-----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, DunHfpMRAf2zCXCfSGE37bNu3Cxa1CAaZ8kgryPxE7HgvLVudl3zlDEWDXo38lNL r59KVumry9RhcXGCYMQ2Kw== 0000897069-02-000869.txt : 20021108 0000897069-02-000869.hdr.sgml : 20021108 20021108142556 ACCESSION NUMBER: 0000897069-02-000869 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020928 FILED AS OF DATE: 20021108 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: 02813944 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 slp429.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 28, 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. -------------------------------------------------------------- (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.) 18550 NE Riverside Parkway Portland, Oregon 97230 ------------------------------------------------------------------------ (Address, zip code of principal executive offices) (503) 766-1010 ------------------------------------------------------------------- (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, 2002: 5,874,449 shares LaCrosse Footwear, Inc. Form 10-Q Index For Quarter Ended September 28, 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 Item 4. Controls and Procedures 14 PART II. Other Information Item 1. Legal Proceedings 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 Certifications 17 Exhibit Index 19 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) September 28, December 31, 2002 2001 ------------- ------------ Assets (Unaudited) Current Assets: Cash and cash equivalents $ -- $ 271 Accounts receivable, net 24,898 18,865 Inventories (2) 27,268 34,371 Prepaid expenses, deferred tax assets and other 3,287 2,880 -------- -------- Total current assets 55,453 56,387 Property, plant and equipment, net 5,202 7,222 Goodwill, net (6) 10,753 11,781 Deferred tax assets and other 1,975 3,926 -------- -------- Total assets $ 73,383 $ 79,316 ======== ======== Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term obligations $ 1,599 $ 1,599 Notes payable, bank 21,260 17,645 Accounts payable 4,596 6,205 Accrued expenses 2,807 3,085 -------- -------- Total current liabilities 30,262 28,534 Long-term obligations 3,609 4,432 Compensation and benefits 3,892 4,805 -------- -------- Total liabilities 37,763 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 13,932 19,857 Less cost of 843,178 shares of treasury stock (4,813) (4,813) -------- -------- Total shareholders' equity 35,620 41,545 -------- -------- Total liabilities and shareholders' equity $ 73,383 $ 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 Nine Months Ended September 28, September 29, September 28, September 29, 2002 2001 2002 2001 ---------------------------------------------------------- Net sales $ 29,155 $ 39,617 $ 71,951 $ 94,839 Cost of goods sold (3) 20,267 28,126 53,031 72,539 -------- -------- -------- -------- Gross profit 8,888 11,491 18,920 22,300 Selling and administrative expenses (3) 7,590 8,732 23,611 25,576 -------- -------- -------- -------- Operating income (loss) 1,298 2,759 (4,691) (3,276) Non-operating income (expense): Interest expense (474) (1,091) (1,344) (2,512) Miscellaneous 39 21 138 79 -------- -------- -------- -------- (435) (1,070) (1,206) (2,433) -------- -------- -------- -------- Income (loss) before income tax benefit 863 1,689 (5,897) (5,709) Provision for income tax benefit (4) -- -- (1,000) -- -------- -------- -------- -------- Net income (loss) before cumulative effect of change in accounting principle 863 1,689 (4,897) (5,709) Cumulative effect of change in accounting principle (6) -- -- (1,028) -- -------- -------- -------- -------- Net income (loss) $ 863 $ 1,689 $ (5,925) $ (5,709) ======== ======== ======== ======== Net income (loss) per common share before cumulative effect of change in accounting principle: Basic $ 0.15 $ 0.29 $ (0.83) $ (0.97) Diluted $ 0.15 $ 0.29 $ (0.83) $ (0.97) Cumulative effect of change in accounting principle: Basic $ -- $ -- $ (0.18) $ -- Diluted $ -- $ -- $ (0.18) $ -- Net income (loss) per common share: Basic $ 0.15 $ 0.29 $ (1.01) $ (0.97) Diluted $ 0.15 $ 0.29 $ (1.01) $ (0.97) 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) Nine Months Ended (Unaudited) September 28, September 29, 2002 2001 ---------------------------- Cash flows from operating activities: Net (loss) $ (5,925) $ (5,709) Adjustments to reconcile net (loss) to net cash used in operating activities: Depreciation and amortization 2,327 2,868 Loss on disposal and impairment charge for plant and equipment 624 1,844 Goodwill impairment charge 1,028 -- Changes in assets and liabilities: Trade accounts receivable (6,033) (11,490) Inventories 7,103 (4,895) Deferred taxes 1,472 -- Accounts payable (1,609) (687) Accrued expenses and other (1,406) 657 -------- -------- Net cash used in operating activities (2,419) (17,412) -------- -------- Cash flows from investing activities: Capital expenditures (644) (1,453) Proceeds from sale of property and equipment -- 1,324 Prepaid loan fees -- (924) Other -- 163 -------- -------- Net cash used in investing activities (644) (890) -------- -------- Cash flows from financing activities: Net proceeds from short-term borrowings 3,615 21,943 Principal payments on long-term obligations (823) (3,575) -------- -------- Net cash provided by financing activities 2,792 18,368 -------- -------- Net increase (decrease) in cash and cash equivalents (271) 66 Cash and cash equivalents: Beginning 271 11 -------- -------- Ending $ -- $ 77 ======== ======== Supplemental information Cash payments (refunds) for: Interest $ 1,391 $ 1,954 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 Income (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 (common stock equivalents) were exercised or converted into common stock at the beginning of the period, unless their effect would be anti-dilutive. Basic and diluted weighted average shares outstanding are the same for each period presented, as the inclusion in the calculation of diluted weighted average shares of any of the common stock equivalents outstanding would have an anti-dilutive effect. 6 e. Recently Issued Accounting Standards In April 2002, the FASB issued Statement 145, Rescission of FASB Statements No. 4, 44, and 64, Amendments of FASB Statement No. 13, and Technical Corrections. The Company does not believe that the adoption of this pronouncement will have a material effect on its financial statements. In June 2002, the FASB issued Statement 146, Accounting for Costs Associated with Exit or Disposal Activities. This Statement requires the recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred versus the date the Company commits to an exit plan. In addition, this Statement states that the liability should be initially measured at fair value. The Statement is effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not believe that the adoption of this pronouncement will have a material effect on its financial statements. 2. INVENTORIES Inventories are comprised of the following: (In thousands) September 28, December 31, 2002 2001 --------------- --------------- Raw materials $ 1,998 $ 1,913 Work in process 183 289 Finished goods 25,087 32,169 ------- ------- Total $27,268 $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 September 28, 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 September 28, 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:
Balance (In thousands) Balance Payments or September 28, December 31, 2001 New Charges Reserves Used 2002 ------------------- ------------ ----------------- ---------------- Inventory reserves $ 379 -- 379 $ -- Severance and related costs -- -- -- -- ------------------- ------------ ----------------- ---------------- Total $ 379 -- 379 $ -- =================== ============ ================= ================
7 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 was recorded in selling and administrative expenses. We eliminated 91 administrative, distribution and production positions in Racine. The activity is as follows:
Balance (In thousands) Balance Payments or September 28, December 31, 2001 New Charges Reserves Used 2002 ------------------- ------------ ----------------- ---------------- Facility shutdown reserves $ -- 1,000 -- $ 1,000 ------------------- ------------ ----------------- ---------------- Total $ -- 1,000 -- $ 1,000 =================== ============ ================= ================
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 carryback 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 first nine months of 2002, we generated a $2.3 million deferred tax asset related to net operating losses, but $1.3 million of this was offset by a corresponding increase in the deferred tax valuation allowance. 5. STOCK OPTION GRANTS During 2002, the Board of Directors granted options to purchase approximately 163,000 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 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: 8 (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 September 28, 2002 $ -- $10,753 $ 10,753 ============= ============ ============
Had SFAS 142 been effective at the beginning of 2001, the non-amortization provisions would have had the following effect on the third quarter and nine month results:
3 months ended 9 months ended ----------------------------- ---------------------------- SFAS 142 effect on net income (loss) September 28, September 29, September 28, September 29, (In thousands) 2002 2001 2002 2001 --------------- ------------- -------------- ------------- Reported net income (loss) $ 863 $ 1,689 $ (5,925) $ (5,709) Add back: Goodwill amortization -- 148 -- 445 --------------- ------------- -------------- ------------- Adjusted net income (loss) $ 863 $ 1,837 $ (5,925) $ (5,264) Add back: Cumulative effect of change in accounting principle -- -- 1,028 -- --------------- ------------- -------------- ------------- Adjusted income (loss) before cumulative effect of change in accounting principle $ 863 $ 1,837 $ (4,897) $ (5,264) =============== ============= ============== ============= 3 months ended 9 months ended ----------------------------- ---------------------------- Earnings (loss) per share September 28, September 29, September 28, September 29, 2002 2001 2002 2001 --------------- ------------- -------------- ------------- Reported basic and diluted income (loss) per share $ 0.15 $ 0.29 $ (1.01) $ (0.97) Add back: Goodwill amortization -- 0.02 -- 0.07 --------------- ------------- -------------- ------------- Adjusted basic and diluted income (loss) per share $ 0.15 $ 0.31 $ (1.01) $ (0.90) Add back: Cumulative effect of change in accounting principle -- -- 0.18 -- --------------- ------------- -------------- ------------- Adjusted basic and diluted income (loss) per share before cumulative effect of change in accounting principle $ 0.15 $ 0.31 $ (0.83) $ (0.90) =============== ============= ============== =============
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 our 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 Nine Months Ended ----------------------------------------- ---------------------------------------- September 28, September 29, % September 28, September 29, % 2002 2001 Change 2002 2001 Change -------------- -------------- ---------- ------------- -------------- --------- Net Sales $29,155 $39,617 (26.4) $71,951 $94,839 (24.1) Gross Profit 8,888 11,491 (22.7) 18,920 22,300 (15.2) Selling and Administrative Expenses 7,590 8,732 (13.1) 23,611 25,576 (7.7) Non-Operating Expenses 435 1,070 (59.3) 1,206 2,433 (50.4) Income Tax Benefit -- -- -- 1,000 -- 100.0
Our 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 28, 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 September 28, 2002 decreased $10.5 million, or 26.4%, to $29.2 million from $39.6 million from the respective period in 2001. The decrease in net sales was due to a 41.3% decrease in the retail channel of distribution of LaCrosse(R) brand products, a 15.6% decline in shipments in the industrial channel of distribution of LaCrosse(R) and Rainfair(R) brand products, offset by a 1.7% increase in shipments for the Danner(R) brand over the same period of last year. These decreases were the result of a continued softening economy on retailers and industrial distributors coupled with tighter inventory management by our channel partners, reduced fall pre-season orders and our decision to reduce the number of products offered through the retail and industrial channels. The retail channel experienced a $1.4 million decrease in shipments of sporting products from the third quarter of last year primarily due to our customers efforts to reduce their stock on hand. In addition, shipments in the pac boot product line were down $4.1 million compared to the third quarter of 2001 due to inventory management objectives of timing product receipts with anticipated shipments and stock-keeping units (SKU) reductions over the past two fiscal years (due to excess inventory, obsolete styling and eliminating unprofitable styles). Further, our children's fashion line has declined $1.7 million from the third quarter of 2001 as a result of our decision to no longer sell in the insulated children's boot market. Net sales for the nine months ended September 28, 2002 decreased $22.8 million, or 24.1%, to $72.0 million from $94.8 million for the comparable nine months of 2001. The decrease in net sales during the nine months was due to a 38.1% decrease in the retail channel of distribution of LaCrosse(R) brand products and a 25.3% 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 5.1% of the decrease in net sales for the industrial division is due to a reduction in apparel shipments to a mass merchant and another 7.1% 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 2.6% 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 September 28, 2002 decreased to $8.9 million, or 30.5% of net sales, from $11.5 million, or 29.0% of net sales, for the third quarter of 2001. Gross margins have improved 2.7% over the third quarter of the prior year due to a larger portion of our sales being from products manufactured outside the United States. These margin improvements were offset by $0.2 million of costs incurred in closing the industrial division manufacturing facility. Gross profit for the nine months ended September 28, 2002 decreased to $18.9 million, or 26.3% of net sales, from $22.3 million, or 23.5% of net sales, for the same period of 2001. The net increase in gross profit as a percent of sales is primarily due to our focus of shifting to higher margin sourced quality products and a one-time charge of $3.7 million during the first half of 2001 related to closing the La Crosse factory. Selling and Administrative Expenses Selling and administrative expenses decreased $1.1 million, or 13.1%, to $7.6 million for the quarter ended September 28, 2002 compared to $8.7 million for the same period a year ago. The decrease is primarily a result of reductions in sales commissions and distribution costs associated with the reduced sales volume. Selling and administrative expenses decreased $2.0 million, or 7.7%, to $23.6 million for the nine months ended September 28, 2002 compared to $25.6 million for the same period a year ago. In the nine months ended September 28, 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 nine months of 2002 and 2001, we decreased selling and administrative expenses approximately $4.2 million mainly as a result of reductions in sales commissions and distribution costs associated with the reduced sales volume. The nine months ended September 29, 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 September 28, 2002 decreased 59.3% to $0.4 million, or 1.5% of net sales, from $1.1 million, or 2.7% of net sales, for the three months ended September 29, 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 nine months ended September 28, 2002 decreased 50.4% to $1.2 million, or 1.7% of net sales, from $2.4 million, or 2.6% of net sales, for the nine months ended September 29, 2001. The decrease is primarily the result of a decrease in interest expense that 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 carryback period for certain losses from two to five years. This law will allow us to use certain losses incurred during 2002 to reduce taxable income from 1997. During the first nine months of 2002, we generated a $2.3 million deferred tax asset related to net operating losses, but $1.3 million of 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 our 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 September 28, 2002, we had $21.3 million of outstanding borrowings under the credit agreement and unused availability of $10.4 million. Net cash used in operating activities was $2.4 million in the first nine months of 2002 compared to $17.4 million used in operating activities in the same period of 2001. In the first nine months of 2002, we incurred a loss of $5.9 million and an increase in accounts receivable of $6.0 million offset by decreases in inventory of $7.1 million. The increase in accounts receivable is normal for the period and the decrease in inventory is related to the implementation of our sales forecasting system to reduce the number of styles being offered and the success we had in selling closeouts during the first nine months of 2002. In the first nine months of 2001, accounts receivable increased $11.5 million, inventory increased $4.9 million, and a net loss of $5.7 million was incurred. These were offset by depreciation and amortization of $2.9 million, and a loss on disposal and impairment charge of plant and equipment of $1.8 million. Net cash used in investing activities was $0.6 million in the first nine months of 2002 compared to $0.9 million for the same period of 2001. The majority of the cash used in both years was for capital expenditures. Net cash provided by financing activities was $2.8 million in the first nine months of 2002 compared to $18.4 million provided by financing activities in the same period of 2001. During the first nine months of 2002, we borrowed $3.7 million in short-term borrowings and repaid $0.8 million in long-term obligations. In June 2001, we entered into a banking relationship with asset-based lenders. During the same period of 2001, we borrowed $21.9 million in short-term borrowings and repaid $3.6 million in long-term obligations. Due to the restructuring completed earlier this year, we were not in compliance with our tangible net worth covenants in our credit agreements' at the end of the second and third quarter of 2002. We will likely not be in compliance as of December 31, 2002. Our lenders have waived our violations for the second and third quarter of 2002. 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 slowdown 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 September 28, 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 September 28, 2002 totaled $15.5 million. Swap agreement rates are based on the three-month LIBOR rate. Based on average floating rate borrowings outstanding throughout the first nine months of 2002, a 100-basis point change in LIBOR would have caused our monthly interest expense to change by approximately $9,000. We believe that these amounts are not material to our earnings. 13 ITEM 4. Controls and Procedures (a) Within the 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information relating to our company (including our consolidated subsidiary) required to be included in our periodic SEC filings. (b) There have been no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the date we carried out this evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 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. In October 2002, we received a letter from a public interest environmental group alleging that we are in violation of product labeling requirements contained in the California Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65 or the Act). The Act requires, among other things, that manufacturers of products sold in California provide "clear and reasonable warning" if the product contains a chemical listed by the State of California as a carcinogen or reproductive toxicant above "No Significant Risk Levels." In our situation, the environmental group alleges polyvinyl chloride (PVC) in our rainwear products contains lead and/or lead compounds above the California standards. If in fact, the lead or lead compounds exceed the California standards, we plan to take the appropriate corrective or remedial action warranted. While the maximum statutory penalties for violating Proposition 65 are severe, we do not believe that violations, if any, of Proposition 65 by us will have a material adverse effect on us, or our business, operations or financial position. ITEM 5. Other Information Our Board of Directors ("Board") is seeking up to two additional directors, at least one of which has a strong sales and marketing background in consumer products. The Board is looking for prospective directors that meet the Nasdaq standard for "independent" directors. While the Board pursues its search process, the Board has determined that it is appropriate to keep Luke E. Sims as a member of its Audit Committee even though he is not viewed as "independent" under Nasdaq rules (because of his position as a partner in the law firm of Foley & Lardner, which has served as general counsel for us since 1982). Because of a recent director resignation, the Board does not currently have any other "independent" directors that could fill a vacancy on the Audit Committee if Mr. Sims left that Committee. Accordingly, Mr. Sims' departure from the Audit Committee would only serve to reduce the human resources available to the Audit Committee at a time when the Audit Committee's role and responsibilities are expanding. The Board has determined that the next qualified "independent" director that joins the Board will be invited to serve on the Audit Committee to fill the vacancy created by Mr. Sims' anticipated departure from that Committee. 14 ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits (4.1) First amendment dated August 12, 2002, to Credit Agreement dated June 15, 2001, by and among LaCrosse Footwear, Inc., as borrowers, and U.S. Bank National Association (f/k/a Firstar Bank, N.A., the lender). (4.2) Limited Waiver and Amendment No. 3 to Credit Agreement, dated as of June 28, 2002, to Credit Agreement dated as of June 15, 2001 by and among LaCrosse Footwear, Inc. and Danner, Inc. as borrowers, and General Electric Capital Corporation and the CIT Group/Commercial Services, Inc. as lenders. (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. 15 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 8, 2002 By: /s/ Joseph P. Schneider -------------------------------- Joseph P. Schneider President and Chief Executive Officer Date: November 8, 2002 By: /s/ David P. Carlson -------------------------------- David P. Carlson Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 16 CERTIFICATIONS I, Joseph P. Schneider, certify that: 1. I have reviewed this quarterly report on Form 10-Q of LaCrosse Footwear, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a)designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b)evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c)presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 8, 2002 By: /s/ Joseph P. Schneider ------------------------------- Joseph P. Schneider President and Chief Executive Officer 17 CERTIFICATIONS I, David P. Carlson, certify that: 1. I have reviewed this quarterly report on Form 10-Q of LaCrosse Footwear, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a)designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b)evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c)presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 8, 2002 By: /s/ David P. Carlson -------------------------------- David P. Carlson Executive Vice President and Chief Financial Officer 18 LaCrosse Footwear, Inc. Exhibit Index to Quarterly Report on Form 10-Q for the Quarter ended September 28, 2002 Exhibit No. Exhibit Description (4.1) First amendment, dated August 12, 2002, to Credit Agreement dated June 15, 2001, by and among LaCrosse Footwear, Inc., as borrowers, and U.S. Bank National Association (f/k/a Firstar Bank, N.A., the lender). (4.2) Limited Waiver and Amendment No. 3 to Credit Agreement, dated as of June 28, 2002, to Credit Agreement dated as of June 15, 2001 by and among LaCrosse Footwear, Inc. and Danner, Inc. as borrowers, and General Electric Capital Corporation and the CIT Group/Commercial Services, Inc. as lenders. (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 19 EX-4.1 3 slp429d.txt FIRST AMENDMENT TO CREDIT AGREEMENT FIRST AMENDMENT TO CREDIT AFREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (THE "First Amendment"), dated as of August 12, 2002, amends the Credit Agreement (the "Credit Agreement") dated as of June 15, 2001 by and between Lacrosse Footwear, Inc. (the "Borrower") and U.S. Bank National Association (f/k/a Firstar Bank, N.A., the "Lender"). 1. Definitions. Capitalized items not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement. 2. Amendments. The parties hereby agree to amend the Credit Agreement as follows: (A) Section 7.12(b) is deleted in its entirety and the following inserted in its place: (B) "Danner" means Danner, Inc., a Wisconsin corporation formerly known as Danner Shoe Manufacturing Co. and a wholly-owned subsidiary of the Borrower." (b) "Minimum Tangible Net Worth. Borrower and its Subsidiaries on a consolidated basis shall have, at the end of each fiscal quarter set forth below, Tangible Net Worth equal to or greater than: $23,882.00 as of the fiscal quarter ending on or about September 30, 2001; $25,920.00 as of the fiscal quarter ending on or about December 31, 2001; $21,920.00 as of the fiscal quarter ending on or about March 31, 2002; $20,220.00 as of the fiscal quarter ending on or about June 30, 2002; $20,500.00 as of the fiscal quarter ending on or about September 30, 2002; $23,000.00 as of the fiscal quarter ending on or about December 31, 2002; $21,920.00 as of the fiscal quarter ending on or about March 31,2003; $21,920.00 as of the fiscal quarter ending on cor about June 30, 2003; $23,920.00 as of the fiscal quarter ending on or about September 30, 2003; $25,920.00 as of the fiscal quarter ending on or about December 31, 2003; $21,920.00 as of the end of each fiscal quarter occurring thereafter." (C) Section 9.2 is amended by deleting the notice provision pertaining to the Borrower (but not the notice provision pertaining to Borrower's counsel) and inserting the following in its place: "LaCrosse Footwear, Inc. Attn: President 18550 NE Riverside Parkway Portland, Oregon 97230-4975" 3. Conditions Precedent. This First Amendment shall become effective on the date that the Lender shall have received: (i) this First Amendment, duly executed by an authorized representative of the Borrower; (ii) the certificate required by Section 6.1 (d) of the Credit Agreement for the fiscal quarters ending on or about December 31, 2001 and March 31, 2002; (iii) a First Amendment to the Subsidiary Security Agreement in the form of Exhibit A attached hereto; and (iv) such additional supporting documents and materials as the Lender or its counsel may reasonably request on or before the date hereof. 4. Representations and Warranties. The Borrower certifies that the representations and warranties contained in the Credit Agreement are true and correct as of the date of this First Amendment, and that, after giving effect to the amendments set forth in Section 2 hereof, no condition, event, act or omission has occurred which, with the giving of notice or passage of time, or both, would constitute an Event of Default under the Credit Agreement. 5. Full Force and Effect. Except as provided herein, all of the terms and conditions set forth in the Credit Agreement, and all additional documents entered into in connection with the Credit Agreement, shall remain unchanged and shall continue in full force and effect as originally set forth; without limiting the generality of the foregoing, the Borrower hereby confirms its obligation to deliver the certificate required by Section 6.1(d) of the Credit Agreement on a timely basis. 6. Binding Effect. This First Amendment shall be binding upon the parties hereto and their respective successors and assigns. In witness whereof, THE PARTIES HERETO HAVE EXECUTED THIS first Amendment to Credit Agreement as of the date first set forth above. LACROSSE FOOTWEAR, INC. By: /s/ ------------------------------ Title: __________________________ U.S. BANK NATIONAL ASSOCIATION (f/k/a Firstar Bank, N.A.) By: /s/ ------------------------------ Title: __________________________ EX-4.2 4 slp429c.txt AMENDMENT NO. 3 AMENDMENT NO. 3 TO CREDIT AGREEMENT This AMENDMENT NO. 3 TO CREDIT AGREEMENT (this "Amendment") is entered into as of this 28th day of June, 2002, by and among LACROSSE FOOTWEAR, INC., a Wisconsin corporation ("Lacrosse"), DANNER SHOE MANUFACTURING CO., a Wisconsin corporation ("Danner" together with Lacrosse, collectively the "Borrowers" and individually, a Borrower), GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("Agent"), for itself as a Lender and as Agent for Lenders, and the other Lenders signatory hereto. Unless otherwise specified herein, capitalized terms used in this Amendment shall have the meanings ascribed to them in Schedule A to the Credit Agreement (as hereinafter defined). RECITALS WHEREAS, the Borrowers, Agent and Lenders have entered into that certain Credit Agreement, dated as of June 15, 2001, as previously amended (as amended, the "Credit Agreement"); and WHEREAS, the Borrowers, Agent and Lenders desire to waive certain provisions of the Credit Agreement and otherwise amend the Credit Agreement as herein set forth. NOW THEREFORE, in consideration of the foregoing recitals, mutual agreements contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Agent, Lenders and the Borrowers agree as follows: SECTION 1 Amendments. (a) Subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, Annex G of the Credit Agreement is hereby amended by amending Section (c) thereto read as follows: (c) Minimum Tangible Net Worth. Borrowers and their Subsidiaries on a consolidated basis shall have, at the end of each Fiscal Quarter set forth below, Tangible Net Worth equal to or greater than: $23,882,000 as of the Fiscal Quarter ending on or about September 30, 2001; $25,920,000 as of the Fiscal Quarter ending on or about December 31, 2001; $21,920,000 as of the Fiscal Quarter ending on or about March 31, 2002; $20,620,000 as of the Fiscal Quarter ending on or about June 30, 2002; $22,620,000 as of the Fiscal Quarter ending on or about September 30, 2002; $25,920,000 as of the Fiscal Quarter ending on or about December 31, 2002; $21,920,000 as of the Fiscal Quarter ending on or about March 31, 2003 $21,920,000 as of the Fiscal Quarter ending on or about June 30, 2003 $23,920,000 as of the Fiscal Quarter ending on or about September 30, 2003 $25,920,000 as of the Fiscal Quarter ending on or about December 31, 2003 $21,920,000 as of the end of each Fiscal Quarter occurring thereafter SECTION 2 Covenant. On or before July 28, 2002, the Borrowers shall deliver to the Agent an operating plan of the Borrowers, on a consolidated and consolidating basis, in form and substance satisfactory to the Agent and containing the same statements, assumptions and information required in the operating plan otherwise required to be delivered pursuant to Section (c) of Annex E to the Credit Agreement, covering the time period beginning January 1, 2003 and ending June 30, 2004 (such satisfactory operating plan referred to herein as the "Amendment Operating Plan"). The Agent and the Lenders agree to review and evaluate the Amendment Operating Plan within thirty days of receipt to determine the feasibility of resetting or redefining the financial covenant requirements currently contained in the Credit Agreement in such a way as is mutually acceptable to the Borrowers, the Agent and the Lenders including, without limitation, a fixed charge coverage ratio. SECTION 3 Conditions to Effectiveness. This Amendment shall be effective upon satisfaction of the following conditions precedent: (a) This Amendment shall have been executed and delivered by Lenders and the Borrowers. (b) The representations and warranties contained herein shall be true and correct in all respects. (c) The Borrowers shall have paid to the Agent, for the ratable benefit of the Lenders, an amendment fee in the amount of $20,000, such amendment fee to be non-refundable, fully earned and payable on the date hereof. SECTION 4 Representations And Warranties Of Credit Parties. (a) The execution, delivery and performance by each Borrower of this Amendment has been duly authorized by all necessary corporate action and this Amendment is a legal, valid and binding obligation of such Borrower enforceable against such Borrower in accordance with its terms, except as the enforcement thereof may be subject to (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and (ii) general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law); (b) Each of the representations and warranties contained in the Credit Agreement is true and correct in all material respects on and as of the date hereof as if made on the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date; and (c) Neither the execution, delivery and performance of this Amendment by each Borrower nor the consummation of the transactions contemplated hereby does or shall contravene, result in a breach of, or violate (i) any provision of such Borrower's certificate or articles of incorporation or bylaws, (ii) any law or regulation, or any order 2 or decree of any court or government instrumentality, or (iii) any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Borrower or any of its Subsidiaries is a party or by which such Borrower or any of its Subsidiaries or any of their property is bound, except in any such case to the extent such conflict or breach has been waived by a written waiver document, a copy of which has been delivered to Agent on or before the date hereof. SECTION 5 Reference To And Effect Upon The Credit Agreement. (a) Except as specifically set forth above, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (b) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Agent or any Lender under the Credit Agreement or any Loan Document, nor constitute amendment of any provision of the Credit Agreement or any Loan Document, except as specifically set forth herein. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby. SECTION 6 Costs And Expenses. As provided in Section 11.3 of the Credit Agreement, Borrowers agree to reimburse Agent for all fees, costs and expenses, including the fees, costs and expenses of counsel or other advisors for advice, assistance, or other representation in connection with this Amendment. SECTION 7 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS. SECTION 8 Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purposes. SECTION 9 Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original, but all such counterparts shall constitute one and the same instrument. (signature page follows) 3 [Signature Page to Amendment No. 3 to Credit Agreement] IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment No. 1 as of the date first written above. LACROSSE FOOTWEAR, INC. By: /s/ Name: Title: DANNER SHOE MANUFACTURING CO. By: /s/ Name: Title: GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender By: /s/ Duly Authorized Signatory THE CIT GROUP/COMMERCIAL SERVICES, INC. as Lender By: /s/ Name: Title: [Signature Page to Amendment No. 3 to Credit Agreement] EX-99.1 5 slp429a.txt CERTIFICATION OF PRESIDENT AND CEO Written Statement of the President and Chief Executive Officer Pursuant to 18 U.S.C. ss.1350 Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned President and Chief Executive Officer of LaCrosse Footwear Inc. (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 28, 2002 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Joseph P. Schneider - ---------------------------- Joseph P. Schneider November 8, 2002 EX-99.2 6 slp429b.txt CERTIFICATION OF EXEC. VICE PRESIDENT AND CFO Written Statement of the Executive Vice President and Chief Financial Officer Pursuant to 18 U.S.C. ss.1350 Solely for the purposes of complying with 18 U.S.C. ss.1350, I, the undersigned Executive Vice President and Chief Financial Officer of LaCrosse Footwear Inc. (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 28, 2002 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ David P. Carlson - --------------------------- David P. Carlson November 8, 2002 -----END PRIVACY-ENHANCED MESSAGE-----