LaCrosse Footwear Inc. reported consolidated net sales of $29.7 million for the fourth quarter of 2005, up 4% from $28.7 million in the fourth quarter of 2004. Sales in 2004 included General Services Administration (GSA) delivery orders for uniform boots, which was not part of an ongoing contract, and the former PVC boot line (PVC). Excluding sales of $2.2 million from GSA delivery orders and $0.3 million from PVC in the fourth quarter of 2004, consolidated net sales grew 14% year-over-year in the same period of 2005. For the full year 2005, net sales were $99.4 million, compared to $105.5 million in 2004. Excluding sales of $9.8 million from GSA delivery orders and $5.1 million from PVC in the full year 2004, consolidated net sales grew 10% during 2005.
Sales to the outdoor market were $14.2 million for the fourth quarter and $48.9 million for the full year of 2005, up 9% from $13.0 million and $44.8 million, respectively, for the same periods of 2004. The growth in outdoor sales primarily reflects the Company's successful introduction of innovative products and continued penetration into the hunting boot market.
Sales to the work market were $15.5 million for the fourth quarter and $50.4 million for the full year of 2005, compared to $15.7 million and $60.7 million, respectively, for the same periods of 2004. Excluding the GSA and PVC sales, work sales grew 18% and 10%, respectively, for the fourth quarter and the full year of 2005. The growth in work sales primarily reflects the successful introduction of innovative products and continued penetration into the general work and uniform boot markets.
The company has continued to improve its gross margins, which were 36.6% of consolidated net sales in the fourth quarter of 2005, up from 36.1% in the same period of 2004. For the full year 2005, gross margins were 36.6%, up from 33.8% in 2004. The margin improvement was primarily due to the Company's strategic departure from lower margin products, such as the PVC boot line, along with increased sales of higher-margin products.
Operating expenses for the fourth quarter of 2005 were $7.5 million, down 3% from the same period in 2004. Operating expenses for the full year of 2005 were down 1% from 2004. The operating expense reduction in 2005 was a result of reduced total incentive compensation of $0.9 million and a decrease of $0.5 million of expense associated with the Claremont, New Hampshire facility, which ceased operations in 2004. This decrease was primarily offset by increased compensation costs for product development and sales.
Income before taxes was $3.3 million in the fourth quarter of 2005, up 27% from $2.6 million in the same period of 2004. For the full year 2005, income before taxes was $8.3 million, up 15% from $7.2 million in 2004.
Net income was $2.0 million or 33 cents per common share in the fourth quarter of 2005, compared to $2.2 million or 37 cents per common share in the same period of 2004. For the full year 2005, net income was $5.2 million or 85 cents per common share, compared to $7.0 million or $1.15 per common share in 2004. Results in the fourth quarter and full year 2005 included an income tax expense of $1.2 million and $3.1 million, respectively, compared to an income tax expense of $0.3 million in the same periods of 2004, due to the use of federal net operating loss carryforwards, which were fully utilized during 2004.
In 2006 the company is required to adopt Statement of Financial Accounting Standards (“SFAS”) No. 123R, Share-Based Payment. Although the Company has not completed its evaluation of the impact SFAS 123R will have on its future financial statements, the Company estimates the impact on 2006 operations will be an expense ranging from $.05 to $.07 per common share, after tax. This estimate is subject to change as the actual future expense under SFAS 123R is dependent upon many factors, including the number of stock options granted in the future as well as their related terms. If the Company had applied this new standard in 2005, net income per common share in 2005 would have been reduced by $.05 per common share.
Inventory was $24.9 million at the end of 2005, up from $17.0 million at the end of 2004, but down from $32.4 million at the end of the third quarter of 2005. The year-over-year inventory increase was a result of bringing innovative new products to market, reducing customer service response times and taking a strong position with core products to capture growth. The sequential reduction in inventory during the fourth quarter resulted from strong sales and bringing inventory levels in line with expected seasonal demand for the first half of the year.
“We are pleased with our sales and earnings performance in our core work and outdoor business for the fourth quarter and the year,” said Joseph P. Schneider, CEO of LaCrosse Footwear. “During the quarter, we continued to increase our brand equity and capture market share in both the work and outdoor footwear markets. Throughout 2005, we made good progress in leveraging our investment in innovative boot technology, introducing a broader selection of more compelling, high-performance footwear and extending our powerful brands into new product categories. We also strengthened our sales and marketing efforts and significantly enhanced our customer service and overall operating efficiencies.”
“Moving into 2006, we are very encouraged by our customers' interest in our new spring and fall product lines. We also believe that our investment in the new distribution facility, anticipated to be operational by mid-year, will help us continue to improve our customer responsiveness and manage our growth. Going forward, we plan to continue to focus on the fundamentals of our business: extending our strong brands across a broader premium-quality product offering; infusing innovative technology across multiple product categories; increasing brand equity through intensified marketing in specialized work and outdoor markets; strengthening our nationwide and international distribution channels; and continuously enhancing customer service. We are excited about our opportunities for growth in 2006 and beyond.”
LaCrosse Footwear, Inc. SELECTED FINANCIAL DATA (Amounts in thousands, except per share amounts) Condensed Consolidated Statements of Operations (unaudited) Quarter Ended Year Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2005 2004 2005 2004 Net sales $29,739 $28,660 $99,378 $105,470 Cost of goods sold 18,844 18,324 63,032 69,822 Gross profit 10,895 10,336 36,346 35,648 Operating expenses 7,543 7,735 27,737 28,008 Operating income 3,352 2,601 8,609 7,640 Non-operating expenses, net (68) (47) (311) (398) Income before income taxes 3,284 2,554 8,298 7,242 Income tax expense 1,239 331 3,064 269 Net income $2,045 $2,223 $5,234 $6,973 Net income per common share, basic $0.34 $0.38 $0.88 $1.18 Net income per common share, diluted $0.33 $0.37 $0.85 $1.15 Weighted average shares outstanding: Basic 5,984 5,903 5,954 5,891 Diluted 6,172 6,090 6,166 6,070 Supplemental Information - Unaudited Work Market Sales $15,501 $15,651 $50,436 $60,660 Outdoor Market Sales 14,238 13,009 48,942 44,810 $29,739 $28,660 $99,378 $105,470 GSA Delivery Order Sales $-- $2,195 $-- $9,759 Discontinued PVC Boot Line Sales $-- $326 $71 $5,108