LaCrosse’s Q3 Income Climbes on Stronger Margins

LaCrosse Footwear, Inc. third quarter ended September 30, 2006 net sales were $32.8 million, up 6% from $31.0 million in the third quarter of 2005. For the first three quarters of 2006, consolidated net sales were $76.1 million, up 9% from $69.6 million in the same period of 2005.

Net income was $2.5 million or 41 cents per diluted share in the third quarter of 2006, up 3% from $2.5 million or 40 cents per diluted share in the third quarter of 2005. For the first three quarters of 2006, net income was $4.1 million or $0.66 income per diluted share, up 29% from $3.2 million or $0.52 per diluted share in the same period of 2005. The results in 2006 include stock-based compensation expense of $0.1 million or $0.01 per diluted share (net of tax) for the third quarter, and $0.3 million or $0.05 per diluted share (net of tax) for first three quarters.

Sales to the work market were $12.5 million for the third quarter, up 4% from $12.1 million for the same period in 2005. The growth in work sales reflects continued penetration into the general work markets. Sales to the outdoor market were $20.3 million for the third quarter of 2006, up 7% from $18.9 million for the same period in 2005. Growth in the outdoor market primarily reflects the success of innovative products introduced in recent years and continued penetration into the hunting and hiking boot markets.

The Company's gross margin was 38.6% of net sales for the third quarter of 2006, up from 36.7% in the same period of 2005, an increase of 190 basis points. The year-over-year gross margin improvement was the result of recently introduced products with higher margins, coupled with reduced sales discounts and allowances.

LaCrosse's total operating expenses were $8.7 million in the third quarter of 2006, up 19% from $7.4 million in the same period of 2005. The increase primarily reflects expansion of the Company's product development, sourcing and sales teams, increased incentive compensation expense and stock-based compensation expense.

As a result of improved alignment of inventory purchases with actual sales demand, the Company reduced its inventory levels at the end of the third quarter of 2006 by approximately $4.5 million or 14% from the end of the third quarter of 2005. At the end of the third quarter of 2006, LaCrosse had cash and cash equivalents of $2.5 million and zero bank debt, compared to zero cash and cash equivalents and bank debt of $12.6 million at the end of the third quarter of 2005.

“We are pleased with our sales and earnings performance for the third quarter, despite a cautious retail environment in the first half of the quarter,” said Joseph P. Schneider, President and CEO of LaCrosse Footwear. “We continue to increase our brand equity and capture market share in work and outdoor markets that are quality and performance driven. In particular, we were proud to announce during the quarter that the United States Marine Corps awarded us with a contract to supply mountain cold weather boots and we recently announced that the City of Chicago selected our new structural fire boots, which surpassed the rigorous performance standards of one of the largest fire departments in the U.S.”

“In coming periods, we plan to introduce new lines of work apparel for specialized safety markets, reinforcing the tradition of performance and innovation associated with our brands. Over the long term, we remain focused on our target markets where our great products, innovative technology and outstanding customer service create opportunities for sustainable and profitable growth. At the same time, we continue to try to further strengthen our gross margins, inventory management and balance sheet.”

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


                                      Quarter Ended     Three Quarters Ended
                                 Sept. 30,  Sept. 24, Sept. 30, Sept. 24,
                                     2006       2005       2006      2005
    Net sales                      $32,840    $31,021    $76,063   $69,639
    Cost of goods sold              20,171     19,640     46,326    44,188
    Gross profit                    12,669     11,381     29,737    25,451
    Operating expenses               8,736      7,365     24,245    20,194
    Operating income                 3,933      4,016      5,492     5,257
    Non-operating income
     (expense), net                   (20)      (137)        115     (243)
    Income before income taxes       3,913      3,879      5,607     5,014
    Income tax provision             1,365      1,416      1,488     1,825
    Net income                     $ 2,548     $2,463     $4,119    $3,189

    Net income per common
     share, basic                    $0.42      $0.41      $0.68    $ 0.54
    Net income per common
     share, diluted                  $0.41      $0.40      $0.66    $ 0.52

    Weighted average number of
     common shares outstanding:
    Basic                            6,034      5,965      6,017     5,943
    Diluted                          6,223      6,164      6,205     6,154


    Supplemental Information

    Work Market Sales              $12,539    $12,105    $38,647   $34,935
    Outdoor Market Sales            20,301     18,916     37,416    34,704
                                   $32,840    $31,021    $76,063   $69,639