##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 1, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from  to
 Commission File Number 0-238001
 LaCrosse Footwear, Inc.
  Wisconsin
    
    39-1446816(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 18550 NE Riverside Parkway
Portland, Oregon 97230
 
  (503) 766-1010
 
  þ o
 o o þ
 o þ
  Common Stock, $.01 par value, outstanding as of May 10, 2006: 6,009,591 shares




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##### 



LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
   PagePART I. Financial InformationItem 1. Consolidated Financial StatementsCondensed Consolidated Balance sheets
April 1, 2006 and March 26, 2005 (Unaudited) and December 31, 2005
    
    
    3Unaudited Condensed Consolidated Statements of Operations
for the quarters ended April 1, 2006 and March 26, 2005
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows
for the quarters ended April 1, 2006 and March 26, 2005
    
    
    5Notes to Interim Unaudited Condensed Consolidated
Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II. Other InformationItem 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    19Item 6. Exhibits
    
    
    20Signatures
    
    
    21Exhibit Index
    
    
    22EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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PART
I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
 
  April 1,
    
    
    December 31,
    
    
    March 26,(in thousands, except share and per share data)
    
    2006
    
    
    2005
    
    
    2005(unaudited)
    
    
    
    
    
    
    (unaudited)Assets:Current Assets:Cash and cash equivalents
    
    $
    11,179
    
    
    $
    6,113
    
    
    $
    6,265Trade accounts receivable, net
    
    
    13,721
    
    
    
    16,684
    
    
    
    12,848Inventories (5)
    
    
    20,668
    
    
    
    24,865
    
    
    
    19,239Prepaid expenses and other
    
    
    871
    
    
    
    955
    
    
    
    332Deferred tax assets (6)
    
    
    1,404
    
    
    
    1,351
    
    
    
    1,638Total current assets
    
    
    47,843
    
    
    
    49,968
    
    
    
    40,322Property and equipment, net
    
    
    3,029
    
    
    
    3,047
    
    
    
    3,214Goodwill
    
    
    10,753
    
    
    
    10,753
    
    
    
    10,753Other assets
    
    
    783
    
    
    
    815
    
    
    
    1,488Total assets
    
    $
    62,408
    
    
    $
    64,583
    
    
    $
    55,777Liabilities and
Shareholders Equity:Current Liabilities:Accounts payable
    
    $
    3,335
    
    
    $
    5,402
    
    
    $
    3,132Accrued expenses
    
    
    2,719
    
    
    
    3,521
    
    
    
    2,390Total current liabilities
    
    
    6,054
    
    
    
    8,923
    
    
    
    5,522Compensation and benefits (8)
    
    
    4,022
    
    
    
    4,015
    
    
    
    3,598Deferred tax liabilities (6)
    
    
    1,168
    
    
    
    1,168
    
    
    
    1,049Total liabilities
    
    
    11,244
    
    
    
    14,106
    
    
    
    10,169Shareholders EquityCommon stock, par value $.01 per
share,
authorized 50,000,000 shares;
issued
6,717,627 shares
    
    
    67
    
    
    
    67
    
    
    
    67Additional paid-in capital
    
    
    26,088
    
    
    
    25,987
    
    
    
    26,108Accumulated other comprehensive
loss
    
    
    (1,306
    )
    
    
    (1,306
    )
    
    
    (1,015
    )Retained earnings
    
    
    30,000
    
    
    
    29,608
    
    
    
    24,692Less cost of 708,436, 728,370
and 779,927 shares of treasury
stock
    
    
    (3,685
    )
    
    
    (3,879
    )
    
    
    (4,244
    )Total shareholders equity
    
    
    51,164
    
    
    
    50,477
    
    
    
    45,608Total liabilities and
shareholders equity
    
    $
    62,408
    
    
    $
    64,583
    
    
    $
    55,777
 See notes to the interim unaudited condensed consolidated financial statements.
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LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
 
   Quarter EndedApril 1,
    
    
    March 26,(in thousands, except per share data)
    
    2006
    
    
    2005Net sales
    
    $
    21,401
    
    
    $
    18,866Cost of goods sold
    
    
    13,017
    
    
    
    11,862Gross profit
    
    
    8,384
    
    
    
    7,004Selling, and administrative expenses
    
    
    7,821
    
    
    
    6,453Operating income
    
    
    563
    
    
    
    551Non-operating income (expense):Interest income (expense)
    
    
    50
    
    
    
    (28
    )Miscellaneous
    
    
    
    
    
    
    (26
    )Total non-operating (expense):
    
    
    50
    
    
    
    (54
    )Income before income taxes
    
    
    613
    
    
    
    497Provision for income taxes (6)
    
    
    221
    
    
    
    179Net income
    
    $
    392
    
    
    $
    318Net income per common share:Basic
    
    $
    0.07
    
    
    $
    0.05Diluted
    
    $
    0.06
    
    
    $
    0.05Weighted average number of common shares outstanding:Basic
    
    
    5,998
    
    
    
    5,923Diluted
    
    
    6,182
    
    
    
    6,154
 See notes to the interim unaudited condensed consolidated financial statements.
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LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
 
   Quarter EndedApril 1,
    
    
    March 26,(in thousands)
    
    2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    392
    
    
    $
    318Adjustments to reconcile net income to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    408
    
    
    
    308Stock-based compensation
    
    
    165
    
    
    
    Deferred income taxes
    
    
    (53
    )
    
    
    179Changes in assets and liabilities:Trade accounts receivable
    
    
    2,963
    
    
    
    2,765Inventories
    
    
    4,197
    
    
    
    (2,277
    )Accounts payable
    
    
    (2,067
    )
    
    
    (216
    )Accrued expenses and other
    
    
    (707
    )
    
    
    (1,609
    )Net cash provided by (used in) operating activities
    
    
    5,298
    
    
    
    (532
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (362
    )
    
    
    (491
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    130
    
    
    
    139Net increase (decrease) in cash and cash equivalents
    
    
    5,066
    
    
    
    (884
    )Cash and cash equivalents:Beginning of period
    
    
    6,113
    
    
    
    7,149Ending of period
    
    $
    11,179
    
    
    $
    6,265Supplemental information:Cash payments for:Interest
    
    $
    
    
    
    $
    1Income taxes
    
    $
    199
    
    
    $
    300
 See notes to the interim unaudited condensed consolidated financial statements.
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LACROSSE FOOTWEAR, INC. AND SUBSIDIARIES
 
 Notes to Interim Unaudited Condensed Consolidated Financial Statements
for the Quarters Ended April 1, 2006 and March 26, 2005
 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation and Use of Estimates 
    Cash and cash equivalents
 Revenue recognition
 Fair value of financial instruments  Disclosures About Fair Value of Financial Instruments
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Trade accounts receivable and allowance for doubtful accounts
  Inventories
 Property and equipment
 Goodwill and other intangible assets
 Recoverability and impairment of intangible assets and other long-lived assets
 Income taxes
 Research and development costs 
 Advertising and promotion
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NOTE 2. PRODUCT WARRANTY
   Quarter Ended(in thousands)
    
    April 1, 2006
    
    
    March 26, 2005Balance, beginning
    
    $
    762
    
    
    $
    846Accruals for products sold
    
    
    518
    
    
    
    473Costs incurred
    
    
    (520
    )
    
    
    (464
    )Balance, ending
    
    $
    760
    
    
    $
    855
 NOTE 3. NET INCOME PER COMMON SHARE
   Quarter Ended(in thousands)
    
    April 1, 2006
    
    March 26, 2005Basic weighted average shares outstanding
    
    5,998
    
5,923Diluted securities:Stock options
    
184
    
231Diluted weighted average shares outstanding
    
6,182
    
    
    6,154
 NOTE 4. STOCK-BASED COMPENSATION
 Share-Based Payment: an amendment of FASB
Statements No. 123,
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Quarter ended(in thousands, except for share data)
    
    March 26, 2005Net income as reported
    
    $
    318Deduct: Total stock-based employee compensation expense determined under the
fair value based method for all awards, net of the related tax effects
    
    
    (116
    )Pro forma net income
    
    $
    202Net income per common share:Basic  as reported
    
    $
    0.05Diluted  as reported
    
    $
    0.05Basic  pro forma
    
    $
    0.03Diluted  pro forma
    
    $
    0.03
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Weighted-
    
    Weighted-Average
    
    AverageNumber of
    
    Exercise
    
    RemainingShares
    
    Price
    
    Contract LifeOutstanding options at beginning of period
    
    
    650,798
    
    
    $
    7.01Granted
    
    
    178,200
    
    
    
    10.71Exercised
    
    
    (19,934
    )
    
    
    4.12Canceled
    
    
    (19,500
    )
    
    
    9.63Outstanding options at end of period
    
    
    789,564
    
    
    $
    7.85
    
    
    7.24 Yrs.Outstanding exercisable at end of period
    
    
    291,847
    
    
    $
    5.69
    
    
    6.35 Yrs.
   Number ofSharesNonvested stock options at beginning of period
    
    
    455,643Vested
    
    
    (116,626
    )Canceled
    
    
    (19,500
    )Granted
    
    
    178,200Nonvested stock options at end of period
    
    
    497,717
  NOTE 5. INVENTORIES
  April 1,
    
    
    December 31,
    
    
    March 26,(in thousands)
    
    2006
    
    
    2005
    
    
    2005Raw materials
    
    $
    1,413
    
    
    $
    1,218
    
    
    $
    2,038Work in process
    
    
    153
    
    
    
    145
    
    
    
    211Finished goods
    
    
    19,816
    
    
    
    24,220
    
    
    
    18,160Subtotal
    
    
    21,382
    
    
    
    25,583
    
    
    
    20,409Less: provision for slow-moving inventory
    
    
    (714
    )
    
    
    (718
    )
    
    
    (1,170
    )Total
    
    $
    20,668
    
    
    $
    24,865
    
    
    $
    19,239
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NOTE 6. INCOME TAXES
   NOTE 7. SOURCING REALIGNMENT AND FACILITY SHUTDOWN CHARGE
   Balance
    
    
    
    
    
    Payments or
    
    BalanceDecember 31,
    
    New
    
    Reserves
    
    April 1,( in thousands)
    
    2005
    
    Charges
    
    Used
    
    2006Racine Facility Shut-down
    
    $
    85
    
    
    $
    
    
    
    $
    53
    
    
    $
    32
 NOTE 8. COMPENSATION AND BENEFIT AGREEMENTS
   Pension Benefits
    
    Other BenefitsQuarter Ended
    
    Quarter endedApril 1,
    
    March 26,
    
    April 1,
    
    March 26,(in thousands)
    
    2006
    
    2005
    
    2006
    
    2005Cost recognized during the quarter:Interest cost
    
    $
    242
    
    
    $
    243
    
    
    $
    4
    
    
    $
    4Expected return on plan assets
    
    
    (235
    )
    
    
    (244
    )
    
    
    
    
    
    
    Amortization of prior loss
    
    
    13
    
    
    
    1
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    Net period cost
    
    $
    24
    
    
    $
    4
    
    
    $
    4
    
    
    $
    4
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NOTE 9. RECENTLY ISSUED ACCOUNTING STANDARDS
 Accounting for Asset Retirement Obligations
 Inventory Costs  an amendment of ARB No.
43, Chapter 4, .
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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
  
    
    Concentration of credit risk as our retail channel customers continue to consolidate and
fund expansion of store growth.
    
    Difficulties with accurate forecasting and controlling inventory levels, particularly
for foreign sourced products with longer manufacturing lead times.
    
    Potential problems or delays associated with the manufacture, transportation and
delivery of foreign-sourced products.
    
    Weather and its impact on the demand for outdoor footwear.
    
    General domestic economic conditions, including interest rates and foreign currency exchange rates.
    
    Consumer confidence and related demand for footwear, including work and outdoor footwear.
    
    Reliance on foreign-sourced products and concentrations of currency, labor, and
political risks, primarily in China.
    
    Restrictions imposed under United States and/or foreign trading rules, regulations and
policies, including export/import regulations, duties, and regulations affecting
manufacturers and/or importers.
    
    Commodity price increases, including rubber and petroleum, which affect transportation
costs, footwear component costs, and ultimately product costs.
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Overview
       - 14 -




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Results of Operations
  Quarter Ended
    
    Quarter Ended($ in thousands)
    
    April 1, 2006
    
    March 26, 2005
    
    $ Change
    
    % ChangeNet Sales
    
    $
    21,401
    
    
    $
    18,866
    
    
    
    2,535
    
    
    
    13.4Gross Profit
    
    
    8,384
    
    
    
    7,004
    
    
    
    1,380
    
    
    
    19.7Gross Margin %
    
    
    39.2
    %
    
    
    37.1
    %SG&A
    
    
    7,821
    
    
    
    6,453
    
    
    
    1,368
    
    
    
    21.2% of Net Sales
    
    
    36.5
    %
    
    
    34.2
    %Non-Operating Income (Expense)
    
    
    50
    
    
    
    (54
    )
    
    
    104
    
    
    
    (192.6
    )Income Before Income Taxes
    
    
    613
    
    
    
    497
    
    
    
    116
    
    
    
    23.3Income Tax Expense
    
    
    221
    
    
    
    179
    
    
    
    42
    
    
    
    23.5Net Income
    
    
    392
    
    
    
    318
    
    
    
    74
    
    
    
    23.3
 Consolidated Net Sales:
    Gross Profit:
 Selling and Administrative Expenses
 Non-Operating Income (Expense):
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Net Income Before Taxes:
 Income Taxes:
 Net Income:
 LIQUIDITY AND CAPITAL RESOURCES
      - 16 -




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(In Thousands)
 Payments due by periodRemainingContractual Obligations
    
    Total
    
    in 2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    ThereafterOperating leases (1) (2)
    
    $
    11,500
    
    
    $
    1,200
    
    
    $
    1,300
    
    
    $
    1,200
    
    
    $
    1,000
    
    
    $
    1,000
    
    
    $
    5,800Software (3)
    
    
    800
    
    
    
    800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    12,300
    
    
    $
    2,000
    
    
    $
    1,300
    
    
    $
    1,200
    
    
    $
    1,000
    
    
    $
    1,000
    
    
    $
    5,800
 
 (1)
    
    Effective July 1, 2004, the Company entered into an agreement to sublease the
leased facility in Racine, WI. Under the sublease agreement, the Company is
scheduled to receive $0.1 million in 2006.(2)
    
    Approximately 11% of one of the Companys leased warehouses in La Crosse,
WI is currently sublet to a third party through April 2007. The balance of the
facility is used by the Company for warehouse space. Under the sublease agreement,
the Company is scheduled to receive $0.1 million in 2006 and $0.1 million in 2007.(3)
    
    In the first quarter of 2006, the Company entered into contractual
agreements for software totaling $0.8 million.    Other Commercial
    
    Maximum AmountCommitment
    
    Committed
    
    Outstanding at 4/1/06
    
    Date of ExpirationLine of credit (1)
    
    $
    30,000
    
    
    $
    
    
    
    June 2007
 
 (1)
    
    On October 1, 2005, we announced an amendment to our existing credit agreement
with Wells Fargo Bank, National Association. Under the amendment, the maximum
aggregate principal amount of borrowings allowed from January 1 to May 31 was
decreased from $30 million to $17.5 million. The maximum aggregate principal amount
of borrowings allowed from June 1 to December 31 remained $30 million. With the
amendment, this became a straight line of credit and borrowing base limitations were
removed. CRITICAL ACCOUNTING POLICIES AND ESTIMATES
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Revenue Recognition:
 Allowances for Doubtful Accounts, Discounts and Non-Defective Returns:
 Allowance for Slow-Moving Inventory:
 Product Warranty:
 Valuation of Long-Lived and Intangible Assets:
 Stock-Based Compensation: Share- Based Payment
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
   
 ITEM 4. Controls and Procedures
 Evaluation of disclosure controls and procedures
 Changes in internal control over financial reporting
 
 PART
II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
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ITEM 6. Exhibits
  (3.1)
    
    Amendment to Amended and Restated By-Laws. [Incorporated by
Reference to Exhibit 3.1 of LaCrosse Footwear, Inc.s Current Report on Form
8-K filed with the SEC on February 6, 2006](31.1)
    
    Certification of President and Chief Executive Officer pursuant to
Rule13a-14(a) or 15d-14(a) under the Securities Exchange Act of
1934.(31.2)
    
    Certification of Executive Vice President and Chief Financial
Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange
Act of 1934.(32.1)
    
    Certification of the President and Chief Executive Officer pursuant to
18 U.S.C. Section 1350.(32.2)
    
    Certification of the Executive Vice President and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350.
 - 20 -




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SIGNATURES
  LACROSSE
FOOTWEAR, INC.(Registrant)Date: May 15, 2006
    
    
    
    By:
    
    /s/ Joseph P. SchneiderJoseph P. SchneiderPresident and Chief Executive Officer(Principal Executive Officer)Date: May 15, 2006
    
    
    
    By:
    
    /s/ David P. CarlsonDavid P. CarlsonExecutive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer)
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ExhibitNo.
    
    Exhibit Description(3.1)
    
    Amendment to Amended and Restated By-Laws. [Incorporated by
Reference to Exhibit 3.1 of LaCrosse Footwear, Inc.s Current Report on Form
8-K filed with the SEC on February 6, 2006](31.1)
    
    Certification of President and Chief Executive Officer pursuant to
Rule13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.(31.2)
    
    Certification of Executive Vice President and Chief Financial Officer
pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of
1934.(32.1)
    
    Certification of the President and Chief Executive Officer pursuant to
18 U.S.C. Section 1350.(32.2)
    
    Certification of the Executive Vice President and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350.
 - 22 -