses was a result of a planned increase in
consumer advertising, increased selling and marketing expenses in support of the
growth of the Danner brand, increased spending on product development and
increased warehousing costs to support the Lake of the Woods brand and as a
result of the consolidation of the Company's industrial warehousing. These
increases more than offset sales volume related decreases in variable expense.
As a percent of net sales, selling and administrative expenses increased from
19.0% in 1997 to 21.7% in 1998, largely as a result of higher planned expenses
and lower sales volume.
Interest Expense. Interest expense increased $220,000, or 11%, in 1998 as
compared to 1997. The increase was primarily the result of $2.4 million in
additional short-term borrowings for the January 1998 purchase of all Rainfair,
Inc. common stock held by the former principal owner. In addition, higher
inventory levels throughout the year, primarily the result of lower fill-in
sales during the winter of 1997-98, contributed to increased borrowings.
Income Tax Expense. The Company's effective income tax rate in 1998 was 39.2%,
the same as the 1997 income tax rate.
Year Ended December 31, 1997
Compared to Year Ended December 31, 1996
Net Sales. Net sales in 1997 increased $23.5 million, or 19%, to $145.5 million
from $122.0 million in 1996. The increase in net sales was largely attributable
to the July 1997 acquisition of the Lake of the Woods product line, which added
6
<PAGE>
approximately $5.2 million in net sales, along with an additional $15.2 million
of net sales contributed by Rainfair and Red Ball, mainly as a result of
including a full year of sales in 1997 as compared to 1996 when sales were
included from their May acquisition dates. Danner net sales increased $2.7
million in 1997 compared to 1996 mainly due to increased sales of hiking boots
and work boots, due in part to new product introductions. Net sales of LaCrosse
products were up less than 1% with increased sales in injection molded vinyl
knee boots largely offset by a weather-related decrease in cold weather pac boot
sales, the result of the mild weather in December 1997. This mild weather in
December 1997, coupled with mild weather during the first quarter of 1998,
resulted in dealers having excess inventories in certain product categories.
Gross Profit. Gross profit as a percentage of net sales increased to 28.0% in
1997 from 27.7% in 1996. The improvement in gross margins as a percentage of net
sales was due to more favorable pricing on key raw materials, a lower defective
return rate on Danner and Red Ball products and improved margins on the Rainfair
business, primarily due to increased volume.
Selling and Administrative Expenses. As a percent of net sales, selling and
administrative expenses decreased from 19.4% of net sales in 1996 to 19.0% of
net sales in 1997. 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. Expenses increased $3.9 million,
or 17%, in 1997 as compared to 1996, partially due to a $1.4 million increase in
expenses reported for Rainfair in 1997 as compared to 1996 when expenses were
included from the date of acquisition in May 1996. The balance of the increase
in spending was largely driven by the increase in net sales.
Interest Expense. Interest expense increased $363,000, or 22%, in 1997 as
compared to 1996. The increase was a result of a higher level of average
borrowings needed to provide the working capital in support of the increased
sales of Lake of the Woods, Rainfair and the Red Ball product lines, which were
acquired in July 1997, May 1996 and May 1996, respectively.
Income Tax Expense. The Company's effective income tax rate in 1997 was 39.2%,
the same as the 1996 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 from August through October. The Company invests
excess cash balances in short-term investment grade securities or money market
investments.
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 was primarily used to fund
acquisitions, is due December 31, 2001 and requires quarterly payments of $.4
million which commenced in March 1998. The credit agreement expires on May 31,
1999.
In July 1997, the Company acquired all of the outstanding shares of capital
stock of Pro-Trak Corporation, the company that operated under the Lake of the
Woods tradename. The purchase price, including the assumption of liabilities,
was approximately $7.3 million. Lake of the Woods was a designer, manufacturer
and marketer of branded leather footwear for both the outdoor and occupational
segment of the market. During 1998, the Company began the transition of the Lake
of the Woods brand product line to the LaCrosse brand, which has broader market
recognition.
Cash generated by operations in 1998 amounted to $5.5 million compared to
$2.1 million in 1997. Net income in 1998 decreased $4.5 million from the 1997
level, however this was more than offset by a $4.2 million reduction in
receivables (as compared to a $4.0 million increase in 1997). The reduction in
receivables as of December 31, 1998 was primarily the result of a 25% reduction
in sales in December 1998 as compared to the prior year. During 1998,
inventories increased $.6 million, primarily as a result of lower than
anticipated net sales during November and December 1998. Accounts payable
decreased $2.9 million from the 1997 level, reflecting lower production levels
during December 1998. In 1997, cash generated by operations amounted to $2.1
million as compared to $9.7 million in 1996. Despite a $1.4 million increase in
net income in 1997 as compared to 1996, cash generated by operating activities
was down $7.6 million from 1996. An increase in accounts receivable, primarily
as a result of changing the terms on fill-in orders, and a $3.3 million increase
in inventories compared to a $2.1 million decrease in 1996 were the primary
reasons for the reduction in cash generated by operations. Inventories increased
primarily as a result of an increase in Red Ball inventories to support the
anticipated increase in Red Ball sales.
Net cash used in investing activities during 1998 was $6.6 million, up from
$3.7 million in 1997. During 1998, spending on property and equipment was up
approximately $.9 million from the prior year primarily as a result of the
construction of a product design/development center
7
<PAGE>
and the purchase of Enterprise Resource Planning (ERP) software. The ERP
software will be installed during 1999 and 2000, replacing the Company's
existing operating software. It is anticipated that capital expenditures in 1999
will be at approximately the same level as in 1998. Also contributing to the
1998 increase in cash used in investing activities was the January 1998 purchase
of all of the 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. During 1997, net cash used in investing activities was $3.7
million, down significantly from $14.2 million in 1996. During 1996, over $11.0
million of cash was invested in the Rainfair acquisition and the purchase of the
Red Ball trademarks. The only acquisition during 1997 was the purchase of
Pro-Trak Corporation for approximately book value, which did not result in a
significant use of cash for investing activities. Purchases of property and
equipment, which accounted for the bulk of the cash used in investing activities
during 1997, were $3.4 million in 1997 as compared to $3.1 million in 1996.
Net cash provided by financing activities was $1.1 million in 1998 as
compared to a usage of $4.7 million in 1997. During 1998, additional short-term
borrowings provided $5.5 million of cash, which was primarily used to repay $3.3
million of long-term debt. Cash dividends of $.9 million and the repurchase of
$.2 million of common stock used an additional $1.1 million of cash in 1998.
During 1997, $8.0 million of debt was repaid and $.7 million of dividends were
paid, which were partially offset by $4.0 million of additional short-term
borrowings.
In March 1995, the Company announced plans to repurchase up to 130,000
shares of common stock in the open market. During the third and fourth quarters
of 1998, the Company repurchased 25,000 shares at a cost of $227,000. This
brings the total shares repurchased to 75,000 shares.
The Company's debt to total capital ratio was 25.9% at December 31, 1998,
24.3% at December 31, 1997 and 24.2% at December 31, 1996.
In March 1994, the Company acquired substantially all of the assets of
Danner Shoe Manufacturing Co., in part by issuing 277,778 shares of common stock
as a portion of the purchase price. In the acquisition, the Company guaranteed
the holders of this common stock a market price of at least $16.20 per share by
March 1, 1999. If the market price of the remaining 135,178 shares subject to
this guarantee is less than $16.20 per share, the Company will be required to
make a cash payment equal to the difference shortly after March 1, 1999. As of
December 31, 1998, the common stock of the Company closed at $9.25 per share
which would indicate an obligation of the Company to such shareholders of
$939,000.
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
during 1999.
From time to time, the Company evaluates acquisitions of businesses or
product lines that could complement the Company's business. 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.
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 Year 2000 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 by the second quarter
of 1999, except for one subsidiary which is scheduled to be 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.
8
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
December 31, 1998 and 1997
(In Thousands)
- -----------------------------------------------------------------------------------------------
Assets 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $364 $426
Trade accounts receivable,
less allowances of $1.0 and $1.6 million 23,151 27,390
Inventories (Note 3) 39,698 39,073
Prepaid expenses and deferred tax assets (Note 4) 4,289 4,670
------- -------
Total current assets 67,502 71,559
------- -------
Property and Equipment
Land and land improvements and buildings 7,997 6,678
Machinery and equipment 29,389 26,896
------- -------
37,386 33,574
Less accumulated depreciation 23,384 20,299
------- -------
14,002 13,275
------- -------
Other Assets
Goodwill, net of amortization of
$2.6 and $1.9 million (Note 2) 14,125 13,946
Deferred tax and other assets (Note 4) 2,986 3,140
------- -------
17,111 17,086
------- -------
$98,615 $101,920
======= =======
Liabilities and Shareholders' Equity
- ----------------------------------------------------------------------------------------------
Current Liabilities
Current maturities of long-term obligations (Note 5) $2,669 $3,349
Notes payable, bank (Note 5) 9,500 4,000
Accounts payable 3,469 6,385
Accrued expenses (Note 7) 7,063 9,412
------- -------
Total current liabilities 22,701 23,146
------- -------
Long-Term Obligations (Note 5) 9,827 12,499
Compensation and Benefits (Note 9) 3,052 2,921
Commitments and Contingencies (Notes 6, 8, 9 and 10)
Minority Interest in Subsidiary (Note 2) - 1,506
Shareholders' Equity
Common stock, par value $.01 per share;
authorized 50,000,000 shares; issued
and outstanding, 6,717,627 shares (Note 8) 67 67
Additional paid-in capital (Note 10) 27,582 27,579
Retained earnings (Note 5) 36,041 34,645
Less - cost of 73,200 and 49,900 shares of treasury stock (655) (443)
------- -------
Total shareholders' equity 63,035 61,848
------- -------
$98,615 $101,920
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income
Years Ended December 31, 1998, 1997 and 1996
(In Thousands,
except for share and per share data)
- ----------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $133,405 $145,503 $121,997
Cost of goods sold 98,829 104,692 88,176
------- ------- -------
Gross profit 34,576 40,811 33,821
Selling and administrative expenses 28,978 27,655 23,733
------- ------- -------
Operating income 5,598 13,156 10,088
Non-operating income (expense):
Interest expense (2,263) (2,043) (1,680)
Miscellaneous 381 593 361
------- ------- -------
(1,882) (1,450) (1,319)
------- ------- -------
Income before income taxes 3,716 11,706 8,769
Provision for income taxes (Note 4) 1,456 4,588 3,440
------- ------- -------
Net income before minority interest 2,260 7,118 5,329
Minority interest in net (income) loss of subsidiary - (339) 57
------- ------- -------
Net income $2,260 $6,779 $5,386
======= ======= =======
Basic earnings per share $0.34 $1.02 $.80
======= ======= =======
Diluted earnings per share $0.34 $1.01 $.80
======= ======= =======
Weighted average shares outstanding:
Basic earnings per share 6,661,683 6,667,702 6,667,627
Diluted earnings per share 6,675,708 6,712,975 6,673,539
See Notes to Consolidated Financial Statements.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1998, 1997 and 1996
(In Thousands, except for share and per share data)
- -----------------------------------------------------------------------------------------------------------------------
Additional Total
Common Paid-In Retained Treasury Shareholders'
Stock Capital Earnings Stock Equity
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 (443) 55,936
Net income - - 6,779 - 6,779
Common stock dividends
($.13 per share) - - (867) - (867)
----------------------------------------------------------------
Balance, December 31, 1997 67 27,579 34,645 (443) 61,848
Net income - - 2,260 - 2,260
Common stock dividends
($.13 per share) - - (864) - (864)
Purchase of 25,000 shares
of treasury stock - - - (227) (227)
Issuance of 1,700 shares
of treasury stock - 3 - 15 18
----------------------------------------------------------------
Balance, December 31, 1998 $67 $27,582 $36,041 $(655) $63,035
================================================================
See Notes to Consolidated Financial Statements.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996
(In Thousands)
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
<S> <C> <C> <C>
Net income $2,260 $6,779 $5,386
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 3,437 3,180 2,925
Amortization 680 572 513
Other 126 386 (34)
Deferred income taxes 207 86 (62)
Change in assets and liabilities,
net of effects from acquisitions
in 1997 and 1996:
Trade accounts receivable 4,239 (4,033) (2,145)
Inventories (625) (3,316) 2,136
Accounts payable (2,916) (1,065) 279
Accrued expenses and other (1,900) (462) 712
------- ------ -------
Net cash provided by operating activities 5,508 2,127 9,710
Cash Flows from Investing Activities
Purchase of the minority interest in Rainfair, Inc. (2,365) - -
Acquisition of Rainfair, Inc., net of cash acquired - - (9,597)
Acquisition of Pro-Trak Corporation,
net of cash acquired - 77 -
Purchase of property and equipment (4,288) (3,364) (3,060)
Purchase of trademarks - - (1,439)
Other 11 (416) (67)
- -------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (6,642) (3,703) (14,163)
Cash Flows from Financing Activities
Proceeds from long-term obligations - - 12,500
Principal payments on long-term obligations (3,352) (7,981) (1,742)
Net proceeds from short-term borrowings 5,500 4,000 -
Cash dividends paid (867) (733) (668)
Purchase of redeemable preferred stock - - (1,957)
Other (209) - -
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 1,072 (4,714) 8,133
Increase (decrease) in cash and
cash equivalents (62) (6,290) 3,680
Cash and cash equivalents:
Beginning 426 6,716 3,036
- -------------------------------------------------------------------------------------------------------------------
Ending $364 $426 $6,716
- -------------------------------------------------------------------------------------------------------------------
Supplemental Information
Cash payments for:
Interest $2,178 $1,891 $1,594
Income taxes $2,101 $4,055 $2,939
See Notes to Consolidated Financial Statements.
</TABLE>
12
<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 clothing for sale principally throughout the United States.
Significant accounting policies:
Principles of consolidation: The 1998 consolidated financial statements include
the accounts of LaCrosse Footwear, Inc. and its wholly owned subsidiaries (the
"Company"). The 1997 and 1996 consolidated financial statements include a 50%
owned subsidiary where the Company had board, operating and financial control.
The Company acquired 100% ownership of its 50% owned subsidiary in January 1998
(Note 2). 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 and wholesalers, 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 periods of 8 to 30 years. Trademarks are
being amortized on a straight-line basis over 15 years.
13
<PAGE>
Impairment of long-lived assets:
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
intangibles 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.
Advertising and promotion:
The Company advertises and promotes its products through national and regional
media, displays, catalogs and through cooperative advertising programs with
retailers. Costs for these advertising and promotional programs are generally
charged to expense as incurred. Advertising and promotional expense included in
the consolidated statements of income for the years ended December 31, 1998,
1997 and 1996 is approximately $2.9, $2.2, and $2.1 million, respectively.
Stock-based compensation:
The Company accounts 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 Company grants
options where the exercise price is equal to the market price at the date of the
grant, no compensation costs have been recognized. Disclosures about the fair
value of outstanding stock options are contained in Note 8.
Earnings per share:
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," requires the presentation of earnings per share by all entities that
have common stock or potential common stock (such as options and convertible
securities) outstanding that trade in a public market. Because the Company has
potential common stock outstanding, as discussed in Note 8, the Company is
required to present basic and diluted earnings per share. Diluted per share
amounts assume the conversion, exercise or issuance of all potential common
stock instruments unless the effect is to reduce the loss or increase the income
per common share from continuing operations.
The numerators are the same for the basic and diluted earnings per share
computations for all years presented. The impact of the stock options on the
denominators of the diluted earnings per share computation was to increase the
shares outstanding by 14,025 shares, 45,273 shares, and 5,912 shares for the
years ended December 31, 1998, 1997 and 1996, respectively.
Recent accounting pronouncements:
The Company adopted SFAS No. 132, "Employers Disclosures about Pensions and
Other Postretirement Benefits," as of January 1, 1998. SFAS No. 132 revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans, however, it does
require additional information on changes in the benefit obligations and fair
values of plan assets in order to facilitate financial analysis.
14
<PAGE>
Note 2. 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 total purchase price was approximately $7.3 million which included the
immediate paydown of liabilities of $6.6 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 values as of the date of
acquisition.
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 the 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.
In January 1998, the Company purchased all Rainfair common stock of the
former principal owner for approximately $2.4 million. The purchase price
resulted in a decrease in minority interest of approximately $1.5 million and an
increase in goodwill of approximately $.9 million.
Note 3. Inventories
A summary of inventories is as follows:
(In Thousands)
December 31,
1998 1997
Finished goods $29,622 $28,889
Work in process 1,536 1,967
Raw materials 8,540 8,217
-------- --------
Total inventories $39,698 $39,073
======== ========
If all inventories were valued on the FIFO method, total inventories for
1998 and 1997 would have been $42.5 and $42.2 million, respectively.
Note 4. Income Tax Matters
Net deferred tax assets and liabilities consist of the following components:
(In Thousands)
December 31,
1998 1997
Deferred tax assets:
Receivable allowances $455 $531
Inventory differences 324 365
Compensation and benefits 1,997 1,969
Insurance reserves and other 453 416
------- -------
3,229 3,281
Deferred tax liabilities,
principally intangibles 819 664
------- -------
$2,410 $2,617
======= =======
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,
1998 1997
Current assets $1,993 $2,132
Noncurrent assets 417 485
------- -------
$2,410 $2,617
======= =======
The provision for income taxes consists of the following:
(In Thousands)
Years Ended December 31,
1998 1997 1996
Current:
Federal $892 $3,684 $2,947
State 357 818 555
Deferred 207 86 (62)
------ ------ ------
$1,456 $4,588 $3,440
====== ====== ======
15
<PAGE>
The differences between statutory federal tax rates and the effective tax
rates are as follows:
Years Ending December 31,
1998 1997 1996
Statutory federal
tax rate 35.0% 35.0% 35.0%
State taxes, net
of federal tax
benefit and other 4.2 4.2 4.2
---- ---- ----
Effective tax rate 39.2% 39.2% 39.2%
==== ==== ====
Note 5. Financing Arrangements
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 May
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, 1998).
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, 1998 and 1997, there was $9.5 million and
$4.0 million outstanding under the revolving line of credit and there were
letter of credit commitments outstanding of $3.7 million and $2.9 million,
respectively. In 1998, the Company entered into interest rate swap agreements to
manage its exposure to interest rate fluctuations on its floating rate debt. As
of December 31, 1998, the Company had swap agreements in effect totaling $11.0
million, of which $7.0 million will mature in 2002 with $4.0 million maturing in
2003. The variable rate borrowings not offset by swap agreements at December 31,
1998, totaled $9.4 million.
Long-term obligations:
(In Thousands)
December 31,
1998 1997
Term loan under credit agreement,
due in quarterly payments of
$.4 million through December 31,
2001, interest payable monthly $10,900 $12,500
10.26% and 10.73% unsecured
notes payable, due in annual
installments of $1.7 million
excluding interest, interest
payable semi-annually(a) 1,028 2,743
Other 568 605
------- -------
12,496 15,848
Less current maturities 2,669 3,349
------- -------
$9,827 $12,499
======= =======
(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 $12.8 million at
December 31, 1998.
Maturities of long-term obligations for the next five years are as follows
(in millions): 1999, $2.7; 2000, $1.7; 2001, $7.8; 2002, $0; 2003, $0 and $.3
thereafter.
Note 6. Lease Commitments and Total Rental Expense
The Company leases office space, retail stores, manufacturing facilities,
equipment and warehouse space under non-cancelable agreements which expire on
various dates through 2009 and are recorded as operating leases. The total
rental expense included in the consolidated statements of income for the years
ended December 31, 1998, 1997 and 1996 is approximately $1.9, $1.8, and $1.6
million, respectively. Approximate future minimum lease payments are as follows
(in millions): 1999, $1.7; 2000, $1.6; 2001, $.7, 2002, $.5; 2003, $.5 and $1.9
thereafter.
16
<PAGE>
Note 7. Accrued Expenses
Accrued expenses are comprised of the following:
(In Thousands)
December 31,
1998 1997
Compensation $3,000 $4,311
Workers' compensation
insurance 665 824
Income taxes payable 662 1,514
Other, including dividends 2,736 2,763
------ ------
Total accrued expenses $7,063 $9,412
====== ======
Note 8. Stock Options
The Company has granted stock options to officers and key employees under its
1993 and 1997 stock option plans pursuant to which options for up to 550,000
shares of common stock may be granted. 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. Substantially all of the options vest in equal
increments over a five-year period.
The following summarizes all stock options granted under the plans:
Common Per Share
Shares Option Price
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
Granted 63,500 10.88-14.50
Canceled (3,300) 9.06
Exercised (100) 9.06
--------
December 31, 1997 268,225 9.06-14.50
Granted 58,563 8.75-14.25
Canceled (23,275) 9.06-14.25
Exercised (1,700) 9.06-10.88
--------
December 31, 1998 301,813 9.06-14.50
Options for approximately 128,000 shares were exercisable at December 31,
1998.
Compensation expense under the plans is 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 provided by SFAS No. 123, pro forma net
income would have been reduced by $.1 million and $.1 million and the pro forma
diluted earnings per share would have been $.32 and $.99 for the years ended
December 31, 1998 and 1997, 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:
1998 1997
Expected dividend yield 1% 1%
Expected stock price volatility 25% 25%
Risk-free interest rate 6.5% 6.5%
Expected life of options 7 years 8 years
The weighted average exercise price of the options granted during 1998 is
$13.84 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. In 1998, the Company's union
pension plan was amended to increase the benefit rate for participants retiring
or terminating after September 30, 1998. The amendment resulted in increases of
approximately $1.0 million in both unrecognized prior service cost and projected
benefit obligation as of December 31, 1998.
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.
17
<PAGE>
Information relative to the Company's defined pension and other
postretirement benefit plans is presented below.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
(In Thousands) (In Thousands)
December 31, December 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Changes in benefit obligations:
Obligations at beginning of year $ 12,568 $ 12,574 $ 797 $ 1,328
Service cost 443 471 74 22
Interest cost 856 844 89 60
Plan amendment 996 -- -- --
Benefits paid (603) (685) (34) (112)
Actuarial losses (gains) (308) (636) 469 (501)
-------- -------- -------- --------
Obligations at end of year $ 13,952 $ 12,568 $ 1,395 $ 797
======== ======== ======== ========
Changes in plan assets:
Fair value of assets at beginning of year $ 14,719 $ 12,948 $ -- $ --
Actual return on assets 1,977 2,410 -- --
Company contributions 34 46 34 112
Participant contributions -- -- 27 41
Benefits paid (603) (685) (61) (153)
-------- -------- -------- --------
Fair value of assets at end of year $ 16,127 $ 14,719 $ - $ -
======== ======== ======== ========
Funded status at end of year:
Plan assets in excess of (less than) obligations $ 2,175 $ 2,151 $ (1,395) $ (797)
Unrecognized gains (4,267) (3,244) (914) (1,484)
Unrecognized prior service cost 1,291 342 -- --
Unrecognized transition obligation 112 163 847 917
-------- -------- -------- --------
Accrued benefit cost $ (689) $ (588) $ (1,462) $ (1,364)
======== ======== ======== ========
Cost recognized during the year:
Service cost $ 443 $ 471 $ 74 $ 22
Interest cost 856 844 89 60
Expected return on plan assets (1,156) (1,017) -- --
Amortization of prior losses (gains) (106) 30 (101) (66)
Amortization of prior service cost 47 31 -- --
Amortization of transition obligation 51 51 70 70
-------- -------- -------- --------
Net periodic benefit cost $ 135 $ 410 $ 132 $ 86
======== ======== ======== ========
Assumptions used in computations:
Discount rate 7.0% 7.0% 7.0% 7.0%
Rate of compensation increase 4.5% 4.5% N/A N/A
Expected return on plan assets 8.0% 8.0% * *
* This plan does not have separate assets, so there is no actual or expected
return on plan assets.
</TABLE>
For measurement purposes, a 6 percent annual rate of increase in the cost
of covered health care benefits was assumed for 1998 and 1997. A
one-percentage-point change in the assumed rates of health care cost increase
would have the following effects relative to 1998 amounts included above for the
other benefit plans (in thousands):
Increase Decrease
- --------------------------------------------------------------------------------
Effect on total of service and interest
cost components $18 $(16)
Effect on postretirement benefit obligation 108 (96)
18
<PAGE>
Note 10. Commitments
In March 1994, the Company acquired substantially all of the assets of Danner
Shoe Manufacturing Co. in part by issuing common stock as a portion of the
purchase price. In the acquisition, the Company guaranteed the holders of this
common stock a market price of at least $16.20 per share by March 1, 1999. If
the market price of the remaining 135,178 shares subject to the guarantee is
less than $16.20 per share, the Company will be required to make a cash payment
equal to the difference shortly after March 1, 1999. Based on the December 31,
1998 closing market price, the Company's obligation would be approximately
$939,000.
Note 11. Enterprise-wide Disclosures
Segment information is not presented since all of the Company's revenue is
attributed to a single reportable segment. Information about the Company's
groups of products within its one segment is presented below.
(In Thousands)
Years Ending December 31,
1998 1997 1996
Footwear $115,643 $126,750 $112,164
Protective clothing 17,762 18,753 9,833
-------- -------- --------
$133,405 $145,503 $121,997
======== ======== ========
The following table presents information about the Company's revenue
attributed to countries based on the location of the customer.
(In Thousands)
Years Ending December 31,
1998 1997 1996
United States $128,570 $142,459 $119,705
Foreign Countries 4,835 3,044 2,292
-------- -------- --------
$133,405 $145,503 $121,997
======== ======== ========
All long-lived assets are located in the United States.
No single customer provided revenue of 10% or more of consolidated revenues
in any of the years presented.
Independent Auditors' 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, 1998 and 1997, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
McGLADREY & PULLEN, LLP
La Crosse, Wisconsin
February 5, 1999
19
<PAGE>
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 1998 and 1997.
<TABLE>
<CAPTION>
Thousands of dollars except per share data - 1998 First Quarter Second Quarter Third Quarter Fourth Quarter
<S> <C> <C> <C> <C>
Net sales $29,936 $29,461 $37,506 $36,502
Gross profit 7,767 7,689 10,160 8,960
Operating income 633 483 2,836 1,646
Net income 189 12 1,321 738
Basic earnings per share .03 .00 .20 .11
Diluted earnings per share $.03 $.00 $.20 $.11
<CAPTION>
Thousands of dollars except per share data - 1997 First Quarter Second Quarter Third Quarter Fourth Quarter
<S> <C> <C> <C> <C>
Net sales $32,698 $28,421 $41,884 $42,500
Gross profit 8,286 7,652 12,422 12,451
Operating income 1,565 1,101 5,152 5,338
Net income 545 539 2,933 2,762
Basic earnings per share .08 .08 .44 .41
Diluted earnings per share $.08 $.08 $.44 $.41
</TABLE>
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 for the past three years. On
March 26, 1999, there were approximately 325 shareholders of record and
approximately 2,400 beneficial owners of the Company's common stock.
<TABLE>
<CAPTION>
1st 2nd 3rd 4th Year-end
<S> <C> <C> <C> <C> <C>
1996 $8 3/4 - 12 $9 1/4 - 11 3/4 $9 1/2 - 10 3/4 $10 - 12 1/4 $10 3/4
1997 $10 3/4 - 14 3/8 $11 - 13 1/2 $12 1/2 - 17 1/4 $14 - 16 $14 1/2
1998 $11 1/2 - 14 1/8 $11 3/8 - 12 1/2 $7 3/4 - 11 1/2 $7 3/4 - 10 $9 1/4
</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 three years:
1998 1997 1996
Dividends declared per share $.13 $.13 $.11
Market Risk Management
The Company enters into interest rate swap agreements ("Swap Agreements") to
reduce its exposure to interest rate fluctuations on its floating rate debt. The
Swap Agreements exchange floating rate for fixed rate interest payments
periodically over the life of the agreements without exchange of the underlying
notional amounts. The notional amounts of interest rate agreements are used to
measure interest to be paid or received and do not represent an amount of
exposure to credit loss. For interest rate instruments that effectively hedge
interest rate exposures, the net cash amounts paid or received on the agreements
are accrued and recognized as an adjustment to interest expense. As of December
31, 1998, the Company had Swap Agreements in effect totaling $11.0 million
notional amount, of which $7.0 million will mature in 2002 with another $4.0
million maturing in 2003. The variable rate borrowings not offset by Swap
Agreements at December 31, 1998 totaled $9.4 million. Swap Agreement rates are
based on the three-month LIBOR rate. Based on average floating rate borrowings
outstanding throughout fiscal year 1998, a 100-basis point change in LIBOR would
have caused the Company's monthly interest expense to change by approximately
$16,000. The Company believes that these amounts are not material to the
earnings of the Company.
20
EXHIBIT (21)
SUBSIDIARIES OF LACROSSE FOOTWEAR, INC.
Jurisdiction
Name of Incorporation Percent Ownership
Direct Indirect
Clintonville Products, Inc. Wisconsin 100%
Hillsboro Footwear, Inc. Wisconsin 100%
Danner Shoe Manufacturing Co. Wisconsin 100%
Rainfair, Inc. Wisconsin 100%
Pro-Trak Corporation Wisconsin 100%
Pro-Trak of Virginia, Inc. Virginia 100% 1
- ---------------
1 Direct percent ownership by Pro-Trak Corporation.
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 5, 1999,
included in the 1998 Annual Report to 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 5, 1999, with respect
to the consolidated financial statements incorporated herein by reference, and
our report dated February 5, 1999, 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, 1998.
McGLADREY & PULLEN, LLP
La Crosse, Wisconsin
March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF LACROSSE FOOTWEAR, INC. AS OF AND FOR THE
YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 364
<SECURITIES> 0
<RECEIVABLES> 24,184
<ALLOWANCES> 377
<INVENTORY> 39,698
<CURRENT-ASSETS> 67,502
<PP&E> 37,386
<DEPRECIATION> 23,384
<TOTAL-ASSETS> 98,615
<CURRENT-LIABILITIES> 22,701
<BONDS> 9,827
0
0
<COMMON> 67
<OTHER-SE> 62,968
<TOTAL-LIABILITY-AND-EQUITY> 98,615
<SALES> 133,405
<TOTAL-REVENUES> 133,405
<CGS> 98,829
<TOTAL-COSTS> 28,886
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 92
<INTEREST-EXPENSE> 2,263
<INCOME-PRETAX> 3,716
<INCOME-TAX> 1,456
<INCOME-CONTINUING> 2,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,260
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
