UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 1, 2000
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
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LaCrosse Footwear, Inc.
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(Exact name of Registrant as specified in its charter)
Wisconsin 39-1446816
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1319 St. Andrew Street, La Crosse, Wisconsin 54603
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(Address of principal executive offices) (Zip Code)
(608) 782-3020
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value, outstanding as of August 1, 2000: 5,874,449 shares
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<PAGE>
LaCrosse Footwear, Inc.
Form 10-Q Index
For Quarter Ended July 1, 2000
Page
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PART I. Financial Information
Item 1. Condensed Consolidated Balance Sheets 3-4
Condensed Consolidated Statements of Operations 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 12
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
2
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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. Financial Statements
--------------------
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
July 1, December 31,
2000 1999
(Unaudited)
-------------- --------------
CURRENT ASSETS
Cash and cash equivalents $ 502,967 $2,021,747
Accounts receivable, net 26,827,430 20,444,903
Inventories (2) 48,969,680 40,336,755
Income tax receivable 0 910,328
Prepaid expenses 2,953,601 2,068,571
Deferred tax assets 2,651,500 2,746,500
-------------- --------------
Total current assets 81,905,178 68,528,804
PROPERTY AND EQUIPMENT, net of
depreciation and amortization 12,055,304 12,811,029
INTANGIBLES 14,386,114 14,782,423
OTHER ASSETS 1,779,286 1,897,286
-------------- --------------
Total assets $110,125,882 $98,019,542
============== ==============
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
July 1, December 31,
2000 1999
(Unaudited)
-------------- --------------
CURRENT LIABILITIES
Current maturities of long-term obligations $1,312,000 $1,712,000
Notes payable, bank 32,650,000 14,088,000
Accounts payable 3,111,445 5,909,802
Accrued expenses 6,612,209 5,197,735
Dividends payable 0 828,678
-------------- --------------
Total current liabilities 43,685,654 27,736,215
LONG-TERM OBLIGATIONS 9,859,979 10,701,920
COMPENSATION AND BENEFITS 3,099,886 3,192,722
-------------- --------------
Total liabilities 56,645,519 41,630,857
-------------- --------------
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share 67,176 67,176
Additional paid-in capital 26,434,480 26,434,480
Retained earnings 31,792,090 32,575,412
Treasury stock (4,813,383) (2,688,383)
-------------- --------------
Total shareholders' equity 53,480,363 56,388,685
-------------- --------------
Total liabilities and shareholders' equity $110,125,882 $98,019,542
============== ==============
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE>
<TABLE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales $31,384,905 $26,788,323 $62,414,763 $54,734,390
Cost of goods sold 23,309,978 19,701,270 46,463,785 40,175,507
----------------- ----------------- ----------------- -----------------
Gross profit 8,074,927 7,087,053 15,950,978 14,558,883
Selling and administrative expenses 8,066,119 7,228,062 16,058,777 14,597,424
----------------- ----------------- ----------------- -----------------
Operating income (loss) 8,808 (141,009) (107,799) (38,541)
----------------- ----------------- ----------------- -----------------
Non-operating income (expense)
Interest expense (776,596) (450,627) (1,278,453) (826,152)
Miscellaneous 9,249 64,716 97,892 91,239
----------------- ----------------- ----------------- -----------------
(767,347) (385,911) (1,180,561) (734,913)
----------------- ----------------- ----------------- -----------------
Loss before income taxes (benefit) (758,539) (526,920) (1,288,360) (773,454)
Provision (benefit) for income taxes (297,879) (206,569) (505,038) (303,216)
----------------- ----------------- ----------------- -----------------
Net loss $(460,660) $(320,351) $(783,322) $(470,238)
================= ================= ================= =================
Basic earnings (loss) per share $(0.08) $(0.05) $(0.13) $(0.07)
================= ================= ================= =================
Diluted earnings (loss) per share $(0.08) $(0.05) $(0.13) $(0.07)
================= ================= ================= =================
Weighted average shares outstanding
Basic 5,874,449 6,441,405 6,073,903 6,541,218
Diluted 5,874,449 6,441,405 6,073,903 6,541,218
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE>
<TABLE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
July 1, July 3,
2000 1999
----------------------- -------------------------
<S> <C> <C>
Net cash used in operating activities $(14,874,757) $(7,928,630)
----------------------- -------------------------
Cash flows from investing activities
Purchase of property and equipment (1,010,404) (1,323,593)
Investment in Danner - Japan 0 (70,134)
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Net cash used in investing activities (1,010,404) (1,393,727)
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Cash flows from financing activities
Cash dividends paid (828,678) (863,775)
Proceeds from short-term borrowings 18,562,000 13,160,000
Proceeds from long-term obligations 0 12,500,000
Principal payments on long-term obligations (1,241,941) (12,738,715)
Purchase of treasury stock (2,125,000) (1,865,854)
Settlement of Danner acquisition contingency 0 (1,148,067)
----------------------- -------------------------
Net cash provided by financing activities 14,366,381 9,043,589
-------------------------------------------------------
Decrease in cash and cash equivalents (1,518,780) (278,768)
Cash and cash equivalents:
Beginning 2,021,747 363,966
----------------------- -------------------------
Ending $502,967 $85,198
======================= =========================
Supplemental information--cash payments (receipts) for:
Interest $995,026 $735,994
======================= =========================
Income taxes (refunds) $(910,599) $642,576
======================= =========================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
6
<PAGE>
LACROSSE FOOTWEAR, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
1. INTERIM FINANCIAL REPORTING
The Company reports its quarterly interim financial information based on 13
week periods. In the opinion of management, the unaudited condensed
consolidated financial statements include all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair
presentation of financial position, results of operations and cash flows in
accordance with generally accepted accounting principles.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the applicable notes thereto that are included in
the Company's Annual Report on Form 10-K for the year ended December 31,
1999.
2. INVENTORIES
Inventories are comprised of the following:
July 1, 2000 December 31, 1999
------------ -----------------
Raw materials $5,985,863 $6,996,001
Work-in process 1,407,674 1,709,383
Finished goods 45,064,372 35,069,600
LIFO reserve (3,488,229) (3,438,229)
----------- -----------
Total $48,969,680 $40,336,755
=========== ===========
The inventory values at July 1, 2000 and December 31, 1999 are net of
reserves to cover losses incurred in the disposition of slow moving,
markdown and obsolete inventory.
7
<PAGE>
ITEM 2
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
The following table sets forth, for the periods indicated, selected financial
information derived from the Company's condensed consolidated financial
statements, expressed as a percentage of net sales. The discussion that follows
the table should be read in conjunction with the condensed consolidated
financial statements.
Percentage of Net Sales
Three Months Ended Six Months Ended
------------------ ----------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
---- ---- ---- ----
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 74.3 73.5 74.5 73.4
---- ---- ---- ----
Gross Profit 25.7 26.5 25.5 26.6
Selling and Administrative Expenses 25.7 27.0 25.7 26.7
---- ---- ---- ----
Operating Income (loss) - (.5) (.2) (.1)
The Company's business is seasonal with lower revenues historically being
generated during the first six months of the year. As a result, revenue for the
six-month period ended July 1, 2000 should not be considered indicative of
results to be reported for the balance of the fiscal year.
Three Months Ended July 1, 2000 Compared to Three Months Ended July 3, 1999
Net Sales
Net sales for the three months ended July 1, 2000 increased $4,596,582, or 17%,
to $31,384,905 from $26,788,323 for the three months ended July 3, 1999. The
increase in net sales during the quarter was a result of increased shipments at
all three divisions. Danner shipments increased 21% during the quarter, largely
due to the success of the new Radical(TM) outdoor cross training products,
higher international shipments and improved inventory availability. LaCrosse
Industrial Division shipments were up approximately 14% driven by new products,
more favorable weather conditions and increased penetration with national
accounts. LaCrosse Retail Division shipments were up approximately 10% as a
result of continued increases in leather work and sport products, offset to some
degree by lower farm/work rubber shipments (a direct result of the dry early
spring weather). Finally, shipments of special make-up consumer rainwear
increased approximately $1.0 million for the quarter.
8
<PAGE>
Gross Profit
Gross profit for the three months ended July 1, 2000 increased to $8,074,927, or
25.7% of net sales, from $7,087,053, or 26.5% of net sales, in the second
quarter of 1999. The decrease in gross profit as a percent of net sales was
primarily the result of lower production levels which reduced overhead
absorption, higher costs related to factory defects at the La Crosse, Wisconsin
plant and lower margins on a larger consumer rainwear shipment to a large mass
merchant.
Selling and Administrative Expenses
Selling and administrative expenses in the second quarter of 2000, increased to
$8,066,119, or 25.7% of net sales, from $7,228,062, or 27.0% of net sales in the
second quarter of 1999. The increase in selling and administrative expenses
during the quarter was primarily related to the continuing commitment to brand
marketing for the LaCrosse and Danner brands, increased product development
spending in support of new products, the addition of a new executive position
within the organization and higher expenses for professional fees in support of
the implementation of a new enterprise resource planning (ERP) system.
Interest Expense
Interest expense for the three months ended July 1, 2000 increased 72% to
$776,596, or 2.5% of net sales, from $450,627, or 1.7% of net sales, for the
three months ended July 3, 1999. The increase in interest expense was the result
of higher interest rates (driven by higher market rates and higher rates per an
amended credit agreement entered into in March 2000) and higher average
borrowings, primarily as a result of common stock repurchases during 1999 and
2000.
Income Tax Expense
The Company's effective income tax rate was 39.3% in the second quarter of 2000
as compared to 39.2% in the second quarter of 1999.
Six Months Ended July 1, 2000 Compared to Six Months Ended July 3, 1999
Net Sales
Net sales for the six months ended July 1, 2000 increased $7,680,373, or 14%, to
$62,414,763 from $54,734,390 for the first six months of 1999. The increase in
net sales during the first half was driven by a $2.7 million increase in Danner
brand shipments (largely due to the success of the new Radical outdoor cross
training products, increased international shipments and improved inventory
availability), a $1.7 million increase in shipments of consumer rainwear (driven
by an order from a mass merchant) and a $1.9 million increase in shipments of
LaCrosse brand products to the industrial market. While shipments of LaCrosse
brand leather sporting and occupational boots through the retail channel of
distribution were up over $2.5 million during the first half, this increase was
offset by lower shipments of traditional rubber products. In addition,
consistent with a previously announced product line reduction initiative,
discontinued/closeout product shipments were approximately $.8 million higher
than last year.
9
<PAGE>
Gross Profit
Gross profit for the six months ended July 1, 2000 increased 10% to $15,950,978,
or 25.5% of net sales, from $14,558,883, or 26.6% of net sales, in the first six
months of 1999. The decrease in gross profit as a percent of net sales was
primarily the result of lower factory utilization resulting in reduced fixed
overhead absorption, an increase in factory defects, an increase in shipments of
discontinued products at reduced margins and the lower margins on a large
consumer rainwear shipment to a mass merchant.
Selling and Administrative Expenses
Selling and administrative expenses in the first half of 2000 increased 10%, to
$16,058,777, or 25.7% of net sales, from $14,597,424, or 26.7% of net sales, the
first half of 1999. The increase in selling and administrative expenses for the
first half of 2000 compared to the first half of 1999 was mainly due to the
continuing commitment to brand marketing for the LaCrosse and Danner brands,
increased product development spending in support of new products, the addition
of an executive position within the organization and higher expenses related to
professional fees in support of a strategic brand marketing study and the
installation of a new enterprise resource planning (ERP) system.
Interest Expense
Interest expense in the first half of 2000 increased 55% to $1,278,453, or 2.0%
of net sales, from $826,152, or 1.5% of net sales, for the first half of 1999.
The increase in interest expense was the result of higher interest rates (driven
by higher market rates and higher rates per an amended credit agreement entered
into in March 2000) and higher average borrowings, primarily as a result of
common stock repurchases during 1999 and 2000.
Income Tax Expense
The Company's effective income tax rate was 39.2% in the first half of both 2000
and 1999.
10
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Liquidity and Capital Resources
-------------------------------
The Company has historically financed its operations with cash generated from
operations, long-term lending arrangements and short-term borrowings under an
unsecured revolving credit agreement. The Company requires working capital
primarily to support fluctuating accounts receivable and inventory levels caused
by the Company's seasonal business cycle. The Company invests excess cash
balances in short-term investment grade securities or money market investments.
Net cash used in operating activities was $14.9 million in the first half of
2000 compared to $7.9 million in the first half of 1999. A $6.4 million increase
in accounts receivable in the first half of 2000 compared to a $.9 million
increase in the first half of 1999 was the primary reason for the higher level
of cash used in operating activities. The accounts receivable increase is higher
in 2000 because of the increased sales and an unusually low level of accounts
receivable as of December 1999. Also contributing to the increased level of cash
used in operations was an increase of $8.6 million in inventory compared to a
$7.0 million increase last year, primarily due to the earlier receipt of
outsourced product in 2000.
Net cash used in investing activities was $1.0 million in the first half of 2000
compared to $1.4 million in the first half of 1999. A $.3 million reduction in
spending for equipment was the primary reason for the decrease.
Net cash provided by financing activities was $14.4 million in the first half of
2000 compared to $9.0 million in the first half of 1999. During the first half
of 2000, the Company borrowed $18.6 million in short-term borrowings which were
used to pay dividends ($.8 million), for capital expenditures ($1.0 million),
repay long-term debt ($1.2 million) and purchase treasury stock ($2.1 million)
with the balance primarily used to fund the cash used in operating activities.
During the first half of 1999, $12.5 million of new long-term obligations and
$13.2 million of short-term borrowings were used to repay $12.7 million of
long-term obligations, purchase treasury stock ($1.9 million), pay an obligation
related to the shares issued in the 1994 acquisition of Danner ($1.1 million),
pay dividends ($.9 million), for capital expenditures ($1.3 million) and fund
the $7.9 million of cash used in operating activities.
In March 2000, the Company repurchased 500,000 shares of common stock in a
private transaction at the current market price. The transaction value was $2.1
million.
At December 31, 1999, the Company did not meet the interest coverage ratio
contained in its credit agreement. In March 2000, the Company and bank entered
into an amendment of its credit agreement which changed certain financial
covenants, increased the interest rate on LIBOR based loans by .75% and provided
a waiver of the December 31, 1999 covenant violation. In the event the Company
does not meet the interest coverage ratio during future quarters in 2000,
management believes it will be able to obtain a waiver.
The Company believes its existing credit facilities are adequate to meet cash
flow requirements for capital expenditures and operating cash flows for 2000 and
2001.
11
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company has not experienced any material changes in its market risk
exposures since December 31, 1999.
PART II - Other Information
---------------------------
ITEM 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company held its annual meeting of shareholders on May 18, 2000.
At such meeting, Patrick K. Gantert, Luke E. Sims and John D.
Whitcombe were elected as directors of the Company for terms to expire
at the 2003 annual meeting of shareholders and until their successors
are duly elected and qualified pursuant to the following votes:
Patrick K. Gantert - 5,480,124 shares voted for, 25,981 shares
withholding authority, 0 abstentions and 0 broker non-votes; Luke E.
Sims - 5,480,159 shares voted for, 25,946 shares withholding
authority, 0 abstentions and 0 broker non-votes; John D. Whitcombe -
5,477,874 shares voted for, 28,231 shares withholding authority, 0
abstentions and 0 broker non-votes. The other directors of the Company
whose terms of office continued after the 2000 annual meeting of
shareholders are as follows: terms expiring at the 2001 annual meeting
- George W. Schneider, Craig L. Leipold and Joseph P. Schneider; terms
expiring at the 2002 annual meeting - Frank J. Uhler, Jr. and Richard
A. Rosenthal.
ITEM 5 Other Information
-----------------
On August 3, 2000, the Board of Directors of LaCrosse Footwear, Inc.
announced that Patrick K. Gantert, the Company's President and Chief
Executive Officer, had resigned to pursue other business
opportunities. Mr. Gantert will continue as a director of the Company.
Joseph P. Schneider, the President and Chief Executive Officer of
Danner Shoe Manufacturing Co., (a Company subsidiary) and a director
of the Company, was named interim President and Chief Executive
Officer of the Company.
ITEM 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit Number Description
-------------- -----------
(27) Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
July 1, 2000.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LACROSSE FOOTWEAR, INC.
-----------------------
(Registrant)
Date: August 14, 2000 By: /s/ Joseph P. Schneider
------------------------------------
Joseph P. Schneider
Interim President and Chief Executive Officer
Date: August 14, 2000 By: /s/ Robert J. Sullivan
------------------------------------
Robert J. Sullivan
Vice President-Finance and Administration
And Chief Financial Officer
(Principal Financial and Accounting Officer)
13
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LACROSSE FOOTWEAR, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
for the Quarterly Period ended July 1, 2000
Exhibit
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(27) Financial Data Schedule (EDGAR version only)
14
