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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
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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: 000-23800
LaCrosse Footwear, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin
(State or other jurisdiction
of incorporation or organization)
39-1446816
(I.R.S. Employer Identification No.)
17634 NE Airport Way
Portland, Oregon
(Address of principal executive offices)
97230
(Zip code)
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Registrants telephone number, including area code:
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(503) 262-0110 |
Securities registered pursuant to Section 12(b) of the Act:
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Title of Class:
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Exchange on which securities are registered: |
Common Stock, $.01 par value
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NASDAQ Global Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark whether the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes o No þ
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.(Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller Reporting Company þ |
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(Do not check if a smaller reporting company ) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
Aggregate market value of the voting and non-voting common equity held by nonaffiliates of the
registrant at June 26, 2009: $42,204,979.
Number of shares of the registrants common stock outstanding at February 26, 2010: 6,403,514
shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Companys 2010 Annual Meeting of Shareholders have been
incorporated by reference into Part III of this Form 10-K. The Proxy Statement is expected to be
filed with the Commission within 120 days after December 31, 2009, the end of the Companys fiscal
year.
Forward Looking Statements
This Annual Report on Form 10-K, including Managements Discussion and Analysis of Financial
Condition and Results of Operations in Item 7, contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. The Company may also make
forward-looking statements in other reports filed with the SEC, in materials delivered to
stockholders and in press releases. In addition, the Companys representatives may from time to
time make oral forward-looking statements.
Forward-looking statements relate to future events and typically address the Companys expected
future business and financial performance. Words such as plan, expect, aim, believe,
project, target, anticipate, intend, estimate, will, should, could and other terms
of similar meaning, typically identify such forward-looking statements. In particular, these
include statements about the Companys strategy for growth, product development, market position,
future performance or results of current or anticipated products, interest rates, foreign exchange
rates, future financial results, impact of the expansion of our domestic production capacity,
future business volumes with the U.S. government, future cash dividend policies, the adequacy of
our existing resources and anticipated cash flows from operations to satisfy our working capital
needs, and the outcome of contingencies, such as legal proceedings. The Company assumes no
obligation to update or revise any forward-looking statements.
Forward-looking statements are based on certain assumptions and expectations of future events and
trends that are subject to risks and uncertainties. Actual future results and trends may differ
materially from historical results or those reflected in any such forward-looking statements
depending on a variety of factors. Discussion of these factors is incorporated by reference from
Part I, Item 1A, Risk Factors, and should be considered an integral part of Part II, Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations.
PART I
Item 1. Business
Unless the context requires otherwise, references in this Annual Report to we, us or our
refer collectively to LaCrosse Footwear, Inc. and its subsidiaries.
General
LaCrosse Footwear, Inc. (LaCrosse or the Company) is a leading developer and marketer of
branded, premium and innovative footwear for work and outdoor users. Our trusted Danner®
and LaCrosse® brands are distributed domestically through a nationwide network of
retailers and distributors, and internationally through our Danish subsidiary, LaCrosse Europe ApS,
and through distributors and retailers in Asia, Europe and Canada. Work customers include people in
law enforcement, transportation, mining, oil and gas, military services and other occupations that
need high-performance and protective footwear as a critical tool for the job. Outdoor customers
include people active in hunting, hiking and other outdoor recreational activities.
Company History
LaCrosse traces its roots back to 1897, with the founding of La Crosse Rubber Mills, a manufacturer
of rubber and vinyl footwear. Located in La Crosse, Wisconsin, the original company was purchased
from the founders in 1982 by George Schneider and the Schneider family. We have established a
highly loyal following among laborers and outdoorsmen operating in severe cold or wet environments.
In 1994, we expanded our brand portfolio through the acquisition of Danner Shoe Manufacturing, a
premium maker of leather boots since 1932, located in Portland, Oregon. Danner had developed a
strong reputation among loggers, shipyard workers and outdoor enthusiasts.
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We have continued to expand our corporate focus on transitioning from primarily manufacturing to a
stronger emphasis on product development and marketing, outsourcing approximately two-thirds of our
total production. For over 25 years, Danner, Inc. has distributed high-end Danner products through
our exclusive distributor in Japan.
In 2005, we opened our first international office in China to diversify our manufacturing capacity
and ensure our high quality standards. In 2006, we opened our new Danner distribution center and
corporate headquarters in Portland, Oregon. In 2008, LaCrosse Europe, Inc. and its wholly-owned
subsidiary, LaCrosse Europe ApS, were established in Copenhagen, Denmark, to acquire certain assets
of our former European distributor and to strengthen LaCrosses direct sales and marketing support
to customers in Europe. In 2009, we opened our new Midwest distribution center for our LaCrosse
brand in Indianapolis, Indiana. In 2010, we plan to open our new Danner factory and factory store
in Portland, Oregon. Our new, world-class Danner factory will significantly increase our capacity
to meet the growing worldwide demand from our many customers in the work, military, law
enforcement, outdoor recreation, hunting and Japanese markets who depend on our U.S.-manufactured
Danner® footwear being crafted to the very highest standards. Our new factory store will provide
increased floor space to showcase more products and highlight the Danner craftsmanship story.
Corporate Strategy
Our corporate strategic initiatives include the following:
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Build identity, expand awareness and create demand for the Danner and LaCrosse brands. |
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Identify and develop new products and technologies that can be leveraged across multiple
market segments. |
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Increase demand through our four distribution channels and two market categories. |
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Improve operational efficiency. |
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Maximize return on human capital. |
Brand Positioning
Within our four channels of distribution, we market footwear under the DANNER® and
LACROSSE® brands and apparel under the LACROSSE® brand. One of our
fastest growing channels is the government channel in which we position the Danner®
brand as performance footwear built to meet the unique demands and specific requirements for
multiple branches of the U.S. military as well as federal, state and other governmental agencies.
From a direct consumer standpoint, we believe each brand is positioned uniquely in the marketplace
to capitalize on differences in end user expectations for performance, price, and function. The
DANNER® brand represents the highest level of performance, with a select line of high
quality, feature-driven leather footwear products at premium prices. The LACROSSE®
brand has a broader product line across multiple price points, from better grade to premium grade,
including rubber and leather footwear as well as a line of rainwear and protective clothing.
Products
Our branded product offerings for the work and outdoor markets include the following brands:
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Danner
The Danner brand is known for crafting higher standards in premium footwear, with rugged designs
that exceed customer expectations for performance and quality, and with classic outdoor heritage
and authentic character. The brand represents the highest level of performance and features with a
select line of high-quality, feature-driven footwear products at premium prices. Danner products
consist of premium quality work and outdoor boots with many features including our stitch-down
manufacturing process, which provides outstanding support and built-in comfort. Danner was the
first footwear manufacturer to include a waterproof, breathable GORE-TEX® liner in its
leather boots. Danners product offerings include product categories such as uniform, hunting,
work, hiking and accessories.
LaCrosse
The LaCrosse brand builds products designed to help you dominate your ground whether in work or
recreation. Among our target customers, the LaCrosse brand is known for high performance in the
field and on the job. Designed for durability and reliability, LaCrosse boots are built to satisfy
specific end-user needs, such as being protective against water, extreme cold, chemicals and other
harsh environments. LaCrosses product offerings include product categories such as hunting, work,
cold weather, apparel and accessories.
Styles
During 2009, we offered 424 styles of footwear and protective clothing. The percentage of net
sales into work markets in 2009, 2008 and 2007 were approximately 63%, 59% and 52%, respectively
and sales to outdoor markets were approximately 37%, 41% and 48%, respectively.
Product Design and Development
Our product design and development concepts originate from our staff and through communication with
our customers and suppliers. We stay in constant contact with our customers to understand consumer
demand and trends. Product concepts are based upon perceived consumer needs and may include new
technological developments in footwear, apparel and materials.
Consumers, sales representatives and suppliers all provide information to our marketing and product
development personnel during the concept, development and testing of new products. Our marketing
and product development personnel, at times in conjunction with design consultants, determine the
final aesthetics of the product. Once a product design is approved for production, responsibility
may be shared with outside sourcing facilities or with our domestic manufacturing facility for
pattern development and commercialization. Our presence in Portland, Oregon provides access to a
broad talent pool of footwear and apparel design professionals.
Customers, Sales, and Distribution Channels
We market our two brands through four channels of distribution: (1) wholesale (formerly known as
retail), (2) government, (3) consumer direct, and (4) international.
Within the wholesale channel, the LACROSSE® and DANNER® brands are marketed
through our employee field sales staff and certain independent distributors. A national account
sales team complements the sales activities for the brands.
Our wholesale channel accounts consist of over 3,300 customers, including sporting goods and
outdoor retailers, general merchandise and independent shoe stores, wholesalers, and industrial
distributors. Our customer base is also diversified as to size and location of customers and
markets served.
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The government channel provides performance footwear built to meet the demands and specific
requirements for multiple branches of the U.S. military as well as federal, state, and other
government agencies. For example, the Danner Marine Hot boot is specifically built with
performance materials to mitigate heat. In addition, we produce the Mountain Cold Weather Boot for
the U.S. Marine Corps which is built with extreme abrasion resistance, unique construction and a
supportive Vibram® 360 outsole, to enhance performance in extreme mountain conditions
and climates. These products are manufactured in the Companys ISO 9001 certified manufacturing
facility located in Portland, Oregon. In addition to receiving direct orders for these products
from the respective branches of the military, Danner military products are also available through
retail and exchange stores on U.S. Marine Corps, U.S. Army, and U.S. Air Force bases, and on
Danners web site (www.danner.com).
Through the consumer direct channels of distribution, we currently operate four Internet websites
for use by consumers and retailers. The primary purposes of the consumer-oriented websites are to
provide product and company information and to sell products to consumers who choose to purchase
directly from us.
We operate a factory store adjacent to our factory in Portland, Oregon. The factory store sells
first quality products, factory seconds, and slow-moving merchandise for both DANNER®
and LACROSSE® brands. In January, 2010, we signed a lease to relocate our factory store
in Portland, Oregon, approximately one mile from its current location. Refer to Item 2.
Properties in this form 10-K.
International sales are primarily derived through our Japanese and Canadian independent
distribution and dealer networks as well as our subsidiary LaCrosse Europe ApS, which was
established in 2008 to acquire certain assets of our former European distributor and to strengthen
our direct sales and marketing support to customers in Europe.
In addition to our four channels of distribution, we sell our products into two primary markets:
work and outdoor. Work consumers include people in law enforcement, transportation, mining, oil and
gas exploration and extraction, construction, military services and other occupations that require
high-performance and protective footwear as a critical tool for the job. Outdoor consumers
include people active in hunting, hiking and other outdoor recreational activities.
Advertising and Promotion
We create customized advertising and marketing materials and programs for each brand and
distribution channel, which allows us to emphasize relevant product features that have special
appeal to the applicable targeted consumer.
We advertise and promote our products through a variety of methods including national and regional
print advertising, public relations, point-of-sale displays, catalogs and packaging, product
licensing agreements and sponsorships, online promotion and co-promotion with dealers and
suppliers. Our largest initiatives include:
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Marketing development funds, which include advertising and local retail partner events,
are funds provided by the Company to help retail customers market and sell Danner and
LaCrosse products; |
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Marketing material updates, website upgrades, point-of-purchase and related advertising;
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Visual merchandising, which focuses on all branded point-of-sale development and
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We believe that once consumers understand the features and benefits of our products, they will be
more likely to become loyal consumers. As such, we are committed to ensuring that the benefits,
features and advanced technologies of all our products are clearly articulated at our customers
retail stores. We have established retail store education programs in which we send representatives
to train the sales associates of key retailers. We coordinate with retail store managers to
improve product positioning and point-of-sale information displays.
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Manufacturing and Sourcing
Manufacturing Overview
We source approximately two-thirds of the products we sell through a network of international
contract manufacturers, primarily in China and Thailand, with the remaining one-third manufactured domestically
in our 36,000 square foot facility in Portland, Oregon. In February, 2010, we signed a
multi-tenant lease to move our Danner factory to an industrial building approximately one mile from
our corporate headquarters. The new factory will be approximately 59,000 square feet,
significantly expanding our existing Portland-based factory, which is being replaced. Our new
production facility will significantly increase our capacity to meet the growing demand from our
many customers in the work, military, law enforcement, outdoor recreation, hunting and Japanese
markets who depend on our U.S.-manufactured Danner® footwear being crafted to the very highest
standards. Our new facility will also enable us to extend this great tradition of superior
craftsmanship. Furthermore, we expect this state-of-the-art facility will allow us to continue to
innovate with new footwear designs and production processes by expanding our overall capabilities
and capacity. The new factory will also improve our operating efficiencies by incorporating the
latest lean manufacturing techniques to meet at-once demand. Refer to Item 2. Properties in this
form 10-K for more information.
Sourcing Overview
In 2005, we formed LaCrosse International, Inc., a wholly owned subsidiary with an office in
Zhongshan, China. LaCrosse International has three primary functions:
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Work with suppliers to maintain our standards for high quality products; |
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Locate and develop relationships with complementary sourcing alternatives; and |
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Increase speed to market for new products. |
We do not have any long-term contracts with our manufacturers, choosing instead to retain the
flexibility to re-evaluate our sourcing and manufacturing decisions. In addition, substantially
all of our transactions with our foreign contract manufacturers are denominated in U.S. dollars.
However, these U.S. dollar prices are impacted by foreign currency exchange rates and commodity
prices. We regularly evaluate our vendors primarily on the quality of their work, cost and ability
to deliver on time. Approximately two-thirds of our outsourced products are purchased from three
foreign manufacturers located in China. Alternate sources of capacity for these products are
available worldwide.
The raw materials used in production of our products are primarily leather, crude rubber and
oil-based vinyl compounds for protective clothing products. We have historically been able to
recover any significant increases in raw material costs through price increases.
Both our contract manufacturers and our domestic manufacturing facility purchase
GORE-TEX® waterproof fabric directly from W.L. Gore and Associates (Gore), for both
the LaCrosse and Danner footwear. GORE-TEX® is a registered trademark of Gore. Gore
has traditionally been one of Danners largest suppliers in terms of dollars spent on raw
materials. Over 75% of Danner styles are GORE-TEX® lined. We have contracts with Gore
that are terminable by either party upon 180 days written notice. We believe our relationship with
Gore is good. In the event the relationship was to terminate, we have identified other sources of
products with similar characteristics.
Competition
The categories of the footwear and apparel markets in which we operate are highly competitive. We
compete with numerous other manufacturers and distributors, many of whom have substantially greater
financial,
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distribution and marketing resources than we do. Because we have a broad product line,
our competition varies by product category. We believe that we maintain a competitive position
through the strength of our brands, our attention to quality, delivery of value, position as an
innovator, our record of delivering products on a timely basis, strong customer relationships, and,
in some cases, the breadth of our product line.
Certain of our competitors in leather footwear categories have strong brand name recognition in the
markets they serve and are the major competitors of our DANNER® and LACROSSE®
leather product lines. These competitors manufacture domestically and/or import products from
offshore. Domestically manufactured DANNER® brand products are generally at a price
disadvantage against lower-cost imported products. Danner focuses on the premium quality, premium
price segment of the market in which product function, design, comfort, quality, continued
technological improvements, brand awareness, and timeliness of product delivery are the overriding
characteristics that consumers demand. By devoting attention to these factors, we believe that the
DANNER® footwear line has maintained a strong competitive position in our market niches.
Several rubber boot marketers with strong brand recognition in their respective markets are
competitors of the LaCrosse® brand. We occupy a favorable niche in the higher price
segments of the work and outdoor rubber boot markets. Our history of supplying quality rubber
boots, all of which are currently sourced from overseas suppliers, has provided a foundation to
compete effectively. Other suppliers offer similar products, some at lower prices and quality
levels, against which we must effectively compete. We believe that our superior quality products,
innovation and design leadership, coupled with solid delivery and customer support enables us to
effectively compete in this market.
Employees
As of December 31, 2009, we had 445 employees located in the United States, 11 employees in China
and 6 in Denmark, substantially all of whom are full-time. Approximately 250 employees in our
Portland, Oregon facilities are represented by the United Food & Commercial Workers Union (UFCW)
under a collective bargaining agreement that will expire in January 2012.
Trademarks and Trade Names; Patents
We own United States federal registrations for several of our marks, including
LACROSSE®, DANNER®, BURLY®, ALPHA-BURLY®, the stylized
Indianhead design that serves as our logo, ICE KING®, ICEMAN®, TERRA
FORCE®, HYPER-DRI®, CAMOHIDETM, ACADIA®, QUAD
COMFORT®, STRIKER®, PRONGHORNTM, and TFX®. We
generally attempt to register a trademark relating to a products name only when we intend to
heavily promote the product or where we expect to sell the product in large volumes. However, we
rely on common law trademark rights for all unregistered brands. We defend our trademarks and
trade names against infringement to the fullest extent practicable under the law. Each federally
registered trademark is renewable indefinitely if the trademark is still in use at the time of
renewal.
We also own several United States patents and have other technologies that are patent-pending at
this time. Our portfolio of patents extends as far as 2027, with none expiring prior to 2011.
Seasonality
Sales have been historically higher during the second half of the year due primarily to greater
consumer demand for our outdoor product offerings during the fall and winter months. Accordingly,
the amount of fixed
operating expenses represents a larger percentage of net sales in the first two quarters than in
the last two quarters of each year. We expect this seasonality to continue in the coming periods.
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We place orders for products sourced from overseas suppliers during the first quarter with
anticipated deliveries starting late in the second quarter. As a result, our inventories generally
peak early in the third quarter, and then trend down to the end of year.
Factors other than seasonality could have a significant impact on our sales backlog and therefore,
our backlog at any one point in time may not be indicative of future results.
Foreign Operations and Sales Outside of the United States
As previously noted, we maintain offices in China and Denmark to support our contract manufacturers
and European sales staff, respectively. Our net sales outside of the Unites States are through our
own European distributor and a focused set of independent distributors, and such sales accounted
for approximately 5%, 6% and 7% of our net sales in 2009, 2008 and 2007, respectively.
Included in the Companys consolidated balance sheets at December 31, 2009 and 2008 are the net
assets of approximately $2.7 million and $1.4 million, respectively. The net book value of fixed
assets located outside of the U.S. totaled $0.5 million and $0.6 million at December 31, 2009 and
2008, respectively. Such assets consist primarily of manufacturing assets, office equipment and
software.
Environmental Matters
We are subject to environmental laws and regulations concerning emissions to the air, discharges to
waterways and the generation, handling, storage, transportation, treatment and disposal of waste
materials. Such laws and regulations are constantly evolving and it is difficult to accurately
assess the effect they will have on our operations in the future.
Compliance with federal, state and local requirements which have been enacted or adopted regulating
the discharge of materials into the environment, or otherwise relating to the protection of the
environment, have not had, nor are they anticipated to have in the future, a material effect on our
capital expenditures, earnings or competitive position.
Executive Officers of the Registrant
The following table lists the names, ages and titles of our executive officers. All executive
officers serve at the discretion of the Companys Board of Directors.
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Joseph P. Schneider
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President, Chief Executive Officer and Director |
David P. Carlson
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Executive Vice President, Chief Financial Officer, and Secretary |
Ross M. Vonhoff
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Senior Vice President Operations |
C. Kirk Layton
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Vice President of Finance and Assistant Secretary |
J. Gary Rebello
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Vice President of Human Resources |
Kirk S. Nichols
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Vice President of Sales |
Where You Can Find More Information
We file annual reports, quarterly reports, current reports, proxy statements and other information
with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 as
amended (Exchange Act). Copies of our reports, proxy statements and other information filed with
the SEC are available for inspection at the offices of the SECs Public Reference Room, 100 F
Street NE, Washington, D.C. 20549. The SEC may be contacted at 1-800-SEC-0330 for further
information. The SEC maintains an Internet
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site at www.sec.gov where SEC filings can be
obtained. We also make available on our corporate website at www.lacrossefootwearinc.com,
our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange
Act as soon as reasonably practicable after they are filed electronically with the SEC. The
information found on our website is not part of this Form 10-K. Our investor relations department
can also be contacted for such reports at (800) 654-3517.
Item 1A. Risk Factors
In evaluating the Company, careful consideration should be given to the following risk factors, in
addition to the other information included in this Annual Report on Form 10-K. Each of these risk
factors could adversely affect the Companys business, operating results and/or financial
condition, as well as adversely affect the value of an investment in the Companys common stock. In
addition to the following disclosures, please refer to the other information contained in this
report, including the consolidated financial statements and the related notes.
Sales to the U.S. Government, which are becoming an increasingly significant portion of our net
sales, may not continue at current levels, or we may not be able to fill these orders due to
facility constraints.
Our ability to continue to generate sales growth in this channel is partially dependent upon the
current U.S. governments policies regarding troop deployments in various global regions requiring
our specialized footwear. Additionally a substantial portion of our U.S. government sales must be
produced by our domestic manufacturing facility. We plan to move into a new Danner factory in
Portland, Oregon and begin production during the third quarter of 2010. If the final construction,
permits and government approvals of the new facility and the related operating systems are delayed,
or if the transition of inventories between the locations is interrupted, we may experience
disruptions in manufacturing and shipping products to our customers or higher initial start-up
costs than originally planned. Any such delay or disruption would adversely affect our results of
operations. Being unable to fill orders on a timely basis could cause us to lose future orders from
these sources and other customers in the work, law enforcement, Japanese and other markets who
depend on our U.S.-manufactured Danner footwear being crafted to the very highest standards and
being delivered on schedule. Given that such orders can be sporadic, we may incur fixed costs
associated with this operation even if the orders do not support such levels of fixed costs. If
government orders do not continue at current levels, or if we are unable to fill orders, it would
have a negative impact on our earnings.
For all of our distribution channels, including domestic retailers, a deterioration in the general
business environment and lack of growth in consumer spending due to unfavorable economic and
consumer credit conditions could create an environment of increasing price discounts which would
negatively impact our product revenues, gross margins and earnings.
Our success in generating sales of our products to consumers depends upon a number of factors,
including economic factors impacting disposable consumer income. These economic factors include
considerations such as employment, general business conditions, consumer confidence, prevailing
interest rates and changes in tax laws. In addition, spending patterns of consumers may be affected
by changes in the amount or severity of inclement weather, the acceptability of U.S. brands in
international markets and the growth or decline of global footwear markets.
Lack of consumer spending may negatively impact our domestic wholesale partners, which impacts
their financial operations and their access to capital to fund growth, which increases and
concentrates our credit risk.
A contraction in consumer spending and tightening of credit markets creates an unfavorable
business environment for our wholesale partners, especially those who use debt to finance their
inventory purchases and other operating capital requirements. If our wholesale partners are unable
to obtain financing for their inventory
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purchases and to fund their operations, it could result in
delayed payment or non-payment of amounts owed to us and/or a reduction in the number of sales we
make to such wholesale partners, either of which could have a material adverse effect on our
results of operations.
Changes in the price or availability of raw materials could disrupt our operations and adversely
affect our financial results, particularly our gross margins.
We purchase raw materials and component parts from various suppliers to be used in the
manufacturing of our products. Changes in our relationships with suppliers or increases in the
costs of purchased raw materials or component parts could result in manufacturing interruptions,
delays, inefficiencies or our inability to successfully market our products. These occurrences
would negatively affect our business, product gross margins and results of operations.
Our product costs are subject to risks associated with foreign currency fluctuations (particularly
with respect to the Chinese Renminbi and Euro), oil price increases and higher foreign labor costs.
If we are unable to increase our selling prices to offset such cost increases, our revenues and
earnings would be negatively impacted.
If petroleum costs were to increase, it could result in significantly higher freight costs to our
company, as we rely on transport companies to deliver our products from abroad to our distribution
centers, and in some cases directly to our customers. Increased petroleum costs also affects our
manufacturing costs. Foreign currency fluctuations and increased labor cost abroad would be
problematic given our dependence on manufacturing in China and distribution through our European
subsidiary. Our profit margins may increase or decrease as foreign currency rates, prices of
petroleum, and the cost of foreign labor fluctuate and we are unable to pass on those changing
costs to our customers.
We are experiencing consolidation in our raw materials supply base for outsoles and leather, which
presents overall risks in our supply base.
Interruptions in supply of raw materials or increased costs for such raw materials could negatively
impact both our domestic manufacturing facility as well as products produced by our international
manufacturing partners, both of which could negatively impact our customer relationships, our
ability to fill current and future orders and our results of operations.
Our European subsidiary, LaCrosse Europe ApS, increases our exposure to risks associated with
foreign operations and the outsourcing of our European distribution center.
Foreign operations through our European subsidiary increases our exposure to risks associated with
foreign currency transactions and compliance with foreign laws. Also, our distribution center for
Europe is owned and managed by an independent third party, which increases our risks associated
with inventory management and timely and accurate customer shipments. Any negative outcome related
to these risks would have an adverse impact on our results of operations.
Our profitability is significantly dependent upon future effective tax rates for federal, state and
international taxing jurisdictions.
Tax rates on corporations may be increased in future periods. Higher effective federal, state and
international tax rates would lower our earnings performance and restrict our ability to invest in
various areas of our business. Future changes to rates of taxation in areas outside of the U.S.
could also negatively impact our future earnings performance.
-9-
We conduct a significant portion of our manufacturing activities and a certain portion of our net
sales occurs outside the U.S.; therefore we are subject to the risks of international commerce.
Also, any adverse political conditions or governmental actions, including the imposition of duties
and quotas, internally within China (where the majority of our third party manufacturers are
concentrated) or externally with NAFTA countries and the European Union could disrupt our supply of
product to customers.
We use third party manufacturers located in foreign countries, primarily in China and Thailand, to
manufacture the majority of our products, including all of our LACROSSE® branded
products. Foreign manufacturing and sales activities are subject to numerous risks, including the
following:
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delays associated with the manufacture, transportation and delivery of
foreign-sourced products; |
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|
tariffs, import and export controls and other non-tariff barriers such as quotas and
local content rules; |
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|
delays in the transportation and delivery of goods due to increased security
concerns; |
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|
foreign currency fluctuations (particularly with respect to the Chinese Renminbi and
Euro), a risk which we do not currently seek to mitigate through hedging transactions; |
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restrictions on the transfer of funds; |
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changing economic conditions; |
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restrictions, due to privacy laws, on the handling and transfer of consumer and other
personal information; |
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changes in governmental policies and regulations; |
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political unrest, terrorism or war, any of which can interrupt commerce; |
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expropriation and nationalization; |
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difficulties in managing foreign operations effectively and efficiently from the
U.S.; |
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difficulties in understanding and complying with local laws, regulations and customs
in foreign jurisdictions; |
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limited capital of foreign distributors and the possibility that such distributors
may terminate their operations or their relationships with us; and |
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concentration of credit risk, currency, and political risks associated with
international distributors. |
Additionally, although net sales outside of the U.S. did not constitute a significant portion of
our revenues in 2009, we expect our international sales will grow over the next few years. Our
ability to continue to do business in international markets is subject to risks associated with
international sales operations, as noted above, as well as the difficulties associated with
promoting products in emerging markets. We are also subject to additional risk as we have a
limited number of foreign distributors, who may have inadequate capital to continue operations over
the long-term. Sales to the international markets are achieved through those foreign distributors,
principally in Japan. Our sales and sales growth may be adversely affected if our relationships
with those distributors were to deteriorate and we are unable to engage suitable alternatives in a
timely manner.
-10-
Because we depend on third party manufacturers, we face challenges in maintaining a timely supply
of goods to meet sales demand, and we may experience delay or interruptions in our supply chain.
Any shortfall or delay in the supply of our products may decrease our sales and have an adverse
impact on our customer relationships.
Third party manufacturers produce approximately two-thirds of our footwear products. Currently, we
source footwear with third party manufacturers primarily located in China and Thailand. We depend
on these manufacturers ability to finance the production of goods ordered and to maintain adequate
manufacturing capacity. We do not exert direct control over the third party manufacturers, so we
may be unable to obtain timely delivery of acceptable products.
Due to various potential factors outside of our control, one or more of our third party
manufacturers may be unable to continue meeting our production requirements. Also, certain of our
third party manufacturers have manufacturing arrangements with companies that are much larger than
we are and whose production needs are much greater than ours. As a result, such manufacturers may
choose to devote additional resources to the production of products other than ours if capacity is
limited.
In addition, we do not have long-term supply contracts with these third party manufacturers, and
any of them could unilaterally terminate their relationship with us at any time or seek to increase
the prices they charge us. As a result, we are not assured of an uninterrupted supply of products
of an acceptable quality and price from our third party manufacturers. We may be unable to offset
any interruption or decrease in supply of our products by increasing production in our
company-operated manufacturing facility due to capacity constraints, and we may be unable to
substitute suitable alternative third party manufacturers in a timely manner or at acceptable
prices. Any disruption in the supply of products from our third party manufacturers may harm our
business and could result in a loss of sales and an increase in production costs, which would
adversely affect our results of operations.
Our business is substantially affected by weather conditions, and sustained periods of warm and/or
dry weather can negatively impact our sales. Additionally, such weather conditions may negatively
impact our inventory levels and subsequent period sales.
We sell our products into two primary markets, work and outdoor. For the year ended December 31,
2009, 37% of our annual revenues were to the outdoor market. This market category is highly
seasonal and weather dependent. Sales of these products are largely dependent on the timing and
severity of weather in the different regions of the United States and Europe. During sustained
periods of warm and/or dry weather conditions, certain key categories in the outdoor market may be
negatively impacted, including hunting, hiking and cold weather products, as consumers postpone
purchases of our products pending the resumption of more conducive weather patterns. Additionally,
given our advance ordering timelines, such reduced demand during normal outdoor market seasons may
also negatively impact our inventory levels and subsequent period profits as such excess
inventories are sold.
Failure to efficiently import foreign sourced products could result in decreased margins, cancelled
orders and unanticipated inventory accumulation.
Our business depends on our ability to source and distribute products in a timely manner. As a
result, we rely on the free flow of goods through open and operational ports worldwide. Labor
disputes at various ports create significant risks for our business, particularly if these disputes
result in work slowdowns, lockouts, strikes, or other disruptions during our peak importing
seasons, and could have a material adverse effect on our business, potentially resulting in
cancelled orders by customers, unanticipated inventory accumulation, and reduced revenues and
earnings.
-11-
Furthermore, many of our imported products are subject to duties, tariffs or quotas that affect the
cost and quantity of various types of goods imported into NAFTA or European Union countries and
into our other sales markets. The countries in which our products are produced or sold may adjust
or impose new quotas, duties, tariffs or other restrictions, any of which could have a material
adverse effect on us.
If we do not accurately forecast consumer demand, we may have excess inventory to liquidate or have
greater difficulty filling our customers orders, either of which could adversely affect our
business.
The footwear industry is subject to cyclical variations and declines in performance, as well as
fashion risks and rapid changes in consumer preferences, the effects of weather, general economic
conditions and other factors affecting demand. Furthermore, the footwear industry has relatively
long lead times for the design and manufacture of products. Consequently, we must commit to
production based on our forecasts of consumer demand.
If we overestimate demand for our products, we may be forced to liquidate excess inventories at a
discount to customers, resulting in markdowns and lower gross margins. Conversely, if we
underestimate consumer demand, we could have inventory shortages, which can result in lost
potential sales, delays in shipments to customers, strains on our relationships with customers and
diminished brand loyalty. A decline in demand for our products, or any failure on our part to
satisfy increased demand for our products, could adversely affect our business and results of
operations.
Labor disruptions or disruptions due to natural disasters or casualty losses at one of our
distribution facilities or our domestic manufacturing facility could have a material adverse effect
on our operations.
Some of our employees at our Danner distribution and manufacturing facilities are organized in a
labor union, the United Food and Commercial Workers Union. Our inability to renew on favorable
terms the collective bargaining agreement between us and the union that represents our employees,
or any strike, work stoppage or other labor disruption could impair our ability to adequately
supply our customers and could have an adverse effect on our results of operations.
In addition, any natural disaster or other serious disruption at one of these facilities, including
our non-union distribution facility in Indianapolis, Indiana, due to fire, earthquake, tornadoes,
flood, terrorist attack or any other natural or manmade cause could damage a portion of our
inventory or impair our ability to use our warehouse for our products. Any of these occurrences
could impair our ability to adequately supply our customers and could have an adverse effect on our
results of operations.
Our financial success may be limited by the strength of our relationships with our wholesale
customers and by the success of such wholesale customers.
Our financial success is significantly related to the willingness of our wholesale customers to
continue to carry our products and to the success of such customers in selling our products. We do
not have long-term contracts with any of our wholesale customers, and sales to our wholesale
customers are increasingly on an order-by-order basis and are subject to rights of cancellation and
rescheduling by the customer. If we cannot fill our wholesale customers orders in a timely manner,
the sales of our products and our relationships with those customers may suffer, and this could
have a material adverse effect on our sales and ability to grow our product line.
Our five largest wholesale customers accounted for approximately 15% of our revenues in 2009. If
any of our major wholesale customers experiences a significant downturn in their business or fails
to remain committed to our products or brands, then these customers may reduce or discontinue
purchases from us in the future. In addition, we extend credit to our customers based on an
evaluation of each customers financial condition. If a
-12-
significant customer to whom we have extended credit experiences financial difficulties, our bad
debt expense may increase relative to revenues in the future, which would adversely impact our net
income and cash flow.
We face significant competition and if we are unable to compete effectively, sales of our products
may decline and our business could be harmed.
The footwear industry is highly competitive. Some of our competitors have products with similar
characteristics, such as design and materials, with certain of our products. In addition, access to
offshore manufacturing is also making it easier for new companies to enter the markets in which we
compete.
The footwear industry includes footwear manufacturers, fashion-oriented footwear marketers,
vertically integrated specialty stores and retailers of private label products. Our principal
competitive differentiators include product design, product performance, quality, brand image,
marketing and promotion, customer support and service, the ability to meet delivery commitments to
retailers, and others. Certain of our competitors have:
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significantly greater financial resources than we have; |
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more comprehensive product lines than ours; |
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broader market presence than we have in retail outlets, or have their own retail
outlets; |
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greater distribution capabilities than we have; |
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stronger brand recognition than we have; and |
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substantially greater product advertising budgets than we do. |
Our competitors greater capabilities in these areas may enable them to better withstand periodic
downturns in the footwear industry, compete more effectively on the basis of price and production
and more quickly develop new products. In addition, a major marketing or promotional success or
technological innovation by one of our competitors could adversely impact our competitive position.
If we fail to compete successfully in the future, our sales and profits may decline and our
financial condition may deteriorate.
In addition, a growing trend in the footwear industry is for dealers and distributors to source
product directly from overseas manufacturers in order to increase profitability by eliminating the
wholesale distributor or manufacturer. While dealers and distributors have not historically
manufactured and developed new and innovative products, if consumers largely accept the directly
sourced products, it could have an adverse effect on our results of operations.
We may be unable to meet changing consumer preferences and demands.
The footwear industry is subject to rapid changes in consumer preferences. Our success depends in
large part on our ability to continuously develop, market and deliver innovative and functional
products that are competitive with other brands in our market. In addition, we must design and
manufacture products that appeal to many consumer markets at a range of price points. While we
continually update our product line with new and innovative products, our products may not continue
to be popular and new products we introduce may not achieve adequate consumer acceptance for us to
recover development, manufacturing, marketing and other costs. Our failure to anticipate, identify
and react to shifts in consumer preferences and maintain a strong brand image could adversely
affect our sales and results of operations.
Our failure or inability to protect our intellectual property could significantly harm our
competitive position and reduce future revenues.
Protecting our intellectual property is an important factor in maintaining our brand and our
competitive position in the footwear industry. If we do not or are unable to adequately protect
our intellectual property, our sales and profitability could be adversely affected. We currently
hold a number of patents and trademarks and have
patent and trademark applications pending. However, our efforts to protect our proprietary rights
may be
-13-
inadequate and applicable laws provide only limited protection. We have a number of
licensing agreements, both for product, camouflage patterns and trademarks, which are significant
to our business. If we are unable to renew the agreements, and suitable replacements are not
available in a timely manner, our revenues could be negatively impacted.
We depend on a limited number of suppliers for key production materials, and any disruption in the
supply of such materials could interrupt product manufacturing and increase product costs.
We depend on a limited number of sources for the primary materials used to make our footwear. For
example, we and our suppliers purchase GORE-TEX® waterproof fabric directly from W.L.
Gore and Associates (Gore), for both our LaCrosse and Danner footwear. Over three-fourths of
Danner styles are GORE-TEX® lined.
While we consider our relationship with Gore to be good, if Gore were to terminate our agreements,
the time required to obtain substitute materials could interrupt our production cycle.
Additionally, consumers may be unwilling to accept any such replacement material. Any termination
or delay in our supply of GORE-TEX® waterproof fabric or the loss of our ability to use
the GORE-TEX® mark in association with our products, or in the procurement of any other
key product component, could result in lost potential sales, delays in shipments to customers,
strained relationships with customers and diminished brand loyalty.
In order to be successful, we must retain and motivate key employees, and the failure to do so
could have an adverse impact on our business.
Our future success will depend in part on the continued service of key personnel. Our future
success will also depend on our ability to attract and retain key managers, product development
engineers, sales people, and others. We face intense competition for such individuals throughout
the footwear and work and outdoor products industries. Not being able to attract or retain these
employees could have a material adverse effect on our financial performance.
If we fail to comply with the covenants contained in our revolving credit facility, we may be
unable to maintain existing, or secure additional financing, and repayment obligations on any
outstanding indebtedness may be accelerated.
Our revolving credit facility contains financial and operating covenants with which we must comply.
Our continued compliance with these covenants is dependent on our financial results, which are
subject to fluctuation as described elsewhere in these risk factors. If we fail to comply with the
covenants in the future or if our lender does not agree to waive any future non-compliance, we may
be unable to borrow funds and any outstanding indebtedness could become immediately due and
payable, which could harm our business. At December 31, 2009 we had no outstanding borrowing under
this credit facility.
Our articles of incorporation, bylaws and Wisconsin corporate law each contain provisions that
could delay, defer or prevent a change in control of our company or changes in our management.
Among other things, these provisions:
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classify our board of directors so that only some of our directors are elected each
year; |
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do not permit cumulative voting in the election of directors, which would otherwise
allow less than a majority of stockholders to elect director candidates; and |
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establish advance notice and other procedural requirements for submitting nominations
for election to the board of directors and for proposing matters that can be acted upon by
stockholders at a meeting. |
-14-
These provisions could discourage proxy contests and make it more difficult for our stockholders to
elect directors and take other corporate actions, which may prevent a change of control and/or
changes in our management that a stockholder might consider favorable. In addition, Subchapter XI
of the Wisconsin Business Corporation Law includes provisions that may discourage, delay, or
prevent a change in control of us. Any delay or prevention of a change of control or change in
management that stockholders might otherwise consider to be favorable could cause the market price
of our common stock to decline.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The following table sets forth certain information, as of December 31, 2009, relating to our
principal facilities.
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PROPERTIES |
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Owned or |
|
Approximate Floor |
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|
Location |
|
Leased |
|
Area in Square Feet |
|
Principal Uses |
Portland, OR
|
|
Leased (1)
|
|
|
145,000 |
|
|
Principal sales,
marketing and executive
offices and
distribution facility |
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Portland, OR
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|
Leased (2)
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36,000 |
|
|
Manufacturing
operations and factory
store |
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Indianapolis, IN
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Leased (3)
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380,000 |
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Distribution facility |
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Zhongshan, China
|
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Leased (4)
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1,400 |
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Office space |
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Copenhagen, Denmark
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Leased (5)
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2,300 |
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Office space |
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Portland, OR
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Leased (6)
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1,800 |
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Office space |
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Portland, OR
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Leased (7)
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59,000 |
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Manufacturing operations |
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Portland, OR
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Leased (8)
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17,500 |
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Factory store |
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(1) |
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The lease term on the Single Tenant Industrial Lease is 120 months from August 1,
2006 and the Lease provides for potential term extensions of up to 60 months after the
original term. |
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(2) |
|
In December 2009, we signed a two month lease extension. The lease for this facility
expires on July 31, 2010. |
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(3) |
|
In June 2008, we signed a Single Tenant Industrial Lease for 124 months beginning
March 1, 2009. |
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(4) |
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The lease for this facility expires November, 2010. |
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(5) |
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The lease for this facility expires June, 2012. |
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(6) |
|
The lease for this facility expires in September 2010. This facility is currently
being sub-let to another tenant. |
-15-
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(7) |
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In February 2010, we signed a multi-tenant lease to relocate our Danner factory. The
lease has an initial term of 64 months, and includes provision for three successive
extension terms of five years each. The initial term of the Lease commences on May 1,
2010. |
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(8) |
|
In January 2010, we signed a lease to move our Danner Factory Store to a new
facility in Portland. The lease has an initial term of 64 months and includes provision
for three successive extension terms of five years each. The initial term of the lease
commences on March 1, 2010. |
Item 3. Legal Proceedings
From time to time, we become involved in ordinary, routine or regulatory legal proceedings
incidental to our business. When a loss is deemed probable to occur and the amount of such loss
can be reasonably estimated, a liability is recorded in our financial statements.
PART II
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Price Range of Common Stock
Our common stock is publicly traded on the NASDAQ Global Market under the ticker symbol BOOT. On
February 26, 2010, the closing sale price of our common stock was $14.10 per share, as reported on
the NASDAQ Global Market. The table below shows the high and low sales prices per share of our
common stock as reported by the NASDAQ Global Market:
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2009 |
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2008 |
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High |
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Low |
|
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High |
|
|
Low |
|
First Quarter |
|
$ |
13.40 |
|
|
$ |
7.00 |
|
|
$ |
18.98 |
|
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$ |
14.05 |
|
Second Quarter |
|
$ |
10.84 |
|
|
$ |
7.10 |
|
|
$ |
16.71 |
|
|
$ |
13.00 |
|
Third Quarter |
|
$ |
12.25 |
|
|
$ |
9.22 |
|
|
$ |
17.63 |
|
|
$ |
14.50 |
|
Fourth Quarter |
|
$ |
15.09 |
|
|
$ |
11.34 |
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$ |
17.00 |
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$ |
9.47 |
|
As of February 26, 2010, there were 232 shareholders of record and approximately 850 beneficial
owners of our common stock.
-16-
Dividends
On February 4, 2008, we announced a special cash dividend of one dollar ($1.00) per share of common
stock and a first quarter cash dividend of twelve and one-half cents ($0.125) per share of common
stock. These dividends were paid together ($1.125 per common share) on March 18, 2008 and totaled
$7.0 million. Subsequently, quarterly dividends totaling $2.3 million, in the amount of $0.125 per
common share, were paid on June 18, 2008, September 18, 2008, and December 18, 2008, respectively.
In 2009, we paid quarterly dividends of $0.8 million ($0.125 per common share) on March 18, 2009,
June 18, 2009, September 18, 2009, and December 18, 2009, totaling $3.2 million.
On February 1, 2010, we announced a special cash dividend of one dollar ($1.00) per share of common
stock and a first quarter cash dividend of twelve and one-half cents ($0.125) per share of common
stock to shareholders of record on February 22, 2010. These dividends will be paid together
($1.125 per common share) on March 18, 2010 and will amount to approximately $7.1 million.
The Board, while not declaring future dividends, currently intends to continue its current policy
of declaring and paying quarterly dividends of twelve and one-half cents ($0.125) per share of
common stock. However, future dividend policies and dividend payments, if any, will depend upon
earnings and the financial condition of our company, our need for funds for other projects, any
limitations on payments of dividends in our current or future debt agreements and other factors.
Sales of Unregistered Securities
We did not have any unregistered sales of equity securities in 2009.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Equity Compensation Plan Information
The information required by this item with respect to our equity compensation plans is contained in
Part III, Item 11 of this Annual Report on Form 10-K.
-17-
Market Price of the Registrants Common Equity
The following graph compares on a cumulative basis changes since December 31, 2004, in (a) the
total shareholder return on our common stock with (b) the total return on the NASDAQ Global Market
Index and (c) the total return on the Hemscott Textile-Apparel Footwear/Accessories Industry Group
Index (the Hemscott Group Index). Such changes have been measured by dividing (a) the sum of (i)
the amount of dividends for the measurement period, assuming dividend reinvestment, and (ii) the
difference between the price per share at the end of and the beginning of the measurement period,
by (b) the price per share at the beginning of the measurement period. The graph assumes $100 was
invested on December 31, 2004 in LaCrosse Footwear, Inc. common stock, the NASDAQ Global Market
Index and the Hemscott Group Index.
|
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12/31/2004 |
|
|
12/31/2005 |
|
|
12/31/2006 |
|
|
12/31/2007 |
|
|
12/31/2008 |
|
|
12/31/2009 |
|
LACROSSE FOOTWEAR, INC. |
|
$ |
100 |
|
|
$ |
100 |
|
|
$ |
123 |
|
|
$ |
164 |
|
|
$ |
128 |
|
|
$ |
134 |
|
HEMSCOTT GROUP INDEX |
|
$ |
100 |
|
|
$ |
108 |
|
|
$ |
132 |
|
|
$ |
132 |
|
|
$ |
93 |
|
|
$ |
139 |
|
NASDAQ MARKET INDEX |
|
$ |
100 |
|
|
$ |
102 |
|
|
$ |
113 |
|
|
$ |
124 |
|
|
$ |
73 |
|
|
$ |
105 |
|
-18-
Item 6. Selected Financial Data
Selected Income Statement Data
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|
Year Ended December 31 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
(in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
139,152 |
|
|
$ |
127,956 |
|
|
$ |
118,179 |
|
|
$ |
107,798 |
|
|
$ |
99,378 |
|
Operating income |
|
$ |
8,585 |
|
|
$ |
10,120 |
|
|
$ |
10,983 |
|
|
$ |
8,834 |
|
|
$ |
8,609 |
|
Net income |
|
$ |
5,510 |
|
|
$ |
6,167 |
|
|
$ |
7,300 |
|
|
$ |
6,344 |
|
|
$ |
5,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.87 |
|
|
$ |
0.99 |
|
|
$ |
1.20 |
|
|
$ |
1.05 |
|
|
$ |
0.88 |
|
Diluted |
|
$ |
0.86 |
|
|
$ |
0.96 |
|
|
$ |
1.15 |
|
|
$ |
1.02 |
|
|
$ |
0.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
6,303 |
|
|
|
6,215 |
|
|
|
6,087 |
|
|
|
6,022 |
|
|
|
5,954 |
|
Diluted |
|
|
6,375 |
|
|
|
6,417 |
|
|
|
6,357 |
|
|
|
6,213 |
|
|
|
6,166 |
|
Selected Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
17,739 |
|
|
$ |
13,683 |
|
|
$ |
15,385 |
|
|
$ |
12,702 |
|
|
$ |
6,113 |
|
Inventories |
|
$ |
27,031 |
|
|
$ |
28,618 |
|
|
$ |
27,131 |
|
|
$ |
22,038 |
|
|
$ |
24,865 |
|
Total assets |
|
$ |
88,585 |
|
|
$ |
84,565 |
|
|
$ |
83,547 |
|
|
$ |
73,533 |
|
|
$ |
64,583 |
|
Long-term debt, including current maturities |
|
|
|
|
|
|
|
|
|
$ |
394 |
|
|
$ |
506 |
|
|
|
|
|
Shareholders equity |
|
$ |
65,595 |
|
|
$ |
61,412 |
|
|
$ |
65,985 |
|
|
$ |
57,344 |
|
|
$ |
50,477 |
|
Dividends paid |
|
$ |
3,154 |
|
|
$ |
9,322 |
|
|
$ |
914 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Dividends paid per common share |
|
$ |
0.50 |
|
|
$ |
1.50 |
|
|
$ |
0.15 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
Inventory turns |
|
|
3.1 |
|
|
|
2.8 |
|
|
|
2.9 |
|
|
|
2.8 |
|
|
|
3.0 |
|
Days sales outstanding |
|
|
46 |
|
|
|
57 |
|
|
|
62 |
|
|
|
56 |
|
|
|
50 |
|
-19-
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
Overview
Our mission is to maximize the work and outdoor experience for our consumers. To achieve this, we
design, develop, manufacture and market premium-quality, high-performance footwear and apparel,
supported by compelling marketing and superior customer service.
Our sales growth continues to be driven by the success of our new product lines, our ability to
meet at-once demand, and our ability to diversify and strengthen our portfolio of sales channels.
Our recent sales volumes to the U.S. government have offset the global, broad-based economic
slowdown which continues to negatively impact our wholesale channel.
While we expect that the current challenging economic landscape will continue to impact us in the
near term, we believe that the strength of our product offerings combined with our operational
excellence focused on customer service and our strong balance sheet provides us with competitive
advantages in our markets over the long term.
Sales to the U.S. government, which are becoming an increasingly significant portion of our net
sales, may not continue at current levels. Our ability to continue to generate sales growth in
this channel is partially dependent upon the current U.S. governments policies regarding troop
deployments in various global regions requiring our specialized footwear. If government orders do
not continue at current levels, or if we are unable to fill orders, it would have a negative impact
on our earnings growth and results of operations.
-20-
RESULTS OF OPERATIONS
Financial Summary 2009 versus 2008
The following table sets forth selected financial information derived from our consolidated
financial statements. The discussion that follows the table should be read in conjunction with the
consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
2009 |
|
2008 |
|
$ Change |
|
% Change |
Net Sales |
|
$ |
139.2 |
|
|
$ |
128.0 |
|
|
$ |
11.2 |
|
|
|
9 |
% |
Gross Profit |
|
$ |
54.1 |
|
|
$ |
50.7 |
|
|
$ |
3.4 |
|
|
|
7 |
% |
Gross Margin % |
|
|
38.9 |
% |
|
|
39.6 |
% |
|
|
|
|
|
(70 bps |
) |
Selling and Administrative Expenses |
|
$ |
45.5 |
|
|
$ |
40.5 |
|
|
$ |
5.0 |
|
|
|
12 |
% |
% of Net Sales |
|
|
32.7 |
% |
|
|
31.7 |
% |
|
|
|
|
|
100 bps |
|
Non-Operating Expense, Net |
|
$ |
(0.4 |
) |
|
$ |
(0.0 |
) |
|
$ |
(0.4 |
) |
|
|
|
|
Income Before Income Taxes |
|
$ |
8.2 |
|
|
$ |
10.1 |
|
|
$ |
(1.9 |
) |
|
|
(19 |
%) |
Income Tax Provision |
|
$ |
2.7 |
|
|
$ |
3.9 |
|
|
$ |
(1.2 |
) |
|
|
(31 |
%) |
Net Income |
|
$ |
5.5 |
|
|
$ |
6.2 |
|
|
$ |
(0.7 |
) |
|
|
(11 |
%) |
Consolidated Net Sales: Consolidated net sales for 2009 increased 9%, to $139.2 million, from
$128.0 million in 2008. Sales to the work market were $88.2 million for the full year of 2009, up
18% from $74.9 million in 2008. The growth in work sales primarily reflects continued expansion
into various areas of the U.S. government. Sales to the outdoor market for 2009 were $51.0
million, down 4% from $53.1 million in 2008, reflecting softness in the overall retail environment
throughout the first three quarters of 2009.
Gross Profit: Gross profit for 2009 was 38.9% of consolidated net sales, compared to 39.6% in
2008. The year-over-year decrease in gross margin primarily reflects the impact of a greater
portion of revenue coming from U.S. government shipments (20 basis points), cost increases
associated with key rubber styles (20 basis points) and other various cost changes (30 basis
points).
Selling and Administrative Expenses: Selling and administrative expenses in 2009 increased $5.0
million, or 12%, to $45.5 million from $40.5 million in 2008. Selling and administrative expenses
as a percent of net sales increased from 31.7% in 2008 to 32.7% in 2009. The $5.0 million growth
in selling and administrative expenses reflects higher costs related to the establishment our new
Midwest distribution center ($1.3 million), expenses related to our European sales subsidiary and
other investments in sales, product development and marketing ($1.6 million), bad debt expenses
related to the bankruptcy of two significant retail customers during the first quarter of 2009
($0.3 million), the operation of our wholly-owned subsidiary Environmentally Neutral Design, Inc.
(END), which was acquired in the second quarter of 2009 ($0.6 million), and other expenses ($1.2
million).
Non-operating
Expense, Net: Non-operating expense was $0.4 million in 2009 compared
to $0.0 million in 2008. The increase in non-operating expense
is primarily the result of certain asset disposal costs ($0.2
million). Non-operating income also decreased from 2008 due to lower rates
in 2009 ($0.2 million).
Income Taxes: We recognized income tax expense at an effective rate of 32.9% in 2009 compared to
an effective tax rate of 38.9% in 2008. The lower effective rate for 2009 was primarily due to a
reduction in our reserve for uncertain tax positions as a result of the completion of an Internal
Revenue Service examination in the second quarter of 2009 for the tax years 2005 through 2007, as
well as the adoption of a new transfer pricing policy for our European sales subsidiary.
Net Income: Net income recognized during 2009 was $5.5 million, or $0.86 diluted earnings per
common share, compared to $6.2 million, or $0.96 diluted earnings per common share, in 2008. The
net income decline of $0.7 million is attributable to the gross profit, expense and tax rate
changes discussed above.
-21-
Financial Summary 2008 versus 2007
The following table sets forth selected financial information derived from our consolidated
financial statements. The discussion that follows the table should be read in conjunction with the
consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
2008 |
|
2007 |
|
$ Change |
|
% Change |
Net Sales |
|
$ |
128.0 |
|
|
$ |
118.2 |
|
|
$ |
9.8 |
|
|
|
8 |
% |
Gross Profit |
|
$ |
50.7 |
|
|
$ |
46.9 |
|
|
$ |
3.8 |
|
|
|
8 |
% |
Gross Margin % |
|
|
39.6 |
% |
|
|
39.7 |
% |
|
|
|
|
|
(10 bps |
) |
Selling and Administrative Expenses |
|
$ |
40.5 |
|
|
$ |
35.9 |
|
|
$ |
4.6 |
|
|
|
13 |
% |
% of Net Sales |
|
|
31.7 |
% |
|
|
30.4 |
% |
|
|
|
|
|
130 bps |
|
Non-Operating Income (Expense) |
|
$ |
(0.0 |
) |
|
$ |
0.3 |
|
|
$ |
(0.3 |
) |
|
|
(108 |
%) |
Income Before Income Taxes |
|
$ |
10.1 |
|
|
$ |
11.3 |
|
|
$ |
(1.2 |
) |
|
|
(10 |
%) |
Income Tax Provision |
|
$ |
3.9 |
|
|
$ |
4.0 |
|
|
$ |
(0.1 |
) |
|
|
(1 |
%) |
Net Income |
|
$ |
6.2 |
|
|
$ |
7.3 |
|
|
$ |
(1.1 |
) |
|
|
(15 |
%) |
Consolidated Net Sales: Consolidated net sales for 2008 increased 8%, to $128.0 million, from
$118.2 million in 2007. In the work market, net sales increased 23%, to $74.9 million, from $60.9
million in 2007. The strong annual growth in work market sales reflects shipments related to into
various areas of the U.S. government orders and continued expansion into a variety of targeted,
niche work markets.
In the outdoor market, net sales declined 7%, to $53.1 million, from $57.3 million in 2007. While
we continued to see growth in at-once demand in certain categories and geographies of the outdoor
market, the overall decline in outdoor sales reflected the widespread decline in retail sales
during 2008.
Gross Profit: Gross profit for 2008 was 39.6% of consolidated net sales, compared to 39.7% in
2007. The margin decline of 10 basis points was due to an increase in markdown sales (40 basis
points), offset by price increases during 2008 and improvements in sales returns, discounts and
allowances (30 basis points).
Selling and Administrative Expenses: Selling and administrative expenses in 2008 increased $4.6
million, or 13%, to $40.5 million from $35.9 million in 2007. Selling and administrative expenses
as a percent of net sales increased from 30.4% in 2007 to 31.7% in 2008. The $4.6 million growth
in selling and administrative expenses included expenses related to the establishment and operation
of our European sales subsidiary ($2.6 million), increased expenses in sales and product
development activities ($1.8 million) and other expenses ($0.2 million).
Non-operating Income (Expense): Non-operating income was negligible in 2008 compared to $0.3
million during 2007. The decline was due to a decrease in interest income due to lower rates in
2008 and realized losses on foreign currency exchange rate transactions.
Income Taxes: We recognized income tax expense at an effective rate of 38.9% in 2008 compared to
an effective tax rate of 35.2% in 2007. The higher effective rate for 2008 was due to the impact of
a rate differential on our European pre-tax results of operations offset by adjustments to our
unrecognized tax benefits for tax positions taken in prior years and certain one-time tax benefits
received during 2007.
Net Income: Net income recognized during 2008 was $6.2 million, or $0.96 diluted earnings per
common share, compared to $7.3 million, or $1.15 diluted earnings per common share, in 2007. The
net income decline of $1.1 million is attributable to gross profit, expense, non-operating income
and tax rate changes discussed above.
-22-
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. Working capital requirements are generally
the lowest in the first quarter and the highest during the third quarter.
On March 9, 2009, we entered into a new line of credit agreement with Wells Fargo Bank, N.A., which
expires June 30, 2012. This line of credit agreement represents a 3-year extension of our previous
line of credit agreement with Wells Fargo Bank, N.A. Amounts borrowed under the agreement are
secured by substantially all of our assets. The maximum aggregate principal amount of borrowings
allowed from January 1 to May 31 is $17.5 million and from June 1 to December 31, the total
available is $30 million. There are no borrowing base limitations under the credit agreement. The
credit agreement provides for an interest rate of LIBOR plus 1.75% and an annual commitment fee of
0.15% on the unused balance. At December 31, 2009 and 2008, we had no outstanding balances due
under this financing agreement. See Note 5, Financing Arrangements and Note 15. Subsequent
Events to the accompanying consolidated financial statements for additional information.
In June 2006, we received a grant of $0.2 million and a non-interest bearing loan of $0.6 million
from the Portland Development Commission, which were used to finance certain leasehold improvements
at our Portland distribution facility. The grant is recorded as deferred revenue and is being
amortized as a reduction of operating expenses on a straight-line basis over five years, which is
the estimated useful life of the associated leasehold improvements. In the third quarter of 2008,
the loan was forgiven by the Portland Development Commission and accordingly we have reclassified
the remaining unamortized long-term debt to deferred revenue and will continue to amortize the
balance until 2011. See Note 5, Financing Arrangements in the accompanying consolidated
financial statements for additional information.
Consolidated Statements of Cash Flows
Net cash provided by operating activities was $12.2 million in 2009, compared to $13.3 million for
2008. The decline in cash provided by operating activities of $1.1 million was due primarily to
lower net income in 2009 and significantly lower accounts payable due to timing of payments for
inventory purchases partially offset by lower accounts receivable on improved collections and
higher deferred income tax liabilities due to accelerated tax depreciation.
Net cash used in investing activities was $5.6 million in 2009 compared to $6.3 million in 2008. We
purchased property and equipment of $5.3 million and $3.2 million in 2009 and 2008, respectively.
In 2009, capital expenditures included $2.6 million related to racking, computer systems and other
build-out costs in our new Indianapolis distribution center in the first half of 2009. In 2008, we
also paid $3.2 million to acquire the inventories and operations of our former European distributor
to establish our new European subsidiary. During 2010, we expect total capital expenditures to be
approximately $8.0 to $9.0 million, which includes leasehold improvements and machinery for the new
factory facility and new factory store.
Net cash used in financing activities was $2.6 million in 2009 compared to $8.3 million in 2008.
Proceeds from the exercise of stock options were $0.6 million in 2009, compared to $1.1 million for
2008. Also, we paid cash dividends of $3.2 million in 2009 compared to $9.3 million in 2008.
As previously noted, on February 1, 2010, we announced a special cash dividend of one dollar
($1.00) per share of common stock and a first quarter cash dividend of twelve and one-half cents
($0.125) per share of common stock to shareholders of record on February 22, 2010. These dividends
will be paid together ($1.125 per common share) on March 18, 2010 and amount to approximately $7.1
million.
-23-
At December 31, 2009 and 2008, our pension plan had accumulated benefit obligations in excess of
the respective plan assets of $4.4 million and $5.6 million, respectively. This obligation in
excess of plan assets and accrued liabilities resulted in a cumulative reduction of equity, net of
tax, of $3.1 million and $3.7 million as of December 31, 2009 and 2008, respectively. We expect to
contribute $0.9 million to the pension plan in 2010.
On February 10, 2010, we announced our plans to move into a new Danner® factory in Portland,
Oregon. The new facilitys lease is scheduled to begin during the second quarter of 2010 for a
term of approximately five years, with options to extend the lease for up to fifteen more years.
We expect to begin production in the new facility in the third quarter of 2010. During 2010, we
expect total capital expenditures to be approximately $8.0 to $9.0 million, which includes
leasehold improvements and machinery for the new factory facility and the new factory store. We
expect total rent payments to be approximately $2.5 million in 2010.
OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
We do not have any off-balance sheet financing arrangements, other than operating leases and
purchase commitments that are disclosed in the contractual obligations table below and in our
consolidated financial statements, nor do we have any transactions, arrangements or other
relationships with any special purpose entities established by us, at our direction or for our
benefit.
A summary of our contractual cash obligations at December 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|
Payments due by period |
Contractual Obligations |
|
Total |
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
Thereafter |
|
Operating leases (1) |
|
$ |
21,106 |
|
|
$ |
2,618 |
|
|
$ |
2,583 |
|
|
$ |
2,594 |
|
|
$ |
2,605 |
|
|
$ |
2,695 |
|
|
$ |
8,011 |
|
Product purchase obligations (2) |
|
|
7,104 |
|
|
|
7,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Part I, Item 2 Properties for a description of our leased facilities.
|
|
|
(1) |
|
see Notes (7) and (8) in Item 2. Obligations related to the new leases that were
executed subsequent to December 31, 2009, have been included in the table above. See Note
15. Subsequent Events in the accompanying consolidated financial statements for
additional information).
|
|
(2) |
|
From time to time, we enter into purchase commitments with our suppliers and third
party manufacturers under customary purchase order terms. Any significant losses implicit
in these contracts would be recognized in accordance with generally accepted accounting
principles. At December 31, 2009, no such losses existed.
|
We also have a commercial line of credit as described below, which is more fully described under
the caption Liquidity and Capital Resources:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Commercial |
|
Maximum Amount |
|
|
|
|
|
|
|
Commitment |
|
Committed |
|
|
Outstanding at 12/31/09 |
|
|
Date of Expiration |
|
Line of credit |
|
$ |
30,000,000 |
|
|
$ |
|
|
|
June 30, 2012 |
We believe that our existing resources, our commercial line of credit and our anticipated cash
flows from operations will be sufficient to satisfy our working capital needs for the foreseeable
future.
-24-
CRITICAL ACCOUNTING ESTIMATES
Our significant accounting policies and estimates are summarized in our annual consolidated
financial statements. Some of our accounting policies require management to exercise significant
judgment in selecting the appropriate assumptions for calculating financial estimates. Such
judgments are subject to an inherent degree of uncertainty. These judgments are based on our
historical experience, known trends in our industry, terms of existing contracts and other
information from outside sources, as appropriate.
Revenue Recognition, Allowances for Doubtful Accounts, Cash Discounts and Non-Defective Returns:
Ownership of our products transfers to the customer when the product is delivered to a third-party
carrier at one of our distribution facilities or upon receipt at our customers designated
facilities depending upon the applicable terms of the customer order. Significant judgment is
required when determining the allowances for doubtful accounts, cash discounts, and non-defective
returns, each of which reduces the amount of accounts receivable and operating income reported in
the accompanying consolidated financial statements.
Our historical experience of write-offs of uncollectible accounts has been insignificant. In
addition to an allowance for doubtful accounts, we maintain allowances for anticipated cash
discounts to be taken by customers and for non-defective returns. Cash discounts are provided
under certain customer service programs and are estimated based on available programs and
historical usage rates. Reserves for non-defective returns are estimated based on historical rates
of return.
Allowance for Slow-Moving Inventory: Provision for potentially slow-moving or excess inventories is
made based on our analysis of inventory levels, future sales forecasts and current estimated market
values. Actual customer requirements and market values in any future periods are inherently
uncertain and thus may differ from our estimates.
Product Warranty: We provide a limited warranty for the replacement of defective products for a
specified time period after sale. We estimate the costs that may be incurred under our limited
warranty and record a liability in the amount of such costs at the time product revenue is
recognized. Factors that affect our warranty liability include the number of units sold and
historical and anticipated future rates of warranty claims. We also utilize information received
from customers to assist in determining the appropriate warranty accrual levels.
Valuation of Long-Lived and Intangible Assets: As a matter of policy, we review our major assets
for impairment at least annually, and whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Our major long-lived and intangible assets are goodwill, and
property and equipment. We depreciate our property and equipment over their estimated useful lives.
In assessing the recoverability of our goodwill of $10.8 million and the investments we have made
in property and equipment, we have analyzed our market capitalization together with assumptions
regarding estimated future cash flows and other factors to determine the fair value of the
respective assets. If these estimates or their related assumptions change in the future, we may be
required to record impairment charges for these assets not previously recorded.
Please refer to the Risk Factors in Part I, Item 1A for a discussion of factors that may have an
effect on our ability to attain future levels of product sales and cash flows.
Pension and Other Postretirement Benefit Plans: The determination of our obligation and expense
for pension and other postretirement benefits is dependent on our selection of certain assumptions
used by actuaries in calculating such amounts. Those assumptions are described in Note 8,
Compensation and Benefit Agreements to our annual consolidated financial statements and include,
among others, the 5.75% discount rate and the 8.0% expected long-term rate of return on plan
assets. Actual results that differ from our assumptions are accumulated and amortized over future
periods and therefore, generally affect our recognized expense and recorded obligation in such future periods. While we believe that our assumptions are
appropriate,
-25-
significant differences in our actual experience or material changes in our
assumptions may affect our pension and other postretirement obligations, our future expense and
shareholders equity. See Quantitative and Qualitative Disclosures About Market Risk in Item 7A
in this annual report on Form 10-K for further sensitivity analysis regarding our estimated pension
obligation.
Deferred Tax Asset Valuation Allowance: Our deferred taxes are reduced by a valuation allowance
when, in our opinion, we believe that it is more likely than not that some portion or all of the
deferred tax assets will not be realized. We have recorded a valuation allowance related to the
state of Wisconsin net operating loss (NOL) carryforwards, as realization of NOL carryforwards is
dependent upon having taxable income in Wisconsin in future periods. The remaining balance of the
deferred taxes after such valuation allowance represents the portion of Wisconsin NOLs which
management believes is more likely than not to be realized.
Stock-Based Compensation: The Company estimates the fair value of share-based awards on the date of
grant using an option-pricing model. The value of the portion of the award that is ultimately
expected to vest is recognized as expense in our consolidated statements of income over the
requisite service periods. Because share-based compensation expense is based on awards that are
ultimately expected to vest, share-based compensation expense is reduced for estimated forfeitures.
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if
actual forfeitures differ from those estimates.
To calculate the share-based compensation expense, we use the Black-Scholes option-pricing model.
Our determination of fair value of option-based awards on the date of grant is impacted by our
stock price as well as assumptions regarding certain highly subjective variables. These variables
include, but are not limited to, our expected stock price volatility over the term of the awards,
the anticipated risk-free interest rate, anticipated future dividend yields and the expected life
of the options. The anticipated risk-free interest rate is based on a treasury instrument whose
term is consistent with the expected life of the stock options granted. The expected volatility,
life of options and dividend yield are based on historical experience.
Recently Issued Accounting Pronouncements
On December 30, 2008, the FASB issued FSP SFAS No. 132(R)-1, Employers Disclosures about
Postretirement Benefit Plan Assets (FSP SFAS No. 132(R)-1) which is included in the new FASB
Accounting Standards Codification as FASB ASC Section 715-20-65. This FSP amends FASB Statement
No. 132 (Revised 2003), Employers Disclosures about Pensions and Other Postretirement Benefits
(SFAS No. 132(R)), to provide guidance on an employers disclosures about plan assets of a
defined benefit pension or other postretirement plan. The disclosures about plan assets required by
FSP SFAS No. 132(R)-1 is required for fiscal years ending after December 15, 2009 (fiscal 2009 for
the Company). The additional disclosure under the standard does not require years prior to fiscal
2009 to be presented for comparative purpose, and only requires additional disclosures concerning
plan assets. The adoption of this standard was effective for the Company in the current period, and
we have complied with such provisions in the financial statements presented herein.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our primary market risk results from fluctuations in interest rates. At our option, our line of
credit interest rate is the LIBOR rate plus 1.75%. We are exposed to market risk related to
interest rates. Based on an average floating rate borrowing of $10.0 million, a one percent change
in the applicable rate would impact the Companys annual interest expense by approximately $0.1
million.
We are also exposed to market risk related to the assumptions we make in estimating our pension
liability. The assumed discount rate used, in part, to calculate the pension plan obligation is
related to the prevailing long-term interest rates. At December 31, 2009, we used an estimated discount rate of 5.75%. A
one-percentage point reduction in the discount rate would result in an increase in the actuarial
present value of projected
-26-
pension benefits of approximately $2.0 million at December 31, 2009 with
a similar charge to equity. At December 31, 2009, we used an expected rate of return on plan assets
of 8.0%. The historical annualized ten-year rate of return on pension plan assets is approximately
4.0%. A one percent change (increase or decrease) in the actual rate of return on pension plan
assets would affect the charge to equity by approximately $0.1 million.
Our financial market risk arises from fluctuations in foreign currencies and interest rates. We
are exposed to changes in exchange rates through the sale of products denominated in non-functional
foreign currencies. Our purchases of inventory are largely denominated in U.S. dollars and we
anticipate that we will continue to purchase in U.S. dollars in the foreseeable future, therefore
we are only indirectly exposed to foreign currency fluctuations on these purchases and our exposure
through foreign-currency denominated transactions is not material. Our net investment exposure in
our foreign subsidiaries translated into U.S. dollars using the period-end exchange rates at
December 31, 2009, was approximately $3.0 million. The potential loss in recorded value resulting
from a hypothetical 10% adverse change in foreign exchange rates would be approximately $0.3
million at December 31, 2009. At December 31, 2009 we had no formal plans to liquidate any of our
operating foreign subsidiaries within of the consolidated group, and therefore, foreign exchange
rate gains or losses on our foreign investments are reflected as a cumulative translation
adjustment and do not affect our results of operations.
Item 8. Financial Statements and Supplementary Data
The consolidated statements of income, shareholders equity and comprehensive income and cash flows
for each of the years in the three-year period ended December 31, 2009, and the related
consolidated balance sheets of the Company as of December 31, 2009 and 2008, together with the
related notes thereto and the Report of Independent Registered Public Accounting Firm appear on
pages F-1 through F-25 hereof and are incorporated by reference in this Item 8.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A(T). Controls and Procedures
(a) Evaluation of disclosure controls and procedures. In accordance with Rule 13a-15(b) of
the Securities Exchange Act of 1934 (the Exchange Act), as of the end of the period covered by
this Annual Report on Form 10-K, the Companys management evaluated, with the participation of the
Companys President and Chief Executive Officer and Executive Vice President and Chief Financial
Officer, the effectiveness of the design and operation of the Companys disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon their evaluation of
these disclosure controls and procedures, the President and Chief Executive Officer and the
Executive Vice President and Chief Financial Officer have concluded that the disclosure controls
and procedures were effective as of the date of such evaluation in ensuring that information
required to be disclosed in the Companys Exchange Act reports is (1) recorded, processed,
summarized and reported in a timely manner, and (2) accumulated and communicated to management,
including the Companys President and Chief Executive Officer and Executive Vice President and
Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
(b) Changes in internal control. There was no change in the Companys internal control over
financial reporting that occurred during the fourth quarter of 2009 that has materially affected,
or is reasonably likely to materially affect, the Companys internal control over financial
reporting.
-27-
Managements Annual Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control
over financial reporting. Our internal control system was designed to provide reasonable assurance
to management and the board of directors regarding the effectiveness of our internal control
processes over the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore,
even those systems determined effective can provide only reasonable assurance with respect to
financial statement preparation and presentation.
We have assessed the effectiveness of our internal controls over financial reporting as of
December 31, 2009. In making this assessment, we used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated
Framework. Based on our assessment, we believe that, as of December 31, 2009, our internal control
over financial reporting is effective based on those criteria.
This annual report does not include an attestation report of the Companys independent registered
public accounting firm regarding internal control over financial reporting. Managements report
was not subject to attestation by the Companys independent registered public accounting firm
pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide
only managements report in this annual report.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers of the Registrant, and Corporate Governance
The information required by this Item with respect to executive officers, directors, Section 16
compliance and corporate governance is included under the captions Proposal 1 Election of
Directors, Board of Directors, Executive Compensation, and Section 16(a) Beneficial Ownership
Reporting Compliance and Report of the Audit Committee, respectively, in the Companys
definitive Proxy Statement for its 2010 Annual Meeting of Shareholders (Proxy Statement) and when
the Proxy Statement is filed with the Securities and Exchange Commission will be incorporated
herein by reference.
We have adopted a Code of Ethics for Senior Financial Officers, Corporate Officers and Directors
that covers, among others, our principal executive officer, our principal financial officer and our
principal accounting officer. This Code of Ethics for Senior Financial Officers is posted on our
website at www.lacrossefootwearinc.com. If any substantive amendments are made to the Code
of Ethics for Senior Financial Officers or the Board of Directors grants any waiver from a
provision of the Code of Ethics to any of our officers, then we will disclose the nature of such
amendment or waiver on our website at the above address.
Item 11. Executive Compensation
The information required by this Item is included under the captions Director Compensation and
Executive Compensation in the Proxy Statement and when the Proxy Statement is filed with the
Securities and Exchange Commission will be incorporated herein by reference.
-28-
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item with respect to Security Ownership of Certain Beneficial
Owners and Management is included under the caption Principal Shareholders in the Proxy Statement
and when the Proxy Statement is filed with the Securities and Exchange Commission will be
incorporated herein by reference.
The following table provides certain equity compensation information as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate number of |
|
|
|
|
|
|
|
|
|
|
|
securities remaining |
|
|
|
|
|
|
|
|
|
|
|
available for future |
|
|
|
Number of securities to |
|
|
|
|
|
|
issuance under equity |
|
|
|
be issued upon |
|
|
Weighted-average |
|
|
compensation plans |
|
|
|
exercise of outstanding |
|
|
exercise price of |
|
|
(excluding securities |
|
|
|
options, warrants and |
|
|
outstanding options, |
|
|
reflected in the first |
|
Plan Category |
|
rights (1) |
|
|
warrants and rights |
|
|
column) (2) |
|
Equity compensation
plans approved by
security holders |
|
|
809,523 |
|
|
$ |
11.57 |
|
|
|
295,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans not approved by
security holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
809,523 |
|
|
$ |
11.57 |
|
|
|
295,000 |
|
|
|
|
|
|
|
(1) |
|
Represents options to purchase the Companys Common Stock granted under the
Companys 1993 Employee Stock Incentive Plan, 1997 Employee Stock Incentive Plan (the
1997 Plan), 2001 Stock Incentive Plan (the 2001 Plan), 2007 Long Term Incentive
Plan and 2001 Non-Employee Director Stock Option Plan, As Amended and Restated (the
Director Plan). |
|
(2) |
|
Includes 244,000 shares of the Companys Common Stock available for issuance under
the 2007 Long Term Incentive Plan and 51,000 shares of the Companys Common Stock
available for issuance under the Director Plan. |
Item 13. Certain Relationships, Related Transactions, and Director Independence
The information required by this Item is included under the captions Transactions with Related
Persons, Compensation Committee Interlocks and Insider Participation, and Board of Directors
in the Proxy Statement and when the Proxy Statement is filed with the Securities and Exchange
Commission will be incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item is included under the caption Independent Registered Public
Accounting Firms Fees in the Proxy Statement and, when the Proxy Statement is filed, will be
incorporated herein by reference.
-29-
PART IV
Item 15. Exhibits and Financial Statement Schedules
|
|
Financial Statements |
|
1. |
|
The following financial statements are included in this Annual Report on Form 10-K beginning
on the pages indicated below: |
|
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
F-1 |
|
|
Consolidated Balance Sheets as of December 31, 2009 and 2008
|
|
F-2 |
|
|
Consolidated Statements of Income for the Years ended December 31,
2009, 2008, and 2007
|
|
F-4 |
|
|
Consolidated Statements of Shareholders Equity and Comprehensive Income for
the Years ended December 31, 2009, 2008, and 2007
|
|
F-5 |
|
|
Consolidated Statements of Cash Flows for the Years ended December 31, 2009,
2008, and 2007
|
|
F-6 |
|
|
Notes to Consolidated Financial Statements
|
|
F-7 |
2. |
|
Financial Statement Schedule |
|
|
|
The financial statement schedule for the years ended December 31, 2009 and 2008 is
included in this Annual Report on Form 10-K and should be read in conjunction with the
Consolidated Financial Statements. |
|
|
|
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm on Financial
Statement Schedule
|
|
|
32 |
|
|
|
Schedule II Valuation and Qualifying Accounts
|
|
|
33 |
|
|
|
All other financial statement schedules are omitted since the required information is
not present or is not present in amounts sufficient to require submission of the
schedules, or because the information required is included in the consolidated
financial statements and notes thereto. |
|
3. |
|
See the Exhibit Index for a description of exhibits filed with or incorporated by reference
in this report. |
-30-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 5th day of March, 2010.
|
|
|
|
|
|
LACROSSE FOOTWEAR, INC.
|
|
|
By |
/s/ Joseph P. Schneider
|
|
|
|
Joseph P. Schneider |
|
|
|
President and Chief Executive Officer |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
/s/ Joseph P. Schneider
|
|
President, Chief Executive
Officer and Director (Principal
|
|
March 5, 2010 |
Joseph P. Schneider
|
|
Executive Officer) |
|
|
|
|
|
|
|
/s/ David P. Carlson
|
|
Executive Vice President and
Chief Financial Officer
|
|
March 5, 2010 |
David P. Carlson
|
|
(Principal Financial and
Accounting Officer) |
|
|
|
|
|
|
|
/s/ Richard A. Rosenthal
|
|
Chairman of the Board and Director
|
|
March 5, 2010 |
|
|
|
|
|
Richard A. Rosenthal
|
|
|
|
|
|
|
|
|
|
/s/Stephen F. Loughlin
|
|
Director
|
|
March 5, 2010 |
|
|
|
|
|
Stephen F. Loughlin
|
|
|
|
|
|
|
|
|
|
/s/ Charles W. Smith
|
|
Director
|
|
March 5, 2010 |
|
|
|
|
|
Charles W. Smith
|
|
|
|
|
|
|
|
|
|
/s/ John D. Whitcombe
|
|
Director
|
|
March 5, 2010 |
|
|
|
|
|
John D. Whitcombe
|
|
|
|
|
|
|
|
|
|
/s/ William H. Williams
|
|
Director
|
|
March 5, 2010 |
|
|
|
|
|
William H. Williams
|
|
|
|
|
-31-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
LaCrosse Footwear, Inc.
Our audits of the consolidated financial statements referred to in our report dated March 5, 2010
(included elsewhere in this Annual Report on Form 10-K) also included the financial statement
schedule of LaCrosse Footwear, Inc. and Subsidiaries, listed in Item
15(a) of this Form 10-K. This
schedule is the responsibility of LaCrosse Footwear, Inc.s management. Our responsibility is to
express an opinion based on our audits of the consolidated financial statements.
In our opinion, the financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ McGladrey & Pullen, LLP
Minneapolis, Minnesota
March 5, 2010
-32-
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
|
Beginning |
|
|
Charged to Costs |
|
|
Charged To |
|
|
|
|
|
|
at End |
|
|
|
of Year |
|
|
and Expenses |
|
|
Other Accounts |
|
|
Deductions |
|
|
of Year |
|
Year ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable allowances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for discounts |
|
$ |
225 |
|
|
$ |
953 |
|
|
$ |
|
|
|
$ |
980 |
|
|
$ |
198 |
|
Allowance for nondefective product |
|
|
135 |
|
|
|
1,623 |
|
|
|
|
|
|
|
1,587 |
|
|
|
171 |
|
Allowance for doubtful accounts |
|
|
449 |
|
|
|
306 |
|
|
|
|
|
|
|
461 |
|
|
|
294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
809 |
|
|
$ |
2,882 |
|
|
$ |
|
|
|
$ |
3,028 |
|
|
$ |
663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for slow-moving inventory |
|
$ |
449 |
|
|
$ |
1,167 |
|
|
$ |
|
|
|
$ |
819 |
|
|
$ |
797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset valuation allowance |
|
$ |
1,070 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
53 |
|
|
$ |
1,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable allowances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for discounts |
|
$ |
303 |
|
|
$ |
1,200 |
|
|
$ |
|
|
|
$ |
1,278 |
|
|
$ |
225 |
|
Allowance for nondefective product |
|
|
156 |
|
|
|
1,565 |
|
|
|
|
|
|
|
1,586 |
|
|
|
135 |
|
Allowance for doubtful accounts |
|
|
211 |
|
|
|
312 |
|
|
|
|
|
|
|
74 |
|
|
|
449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
670 |
|
|
$ |
3,077 |
|
|
$ |
|
|
|
$ |
2,938 |
|
|
$ |
809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for slow-moving inventory |
|
$ |
374 |
|
|
$ |
630 |
|
|
$ |
|
|
|
$ |
555 |
|
|
$ |
449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset valuation allowance |
|
$ |
1,028 |
|
|
$ |
42 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accounts receivable, inventory, and deferred tax asset allowances above are deducted from the applicable asset accounts
in the accompanying consolidated balance sheets. |
-33-
EXHIBIT INDEX
|
|
|
|
|
Exhibit Number |
|
Exhibit Description |
|
(3.1 |
) |
|
Restated Articles of Incorporation of LaCrosse Footwear, Inc. (Incorporated by
reference to Exhibit (3.0) to LaCrosse Footwear, Inc.s Form S-1 Registration
Statement (Registration No. 33-75534)) |
|
|
|
|
|
|
(3.2 |
) |
|
Amended and Restated By-Laws of LaCrosse Footwear, Inc. (Incorporated by reference
to Exhibit (3.1) to LaCrosse Footwear, Inc.s Current Report on Form 8-K filed with
the Commission on November 3, 2005) |
|
|
|
|
|
|
(3.3 |
) |
|
Amendment to Amended and Restated By-Laws of LaCrosse Footwear, Inc. (Incorporated
by reference to Exhibit (3.1) to LaCrosse Footwear, Inc.s Current Report on Form
8-K filed with the Commission on February 6, 2006) |
|
|
|
|
|
|
(10.1)* |
|
|
LaCrosse Footwear, Inc. Retirement Plan (Incorporated by reference to Exhibit
(10.18) to LaCrosse Footwear, Inc.s Form S-1 Registration Statement (Registration
No. 33-75534)) |
|
|
|
|
|
|
(10.2)* |
|
|
LaCrosse Footwear, Inc. Employees Retirement Savings Plan (Incorporated by
reference to Exhibit (10.19) to LaCrosse Footwear, Inc.s Form S-1 Registration
Statement (Registration No. 33-75534)) |
|
|
|
|
|
|
(10.3)* |
|
|
LaCrosse Footwear, Inc. 1993 Employee Stock Incentive Plan (Incorporated by
reference to Exhibit (10.20) to LaCrosse Footwear, Inc.s Form S-1 Registration
Statement (Registration No. 33-75534)) |
|
|
|
|
|
|
(10.4)* |
|
|
LaCrosse Footwear, Inc. 1997 Employee Stock Incentive Plan (Incorporated by
reference to Exhibit (10.17) to LaCrosse Footwear, Inc.s Annual Report on Form 10-K
for the year ended December 31, 1996) |
|
|
|
|
|
|
(10.5)* |
|
|
LaCrosse Footwear, Inc. 2001 Stock Incentive Plan, as amended (Incorporated by
reference to Exhibit (10.1) of LaCrosse Footwear, Inc.s Current Report on Form 8-K
as filed with the Commission on May 9, 2005) |
|
|
|
|
|
|
(10.6)* |
|
|
Amended and Restated LaCrosse Footwear, Inc. 2001 Non-Employee Director Stock Option
Plan, as amended (Incorporated by reference to Exhibit 4.1 of LaCrosse Footwear,
Inc.s Registration Statement on Form S-8 as filed with the Commission on May 3,
2007 (Registration No. 333-142598)) |
|
|
|
|
|
|
(10.7)* |
|
|
LaCrosse Footwear, Inc. 2007 Long Term Incentive Plan (Incorporated by reference to
Exhibit 4.1 of LaCrosse Footwear, Inc.s Registration Statement on Form S-8 as filed
with the Commission on May 3, 2007 (Registration No. 333-142597)) |
|
|
|
|
|
|
(10.8)* |
|
|
LaCrosse Footwear, Inc. 2009 Annual Incentive Compensation Plan Document
(Incorporated by reference to Exhibit (10.1) of LaCrosse Footwear, Inc.s Current
Report on Form 8-K as filed with the Commission on December 23, 2008) |
|
|
|
|
|
|
(10.9)* |
|
|
Summary of 2009 Compensation of Executive Officers (Incorporated by reference to
LaCrosse Footwear, Inc.s Current Report on Form 8-K as filed with the Commission on
December 23, 2008)) |
|
|
|
|
|
|
(10.10)* |
|
|
LaCrosse Footwear, Inc. 2010 Annual Incentive Compensation Plan Document
(Incorporated |
|
|
|
* |
|
A management contract or
compensatory plan or arrangement. |
-34-
|
|
|
|
|
Exhibit Number |
|
Exhibit Description |
|
|
|
|
by reference to Exhibit (10.1) of LaCrosse Footwear, Inc.s Current
Report on Form 8-K as filed with the Commission on December 11, 2009 |
|
|
|
|
|
|
(10.11)* |
|
|
Schedule of Fees for Non-Employee Directors (Incorporated by Reference to LaCrosse
Footwear, Inc.s Current Report on Form 8-K as filed with the Commission on January
6, 2005) |
|
|
|
|
|
|
(10.12 |
) |
|
Lease, dated as of March 14, 1994, by and between JEPCO Development Co. and LaCrosse
Footwear, Inc. (Incorporated by reference to Exhibit (10.22) to LaCrosse Footwear,
Inc.s Form S-1 Registration Statement (Registration No. 33-75534)) |
|
|
|
|
|
|
(10.13 |
) |
|
Amendment, dated as of March 17, 1998, to Lease by and between JEPCO Development
Co., LLC and LaCrosse Footwear, Inc. (Incorporated by reference to Exhibit (10.17)
to LaCrosse Footwear, Inc.s Annual Report on Form 10-K for the year ended December
31, 1998) |
|
|
|
|
|
|
(10.14 |
) |
|
Second Amendment, dated as of November 24, 2008, to lease by and between JEPCO
Development Co., LLC and LaCrosse Footwear, Inc. (Incorporated by reference to
Exhibit (10.13) to LaCrosse Footwear, Inc.s Annual Report on Form 10-K for the year
ended December 31, 2008) |
|
|
|
|
|
|
(10.15 |
) |
|
Third Amendment, dated as of December 4, 2009, to lease by and between JEPCO
Development Co., LLC and LaCrosse Footwear, Inc. |
|
|
|
|
|
|
(10.16 |
) |
|
Single-Tenant Industrial Triple Net Lease, by and between LaCrosse Footwear, Inc.
and ProLogis, dated October 14, 2005 (Incorporated by reference to Exhibit (10.2) to
LaCrosse Footwear, Inc.s Current Report on Form 8-K as filed with the Commission on
October 20, 2005) |
|
|
|
|
|
|
(10.17 |
) |
|
Single Tenant Industrial Triple Net Lease, dated June 11, 2008, by and between
LaCrosse Footwear, Inc. and 267 Associates, L.L.C. (Incorporated by reference to
Exhibit (10.1) to LaCrosse Footwear, Inc.s Current Report on Form 8-K as filed with
the Commission on June 13, 2008) |
|
|
|
|
|
|
(10.18 |
) |
|
Multi-Tenant Industrial Triple Net Lease, dated February 9, 2010, by and among
LaCrosse Footwear, Inc., Danner, Inc., and DP Partners Portland I, LLC (Incorporated
by reference to Exhibit (10.1) to LaCrosse Footwear, Inc.s Current Report on Form
8-K as filed with the Commission on February 10, 2010 |
|
|
|
|
|
|
(10.19 |
) |
|
Parking Lot Lease, dated February 9, 2010, by and among LaCrosse Footwear, Inc., ,
Danner, Inc., and DP Partners Portland I, LLC (Incorporated by reference to
Exhibit (10.2) to LaCrosse Footwear, Inc.s Current Report on Form 8-K as filed with
the Commission on February 10, 2010) |
|
|
|
|
|
|
(10.20 |
) |
|
Certified Manufacturer Agreement, dated as of March 5, 2003, by and between W.L.
Gore & Associates, Inc. and LaCrosse Footwear, Inc. (Incorporated by reference to
Exhibit (10.14) to LaCrosse Footwear, Inc.s Annual Report on Form 10-K filed with
the Commission on March 7, 2008) [Confidential treatment has been granted with
respect to a portion of this Agreement] |
|
|
|
|
|
|
(10.21 |
) |
|
Trademark License, dated as of February 25, 2003, by and between W.L. Gore &
Associates, Inc. and LaCrosse Footwear, Inc. (Incorporated by reference to Exhibit
(10.15) to LaCrosse Footwear, Inc.s Annual Report on Form 10-K filed with the
Commission on March 7, 2008) [Confidential treatment has been granted with respect
to a portion of this Agreement] |
|
|
|
|
|
|
(10.22 |
) |
|
Amendment to Contractual Agreements, dated as of November 17, 2008, by and between
W.L. Gore & Associates, Inc. and LaCrosse Footwear, Inc.
(Incorporated by reference to Exhibit 10.18 to LaCrosse
Footwear, Inc.s Annual Report on Form 10-K Filed with the
Commission on March 7, 2008) [Confidential treatment has
been granted with respect to a portion of this Agreement] |
|
|
|
|
|
|
(10.23 |
) |
|
Amended and Restated Credit Agreement, dated September 6, 2006, by and between
LaCrosse |
-35-
|
|
|
|
|
Exhibit Number |
|
Exhibit Description |
|
|
|
|
Footwear, Inc. as borrower, and Wells Fargo Bank, National Association, as
lender. (Incorporated by reference to Exhibit (4.1) to LaCrosse Footwear, Inc.s
Current Report on Form 8-K as filed with the Commission on September 12, 2006) |
|
|
|
|
|
|
(10.24 |
) |
|
Revolving Credit Note, dated as of September 8, 2006, issued by LaCrosse Footwear,
Inc. in favor of Wells Fargo Bank, National Association (Incorporated by reference
to Exhibit 10.2 to LaCrosse Footwear, Inc.s Current Report on Form 8-K as filed
with the Commission on September 12, 2006) |
|
|
|
|
|
|
(10.25 |
) |
|
First Amendment To Credit Agreement and Waiver, dated February 25, 2008, by and
between LaCrosse Footwear, Inc. as borrower, and Wells Fargo Bank, National
Association, as lender. (Incorporated by reference to Exhibit (10.1) to LaCrosse
Footwear Inc.s Form 8-K as filed with the Commission on February 27, 2008) |
|
|
|
|
|
|
(10.26 |
) |
|
Second Amendment to Credit Agreement and Waiver, dated October 3, 2008, by and
between LaCrosse Footwear, Inc. as borrower, and Wells Fargo Bank, National
Association, as lender (Incorporated by reference to exhibit (10.1) to LaCrosse
Footwear, Inc.s Quarterly Report on Form 10-Q as filed with the Commission on
October 28, 2008) |
|
|
|
|
|
|
(10.27 |
) |
|
Second Amended and Restated Credit Agreement, dated March 1, 2009, by and between
LaCrosse Footwear, Inc. as borrower, and Wells Fargo Bank, National Association, as
lender (Incorporated by reference to exhibit (10.1) to LaCrosse Footwear, Inc.s
Quarterly Report on Form 10-Q as filed with the Commission on April 4, 2009) |
|
|
|
|
|
|
(10.28 |
) |
|
Letter Amendment to Second Amended and Restated Credit Agreement, dated November 30,
2009, by and between LaCrosse Footwear, Inc. as borrower, and Wells Fargo Bank,
National Association, as lender. |
|
|
|
|
|
|
(10.29 |
) |
|
Letter Amendment to Second Amended and Restated Credit Agreement, dated January 26,
2010, by and between LaCrosse Footwear, Inc. as borrower, and Wells Fargo Bank,
National Association, as lender. |
|
|
|
|
|
|
(10.30 |
) |
|
Second Amendment to Third Party Security Agreement, dated January 26, 2010, by and
between LaCrosse Footwear, Inc. and Wells Fargo Bank, National Association. |
|
|
|
|
|
|
(10.31 |
) |
|
Second Amendment to Third Party Security Agreement, dated January 26, 2010, by and
between Danner, Inc. and Wells Fargo Bank, National Association. |
|
|
|
|
|
|
(21.1 |
) |
|
List of subsidiaries of LaCrosse Footwear, Inc. |
|
|
|
|
|
|
(23.1 |
) |
|
Consent of McGladrey & Pullen, LLP |
|
|
|
|
|
|
(31.1 |
) |
|
Certification of the President & Chief Executive Officer pursuant to Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934 |
|
|
|
|
|
|
(31.2 |
) |
|
Certification of the Executive Vice President & Chief Financial Officer pursuant to
Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934 |
|
|
|
|
|
|
(32.1 |
) |
|
Certification of the President & Chief Executive Officer pursuant to 18 U.S.C. § 1350 |
|
|
|
|
|
|
(32.2 |
) |
|
Certification of the Executive Vice President & Chief Financial Officer pursuant to
18 U.S.C. § 1350 |
-36-
INDEX
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
F-2 and F-3 |
|
|
|
F-4 |
|
|
|
|
F-5 |
|
|
|
|
F-6 |
|
|
|
|
F-7 F-25 |
|
F INDEX
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
LaCrosse Footwear, Inc.
We have audited the accompanying consolidated balance sheets of LaCrosse Footwear, Inc. and
Subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income,
shareholders equity and comprehensive income and cash flows for each of the years in the
three-year period ended December 31, 2009. These financial statements are the responsibility of
the Companys management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of LaCrosse Footwear, Inc. and Subsidiaries as of
December 31, 2009 and 2008, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 2009, in conformity with U.S. generally
accepted accounting principles.
We were not engaged to examine managements assessment of the effectiveness of LaCrosse Footwear,
Inc. and Subsidiaries internal control over financial reporting as of December 31, 2009 included
in the Companys Annual Report and titled Managements Annual Report on Internal Control over
Financial Reporting and, accordingly, we do not express an opinion thereon.
/s/ McGLADREY & PULLEN, LLP
Minneapolis, Minnesota
March 5, 2010
F - 1
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2009 and 2008
(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
ASSETS |
|
2009 |
|
|
2008 |
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents (Notes 2 and 9) |
|
$ |
17,739 |
|
|
$ |
13,683 |
|
Trade accounts and other receivables, less allowances of
$663 in 2009 and $809 in 2008 (Note 9) |
|
|
21,635 |
|
|
|
22,449 |
|
Inventories (Note 3) |
|
|
27,031 |
|
|
|
28,618 |
|
Prepaid expenses and other |
|
|
1,129 |
|
|
|
1,402 |
|
Deferred tax assets (Note 4) |
|
|
1,503 |
|
|
|
1,364 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
69,037 |
|
|
|
67,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT |
|
|
|
|
|
|
|
|
Leasehold improvements |
|
|
1,772 |
|
|
|
2,415 |
|
Machinery and equipment |
|
|
18,584 |
|
|
|
15,490 |
|
|
|
|
|
|
|
|
Gross property and equipment |
|
|
20,356 |
|
|
|
17,905 |
|
Less accumulated depreciation |
|
|
11,874 |
|
|
|
11,768 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
8,482 |
|
|
|
6,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
|
|
|
|
Goodwill |
|
|
10,753 |
|
|
|
10,753 |
|
Other assets |
|
|
313 |
|
|
|
159 |
|
|
|
|
|
|
|
|
Total other assets |
|
|
11,066 |
|
|
|
10,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
88,585 |
|
|
$ |
84,565 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F - 2
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
2009 |
|
|
2008 |
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
8,036 |
|
|
$ |
10,288 |
|
Accrued compensation |
|
|
3,343 |
|
|
|
3,151 |
|
Other accruals |
|
|
3,755 |
|
|
|
2,528 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
15,134 |
|
|
|
15,967 |
|
|
|
|
|
|
|
|
|
|
DEFERRED REVENUE (Note 5) |
|
|
225 |
|
|
|
375 |
|
DEFERRED LEASE OBLIGATIONS |
|
|
614 |
|
|
|
190 |
|
COMPENSATION AND BENEFITS (Note 8) |
|
|
4,680 |
|
|
|
5,844 |
|
DEFERRED TAX LIABILITIES (Note 4) |
|
|
2,337 |
|
|
|
777 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
22,990 |
|
|
|
23,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Notes 6, 8, 9 and 15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY (Notes 7, 8, 13 and 15) |
|
|
|
|
|
|
|
|
Common stock, par value $.01 per share; authorized
50,000,000 shares; issued 6,717,627 shares |
|
|
67 |
|
|
|
67 |
|
Additional paid-in capital |
|
|
29,041 |
|
|
|
28,247 |
|
Accumulated other comprehensive loss |
|
|
(3,348 |
) |
|
|
(4,029 |
) |
Retained earnings |
|
|
41,529 |
|
|
|
39,173 |
|
Less cost of 381,829 and 464,496 shares of treasury stock |
|
|
(1,694 |
) |
|
|
(2,046 |
) |
|
|
|
|
|
|
|
Total shareholders equity |
|
|
65,595 |
|
|
|
61,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
$ |
88,585 |
|
|
$ |
84,565 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F - 3
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2009, 2008, and 2007
(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Net sales (Note 10) |
|
$ |
139,152 |
|
|
$ |
127,956 |
|
|
$ |
118,179 |
|
Cost of goods sold |
|
|
85,062 |
|
|
|
77,295 |
|
|
|
71,273 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
54,090 |
|
|
|
50,661 |
|
|
|
46,906 |
|
Selling and administrative expenses |
|
|
45,505 |
|
|
|
40,541 |
|
|
|
35,923 |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
8,585 |
|
|
|
10,120 |
|
|
|
10,983 |
|
Non-operating income (expense) |
|
|
(375 |
) |
|
|
(24 |
) |
|
|
289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
8,210 |
|
|
|
10,096 |
|
|
|
11,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision (Note 4) |
|
|
2,700 |
|
|
|
3,929 |
|
|
|
3,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,510 |
|
|
$ |
6,167 |
|
|
$ |
7,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.87 |
|
|
$ |
0.99 |
|
|
$ |
1.20 |
|
Diluted |
|
$ |
0.86 |
|
|
$ |
0.96 |
|
|
$ |
1.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
6,303,473 |
|
|
|
6,215,049 |
|
|
|
6,087,224 |
|
Diluted |
|
|
6,374,936 |
|
|
|
6,416,731 |
|
|
|
6,357,235 |
|
See accompanying notes to consolidated financial statements.
F - 4
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
AND COMPREHENSIVE INCOME
Years Ended December 31, 2009, 2008, and 2007
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
Additional Paid-In |
|
|
Other Comprehensive |
|
|
Retained |
|
|
Treasury |
|
|
Total Shareholders |
|
|
Comprehensive |
|
|
|
Stock |
|
|
Capital |
|
|
Loss |
|
|
Earnings |
|
|
Stock |
|
|
Equity |
|
|
Income |
|
|
Balance, December 31, 2006 |
|
$ |
67 |
|
|
$ |
26,458 |
|
|
|
($1,684 |
) |
|
$ |
35,952 |
|
|
|
($3,449 |
) |
|
$ |
57,344 |
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,300 |
|
|
|
|
|
|
|
7,300 |
|
|
$ |
7,300 |
|
Adoption of FASB ASC Subtopic 740-10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
(10 |
) |
|
|
|
|
Minimum pension liability net of tax
expense of $430 |
|
|
|
|
|
|
|
|
|
|
673 |
|
|
|
|
|
|
|
|
|
|
|
673 |
|
|
|
673 |
|
Stock based compensation
expense |
|
|
|
|
|
|
549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
549 |
|
|
|
|
|
Cash dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(914 |
) |
|
|
|
|
|
|
(914 |
) |
|
|
|
|
Exercise of stock options |
|
|
|
|
|
|
466 |
|
|
|
|
|
|
|
|
|
|
|
577 |
|
|
|
1,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,973 |
|
|
|
|
|
|
Balance, December 31, 2007 |
|
|
67 |
|
|
|
27,473 |
|
|
|
(1,011 |
) |
|
|
42,328 |
|
|
|
(2,872 |
) |
|
|
65,985 |
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,167 |
|
|
|
|
|
|
|
6,167 |
|
|
|
6,167 |
|
Minimum pension liability net of tax
benefit of $1,731 |
|
|
|
|
|
|
|
|
|
|
(2,709 |
) |
|
|
|
|
|
|
|
|
|
|
(2,709 |
) |
|
|
(2,709 |
) |
Stock based compensation
expense |
|
|
|
|
|
|
577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
577 |
|
|
|
|
|
Cash dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,322 |
) |
|
|
|
|
|
|
(9,322 |
) |
|
|
|
|
Purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(95 |
) |
|
|
(95 |
) |
|
|
|
|
Exercise of stock options |
|
|
|
|
|
|
197 |
|
|
|
|
|
|
|
|
|
|
|
921 |
|
|
|
1,118 |
|
|
|
|
|
Foreign currency translation
adjustment |
|
|
|
|
|
|
|
|
|
|
(309 |
) |
|
|
|
|
|
|
|
|
|
|
(309 |
) |
|
|
(309 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,149 |
|
|
|
|
|
|
Balance, December 31, 2008 |
|
|
67 |
|
|
|
28,247 |
|
|
|
(4,029 |
) |
|
|
39,173 |
|
|
|
(2,046 |
) |
|
|
61,412 |
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,510 |
|
|
|
|
|
|
|
5,510 |
|
|
|
5,510 |
|
Minimum pension liability net of tax
expense of $411 |
|
|
|
|
|
|
|
|
|
|
641 |
|
|
|
|
|
|
|
|
|
|
|
641 |
|
|
|
641 |
|
Stock based compensation
expense |
|
|
|
|
|
|
581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
581 |
|
|
|
|
|
Cash dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,154 |
) |
|
|
|
|
|
|
(3,154 |
) |
|
|
|
|
Exercise of stock options |
|
|
|
|
|
|
213 |
|
|
|
|
|
|
|
|
|
|
|
352 |
|
|
|
565 |
|
|
|
|
|
Foreign currency translation
adjustment |
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,191 |
|
|
|
|
|
|
Balance, December 31, 2009 |
|
$ |
67 |
|
|
$ |
29,041 |
|
|
|
($3,348 |
) |
|
$ |
41,529 |
|
|
|
($1,694 |
) |
|
$ |
65,595 |
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F - 5
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2009, 2008, and 2007
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
| | | |
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,510 |
|
|
$ |
6,167 |
|
|
$ |
7,300 |
|
Adjustments to reconcile net income to net cash
provided by operating activities, net of effects of
acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
2,705 |
|
|
|
1,891 |
|
|
|
1,761 |
|
Loss on disposal of property and equipment |
|
|
225 |
|
|
|
5 |
|
|
|
97 |
|
Stock-based compensation expense |
|
|
581 |
|
|
|
577 |
|
|
|
549 |
|
Deferred income taxes |
|
|
1,011 |
|
|
|
64 |
|
|
|
586 |
|
Changes in current assets and liabilities, net of effects
of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts and other receivables |
|
|
814 |
|
|
|
144 |
|
|
|
(2,681 |
) |
Inventories |
|
|
1,740 |
|
|
|
1,682 |
|
|
|
(5,093 |
) |
Accounts payable |
|
|
(2,252 |
) |
|
|
3,022 |
|
|
|
2,029 |
|
Accrued expenses and other |
|
|
1,872 |
|
|
|
(301 |
) |
|
|
(488 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
12,206 |
|
|
|
13,251 |
|
|
|
4,060 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(5,254 |
) |
|
|
(3,176 |
) |
|
|
(1,508 |
) |
Proceeds from sales of property and equipment |
|
|
41 |
|
|
|
|
|
|
|
2 |
|
Acquisition payment (Note 11) |
|
|
(388 |
) |
|
|
(3,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(5,601 |
) |
|
|
(6,345 |
) |
|
|
(1,506 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid |
|
|
(3,154 |
) |
|
|
(9,322 |
) |
|
|
(914 |
) |
Purchase of treasury stock |
|
|
|
|
|
|
(95 |
) |
|
|
|
|
Proceeds from exercise of stock options |
|
|
565 |
|
|
|
1,118 |
|
|
|
1,043 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(2,589 |
) |
|
|
(8,299 |
) |
|
|
129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate changes on cash and
cash equivalents |
|
|
40 |
|
|
|
(309 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
4,056 |
|
|
|
(1,702 |
) |
|
|
2,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning |
|
|
13,683 |
|
|
|
15,385 |
|
|
|
12,702 |
|
|
|
|
|
|
|
|
|
|
|
Ending |
|
$ |
17,739 |
|
|
$ |
13,683 |
|
|
$ |
15,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments for income taxes |
|
$ |
438 |
|
|
$ |
3,692 |
|
|
$ |
2,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash minimum pension liability adjustment, net of tax
(Note 8) |
|
$ |
641 |
|
|
$ |
(2,709 |
) |
|
$ |
673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash deferred income tax expense (benefit) from
adjustment to pension liability (Note 8) |
|
$ |
411 |
|
|
$ |
(1,731 |
) |
|
$ |
430 |
|
See accompanying notes to consolidated financial statements.
F - 6
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
LaCrosse Footwear, Inc. is a leading developer and marketer of branded, premium and innovative
footwear for expert work and outdoor users. The Companys Danner® and LaCrosse® brands are
distributed domestically through a nationwide network of specialty retailers and distributors,
and internationally through distributors and retailers in Asia, Europe and Canada.
The Company markets its two brands through four channels of distribution: (1) wholesale (formerly
known as retail), (2) government, (3) consumer direct, and (4) international.
|
|
|
Within the wholesale channel, the LACROSSE® and DANNER® brands
are marketed through our employee field sales staff directly to sporting goods and
outdoor retailers, general merchandisers, industrial distributors, and independent shoe
stores. |
|
|
|
|
The government channel provides performance footwear built to meet the demands and
specific requirements for multiple branches of the U.S. military, as well as federal,
state and other governmental agencies. |
|
|
|
|
Through the consumer direct channels of distribution, the Company operates four
Internet websites for use by consumers and our wholesale partners. The Company also has a
factory store in Portland, Oregon. |
|
|
|
|
International sales are primarily derived through independent distributors and dealer
networks in Japan and Canada as well as our subsidiary LaCrosse Europe ApS, which was
established to strengthen the Companys direct sales and marketing support to customers
in Europe. |
Summary of significant accounting policies:
Principles of consolidation The consolidated financial statements include the accounts of
LaCrosse Footwear, Inc. and its wholly owned subsidiaries, Danner, Inc., LaCrosse International,
Inc., LaCrosse Europe, Inc., LaCrosse Europe ApS, and Environmentally Neutral Design Outdoor,
Inc. (collectively the Company). All material intercompany accounts and transactions have
been eliminated in consolidation.
Use of estimates in the preparation of financial statements The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying footnotes. Significant items subject to
estimates and assumptions include valuation allowances for trade accounts receivable,
inventories, and deferred tax assets, as well as pension obligations, product warranties,
stock-based compensation, and estimated future cash flows used together with the Companys market
capitalization in the annual impairment test of goodwill. Actual results could differ from those
estimates.
Reclassifications
- Certain amounts in the 2008 consolidated balance sheets have been
reclassified to conform with the 2009 presentation.
F - 7
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies, Continued
Cash and cash equivalents The Company maintains its cash in money market accounts and U.S.
Government money market accounts, which may, at times, exceed federally insured limits. The
Company has not experienced any losses in such accounts. The carrying amounts of such assets are
a reasonable estimate of their fair value due to the short term to maturity and readily available
market for the investments.
Revenue recognition - Revenue is recognized when products are shipped, the customer takes title
and assumes risk of loss, collection of related receivables are probable, persuasive evidence of
an arrangement exists, and the sales price is fixed or determinable. Factory store revenues are
recorded at the time of sale. Allowances for estimated returns and discounts are provided when
the related revenue is recorded. Amounts billed for shipping and handling costs are recorded as a
component of net sales.
Foreign currency translation and foreign currency transactions - The assets and liabilities of
the Companys foreign subsidiaries have been translated into U.S. dollars using the exchange
rates in effect at period end, and the net sales and expenses have been translated into U.S.
dollars using average exchange rates in effect during the period. The foreign currency
translation adjustments are included as a separate component of accumulated other comprehensive
loss within shareholders equity.
Any gains or losses generated by foreign currency transactions are recorded in non-operating
income (expense) in the consolidated statements of income in the period in which they occur.
Fair value of financial instruments - The Companys financial instruments, including cash and
cash equivalents, trade accounts receivable, accounts payable, and accrued compensation are
estimated to approximate their fair value due to their short maturities.
Trade accounts receivable and allowance for doubtful accounts - Trade accounts receivable are
carried at original invoice amount less estimated allowances for doubtful accounts, cash
discounts and non-defective returns. The Company maintains an allowance for doubtful accounts for
the uncertainty of its customers ability to make required payments. In determining the amount
of the allowance, the Company considers historical levels of credit losses and makes judgments
about the creditworthiness of customers based upon ongoing credit evaluations. The Company also
analyzes its cash discount programs and returns policies and ongoing rates of non-defective
returns to assess the adequacy of allowance levels and adjusts such allowances as necessary.
Inventories Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out (FIFO) method. Provision for potentially slow-moving or excess inventories
is made based on managements analysis of inventory levels, future sales forecasts, and current
estimated market values.
Property and equipment - Property and equipment are carried at cost and are depreciated using the
straight-line method over their estimated useful lives or lease term, whichever is shorter.
Depreciable lives range from three to ten years for leasehold improvements and from three to
seven years for machinery and equipment.
F - 8
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies, Continued
Goodwill - Goodwill represents the excess of the purchase price over the fair value of the net
tangible and identified intangible assets. Goodwill is not amortized, but is subject to annual
impairment tests in accordance with FASB Accounting Standards Codification Topic 350 Intangibles
Goodwill and Other (FASB ASC Subtopic 350-20). In accordance with FASB ASC Subtopic 350-20,
the Company reviews its goodwill for impairment annually, or more frequently, if there is a
triggering event. The provisions of ASC Subtopic 350-20 require that a two-step test be performed
to assess goodwill for impairment. First, the fair value of the reporting unit is compared to its
carrying value. If the fair value exceeds the carrying value, goodwill is not impaired and no
further testing is required. The second step is performed if the carrying value exceeds the fair
value. The implied fair value of the reporting units goodwill must be determined and compared to
the carrying value of the goodwill. If the carrying value of a reporting units goodwill exceeds
its implied fair value, an impairment loss equal to the difference will be recorded. The Company
also reviews the carrying amount of goodwill for impairment if an event occurs or circumstances
change that would indicate the carrying amount may be impaired. As of June 27, 2009, the Company
has determined that there was no impairment of its recorded goodwill and as of December 31, 2009,
there have been no triggering events that would require an updated impairment review.
Recoverability and impairment of intangible assets and other long-lived assets - In accordance
with FASB Accounting Standards Codification Subtopic 360-10 Impairment or Disposal of Long-Lived
Assets, the Company reviews long-lived assets and certain identifiable intangibles for
impairment whenever events or changes indicate the carrying value may be impaired. In these
cases, the Company estimates the future undiscounted net cash flows to be derived from the assets
to determine whether a potential impairment exists. If the carrying value exceeds the estimate of
future undiscounted cash flows, the Company then calculates the impairment as the excess of the
carrying value of the asset over the estimate of its fair value. The Company determined that
there was no impairment as of December 31, 2009.
Product warranties - The Company provides a limited warranty for the replacement of defective
products sold for a specified time period after sale. The Company estimates the costs that may be
incurred under its limited warranty and records a liability in the amount of such costs at the
time product revenue is recognized. Factors that affect the Companys warranty liability include
the number of units sold, and historical and anticipated future rates of warranty claims. The
Company also utilizes historical trends and information received from its customers to assist in
determining the appropriate warranty accrual levels.
Accruals for product warranties are included in other accruals in the accompanying consolidated
balance sheets. Changes in the carrying amount of accrued product warranty cost for the years
ended December 31, 2009 and 2008 are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Accrued product warranties, beginning |
|
$ |
1,266 |
|
|
$ |
941 |
|
Accruals for products sold |
|
|
2,890 |
|
|
|
2,832 |
|
Warranty claims |
|
|
(2,747 |
) |
|
|
(2,507 |
) |
|
|
|
|
|
|
|
Accrued product warranties, ending |
|
$ |
1,409 |
|
|
$ |
1,266 |
|
|
|
|
|
|
|
|
Stock-based compensation The Company follows the provisions of FASB Accounting Standards
Codification Topic 718 Compensation Stock Compensation, which requires the Company to
recognize expense related to the fair value of its share-based compensation awards. The Company
uses the Black-Scholes model to estimate the fair value of all share-based compensation awards on the date of
grant.
F - 9
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies, Continued
The Company recognizes the compensation expense for options on a straight-line basis over the
requisite service period of the award.
Stock-based compensation expense recognized was $0.6 million ($0.06 per diluted share) for 2009,
$0.6 million ($0.05 per diluted share) for 2008 and $0.5 million ($0.06 per diluted share) for
2007. See Note 7, Stock Options for additional information.
Income taxes - The provision for income taxes is based on earnings reported in the consolidated
statements of income. Deferred tax assets and liabilities are determined by applying anticipated
future tax rates to the cumulative temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax bases. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment. See Note 4, Income Tax Matters for additional information.
Research and development costs Expenditures relating to the development of new products and
processes are expensed as incurred. These costs include expenditures for compensation, materials,
facilities, and other costs.
Advertising and promotion - The Company advertises and promotes its products through national and
regional media, displays, and catalogs and through cooperative advertising programs with
wholesalers. Costs for these advertising and promotional programs are charged to expense as
incurred. Advertising and promotional expenses included in the consolidated statements of income
for the years ended December 31, 2009, 2008, and 2007 were $3.1 million, $2.4 million, and $2.9
million, respectively.
Net income per common share - The Company presents its net income on a per share basis for both
basic and diluted common shares. Basic earnings per common share excludes all dilutive stock
options and is computed using the weighted average number of common shares outstanding during the
period. The diluted earnings per common share calculation assumes that all stock options were
exercised and converted into common stock at the beginning of the period, unless their effect
would be anti-dilutive.
A reconciliation of the shares used in the basic and diluted earnings per common share is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Basic weighted average common shares outstanding |
|
|
6,303,473 |
|
|
|
6,215,049 |
|
|
|
6,087,224 |
|
Dilutive stock options |
|
|
71,463 |
|
|
|
201,682 |
|
|
|
270,011 |
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares
outstanding |
|
|
6,374,936 |
|
|
|
6,416,731 |
|
|
|
6,357,235 |
|
|
|
|
|
|
|
|
|
|
|
Segment reporting The Company complies with FASB Accounting Standards Codification Topic
280 Segment Reporting (FASB ASC Topic 280). FASB ASC Topic 280, which is based on a management
approach to segment reporting, establishes requirements to report selected segment information
quarterly and to report annually entity-wide disclosures about products, major customers and the
geographies in which the entity holds material assets and reports revenue. An operating segment
is defined as a component that engages in business activities whose operating results are
reviewed by the chief operating decision maker and for which discrete financial information is
available. Based on the provisions of FASB ASC Topic 280, the Company has determined that it
operates as a single segment. The Company manages
F - 10
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies, Continued
|
|
its resources and assesses its performance on an enterprise-wide basis. |
Note 2. Fair Value of Financial Instruments
|
|
Cash and cash equivalents at December 31, 2009 and 2008 were $17.7 and $13.7 million,
respectively. The Company has categorized its cash and cash equivalents as a Level 1 financial
asset, measured at fair value based on quoted prices in active markets of identical assets, in
accordance with Accounting Standards Codification Topic 820 Fair Value Measurements and
Disclosures. The Company does not have any other financial assets or liabilities that are
measured at fair value. |
Note 3. Inventories
|
|
A summary of inventories is as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Raw materials |
|
$ |
4,094 |
|
|
$ |
3,590 |
|
Work in process |
|
|
388 |
|
|
|
316 |
|
Finished goods |
|
|
23,346 |
|
|
|
25,161 |
|
|
|
|
|
|
|
|
Subtotal |
|
|
27,828 |
|
|
|
29,067 |
|
Less: provision for obsolete and slow-moving inventories |
|
|
(797 |
) |
|
|
(449 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
27,031 |
|
|
$ |
28,618 |
|
|
|
|
|
|
|
|
Note 4. Income Tax Matters
|
|
As of December 31, 2009 and 2008, the Company recorded a valuation allowance of $1.0 million and
$1.1 million, respectively, related to the state of Wisconsin net operating loss (NOL)
carryforwards of which the realization of such carryforwards is dependent on having taxable
income in Wisconsin in future periods.
In future periods of earnings, the Company will report income tax expense offset by any further
reductions in the valuation allowance based on an ongoing assessment of the future realization of
the state NOL deferred tax assets. |
|
|
|
The total state NOLs as of December 31, 2009 are approximately $21.0 million, which will expire
as follows: $1.9 million in 2015, $5.3 million in 2016, $9.2 million in 2017, $2.5 million in
2018, $1.6 million in 2019, at $0.5 million in 2020. |
|
|
|
Income before income taxes consist of the following (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31, |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
United States |
|
$ |
7,983 |
|
|
$ |
11,536 |
|
|
$ |
11,272 |
|
Foreign |
|
|
227 |
|
|
|
(1,440 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
8,210 |
|
|
$ |
10,096 |
|
|
$ |
11,272 |
|
|
|
|
F - 11
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Income Tax Matters, Continued
|
|
Net deferred tax assets and liabilities consist of the following components (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Trade receivable allowances |
|
$ |
147 |
|
|
$ |
242 |
|
Inventory allowances |
|
|
800 |
|
|
|
641 |
|
Compensation and benefits |
|
|
2,615 |
|
|
|
2,897 |
|
Warranty reserves and other |
|
|
849 |
|
|
|
782 |
|
Net operating loss carryforwards |
|
|
1,058 |
|
|
|
1,388 |
|
Valuation allowance |
|
|
(1,017 |
) |
|
|
(1,070 |
) |
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
4,452 |
|
|
|
4,880 |
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Goodwill amortization |
|
|
4,194 |
|
|
|
4,131 |
|
Property and equipment |
|
|
1,012 |
|
|
|
131 |
|
Prepaid expenses and other |
|
|
80 |
|
|
|
31 |
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
5,286 |
|
|
|
4,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax
assets (liabilities) |
|
$ |
(834 |
) |
|
$ |
587 |
|
|
|
|
|
|
|
|
|
|
The components giving rise to the net deferred tax assets (liabilities) described above have been
included in the accompanying consolidated balance sheets as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Current assets |
|
$ |
1,503 |
|
|
$ |
1,364 |
|
Noncurrent liabilities |
|
|
(2,337 |
) |
|
|
(777 |
) |
|
|
|
|
|
|
|
Net deferred tax
assets (liabilities) |
|
$ |
(834 |
) |
|
$ |
587 |
|
|
|
|
|
|
|
|
F - 12
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Income Tax Matters, Continued
|
|
The components of the provision for income taxes are as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
2009 |
|
|
2008 |
|
|
2007 |
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
1,714 |
|
|
$ |
3,542 |
|
|
$ |
3,071 |
|
State |
|
|
431 |
|
|
|
323 |
|
|
|
315 |
|
Foreign |
|
|
(372 |
) |
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
545 |
|
|
|
379 |
|
|
|
526 |
|
State |
|
|
(15 |
) |
|
|
43 |
|
|
|
60 |
|
Foreign |
|
|
397 |
|
|
|
(358 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
$ |
2,700 |
|
|
$ |
3,929 |
|
|
$ |
3,972 |
|
|
|
|
|
|
|
|
|
|
|
|
The differences between statutory federal tax rates and the effective tax rates reflected in the
consolidated statements of income are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
2009 |
|
|
2008 |
|
|
2007 |
Statutory federal tax rate |
|
|
34.0 |
% |
|
|
34.0 |
% |
|
|
34.0 |
% |
State rate, net of federal tax effect |
|
|
5.1 |
% |
|
|
3.2 |
% |
|
|
3.2 |
% |
Federal & state research and experimentation credits |
|
|
(2.0 |
%) |
|
|
(2.3 |
%) |
|
|
(2.1 |
%) |
Liability for unrecognized tax benefits |
|
|
(3.1 |
%) |
|
|
1.3 |
% |
|
|
0.5 |
% |
Foreign rate differential |
|
|
(1.8 |
%) |
|
|
1.8 |
% |
|
|
0.0 |
% |
Other, net |
|
|
0.7 |
% |
|
|
0.9 |
% |
|
|
(0.4 |
%) |
|
|
|
|
|
|
|
Effective income tax rate |
|
|
32.9 |
% |
|
|
38.9 |
% |
|
|
35.2 |
% |
|
|
|
|
|
|
|
|
|
A reconciliation of the beginning and ending liability for unrecognized income tax benefits for
2009 and 2008 is shown below (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
2009 |
|
|
2008 |
Balance, beginning of year |
|
$ |
349 |
|
|
$ |
215 |
|
Additions for tax positions of prior years |
|
|
|
|
|
|
87 |
|
Additions based on tax positions related to the current year |
|
|
8 |
|
|
|
47 |
|
Reductions for tax positions of prior years |
|
|
(265 |
) |
|
|
|
|
Settlements |
|
|
(75 |
) |
|
|
|
|
|
|
|
|
|
|
Balance, end of year |
|
$ |
17 |
|
|
$ |
349 |
|
|
|
|
|
|
|
|
|
As of December 31, 2009, the Companys balance of net uncertain tax benefit positions would
reduce the Companys effective income tax rate if recognized. |
|
|
The Companys policy is to accrue interest related to potential underpayment of income taxes
within the |
F - 13
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Income Tax Matters, Continued
|
|
provision for income taxes. The liability for accrued interest as of December 31, 2009 and
December 31, 2008 was insignificant. Interest is computed on the difference between the
Companys uncertain tax benefit positions under the provisions FASB ASC Subtopic 740-10 and the
amount deducted or expected to be deducted in the Companys tax returns. |
|
|
The Company files a consolidated U.S. federal income tax return as well as foreign and state tax
returns on a consolidated, combined, or stand-alone basis (depending upon the jurisdiction). The
Company has concluded tax examinations for U.S. federal and Oregon state filings through the tax
year ended December, 2007 and December 2006, respectively. Depending on the jurisdiction, the
Company is no longer subject to state examinations by tax authorities other than Oregon for years
prior to the December 2004 and 2005 tax years. The Company is not subject to foreign tax
examinations prior to the year ended December 2008. |
Note 5. Financing Arrangements
|
|
On March 9, 2009, the Company entered into a new line of credit agreement with Wells Fargo Bank,
N.A., which expires June 30, 2012. This line of credit agreement represents a 3-year extension of
the Companys previous line of credit agreement with Wells Fargo Bank, N.A. Amounts borrowed
under the agreement are secured by substantially all of the Companys assets. The maximum
aggregate principal amount of borrowings allowed from January 1 to May 31 is $17.5 million and
from June 1 to December 31, the total available is $30 million. There are no borrowing base
limitations under the credit agreement. The credit agreement provides for an interest rate of
LIBOR plus 1.75% and an annual commitment fee of 0.15% on the unused balance. At December 31,
2009 and 2008, the Company had no outstanding balances due under this financing agreement. See
Note 15. Subsequent Events, for information regarding a
January 26, 2010 amendment to this
credit agreement. |
|
|
In June 2006, the Company received a grant of $0.2 million and a non-interest bearing loan of
$0.6 million from the Portland Development Commission, which were used to finance certain
leasehold improvements at the Companys Portland distribution facility. The grant is recorded as
deferred revenue and is being amortized as a reduction of operating expenses on a straight-line
basis over five years, which is the estimated useful life of the associated leasehold
improvements. In the third quarter of 2008, the loan was forgiven by the Portland Development
Commission and accordingly, the Company reclassified the remaining unamortized long-term debt to
deferred revenue and will continue to amortize the balance until 2011. Deferred revenue was $0.2
million and $0.4 million at December 31, 2009 and 2008, respectively. |
Note 6. Lease Commitments and Contingencies
|
|
Lease Commitments The Company has real estate operating leases for office space, factory store,
and manufacturing and distribution space under non-cancelable lease agreements expiring on
various dates through 2019. The total rental expense included in the consolidated statements of income for
the years ended December 31, 2009, 2008, and 2007 is $2.9 million, $2.2 million, and $2.1
million, respectively. The future minimum lease payments required under non-cancelable operating
leases at December 31, 2009 are: $2.6 million in each of years 2010 through 2013, $2.7 million
in 2014, and $8.0 million thereafter. Obligations related to the new leases that were executed
subsequent to December 31, 2009, have been included in the future minimum lease payments above
(see Note 15. Subsequent Events). |
|
|
Contingencies In the normal course of business, the Company is subject to claims and
litigation. Management believes that such matters which are currently known will not have a
material adverse effect |
F - 14
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Lease Commitments and Contingencies, Continued
|
|
on the Companys results of operations, liquidity or financial condition. |
Note 7. Stock Options
|
|
The Company has outstanding stock options under certain employee and director stock option plans.
Outstanding employee stock options are subject to the provisions of the 1993 Employee Stock
Incentive Plan, 1997 Employee Stock Incentive Plan, 2001 Stock Incentive Plan, and 2007 Long Term
Incentive Plan. The Board of Directors stock options are subject to the provisions of the 2001
Non-Employee Director Stock Option Plan, as Amended and Restated. Prior to 2006, employee stock
options vested over a period of five years and had a maximum term of ten years. Beginning in
2006, the employee stock option issuances vest over four years and have a maximum term of seven
years. Prior to 2008, the directors stock options vested over a period of five years and had a
maximum term of ten years. Beginning in 2008, the directors stock option issuances vest over
four years and have a maximum term of seven years. |
|
|
|
FASB Accounting Standards Codification Topic 718 Compensation Stock Compensation requires
companies to estimate the fair value of share-based awards on the date of grant using an
option-pricing model. The value of the portion of the award that is ultimately expected to vest
is recognized as expense in the Companys consolidated statements of income over the requisite
service periods. Because share-based compensation expense is based on awards that are ultimately
expected to vest, share-based compensation expense is reduced for estimated forfeitures. FASB
ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those estimates. |
|
|
|
To calculate the share-based compensation expense, the Company uses the Black-Scholes
option-pricing model. The Companys determination of fair value of option-based awards on the
date of grant is impacted by the Companys stock price as well as assumptions regarding certain highly subjective
variables. These variables include, but are not limited to, the Companys expected stock price
volatility over the term of the awards, the anticipated risk-free interest rate, anticipated
future dividend yields and the expected life of the options. The anticipated risk-free interest
rate is based on a treasury instrument whose term is consistent with the expected life of the
stock options granted. The expected volatility, life of options and dividend yield are based on
historical experience. |
F - 15
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Stock Options, Continued
|
|
The following table lists the assumptions used by the Company in determining the fair value of
stock options and the resulting fair value for the years ended December 31, 2009, 2008, and 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
2009 |
|
|
2008 |
|
|
2007 |
Expected dividend yield |
|
|
3.7 |
% |
|
|
2.9 |
% |
|
|
0 |
% |
Expected stock price volatility |
|
|
46 |
% |
|
|
31 |
% |
|
|
42 |
% |
Risk-free interest rate |
|
|
1.4 |
% |
|
|
3.2 |
% |
|
|
4.7 |
% |
Expected life of options |
|
4.6 years |
|
4.4 years |
|
3.2 years |
Weighted average fair value of options |
|
$ |
3.26 |
|
$ |
3.76 |
|
$ |
4.57 |
|
|
The following table represents stock option activity for the three years ended December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
|
Weighted Average |
|
|
Average Remaining |
|
|
|
Under Options |
|
|
Exercise Price |
|
|
Contract Life |
|
|
|
|
Options outstanding December 31, 2006 |
|
|
749,722 |
|
|
$ |
8.04 |
|
|
|
|
|
Granted |
|
|
167,650 |
|
|
|
13.52 |
|
|
|
|
|
Canceled |
|
|
(54,051 |
) |
|
|
11.81 |
|
|
|
|
|
Exercised |
|
|
(74,742 |
) |
|
|
8.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding December 31, 2007 |
|
|
788,579 |
|
|
|
8.94 |
|
|
|
|
|
Granted |
|
|
193,175 |
|
|
|
16.72 |
|
|
|
|
|
Canceled |
|
|
(43,749 |
) |
|
|
13.83 |
|
|
|
|
|
Exercised |
|
|
(141,166 |
) |
|
|
5.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding December 31, 2008 |
|
|
796,839 |
|
|
|
11.12 |
|
|
|
|
|
Granted |
|
|
193,150 |
|
|
|
11.46 |
|
|
|
|
|
Canceled |
|
|
(97,799 |
) |
|
|
12.80 |
|
|
|
|
|
Exercised |
|
|
(82,667 |
) |
|
|
5.52 |
|
|
|
|
|
|
|
|
Options outstanding December 31, 2009 |
|
|
809,523 |
|
|
$ |
11.57 |
|
|
4.7 years |
|
|
|
|
|
|
|
|
|
|
|
|
F - 16
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Stock Options, Continued
|
|
Options outstanding under the option plans on December 31, 2009 by price range are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options |
|
|
Exercisable Options |
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
Number of |
|
|
Weighted |
|
|
Average |
|
|
Number of |
|
|
Weighted |
|
|
Average |
|
Range of |
|
Outstanding |
|
|
Average |
|
|
Remaining |
|
|
Outstanding |
|
|
Average |
|
|
Remaining |
|
Exercise Price |
|
Options |
|
|
Exercise Price |
|
|
Life |
|
|
Options |
|
|
Exercise Price |
|
|
Life |
|
< $7.70 |
|
|
51,000 |
|
|
$ |
2.77 |
|
|
|
2.8 |
|
|
|
51,000 |
|
|
$ |
2.77 |
|
|
|
2.8 |
|
$7.70 - $10.50 |
|
|
127,207 |
|
|
|
7.93 |
|
|
|
4.4 |
|
|
|
106,257 |
|
|
|
7.72 |
|
|
|
4.0 |
|
> $10.50 |
|
|
631,316 |
|
|
|
13.01 |
|
|
|
4.9 |
|
|
|
271,884 |
|
|
|
12.36 |
|
|
|
4.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
809,523 |
|
|
|
11.57 |
|
|
|
4.7 |
|
|
|
429,141 |
|
|
|
10.07 |
|
|
|
4.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys nonvested stock option activity for the year ended December 31, 2009 is as follows: |
|
|
|
|
|
|
|
Number of |
|
|
|
Shares |
|
Nonvested stock options at beginning of year |
|
|
447,393 |
|
Vested |
|
|
(162,362 |
) |
Canceled |
|
|
(97,799 |
) |
Granted |
|
|
193,150 |
|
Nonvested stock options at end of year |
|
|
380,382 |
|
|
|
|
|
|
|
Shares available for future stock grants to employees and directors under existing plans
were approximately 295,000 at December 31, 2009. The aggregate intrinsic value of options
outstanding at December 31, 2009 was $1.5 million, and the aggregate intrinsic value of
exercisable options was $1.3 million. The total intrinsic value of options exercised during 2009
was $0.4 million. At December 31, 2009, there was approximately $0.4 million of unrecognized
compensation cost related to share-based payments to be recognized over a weighted-average period
of approximately 1.1 years. The total fair value of options vesting in 2009 was approximately
$0.6 million. A tax benefit of $0.1 million was recognized in 2009 from the exercise of stock
options. |
Note 8. Compensation and Benefit Agreements
|
|
The Company has a defined benefit pension plan covering eligible past employees and less than 1%
of its current employees. Eligible participants are entitled to monthly pension benefits
beginning at normal retirement age sixty-five (65). The monthly benefit payable at normal
retirement date under the plan is equal to a specified dollar amount or percentage of average
monthly compensation, as defined in the plan, multiplied by years of benefit service (maximum of
38 years). The Companys funding policy is to make not less than the minimum contribution
required by applicable regulations, plus such amounts as the Company may determine to be
appropriate from time to time. The Company froze the plan during 2003 and
as a result, participants do not accrue any additional years of service regardless of any
increases in their compensation or completion of additional years of credited service. |
|
|
The Company also sponsors an unfunded defined benefit postretirement death benefit plan that
covers eligible past employees. The Company funds this postretirement benefit obligation as the
benefits are paid. |
F - 17
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Compensation and Benefit Agreements, Continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
|
|
December 31, |
|
|
December 31, |
|
Summary of pension and other postretirement benefit plans (in thousands): |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Changes in benefit obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations at beginning of year |
|
$ |
15,586 |
|
|
$ |
15,720 |
|
|
$ |
279 |
|
|
$ |
282 |
|
Interest cost |
|
|
944 |
|
|
|
951 |
|
|
|
17 |
|
|
|
17 |
|
Benefits paid |
|
|
(1,088 |
) |
|
|
(1,089 |
) |
|
|
(21 |
) |
|
|
(19 |
) |
Actuarial (gains) losses |
|
|
895 |
|
|
|
4 |
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations at end of year |
|
$ |
16,337 |
|
|
$ |
15,586 |
|
|
$ |
275 |
|
|
$ |
279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in plan assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets at beginning of year |
|
$ |
10,021 |
|
|
$ |
14,009 |
|
|
$ |
|
|
|
$ |
|
|
Actual return on assets |
|
|
2,405 |
|
|
|
(3,355 |
) |
|
|
|
|
|
|
|
|
Company contributions |
|
|
594 |
|
|
|
456 |
|
|
|
21 |
|
|
|
19 |
|
Benefits paid |
|
|
(1,088 |
) |
|
|
(1,089 |
) |
|
|
(21 |
) |
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets at end of year |
|
$ |
11,932 |
|
|
$ |
10,021 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets less than obligations |
|
$ |
(4,405 |
) |
|
$ |
(5,565 |
) |
|
$ |
(290 |
) |
|
$ |
(278 |
) |
Unrecognized (gain) loss |
|
|
5,046 |
|
|
|
6,004 |
|
|
|
15 |
|
|
|
(1 |
) |
Unrecognized prior service cost |
|
|
|
|
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued benefit (cost) |
|
$ |
641 |
|
|
$ |
533 |
|
|
$ |
(275 |
) |
|
$ |
(279 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total compensation and benefits liabilities |
|
$ |
4,405 |
|
|
$ |
5,565 |
|
|
$ |
275 |
|
|
$ |
279 |
|
The following is a reconciliation to the compensation and benefits financial statement line item on the accompanying balance sheets: |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Pension benefits |
|
$ |
4,405 |
|
|
$ |
5,565 |
|
Other benefits |
|
|
275 |
|
|
|
279 |
|
|
|
|
|
|
|
|
Total compensation and benefits |
|
$ |
4,680 |
|
|
$ |
5,844 |
|
|
|
|
|
|
|
|
F - 18
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Compensation and Benefit Agreements, Continued
Changes to Accumulated Other Comprehensive Loss pertaining to the defined benefit pension plan
for the years ended December 31, 2009, 2008, and 2007 are shown below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Prior |
|
|
|
|
|
|
|
|
|
Deferred |
|
Other |
|
|
Service |
|
Unrecognized |
|
|
|
|
|
Tax |
|
Comprehensive |
|
|
Cost |
|
Losses |
|
Total |
|
Amount |
|
Loss * |
|
|
|
Balance, December 31, 2006 |
|
$ |
123 |
|
|
$ |
2,638 |
|
|
$ |
2,761 |
|
|
$ |
(1,077 |
) |
|
$ |
1,684 |
|
Incurred in the current year |
|
|
|
|
|
|
(981 |
) |
|
|
(981 |
) |
|
|
382 |
|
|
|
(599 |
) |
Recognized as component of
net period (cost) |
|
|
(15 |
) |
|
|
(107 |
) |
|
|
(122 |
) |
|
|
48 |
|
|
|
(74 |
) |
|
|
|
Balance, December 31, 2007 |
|
|
108 |
|
|
|
1,550 |
|
|
|
1,658 |
|
|
|
(647 |
) |
|
|
1,011 |
|
Incurred in the current year |
|
|
|
|
|
|
4,454 |
|
|
|
4,454 |
|
|
|
(1,736 |
) |
|
|
2,718 |
|
Recognized as component of
net period (cost) |
|
|
(14 |
) |
|
|
|
|
|
|
(14 |
) |
|
|
5 |
|
|
|
(9 |
) |
|
|
|
Balance, December 31, 2008 |
|
|
94 |
|
|
|
6,004 |
|
|
|
6,098 |
|
|
|
(2,378 |
) |
|
|
3,720 |
|
Incurred in the current year |
|
|
|
|
|
|
(764 |
) |
|
|
(764 |
) |
|
|
299 |
|
|
|
(465 |
) |
Recognized as component of
net period (cost) |
|
|
(94 |
) |
|
|
(194 |
) |
|
|
(288 |
) |
|
|
112 |
|
|
|
(176 |
) |
|
|
|
Balance, December 31, 2009 |
|
$ |
|
|
|
$ |
5,046 |
|
|
$ |
5,046 |
|
|
$ |
(1,967 |
) |
|
$ |
3,079 |
|
|
|
|
To be recognized as component of
net period (cost) in 2010 |
|
$ |
|
|
|
$ |
149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Excludes $0.3 million of foreign currency translation adjustment as of December 31, 2009. |
Accumulated other comprehensive loss reported on our consolidated balance sheets consists of
adjustments related to foreign currency translation and minimum liabilities for pension benefits.
The components of accumulated other comprehensive loss are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Minimum pension liability, net of tax |
|
$ |
3,079 |
|
|
$ |
3,720 |
|
Foreign currency translation adjustment |
|
|
269 |
|
|
|
309 |
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
$ |
3,348 |
|
|
$ |
4,029 |
|
|
|
|
|
|
|
|
F - 19
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Compensation and Benefit Agreements, Continued
The components of net period cost for the years ended December 31 are shown below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
Other Benefits |
|
|
December 31, |
|
December 31, |
|
|
2009 |
|
2008 |
|
2007 |
|
2009 |
|
2008 |
|
2007 |
Cost (income) recognized during the year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
$ |
944 |
|
|
$ |
951 |
|
|
$ |
934 |
|
|
$ |
17 |
|
|
$ |
17 |
|
|
$ |
17 |
|
Expected return on plan assets |
|
|
(798 |
) |
|
|
(1,095 |
) |
|
|
(1,024 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of loss |
|
|
194 |
|
|
|
|
|
|
|
107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
|
|
|
|
14 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailment |
|
|
146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net period cost (income) |
|
$ |
486 |
|
|
$ |
(130 |
) |
|
$ |
32 |
|
|
$ |
17 |
|
|
$ |
17 |
|
|
$ |
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Assumptions used in determining net
period cost (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
5.75 |
% |
|
|
6.25 |
% |
|
|
6.25 |
% |
|
|
5.75 |
% |
|
|
6.25 |
% |
|
|
6.25 |
% |
Expected return on plan assets |
|
|
8.0 |
% |
|
|
8.0 |
% |
|
|
8.0 |
% |
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
|
* |
|
This plan does not have separate assets, as a result there is no actual or expected return on
plan assets. |
The discount rate used is based on an assumed portfolio of high quality bonds with cash flows
matching the
timing of expected benefit payments. The expected return on plan assets is based on the asset
allocation mix and historical returns, taking into account current and expected market
conditions. The actual returns on pension plan assets were approximately 26% in 2009, (24%) in
2008, and 8% in 2007. The historical annualized ten-year rate of return on pension plan assets
is approximately 4%.
The Companys pension plan asset allocation at December 31, 2009 and 2008 and target allocation
for 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target |
|
|
Percentage of Plan Assets |
|
|
|
Allocation |
|
|
December 31, |
|
Asset Category |
|
2010 |
|
|
2009 |
|
|
2008 |
|
Equity securities mutual funds |
|
|
50% - 60 |
% |
|
|
56 |
% |
|
|
52 |
% |
Debt securities mutual funds |
|
|
40% - 50 |
% |
|
|
44 |
% |
|
|
48 |
% |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
The pension plan investment strategy is to maintain a diversified portfolio designed to achieve
an average long-term rate of return of 8%. The assets of the plan are strategically allocated
between asset categories according to the target minimum and maximum allocations. Asset
allocation target ranges for each asset category are monitored and may be changed from time to
time based on asset allocation studies performed by the plans investment advisor, with
evaluations of the risk and return expectations for various weightings of the authorized asset
categories. Additional asset categories may also be added to the plan within the context of the
investment objectives.
F - 20
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Compensation and Benefit Agreements, Continued
The Company expects to contribute $0.9 million to the pension plan in 2010. The following
benefit payments are expected to be paid from the plan over the next ten years (in thousands):
|
|
|
|
|
|
|
|
|
Year(s) |
|
Pension Benefits |
|
Other Benefits |
2010
|
|
$ |
1,066 |
|
|
$ |
22 |
|
2011
|
|
|
1,049 |
|
|
|
23 |
|
2012
|
|
|
1,041 |
|
|
|
24 |
|
2013
|
|
|
1,044 |
|
|
|
24 |
|
2014
|
|
|
1,032 |
|
|
|
25 |
|
2015-2019
|
|
|
5,578 |
|
|
|
121 |
|
The Company has established a framework for measuring fair value in accordance with FASB
Accounting Standards Codification Topic 820 Fair Value Measurements and Disclosures, which,
among other things, establishes a three-tier fair value hierarchy which prioritizes the inputs
used in measuring fair value. The framework provides a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities (level
1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three
levels of the fair value hierarchy are described as follows:
Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets
in active markets that the plan has the ability to access.
Level 2 Inputs to the valuation methodology include:
|
|
|
Quoted prices for similar assets in active markets; |
|
|
|
|
Quoted prices for identical or similar assets in inactive markets; |
|
|
|
|
Inputs other than quoted prices that are observable for the asset; |
|
|
|
|
Inputs that are derived principally from or corroborated by observable market data by
correlation or other means. |
If the asset has a specified (contractual) term, the level 2 input must be observable for
substantially the full term of the asset.
Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
The assets fair value measurement level within the fair value hierarchy is based on the lowest
level of any input that is significant to the fair value measurement. Valuation techniques used
need to maximize the use of observable inputs and minimize the use of unobservable inputs.
F - 21
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Compensation and Benefit Agreements, Continued
The following table sets forth by level, within the fair value hierarchy, the Plans assets at
fair value as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
|
Equity securities- mutual funds |
|
$ |
6,625 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
6,625 |
|
Debt securities mutual funds |
|
|
5,307 |
|
|
|
|
|
|
|
|
|
|
|
5,307 |
|
|
|
|
Total |
|
$ |
11,932 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
11,932 |
|
|
|
|
The Company has an employee retirement savings plan, which is classified as a defined
contribution plan under Section 401(k) of the Internal Revenue Code. The plan allows employees
to defer a portion of their annual compensation through pre-tax contributions.
For this plan, the Company matches 100% of the first 3% and 50% of the next 2% of an employees
contributions, up to a maximum of 4% of the employees compensation. Matching contributions for
the years ended December 31, 2009, 2008, and 2007 were $0.5 million, $0.4 million, and $0.4
million, respectively. The Companys Board of Directors may also approve discretionary annual
contributions to employees 401(k) retirement accounts. The discretionary contributions for the
years ended December 31, 2009, 2008 and 2007 were $0.1 million, $0.1 million and $0.2 million,
respectively.
Note 9. Significant Risks and Uncertainties
Concentrations of Credit Risk Cash - At December 31, 2009 and 2008, the Company had $17.7
million and $13.7 million, respectively, in cash, money market accounts, and U.S. Government
money market accounts at financial institutions, which included amounts in excess of the
federally insured limits.
Concentration of Credit Risk Accounts Receivable The Company has a relatively small number of
key wholesalers that comprise a relatively significant portion of its total accounts receivable
balance. Generally, the Company does not require collateral or other security to support customer
receivables. However, the Company continually monitors and evaluates customers creditworthiness
to minimize potential credit risks associated with its accounts receivable. The Company has
determined that there is no material accounts receivable credit risk exposure beyond the current
allowance for uncollectible accounts in the consolidated financial statements.
F - 22
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Enterprise-wide Disclosures
|
|
The Company focuses on two market categories, work and outdoor. The following table presents
information about the Companys net sales attributed to these two market categories (in
thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
Net sales: |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
Work Market |
|
$ |
88,200 |
|
|
$ |
74,902 |
|
|
$ |
60,893 |
|
Outdoor Market |
|
|
50,952 |
|
|
|
53,054 |
|
|
|
57,286 |
|
|
|
|
Total |
|
$ |
139,152 |
|
|
$ |
127,956 |
|
|
$ |
118,179 |
|
|
|
|
|
|
The following table presents information about the Companys net sales by geography based on the
location of the customer (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
Net sales: |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
United States |
|
$ |
131,897 |
|
|
$ |
120,039 |
|
|
$ |
109,989 |
|
Foreign Countries |
|
|
7,255 |
|
|
|
7,917 |
|
|
|
8,190 |
|
|
|
|
Total |
|
$ |
139,152 |
|
|
$ |
127,956 |
|
|
$ |
118,179 |
|
|
|
|
|
|
Included in the Companys consolidated balance sheets at December 31, 2009 and 2008 are the
net assets located outside of the United States of approximately $2.7 million and $1.4 million,
respectively. The net book value of long-lived assets located outside of the United States
totaled $0.5 million and $0.6 million at December 31, 2009 and 2008, respectively. |
|
|
|
The Company sells its products to a large number of customers in different markets across
multiple product categories. One customer accounted for 20%, 9% and 1%, respectively, of total
revenues for the years ended December 31, 2009, 2008 and 2007. |
Note 11. Acquisitions
|
|
On May 8, 2009, the Company announced the formation of Environmentally Neutral Design Outdoor,
Inc. (END). END was formed in the second quarter of 2009 when the Company acquired
substantially all the assets of the predecessor company doing business as END Footwear for $0.4
million. The assets acquired included inventory, intellectual property, and property and
equipment. ENDs results of operations since the date of acquisition have been included in the
consolidated financial statements. On August 7, 2009, the Company announced its plans to
discontinue END as a standalone footwear brand and to integrate its platform of lightweight
footwear designs into the Danner brand. |
|
|
|
On July 21, 2008, the Company announced the formation of LaCrosse Europe ApS, a subsidiary based
in Denmark. In establishing this company, LaCrosse Europe ApS purchased certain assets for $3.2
million in cash from the Companys former European distributor, Gateway Footgear. The acquired
assets included inventory and sales order backlog. The results of operations since the date of
acquisition have been included in the consolidated financial statements. Proforma results of
periods prior to the date of |
F - 23
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Acquisitions, Continued
|
|
acquisition to include the acquired entity are not included since management has determined they
are not material to the consolidated financial statements. |
Note 12. Quarterly Selected Financial Data (Unaudited)
|
|
The following reflects the Companys unaudited quarterly results of operations for 2009 and 2008
(in thousands except per share data): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
Q1 |
|
|
Q2 |
|
|
Q3 |
|
|
Q4 |
|
|
|
|
Net sales |
|
$ |
25,910 |
|
|
$ |
29,976 |
|
|
$ |
40,761 |
|
|
$ |
42,505 |
|
Gross profit |
|
|
9,831 |
|
|
|
12,218 |
|
|
|
15,721 |
|
|
|
16,320 |
|
Operating income |
|
|
(1,038 |
) |
|
|
1,990 |
|
|
|
3,906 |
|
|
|
3,727 |
|
Income tax provision (benefit) |
|
|
(398 |
) |
|
|
315 |
|
|
|
1,450 |
|
|
|
1,333 |
|
Net income (loss) |
|
|
(692 |
) |
|
|
1,658 |
|
|
|
2,221 |
|
|
|
2,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per common share |
|
|
($0.11 |
) |
|
$ |
0.26 |
|
|
$ |
0.35 |
|
|
$ |
0.37 |
|
Diluted income (loss) per common share |
|
|
($0.11 |
) |
|
$ |
0.26 |
|
|
$ |
0.35 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
Q1 |
|
|
Q2 |
|
|
Q3 |
|
|
Q4 |
|
|
|
|
Net sales |
|
$ |
24,732 |
|
|
$ |
27,810 |
|
|
$ |
40,265 |
|
|
$ |
35,149 |
|
Gross profit |
|
|
10,061 |
|
|
|
11,242 |
|
|
|
15,787 |
|
|
|
13,571 |
|
Operating income |
|
|
1,093 |
|
|
|
2,304 |
|
|
|
4,553 |
|
|
|
2,170 |
|
Income tax provision |
|
|
473 |
|
|
|
820 |
|
|
|
1,731 |
|
|
|
905 |
|
Net income |
|
|
779 |
|
|
|
1,436 |
|
|
|
2,768 |
|
|
|
1,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share |
|
$ |
0.13 |
|
|
$ |
0.23 |
|
|
$ |
0.44 |
|
|
$ |
0.19 |
|
Diluted income per common share |
|
$ |
0.12 |
|
|
$ |
0.22 |
|
|
$ |
0.43 |
|
|
$ |
0.18 |
|
Note 13. Cash Dividends
|
|
On February 4, 2008, the Company announced a special cash dividend of one dollar ($1.00) per
share of common stock and a first quarter cash dividend of twelve and one-half cents ($0.125) per
share of common stock. These dividends were paid together ($1.125 per common share) on March 18,
2008 and totaled $7.0 million. Subsequently, quarterly dividends totaling $2.3 million, in the
amount of $0.125 per common share, were paid on June 18, 2008, September 18, 2008, and December
18, 2008, respectively. |
|
|
|
In 2009, the Company paid quarterly dividends of $0.8 million ($0.125 per common share) on March
18, 2009, June 18, 2009, September 18, 2009, and December 18, 2009, totaling $3.2 million. |
F - 24
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Recent Accounting Pronouncements
|
|
On December 30, 2008, the FASB issued FSP SFAS No. 132(R)-1, Employers Disclosures about
Postretirement Benefit Plan Assets (FSP SFAS No. 132(R)-1) which is included in the new FASB
Accounting Standards Codification as FASB ASC Section 715-20-65. This FSP amends FASB Statement
No. 132 (Revised 2003), Employers Disclosures about Pensions and Other Postretirement Benefits
(SFAS No. 132(R)), to provide guidance on an employers disclosures about plan assets of a
defined benefit pension or other postretirement plan. The disclosures about plan assets required
by FSP SFAS No. 132(R)-1 is required for fiscal years ending after December 15, 2009 (fiscal 2009
for the Company). The additional disclosure under the standard does not require years prior to
fiscal 2009 to be presented for comparative purpose, and only requires additional disclosures
concerning plan assets. The adoption of this standard was effective for the Company in the
current period, and the Company has complied with such provisions in the financial statements
presented herein. |
Note 15. Subsequent Events
|
|
On February 1, 2010, the Company announced a special cash dividend of one dollar ($1.00) per
share of common stock and a first quarter cash dividend of twelve and one-half cents ($0.125) per
share of common stock. This special and first quarter dividend will be paid together on March
18, 2010 to shareholders of record as of the close of business on February 22, 2010. The total
cash payment for this dividend will be approximately $7.1 million. |
|
|
|
On February 10, 2010, the Company announced its plans to move into a new Danner® factory in
Portland, Oregon. The new Danner® facility will be located in an industrial building
approximately one mile from the Companys corporate headquarters. The new factory will be
approximately 59,000 square feet, representing a significant increase in the square footage of
the Companys existing Portland-based factory which is being replaced. The lease has an initial
term of approximately five years, and includes provision for three successive extension terms of
five years each. The initial term of the lease commences on May 1, 2010, and monthly base rent of
$0.03 million becomes payable beginning September 1, 2010. |
|
|
|
On January 26, 2010, the Company entered into an Amended and Restated Credit Agreement with Wells
Fargo Bank, N.A. which amends the allowable capital expenditures and cash dividends for the year
ended December 31, 2010. |
F - 25