-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VDbYswBtRjieh7M6PPz6g0kKkBmw812+DjSab/7kXRJO8l1irBeNyOxGFB6ti6ne gFo9/5QiZ1x0PmUkx6pS6g== 0000897069-01-500554.txt : 20020410 0000897069-01-500554.hdr.sgml : 20020410 ACCESSION NUMBER: 0000897069-01-500554 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010929 FILED AS OF DATE: 20011113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LACROSSE FOOTWEAR INC CENTRAL INDEX KEY: 0000919443 STANDARD INDUSTRIAL CLASSIFICATION: RUBBER & PLASTICS FOOTWEAR [3021] IRS NUMBER: 391446816 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23800 FILM NUMBER: 1782649 BUSINESS ADDRESS: STREET 1: 1319 ST ANDREW ST CITY: LACROSSE STATE: WI ZIP: 54603 BUSINESS PHONE: 6087823020 MAIL ADDRESS: STREET 1: 1319 ST ANDREW ST CITY: LA CROSSE STATE: WI ZIP: 54603 10-Q 1 slp133.txt FORM 10-Q 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 29, 2001 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ______________ Commission File Number 0-238001 LaCrosse Footwear, Inc. -------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Wisconsin 39-1446816 --------------------------- -------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1319 St. Andrew Street, La Crosse, Wisconsin 54603 ------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (608) 782-3020 ------------------------------------------------------------------- (Registrant's telephone number, including area code) ------------------------------------------------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value, outstanding as of November 1, 2001: 5,874,449 shares LaCrosse Footwear, Inc. Form 10-Q Index For Quarter Ended September 29, 2001 Page 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 7-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-16 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18 2 PART I - FINANCIAL INFORMATION ITEM 1 Financial Statements LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 29, December 31, 2001 2000 (Unaudited) -------------- ------------- CURRENT ASSETS Cash and cash equivalents $ 76,694 $ 10,506 Accounts receivable, net 38,311,252 26,820,360 Inventories (2) 43,458,778 38,563,826 Income tax receivable 906,000 906,000 Prepaid expenses 1,144,953 1,489,653 Deferred tax assets 1,665,000 2,456,400 ------------ ------------ Total current assets 85,562,677 70,246,745 PROPERTY AND EQUIPMENT, net of depreciation and amortization 7,596,998 11,287,281 GOODWILL 12,254,779 12,765,106 OTHER ASSETS 4,364,735 3,298,912 ------------ ------------ Total assets (4) $109,779,189 $ 97,598,044 ============ ============ The accompanying notes are an integral part of the condensed consolidated financial statements. 3 LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
September 29, December 31, 2001 2000 (Unaudited) ------------- ------------- CURRENT LIABILITIES Current maturities of long-term obligations (4) $ 1,707,422 $ 10,217,422 Notes payable, bank (4) 42,782,556 20,840,000 Accounts payable 5,625,563 6,312,829 Accrued expenses 5,016,292 5,116,735 ------------- ------------- Total current liabilities 55,131,833 42,486,986 LONG-TERM OBLIGATIONS (4) 5,423,792 188,653 COMPENSATION AND BENEFITS 5,437,657 5,427,533 ------------- ------------- Total liabilities 65,993,282 48,103,172 ------------- ------------- 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 22,097,634 27,806,599 Treasury stock (4,813,383) (4,813,383) ------------- ------------- Total shareholders' equity 43,785,907 49,494,872 ------------- ------------- Total liabilities and shareholders' equity $ 109,779,189 $ 97,598,044 ============= =============
The accompanying notes are an integral part of the condensed consolidated financial statements. 4 LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended September 29, September 30, September 29, September 30, 2001 2000 2001 2000 ------------------ ----------------- ---------------- ------------------ Net sales $39,617,138 $37,238,822 $94,839,511 $99,653,585 Cost of goods sold (3) 28,125,564 27,943,620 72,539,173 74,407,405 ------------------ ----------------- ---------------- ------------------ Gross profit 11,491,574 9,295,202 22,300,338 25,246,180 Selling & administrative expenses (3) 8,732,958 9,612,762 25,576,180 25,671,539 ------------------ ----------------- ---------------- ------------------ Operating income (loss) 2,758,616 (317,560) (3,275,842) (425,359) Non-operating income (expense) Interest expense (1,090,438) (1,045,938) (2,511,884) (2,324,391) Miscellaneous 20,848 (12,232) 78,761 85,660 ------------------ ----------------- ---------------- ------------------ (1,069,590) (1,058,170) (2,433,123) (2,238,731) Income (loss) before income taxes 1,689,026 (1,375,730) (5,708,965) (2,664,090) (benefit) Income taxes (benefit) (5) 0 (539,285) 0 (1,044,323) ------------------ ----------------- ---------------- ------------------ Net income (loss) $1,689,026 $(836,445) $(5,708,965) $(1,619,767) ================== ================= ================ ================== Basic income (loss) per share $0.29 $(0.14) $(0.97) $(0.27) ================== ================= ================ ================== Diluted income (loss) per share $0.29 $(0.14) $(0.97) $(0.27) ================== ================= ================ ================== Weighted average shares outstanding: Basic 5,874,449 5,874,449 5,874,449 6,007,661 Diluted 5,874,449 5,874,449 5,874,449 6,007,661
The accompanying notes are an integral part of the condensed consolidated financial statements. 5 LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 29, September 30, 2001 2000 ------------- ------------- Net cash used in operating activities $(17,411,916) $(23,856,390) ------------ ------------ Cash Flows from Investing Activities Purchase of property and equipment (1,453,317) (2,018,620) Proceeds from sale of property and equipment 1,323,507 47,600 Prepaid loan fees (923,784) 0 Other 163,797 (73,786) ------------ ------------ Net cash used in investing activities (889,797) (2,044,806) Cash Flows from Financing Activities Cash dividends paid 0 (828,678) Proceeds from short-term borrowings 21,942,555 28,727,000 Principal payments on long-term obligations (3,574,654) (1,263,245) Purchase of treasury stock 0 (2,125,000) ------------ ------------ Net cash provided by financing activities 18,367,901 24,510,077 Increase (decrease) in cash and cash equivalents 66,188 (1,391,119) Cash and cash equivalents: Beginning 10,506 2,021,747 ------------ ------------ Ending $ 76,694 $ 630,628 ============ ============ Supplemental information--cash payments (receipts) for: Interest $ 1,954,105 $ 2,116,766 ============ ============ Income taxes (refunds) $ 0 $ (910,599) ============ ============
The accompanying notes are an integral part of the condensed consolidated financial statements. 6 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, 2000. 2. INVENTORIES Inventories are comprised of the following: September 29, 2001 December 31, 2000 ------------------ ----------------- Raw materials $3,512,271 $4,311,131 Work-in process 631,526 1,193,950 Finished goods 40,915,819 35,222,782 LIFO reserve (1,600,838) (2,164,037) ----------- ----------- Total $43,458,778 $38,563,826 =========== =========== The inventory values at September 29, 2001 and December 31, 2000 are net of reserves to cover losses incurred in the disposition of slow moving, markdown and obsolete inventory. 3. SOURCING REALIGNMENT CHARGE As discussed in the Company's Form 10-Q for the quarter ended June 30, 2001, the Company initiated a strategic realignment of its sourcing for rubber footwear during the second quarter of 2001. In connection with this realignment, the Company has already 7 closed and sold its manufacturing facility located in La Crosse, Wisconsin. The Company has also eliminated certain footwear offerings and related raw materials, reduced administrative support services and incurred other expenses in connection with the strategic realignment. The realignment activities were primarily completed in the second and third quarters of 2001 with the balance to be completed in the fourth quarter of 2001 and the first half of 2002. The following table summarizes the activity and remaining liabilities associated with the sourcing realignment activities at September 29, 2001:
Severance Other and Related Exit Costs Inventories Costs Total Amounts initially recognized as charges in $ 490 $ 1,019 $ 943 $ 2,452 the June 30, 2001 condensed consolidated statement of operations Disposal of inventories (356) (356) Payments and other adjustments (226) ____ (444) (670) ------- ------- ------- ------- Balance at September 29, 2001 $ 264 $ 663 $ 499 $ 1,426 ======= ======= ======= =======
As of September 29, 2001 workforce terminations totaling 127 employees have occurred in the areas of manufacturing (105) and supervisory and support personnel (22). 4. NOTES PAYABLE AND LONG-TERM OBLIGATIONS The Company completed a refinancing of its secured revolving credit facility with two asset based lenders on June 15, 2001. The existing $52.5 million revolving line of credit was replaced with a three year, $57.5 million revolving line of credit which requires certain levels of accounts receivable and inventory to support the borrowings. This new credit facility contains covenants regarding minimum availability, tangible net worth and capital expenditures. The interest rate for the revolving credit facility is either the prime rate plus .5% or LIBOR (for the applicable loan period) plus 2.75% compared to LIBOR plus 1.50% for the previous facility. In addition, the Company also restructured its term loan with Firstar Bank, N.A. The term loan was reduced to $7.5 million (compared to $10.1 million outstanding at December 31, 2000). The term loan calls for semi-annual payments of $750,000 with the loan maturing in May 2004. The term loan is secured by, among other thing, certain properties and equipment of the Company and a personal guarantee from the Company's principal shareholder. In the event of a sale of any of the secured properties and equipment, a portion of the net proceeds will be applied to the term loan. At the Company's option, the interest rate on the term loan is either the bank's prime rate or LIBOR plus 2.0%. 8 5. INCOME TAXES No provision for income tax benefit has been recorded during the nine months ended September 29, 2001 since the Company has no prior year taxes available for recovery from tax loss carryback and realization of benefit is uncertain at this time. 6. EARNINGS PER SHARE Because the Company has potential common stock outstanding, the Company is required to present basic and diluted earnings per share. Options to purchase shares of common stock were not included in the computation of diluted earnings per share for 2001 because to do so would be antidilutive. 7. PRONOUNCEMENTS ISSUED NOT YET ADOPTED In July 2001, the Financial Accounting Standards Board (FASB) issued two statements - Statement 141, Business Combinations and Statement 142, Goodwill and Other Intangible Assets, which will potentially impact the Company's accounting for its reported goodwill and other intangible assets. Statement 141 requires that all business combinations be accounted for using the purchase method and requires that intangible assets that meet certain criteria be reported separately from goodwill. Statement 142 eliminates the amortization of goodwill and other intangibles that are determined to have an indefinite life and requires, at a minimum, annual impairment tests for goodwill and other intangible assets that are determined to have an indefinite life. Upon adoption of these Statements, the Company is required to re-evaluate goodwill and other intangible assets that arose from business combinations entered into before July 1, 2001 and reassess the useful lives of intangible assets and adjust the remaining amortization periods accordingly. The Company has not yet completed its full assessment of the effects of these Statements on its financial statements and so is uncertain as to the impact. The Statements are generally required to be implemented by the Company in its 2002 financial statements. In September 2001, the FASB issued Statement 143, Asset Retirement Obligations. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Statement will be effective for the Company's fiscal year ending December 2003. The Company has not yet completed its full assessment of the effects of this Statement on its financial statements and so is uncertain as to the impact. In August 2001, the FASB issued Statement 144, Accounting for Impairment or Disposal of Long-Lived Assets. This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Statement will be effective for the Company's fiscal year ending December 2002. The Company has not yet completed its full assessment of the effects of this Statement on its financial statements and so is uncertain as to the impact. 9 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.
2001 2000 ---------------------------------------------------------------------- ------------------------- Realignment Before Realignment and and Impairment Impairment Charge Charge As Reported As Reported $000 % $000 $000 % $000 % ------------- -------- --------------- --------- --------- ------------ --------- Net Sales Third Quarter 39,617 100.0 0 39,617 100.0 37,239 100.0 First Nine Months 94,840 100.0 0 94,840 100.0 99,654 100.0 Gross Profit Third Quarter 11,492 29.0 0 11,492 29.0 9,295 25.0 First Nine Months 25,970 27.4 (3,670) 22,300 23.5 25,246 25.3 Selling & Administrative Expenses Third Quarter 8,733 22.0 0 8,733 22.0 9,613 25.8 First Nine Months 24,927 26.3 (649) 25,576 27.0 25,671 25.8 Non-operating Expenses Third Quarter 1,070 2.7 0 1,070 2.7 1,058 2.9 First Nine Months 2,433 2.6 0 2,433 2.6 2,239 2.2 Income (Loss) Before Income Tax (Benefit) Third Quarter 1,689 4.3 0 1,689 4.3 (1,376) (3.7) First Nine Months (1,390) (1.5) (4,319) (5,709) (6.0) (2,664) (2.7)
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 ending September 29, 2001 should not be considered to be indicative of results to be reported for the balance of the fiscal year. 10 Three Months Ended September 29, 2001 Compared to Three Months Ended September 30, 2000 Net Sales Net sales for the three months ended September 29, 2001 increased $2,378,000, or 6%, to $39,617,000 from $37,239,000 for the three months ended September 30, 2000. The increase in net sales during the quarter was driven by a 19% increase of LaCrosse(R) branded sales through the retail channel of distribution and an 11% increase in sales of Danner(R) branded product. These increases were driven by improved availability of sourced product and marketplace acceptance of new product offerings. This increase was partially offset by a 17% decrease in sales through the industrial channel, which is a result of the slowing of the industrial sector industries and distributors. Gross Profit Gross profit for the three months ended September 29, 2001 increased 24% to $11,492,000, or 29.0% of net sales, from $9,295,000, or 25.0% of net sales, in the third quarter of 2000. The increase in gross profit as a percentage of net sales was primarily the result of higher margins on the increasing volume of sourced product and the reduction of underabsorbed overhead due to the elimination of manufacturing at the La Crosse, Wisconsin manufacturing facility. Selling and Administrative Expenses Selling and administrative expenses in the third quarter of 2001 decreased 9% to $8,733,000, or 22.0% of net sales, from $9,613,000, or 25.8% of net sales, in the third quarter of 2000. The decrease in selling and administrative expenses for the third quarter of 2001 compared to the third quarter of 2000 was primarily the result of a reduction in spending on sales and marketing programs coupled with the impact of the cost reductions implemented over the past year. Non-operating Expenses Non-operating expenses for the three months ended September 29, 2001 increased 1% to $1,070,000, or 2.7% of net sales, from $1,058,000, or 2.9% of net sales, for the three months ended September 30, 2000. The increase was the result of an increase in interest expense which was due to the impact of recording interest rate swap agreements at fair market value ($268,000) as required by Statement of Financial Accounting Standards No. 133, which was adopted during the first quarter of 2001. This increase in interest expense was partially offset by lower interest expense on borrowings, which was the result of lower average borrowings during the quarter coupled with lower interest rates (the result of lower market rates). 11 Nine Months Ended September 29, 2001 Compared to Nine Months Ended September 30, 2000 Net Sales Net sales for the nine months ended September 29, 2001 decreased $4,814,000, or 5%, to $94,840,000 from $99,654,000 for the first nine months of 2000. The decrease in net sales during the first nine months of the year was due to the impact of the softening economy on retailers and industrial distributors, outages in certain products during the first half of the year (partially as a result of the transitioning to more sourced product) and a reduction in promotional programs in the retail channel of distribution for LaCrosse(R) branded products during the first half of the year. Gross Profit Excluding the sourcing realignment and impairment charge in 2001, gross profit for the nine months ended September 29, 2001 increased 3% to $25,970,000, or 27.4% of net sales, from $25,246,000, or 25.3% of net sales, in the first nine months of 2000. The increase in gross profit as a percentage of net sales was primarily the result of higher margins on the increasing volume of sourced product and the reduction in underabsorbed overhead due to the elimination of manufacturing at the La Crosse, Wisconsin manufacturing facility. In addition, the Company's overall product mix was weighted more heavily towards the higher gross margin items sold through the retail channel of distribution. Selling and Administrative Expenses Excluding the sourcing realignment and impairment charge in 2001, selling and administrative expenses in the first nine months of 2001 decreased 3% to $24,927,000, or 26.3% of net sales, from $25,671,000, or 25.8% of net sales in the first nine months of 2000. The decrease in selling and administrative expenses for the first nine months of 2001 compared to the first nine months of 2000 was primarily due to the impact of the cost reductions implemented during the past year. Non-operating Expenses Non-operating expenses in the first nine months of 2001 increased 9% to $2,433,000, or 2.6% of net sales, from $2,239,000, or 2.2% of net sales, for the first nine months of 2000. The increase was primarily the result of an increase in interest expense which was due to the impact of recording interest rate swap agreements at fair market value ($453,000) as required by Statement of Financial Accounting Standards No. 133, which was adopted during the first quarter of 2001. This increase was substantially offset by lower interest expense on borrowings, which was the result of lower average borrowings coupled with lower interest rates. 12 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 a 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 $17.4 million in the first nine months of 2001 compared to $23.9 million in the first nine months of 2000. The net loss reported in the first nine months of 2001 was $4.1 million greater than last year, however, this was more than offset by a smaller increase in accounts receivable (an $11.5 million increase in the first nine months of 2001 compared to an $17.9 million increase in the first nine months of 2000) and a $4.9 million increase in inventories (compared to a $6.8 million increase in the first half of 2000). The smaller increase in accounts receivable was driven by higher shipments in the fourth quarter of 2000 (as compared to the fourth quarter of 1999). Net cash used in investing activities was $.9 million in the first nine months of 2001 compared to $2.0 million in the first nine months of 2000. A $.5 million reduction in purchases of property and equipment (a result of reduced manufacturing activity) and the sale of property and equipment from the La Crosse, Wisconsin manufacturing facility (which was closed in June 2001) were the reasons for the decrease in cash used in investing activities. These decreases were partially offset by loan fees associated with the new credit agreement. Net cash provided by financing activities was $18.4 million in the first nine months of 2001 compared to $24.5 million in the first nine months of 2000. During the first nine months of 2001, the Company borrowed $21.9 million in short-term borrowings which were used for capital expenditures ($1.5 million) and repayment of long-term debt ($3.6 million), with the balance primarily used to fund operating activities. 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), to repay long-term debt ($1.3 million) and to purchase treasury stock ($2.1 million), with the balance primarily used to fund operating activities. In March 2000, the Company repurchased 500,000 shares of common stock in a private transaction at the market price. The transaction value was $2.1 million. In June 2001, the Company refinanced its secured revolving credit facility with two asset based lenders, with General Electric Capital Corporation serving as the lead lender. Under the terms of the new three year credit agreement, the revolving line of credit was increased to $57.5 million, which requires certain levels of accounts receivable and inventory to support the borrowings, from the previous maximum of $52.5 million. At the Company's option, the interest rate on borrowings under the line of credit is either the prime rate plus .5% or LIBOR (for the applicable loan period) plus 2.75%. In addition, the credit agreement requires the Company to maintain certain levels of net availability (depending on the time of the year) and to meet certain tangible 13 net worth requirements on a quarterly basis. As of September 29, 2001, the Company exceeded the net availability requirement by $4.6 million and the tangible net worth requirement by $.8 million. The Company believes this new credit facility will be adequate to meet cash requirements for capital expenditures and operating cash flows. In conjunction with refinancing the line of credit, the Company also refinanced its term loan with Firstar Bank, N.A. The amount of the new term loan is $7.5 million, compared to $10.1 million (which was outstanding at December 31, 2000). The term loan expires May 28, 2004 and calls for semi-annual payments of $750,000 commencing in November of 2001. The term loan is secured by, among other things, certain properties and equipment of the Company and a personal guarantee from the Company's principal shareholder. In the event of a sale of any of the secured properties and equipment, a portion of the net proceeds will be applied to the term loan. At the Company's option, the interest rate on the term loan is either the bank's prime rate or LIBOR plus 2.0%. On May 11, 2001, the Company announced a strategic realignment of its sourcing for rubber footwear. In connection with this realignment, the Company has ceased manufacturing at its La Crosse, Wisconsin manufacturing facility, eliminated certain footwear product offerings and related raw material inventories, reduced administrative support services and incurred other expenses. Workforce reductions of approximately 135 production, supervisory and support personnel employees have been or will be implemented, primarily in manufacturing. It is expected that the realignment actions will reduce fixed costs and lower the total cost of rubber footwear products. The realignment activities were primarily completed in the second and third quarters of 2001 with the balance to be completed in the fourth quarter of 2001 and the first half of 2002. The Company intends to outsource the majority of the product from lower total cost sources (primarily in the Far East). This change in sourcing allows the Company to move to a more variable cost structure going forward. The Company recorded a sourcing realignment and impairment charge of approximately $4.3 million during the second quarter of 2001 as a result of the elimination of manufacturing at the La Crosse, Wisconsin manufacturing facility. This charge was for impairment of the La Crosse, Wisconsin manufacturing facility and related production equipment, impairment of raw materials, components and finished goods as a result of the change in sourcing, employee related costs, a partial curtailment of a pension plan and other exit costs. The Company does not expect this change in sourcing to have a significant impact on sales or cash flow. On August 1, 2001, the Company announced that it sold its principal manufacturing facility in La Crosse, Wisconsin and some related assets. The Company realized net proceeds from this transaction of approximately $1.1 million and used the proceeds to pay down debt. The loss on the sale of the facility was covered in the impairment charge recognized in the second quarter of 2001. On August 1, 2001, the Company announced that it will be relocating its corporate headquarters and certain other functions from La Crosse, Wisconsin to Portland, Oregon. The Company will be located in the existing facility occupied by Danner Shoe Manufacturing Co., a subsidiary of the Company. The Company anticipates being able to reduce staffing levels within the Company 14 as a result of this move. The number of personnel to be relocated is less than ten with the moves anticipated in the third and fourth quarters of 2001 and the first quarter of 2002. As a result of the relocation of the Company's headquarters, the Company reevaluated its current enterprise software system and came to the decision in August of 2001 to utilize the enterprise software system already in use at the Company's Danner Shoe Manufacturing Company subsidiary. As a result of this decision, the useful life of the current enterprise software system was reduced to thirteen months from approximately five and one-half years. This resulted in additional amortization expense of approximately $100,000 during the third quarter of 2001 and will result in additional amortization expense of approximately $300,000 during each of the next four quarters. Commencing in the fourth quarter of 2001, the Company began experiencing some problems in collecting trade accounts receivable from several customers. The Company is not currently able to determine whether this difficulty is related to the weak overall economy in the United States or whether there are problems specific to the particular customers. The Company is not currently able to determine what impact, if any, this development will have on the Company. In June 2001, the Company closed its manufacturing facility in La Crosse, Wisconsin. Since that date, the Company has experienced higher than normal workmen's compensation claims from employees who were laid off as part of that plant closing. The Company is evaluating such workmen's compensation claims, but is currently unable to determine what impact, if any, these increased workmen's compensation claims may have on the Company. In July 2001, the Financial Accounting Standards Board (FASB) issued two statements - Statement 141, Business Combinations and Statement 142, Goodwill and Other Intangible Assets, which will potentially impact the Company's accounting for its reported goodwill and other intangible assets. Statement 141 requires that all business combinations be accounted for using the purchase method and requires that intangible assets that meet certain criteria be reported separately from goodwill. Statement 142 eliminates the amortization of goodwill and other intangibles that are determined to have an indefinite life and requires, at a minimum, annual impairment tests for goodwill and other intangible assets that are determined to have an indefinite life. Upon adoption of these Statements, the Company is required to re-evaluate goodwill and other intangible assets that arose from business combinations entered into before July 1, 2001 and reassess the useful lives of intangible assets and adjust the remaining amortization periods accordingly. The Company has not yet completed its full assessment of the effects of these Statements on its financial statements and so is uncertain as to the impact. The Statements are generally required to be implemented by the Company in its 2002 financial statements. In September 2001, the FASB issued Statement 143, Asset Retirement Obligations. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Statement will be effective for the Company's fiscal year ending December 2003. The Company has not yet completed its full assessment of the effects of this Statement on its financial statements and so is uncertain as to the impact. 15 In August 2001, the FASB issued Statement 144, Accounting for Impairment or Disposal of Long-Lived Assets. This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Statement will be effective for the Company's fiscal year ending December 2002. The Company has not yet completed its full assessment of the effects of this Statement on its financial statements and so is uncertain as to the impact. 16 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, 2000. PART II - Other Information ITEM 6 Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended September 29, 2001. 17 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: November 9, 2001 By: /s/ Joseph P. Schneider ---------------------------------------- Joseph P. Schneider President and Chief Executive Officer Date: November 9, 2001 By: /s/ Robert J. Sullivan ---------------------------------------- Robert J. Sullivan Vice President-Finance and Administration And Chief Financial Officer (Principal Financial and Accounting Officer) 18 -----END PRIVACY-ENHANCED MESSAGE-----