LaCrosse Footwear Q3 Net Income Surges 82% on 15% Sales Increase

LaCrosse Footwear, Inc. reported consolidated net sales of $34.5 million for the third quarter ended September 25, 2004, up 15% from $29.9 in the third quarter of 2003. For the first three quarters of 2004, net sales were $76.8 million, up 12% from $68.4 million in the same period of 2003.

Consolidated net income was $3.9 million, or 64 cents per share, in the third quarter of 2004, up 82% from $2.1 million, or 36 cents per share, in the third quarter of 2003. For the first three quarters of 2004, consolidated net income was $4.8 million, or $0.78 per share, up 218% from $1.5 million, or $0.25 per share, in the same period of 2003.

The Company has successfully increased sales of both its occupational and recreational footwear. LaCrosse has also benefited from the occupational market's year-around demand to partially offset the seasonality of its recreational sales, which are usually stronger in the second half of the year. Occupational sales were $15.8 million for the third quarter and $45.0 million for the first three quarters of 2004, up from $11.6 million and $37.4 million, respectively, for the same periods in 2003. The growth in occupational sales spanned multiple product categories, including boots for public safety, general work and firefighting. The Government Services Administration (GSA) delivery orders for military boots contributed $2.8 million to sales for the third quarter and $7.5 million for the first three quarters of 2004, with a remaining balance of $2.2 million expected to be shipped in the fourth quarter. Recreational sales were $18.7 million for the third quarter and $31.8 million for the first three quarters of 2004, up from $18.3 million and $31.0 million, respectively, for the same periods in 2003.

The Company continued to improve its overall gross margin, which was 35.1% of net sales for the third quarter of 2004, up from 31.4% for the same period of 2003, an increase of 370 basis points. The continued margin improvement reflects the increased sales of the Company's new, higher margin products and improved factory utilization due to the GSA order. Excluding a charge of $0.9 million related to the sale of its PVC boot line and closure of its Claremont, New Hampshire manufacturing facility, selling and administrative expenses increased 5% from the third quarter of 2003, due primarily to an increase in employee incentive compensation. Because of continued improvements in systems, forecasting and management processes, the Company also lowered its inventory by $5.7 million from the third quarter of 2003.

“We are pleased with our growth in sales, gross margins and earnings in the third quarter, which is usually our strongest period in the year,” said Joseph P. Schneider, President and CEO of LaCrosse Footwear, Inc. “During the quarter, we continued our strategic transition away from low-priced footwear, increased our penetration into targeted segments of the occupational market and reinforced our position in recreational markets with the success of our new products. Our growth strategy continues to focus on leveraging our powerful brands with technology innovation, compelling marketing initiatives and enhanced customer service. We also remain committed to improving gross margins, increasing profitability and strengthening our balance sheet. We are excited about our progress and our opportunities for long-term revenue growth.”

During the third quarter of 2004, the Company utilized its remaining federal net operating loss carryforwards. As a result, beginning in the fourth quarter of 2004, the Company expects to present income tax expense on future earnings.

                         LaCrosse Footwear, Inc.
                         SELECTED FINANCIAL DATA
             (Amounts in thousands, except per share amounts)

  Condensed Consolidated
   Statements of
   Operations
                             Quarter Ended         Three Quarters Ended
                              (Unaudited)              (Unaudited)
                         Sept. 25,    Sept. 27,   Sept. 25,     Sept. 27,
                           2004          2003        2004         2003
  Net sales              $34,484      $29,900      $76,810      $68,362
  Cost of goods sold      22,375       20,509       51,498       47,378
  Gross profit            12,109        9,391       25,312       20,984
  Selling and
   administrative
   expenses                8,219        6,979       20,273       18,718
  Operating income         3,890        2,412        5,039        2,266
  Non-operating
   expenses, net             (60)        (272)        (351)        (771)
  Income before
   income tax benefit      3,830        2,140        4,688        1,495
  Income tax benefit         (62)          --          (62)          --
  Net income              $3,892       $2,140       $4,750       $1,495
  Net income
   per common share,
   basic                   $0.66        $0.36        $0.81        $0.25
  Net income per
   common share,
   diluted                 $0.64        $0.36        $0.78        $0.25