LaCrosse Sees Q1 Sales Fall on Less Military Business

LaCrosse reported consolidated net sales of $18.9 million For the first quarter of 2005, a decline of 20.3% compared to $23.7 million in the first quarter of 2004. Sales for the first quarter of 2004 included $4.3 million from General Services Administration (GSA) delivery orders to the United States Military and $1.7 million from the discontinued PVC boot line.

Consolidated net income was $0.3 million or 5 cents per common share in the first quarter of 2005, compared to $1.1 million or 18 cents per common share in the first quarter of 2004. Results for the first quarter of 2004 included an expense reduction due to a one-time cash payment of $0.9 million from a former vendor. The results in the first quarter of 2005 include an income tax expense of $0.2 million, compared to zero income tax expense in the first quarter of 2004 due to previously unrecognized federal net operating loss carryforwards, which were fully utilized during fiscal 2004. The reduction in net income also reflects the margins related to the GSA delivery orders in the first quarter of 2004. The company currently expects its effective income tax rate to be approximately 36% in 2005 and approximately 37% in 2006 and beyond.

Sales to the work market were $12.0 million for the first quarter, compared to $17.1 million for the same period in 2004. Work sales in the first quarter of 2004 included the $6.0 million from GSA and PVC sales. In the first quarter of 2005, work sales grew in a number of targeted product categories, including boots for public safety, general work and firefighting. Sales to the outdoor market were $6.9 million for the first quarter of 2005, up 4% from $6.6 million for the same period in 2004. While outdoor sales are typically stronger in the second half of the year, the year-over-year growth in the first quarter of 2005 included stronger penetration into various hunting markets.

The company continued to improve its overall gross margin, which was 37.1% of net sales for the first quarter of 2005, up from 30.5% in the same period of 2004, an increase of 660 basis points. The continued margin improvement reflects the increased sales of the company's new higher-margin products and the strategic discontinuation of the low margin PVC boot line.

LaCrosse's selling and administrative expenses were $6.5 million in the first quarter of 2005, compared to $6.0 million in the same period of 2004. The selling and administrative expenses for the first quarter of 2004 were reduced due to the one-time cash payment of $0.9 million from a former vendor. As a result of its continued profitability, LaCrosse had cash and cash equivalents of $6.3 million and no outstanding bank debt at the end of first quarter of 2005, significantly improved from zero cash and funded debt of $4.7 million at the end of first quarter of 2004.

“We are pleased with the sales and earnings growth in our core work and outdoor business, continued gross margin improvement and stronger balance sheet in the first quarter,” said Joseph P. Schneider, CEO of LaCrosse Footwear. “During the quarter, we continued to increase our brand equity in both the work and outdoor footwear markets and prepared for the roll out of an exciting Fall line. Our new products underscore LaCrosse's strategic focus on penetrating deeper into targeted occupational and recreational markets and continue to raise the bar on performance, innovation and quality.

“In order to execute our long-term growth strategy, we have recently taken some important steps to strengthen our organization. We have added terrific people, who have a variety of business and footwear industry experience, to our management team. We have also integrated our nationwide sales, marketing and customer services teams to get closer to our customers, enhance our targeted marketing efforts and extend our distribution into specific work and uniform market opportunities.”

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

                                                             Quarter Ended
                                                          March 26,  March 27,
                                                             2005      2004

    Net sales                                              $18,866    $23,726
    Cost of goods sold                                      11,862     16,493
    Gross profit                                             7,004      7,233
    Operating expenses                                       6,453      5,997
    Operating income                                           551      1,236
    Non-operating expenses, net                                 54        141
    Income before income taxes                                 497      1,095
    Income tax expense                                         179         --
    Net income                                                $318     $1,095

    Net income per common share, basic                       $0.05      $0.19
    Net income per common share, diluted                     $0.05      $0.18

    Weighted average shares outstanding:
    Basic                                                    5,923      5,879
    Diluted                                                  6,154      6,066

    Supplemental Information
    Work Sales                                             $12,002    $17,141
    Outdoor Sales                                           $6,864     $6,585
                                                           $18,866    $23,726

    GSA Delivery Order Sales                                   $--     $4,267
    Discontinued PVC Boot Line Sales                           $71     $1,735