 | | |
 | | |
 | | |
 | | |
| ||
 | | |
 |  | |
LaCrosse Footwear, Inc. (Nasdaq: BOOT) is a leading developer and marketer of branded, premium and innovative footwear for expert work and outdoor users. The Company’s trusted Danner® and LaCrosse® brands are sold through a network of specialty retailers and distributors in the United States, Canada, Europe and Asia. LaCrosse has been successful in increasing its brand equity in niche segments of the work and outdoor footwear markets that are quality and performance driven, which offer opportunities for sustainable and profitable growth over the long term. The Company is executing a growth strategy based on leveraging its powerful brands with technology innovation, compelling marketing initiatives and enhanced customer service. Annual Sales Growth In Millions  For the third quarter of 2009, LaCrosse reported net sales of $40.8 million, up from $40.3 million in the third quarter of 2008. For the first three quarters of 2009, net sales were $96.6 million, up 4% from $92.8 million in the same period of 2008. Annual Net Income In Millions .jpg) Work Footwear Market LaCrosse competes in two market segments of the footwear industry. With total annual sales of approximately $3 billion, the work-related footwear market is much larger than the outdoor market. The Company’s work customers include people employed in law enforcement, transportation, mining, oil and gas, military services and and other occupations that need high-performance and protective footwear as a critical tool for the job. Unlike the outdoor market, the work market has year-around demand. Sales to the work market were $22.1 million for the third quarter of 2009, up 14% from $19.5 million for the same period of 2008. The growth in work sales reflects continued penetration into various branches of the U.S. military.  Outdoor Footwear Market The outdoor footwear market is the smaller segement, with total annual sales of approximately $1 billion. The Company’s outdoor customers include people active in hunting, fishing, camping and other outdoor recreational activities. Outdoor customers are extremely brand conscious and innovation-driven, seeking products that have specific benefits, such as waterproof, ultra-lightweight and other high-tech materials designed for a specialized outdoor activity. This business tends to be quite seasonal, with the strongest sales in the second half of the year. Sales to the outdoor market were $18.7 million for the third quarter of 2009, down from $20.8 million for the same period of 2008, reflecting continued softness in the overall global retail environment.  Strong Brands and Technology One of the Company's biggest assets is its powerful brands. The Danner brand is known nationwide as the "expert's choice" in premium outdoor footwear, with rugged designs that exceed customer expectations for performance and quality, and with classic outdoor heritage and authentic character. Among its target customers, the LaCrosse brand is known throughout the U.S. for high performance in the field and on the job. Designed for durability and reliability, LaCrosse boots are built to satisfy specific end-user needs, such as being protective against water, extreme cold, chemicals or fire, and other harsh environments.   In addition to its strong brands, LaCrosse continues to differentiate its products by incorporating substantive technology into its productsand then migrating that technology across different product categories. In recent years, the Company introduced such technology as its AlphaTM, Quad ComfortTM and TERRA FORCETM platforms, which were first incorporated one product category and later successfully used in others. For 2006, the Company announced its new EXOTM technology, combining exceptional durability with the performance of an athletic shoe. EXO?s pioneering sport-outdoor fusion design replaces a standard shank system with an ultra-light exoskeleton chassis. EXO will initially be featured in uniform boots and later introduced into hunting boots. In coming periods, LaCrosse expects to continue to bring more groundbreaking, performance-oriented technology to the marketplace that clearly differentiates its products.  Leveraging Innovation and Brand Power By competing in the recreational market, LaCrosse is forced to remain highly innovative and continuously work to strengthen brand loyalty for its occupational products. The Company sees strong crossover of brand awareness and sales between recreational customers and occupational customers.  Corporate History and Transformation The Company traces its roots back to 1897, with the founding of La Crosse Rubber Mills, which eventually focused on the manufacture of rubber and vinyl footwear. Located in LaCrosse, Wisconsin, the original company was purchased from the founders in 1982 by a new management group and legally incorporated in Wisconsin in 1983. LaCrosse established a loyal following among Midwestern laborers and outdoorsmen operating in severe cold or wet environments. In 1994, the Company acquired Danner Shoe Manufacturing, a premium maker of leather boots since 1932, which was located in Portland, Oregon since 1936. Danner built a strong reputation among Pacific Northwest loggers, shipyard workers and early outdoor enthusiasts. By the late 1990s, the two brands were associated nationwide with time-honored quality and performance, but the Company was operating at a growing loss and straddled by increasing debt. In recent years, the Company business restructuring has resulted in significantly improved operating efficiencies, as it moved from being a manufacturer to being primarily a developer and marketer: increasing its outsourced production from approximately 50% to 80%; evolving from fixed to variable business model; consolidating its operations and facilities; and dramatically reducing its cost structure. During 2004, LaCrosse continued to trim less profitable parts of its business, including its former PVC boot line and related facility. While the remaining domestic manufacturing facility in Portland, Oregon, provides tremendous flexibility, the Company is positioned for increased low-cost, high-quality sourcing from China. To strengthen both customer responsiveness and product quality, the Company operates an international office in China to oversee its outsourced manufacturing and ensure high quality standards, as well as continue to work to reduce product development lead-times -- a key to remaining competitive in today’s ever-changing marketplace. In line with our long-term strategy to diversify and strengthen our sales channels, the Company recently opened a new European sales office in order to expand its international business. In addition, LaCrosse recently completed a new world-class distribution facility in the Midwest to improve operating efficiencies, increase speed of delivery and better serve its customers. Strong Operating Efficiencies and Balance Sheet For the third quarter of 2009, gross margins were 38.6% of net sales, compared to 39.2% in the same period of 2008. The decrease in gross profit was primarily due to the impact of a greater portion of quarterly revenue coming from military delivery orders. LaCrosse generally moderated its operating expense growth during the third quarter of 2009. Operating expenses were $11.8 million in the third quarter of 2009, up 5% or $0.6 million from the third quarter of 2008. The Company continued to maintain a strong balance sheet with no debt. At the end of the third quarter of 2009, LaCrosse had cash and cash equivalents of $3.5 million. The $3.8 million year-over-year increase in inventory primarily reflects the growth in domestic production for the Company’s expanded military business, as well as increased inventory for the planned build-up of certain core products for anticipated demand during the fall and winter seasons. Growth Strategy LaCrosse's long-term objective is to become the premier work and outdoor footwear company in the world. Management believes LaCrosse Footwear is well positioned to continue to execute its growth strategy:
We caution you that this document contains forward-looking statements within the meaning of the Securities and Exchange Act of 1934. Forward-looking statements are only predictions or statements of our current plans, which we review on a continual basis. Forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement includes phrases such as we "believe," "expect," or other words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward looking statements. Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results or outcomes to differ materially from those currently anticipated. All forward-looking statements may differ from actual results due to, but not limited to: Consumer demand for outdoor footwear; Weather and its impact on the demand for outdoor footwear; Dealer inventory levels; Company inventory levels, including (i) inventory levels required for foreign-sourced product and the related need for accurate forecasting and (ii) the limited ability to resupply dealers for fill-in orders for foreign-sourced product; potential problems associated with the manufacture, transportation and delivery of foreign-sourced product; United States and/or foreign trading rules, regulations and policies, including export/import regulations and regulations affecting manufacturers and/or importers; and General domestic economic conditions, including interest rates and foreign currency exchange rates. You should consider these important factors in evaluating any statement contained in this report and/or made by us or on our behalf. The Company has no obligation to update or revise forward-looking statements to reflect the occurrence of future events or circumstances. |
