UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 2002
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.
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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.)
18550 NE Riverside Parkway
Portland, Oregon 97230
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(Address, zip code of principal executive offices)
(503) 766-1010
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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 5, 2002: 5,874,449 shares
LaCrosse Footwear, Inc.
Form 10-Q Index
For Quarter Ended June 29, 2002
Page
PART I. Financial Information
Item 1. Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
PART II. Other Information
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
LACROSSE FOOTWEAR, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data) June 29, December 31,
2002 2001
--------------------------------------
Assets (Unaudited)
Current Assets:
Cash and cash equivalents $ 33 $ 271
Accounts receivable, net 14,697 18,865
Inventories (2) 29,173 34,371
Prepaid expenses, deferred tax assets and other 3,394 2,880
---------------------------------
Total current assets 47,297 56,387
Property, plant and equipment, net 5,312 7,222
Goodwill, net (6) 10,753 11,781
Deferred tax assets and other 2,050 3,926
---------------------------------
Total assets $ 65,412 $ 79,316
=================================
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term obligations $ 1,599 $ 1,599
Notes payable, bank 14,697 17,645
Accounts payable 3,716 6,205
Accrued expenses 2,876 3,085
---------------------------------
Total current liabilities 22,888 28,534
Long-term obligations 3,634 4,432
Compensation and benefits 4,133 4,805
---------------------------------
Total liabilities 30,655 37,771
Shareholders' Equity:
Common stock, par value $.01 per share,
authorized 50,000,000 shares; issued
6,717,627 shares 67 67
Additional paid-in capital 26,434 26,434
Retained earnings 13,069 19,857
Less cost of 843,178 shares of treasury stock (4,813) (4,813)
---------------------------------
Total shareholders' equity 34,757 41,545
---------------------------------
Total liabilities and shareholders' equity $ 65,412 $ 79,316
=================================
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
LACROSSE FOOTWEAR, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited) Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
----------------------------------------------------------------------
Net sales $ 19,975 $ 26,074 $ 42,796 $ 55,222
Cost of goods sold 15,849 22,722 32,764 44,414
----------------------------------------------------------------------
Gross profit 4,126 3,352 10,032 10,808
Selling and administrative expenses 7,436 8,549 16,019 16,843
----------------------------------------------------------------------
Operating loss (3,310) (5,197) (5,987) (6,035)
Non-operating income (expense):
Interest expense (512) (704) (870) (1,421)
Miscellaneous 45 (9) 97 58
----------------------------------------------------------------------
(467) (713) (773) (1,363)
----------------------------------------------------------------------
Loss before income tax benefit (3,777) (5,910) (6,760) (7,398)
Provision for income tax benefit (4) -- -- (1,000) --
----------------------------------------------------------------------
Net loss before cumulative effect
of change in accounting principle (3,777) (5,910) (5,760) (7,398)
Cumulative effect of change in accounting
principle (6) -- -- (1,028) --
----------------------------------------------------------------------
Net loss $ (3,777) $ (5,910) $ (6,788) $ (7,398)
======================================================================
Net loss per common share before cumulative
effect of change in accounting principle:
Basic $ (0.64) $ (1.01) $ (0.98) $ (1.26)
Diluted $ (0.64) $ (1.01) $ (0.98) $ (1.26)
Cumulative effect of change in
accounting principle:
Basic $ -- $ -- $ (0.18) $ --
Diluted $ -- $ -- $ (0.18) $ --
Net loss per common share:
Basic $ (0.64) $ (1.01) $ (1.16) $ (1.26)
Diluted $ (0.64) $ (1.01) $ (1.16) $ (1.26)
Weighted average shares outstanding:
Basic and diluted 5,874 5,874 5,874 5,874
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
LACROSSE FOOTWEAR, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) Six Months Ended
(Unaudited) June 29, June 30,
2002 2001
--------------------------------
Cash flows from operating activities:
Net (loss) $ (6,788) $ (7,398)
Adjustments to reconcile net (loss) to
net cash provided by (used in)
operating activities:
Depreciation and amortization 1,838 1,973
Loss on disposal and impairment charge
for plant and equipment 624 1,899
Goodwill impairment charge 1,028 --
Changes in assets and liabilities:
Trade accounts receivable 4,168 5,723
Inventories 5,198 (7,462)
Deferred taxes 1,472 568
Accounts payable (2,489) (1,701)
Accrued expenses and other (1,202) (349)
------------------------------
Net cash provided by (used in) operating activities $ 3,849 $ (6,747)
------------------------------
Cash flows from investing activities:
Capital expenditures (341) (1,189)
Proceeds from sale of property and equipment -- 174
Prepaid loan fees -- (603)
Other -- 39
------------------------------
Net cash used in investing activities (341) (1,579)
------------------------------
Cash flows from financing activities:
Proceeds (payments) on short-term borrowings (2,948) 12,603
Principal payments on long-term obligations (798) (2,658)
------------------------------
Net cash provided by (used in) financing activities (3,746) 9,945
------------------------------
Net increase (decrease) in cash and cash
equivalents (238) 1,619
Cash and cash equivalents:
Beginning 271 10
------------------------------
Ending $ 33 $ 1,629
==============================
Supplemental information
Cash payments (refunds) for:
Interest $ 574 $ 1,236
Income taxes $ (2,340) --
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
LACROSSE FOOTWEAR, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation and Use of Estimates
LaCrosse Footwear, Inc. is referred to as "we", "us" or "our" in this
report. We have prepared these unaudited condensed consolidated financial
statements in accordance with accounting principles generally accepted in
the United States of America for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, we have condensed or omitted certain information and footnote
disclosures. In our opinion, these financial statements include all normal
recurring adjustments necessary to present fairly the results for the
interim periods shown.
Preparing financial statements in conformity with accounting principles
generally accepted in the United States of America requires us to make
estimates and assumptions which affect the amounts of assets, liabilities,
revenue and expenses we have reported and our disclosure of contingent
assets and liabilities at the date of the financial statements. The
results of the interim periods are not necessarily indicative of the
results for the full year. You should read these condensed consolidated
financial statements in conjunction with the audited consolidated
financial statements and the related notes included in our Annual Report
on Form 10-K for the year ended December 31, 2001.
We report our quarterly interim financial information based on 13-week
periods.
b. Principles of Consolidation
The consolidated financial statements include the accounts of LaCrosse
Footwear, Inc. and our wholly owned subsidiary. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
c. Revenue Recognition and Product Warranty
Revenue is recognized at the time products are shipped to customers.
Revenue is recorded net of freight, discounts and returns. We warranty our
products against defects in design, materials and workmanship for a period
of generally one year. A provision for estimated future warranty cost is
recorded when products are shipped. Amounts billed to customers relating
to shipping and handling are classified as revenue. Costs incurred for
shipping and handling are classified as cost of goods sold.
d. Net Loss Per Share
We follow the provisions of Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share" which requires presentation of both
basic and diluted earnings per share (EPS) on the face of the condensed
consolidated statement of operations. Basic EPS excludes all dilution and
is computed using the weighted average number of common shares outstanding
during the period. The diluted EPS calculation assumes that all stock
options or other arrangements to issue common stock were exercised or
converted into common stock at the beginning of the period. Because we
incurred a loss in all periods presented, the inclusion of common stock
equivalents in our diluted weighted average shares outstanding would have
reduced our net loss per share. Accordingly, basic and diluted weighted
average shares outstanding are the same for each period presented.
6
2. INVENTORIES
Inventories are comprised of the following:
(In thousands) June 29, December 31,
2002 2001
----------------------------
Raw materials $ 1,846 $ 1,913
Work in process 279 289
Finished goods 27,048 32,169
----------------------------
Total $ 29,173 $ 34,371
============================
Inventory is valued at the lower of cost or market. Rubber boot products
are valued using the last-in, first-out (LIFO) method. All other inventory
items are valued using the first-in, first-out (FIFO) method. The
inventory values at June 29, 2002 and December 31, 2001 are net of
reserves of $1.7 million and $3.8 million, respectively, to cover losses
incurred in the disposition of slow moving and obsolete inventory.
Approximately $1.0 million of the reduction in the reserves is related to
the disposal of raw materials that were fully reserved at December 31,
2001. The LIFO reserve was $0.4 million at June 29, 2002 and December 31,
2001.
3. SOURCING REALIGNMENT AND OTHER NON-RECURRING CHARGES
In the second quarter of 2001, we announced a strategic decision that led
to charges of $3.7 million recorded in cost of goods sold and $0.7 million
recorded in selling and administrative expenses related to the closure of
the manufacturing facility in La Crosse, Wisconsin. We eliminated 134
production and support positions, primarily in manufacturing. A summary of
the activity in the exit costs accrual since December 31, 2001 is as
follows:
(In thousands) Balance Payments or Balance
December 31, 2001 New Charges Reserves Used June 29, 2002
------------------- ------------ ----------------- ---------------
Inventory reserves $ 379 -- 379 $ --
Severance and related costs -- -- -- --
------------------- ------------ ----------------- ---------------
Total $ 379 -- 379 $ --
=================== ============ ================= ===============
In the second quarter of 2002, we announced a strategic decision to
relocate the administrative and distribution functions as well as close
the manufacturing facility at our Racine, Wisconsin location. This
decision led to charges of $1.0 million primarily related to facility
shutdown costs. The expense has been recorded in selling and
administrative expenses. We will eliminate 91 administrative, distribution
and production positions in Racine, Wisconsin.
4. INCOME TAXES
We recorded an income tax benefit in the first quarter of 2002 due to tax
provisions enacted as part of the Job Creation and Worker Assistance Act
of 2002. The law extends the loss carry-back period for certain losses
from two to five years. This law will allow us to use losses incurred
during 2002 to reduce taxable income from 1997. In May 2002, we received
an income tax refund of $2.3 million for tax losses incurred in 2001.
Deferred tax assets are described in detail in our Annual Report on Form
10-K for the year ended December 31, 2001.
During the second quarter 2002, we generated a deferred tax asset related
to net operating losses, but this was offset by a corresponding increase
in the deferred tax valuation allowance.
7
5. STOCK OPTION GRANTS
During 2002, the Board of Directors granted options to purchase
approximately 152,000 shares of common stock to certain officers, key
employees and non-employee directors under existing stock incentive plans.
The average exercise price for these options is $3.34 per share. The
exercise price is calculated as the mean between the highest and lowest
reported selling prices of the common stock on The NASDAQ Stock Market on
the day before the options were granted. The options generally vest in
equal increments over a five-year period.
6. GOODWILL
Effective January 2002, we adopted SFAS 142, Goodwill and Other Intangible
Assets. This pronouncement provides that goodwill be reviewed for
impairment rather than amortized. As a result, we ceased amortization of
goodwill.
In accordance with SFAS 142, we completed the transitional goodwill
impairment test during the second quarter 2002 for our Industrial and
Danner divisions. The impairment test, which was performed by an
independent appraiser, indicated that the Industrial division goodwill was
impaired. Accordingly, we recorded a $1.0 million charge as a cumulative
effect of change in accounting principle. This charge has been reflected
in the first quarter pursuant to implementation guidelines. Accordingly,
we have restated our first quarter 2002 results to reflect this change as
follows:
(In thousands) March 31,
2002
---------------
Reported net loss for the quarter ended $ (1,983)
Less: Cumulative effect of change in
accounting principle 1,028
---------------
Net loss as restated $ (3,011)
===============
Basic and diluted loss per share as reported $ (0.34)
Less: Cumulative effect of change in
accounting principle 0.18
---------------
Basic and diluted loss per share as restated $ (0.52)
===============
The changes in the carrying amount of goodwill are as follows:
(In thousands) Industrial Danner Total
------------- ------------ ------------
Balance as of January 1, 2002 $ 1,028 $ 10,753 $ 11,781
Cumulative effect of change in accounting principle (1,028) -- (1,028)
------------- ------------ ------------
Balance as of June 29, 2002 $ -- $ 10,753 $ 10,753
============= ============ ============
8
Had SFAS 142 been effective at the beginning of 2001, the non-amortization
provisions would have had the following effect on the second quarter and
six month results:
3 months ended 6 months ended
------------------------------ ----------------------------
(In thousands) June 29, June 30, June 29, June 30,
2002 2001 2002 2001
------------- ------------- ------------- -----------
Reported net loss $ (3,777) $ (5,910) $ (6,788) $ (7,398)
Add back: Goodwill amortization -- 148 -- 297
------------- ------------- ------------- -----------
Adjusted net loss $ (3,777) $ (5,762) $ (6,788) $ (7,101)
Add back: Cumulative effect of change
in accounting principle -- -- 1,028 --
------------- ------------- ------------- -----------
Adjusted loss before cumulative effect
of change in accounting principle
$ (3,777) $ (5,762) $ (5,760) $ (7,101)
============= ============= ============= ===========
3 months ended 6 months ended
------------------------------ ----------------------------
(In thousands) June 29, June 30, June 29, June 30,
2002 2001 2002 2001
------------- ------------- ------------- -----------
Reported basic and diluted loss per share $ (0.64) $ (1.01) $ (1.16) $ (1.26)
Add back: Goodwill amortization -- 0.03 -- 0.05
------------- ------------- ------------- -----------
Adjusted basic and diluted loss per share $ (0.64) $ (0.98) $ (1.16) $ (1.21)
Add back: Cumulative effect of change
in accounting principle -- -- 0.18 --
------------- ------------- ------------- -----------
Adjusted basic and diluted loss per share
before cumulative effect of change in
accounting principle $ (0.64) $ (0.98) $ (0.98) $ (1.21)
============= ============ ============= ===========
9
ITEM 2
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
The following table sets forth selected financial information derived from the
Company's condensed consolidated financial statements. The discussion that
follows the table should be read in conjunction with the condensed consolidated
financial statements. In addition, please see Management's Discussion and
Analysis of Financial Condition and Results of Operations, audited financial
statements and related notes included in our Annual Report on Form 10-K for the
year ended December 31, 2001.
(In thousands) Three Months Ended Six Months Ended
--------------------------------- ----------------------------------
June 29, June 30, % June 29, June 30, %
2002 2001 Change 2002 2001 Change
----------- ----------- --------- ------------ ----------- ---------
Net Sales $19,975 $26,074 (23.4) $42,796 $55,222 (22.5)
Gross Profit 4,126 3,352 23.1 10,032 10,808
(7.2)
Selling and Administrative Expenses 7,436 8,549 (13.0) 16,019 16,843 (4.9)
Non-Operating Expenses 467 713 (34.5) 773 1,363 (43.3)
Income Tax Benefit -- -- -- 1,000 -- 100.0
Cumulative Effect of Change in
Accounting Principle -- -- -- 1,028 -- 100.0
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
period ending June 29, 2002 should not be considered to be indicative of results
to be reported for the balance of the fiscal year.
Net Sales
Net sales for the three months ended June 29, 2002 decreased $6.1 million, or
23.4%, to $20.0 million from $26.1 million from the respective period in 2001.
The decrease in net sales was due to a 47.4% decrease in the retail channel of
distribution of LaCrosse(R) brand products, an 11.1% decline in shipments in the
industrial channel of distribution of LaCrosse(R) and Rainfair(R) brand products
and a 4.3% decrease in shipments for the Danner(R) brand over the same period of
last year. These decreases were the result of a softening economy on retailers
and industrial distributors coupled with tighter inventory management by our
channel partners, reduced fall pre-season orders and a decision to reduce the
number of products offered through the industrial channel. The retail channel
experienced approximately 19.7% decrease in shipments of sporting products from
the second quarter of last year primarily due to our largest customers efforts
to reduce their stock on hand. In addition, shipments in the pac boot product
line are down 6.4% due to inventory management objectives of timing product
receipts with anticipated shipments. Further, the Company concluded that it
would no sell in the insulated children's boot market which led to a decrease of
4.4%.
Net sales for the six months ended June 29, 2002 decreased $12.4 million, or
22.5%, to $42.8 million from $55.2 million for the respective six months of
2001. The decrease in net sales during the first half was due to a 34.4%
decrease in the retail channel of distribution of LaCrosse(R) brand products and
a 28.5% decline in shipments in the industrial channel of distribution of
LaCrosse(R) and Rainfair(R) brand products. These decreases were the result of a
softening economy on retailers and industrial distributors, reduced fill-in
business for cold weather products in the LaCrosse(R) brand retail channel, and
an overall reduction in the number of products being offered for sale as
management worked to eliminate slow moving styles. Approximately 7.6% of the
decrease in net sales for the industrial division is due to a reduction in
apparel shipments to a mass merchant and another 6.6% of the decrease is related
to a management decision to reduce the number of products offered through the
industrial channel. These decreases were partially offset by a 3.2% increase in
shipments for the Danner(R) brand over the same period of last year, which is
related primarily to the introduction of new styles using the TERRA FORCE(TM)
technology platform within the uniform, hunting, work and outdoor cross-training
product lines.
10
Gross Profit
Gross profit for the three months ended June 29, 2002 increased to $4.1 million,
or 20.7% of net sales, from $3.4 million, or 12.9% of net sales, for the second
quarter of 2001. The net increase in gross profit as a percent of sales is
primarily due to a one-time charge during the second quarter of 2001 of $3.7
million related to closing the La Crosse factory. In addition, we focused on
selling close out inventory during the second quarter of 2002 which reduced our
gross profit as a percent of sales approximately 3%.
Gross profit for the six months ended June 29, 2002 decreased to $10.0 million,
or 23.4% of net sales, from $10.8 million, or 19.6% of net sales, for the first
half of 2001. The net increase in gross profit as a percent of sales is due to a
one-time charge during the first half of 2001 of $3.7 million related to closing
the La Crosse factory. In addition, we focused on selling close out inventory
during the first half of 2002 which reduced our gross profit as a percent of
sales approximately 3%.
Selling and Administrative Expenses
Selling and administrative expenses decreased $1.1 million, or 13.0%, to $7.4
million for the quarter ended June 29, 2002 compared to $8.5 million for the
same period a year ago. In the second quarter of 2002, we recorded a $1.0
million charge related to relocating the Rainfair industrial division as well as
a final charge of $0.3 million related to the change in the estimated life of
our enterprise software package. Factoring out the one time charges of $1.3
million in the second quarter of 2002 and $0.7 million in the second quarter of
2001, we decreased net selling and administrative expenses approximately $1.7
million primarily as a result of reductions in sales commissions and
distribution costs associated with the reduced sales volume.
Selling and administrative expenses decreased $0.8 million, or 4.9%, to $16.0
million for the six months ended June 29, 2002 compared to $16.8 million for the
same period a year ago. In the first half of 2002, we recorded $2.9 million of
charges associated with the move of the corporate headquarters to Portland,
Oregon from La Crosse, Wisconsin ($1.9 million) and the move of the Rainfair
division to Portland, Oregon from Racine, Wisconsin ($1.0 million). This
includes one-time charges of $1.1 million of depreciation expense related to a
change in the estimated life of our enterprise software package and related
system and a non-cash property and equipment impairment charge of $0.6 million.
Factoring out one-time restructuring charges in the first half of 2002 and 2001,
we decreased selling and administrative expenses approximately $2.4 million
mainly as a result of reductions in sales commissions and distribution costs
associated with the reduced sales volume. The six months ended June 2001
included $0.7 million of restructuring charges related to closing the
manufacturing facility in La Crosse, Wisconsin.
Non-Operating Expenses
Non-operating expenses for the three months ended June 29, 2002 decreased 34.5%
to $0.5 million, or 2.3% of net sales, from $0.7 million, or 2.7% of net sales,
for the three months ended June 30, 2001. The decrease is primarily the result
of a decrease in interest expense which was the result of lower interest rates,
lower average borrowings and the impact of recording interest rate swap
agreements at fair market value.
Non-operating expenses for the six months ended June 29, 2002 decreased 43.3% to
$0.8 million, or 1.8% of net sales, from $1.4 million, or 2.5% of net sales, for
the six months ended June 30, 2001. The decrease is primarily the result of a
decrease in interest expense which was the result of lower interest rates, lower
average borrowings and the impact of recording interest rate swap agreements at
fair market value.
Income Tax Benefit
We recorded an income tax benefit of $1.0 million in the first quarter of 2002
due to tax provisions enacted as part of the Job Creation and Worker Assistance
Act of 2002. The law extends the loss carry-back period for certain losses from
two to five years. This law will allow us to use any losses incurred during 2002
to reduce taxable income from 1997.
During the second quarter 2002, we generated a deferred tax asset related to net
operating losses, but this was offset by a corresponding increase in the
deferred tax valuation allowance.
11
Liquidity and Capital Resources
We have historically funded working capital requirements and capital
expenditures with cash generated from operations and borrowings under a
revolving credit agreement or other long-term lending arrangements. We require
working capital to support fluctuating accounts receivable and inventory levels
caused by the Company's seasonal business cycle. Borrowing requirements are
generally the lowest in the first quarter and the highest during the third
quarter.
Our revolving credit agreement provides for advances based on a percentage of
eligible accounts receivable and inventory with maximum borrowings of $52.5
million. The credit agreement is used to support working capital requirements.
Borrowings under the credit agreement and cash flows generated from operations
are expected to be sufficient to meet our cash requirements for the next 12
months. Excess cash flows from operations are used to pay down the credit
agreement. At June 29, 2002, we had $14.7 million of outstanding borrowings
under the credit agreement and unused availability of $9.1 million.
Net cash provided by operating activities was $3.8 million in the first half of
2002 compared to $6.7 million used by operating activities in the first half of
2001. In the first half of 2002, we incurred a loss of $6.8 million offset by
decreases in inventory of $5.2 million and accounts receivable of $4.2 million.
The decrease in accounts receivable is normal for the period and the decrease in
inventory is related to our focus on reducing the number of styles being offered
and the success we had in selling closeouts during the first half. In the first
half of 2001, accounts receivable decreased $5.7 million (primarily due to a
high level of accounts receivable at December 31, 2000 and the lower sales in
the first half) offset by a $1.7 million decrease in accounts payable, a net
loss of $7.4 million and a $7.5 million increase in inventory.
Net cash used in investing activities was $0.3 million in the first half of 2002
compared to $1.6 million in the first half of 2001. The majority of the activity
in both years was for capital expenditures.
Net cash used in financing activities was $3.7 million in the first half of 2002
compared to $9.9 million provided by financing activities in the first half of
2001. The cash used in the first half of 2002 was generated from operations and
was paid on the credit agreement and long-term obligations. In June 2001, the
Company entered into a banking relationship with GE Capital. During the first
half of 2001, the Company borrowed $12.6 million in short-term borrowings and
repaid $2.7 million in long-term obligations.
As of June 29, 2002, we were not in compliance with the tangible net worth
covenant contained in our credit agreements. One of our lenders waived our
violation and on August 12, 2002 the other amended our agreement to cure the
violation.
12
Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements within
the meaning of the Securities Exchange Act of 1934. Forward-looking statements
are only predictions or statements of our current plans, which we review on a
continual basis. These statements are based on our beliefs, expectations and
assumptions and on information currently available to us. We are not required to
update or revise forward-looking statements. The words "may", "should",
"expect", "anticipate", "intend", "plan", "continue", "believe", "estimate" or
similar expressions used in this report are intended to identify forward-looking
statements.
The forward-looking statements in this quarterly report on Form 10-Q involve
certain risks, uncertainties and assumptions. They are not guarantees of future
performance. Factors that may cause actual results to differ materially from
those expressed or implied in any forward-looking statements include, but are
not limited to, any of the following possibilities:
o Weather conditions
o Dealer inventory levels
o Inventory levels required for sourced product and emphasis on
forecasting capabilities
o Lead times (or delays) for sourced product and dependence on
independent manufacturers or suppliers
o Limited ability to resupply customer for fill-in orders for sourced
product
o Trading policies or import and export regulations and foreign
regulation of manufacturers or suppliers
o Actions of competitors
o Changes in consumer buying patterns
o Loss of a material customer
o Increase in interest rates
o West coast domestic port of entry work slow down or stoppage due to
failed union contact negotiations
You should consider these important factors in evaluating any statement
contained in this report and/or made by us or on our behalf.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Our primary market risk results from fluctuations in interest rates. We enter
into interest rate swap agreements (swap agreements) to reduce our exposure to
interest rate fluctuations on our 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. In addition, we record the fair value of
the swap agreements each month as an adjustment to interest expense. As of June
29, 2002, we had swap agreements in effect totaling $11.0 million notional
amount, of which $7.0 million will mature in January 2003 with another $4.0
million maturing October 2003. The variable rate borrowings not offset by swap
agreements at June 29, 2002 totaled $8.9 million. Swap agreement rates are based
on the three-month LIBOR rate. Based on average floating rate borrowings
outstanding throughout the first half of 2002, a 100-basis point change in LIBOR
would have caused our monthly interest expense to change by approximately
$8,000. We believe that these amounts are not material to the earnings of
LaCrosse Footwear, Inc.
13
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
We are party to routine litigation arising in the normal course of business. We
do not expect these matters, individually or in the aggregate, to have a
material adverse effect on our financial position, results of operations or cash
flows.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on May 22, 2002. At such
meeting, Richard A. Rosenthal and Frank J. Uhler, Jr. were elected as directors
of the Company for terms to expire at the 2005 annual meeting of shareholders
and until their successors are duly elected and qualified pursuant to the
following votes: Richard A. Rosenthal - 5,427,586 shares voted for, 96,246
shares withholding authority, 0 abstentions and 0 broker non-votes; and Frank J.
Uhler, Jr. - 5,427,586 shares voted for, 96,246 shares withholding authority, 0
abstentions and 0 broker non-votes. The other directors of the Company whose
terms of office continued after the 2002 annual meeting of shareholders are as
follows: terms expiring at the 2003 annual meeting - Luke E. Sims and John D.
Whitcombe; and terms expiring at the 2004 annual meeting - George W. Schneider,
Craig L. Leipold and Joseph P. Schneider.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(99.1) Certification of President and Chief Executive Officer
pursuant to 18 U.S.C. section 1350
(99.2) Certification of Executive Vice President and Chief Financial
Officer pursuant to 18 U.S.C. section 1350
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter.
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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 13, 2002 By: /s/ Joseph P. Schneider
------------------------------------
Joseph P. Schneider
President and Chief Executive Officer
Date: August 13, 2002 By: /s/ David P. Carlson
-------------------------------------
David P. Carlson
Executive Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
15
LaCrosse Footwear, Inc.
Exhibit Index to Quarterly Report on Form 10-Q
for the Quarter ended June 29, 2002
Exhibit
No. Exhibit Description
(99.1) Certification of President and Chief Executive Officer pursuant to
18 U.S.C. section 1350
(99.2) Certification of Executive Vice President and Chief Financial
Officer pursuant to 18 U.S.C. section 1350
16