e10vk
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, 2006
or
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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: 0-238001
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)
Registrants telephone number, including area code: (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 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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act.
(Check one): Large accelerated filer o Accelerated filer o Non-accelerated filer þ
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 July 1, 2006: $37,728,354.
Number of shares of the registrants common stock outstanding at March 2, 2007: 6,066,098 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Companys 2007 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, 2006, the end of the Companys fiscal
year.
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 leader in the design, development,
marketing and manufacturing of premium quality footwear and apparel for the work and outdoor
markets. We market our products primarily under the LACROSSE® and DANNER®
brands through selected distributors, retailers, and direct to consumer channels. Our products are
characterized by innovative technology, functional design, comfort, durability, performance
features, and quality materials.
LaCrosse was incorporated in Wisconsin in 1983, but traces its history to 1897 when La Crosse
Rubber Mills Company was founded. The family of Joseph P. Schneider, our Chief Executive Officer,
purchased LaCrosses predecessor company from the heirs of the founding family and other
shareholders in 1982.
Historically, LaCrosse produced footwear primarily made of rubber, with some models incorporating
leather or fabric uppers. In 1994, the Company acquired Danner, Inc. (Danner), a producer of
premium quality leather footwear for the work and outdoor markets, which is sold primarily under
the DANNER® brand.
In 2005, the Company formed LaCrosse International, Inc., a wholly owned subsidiary, to improve its
sourcing capabilities in Asia.
Strategy
Our business strategy is to continue to:
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build, position and capitalize on the strength of established brands; |
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develop innovative products and relevant technologies that will differentiate our
footwear and apparel products; |
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offer superior customer service; and |
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expand and enhance our strong network of sales channels and customer base. |
Brand Positioning
Within the retail channel of distribution, we market footwear and apparel under the
DANNER® and LACROSSE® brands. We also sell products through the safety and
industrial distributor channel principally under the LACROSSE® brand. 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 including rubber and leather footwear as well as a line of rainwear and
protective clothing.
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Products
Our branded product offerings for the work and outdoor markets include the following major
categories:
Rubber Footwear
We market rubber footwear mainly under the LACROSSE® brand in both the work and outdoor
markets. The product line focuses on high performance, innovative rubber products directed to
specific work and outdoor markets.
In addition, we market footwear products in rubber bottom, leather/fabric upper for extreme cold
and other high performance applications. A rubber bottom boot with a leather or fabric upper
combines the flexibility of rubber footwear with the fit and support of a laced leather boot.
Leather Footwear
We market leather footwear under the DANNER® and LACROSSE® brand names. The
DANNER® products consist of premium quality work and outdoor boots available in numerous
styles, many of which feature the stitch-down manufacturing process, which provides outstanding
support and built-in comfort for the owner. Danner was the first footwear manufacturer to include
a waterproof, breathable GORE-TEX® liner (seam taped insert) in its leather boots. The
LACROSSE® brand also markets a line of indoor and outdoor leather work boots appealing
to consumers who desire durability and comfort.
Rainwear and Protective Clothing
Rainwear and protective clothing are complementary products in many work and outdoor environments.
We offer a line of quality rainwear and protective clothing appealing to workers in utility,
construction, chemical processing, food processing, and other groups that traditionally purchase
through industrial distributors. While most of the garments are developed for general workwear, a
number are constructed for specific applications such as acid and flame environments and high
visibility. We market these products based on their durability and quality.
During 2006, we offered approximately 470 styles of footwear and protective clothing. The
percentage of net sales into work markets in 2006, 2005 and 2004 were approximately 51%, 51% and
56%, respectively and sales to outdoor markets were 49%, 49% and 44%, respectively.
Accessories
In December 2005, we introduced a high quality, technical sock line in both the
LACROSSE® and DANNER® brands. We also sell footwear accessories such as
laces and boot care products.
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Product Design and Development
Our product design and development concepts originate within the company and through communication
with our customers and suppliers. Such product concepts are based upon perceived consumer needs and
may include new technological developments in footwear, rainwear 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. New product needs generally
can be related to functional or technical characteristics. The final aesthetics of the product are
determined by marketing and product development personnel, at times in conjunction with outside
design consultants. Once a product design is approved for production, responsibility may be shared
with outside sourcing facilities for pattern development and commercialization.
Customers, Sales, and Distribution
We market our brands and associated products through two primary channels of distribution: (1)
retail, and (2) safety and industrial.
Within the retail market, the LACROSSE® and DANNER® brands are marketed
through independent representative groups and our in-house sales staff. For both brands, some of
the independent agents are part of multi-line representative groups and some are dedicated solely
to our products. A national account sales team complements the sales activities for the brands.
Our products are sold directly to more than 3,500 accounts, including sporting goods and outdoor
retailers, general merchandise and independent shoe stores, wholesalers, distributors, and federal,
state, and local government agencies. Our customer base is also diversified as to size and
location of customer and markets served. As a result, we are less dependent upon a few customers.
However, our retail and safety and industrial customers have recently shown a trend towards
consolidation into regional, super regional, and national businesses, and this trend has the effect
of consolidating our customer base. As consolidation continues, our dependency on fewer, larger
customers may increase.
We currently operate four Internet websites for use by consumers and retailers. The primary
purpose of the consumer-oriented websites is to provide product and company information. In
addition, two of these four sites sell products to consumers who choose to purchase directly from
us. The business-to-business website for the LACROSSE® and DANNER®
brands provides product ordering capability and critical information to dealers about the
status of pending orders, inventory levels, shipping and other data. Our corporate website,
www.lacrossefootwearinc.com, provides information about the company and its brands to
investors and the corporate community.
We operate a retail outlet store at the factory in Portland, Oregon. The factory outlet store
sells slow-moving merchandise, factory seconds, and first quality products for both
DANNER® and LACROSSE® brands.
International sales are primarily derived through our Japanese and European independent
distribution networks.
Advertising and Promotion
Our marketing expenditures are specifically targeted at promotional materials, cooperative
advertising and point-of-sale advertising designed to assist dealers and distributors in the sale
of our products. We
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customize our advertising and marketing materials and programs for each of our brands in each of
our distribution channels, which allows us to emphasize those features of our products 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.
Manufacturing and Sourcing
Prior to 2002, we manufactured the majority of our rubber and leather products in our United States
manufacturing facilities. During the last decade, the quality and timeliness of products provided
by offshore sources have improved substantially. As a result, we believe that todays consumer
preference is for products that offer the best value regardless of the origin of manufacture. We
outsourced the manufacture of 76% of net sales dollars in 2006, 79% in 2005, and 65% in 2004.
Significant portions of the outsourced products are purchased from a limited number of foreign
manufacturers located in the Asia-Pacific region, primarily in China. We have established criteria
for our third-party manufacturers in order to monitor product quality and labor practices. Sources
of capacity related to these products are available worldwide and we have identified alternative
sources for these products. These alternate sources are in varying degrees of development.
With the formation of LaCrosse International, Inc., we now have personnel located in China, who
work with our suppliers to maintain our high quality standards, to locate complementary sourcing
alternatives, and to increase speed to market for new products.
The raw materials used in production of our products are leather, crude rubber and oil-based vinyl
compounds for protective clothing products. Since these raw materials are all available on a
global basis, we have no reason to believe they will not continue to be available at competitive
prices.
LaCrosse, or our contract manufacturers, purchase GORE-TEX® waterproof fabric directly
from W.L. Gore and Associates (Gore), for both the LaCrosse and Danner footwear. Gore has
traditionally been one of Danners largest suppliers in terms of dollars spent on raw materials.
Over 90% of Danner styles are GORE-TEX® lined. We have a contract with Gore that is
terminable by either party upon 90 days written notice. We believe our relationship with Gore is
good. GORE-TEX® is a registered trademark of W.L. Gore & Associates, Inc. In the
event the relationship were 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, distribution and marketing resources than LaCrosse. Because we have a broad product
line, our competition varies by product category. We believe 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. We have four major competitors in our rubber
product markets and at least six major competitors in our leather footwear products and in our rain
weather and protective clothing product markets.
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Several rubber boot manufacturers with strong brand recognition in their respective markets are our
main competitors, though 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 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.
Leather boot manufacturers and suppliers, some of which have strong brand name recognition in the
markets they serve, 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 effectively compete with
other domestically produced products, but 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 attention to these factors, we believe that the DANNER® footwear line has
maintained a strong competitive position in our market niches. For leather and rubber boots, the
LACROSSE® brand sources all products offshore. We compete with other distributors with
products similarly sourced from offshore locations.
Employees
As of December 31, 2006, we had approximately 300 employees located in the United States and three
employees in our China office. Approximately 25 of our employees at the La Crosse, Wisconsin
facility are represented by the United Steel Workers of America under a three-year collective
bargaining agreement, which expires in September 2009. Approximately 125 of our employees at the
Portland, Oregon facility are represented by the United Food & Commercial Workers Union (UFCW)
under a collective bargaining agreement, which will expire in January 2009. We consider our
employee relations to be good.
Trademarks and Trade Names; Patents
We own United States federal registrations for several of our marks, including
LACROSSE®, DANNER®, RED BALL®, RAINFAIR®, the stylized
Indianhead design that serves as our logo, FIRETECH®, ICE KING®,
ICEMAN®, AIRTHOTIC®, GAMEMASTER®, TERRA FORCETM,
HYPER-DRI®, CAMOHIDETM, ACADIA®, QUAD COMFORT®,
STRIKER®, PRONGHORN®, and RED BALL JETS®. 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.
We also own several United States patents, including the DANNER BOB® outsole; TERRA
FORCETM, a three-shank cement and stitch-down manufacturing process; and our
AIRTHOTIC® ventilated arch support that fits under the heel. Our newest platform
outsole/midsole construction process, EXOTM, is patent-pending at this time.
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Seasonality
Sales have been historically higher in the second half of the year due primarily to higher sales of
our cold and wet weather product offerings during the winter months. This was also the case in
2006, during which our revenue was higher in the last two quarters of the year than in the first
two quarters. Accordingly, the amount of fixed costs related to our operations represented a larger
percentage of revenue in the first two quarters of 2006 than in the last two quarters of 2006. We
expect this seasonality to continue in the near future.
In order to satisfy shipping requirements, we place orders for sourced product during the first
quarter with anticipated delivery to us starting late in the second quarter. As a result,
inventories generally peak early in the third quarter, and then trend down by the end of year.
Factors other than seasonality could have a significant impact on our backlog and therefore, our
backlog at any one point in time may not be indicative of future results.
Foreign Operations and Export Sales
Other than LaCrosse International, Inc. (LaCrosse International), which is a wholly-owned
subsidiary located in China, we do not own a majority or controlling interest in any other
international company. All of our fixed assets are located in the United States. We achieve
international sales through a focused set of independent distributors. Total international sales
accounted for approximately 5%, 5% and 4% of our net sales in 2006, 2005 and 2004, respectively.
LaCrosse International is our first representative office and was created primarily to work with
our suppliers to maintain our high quality standards, to locate complementary sourcing
alternatives, and to increase speed to market for new products.
Environmental Matters
LaCrosse and the industry in which we compete 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. These laws and regulations are
constantly evolving and it is difficult to predict accurately 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, a
material effect on our capital expenditures, earnings or competitive position.
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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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Name |
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Age |
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Position |
Joseph P. Schneider
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47 |
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President, Chief Executive Officer and Director |
David P. Carlson
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51 |
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Executive Vice President, Chief Financial Officer,
and Secretary |
J. Gary Rebello
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55 |
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Vice President of Human Resources |
C. Kirk Layton
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51 |
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Corporate Controller |
Craig P. Cohen
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40 |
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Vice President of Demand Planning |
Erron S. Sorensen
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37 |
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Vice President of Marketing |
Kirk S. Nichols
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38 |
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Vice President of Sales |
Robert G. Rinehart, Jr.
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Vice President of Product Development |
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). You can inspect and copy our reports, proxy statements and other
information filed with the SEC at the offices of the SECs Public Reference Room, 100 F Street NE,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Room. The SEC maintains an Internet site at www.sec.gov where you can
obtain most of our SEC filings. We also make available, free of charge 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.
You can also obtain copies of these reports by contacting our investor relations department at
(800) 654-3517.
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, financial results, and the outcome of contingencies, such as legal proceedings. The Company
assumes no obligation to update or revise any forward-looking statements.
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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.
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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.
We conduct a significant portion of our manufacturing activities and a certain portion of our net
sales outside the U.S. Therefore we are subject to the risks of international commerce, including
the following:
We use third party manufacturers located in foreign countries, primarily in China, to manufacture
the majority of our products, including most of our LACROSSE® branded products. We also
sell a growing percentage of our products to retailers outside of the U.S. 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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increased transportation costs due to rising energy prices, more burdensome port
security procedures, or other factors; |
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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 Euro and Chinese
Renminbi), a risk for 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. International distributors represent 5% of our net sales
in 2006. |
Additionally, although sales outside of the U.S. did not constitute a significant portion of our
revenues in 2006, 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 the Company has
a limited number of foreign distributors, who may have
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inadequate capital to continue operations over the long-term. Sales to the international markets
are achieved through those foreign distributors. If the relationship with those distributors were
to deteriorate, it could have an adverse impact assuming the Company is unable to engage suitable
alternatives in a timely manner.
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 manufacturing 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.
The continued consolidation of retailers, and the leveraged growth in the overall number of stores,
increases and concentrates our credit risk.
Significant retailers in the work and outdoor retail industry continue to expand rapidly through
construction of additional stores and acquisitions. Further, the industry continues to experience
consolidation, resulting in a smaller number of primary retailers. The increased capital
requirement required to open and operate new stores concentrates the Companys credit risk in a
relatively small number of customers. If these retailers were to extinguish their capital and were
unable to replenish their liquidity, there is a risk that their outstanding payables to our Company
may not be paid.
Our business is substantially affected by the weather, and sustained periods of warm and/or dry
weather can negatively impact our sales.
We sell our products to the work and outdoor footwear markets. Many of our outdoor products are
designed for use in cold and/or wet weather. Sales of these products are largely dependent on the
timing and severity of weather in the different regions of the United States. Prolonged periods of
relatively dry and/or warm weather, particularly in the fall and winter, could have an adverse
affect on demand for our products.
A decline in consumer spending due to unfavorable economic conditions could hinder our product
revenues and earnings.
Footwear, particularly outdoor and recreational footwear, is a cyclical industry that is largely
dependent upon overall levels of consumer spending. The success of our products depends
substantially on the amount of discretionary funds available to consumers and their purchasing
preferences. Our customers anticipate and respond to adverse changes in economic conditions and
uncertainty by reducing inventories and canceling orders. As a result, our business and financial
condition could be adversely affected by any substantial deterioration in general economic
conditions, an increase in energy costs or interest rates, any
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significant acts of nature, terrorist events, and any other event that could diminish consumer
spending and overall consumer confidence.
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.
In 2006, third party manufacturers produced approximately 76% of our footwear products. Currently,
we have footwear manufacturing arrangements with third party manufacturers located in China,
Thailand, and Europe. 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 factors, one or more of our third party manufacturers may be unable to continue
meeting our production requirements. For example, the exclusive manufacturer of certain of our
rubber footwear products has experienced work stoppages with its workforce, and our ability to fill
customer orders for this type of footwear would be negatively impacted if these labor issues were
to reoccur. Moreover, some of our third party manufacturers have manufacturing engagements with
companies that are much larger than we are and whose production needs are much greater than ours.
As a result, one or more 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 may 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 facilities 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.
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.
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 the United States or 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.
-11-
Labor disruptions or disruptions due to natural disasters or casualty losses at one of our two
distribution facilities or our domestic manufacturing facility could have a material adverse effect
on our operations.
We have distribution centers in Portland, Oregon and La Crosse, Wisconsin and a domestic
manufacturing facility in Portland, Oregon. Some of the employees at each of these facilities are
organized in labor unions. Our inability to renew on favorable terms the collective bargaining
agreements between us and the unions that represent 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 due to
fire, earthquake, 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 as a docking location for
product. 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 retail customers
and by the success of such retail customers.
Our financial success is significantly related to the willingness of our retail 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 retail customers, and sales to our retail customers
are generally on an order-by-order basis and are subject to rights of cancellation and rescheduling
by the customer. If we cannot fill our retail 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 product sales and ability to grow our product line.
In 2006, our five largest retail customers accounted for approximately 25% of our revenues. If any
of our major retail 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 addition, we extend credit to our customers based on an evaluation of each
customers financial condition. If a significant customer to whom we have extended credit
experiences financial difficulties, our bad debt expense may increase relative to revenues in the
future. Any significant increase in our bad debt expense relative to revenues would adversely
impact our net income and cash flow and could affect our ability to pay our own obligations as they
become due.
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. Recent growth in the market for outdoor and work
footwear has encouraged the entry of new competitors into the marketplace and has increased
competition from established companies. Some of our competitors have products with similar
characteristics, such as design and materials, to a number 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.
Our competitors include footwear manufacturers, fashion-oriented footwear marketers, vertically
integrated specialty stores and retailers of private label products. The principal competitive
differentiators
-12-
in our industry include product design, product performance, quality, brand image, price, marketing
and promotion, customer support and service, the ability to meet delivery commitments to retailers,
obtaining access to retail outlets and sufficient floor space. A number of our competitors:
|
|
|
have significantly greater financial resources than we have; |
|
|
|
|
have more comprehensive product lines than ours; |
|
|
|
|
have broader market presence than we have in retail outlets, or have their own retail outlets; |
|
|
|
|
have longer-standing relationships with retailers than we have; |
|
|
|
|
have greater distribution capabilities than we have; |
|
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|
|
have stronger brand recognition than we have; and |
|
|
|
|
spend substantially more on product advertising and sales 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, our financial
condition may deteriorate and the market price of our common stock may fall.
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 at a pace, intensity, and price that is competitive with other brands in our market. In
addition, we must design and manufacture products that appeal to many consumer segments 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 may 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.
Changes in the price or availability of raw materials could disrupt our operations and adversely
affect our financial results.
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. We also rely on
transport companies to deliver our products from abroad to our distribution centers, and in some
cases directly to our customers. If petroleum costs were to increase it could result in
significantly higher freight costs to our company. Increased petroleum costs also affect our
manufacturing costs, as rubber is a key component of our footwear. Our profit
-13-
margins may decrease if prices of purchased raw materials, component parts, finished goods, or
petroleum increase and we are unable to pass on those additional costs to our customers.
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 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 the Company is
unable to renew the agreements, and suitable replacements are not available in a timely manner,
this may reduce revenues.
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 contract manufacturers purchase GORE-TEX® waterproof fabric directly from W.L.
Gore and Associates (Gore), for both our LaCrosse and Danner footwear. Over 90% of Danner styles
are GORE-TEX® lined. We have a supply contract with Gore that is terminable by either party upon
90 days written notice.
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. Further,
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, including Joseph
P. Schneider, our President and Chief Executive Officer, and David P. Carlson, our Executive Vice
President and Chief Financial Officer. 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 revenues and earnings.
-14-
If we fail to comply with the covenants contained in our revolving credit facility we may be unable
to secure additional financing and repayment obligations on our outstanding indebtedness may be
accelerated.
Our revolving credit facility contains financial and operating covenants with which we must comply.
As of December 31, 2006, we were in compliance with each of these covenants. However, among other
factors, 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 materially harm our business.
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. |
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
Not Applicable.
-15-
The following table sets forth certain information, as of December 31, 2006, relating to our
principal facilities.
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PROPERTIES |
|
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|
Approximate Floor |
|
|
Location |
|
Owned or Leased |
|
Area in Square Feet |
|
Principal Uses |
|
|
|
|
|
|
|
Portland, OR |
|
Leased(1) |
|
145,000 |
|
New principal sales, marketing and executive offices and distribution facility |
|
|
|
|
|
|
|
Portland, OR |
|
Leased(2) |
|
36,000 |
|
Manufacturing operations and retail outlet store |
|
|
|
|
|
|
|
La Crosse, WI |
|
Leased(3) |
|
185,000 |
|
Distribution facility |
|
|
|
|
|
|
|
La Crosse, WI |
|
Leased(4) |
|
236,000 |
|
Distribution facility |
|
|
|
|
|
|
|
Zhongshan, China |
|
Leased |
|
1,400 |
|
Office space |
|
|
|
(1) |
|
In June 2006, we moved our corporate headquarters and distribution center for
our Danner line of footwear products to a newly constructed, 145,000 square foot building
in Portland, Oregon. The monthly base rent on the Single Tenant Industrial Lease is
scheduled for 120 months from August 1, 2006 and the Lease provides for potential term
extensions of up to 60 months after the original term. |
|
(2) |
|
The lease for this facility expires in March 2009; however, we have the option to
extend the term for an additional five years. |
|
(3) |
|
In August 2006, we signed a first amendment and extension of lease for this facility.
The amendment extends the term of the lease through May 2009 and removes all sublease
agreements. The previous sublessees now pay rent directly to the lessor. |
|
(4) |
|
In August 2006, we extended our lease on this facility through April 2009. |
Based on present plans, we believe that our current facilities, which are in reasonably good
operating condition, will be adequate to meet our anticipated needs for at least the next few
years.
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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, a reasonable estimate is recorded in
our financial statements.
-16-
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|
Item 4. |
|
Submission of Matters to a Vote of Security Holders |
During the fourth quarter of the fiscal year ended December 31, 2006, no matter was submitted to a
vote of security holders through the solicitation of proxies or otherwise.
PART II
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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
March 2, 2007, the closing sale price of our common stock was $14.75 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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|
|
|
|
|
|
|
2006 |
|
2005 |
|
|
High |
|
Low |
|
High |
|
Low |
First Quarter |
|
$ |
12.15 |
|
|
$ |
9.70 |
|
|
$ |
13.67 |
|
|
$ |
10.06 |
|
Second Quarter |
|
|
13.98 |
|
|
|
11.30 |
|
|
|
13.19 |
|
|
|
8.00 |
|
Third Quarter |
|
|
13.50 |
|
|
|
11.49 |
|
|
|
12.80 |
|
|
|
9.58 |
|
Fourth Quarter |
|
|
13.71 |
|
|
|
11.63 |
|
|
|
12.78 |
|
|
|
9.51 |
|
As of March 2, 2007, there were 255 shareholders of record and 1,090 beneficial owners of our
common stock.
Dividends
We did not declare or pay a cash dividend in 2006 or 2005. Future dividend policy and payments, if
any, will depend upon earnings and financial condition of the Company, our need for funds, any
limitations on payments of dividends present 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 2006.
-17-
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not make any purchases of our equity securities in 2006.
Equity Compensation Plan Information
The information required by this item with respect to our equity compensation plans is contained in
Part III, Item 12 of this Annual Report on Form 10-K.
Market Price of the Registrants Common Equity
The following graph compares on a cumulative basis changes since December 31, 2001, 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, 2001 in LaCrosse Footwear, Inc. common stock, the NASDAQ Global Market
Index and the Hemscott Group Index.
5-year Cumulative Total Return
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2001 |
|
|
|
12/31/2002 |
|
|
|
12/31/2003 |
|
|
|
12/31/2004 |
|
|
|
12/31/2005 |
|
|
|
12/31/2006 |
|
|
|
LaCrosse Footwear, Inc. |
|
|
$ |
100 |
|
|
|
$ |
81 |
|
|
|
$ |
246 |
|
|
|
$ |
337 |
|
|
|
$ |
338 |
|
|
|
$ |
415 |
|
|
|
NASDAQ Global Market Index |
|
|
$ |
100 |
|
|
|
$ |
70 |
|
|
|
$ |
105 |
|
|
|
$ |
114 |
|
|
|
$ |
116 |
|
|
|
$ |
128 |
|
|
|
Hemscott Group Index |
|
|
$ |
100 |
|
|
|
$ |
99 |
|
|
|
$ |
144 |
|
|
|
$ |
192 |
|
|
|
$ |
207 |
|
|
|
$ |
254 |
|
|
|
-18-
Item 6.
Selected Financial Data
Selected Income Statement Data
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
(in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
107,798 |
|
|
$ |
99,378 |
|
|
$ |
105,470 |
|
|
$ |
95,687 |
|
|
$ |
97,785 |
|
Operating income (loss) |
|
|
8,834 |
|
|
|
8,609 |
|
|
|
7,640 |
|
|
|
3,666 |
|
|
|
(3,999 |
) |
Net income (loss) |
|
|
6,344 |
|
|
|
5,234 |
|
|
|
6,973 |
|
|
|
2,630 |
|
|
|
(5,086 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.05 |
|
|
$ |
0.88 |
|
|
$ |
1.18 |
|
|
$ |
0.45 |
|
|
($ |
0.87 |
) |
Diluted |
|
$ |
1.02 |
|
|
$ |
0.85 |
|
|
$ |
1.15 |
|
|
$ |
0.44 |
|
|
($ |
0.87 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
6,022 |
|
|
|
5,954 |
|
|
|
5,891 |
|
|
|
5,874 |
|
|
|
5,874 |
|
Diluted |
|
|
6,213 |
|
|
|
6,166 |
|
|
|
6,070 |
|
|
|
5,939 |
|
|
|
5,874 |
|
Selected Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
$ |
22,038 |
|
|
$ |
24,865 |
|
|
$ |
16,962 |
|
|
$ |
24,042 |
|
|
$ |
23,460 |
|
Total assets |
|
|
73,533 |
|
|
|
64,583 |
|
|
|
57,788 |
|
|
|
55,241 |
|
|
|
60,845 |
|
Note payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,319 |
|
|
|
8,378 |
|
Long-term debt, including current maturities |
|
|
506 |
|
|
|
|
|
|
|
|
|
|
|
2,219 |
|
|
|
4,432 |
|
Shareholders equity |
|
|
57,344 |
|
|
|
50,477 |
|
|
|
45,151 |
|
|
|
37,876 |
|
|
|
35,089 |
|
No dividends were declared or paid in any year from 2002 through 2006.
-19-
|
|
|
Item 7. |
|
Managements Discussion and Analysis of Financial Condition and
Results of Operations |
Overview
Our mission is to maximize and enhance the work and outdoor experience for our customers. To
achieve this, we develop and manufacture premium-quality performance footwear and apparel,
supported by compelling marketing and superior customer service.
Our products are primarily directed at both the retail consumer and the safety and industrial
channels of distribution. Economic indicators that are important to our business include consumer
confidence and unemployment rates. Increasing consumer confidence trends improve retail channel
product sales, and increasing employment trends improve safety and industrial channel and the
broader work market sales.
Weather, especially in the fall and winter, has been, and will continue to be a significant
contributing factor to our results. Sales are typically higher in the second half of the year due
to our cold and wet weather product offerings. We augment these offerings by infusing innovative
technology into product categories, principally work products, with the intent to create additional
demand in all four quarters of the year.
Consolidated net sales for 2006 increased 8%, to $107.8 million, from $99.4 million in 2005. Sales
to the work market were $54.7 million in 2006, up 8% from $50.4 million in 2005. The growth in
work sales reflects the success of our fire boot offerings along with continued penetration into
the uniform market. Sales to the outdoor market were $53.1 million in 2006, up 9% from $48.9
million in 2005. Growth in the outdoor market reflects continued penetration into the hunting and
hiking boot markets.
Gross margins improved by 260 basis points to 39.2% in 2006 from 36.6% in 2005. Margin improvement
in 2006 was due to innovative products introduced in recent years with higher margins, a price
increase in the fourth quarter, and fewer closeout sales.
Selling, general and administrative (SG&A) expenses increased $5.7 million, or 21% to $33.5
million in 2006. The increase primarily reflects expansion of our sales, product development, and
sourcing teams, increased incentive compensation expense and stock-based compensation expense.
These types of investments are expected to continue to support our growth initiatives.
Net income for 2006 was $6.3 million or $1.02 diluted earnings per common share compared to $5.2
million or $0.85 diluted earnings per common share in 2005. The increase in net income of 21% was
due to increased sales volume and higher gross margins, substantially offset by increased operating
expenses.
The trade accounts receivable balance at December 31, 2006 increased $3.2 million or 19% from
December 31, 2005. The increase in accounts receivable was primarily due to an 8% growth in net
sales and an increase in our orders for immediate delivery (at once business) during the latter
part of the fourth quarter compared to the prior year. During the final two months of 2006, net
sales grew at a greater rate than the overall growth rate, which is expected to translate into
increased cash collections during the first quarter of 2007. As a result, Days Sales Outstanding
(DSO) increased from 50 days at December 31, 2005 to 56 days at December 31, 2006. DSO is
computed by dividing ending receivables by quarterly net sales and multiplying the quotient by 90
days.
-20-
At December 31, 2006, we had reduced inventory levels by approximately $2.8 million or 11% from
December 31, 2005. The inventory reduction was primarily due to improved alignment of inventory
purchases with actual sales demand and increased at once business during the latter part of the
fourth quarter compared to the same period in the prior year.
RESULTS OF OPERATIONS FISCAL 2006 COMPARED TO FISCAL 2005
Financial Summary 2006 versus 2005
The following table sets forth selected financial information derived from our consolidated
financial statements. The discussion that follows the table should be read in conjunction with the
consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
2006 |
|
2005 |
|
$ Change |
|
% Change |
Net Sales |
|
$ |
107.8 |
|
|
$ |
99.4 |
|
|
$ |
8.4 |
|
|
|
8 |
% |
Gross Profit |
|
|
42.3 |
|
|
|
36.3 |
|
|
|
6.0 |
|
|
|
17 |
% |
Gross Margin % |
|
|
39.2 |
% |
|
|
36.6 |
% |
|
|
|
|
|
|
|
|
|
SG&A |
|
$ |
33.5 |
|
|
$ |
27.7 |
|
|
$ |
5.7 |
|
|
|
21 |
% |
% of Net Sales |
|
|
31.0 |
% |
|
|
27.9 |
% |
|
|
|
|
|
|
|
|
|
Non-Operating Income (Expense) |
|
$ |
0.1 |
|
|
$ |
(0.3 |
) |
|
$ |
0.4 |
|
|
|
-133 |
% |
Income Before Income Taxes |
|
|
8.9 |
|
|
|
8.3 |
|
|
|
0.6 |
|
|
|
8 |
% |
Income Tax Expense |
|
|
2.6 |
|
|
|
3.1 |
|
|
|
(0.5 |
) |
|
|
-16 |
% |
Net Income |
|
|
6.3 |
|
|
|
5.2 |
|
|
|
1.1 |
|
|
|
21 |
% |
Consolidated Net Sales: Consolidated net sales for 2006 increased 8%, to $107.8 million, from
$99.4 million in 2005. In the work market, net sales increased 8%, to $54.7 million, from $50.4
million in 2005. Year-over-year growth in work sales reflects the success of our fire boot
offerings along with continued penetration into the uniform market. In the outdoor market, net
sales increased 9%, to $53.1 million, from $48.9 million in 2005. The growth in the outdoor market
primarily resulted from the continued penetration into the hunting and hiking markets. In
addition, the introduction of socks into the work and outdoor markets contributed to our overall
sales growth.
Gross Profit: Gross profit for 2006 was 39.2% of consolidated net sales, compared to 36.6% in
2005. Margin improvement of 260 basis points was the result of improved margins of products
introduced in recent years with higher margins and a price increase in the fourth quarter (180
basis points), and fewer markdown sales (80 basis points).
Sales, General and Administrative Expenses (SG&A): SG&A expenses in 2006 increased $5.7 million,
or 21%, to $33.5 million from $27.7 million in 2005. The increase reflects added compensation
expenses of $3.6 million, which primarily includes additional sales, product development, and
sourcing staff ($1.7 million), incentive compensation ($1.4 million) and stock-based compensation
($0.5 million). Additionally, travel and training expenses increased $0.8 million and costs
associated with the relocation of our Portland distribution center and office were $0.5 million.
Non-operating Income: Non-operating income in 2006 increased $0.4 million, to $0.1 million from a
non-operating expense of $0.3 million in 2005. The increase was primarily the result of interest
income
-21-
more than offsetting interest expense and bank fees. At the end of 2006 and 2005, we had no
outstanding borrowings under our line of credit.
Income Before Income Taxes: Income before income taxes increased by $0.6 million, or 8%, to $8.9
million from $8.3 million in 2005. The increase was due to an 8% increase in net sales and a 260
basis point improvement in gross margins, partially offset by a 21% increase in SG&A expenses.
Income Taxes: Income tax expense in 2006 decreased to $2.6 million, from $3.1 million in 2005.
Our effective rate was 28.9% in 2006 compared to an effective tax rate of 36.9% in 2005, the
reduction being primarily due to research and development tax credits of approximately $0.6 million
in 2006. In future periods of earnings, we will continue to report income tax expense at statutory
rates 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.
Net Income: As a result of consolidated net sales, gross profit, and SG&A changes discussed above,
we realized 2006 net income of $6.3 million, or $1.02 net income per diluted common share, compared
to $5.2 million or $0.85 net income per diluted common share in 2005.
RESULTS OF OPERATIONS FISCAL 2005 COMPARED TO FISCAL 2004
Financial Summary 2005 versus 2004
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
$ Change |
|
% Change |
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
99.4 |
|
|
$ |
105.5 |
|
|
$ |
(6.1 |
) |
|
|
-6 |
% |
Gross Profit |
|
|
36.3 |
|
|
|
35.6 |
|
|
|
0.7 |
|
|
|
2 |
% |
Gross Margin % |
|
|
36.6 |
% |
|
|
33.8 |
% |
|
|
|
|
|
|
|
|
SG&A |
|
|
27.7 |
|
|
|
28.0 |
|
|
|
(0.3 |
) |
|
|
-1 |
% |
% of Net Sales |
|
|
27.9 |
% |
|
|
26.5 |
% |
|
|
|
|
|
|
|
|
Non-Operating Expenses |
|
|
(0.3 |
) |
|
|
(0.4 |
) |
|
|
0.1 |
|
|
|
-25 |
% |
Income Before Income Taxes |
|
|
8.3 |
|
|
|
7.2 |
|
|
|
1.1 |
|
|
|
15 |
% |
Income Tax Expense |
|
|
3.1 |
|
|
|
0.3 |
|
|
|
2.8 |
|
|
|
1052 |
% |
Net Income |
|
$ |
5.2 |
|
|
$ |
7.0 |
|
|
$ |
(1.8 |
) |
|
|
-26 |
% |
Consolidated Net Sales: In 2005, we experienced a decrease in consolidated net sales of $6.1
million, or 6% from 2004. The overall sales decline was due in part to our shipment of $9.8
million in General Service Administration (GSA) delivery orders to the United States government
in 2004, which was not part of an ongoing contract. Net sales in 2004 also included $5.1 million
in sales to the lower margin PVC boot market, which we exited in 2004. Excluding these items, our
consolidated net sales grew $8.8 million, or 9.7% in 2005. This increase reflected the recent
introduction of innovative products and continued penetration of existing products directed at our
core consumer base in both the work and outdoor markets.
-22-
In the outdoor market, net sales increased to $48.9 million in 2005 from $44.8 million in 2004, or
an increase of 9%. Growth in the outdoor market was primarily attributed to recent new products
and continued penetration of existing products delivered to the hunting market.
In the work market, net sales decreased from $60.7 million in 2004 to $50.4 million in 2005, a
decline of 17%, or $10.3 million. Excluding sales totaling $14.9 million from GSA delivery orders
and our former PVC boot line, work sales grew by $4.6 million, or 10% in 2005. The growth was
attributable to the introduction of new products within our general work and uniform boot lines.
Gross Profit: Gross margin for 2005 was 36.6% of consolidated net sales, compared to 33.8% in
2004. The margin improvement of 280 basis points was primarily attributed to our strategic
discontinuation of lower margin products, primarily the PVC boot line (170 basis points) and
increased sales of new higher-margin products (110 basis points). As the result of improved margin
percentages, gross profit increased by $0.6 million from $35.7 million in 2004 to $36.3 million in
2005 despite lower consolidated net sales. The provision for slow-moving and obsolete inventory
decreased in 2005 by $1.0 million, or 58%, down to $0.7 million, primarily through targeted sales
programs within our normal channels of distribution.
Sales, General and Administrative Expenses (SG&A): SG&A expenses decreased $0.3 million, or 1.1%,
to $27.7 million in 2005, compared to $28.0 million in 2004. However, as a percentage of
consolidated net sales, SG&A expenses increased from 26.5% of sales in 2004 to 27.9% of sales in
2005. The overall operating expense reduction in 2005 was largely the result of a reduction in
total incentive compensation of $0.9 million and a decrease of $0.5 million in general operating
expense associated with the Claremont, New Hampshire facility, which ceased operations in 2004.
This decrease was primarily offset by increased compensation costs of $0.6 million related to
additional staffing in our product development, sales and marketing teams.
Non-operating Expenses: Non-operating expenses in 2005 decreased $0.1 million, or 25%, to $0.3
million from $0.4 million in 2004. The decrease was primarily the result of lower interest
expense, due to reduced borrowings.
Net Income Before Taxes: Net income before taxes increased by $1.1 million, or 15%, to $8.3
million from $7.2 million in 2004. This increase resulted primarily from our continued improvement
in gross margins resulting in additional gross profits and a reduction of overall SG&A expenses.
Income Taxes: Income tax expense in 2005 increased to $3.1 million, compared to $0.3 million in
2004. The increase in our income tax expense was primarily the result of significantly lower than
expected income tax expense in 2004 due to the utilization of federal net operating loss tax
carry-forwards and a reduction in our deferred tax valuation allowance during 2004. In 2005 our
income tax expense was recorded primarily at the current statutory rates. In future periods of
earnings, we will continue to report income tax expense at statutory rates 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 effective tax rate for 2005 was 36.9%.
Net Income: As a result of the consolidated net sales, gross profit, and SG&A changes discussed
above, we realized 2005 net income of $5.2 million, or $0.85 net income per diluted common share,
compared to $7.0 million or $1.15 net income per diluted common share in 2004. The decrease in net
income in 2005 was primarily due to income tax expense of $3.1 million reflected in 2005 as
compared to $0.3 million in 2004.
-23-
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. We did not have to
borrow against our credit line during 2006.
We have a line of credit agreement with Wells Fargo Bank, N.A., which expires, if not renewed, on
June 30, 2009. Amounts borrowed under the agreement are primarily secured by all of our assets.
The maximum aggregate principal amount of borrowings allowed from January 1 to May 31 is $17.5
million. The maximum aggregate principal amount of borrowings allowed from June 1 to December 31 is
$30 million. There are no borrowing base limitations under the credit agreement. No amounts were
outstanding under this agreement as of December 31, 2006 or 2005. At our option, the credit
agreement provides for interest rate options of prime rate minus 0.50% or LIBOR plus 1.50%.
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, the proceeds of which were used to finance certain
leasehold improvements at our new distribution facility. The loan will be forgiven over a two-year
period as long as certain employment and facility usage requirements are met. See Note 4,
Financing Arrangements to the accompanying consolidated financial statements.
Net cash provided by operating activities was $9.9 million in 2006, compared to net cash used in
operating activities of $0.6 million for 2005. The 2006 amount consisted of net income of $6.3
million, adjusted for non-cash items including depreciation and amortization totaling $1.7 million
and $0.5 million of stock-based compensation expense, and changes in working capital components,
consisting primarily of an increase in accounts receivable of $3.2 million, and a decrease in
inventory of $2.8 million.
Net cash used in operating activities was $0.6 million in 2005, compared to net cash provided by
operating activities of $15.5 million for 2004. The 2005 amount consisted of net income of $5.2
million, adjusted for non-cash items including depreciation and amortization totaling $1.5 million,
and changes in working capital components, primarily an increase in accounts receivable of $1.1
million, an increase in inventory of $7.9 million, and an increase in accounts payable of $2.1
million. Inventory was $24.9 million at the end of 2005, up from $17.0 million at the end of 2004.
The year-over-year inventory increase was a result of the introduction of new products to the
market, reducing customer service response times and taking a strong position with core products to
capture growth.
Net cash
provided by financing activities was $0.8 million in 2006 compared to $0.4 million in 2005.
The Portland Development Commission funded $0.8 million of our capital expenditures in 2006. Net
cash used in investing activities was $4.1 million in 2006 compared to $0.8 million in 2005. The
majority of the cash used in both years was for capital expenditures. Capital expenditures related
to the new leased distribution facility and administrative offices in Portland, Oregon accounted
for most of the increase in 2006. We anticipate spending $2.0 million on capital expenditures in
2007.
-24-
At December 31, 2006 and 2005, our pension plan had accumulated benefit obligations in excess of
the respective plan assets and accrued pension liabilities. This obligation in excess of plan
assets and accrued liabilities has resulted in a cumulative direct charge to equity net of tax of
$1.7 million and $1.3 million as of December 31, 2006 and 2005, respectively. We expect to
contribute $0.8 million to the pension plan in 2007.
OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
We do not have any off-balance sheet financing arrangements, other than property operating leases
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, 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|
Payments due by period |
Contractual Obligations |
|
Total |
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
Thereafter |
|
Long-term debt (1) |
|
$ |
506 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
506 |
|
Operating leases (2) |
|
|
12,258 |
|
|
|
2,035 |
|
|
|
2,070 |
|
|
|
1,324 |
|
|
|
990 |
|
|
|
1,012 |
|
|
|
4,827 |
|
|
|
|
Total Contractual Obligations |
|
$ |
12,764 |
|
|
$ |
2,035 |
|
|
$ |
2,070 |
|
|
$ |
1,324 |
|
|
$ |
990 |
|
|
$ |
1,012 |
|
|
$ |
5,333 |
|
|
|
|
|
|
|
(1) |
|
As long as we meet certain employment and facility usage requirements
through July 1, 2008, this loan will be forgiven and will not result in a cash
outflow. See Note 4, Financing Arrangements to the accompanying consolidated
financial statements for additional information. |
|
(2) |
|
See Part I, Item 2 Properties for a description of our leased facilities. |
From time to time we enter into purchase commitments with our suppliers 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, 2006, no such losses
existed.
We also have a commercial commitment as described below, which is more fully described under the
caption Liquidity and Capital Resources:
|
|
|
|
|
|
|
(In Thousands) |
|
|
|
|
|
|
Other Commercial |
|
Maximum Amount |
|
|
|
|
Commitment |
|
Committed |
|
Outstanding at 12/31/06 |
|
Date of Expiration |
Line of credit |
|
$30,000 |
|
$ |
|
June 2009 |
We believe that our existing resources and anticipated cash flows from operations will be
sufficient to satisfy our working capital needs for the foreseeable future.
-25-
CRITICAL ACCOUNTING POLICIES AND 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.
Allowances for Doubtful Accounts, Discounts and Non-Defective Returns: According to our standard
sales agreement, ownership of our products transfers to the customer when the product is delivered
to a third-party carrier at one of our distribution facilities. Therefore, the amount of revenue
recognized does not require a material level of judgment or subjectivity. However, there is
significant judgment required when determining the allowances for doubtful accounts, discounts, and
non-defective returns, each of which reduces the amount of operating income reported in the
accompanying consolidated statements of operations.
Our historical experience of write-offs of uncollectible accounts has been immaterial. However,
based on our reviews of accounts receivable agings and assessing the risk factors associated with
our largest customers, we have recorded an allowance for doubtful accounts of $0.3 million at
December 31, 2006 and $0.4 million at December 31, 2005.
In addition to an allowance for doubtful accounts, we maintain reserves against accounts receivable
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 returns. These reserves total $0.3 million and $0.4 million at December 31,
2006 and 2005, respectively.
Allowance for Slow-Moving Inventory: We consistently analyze the level of inventory on hand, its
cost in relation to market value and estimated customer requirements to determine whether
write-downs for slow-moving inventory are required. Actual customer requirements in any future
periods are inherently uncertain and thus may differ from estimates. If actual or expected
requirements were significantly greater or lower than the established reserves, a reduction or
increase to the allowance would be recorded in the period in which such a determination was made
with an offsetting charge or credit to cost of goods sold.
Product Warranty: We provide a limited warranty for the replacement of defective products. Our
standard warranties require us to repair or replace defective products at no cost to the consumer.
We estimate the costs that may be incurred under our basic 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, historical and anticipated rates of warranty
claims, and cost per claim. We consistently assess the adequacy of our recorded warranty
liabilities and adjust the amounts as necessary with a corresponding charge or credit to net sales.
We utilize historical trends and information received from customers to assist in determining the
appropriate loss reserve 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,
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 our other long-term
-26-
investments, primarily property and equipment of $5.4 million, we have made 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 IA 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 7,
Compensation and Benefit Agreements to our annual consolidated financial statements and include,
among others, the discount rate and expected long-term rate of return on plan assets. In
accordance with accounting principles generally accepted in the United States of America, 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, significant differences in our actual
experience or significant changes in our assumptions may affect our pension and other
postretirement obligations, our future expense and 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. The valuation allowance at December 31, 2006 and 2005 is
related entirely to state net operating loss (NOL) carryforwards for which the realization is
dependent on having taxable income in a certain state well into the future. Currently, our
projected levels of taxable income in such state are not sufficient to reduce the valuation
allowance. On an ongoing basis, we will assess the future realization of the state NOL deferred
tax assets to determine if any reductions in the valuation allowance are needed.
Stock-Based Compensation: We adopted the provisions of SFAS 123(R), Share-Based Payment (SFAS
123R) on January 1, 2006. SFAS 123R requires us to measure and recognize in our consolidated
statements of operations the expense associated with all share-based payment awards made to
employees and directors based on estimated fair values. We utilize the Black-Scholes option
valuation model to measure the amount of compensation expense to be recognized for each option
award. There are several assumptions that must be made when using the Black-Scholes model such as
the expected term of each option, the expected volatility of the stock price during the expected
term of the option, the expected dividends to be paid and the risk free interest rate expected
during the option term. Of these assumptions, the expected term of the option and expected
volatility of our common stock are the most difficult to estimate since they are based on the
exercise behavior of employees and the expected future performance of our stock. An increase in the
volatility of our stock price or an increase in the average period before exercise will increase
the amount of compensation expense related to awards granted after December 31, 2006.
-27-
Recently Issued Accounting Pronouncements
In September 2006, the SEC staff issued Staff Accounting Bulletin 108, Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB
108). SAB 108 requires that public companies utilize a dual-approach to assessing the
quantitative effects of financial misstatements. This dual approach includes both an income
statement focused assessment and a balance sheet focused assessment. We adopted SAB 108 in the
quarter ended December 31, 2006 without any impact on our consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. This Statement applies
under other accounting pronouncements that require or permit fair value measurements, the FASB
having previously concluded in those accounting pronouncements that fair value is the relevant
measurement attribute. Accordingly, this Statement does not require any new fair value
measurements. SFAS 157 is effective for fiscal years beginning after December 15, 2007. We believe
the impact of adopting SFAS 157 will not have a material impact on the Companys consolidated
financial statements.
In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an
Interpretation of FASB Statement 109 (FIN 48), which clarifies the accounting for uncertainty in
tax positions. FIN 48 provides that the tax effects from an uncertain tax position can be
recognized in the Companys financial statements, only if the position is more likely to be
sustained on audit, based on the technical merits of the position than not. The provisions of FIN
48 are effective as of the beginning of fiscal year 2007, with the cumulative effect of the change
in accounting principle recorded as an adjustment to opening retained earnings. We believe the
impact of adopting FIN 48 will not have a material impact on our consolidated financial statements.
|
|
|
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 either the prime rate minus 0.50% or the LIBOR rate plus 1.50%. 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 have caused the Companys interest
expense to change by approximately $0.1 million. Given our current cash position, we believe these
risks are not material to the earnings of the Company.
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, 2006, 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 pension benefits of approximately $2.0 million
at December 31, 2006 with a similar charge to equity. Furthermore, a minus one percent change
(increase or decrease) in the actual rate of return on pension plan assets would affect the
additional minimum pension plan liability by approximately $0.1 million.
-28-
|
|
|
Item 8. |
|
Financial Statements and Supplementary Data |
The consolidated statements of operations, shareholders equity and cash flows for each of the
years in the three-year period ended December 31, 2006, and the related consolidated balance sheets
of the Company as of December 31, 2006 and 2005, together with the related notes thereto and the
Report of Independent Registered Public Accounting Firm appear on pages F-1 through F-21 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. |
|
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 period covered by this Annual Report on Form 10-K that
has materially affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting.
|
|
|
Item 9B. |
|
Other Information |
None.
-29-
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 2007 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.
The Company has adopted a Code of Ethics for Senior Financial Officers that covers, among others,
the principal executive officer, the principal financial officer and the principal accounting
officer. This Code of Ethics for Senior Financial Officers is posted on the Companys 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 the officers of the Company, then the Company will disclose the nature of
such amendment or waiver on its website at the above address.
|
|
|
Item 11. |
|
Executive Compensation |
The information required by this Item is included under the captions Compensation Discussion and
Analysis, Board of DirectorsDirector 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.
-30-
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, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities |
|
|
|
|
|
|
|
|
|
|
remaining available for |
|
|
|
|
|
|
|
|
|
|
future issuance under |
|
|
Number of securities to |
|
Weighted-average |
|
equity compensation |
|
|
be issued upon exercise |
|
exercise price of |
|
plans (excluding |
|
|
of outstanding options, |
|
outstanding options, |
|
securities reflected in |
Plan Category |
|
warrants and rights (1) |
|
warrants and rights |
|
the first column) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans
approved by security holders |
|
|
749,722 |
|
|
$ |
8.04 |
|
|
|
261,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not
approved by security holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
749,722 |
|
|
$ |
8.04 |
|
|
|
261,000 |
|
|
|
|
|
|
|
(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) and 2001 Non-Employee
Director Stock Option Plan (the Director Plan). |
|
(2) |
|
Includes 220,000 shares of the Companys Common Stock available for issuance
under the 2001 Plan and 41,000 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-Independent 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 Miscellaneous-Independent
Auditors Fees in the Proxy Statement and, when the Proxy Statement is filed, will be incorporated
herein by reference.
- 31 -
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, 2006 and 2005 |
|
F-2 |
|
|
Consolidated Statements of Operations for the Years ended December 31, |
|
|
|
|
2006, 2005, and 2004 |
|
F-4 |
|
|
Consolidated Statements of Shareholders Equity for the Years ended |
|
|
|
|
December 31, 2006, 2005, and 2004 |
|
F-5 |
|
|
Consolidated Statements of Cash Flows for the Years ended December 31, |
|
|
|
|
2006,
2005, and 2004 |
|
F-6 |
|
|
Notes to Consolidated Financial Statements for the Years ended |
|
|
|
|
December 31, 2006, 2005, and 2004 |
|
F-7 |
2. |
|
Financial Statement Schedule |
|
|
|
The financial statement schedule for the years ended December 31, 2006, 2005 and 2004
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 |
|
37 |
|
|
Schedule II Valuation and Qualifying Accounts |
|
38 |
|
|
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. |
- 32 -
3. |
|
Exhibits |
|
|
|
The following exhibits are filed herewith: |
|
|
|
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)*
|
|
LaCrosse Footwear, Inc. 2001 Non-Employee Director Stock Option Plan, as amended
(Incorporated by reference to Exhibit 10.2 of LaCrosse Footwear, Inc.s Current
Report on Form 8-K as filed with the Commission on May 9, 2005). |
|
|
|
(10.7)*
|
|
Summary of 2007 Incentive Compensation Program (Incorporated by reference to
LaCrosse Footwear, Inc.s Current Report on Form 8-K as filed with the Commission on
December 22, 2006) |
|
|
|
(10.8)*
|
|
Summary of 2007 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 22, 2006) |
|
|
|
|
|
* A management contract or
compensatory plan or arrangement. |
- 33 -
|
|
|
Exhibit |
|
|
Number |
|
Exhibit Description |
|
|
|
(10.9)*
|
|
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) |
|
|
|
(10.10)
|
|
Lease, dated as of March 14, 1994, 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)) |
|
|
|
(10.12)
|
|
Amendment, dated as of March 17, 1998, to Lease 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) |
|
|
|
(10.13)
|
|
Lease Termination Agreement, by and among LaCrosse Footwear, Inc., Danner, Inc., and
ProLogis, dated October 17, 2005 (Incorporated by reference to Exhibit (10.1) to
LaCrosse Footwear, Inc.s Current Report on Form 8-K as filed with the Commission on
October 20, 2005) |
|
|
|
(10.14)
|
|
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) |
|
|
|
(10.15)
|
|
Manufacturing Certification Agreement, dated as of October 19, 1993, between W.L.
Gore & Associates, Inc. and Danner Shoe Manufacturing Co. (Incorporated by
reference to Exhibit (10.23) to LaCrosse Footwear, Inc.s Form S-1 Registration
Statement (Registration No. 33-75534)) |
|
|
|
(10.16)
|
|
Trademark License, dated as of October 19, 1993, between W.L. Gore & Associates,
Inc. and Danner Shoe Manufacturing Co. (Incorporated by reference to Exhibit
(10.24) to LaCrosse Footwear, Inc.s Form S-1 Registration Statement (Registration
No. 33-75534)) |
|
|
|
(10.17)
|
|
Amended and Restated Credit Agreement, dated September 6, 2006, by and among
LaCrosse 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) |
|
|
|
(10.18)
|
|
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. |
|
|
|
(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 |
- 34 -
|
|
|
Exhibit |
|
|
Number |
|
Exhibit Description |
|
|
|
(99.1)
|
|
Proxy Statement for the 2007 Annual Meeting of Shareholders |
|
|
|
|
|
[The Proxy Statement for the 2007 Annual Meeting of Shareholders will be filed with
the Securities and Exchange Commission under Regulation 14A within 120 days after
the end of the Companys fiscal year. Except to the extent specifically
incorporated by reference, the Proxy Statement for the 2007 Annual Meeting of
Shareholders shall not be deemed to be filed with the Securities and Exchange
Commission as part of this Annual Report on Form 10-K.] |
- 35 -
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 20th day of March, 2007.
|
|
|
|
|
|
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
Joseph P. Schneider
|
|
President, Chief Executive Officer and
Director (Principal Executive Officer)
|
|
March 20, 2007 |
|
|
|
|
|
/s/ David P. Carlson
David P. Carlson
|
|
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
|
|
March 20, 2007 |
|
|
|
|
|
/s/ Richard A. Rosenthal
Richard A. Rosenthal
|
|
Chairman of the Board and Director
|
|
March 20, 2007 |
|
|
|
|
|
/s/Stephen F. Loughlin
Stephen F. Loughlin
|
|
Director
|
|
March 20, 2007 |
|
|
|
|
|
/s/ Luke E. Sims
Luke E. Sims
|
|
Director
|
|
March 20, 2007 |
|
|
|
|
|
/s/ Charles W. Smith
Charles W. Smith
|
|
Director
|
|
March 20, 2007 |
|
|
|
|
|
/s/ John D. Whitcombe
John D. Whitcombe
|
|
Director
|
|
March 20, 2007 |
|
|
|
|
|
/s/ William H. Williams
William H. Williams
|
|
Director
|
|
March 20, 2007 |
- 36 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of
LaCrosse Footwear, Inc.
Portland, Oregon
Our audits were conducted in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated supplemental Schedule II is
presented for purposes of complying with the Securities and Exchange Commissions rules and is not
a part of the basic consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in our audits of the basic consolidated financial statements and, in
our opinion, is fairly stated in all material respects in relation to the basic consolidated
financial statements taken as a whole.
|
|
|
|
|
|
|
|
|
/s/ McGladrey & Pullen, LLP
|
|
|
|
|
|
McGLADREY & PULLEN, LLP |
|
|
Minneapolis, Minnesota
March 20, 2007
- 37 -
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, 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable allowances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for discounts |
|
$ |
47 |
|
|
$ |
2,125 |
|
|
$ |
|
|
|
$ |
1,985 |
|
|
$ |
187 |
|
Allowance for doubtful accounts |
|
|
351 |
|
|
|
108 |
|
|
|
|
|
|
|
126 |
|
|
|
333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
398 |
|
|
$ |
2,233 |
|
|
$ |
|
|
|
$ |
2,111 |
|
|
$ |
520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for slow-moving inventory |
|
$ |
1,674 |
|
|
$ |
1,068 |
|
|
$ |
|
|
|
$ |
1,044 |
|
|
$ |
1,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset valuation allowance |
|
$ |
3,560 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,472 |
|
|
$ |
1,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for warranties |
|
$ |
852 |
|
|
$ |
1,840 |
|
|
$ |
|
|
|
$ |
1,846 |
|
|
$ |
846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable allowances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for discounts |
|
$ |
187 |
|
|
$ |
2,335 |
|
|
$ |
|
|
|
$ |
2,178 |
|
|
$ |
344 |
|
Allowance for nondefective product |
|
|
|
|
|
|
1,923 |
|
|
$ |
|
|
|
|
1,845 |
|
|
|
78 |
|
Allowance for doubtful accounts |
|
|
333 |
|
|
|
129 |
|
|
|
|
|
|
|
109 |
|
|
|
353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
520 |
|
|
$ |
4,387 |
|
|
$ |
|
|
|
$ |
4,132 |
|
|
$ |
775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for slow-moving inventory |
|
$ |
1,698 |
|
|
$ |
302 |
|
|
$ |
|
|
|
$ |
1,282 |
|
|
$ |
718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset valuation allowance |
|
$ |
1,088 |
|
|
$ |
3 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for warranties |
|
$ |
846 |
|
|
$ |
1,494 |
|
|
$ |
|
|
|
$ |
1,578 |
|
|
$ |
762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 38 -
SCHEDULE II - continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable allowances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for discounts |
|
$ |
344 |
|
|
$ |
2,137 |
|
|
$ |
|
|
|
$ |
2,232 |
|
|
$ |
249 |
|
Allowance for nondefective product |
|
|
78 |
|
|
|
2,132 |
|
|
|
|
|
|
|
2,109 |
|
|
|
101 |
|
Allowance for doubtful accounts |
|
|
353 |
|
|
|
400 |
|
|
|
|
|
|
|
497 |
|
|
|
256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
775 |
|
|
$ |
4,669 |
|
|
$ |
|
|
|
$ |
4,838 |
|
|
$ |
606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for slow-moving inventory |
|
$ |
718 |
|
|
$ |
601 |
|
|
$ |
|
|
|
$ |
829 |
|
|
$ |
490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset valuation allowance |
|
$ |
1,091 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
63 |
|
|
$ |
1,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for warranties |
|
$ |
762 |
|
|
$ |
1,837 |
|
|
$ |
|
|
|
$ |
1,827 |
|
|
$ |
772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accounts receivable, inventory, and deferred tax asset allowances
above were deducted from the applicable asset accounts.
- 39 -
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)*
|
|
LaCrosse Footwear, Inc. 2001 Non-Employee Director Stock Option Plan, as amended
(Incorporated by reference to Exhibit 10.2 of LaCrosse Footwear, Inc.s Current
Report on Form 8-K as filed with the Commission on May 9, 2005). |
|
|
|
(10.7)*
|
|
Summary of 2007 Incentive Compensation Program (Incorporated by reference to
LaCrosse Footwear, Inc.s Current Report on Form 8-K as filed with the Commission on
December 22, 2006) |
|
|
|
(10.8)*
|
|
Summary of 2007 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 22, 2006) |
|
|
|
(10.9)*
|
|
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) |
|
|
|
|
|
* A management contract or
compensatory plan or arrangement. |
- 40 -
|
|
|
Exhibit Number |
|
Exhibit Description |
(10.10)
|
|
Lease, dated as of March 14, 1994, 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)) |
|
|
|
(10.12)
|
|
Amendment, dated as of March 17, 1998, to Lease 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) |
|
|
|
(10.13)
|
|
Lease Termination Agreement, by and among LaCrosse Footwear, Inc., Danner, Inc., and
ProLogis, dated October 17, 2005 (Incorporated by reference to Exhibit (10.1) to
LaCrosse Footwear, Inc.s Current Report on Form 8-K as filed with the Commission on
October 20, 2005) |
|
|
|
(10.14)
|
|
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) |
|
|
|
(10.15)
|
|
Manufacturing Certification Agreement, dated as of October 19, 1993, between W.L.
Gore & Associates, Inc. and Danner Shoe Manufacturing Co. (Incorporated by
reference to Exhibit (10.23) to LaCrosse Footwear, Inc.s Form S-1 Registration
Statement (Registration No. 33-75534)) |
|
|
|
(10.16)
|
|
Trademark License, dated as of October 19, 1993, between W.L. Gore & Associates,
Inc. and Danner Shoe Manufacturing Co. (Incorporated by reference to Exhibit
(10.24) to LaCrosse Footwear, Inc.s Form S-1 Registration Statement (Registration
No. 33-75534)) |
|
|
|
(10.17)
|
|
Amended and Restated Credit Agreement, dated September 6, 2006, by and among
LaCrosse 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) |
|
|
|
(10.18)
|
|
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. |
|
|
|
(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 |
- 41 -
|
|
|
|
|
|
Exhibit Number |
|
Exhibit Description |
(99.1)
|
|
Proxy Statement for the 2007 Annual Meeting of Shareholders |
|
|
[The Proxy Statement for the 2007 Annual Meeting of Shareholders will be filed with
the Securities and Exchange Commission under Regulation 14A within 120 days after
the end of the Companys fiscal year. Except to the extent specifically
incorporated by reference, the Proxy Statement for the 2007 Annual Meeting of
Shareholders shall not be deemed to be filed with the Securities and Exchange
Commission as part of this Annual Report on Form 10-K.] |
- 42 -
INDEX
|
|
|
|
|
|
|
|
F-1 |
|
CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
|
F-2 and F-3 |
|
|
|
|
F-4 |
|
|
|
|
F-5 |
|
|
|
|
F-6 |
|
|
|
|
F-7 F-21 |
|
F-INDEX
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
LaCrosse Footwear, Inc.
Portland, Oregon
We have audited the consolidated balance sheets of LaCrosse Footwear, Inc. and Subsidiaries as
of December 31, 2006 and 2005, and the related consolidated statements of operations, shareholders
equity and cash flows for each of the years in the three-year period ended December 31, 2006.
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, 2006 and 2005, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 2006, in conformity with U.S. generally
accepted accounting principles.
As discussed in Note 6 to the consolidated financial statements, the Company adopted Statement of
Financial Accounting Standards No. 123(R), Share-Based Payment in 2006.
McGLADREY & PULLEN, LLP
Minneapolis, Minnesota
March 20, 2007
F - 1
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2006 and 2005
(In Thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
ASSETS |
|
2006 |
|
|
2005 |
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
12,702 |
|
|
$ |
6,113 |
|
Trade accounts receivable, less allowances of
$0.6 million in 2006 and $0.8 million in 2005 |
|
|
19,912 |
|
|
|
16,684 |
|
Inventories (Note 2) |
|
|
22,038 |
|
|
|
24,865 |
|
Prepaid expenses and other |
|
|
987 |
|
|
|
955 |
|
Deferred tax assets (Note 3) |
|
|
1,223 |
|
|
|
1,351 |
|
|
|
|
Total current assets |
|
|
56,862 |
|
|
|
49,968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT |
|
|
|
|
|
|
|
|
Leasehold improvements |
|
|
2,463 |
|
|
|
1,713 |
|
Machinery and equipment |
|
|
13,765 |
|
|
|
12,762 |
|
|
|
|
|
|
|
16,228 |
|
|
|
14,475 |
|
Less accumulated depreciation |
|
|
10,786 |
|
|
|
11,428 |
|
|
|
|
Net property and equipment |
|
|
5,442 |
|
|
|
3,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
|
|
|
|
Goodwill |
|
|
10,753 |
|
|
|
10,753 |
|
Other assets |
|
|
476 |
|
|
|
815 |
|
|
|
|
Total other assets |
|
|
11,229 |
|
|
|
11,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
73,533 |
|
|
$ |
64,583 |
|
|
|
|
See Notes to Consolidated Financial Statements.
F - 2
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
2006 |
|
|
2005 |
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
5,427 |
|
|
|
5,402 |
|
Accrued compensation |
|
|
3,183 |
|
|
|
1,507 |
|
Other accruals |
|
|
1,575 |
|
|
|
2,014 |
|
|
|
|
Total current liabilities |
|
|
10,185 |
|
|
|
8,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT (Note 4) |
|
|
506 |
|
|
|
|
|
DEFERRED REVENUE (Note 4) |
|
|
169 |
|
|
|
|
|
COMPENSATION AND BENEFITS (Note 7) |
|
|
4,041 |
|
|
|
4,015 |
|
DEFERRED TAX LIABILITIES (Note 3) |
|
|
1,288 |
|
|
|
1,168 |
|
|
|
|
Total liabilities |
|
|
16,189 |
|
|
|
14,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY (Notes 6 and 7) |
|
|
|
|
|
|
|
|
Common stock, par value $.01 per share; authorized
50,000,000 shares; issued 6,717,627 shares |
|
|
67 |
|
|
|
67 |
|
Additional paid-in capital |
|
|
26,458 |
|
|
|
25,987 |
|
Accumulated other comprehensive loss |
|
|
(1,684 |
) |
|
|
(1,306 |
) |
Retained earnings |
|
|
35,952 |
|
|
|
29,608 |
|
Less cost of 675,104 and 728,370 shares of treasury stock |
|
|
(3,449 |
) |
|
|
(3,879 |
) |
|
|
|
Total shareholders equity |
|
|
57,344 |
|
|
|
50,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
$ |
73,533 |
|
|
$ |
64,583 |
|
|
|
|
F - 3
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2006, 2005, and 2004
(In Thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
Net sales (Notes 9 and 10) |
|
$ |
107,798 |
|
|
$ |
99,378 |
|
|
$ |
105,470 |
|
Cost of goods sold |
|
|
65,502 |
|
|
|
63,032 |
|
|
|
69,822 |
|
|
|
|
Gross profit |
|
|
42,296 |
|
|
|
36,346 |
|
|
|
35,648 |
|
Selling and administrative expenses |
|
|
33,462 |
|
|
|
27,737 |
|
|
|
28,008 |
|
|
|
|
Operating income |
|
|
8,834 |
|
|
|
8,609 |
|
|
|
7,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense) |
|
|
130 |
|
|
|
(317 |
) |
|
|
(543 |
) |
Other income (expense) |
|
|
(42 |
) |
|
|
6 |
|
|
|
145 |
|
|
|
|
Total non-operating income (expense) |
|
|
88 |
|
|
|
(311 |
) |
|
|
(398 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
8,922 |
|
|
|
8,298 |
|
|
|
7,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (Note 3) |
|
|
2,578 |
|
|
|
3,064 |
|
|
|
269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,344 |
|
|
$ |
5,234 |
|
|
$ |
6,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.05 |
|
|
$ |
0.88 |
|
|
$ |
1.18 |
|
Diluted |
|
$ |
1.02 |
|
|
$ |
0.85 |
|
|
$ |
1.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
6,022,349 |
|
|
|
5,954,119 |
|
|
|
5,890,721 |
|
Diluted |
|
|
6,213,016 |
|
|
|
6,165,547 |
|
|
|
6,070,167 |
|
See Notes to Consolidated Financial Statements.
F - 4
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
Years Ended December 31, 2006, 2005, and 2004
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Common |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Retained |
|
|
Treasury |
|
|
Shareholders |
|
|
|
Stock |
|
|
Capital |
|
|
Loss |
|
|
Earnings |
|
|
Stock |
|
|
Equity |
|
|
Balance, December 31, 2003 |
|
$ |
67 |
|
|
$ |
26,430 |
|
|
$ |
(1,215 |
) |
|
$ |
17,401 |
|
|
$ |
(4,807 |
) |
|
$ |
37,876 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,973 |
|
|
|
|
|
|
|
6,973 |
|
Minimum pension liability,
net of tax benefit of $450 |
|
|
|
|
|
|
|
|
|
|
200 |
|
|
|
|
|
|
|
|
|
|
|
200 |
|
Exercise of stock options |
|
|
|
|
|
|
(175 |
) |
|
|
|
|
|
|
|
|
|
|
277 |
|
|
|
102 |
|
|
|
|
Balance, December 31, 2004 |
|
|
67 |
|
|
|
26,255 |
|
|
|
(1,015 |
) |
|
|
24,374 |
|
|
|
(4,530 |
) |
|
|
45,151 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,234 |
|
|
|
|
|
|
|
5,234 |
|
Minimum pension liability,
net of tax benefit of $310 |
|
|
|
|
|
|
|
|
|
|
(291 |
) |
|
|
|
|
|
|
|
|
|
|
(291 |
) |
Exercise of stock options |
|
|
|
|
|
|
(268 |
) |
|
|
|
|
|
|
|
|
|
|
651 |
|
|
|
383 |
|
|
|
|
Balance, December 31, 2005 |
|
|
67 |
|
|
|
25,987 |
|
|
|
(1,306 |
) |
|
|
29,608 |
|
|
|
(3,879 |
) |
|
|
50,477 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,344 |
|
|
|
|
|
|
|
6,344 |
|
Adjustment to pension liability
net of tax benefit of $317 |
|
|
|
|
|
|
|
|
|
|
(378 |
) |
|
|
|
|
|
|
|
|
|
|
(378 |
) |
Stock based compensation expense |
|
|
|
|
|
|
508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
508 |
|
Exercise of stock options |
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
430 |
|
|
|
393 |
|
|
|
|
Balance, December 31, 2006 |
|
$ |
67 |
|
|
$ |
26,458 |
|
|
$ |
(1,684 |
) |
|
$ |
35,952 |
|
|
$ |
(3,449 |
) |
|
$ |
57,344 |
|
|
|
|
See Notes to Consolidated Financial Statements.
F - 5
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2006, 2005, and 2004
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,344 |
|
|
$ |
5,234 |
|
|
$ |
6,973 |
|
Adjustments to reconcile net income to net cash
provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
1,648 |
|
|
|
1,353 |
|
|
|
1,255 |
|
Amortization |
|
|
14 |
|
|
|
147 |
|
|
|
216 |
|
(Gain) loss on disposal or impairment of property and equipment |
|
|
46 |
|
|
|
(30 |
) |
|
|
540 |
|
Stock-based compensation expense |
|
|
508 |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
565 |
|
|
|
895 |
|
|
|
(318 |
) |
Changes in current assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable |
|
|
(3,228 |
) |
|
|
(1,071 |
) |
|
|
(2,201 |
) |
Inventories |
|
|
2,827 |
|
|
|
(7,903 |
) |
|
|
7,080 |
|
Accounts payable |
|
|
25 |
|
|
|
2,054 |
|
|
|
621 |
|
Accrued expenses and other |
|
|
1,102 |
|
|
|
(1,285 |
) |
|
|
1,344 |
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
9,851 |
|
|
|
(606 |
) |
|
|
15,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(4,089 |
) |
|
|
(1,423 |
) |
|
|
(934 |
) |
Proceeds from sales of property and equipment |
|
|
|
|
|
|
610 |
|
|
|
226 |
|
|
|
|
Net cash used in investing activities |
|
|
(4,089 |
) |
|
|
(813 |
) |
|
|
(708 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt |
|
|
562 |
|
|
|
|
|
|
|
|
|
Principal payments on long-term obligations |
|
|
|
|
|
|
|
|
|
|
(2,219 |
) |
Net payments on short-term borrowings |
|
|
|
|
|
|
|
|
|
|
(5,319 |
) |
Payment of deferred financing costs |
|
|
|
|
|
|
|
|
|
|
(217 |
) |
Proceeds from exercise of stock options |
|
|
265 |
|
|
|
383 |
|
|
|
102 |
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
827 |
|
|
|
383 |
|
|
|
(7,653 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
6,589 |
|
|
|
(1,036 |
) |
|
|
7,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning |
|
|
6,113 |
|
|
|
7,149 |
|
|
|
|
|
|
|
|
Ending |
|
$ |
12,702 |
|
|
$ |
6,113 |
|
|
$ |
7,149 |
|
|
|
|
SUPPLEMENTAL INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments of: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
|
|
|
$ |
323 |
|
|
$ |
602 |
|
Income taxes |
|
$ |
2,251 |
|
|
$ |
1,984 |
|
|
$ |
318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash deferred income tax benefit from adjustment to
pension liability (Note 7) |
|
$ |
(317 |
) |
|
$ |
(310 |
) |
|
$ |
(450 |
) |
See 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. designs, manufactures and markets premium quality footwear and apparel
for work and outdoor consumers through a network of specialty retailers and distributors
throughout the United States, Canada, Europe and Asia.
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., and LaCrosse
International, 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, deferred tax assets, pension assumptions, stock-based compensation related
assumptions, and estimated future cash flows used in the annual impairment test of goodwill.
Actual results could differ from those estimates.
Cash and cash equivalents The Company considers all highly liquid debt instruments purchased
with maturities of three months or less to be cash equivalents. 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. The Company maintains its cash in money market
accounts, which, at times, exceed federally insured limits. The Company has not experienced any
losses in such accounts.
Revenue recognition - Revenue is recognized when products are shipped, the customer takes title
and assumes risk of loss, collection of related receivable is probable, persuasive evidence of an
arrangement exists, and the sales price is fixed or determinable. Allowances for estimated
returns, discounts, and bad debts are provided when the related revenue is recorded. Amounts
billed for shipping and handling costs are recorded as a component of net sales, while the
related costs paid to third-party shipping companies are recorded as a cost of goods sold.
Fair
value of financial instruments - Pursuant to Statement of Financial Accounting
Standards (SFAS) No. 107, Disclosures About Fair Value of Financial Instruments, the
Company estimated the fair value of all financial instruments included on its consolidated
balance sheets as of December 31, 2006 and 2005. The Companys financial instruments, including
cash and cash equivalents, trade receivables, trade payables, accounts payable, and accrued
compensation are estimated to approximate their fair value due to their short maturities.
F - 7
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies, Continued
Trade accounts receivable and allowance for doubtful accounts - Trade accounts receivable are
carried at original invoice amount less an estimated allowance for doubtful accounts. The Company
maintains an allowance for doubtful accounts for the uncertainty of its customers ability to
make required payment. If the financial condition of the customer were to deteriorate, resulting
in an impairment of the receivable balance, the Company would record an additional allowance.
The Company also records allowances for cash discounts and non-defective returns. The Company
analyzes its cash discount programs to determine 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
straight-line and accelerated methods over their estimated useful lives. Depreciable lives range
from five to ten years for leasehold improvements and from three to seven years for machinery and
equipment.
Goodwill - Goodwill represents the excess of the purchase price over the fair value of the net
tangible and identified intangible assets of Danner, Inc. Goodwill and identified intangible
assets deemed to have indefinite lives are not amortized, but are subject to impairment tests at
least annually in accordance with Financial Accounting Standards Board (FASB) Statement No.
142, Goodwill and Other Intangible Assets. 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. An impairment loss would generally be recognized when the
carrying amount of Danner, Inc.s net assets exceeds the estimated fair value of its net assets,
which is established based upon a projection of profitability. Using these procedures, the
Company determined that the fair value of Danner, Inc.s net assets exceeded its carrying value
for both the year-end December 31, 2006 and 2005, and therefore goodwill was not impaired. The
net carrying amount of goodwill for Danner was $10.8 million for each year.
Recoverability and impairment of intangible assets and other long-lived assets Pursuant to SFAS
No. 144, Accounting for the 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 has determined that its long-lived assets at December
31, 2006 and 2005 were not impaired.
F - 8
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies, Continued
Product warranties - The Company provides a limited warranty for the replacement of defective
products. The Companys limited warranty requires the Company to repair or replace defective
products at no cost to the consumer within 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
rates of warranty claims. The Company utilizes historical trends and information received from
its customers to assist in determining the appropriate warranty accrual levels.
Changes in the carrying amount of accrued product warranty cost for the years ended December 31,
2006 and 2005 are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Balance, beginning |
|
$ |
762 |
|
|
$ |
846 |
|
Accruals for products sold |
|
|
1,837 |
|
|
|
1,494 |
|
Costs incurred |
|
|
(1,827 |
) |
|
|
(1,578 |
) |
|
|
|
|
|
|
|
Balance, ending |
|
$ |
772 |
|
|
$ |
762 |
|
|
|
|
|
|
|
|
Stock-based compensation The Companys 2006 consolidated financial statements reflect the
impact of SFAS No. 123(R), Share-Based Payment (SFAS 123R). In accordance with the modified
prospective transition method, the Companys consolidated financial statements for the prior
periods have not been restated to reflect, and do not include, the impact of SFAS 123R.
Stock-based compensation expense recognized under SFAS 123R was $0.5 million ($0.05 per diluted
share) for 2006 and $0 for 2005 and 2004. See Note 6, Stock Options for additional
information.
Income taxes - The provision for income taxes is based on earnings reported in the consolidated
financial statements. Deferred tax assets and liabilities are determined by applying enacted 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.
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
retailers. Costs for these advertising and promotional programs are generally charged to expense
as incurred. Advertising and promotional expense included in the consolidated statements of
operations for the years ended December 31, 2006, 2005, and 2004 were approximately $2.4 million,
$2.3 million, and $2.2 million, respectively.
F - 9
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies, Continued
Net income per common share Pursuant to SFAS No. 128, Earnings per Share, and SFAS 123R, 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 instruments 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 or other arrangements to issue common
stock (common stock equivalents) were exercised or converted into common stock at the beginning
of the period, unless their effect would be anti-dilutive.
A reconciliation of the shares used in the basic and diluted earnings per common share is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Basic weighted average shares outstanding |
|
|
6,022,349 |
|
|
|
5,954,119 |
|
|
|
5,890,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
190,667 |
|
|
|
211,428 |
|
|
|
179,446 |
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding |
|
|
6,213,016 |
|
|
|
6,165,547 |
|
|
|
6,070,167 |
|
|
|
|
|
|
|
|
|
|
|
Note 2. Inventories
A summary of inventories is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Raw materials |
|
$ |
1,433 |
|
|
$ |
1,218 |
|
Work in process |
|
|
182 |
|
|
|
145 |
|
Finished goods |
|
|
20,913 |
|
|
|
24,220 |
|
|
|
|
|
|
|
|
Subtotal |
|
|
22,528 |
|
|
|
25,583 |
|
Less: provision for obsolete and slow-moving inventory |
|
|
(490 |
) |
|
|
(718 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
22,038 |
|
|
$ |
24,865 |
|
|
|
|
|
|
|
|
Note 3. Income Tax Matters
As of December 31, 2006 and 2005, the Company recorded a valuation allowance against certain
deferred tax assets of $1.0 and $1.1 million, respectively, related entirely to state net
operating loss (NOL) carryforwards for which the realization is dependent on having taxable
income in a certain state well into the future. 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 carryforwards.
F - 10
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Income Tax Matters, Continued
The total state NOL carryforwards as of December 31, 2006 are approximately $22.7 million, which
will expire as follows: $1.0 million in 2014, $2.7 million in 2015, $5.3 million in 2016, $9.2
million in 2017, $2.5 million in 2018, $1.6 million in 2019, and $0.4 million in 2020.
Net deferred tax assets and liabilities consist of the following components (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Receivable allowances |
|
$ |
197 |
|
|
$ |
301 |
|
Inventory differences |
|
|
728 |
|
|
|
669 |
|
Compensation and benefits |
|
|
1,613 |
|
|
|
1,605 |
|
Warranty reserves and other |
|
|
849 |
|
|
|
597 |
|
Net operating loss carryforwards |
|
|
1,182 |
|
|
|
1,253 |
|
Valuation allowance |
|
|
(1,028 |
) |
|
|
(1,091 |
) |
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
3,541 |
|
|
|
3,334 |
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
Intangibles |
|
|
3,377 |
|
|
|
3,000 |
|
Property and equipment |
|
|
59 |
|
|
|
23 |
|
Other |
|
|
170 |
|
|
|
128 |
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
3,606 |
|
|
|
3,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities) |
|
$ |
(65 |
) |
|
$ |
183 |
|
|
|
|
|
|
|
|
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, |
|
|
|
2006 |
|
|
2005 |
|
Current assets |
|
$ |
1,223 |
|
|
$ |
1,351 |
|
Noncurrent liabilities |
|
|
(1,288 |
) |
|
|
(1,168 |
) |
|
|
|
|
|
|
|
Net deferred tax assets (liabilities) |
|
$ |
(65 |
) |
|
$ |
183 |
|
|
|
|
|
|
|
|
At December 31, 2003, the Company had recorded a $3.6 million valuation allowance against
its deferred tax assets due to the uncertainty of the realization and timing of the benefits from
those deferred tax assets, as the Company had not achieved a sustained level of profitability.
During 2004, management concluded that the Company had attained a sufficient level of sustained
annual profitability to allow the valuation allowance to be reduced to reflect managements
estimate of the amount of deferred tax assets that will be realized in the near term.
F - 11
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Income Tax Matters, Continued
The provision for income taxes consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
1,898 |
|
|
$ |
2,141 |
|
|
$ |
587 |
|
State |
|
|
115 |
|
|
|
28 |
|
|
|
|
|
Deferred |
|
|
565 |
|
|
|
895 |
|
|
|
(318 |
) |
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
$ |
2,578 |
|
|
$ |
3,064 |
|
|
$ |
269 |
|
|
|
|
|
|
|
|
|
|
|
The differences between statutory federal tax rates and the effective tax rates reflected in
the consolidated statements of operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Statutory federal tax rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
State rate, net of federal tax effect |
|
|
3.1 |
% |
|
|
2.3 |
% |
|
|
4.2 |
% |
Benefit of net operating loss carryforwards |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
(18.0 |
%) |
Valuation allowance |
|
|
(0.7 |
%) |
|
|
0.0 |
% |
|
|
(15.9 |
%) |
Federal and
state research and experimentation credits |
|
|
(7.7 |
%) |
|
|
0.0 |
% |
|
|
0.0 |
% |
Other, net |
|
|
(0.8 |
%) |
|
|
(0.4 |
%) |
|
|
(1.6 |
%) |
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
28.9 |
% |
|
|
36.9 |
% |
|
|
3.7 |
% |
|
|
|
|
|
|
|
|
|
|
The Company completed its analysis of federal research and development tax credits for the
2000 to 2006 tax years in 2006 and concluded that it met the necessary criteria to record a $0.6
million income tax benefit. The effect of this discrete item resulted in a lower effective tax
rate for the year ended December 31, 2006 compared to the effective tax rate for the year ended
December 31, 2005.
Note 4. Financing Arrangements
In September 2006, the Company entered into an amended and restated line of credit agreement. The
new agreement supersedes the former credit agreement, extends the term of the credit arrangement
to June 30, 2009, and provides for an interest rate at the Companys option of the prime rate
minus 0.50%, or LIBOR plus 1.50%. The maximum aggregate principal amount of borrowings allowed
from January 1 to May 31 remains $17.5 million. The maximum aggregate principal amount of
borrowings allowed from June 1 to December 31 remains $30 million. As with the superseded credit
agreement, amounts borrowed under the revised agreement are primarily secured by all of the
Companys assets. There continues to be no borrowing base limitations under the new agreement.
The credit agreement contains certain restrictive covenants, which among other things, require
the Company to meet certain tangible net worth and earnings requirements as well as limiting
dividend payments to $1.5 million annually. At December 31, 2006 and 2005, the Company had no
outstanding balance due under the line of credit.
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 new 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.
F - 12
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Financing Arrangements, Continued
The loan is recorded as long-term debt and will be forgiven by the Portland Development
Commission ratably over two years as the Company meets certain facility usage requirements and
employment criteria, including maintaining a minimum number of employees in the city of Portland,
Oregon and paying those employees a competitive specified wage and benefits package. The loan,
which is secured by certain leasehold improvements at the new distribution facility, is being
amortized over the life of the related leasehold improvements, as a reduction of operating
expenses on a straight-line basis over five years. At July 1, 2008, when the loan is forgiven in
total, the Company will reclassify the remaining unamortized long-term debt to deferred revenue
and continue to amortize the balance until 2011. If the Company does not meet the employment
criteria, the remaining loan balance at that time will bear interest at 8.50% and will mature in
2013.
Note 5. Lease Commitments and Contingencies
Lease Commitments The Company leases real estate for office space, retail stores, and
manufacturing and distribution space under non-cancelable lease agreements expiring on various
dates through 2016, which are recorded as operating leases. The total rental expense included
in the consolidated statements of operations for the years ended
December 31, 2006, 2005, and 2004
is approximately $1.8 million, $1.4 million, and $1.6 million, respectively. The following is a
schedule of future minimum lease payments required under non-cancelable operating leases at
December 31, 2006: $2.0 million in 2007, $2.1 million in 2008, $1.3 million in 2009, $1.0
million in 2010, $1.0 million in 2011, and $4.8 million thereafter.
Contingencies In the normal course of business, the Company is subject to claims and
litigation. Management believes that such matters will not have a material adverse effect on the
Companys results of operations, liquidity or financial condition.
Note 6. Stock Options
The Company has issued stock options under the 1993, 1997, and 2001 employee stock option plans.
Prior to 2006, employee stock options vested over a period of five years and had a maximum term
of ten years. The Companys employee stock option issuances in 2006 vest over four years and
have a maximum term of seven years. The Company has also issued stock options under its 2001
directors stock option plan, which vest over a period of five years and have a maximum term of
ten years.
In December 2004, the FASB issued SFAS No. 123R, which requires companies to recognize in the
income statement the grant-date fair value of stock options and other equity-based compensation
issued to employees. In adopting SFAS No. 123R, as of January 1, 2006, the Company used the
modified prospective transition method.
Under the modified prospective transition method, awards that are granted, modified or settled
after the date of adoption will be measured and accounted for in accordance with SFAS 123R.
Compensation cost for awards granted prior to, but not vested, as of the date SFAS 123R was
adopted are based on the grant date attributes originally used to value those awards for pro
forma purposes under SFAS 123, Accounting for Stock-Based Compensation (SFAS 123).
F - 13
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Stock Options, Continued
On November 10, 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff
Position No. SFAS 123(R)-3, Transition Election Related to Accounting for Tax Effects of
Share-Based Payment Awards. The alternative transition method includes simplified methods to
establish the beginning balance of the additional paid-in capital pool (APIC pool) related to
the tax effects of employee share-based compensation, and to determine the subsequent impact on
the APIC pool and consolidated statements of cash flows of the tax effects of employee
share-based compensation awards that are outstanding upon adoption of SFAS 123R. The Company has
adopted this method.
Prior to the adoption of SFAS 123R, the Company accounted for stock options issued under its
plans using APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. Because the exercise price of the Companys stock options granted to employees
and directors equaled the fair market value of the underlying stock at the grant date, under the
intrinsic value method, no share-based compensation expense was recognized in the Companys
consolidated statements of operations for the years ending December 31, 2005 and 2004. If
compensation cost had been determined based on fair values at the date of grant under SFAS 123,
pro-forma net income and net income per share would have been as follows (in thousands, except
per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
2004 |
|
|
|
|
|
Net income as reported |
|
$ |
5,234 |
|
|
$ |
6,973 |
|
|
|
|
|
Deduct: Total stock-based employee compensation expense determined
under the fair value based method for all awards, net of the related
tax effects |
|
|
(310 |
) |
|
|
(386 |
) |
|
|
|
|
|
|
|
Pro forma net income |
|
$ |
4,924 |
|
|
$ |
6,587 |
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic as reported |
|
$ |
0.88 |
|
|
$ |
1.18 |
|
|
|
|
|
Diluted as reported |
|
$ |
0.85 |
|
|
$ |
1.15 |
|
|
|
|
|
Basic pro forma |
|
$ |
0.83 |
|
|
$ |
1.12 |
|
|
|
|
|
Diluted pro forma |
|
$ |
0.80 |
|
|
$ |
1.09 |
|
|
|
|
|
SFAS 123R 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 operations
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. SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those estimates. In the pro
forma information required under SFAS 123 for periods prior to fiscal 2006, the Company accounted
for forfeitures as they occurred.
To calculate the option-based compensation expense under SFAS 123R, the Company uses the
Black-Scholes option-pricing model, which it had previously used for the valuation of
option-based awards for its pro forma information required under SFAS 123 for periods prior to
fiscal 2006. The Companys determination of fair value of option-based awards on the date of
grant using the Black-Scholes model is affected by the Companys stock price as well as
assumptions regarding certain subjective variables. These variables include, but are not limited
to, the Companys expected stock price volatility over the term of the awards, the risk-free
interest rate, and the expected life of the options. The 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, holding period, and forfeitures of options are based on
historical experience.
F - 14
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Stock Options, Continued
The following table lists the weighted average assumptions used by the Company in determining the
fair value of stock options for the years ended December 31, 2006, 2005, and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Expected stock price volatility |
|
|
42 |
% |
|
|
40 |
% |
|
|
55 |
% |
Risk-free interest rate |
|
|
4.8 |
% |
|
|
4.1 |
% |
|
|
3.6 |
% |
Expected life of options |
|
3.75 years |
|
4 years |
|
4 years |
The weighted-average fair value at date of grant for options granted during 2006 was $4.06,
as compared to $4.07 for 2005 and $3.58 for 2004. The following table represents stock option
activity for the three years ended December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
|
Weighted Average |
|
|
Average Remaining |
|
|
|
|
|
|
|
Under Options |
|
|
Exercise Price |
|
|
Contract Life |
|
|
|
|
|
|
|
|
December 31, 2003 |
|
|
457,094 |
|
|
$ |
4.14 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
249,350 |
|
|
|
7.78 |
|
|
|
|
|
|
|
|
|
Canceled |
|
|
(84,050 |
) |
|
|
7.61 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(31,203 |
) |
|
|
3.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 |
|
|
591,191 |
|
|
|
5.23 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
207,050 |
|
|
|
11.03 |
|
|
|
|
|
|
|
|
|
Canceled |
|
|
(64,562 |
) |
|
|
6.87 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(82,881 |
) |
|
|
4.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
650,798 |
|
|
|
7.01 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
212,700 |
|
|
|
11.01 |
|
|
|
|
|
|
|
|
|
Canceled |
|
|
(60,510 |
) |
|
|
10.08 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(53,266 |
) |
|
|
4.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
749,722 |
|
|
$ |
8.04 |
|
|
6.6 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Detailed information on the options outstanding under the option plans on December 31, 2006
by price range is set forth 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 |
|
209,122 |
|
$ |
3.02 |
|
|
5.2 |
|
146,840 |
|
$ |
3.11 |
|
|
5.0 |
$7.70 - $10.50 |
|
182,370 |
|
$ |
7.89 |
|
|
6.8 |
|
73,435 |
|
$ |
7.93 |
|
|
6.3 |
> $10.50 |
|
358,230 |
|
$ |
11.04 |
|
|
7.2 |
|
42,140 |
|
$ |
11.23 |
|
|
7.7 |
|
|
|
|
|
|
|
749,722 |
|
$ |
8.04 |
|
|
6.6 |
|
262,415 |
|
$ |
5.76 |
|
|
5.8 |
|
|
|
|
|
F - 15
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Stock Options, Continued
The following table summarizes the Companys nonvested stock option activity for the year ended
December 31, 2006:
|
|
|
|
|
|
|
Number of |
|
|
|
Shares |
|
Nonvested stock options at beginning of period |
|
|
455,643 |
|
Vested |
|
|
(120,526 |
) |
Canceled |
|
|
(60,510 |
) |
Granted |
|
|
212,700 |
|
|
|
|
|
Nonvested stock options at end of period |
|
|
487,307 |
|
|
|
|
|
Shares available for future stock grants to employees and directors under existing plans
were 261,000 at December 31, 2006. The aggregate intrinsic value of options outstanding at
December 31, 2006 was $3.9 million, and the aggregate intrinsic value of exercisable options was
$2.0 million. Total intrinsic value of options exercised during 2006 was $0.4 million. At
December 31, 2006, there was approximately $0.5 million of unrecognized compensation cost related
to share-based payments, which is expected to be recognized over a weighted-average period of
approximately 1.4 years. The total fair value of options vesting in 2006 was approximately $0.3
million. A tax benefit of $0.1 million was recognized in 2006 from the exercise of stock
options.
Note 7. Compensation and Benefit Agreements
The Company has a defined benefit pension plan covering eligible past employees and approximately
10% of its current employees. Eligible participants are entitled to monthly pension benefits
beginning at normal retirement age (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 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 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.
The Company also has an employee retirement savings matching plan, which is classified as a
defined contribution plan under Section 401(k) of the Internal Revenue Code. This plan allows
employees to defer a portion of their annual compensation through pre-tax contributions. 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, 2006, 2005, and 2004 were approximately $0.2 million, $0.1 million, and $0.1
million, respectively. The Companys Board of Directors may also approve discretionary
contributions to employees 401(k) retirement accounts.
F - 16
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Compensation and Benefit Agreements, Continued
Information relative to the Companys defined pension and other postretirement benefit plans
is presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Changes in benefit obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations at beginning of year |
|
$ |
16,002 |
|
|
$ |
15,889 |
|
|
$ |
282 |
|
|
$ |
281 |
|
Interest cost |
|
|
963 |
|
|
|
972 |
|
|
|
17 |
|
|
|
16 |
|
Benefits paid |
|
|
(1,050 |
) |
|
|
(1,039 |
) |
|
|
(17 |
) |
|
|
(15 |
) |
Actuarial losses |
|
|
863 |
|
|
|
180 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations at end of year |
|
$ |
16,778 |
|
|
$ |
16,002 |
|
|
$ |
294 |
|
|
$ |
282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in plan assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets at beginning of year |
|
$ |
12,270 |
|
|
$ |
12,575 |
|
|
$ |
|
|
|
$ |
|
|
Actual return on assets |
|
|
1,191 |
|
|
|
552 |
|
|
|
|
|
|
|
|
|
Company contributions |
|
|
609 |
|
|
|
182 |
|
|
|
17 |
|
|
|
15 |
|
Benefits paid |
|
|
(1,050 |
) |
|
|
(1,039 |
) |
|
|
(17 |
) |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets at end of year |
|
$ |
13,020 |
|
|
$ |
12,270 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets less than obligations |
|
$ |
(3,758 |
) |
|
$ |
(3,732 |
) |
|
$ |
(294 |
) |
|
$ |
(268 |
) |
Unrecognized (gain) loss |
|
|
2,638 |
|
|
|
2,066 |
|
|
|
11 |
|
|
|
(14 |
) |
Unrecognized prior service cost |
|
|
123 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued benefit cost |
|
$ |
(997 |
) |
|
$ |
(1,528 |
) |
|
$ |
(283 |
) |
|
$ |
(282 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the accompanying consolidated balance sheets are compensation and benefits
liabilities of approximately $4.0 million at December 31, 2006 and 2005 relating to these defined
benefit plans.
In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans (SFAS 158), which required the Company to recognize the
underfunded status of its defined benefit pension and postretirement plans as a liability in its
statement of financial position at December 31, 2006. Subsequent to initial recognition, the
Company will recognize changes in funded status in the year in which the changes occur through
comprehensive income. The incremental effects of applying SFAS 158 on individual line items in
the accompanying consolidated balance sheets at December 31, 2006 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
|
|
|
|
|
Before |
|
|
|
|
|
|
After |
|
|
|
|
|
|
Application of |
|
|
|
|
|
|
Application of |
|
|
|
|
|
|
SFAS 158 |
|
|
Adjustments |
|
|
SFAS 158 |
|
|
Dec 31, 2005 |
|
|
|
|
Pension intangible asset |
|
$ |
123 |
|
|
$ |
(123 |
) |
|
$ |
|
|
|
$ |
138 |
|
Pension liability |
|
|
(3,758 |
) |
|
|
|
|
|
|
(3,758 |
) |
|
|
(3,732 |
) |
Accumulated other comp. loss |
|
|
2,638 |
|
|
|
123 |
|
|
|
2,761 |
|
|
|
2,066 |
|
Amount recorded as a deferred tax asset |
|
|
1,077 |
|
|
|
|
|
|
|
1,077 |
|
|
|
760 |
|
|
|
|
Cumulative equity reduction component |
|
$ |
1,561 |
|
|
$ |
123 |
|
|
$ |
1,684 |
|
|
$ |
1,306 |
|
F - 17
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Compensation and Benefit Agreements, Continued
Changes to Accumulated Other Comprehensive Loss for the years ended December 31, 2006, 2005,
and 2004 are shown below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded in |
|
|
|
|
|
|
Prior |
|
|
|
|
|
|
|
|
|
Deferred |
|
Accumulated |
|
|
|
|
|
|
Service |
|
Unrecognized |
|
|
|
|
|
Tax |
|
Other Comp. |
|
|
|
|
|
|
Cost |
|
Losses |
|
Total |
|
Amount |
|
Loss |
|
|
|
|
|
|
|
Balance, December 31, 2003 |
|
$ |
168 |
|
|
$ |
1,747 |
|
|
$ |
1,915 |
|
|
$ |
(700 |
) |
|
$ |
1,215 |
|
|
|
|
|
Incurred in the current year |
|
|
|
|
|
|
(435 |
) |
|
|
(435 |
) |
|
|
244 |
|
|
|
(191 |
) |
|
|
|
|
Recognized as component of
net period cost |
|
|
(15 |
) |
|
|
|
|
|
|
(15 |
) |
|
|
6 |
|
|
|
(9 |
) |
|
|
|
|
|
|
|
Balance, December 31, 2004 |
|
|
153 |
|
|
|
1,312 |
|
|
|
1,465 |
|
|
|
(450 |
) |
|
|
1,015 |
|
|
|
|
|
Incurred in the current year |
|
|
|
|
|
|
619 |
|
|
|
619 |
|
|
|
(317 |
) |
|
|
302 |
|
|
|
|
|
Recognized as component of
net period cost |
|
|
(15 |
) |
|
|
(3 |
) |
|
|
(18 |
) |
|
|
7 |
|
|
|
(11 |
) |
|
|
|
|
|
|
|
Balance, December 31, 2005 |
|
|
138 |
|
|
|
1,928 |
|
|
|
2,066 |
|
|
|
(760 |
) |
|
|
1,306 |
|
|
|
|
|
Incurred in the current year |
|
|
|
|
|
|
751 |
|
|
|
751 |
|
|
|
(337 |
) |
|
|
414 |
|
|
|
|
|
Recognized as component of
net period cost |
|
|
(15 |
) |
|
|
(41 |
) |
|
|
(56 |
) |
|
|
20 |
|
|
|
(36 |
) |
|
|
|
|
|
|
|
Balance, December 31, 2006 |
|
$ |
123 |
|
|
$ |
2,638 |
|
|
$ |
2,761 |
|
|
$ |
(1,077 |
) |
|
$ |
1,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To be recognized as component of
net period cost in 2007 |
|
|
(15 |
) |
|
|
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of Net Period Cost are shown below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
Other Benefits |
|
|
December 31, |
|
December 31, |
|
|
2006 |
|
2005 |
|
2004 |
|
2006 |
|
2005 |
|
2004 |
|
|
|
|
|
Cost recognized during the year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
$ |
963 |
|
|
$ |
972 |
|
|
$ |
999 |
|
|
$ |
17 |
|
|
$ |
16 |
|
|
$ |
18 |
|
Expected return on plan assets |
|
|
(940 |
) |
|
|
(976 |
) |
|
|
(989 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of loss |
|
|
41 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
15 |
|
|
|
15 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net period cost |
|
$ |
79 |
|
|
$ |
14 |
|
|
$ |
25 |
|
|
$ |
17 |
|
|
$ |
16 |
|
|
$ |
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
Other Benefits |
|
|
December 31, |
|
December 31, |
|
|
2006 |
|
2005 |
|
2004 |
|
2006 |
|
2005 |
|
2004 |
|
|
|
|
|
Assumptions used in computations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. |
F - 18
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Compensation and Benefit Agreements, Continued
The discount rate used is based on a hypothetical portfolio of high quality bonds with cash flows
matching expected benefit payments. The expected return on plan assets is based on the asset
allocation mix and historical return, taking into account current and expected market conditions.
The actual return on pension plan assets was approximately 11% in 2006, compared to 6% in 2005.
The historical annualized ten-year rate of return on pension plan assets is approximately 7%.
The Companys pension plan asset allocation at December 31, 2006 and 2005 and target allocation
for 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target |
|
|
Percentage of Plan Assets |
|
|
|
Allocation |
|
|
December 31, |
|
Asset Category |
|
2007 |
|
|
2006 |
|
|
2005 |
|
Equity securities |
|
|
50% - 60 |
% |
|
|
57 |
% |
|
|
58 |
% |
Debt securities |
|
|
40% - 50 |
% |
|
|
43 |
% |
|
|
42 |
% |
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.
The Company expects to contribute $0.8 million to the pension plan in 2007. The following benefit
payments are expected to be paid from the plans (in thousands):
|
|
|
|
|
|
|
|
|
Year(s) |
|
Pension Benefits |
|
|
Other Benefits |
|
2007 |
|
$ |
1,015 |
|
|
$ |
18 |
|
2008 |
|
|
1,010 |
|
|
|
19 |
|
2009 |
|
|
995 |
|
|
|
20 |
|
2010 |
|
|
985 |
|
|
|
21 |
|
2011 |
|
|
970 |
|
|
|
22 |
|
2012-2016 |
|
|
5,175 |
|
|
|
116 |
|
Note 8. Comprehensive Income
The components of comprehensive income, net of tax, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
Net income, as reported |
|
$ |
6,344 |
|
|
$ |
5,234 |
|
|
$ |
6,973 |
|
Adjustment to pension liability |
|
|
(378 |
) |
|
|
(291 |
) |
|
|
200 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
5,966 |
|
|
$ |
4,943 |
|
|
$ |
7,173 |
|
|
|
|
|
|
|
|
|
|
|
F - 19
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Significant Risks and Uncertainties
Concentrations of Credit Risk Cash - At December 31, 2006 and 2005, the Company had
approximately $12.7 million and $6.1 million, respectively, in cash and certificate of deposit
balances at financial institutions, which were in excess of the federally insured limits.
Concentration of Credit Risk Accounts Receivable - Credit risk with respect to accounts
receivable is generally diversified due to the large number of customers comprising the sales
base. Generally, the Company does not require collateral or other security to support customer
receivables, however, the Company continually monitors and evaluates creditworthiness and a
collection procedure to minimize potential credit risks associated with its accounts receivable
and establishes an allowance for uncollectible accounts and as a consequence, believes that its
accounts receivable credit risk exposure beyond such allowance is not material to the
consolidated financial statements.
Major Customer - In 2004 sales related to the General Services Administration (GSA) delivery
orders for uniform boots, which was not part of an on-going contract, accounted for approximately
11% of consolidated revenues. In all other reportable years, no sales to a single customer have
resulted in greater than 10% of consolidated net sales except for the GSA delivery orders noted
above.
Note 10. Enterprise-wide Disclosures
The Company has identified three operating segments, LaCrosse Retail, LaCrosse Safety and
Industrial, and Danner, which were determined based upon how the Company operates. For reporting
purposes, these operating segments have been aggregated into a single reportable segment due to
their similar economic characteristics. Information about the Companys groups of products
within its one reportable segment is presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
2006 |
|
2005 |
|
2004 |
|
|
|
Footwear |
|
$ |
101,846 |
|
|
$ |
95,054 |
|
|
$ |
100,969 |
|
Protective Clothing and Apparel |
|
|
5,952 |
|
|
|
4,324 |
|
|
|
4,501 |
|
|
|
|
|
|
$ |
107,798 |
|
|
$ |
99,378 |
|
|
$ |
105,470 |
|
|
|
|
The following table presents information about the Companys revenue attributed to countries
based on the location of the customer (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
2006 |
|
2005 |
|
2004 |
|
|
|
United States |
|
$ |
102,245 |
|
|
$ |
94,310 |
|
|
$ |
101,644 |
|
Foreign Countries |
|
|
5,553 |
|
|
|
5,068 |
|
|
|
3,826 |
|
|
|
|
|
|
$ |
107,798 |
|
|
$ |
99,378 |
|
|
$ |
105,470 |
|
|
|
|
F - 20
LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Recent Accounting Pronouncements
In September 2006, the SEC staff issued Staff Accounting Bulletin 108, Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB
108). SAB 108 requires that public companies utilize a dual-approach to assessing the
quantitative effects of financial misstatements. This dual approach includes both an income
statement focused assessment and a balance sheet focused assessment. The Company adopted SAB 108
in the quarter ended December 31, 2006 without any impact on the Companys consolidated financial
statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. This Statement
applies under other accounting pronouncements that require or permit fair value measurements, the
FASB having previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any new fair value
measurements. SFAS 157 is effective for fiscal years beginning after December 15, 2007. We believe
the impact of adopting SFAS 157 will not have a material impact on the Companys consolidated
financial statements.
In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an
Interpretation of FASB Statement 109 (FIN 48), which clarifies the accounting for uncertainty in
tax positions. FIN 48 provides that the tax effects from an uncertain tax position can be
recognized in the Companys financial statements, only if the position is more likely to be
sustained on audit, based on the technical merits of the position than not. The provisions of FIN
48 are effective as of the beginning of fiscal year 2007, with the cumulative effect of the change
in accounting principle recorded as an adjustment to opening retained earnings. We believe the
impact of adopting FIN 48 will not have a material impact on the Companys consolidated financial
statements.
Note 12. Quarterly Selected Financial Data (Unaudited)
The following tabulation presents the Companys unaudited quarterly results of operations for
2006 and 2005 (in thousands except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
|
|
Net sales |
|
$ |
21,401 |
|
|
$ |
21,822 |
|
|
$ |
32,840 |
|
|
$ |
31,735 |
|
Gross profit |
|
|
8,384 |
|
|
|
8,684 |
|
|
|
12,669 |
|
|
|
12,559 |
|
Operating income |
|
|
563 |
|
|
|
996 |
|
|
|
3,933 |
|
|
|
3,342 |
|
Income tax expense (benefit) |
|
|
221 |
|
|
|
(98 |
) |
|
|
1,365 |
|
|
|
1,090 |
|
Net income |
|
|
392 |
|
|
|
1,179 |
|
|
|
2,548 |
|
|
|
2,225 |
|
Basic income per common share |
|
|
0.07 |
|
|
|
0.20 |
|
|
|
0.42 |
|
|
|
0.37 |
|
Diluted income per common share |
|
|
0.06 |
|
|
|
0.19 |
|
|
|
0.41 |
|
|
|
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
|
|
Net sales |
|
$ |
18,866 |
|
|
$ |
19,752 |
|
|
$ |
31,021 |
|
|
$ |
29,739 |
|
Gross profit |
|
|
7,004 |
|
|
|
7,066 |
|
|
|
11,381 |
|
|
|
10,895 |
|
Operating income |
|
|
551 |
|
|
|
690 |
|
|
|
4,016 |
|
|
|
3,352 |
|
Income tax expense |
|
|
186 |
|
|
|
222 |
|
|
|
1,416 |
|
|
|
1,239 |
|
Net income |
|
|
318 |
|
|
|
408 |
|
|
|
2,463 |
|
|
|
2,045 |
|
Basic income per common share |
|
|
0.05 |
|
|
|
0.07 |
|
|
|
0.41 |
|
|
|
0.34 |
|
Diluted income per common share |
|
|
0.05 |
|
|
|
0.07 |
|
|
|
0.40 |
|
|
|
0.33 |
|
F - 21