LaCrosse Footwear Sees Outdoor Sales Up 5%

For the second quarter of 2006, LaCrosse Footwear, Inc. posted net sales of $21.8 million, an increase of 10% from $19.8 million for the same period last year. For the first half of 2006, consolidated net sales were $43.2 million, up 12% from $38.6 million in the same period of 2005. Approximately 4% of the revenue and expenses in the first half of 2006 can be attributed to five more business days (in the first quarter) than in the first half of 2005, due to the nature of the company’s reporting calendar.

Net income was $1.2 million or 19 cents per diluted share in the second quarter of 2006, up 189% from $0.4 million or 7 cents per diluted share in the same quarter last year. Results for the second quarter of 2006 include an income tax benefit for research and development of approximately $0.5 million or 8 cents per diluted share. For the first half of 2006, net income was $1.6 million, or 25 cents income per diluted share, up 116% from $0.7 million or 12 cents per diluted share in the same period of 2005.

Sales to the work market were $12.5 million for the second quarter, up 15% from $10.8 million for the same period in 2005. The year-over-year growth in work sales primarily reflects the success of the company’s new products and continued penetration into the general work, public safety and fire boot markets. Sales to the outdoor market were $9.4 million for the second quarter of 2006, up 5% from $8.9 million for the same period in 2005. The year-over-year growth in outdoor sales is mostly due to new products and continued penetration into the hunting and hiking boot markets.

The company continued to improve its overall gross margin, which was a record 39.8% of net sales for the second quarter of 2006, up from 35.8% in the same period of 2005, an increase of 400 basis points. The continued margin improvement in the second quarter was the result of a reduction in closeout sales, higher margins on new product sales, and fewer returns and allowances. LaCrosse’s total operating expenses were $7.7 million in the second quarter of 2006, up 21% from $6.4 million in the same period of 2005. The increase primarily reflects expansion of the Company’s product development and sales teams and related commissions. The second quarter 2006 operating expenses also include stock-based compensation expense of $0.1 million or approximately 1 penny per diluted share after tax.

As a result of strong demand for its products and execution of its inventory management plan, the Company reduced inventory levels by approximately $1.1 million or 4% from the end of 2005. At the end of the second quarter of 2006, LaCrosse had cash and cash equivalents of $11.6 million, up 89% from $6.1 million at the end of 2005.

“We are very pleased with our sales and earnings performance for the second quarter,” said Joseph P. Schneider, CEO of LaCrosse Footwear. “We continued to increase our brand equity and capture market share in both our work and outdoor businesses. We improved our gross margin, more effectively managed our inventory and further strengthened our balance sheet. The customer response to our new products, including our new work and outdoor socks, has been excellent. We continue to make good progress in markets that are quality and performance driven, where our great products and outstanding customer service create opportunities for sustainable and profitable growth over the long term.”

“During the quarter, we strengthened our national sales team and improved our presence in a number of specific regions and target markets where we want to gain market share. Together with RealTree(TM), a leader in camouflage patterns, we commenced an exciting integrated marketing program with TV commercials, promotional contests and point-of-purchase advertising for our new LaCrosse-branded, leather hunting boots. We also successfully completed our move into the new distribution facility, which will help us maintain strong customer responsiveness and manage our growth.”

                           LaCrosse Footwear, Inc.
               Condensed Consolidated Statements of Operations
               (Amounts in thousands, except per share amounts)
                                 (Unaudited)

                                                               First Half
                                            Quarter Ended      Year Ended
                                           July 1, June 25,  July 1, June 25,
                                            2006     2005     2006     2005
    Net sales                              $21,822  $19,752  $43,223  $38,618
    Cost of goods sold                      13,138   12,686   26,155   24,548
    Gross profit                             8,684    7,066   17,068   14,070
    Operating expenses                       7,688    6,376   15,509   12,829
    Operating income                           996      690    1,559    1,241
    Non-operating income (expense), net         85      (52)     135     (106)
    Income before income taxes               1,081      638    1,694    1,135
    Income tax (benefit) provision             (98)     230      123      409
    Net income                              $1,179     $408   $1,571     $726

    Net income per common share, basic       $0.20    $0.07    $0.26    $0.12
    Net income per common share, diluted     $0.19    $0.07    $0.25    $0.12

    Weighted average shares outstanding:
    Basic                                    6,020    5,941    6,009    5,932
    Diluted                                  6,213    6,145    6,196    6,150

    Supplemental Information

    Work Market Sales                      $12,463  $10,840  $26,108  $22,842
    Outdoor Market Sales                     9,359    8,912   17,115   15,776
                                           $21,822  $19,752  $43,223  $38,618