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 September 30, 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
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(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 November 1, 2000: 5,874,449
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shares
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LaCrosse Footwear, Inc.
Form 10-Q Index
For Quarter Ended September 30, 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 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-13
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
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PART I - FINANCIAL INFORMATION
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ITEM 1. Financial Statements
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LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2000 1999
(Unaudited)
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CURRENT ASSETS
Cash and cash equivalents $ 630,628 $2,021,747
Accounts receivable, net 38,363,864 20,444,903
Inventories (2) 47,103,747 40,336,755
Income tax receivable 1,704,488 910,328
Prepaid expenses 2,075,481 2,068,571
Deferred tax assets 2,269,500 2,746,500
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Total current assets 92,147,708 68,528,804
PROPERTY AND EQUIPMENT, net of
depreciation and amortization 12,098,976 12,811,029
INTANGIBLES 14,187,844 14,782,423
OTHER ASSETS 1,811,073 1,897,286
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Total assets $120,245,601 $98,019,542
============== ==============
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
September 30, December 31,
2000 1999
(Unaudited)
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CURRENT LIABILITIES
Current maturities of long-term obligations $1,312,000 $1,712,000
Notes payable, bank 42,815,000 14,088,000
Accounts payable 4,186,530 5,909,802
Accrued expenses 6,211,008 5,197,735
Dividends payable 0 828,678
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Total current liabilities 54,524,538 27,736,215
LONG-TERM OBLIGATIONS 9,838,676 10,701,920
COMPENSATION AND BENEFITS 3,238,469 3,192,722
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Total liabilities 67,601,683 41,630,857
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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 30,955,645 32,575,412
Treasury stock (4,813,383) (2,688,383)
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Total shareholders' equity 52,643,918 56,388,685
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Total liabilities and
shareholders' equity $120,245,601 $98,019,542
============== ==============
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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<TABLE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, October 2, September 30, October 2,
2000 1999 2000 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales $37,238,822 $37,024,101 $99,653,585 $91,758,491
Cost of goods sold 27,943,620 27,233,828 74,407,405 67,409,335
----------------- ----------------- ----------------- -----------------
Gross profit 9,295,202 9,790,273 25,246,180 24,349,156
Selling and administrative expenses 9,612,762 7,830,976 25,671,539 22,428,400
----------------- ----------------- ----------------- -----------------
Operating income (loss) (317,560) 1,959,297 (425,359) 1,920,756
Non-operating income (expense)
Interest expense (1,045,938) (677,736) (2,324,391) (1,503,888)
Miscellaneous (12,232) 56,111 85,660 147,350
----------------- ----------------- ----------------- -----------------
(1,058,170) (621,625) (2,238,731) (1,356,538)
Income (loss) before income taxes (benefit) (1,375,730) 1,337,672 (2,664,090) 564,218
Provision for income taxes (benefit) (539,285) 524,389 (1,044,323) 221,173
----------------- ----------------- ----------------- -----------------
Net income (loss) $(836,445) $813,283 $(1,619,767) $343,045
================= ================= ================= =================
Basic earnings (loss) per share $(0.14) $0.13 $(0.27) $0.05
================= ================= ================= =================
Diluted earnings (loss) per share $(0.14) $0.13 $(0.27) $0.05
================= ================= ================= =================
Weighted average shares outstanding
Basic earnings per share 5,874,449 6,397,608 6,007,661 6,493,185
Diluted earnings per share 5,874,449 6,397,608 6,007,661 6,493,185
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
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<TABLE>
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended
September 30, October 2,
2000 1999
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<S> <C> <C>
Net cash used in operating activities $(23,856,390) $(20,532,994)
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Cash flows from investing activities
Purchase of property and equipment (1,971,020) (1,783,745)
Investment in Danner - Japan 0 (70,134)
Other (73,786) (73,786)
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Net cash used in investing activities (2,044,806) (1,927,665)
Cash flows from financing activities
Cash dividends paid (828,678) (863,775)
Proceeds from short-term borrowings 28,727,000 26,489,000
Proceeds from long-term obligations 0 12,500,000
Principal payments on long-term obligations (1,263,245) (12,804,720)
Purchase of treasury stock (2,125,000) (2,003,658)
Settlement of Danner acquisition contingency 0 (1,148,067)
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Net cash provided by financing activities 24,510,077 22,168,780
Decrease in cash and cash equivalents (1,391,119) (291,879)
Cash and cash equivalents:
Beginning 2,021,747 363,966
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Ending $630,628 $72,087
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Supplemental information--cash payments (receipts) for:
Interest $2,116,766 $1,274,071
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Income taxes (refunds) $(910,599) $644,456
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The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
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LACROSSE FOOTWEAR, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. INTERIM FINANCIAL REPORTING
The Company reports its quarterly interim financial information based on 13
week periods. In the opinion of management, the unaudited condensed
consolidated financial statements include all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair
presentation of financial position, results of operations and cash flows in
accordance with generally accepted accounting principles.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the 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:
September 30, 2000 December 31, 1999
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Raw materials $4,676,483 $6,996,001
Work-in process 1,628,080 1,709,383
Finished goods 44,387,413 35,069,600
LIFO reserve (3,588,229) (3,438,229)
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Total $47,103,747 $40,336,755
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The inventory values at September 30, 2000 and December 31, 1999 are net of
reserves to cover losses incurred in the disposition of slow moving,
markdown and obsolete inventory.
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3. ACCOUNTING STANDARDS
In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes some of the staff's interpretations of
the application of generally accepted accounting principles to revenue
recognition. The Company will adopt SAB No. 101 when required in the fourth
quarter of 2000. Management believes the adoption of SAB No. 101 will not
have a significant affect on its financial statements.
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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.
<TABLE>
<CAPTION>
Percentage of Net Sales
Three Months Ended Nine Months Ended
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September 30, October 2, September 30, October 2,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 75.1 73.6 74.7 73.5
---- ---- ---- ----
Gross Profit 24.9 26.4 25.3 26.5
Selling and Administrative Expenses 25.8 21.1 25.7 24.4
---- ---- ---- ----
Operating Income (Loss) (.9) 5.3 (.4) 2.1
</TABLE>
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
nine-month period ended September 30, 2000 should not be considered to be
indicative of results to be reported for the balance of the fiscal year.
Three Months Ended September 30, 2000 Compared to Three Months Ended October 2,
1999
Net Sales
Net sales for the three months ended September 30, 2000 increased $214,721, or
1%, to $37,238,822 from $37,024,101 for the three months ended October 2, 1999.
The increase in net sales was primarily due to increased shipments of Danner
brand product, primarily due to shipments of the new Radical outdoor cross
training product, increased shipments through the LaCrosse Industrial Division
(driven largely by new products and increased penetration with national
distributors) and increased shipments of LaCrosse brand leather work and sport
products through the LaCrosse Retail Division. These increases were largely
offset by reduced shipments of traditional rubber products through the LaCrosse
Retail Division.
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Gross Profit
Gross profit for the three months ended September 30, 2000 decreased 5% to
$9,295,202, or 24.9% of net sales, from $9,790,273, or 26.4% of net sales, in
the third quarter of 1999. The reduction in gross profit as a percent of net
sales was primarily the result of lower production levels at the Company's La
Crosse, Wisconsin manufacturing facility (which resulted in labor inefficiencies
and an increase in unabsorbed overhead) and an increase in shipments of
discontinued products at reduced margins.
For competitive reasons, the Company purchases an increasingly larger percentage
of its products from foreign contract manufacturers. The Company is reducing its
domestic employment levels as it continues to source more of its products
offshore. As a result of this additional outsourcing, the Company announced in
mid October that, before the end of the fourth quarter, it would be laying off
approximately 200 people at the LaCrosse, Wisconsin manufacturing facility. The
Company will continue to evaluate its future manufacturing needs and will align
its domestic manufacturing capacity accordingly.
Selling and Administrative Expenses
Selling and administrative expenses in the third quarter of 2000 increased 23%
to $9,612,762, or 25.8% of net sales, from $7,830,976, or 21.1% of net sales, in
the third quarter of 1999. The increase in selling and administrative expenses
was primarily a result of the continued commitment to brand marketing for the
LaCrosse and Danner brands, increased product development spending (in support
of new products and product outsourcing) and an increase in
warehouse/distribution costs. Also contributing to the increase was the one time
cost of a severance package for the former president of the Company.
Interest Expense
Interest expense for the three months ended September 30, 2000 increased 54% to
$1,045,938, or 2.8% of net sales, from $677,736, or 1.8% of net sales, for the
three months ended October 2, 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 and higher levels of finished goods inventory.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended October 2,
1999
Net Sales
Net sales for the nine months ended September 30, 2000 increased $7,895,094, or
9%, to $99,653,585 from $91,758,491 for the first nine months of 1999. The
increase in net sales during the first nine months of the year was driven by a
$3.1 million increase in Danner brand shipments (largely due to the success of
the new Radical outdoor cross training products), an increase in shipments of
consumer rainwear (driven by an order from a mass merchant), an increase in
shipments through the LaCrosse Industrial division (driven largely by new
products
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and increased penetration with national distributors), an increase in shipments
of LaCrosse brand leather work and sport products and an increase in shipments
of discontinued/closeout products. These increases were partially offset by
lower shipments of traditional rubber products.
Gross Profit
Gross profit for the nine months ended September 30, 2000 increased 4% to
$25,246,180, or 25.3% of net sales, from $24,349,156, or 26.5% of net sales, in
the first nine months of 1999. The decrease in gross profit as a percentage of
net sales was primarily the result of lower factory utilization (which resulted
in labor inefficiencies and reduced fixed overhead absorption), 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 nine months of 2000 increased
14% to $25,671,539, or 25.7% of net sales, from $22,428,400, or 24.4% of net
sales in the first nine months of 1999. The increase in selling and
administrative expenses for the first nine months of 2000 compared to the first
nine months of 1999 was mainly due to the continued commitment to brand
marketing for the LaCrosse and Danner brands, increased product development
spending (in support of new products and product outsourcing), 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 a new
enterprise resource planning (ERP) system. Also contributing to the increase was
the one time cost of a severance package for the former president of the
Company.
Interest Expense
Interest expense in the first nine months of 2000 increased 55% to $2,324,391,
or 2.3% of net sales, from $1,503,888, or 1.6% of net sales, for the first nine
months 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 and
higher levels of finished goods inventory.
11
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Liquidity and Capital Resources
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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 $23.9 million in the first nine months
of 2000 compared to $20.5 million in the first nine months of 1999. The $3.4
million increase in cash used in operating activities during the nine months of
2000 as compared to the first nine months of 1999 was largely the result of a
$1.6 million loss in the first nine months of 2000 (compared to a $.3 million
profit in the first nine months of 1999) and a $6.8 million increase in
inventories in the first nine months of 2000 compared to a $5.7 million increase
in the first nine months of 1999. The increase in inventories was primarily the
result of the earlier receipt of outsourced goods in 2000 as compared to 1999.
Net cash used in investing activities was $2.0 million in the first nine months
of 2000 compared to $1.9 million in the first nine months of 1999. An increase
in spending for equipment was the reason for the increase.
Net cash provided by financing activities was $24.5 million in the first nine
months of 2000 compared to $22.2 million in the first nine months of 1999.
During the first nine months of 2000, the Company borrowed $28.7 million in
short-term borrowings which were used to pay dividends ($.8 million), for
capital expenditures ($2.0 million), repay long-term debt ($1.3 million) and
purchase treasury stock ($2.1 million) with the balance primarily used to fund
the cash used in operating activities. During the first nine months of 1999,
$12.5 million of a new long-term obligation and $26.5 million of short-term
borrowings were used to repay $12.8 million of long-term obligations, pay
dividends ($.9 million), for capital expenditures ($1.8 million), purchase
treasury stock ($2.0 million) and pay an obligation related to the shares issued
in the 1994 acquisition of Danner ($1.1 million) with the balance primarily used
to fund the 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.
In May 1999, 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 line of credit was increased to $75.0 million, including a $12.5
million term loan, from the previous maximum level of $60.1 million, including a
$10.1 million term loan which was repaid. The term loan which the Company
received in May 1999, is due May 28, 2004 and calls for quarterly payments of
$.4 million commencing in August 1999. At the Company's option, the interest
rate on the revolving portion of the loan is either the bank's prime rate or
LIBOR (for the applicable loan period) plus 1.5%. The rate for the term loan is
.375% higher than for the revolving loans. In
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October 2000, the amount available under the revolving portion of the loan was
reduced by $10.0 million to $52.5 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. At September 30, 2000, the
Company did not meet the interest coverage ratio contained in the credit
agreement. The Company has received a waiver of the September 30, 2000
violation. As part of receiving the waiver, the Company was required to pay a
waiver fee of .1% of the loan commitment.
The Company believes it existing credit facilities are adequate to meet cash
flow requirements for capital expenditures and operating cash flows for 2000 and
2001.
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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
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ITEM 6 Exhibits and Reports on Form 8-K
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(a) Exhibit Number Description
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(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 September 30, 2000.
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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.
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(Registrant)
Date: November 13, 2000 By: /s/ Joseph P. Schneider
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Joseph P. Schneider
Interim President and Chief Executive Officer
Date: November 13, 2000 By: /s/ Robert J. Sullivan
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Robert J. Sullivan
Vice President-Finance and Administration
And Chief Financial Officer
(Principal Financial and Accounting Officer)
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LACROSSE FOOTWEAR, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
for the Quarterly Period ended September 30, 2000
Exhibit
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(27) Financial Data Schedule (EDGAR version only)
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