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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31,
2004oro
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the transition period from to
 Commission file number: 0-238001 LaCrosse Footwear, Inc. (Exact name of registrant as specified in its charter)
 Wisconsin
(State or other jurisdiction
of incorporation or organization) 39-1446816
 18550 NE Riverside Parkway  Portland, Oregon
 97230
 Registrants telephone number, including area code: (503) 766-1010 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of Class
Common Stock, $.01 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ  No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
22b-2 of the Act).
Yes o  No þ Aggregate market value of the voting and non-voting common equity held by nonaffiliates of the
registrant at June 25, 2004: $32,751,078. Number of shares of the registrants common stock outstanding at March 2, 2005: 5,934,280 shares.




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DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for 2005 Annual Meeting of Shareholders (to be filed with the
Commission under Regulation 14A within 120 days after the end of the registrants fiscal year and,
upon such filing, to be incorporated by reference into Part III). -2-




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TABLE OF CONTENTS PagePART IITEM 1.
    
    BUSINESS
    
    
    1ITEM 2.
    
    PROPERTIES
    
    
    9ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    10ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    10PART IIITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
    
    
    10ITEM 6.
    
    SELECTED FINANCIAL DATA
    
    
    11ITEM 7.
    

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    11ITEM 7A.
    

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    19ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    20ITEM 9.
    

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    20ITEM 9A.
    
    CONTROLS AND PROCEDURES
    
    
    21ITEM 9B.
    
    OTHER INFORMATION
    
    
    21PART IIIITEM 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    21ITEM 11.
    
    EXECUTIVE COMPENSATION
    
    
    22ITEM 12.
    

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    22ITEM 13.
    

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    23ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    23PART IVITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    24SIGNATURES
    
    
    27EXHIBITS FILED AS PART OF FORM 10-K
    
    Exhibit IndexFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    F-1 to F-21EXHIBIT 21EXHIBIT 23EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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PART I 
 Item 1.   Business Unless the context requires otherwise, references in this Annual Report to we, us or our
refer collectively to LaCrosse Footwear, Inc. and its subsidiaries. Forward-Looking Statements We caution you that this annual report on Form 10-K contains forward-looking statements within the
meaning of the Securities Exchange Act of 1934. Forward-looking statements are only predictions or
statements of our current plans, which we review on a continual basis. Forward-looking statements
are intended to qualify for the safe harbor from liability established by the Private Securities
Litigation Reform Act of 1995. These forward-looking statements can generally be identified as
such because the context of the statement includes phrases such as we believe, expect, or other
words of similar import. Similarly, statements that describe our future plans, objectives or goals
are also forward looking statements. Such forward-looking statements are subject to certain risks
and uncertainties which could cause actual results or outcomes to differ materially from those
currently anticipated. All forward-looking statements may differ from actual results due to, but
not limited to:  
    Commodity price increases, including rubber and petroleum. Price increases will affect
transportation costs, footwear component costs, and ultimately product costs.
    Consumer confidence and related demand for footwear, including work and outdoor footwear.
    Weather and its impact on the demand for outdoor footwear.
    Dealer inventory levels.
    Company inventory levels, including inventory levels required for foreign-sourced
product and the related need for accurate forecasting and the limited ability to resupply
dealers for fill-in orders for foreign-sourced product.
    Potential problems associated with the manufacture, transportation and delivery of
foreign-sourced product.
    United States and/or foreign trading rules, regulations and policies, including
export/import regulations and regulations affecting manufacturers and/or importers.
    General domestic economic conditions, including interest rates and foreign currency
exchange rates. You should consider these important factors in evaluating any statement contained in this report
and/or made by us or on our behalf. The Company has no obligation to update or revise
forward-looking statements to reflect the occurrence of future events or circumstances. -1-




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General LaCrosse Footwear, Inc. (LaCrosse or the Company) is a leader in the design, development,
marketing and manufacturing of premium quality protective footwear and clothing for the work and
outdoor markets. The Company markets its products primarily under the LACROSSE® and
DANNER® brands through selected distributors and retailers using independent
representatives. LaCrosses products are characterized by innovative, functional design;
durability; performance features; and quality materials. Historically, LaCrosse has produced footwear primarily of rubber, some of which includes leather or
fabric uppers. In March 1994, the Company acquired the business of Danner Shoe Manufacturing Co.
(Danner), a producer of premium quality leather footwear for the work and outdoor markets, which
is sold primarily under the DANNER® brand. Danners legal name was changed to Danner,
Inc. in 2002. To broaden the base of business in the protective clothing area, in May 1996, a
50%-owned subsidiary of the Company purchased the assets of Rainfair, Inc. (Rainfair) of Racine,
Wisconsin. Rainfair designs and markets rainwear, footwear and other protective clothing generally
for the work market, which are sold primarily under the LACROSSE® brand. In January
1998, the Company acquired the remaining 50% of Rainfair that it did not own, thereby making it a
wholly-owned subsidiary (and, subsequently, Rainfair was merged into the Company). In October
2002, the Company changed the name of its Rainfair division to LaCrosse Safety and Industrial. In
1997, the Company acquired the LAKE OF THE WOODS® trade name. LAKE OF THE
WOODS® was a designer, manufacturer and marketer of branded leather footwear for both
the work and outdoor markets. From 1997 to 1999, the Company transitioned the LAKE OF THE
WOODS® product offerings to the LACROSSE® brand where leather boots have
become a significant product offering for the LACROSSE® brand. The Company was incorporated in Wisconsin in 1983 but traces its history to 1897 when La Crosse
Rubber Mills Company was founded. Current management purchased LaCrosses predecessor from the
heirs of the founding family and other shareholders in 1982. Strategy The Companys business strategy is to continue to:  
    build, position and capitalize on the strength of established brands;
    develop innovative products and relevant technologies that will differentiate its
products, footwear and rainwear;
    offer superior customer service; and
    expand and enhance its strong distribution network of sales representatives and retail
and industrial customers. -2-




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Brand Positioning Within the retail channel of distribution, the Company markets footwear and rainwear under the
well-established DANNER® and LACROSSE® brands. The Company also sells
products through the safety and industrial distributor channel principally under the
LACROSSE® brand. Each brand is positioned uniquely in the marketplace to capitalize on
differences in end user expectations for performance, price, and end-use. The DANNER®
brand represents the highest level of performance, with a select line of high quality,
feature-driven leather footwear products at premium prices. The LACROSSE® brand has a
more extensive product line including rubber and leather footwear as well as an extensive line of
rainwear and protective clothing. Products The Companys brand product offering includes these major categories: Rubber Footwear The Companys rubber footwear line is the most extensive of its product categories with product
offerings covering the work and outdoor markets. The Company markets rubber footwear mainly under
the LACROSSE® brand. The product line ranges from low cost rubber products to high
performance, handcrafted rubber products directed to specific work and outdoor market niches. In addition, the Company markets products in rubber bottom, leather/fabric upper footwear for
extreme cold and other high performance applications. A rubber bottom boot with a leather or
fabric upper combines the waterproof qualities and flexibility of rubber footwear with the fit and
support of a laced leather boot. Leather Footwear The Company markets leather footwear under two brand names, DANNER® and
LACROSSE®. The DANNER® products consist of premium quality work and outdoor
boots available in numerous styles, many of which feature the stitch-down manufacturing process,
which provides outstanding support and built-in comfort for the owner. Danner was the first
footwear manufacturer to include a waterproof, breathable GORE-TEX® liner (seam taped
insert) in leather boots, and it continues to include that liner in over 90% of its Danner
products. The LACROSSE® brand markets a line of indoor and outdoor work boots and
hikers appealing to consumers who desire durability and comfort. Rainwear and Protective Clothing Rainwear and footwear are complementary products in many work and outdoor environments. LaCrosse
Safety and Industrial offers a broad line of quality rainwear and protective clothing appealing to
those workers in utility, construction, chemical processing, food processing, and other groups
traditionally purchasing through industrial distributors. While most of the garments are developed
for general workwear, a number are constructed for specific applications such as acid and flame
environments. These products are recognized in the industry for their durability, quality and
heritage. LaCrosse also sells footwear accessories such as liners, wader suspenders and socks. During 2004,
the Company offered approximately 500 styles of footwear and rainwear. -3-




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Overall, sales of work products accounted for approximately 58% of net sales, while sales of
outdoor products accounted for approximately 42% of net sales in 2004. Product Design and Development The Companys product design and development ideas originate within the Company and through
communication with its customers and suppliers based upon perceived customer or consumer needs or
new technological developments in footwear, rainwear and materials. Consumers, sales personnel and
suppliers provide information to the Companys marketing and product development personnel during
the concept, development and testing of new product. New product needs generally can be related to
functional or technical characteristics. The final aesthetics of the product are determined by
marketing and product development personnel, at times in conjunction with outside design
consultants. Once a product design is approved for production, responsibility is shared with
outside sourcing facilities for pattern development and commercialization. Customers, Sales and Distribution The Company markets its brands and associated products through two separate channels of
distribution: retail and industrial. Within the retail market, the LACROSSE® and DANNER® brands are marketed
through independent representative groups. For both brands, some of the independent agents are
multi-line representative groups and some are dedicated to the Companys products. A national
account sales team complements the sales activities for the brands. The Companys industrial products are distributed through the LaCrosse Safety and Industrial
Division using independent representatives and a national account team. The Companys products are sold directly to more than 4,000 accounts, including sporting
goods/outdoor retailers, general merchandise and independent shoe stores, wholesalers, industrial
distributors, catalog operations and the United States government. The Companys customer base is
also diversified as to size and location of customer and markets served. As a result, the Company
is less dependent upon a few customers. However, the recent trend of consolidating retail and
safety and industrial channels into regional, super regional, and national businesses is having an
effect of consolidating the customer base. As consolidation continues, dependency on fewer,
consolidated customers will increase. The Company currently operates five Internet websites for use by consumers and customers. The
primary purpose of the three consumer-oriented websites at this time is to provide product and
Company information, and in the case of the DANNER® and LACROSSE® websites,
to sell product to consumers who choose to purchase direct from the manufacturer. The Company also
operates business-to-business websites, for the DANNER®, LaCrosse Safety and Industrial
and LACROSSE® divisions that provide product ordering capability and critical
information to dealers about the status of pending orders, inventory levels, shipping and other
data. The Company operates two retail outlet stores whose primary purpose is disposal of slow-moving
merchandise and factory seconds. One of these stores is located at the manufacturing facility in
Portland, Oregon. -4-




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The Company also derives royalty income from Danner Japan Ltd., a Japanese company in which the
Company has a 12% ownership interest. Danner Japan Ltd. distributes products in Japan under the
DANNER® brand that are manufactured by others overseas, and products manufactured in the
Portland, Oregon factory. These sales amounts are included in revenues from foreign countries in
our annual report. Advertising and Promotion A majority of the Companys marketing expenditures are for promotional materials, cooperative
advertising and point-of-sale advertising designed to assist dealers and distributors in the sale
of the Companys products. The Company customizes advertising and marketing materials and programs
for each of its brands in each of its distribution channels, which allows it to emphasize those
features of its products that have special appeal to the applicable targeted consumer. The Company advertises and promotes its products through a variety of methods including national
and regional print advertising, public relations, point-of-sale displays, catalogs and packaging,
product licensing agreements and sponsorships, online promotion, and through co-promotion with
dealers. Manufacturing and Sourcing Traditionally, the Company manufactured the majority of its rubber and leather products in its
United States manufacturing facilities. During the last decade, the quality and timeliness of
product provided by offshore sources have improved substantially. This has resulted in consumers
shifting their allegiance from domestically produced product to product that offers the best value
regardless of origin of manufacture. The Company outsourced over 65% of the product it sold in
2004 and 2003 and expects that number to increase over the next few years. A significant portion of the outsourced products are purchased from a limited number of foreign
manufacturers located in the Asian-Pacific region. The Company has established criteria for its
third-party manufacturers in order to monitor product quality and labor practices. Sources of
capacity related to these products are available worldwide and management has identified
alternative sources for these products. The raw materials used in production of the Companys products are quality leather, crude rubber
and oil-based vinyl compounds for protective clothing products. Since these products are all
available on a global basis, the Company has no reason to believe these raw materials will not
continue to be available at competitive prices. The Company, or its contract manufacturers, purchase GORE-TEX® waterproof fabric
directly from W.L. Gore and Associates (Gore), for both the LaCrosse and Danner footwear. Gore
has traditionally been Danners single largest supplier, in terms of dollars spent on raw
materials. Over 90% of Danner styles are GORE-TEX® lined. Agreements with Gore may be
terminated by either party upon 90 days written notice. The Company considers its relationship
with Gore to be good. GORE-TEX® is a registered trademark of W.L. Gore & Associates,
Inc. -5-




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Backlog At December 31, 2004, the Company had unfilled orders from its customers in the amount of
approximately $7.5 million compared to $12.3 million at December 31, 2003. The backlog at December
31, 2003 included a $4.9 million General Services Administration, GSA, delivery order to supply
boots to the U.S. military that the Company fulfilled in the first part of 2004. All orders at
December 31, 2004 are expected to be filled during 2005. Because a major portion of the Companys
orders are placed in January through June for delivery in June through November, the Companys
backlog is lowest during the fourth quarter and peaks during the second quarter. Factors other
than seasonality, such as pending large national account orders or United States government orders,
could have a significant impact on the Companys backlog. Therefore, backlog at any one point in
time may not be indicative of future results. Generally, orders may be cancelled by customers
prior to shipment without penalty. Competition The various categories of the protective footwear, rainwear and protective clothing markets in
which the Company operates are highly competitive. The Company competes with numerous other
manufacturers and distributors, many of whom have substantially greater financial, distribution and
marketing resources than the Company. Because the Company has a broad product line, its
competition varies by product category. The Company has two to three major competitors in most of
its rubber product lines, at least four major competitors in connection with the Companys outdoor
footwear, and at least four major competitors in connection with its work footwear, rainwear and
protective clothing. LaCrosse believes it maintains a competitive position through the strength of its brands; its
attention to quality and the delivery of value; its position as an innovator; its record of
delivering products on a timely basis; its strong customer relationships; and, in some cases, the
breadth of its product line. Some of the Companys competitors compete mainly on the basis of
price. Leather boot manufacturers and suppliers, some of which have strong brand name recognition in the
markets they serve, are the major competitors of the Companys DANNER® and
LACROSSE® leather product line. These competitors manufacture domestically and/or
import products from offshore. Domestically manufactured DANNER® brand products
effectively compete with other domestically produced products, but are generally at a price
disadvantage against lower-cost imported products, because offshore manufacturers generally pay
significantly lower labor costs. Danner focuses on the premium quality, premium price segment of
the market in which product function, design, comfort and quality, continued technological
improvements, brand awareness, timeliness of product delivery and product pricing are all
important. The Company believes, by attention to these factors, that the DANNER®
footwear line has maintained a strong competitive position in its current market niches. For
leather boots, the LACROSSE® brand, sources product from offshore. Therefore, it
competes with other distributors with products sourced from offshore locations. Several rubber boot manufacturers with strong brand recognition in their respective markets are the
major competitors to LACROSSE®, though the Company occupies a favorable niche in the
higher price segments of the work and outdoor rubber boot markets. The Companys history of
supplying quality rubber boots has provided a foundation to compete effectively. Other suppliers
offer similar products, some at lower prices and quality levels, against which the Company must
effectively compete. The -6-




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Company believes that its superior quality products, innovation and design leadership, coupled with
solid delivery and customer support will enable it to effectively compete in this market. Employees As of December 31, 2004, the Company had approximately 300 employees, all located in the United
States. Approximately 20 of the Companys employees at the La Crosse, Wisconsin facility are
represented by the United Steel Workers of America under a four-year collective bargaining
agreement which expires in September 2006. Approximately 150 of the Companys employees at the
Portland, Oregon facility are represented by the United Food & Commercial Workers Union under a
collective bargaining agreement which expires in January 2006. The Company considers its employee
relations to be good. Trademarks and Trade Names; Patents The Company owns United States federal registrations for several of its marks, including
LACROSSE®, DANNER®, RED BALL®, RAINFAIR®, LACROSSE and
stylized Indianhead design that serve as the Companys logo, RAINFAIR and stylized horse design
that serve as Rainfairs logo, FIRETECH®, ICE KING®, ICEMAN®,
AIRTHOTIC®, GAMEMASTER®, TERRA FORCETM, HYPER-DRI®,
CAMOHIDETM, ACADIA®, and RED BALL JETS®. The Company generally
attempts to register a trademark relating to a products name only where the Company intends to
heavily promote the product or where the Company expects to sell the product in large volumes.
However, the Company relies on common law trademark rights for all unregistered brands. The
Company defends its trademarks and trade names against infringement to the fullest extent
practicable under the law. Other than registrations relating to the LACROSSE® and
DANNER® names, the Company does not believe any trademark is material to its business. The Company is not aware of any material conflicts concerning its marks or its use of marks owned
by other companies. The Company owns several patents that improve its competitive position in the marketplace,
including the DANNER BOB® outsole; TERRA FORCETM, a three-shank cement and
stitch-down manufacturing process; and a patent for its AIRTHOTIC® ventilated arch
support that fits under the heel. Seasonality/Working Capital As has traditionally been the case, the Companys sales in 2004 were higher in the last two
quarters of the year than in the first two quarters and, to satisfy shipping requirements, the
Company places orders for sourced product during the first quarter with delivery to the Company
starting in the second quarter. As a result, inventories generally peak early in the third
quarter. The Company expects these trends to continue. The Company has historically financed
operations with cash generated from operations, long-term lending arrangements and short-term
borrowings under a line of credit. The Company requires working capital to support fluctuating
accounts receivable and inventory levels caused by our seasonal business cycle. The Companys
working capital needs are the lowest in the first quarter and highest from August through November
in each year. -7-




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Foreign Operations and Export Sales Other than the Companys 12% equity interest in Danner Japan, Ltd., the Company does not have
foreign operations. International sales accounted for less than 4% of the Companys net sales in
2004. Environmental Matters The Company and the industry in which it competes are subject to environmental laws and regulations
concerning emissions to the air, discharges to waterways and the generation, handling, storage,
transportation, treatment and disposal of waste materials. The Companys policy is to comply with
all applicable environmental, health and safety laws and regulations. These laws and regulations
are constantly evolving and it is difficult to predict accurately the effect they will have on the
Company in the future. Compliance with applicable environmental regulations and controls has not
had, nor are they expected to have in 2005, any material impact on the capital expenditures,
earnings or competitive position of the Company. Where You Can Find More Information We file annual reports, quarterly reports, current reports, proxy statements and other information
with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 as
amended (Exchange Act). You can inspect and copy our reports, proxy statements and other
information filed with the SEC at the offices of the SECs Public Reference Room in Washington,
D.C. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room.
The SEC maintains an Internet site at http://www.sec.gov/ where you can obtain most of our SEC
filings. We also make available, free of charge on our website at www.lacrossefootwearinc.com, our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange
Act as soon as reasonably practicable after they are filed electronically with the SEC. The
information found on our website is not part of this Form 10-K. You can also obtain copies of these
reports by contacting our investor relations department at (800) 654-3517. -8-




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Item 2.Properties The following table sets forth certain information, as of December 31, 2004, relating to the
Companys principal facilities. PropertiesApproximate FloorLocation
    
    Owned or Leased
    
    Area in Square Feet
    
    Principal UsesPortland, OR
    
    Leased(1)
    
    
    55,000
    
    
    Principal sales, marketing
and executive offices and
warehouse spacePortland, OR
    
    Leased(2)
    
    
    36,000
    
    
    Manufacturing operations and retail
outlet storeLa Crosse, WI
    
    Leased(3)
    
    
    212,000
    
    
    Warehouse spaceLa Crosse, WI
    
    Leased(4)
    
    
    230,000
    
    
    Warehouse and distribution
facilityLa Crosse, WI
    
    Leased
    
    
    11,000


    
    
    Retail outlet storeClaremont, NH
    
    Owned
    
    
    150,000
    
    
    Ceased manufacturing in
August 2004. Currently
used for distributionRacine, WI
    
    Leased(5)
    
    
    104,700
    
    
    Sublet through end of lease
   (1)
    
    The lease for this facility expires in 2007.(2)
    
    The lease for this facility expires in March 2009, but the Company has the option to extend
the term for an additional five years.(3)
    
    The lease for this building expires in 2007. Approximately 11% of this building 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 received $0.1 million
in 2004, and is scheduled to receive $0.1 million in 2005, $0.1 million in 2006, and $0.1
million in 2007.(4)
    
    The lease for space in this facility expires in December 2006. The Company may terminate
this lease at any time upon 120 days written notice to the lessor but in no event shall such
notice be given prior to January 2005.(5)
    
    The lease for this facility was entered into in May 1996 and expires in May 2006. At
December 31, 2003, the Company had recorded a liability for the cost of the estimated market
lease rate and length of time needed to sublet the facility. Effective July 1, 2004, the
Company entered into an agreement to sublease this facility. Under the sublease agreement,
the Company received $0.1 million in 2004 and is scheduled to receive $0.2 million in 2005 and
$0.1 million in 2006. -9-




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Based on present plans, management believes that the Companys current facilities will be
adequate to meet the Companys anticipated needs for at least the next two years. 
 Item 3.Legal Proceedings From time to time, we become involved in ordinary, routine or regulatory legal proceedings
incidental to the business. When a loss is deemed probable and reasonably estimable an amount is
recorded in our financial statements. As of March 2, 2005, we were not a party to any material
legal proceeding. 
 Item 4.Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of shareholders during the quarter ended December 31, 2004. 
 PART II 
 Item 5.Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities Price Range of Common Stock The Companys Common Stock is publicly traded on the NASDAQ National Market under the ticker symbol
BOOT. On March 2, 2005, the sale price of our Common Stock was $12.20 per share, as reported on
the NASDAQ National Market. The table below shows the high and low sales prices per share of our
Common Stock as reported by the NASDAQ National Market: 2004
    
    
    2003High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    8.99
    
    
    $
    7.03
    
    
    $
    3.00
    
    
    $
    2.00Second Quarter
    
    
    11.00
    
    
    
    7.10
    
    
    
    3.99
    
    
    
    2.43Third Quarter
    
    
    8.85
    
    
    
    6.03
    
    
    
    5.00
    
    
    
    2.65Fourth Quarter
    
    
    12.39
    
    
    
    6.76
    
    
    
    7.92
    
    
    
    4.38
 As of March 2, 2005, there were approximately 315 shareholders of record and approximately 1,406
beneficial owners of the Companys Common Stock. Dividends The Company did not declare or pay a cash dividend in 2003 or 2004. Future dividend policy and
payments, if any, will depend upon earnings and financial condition of the Company, the Companys
need for funds, any limitations on payments of dividends present in our current or future debt
agreements and other factors. Equity Compensation Plan Information Certain information with respect to the Companys equity compensation plans are contained in Part
III, Item 12 of this Annual Report on Form 10-K. -10-




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Item 6.Selected Financial Data Selected Income Statement DataYear Ended December 31
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000($ in thousands)Net sales
    
    $
    105,470
    
    
    $
    95,687
    
    
    $
    97,785
    
    
    $
    125,301
    
    
    $
    138,161Operating income (loss)
    
    
    7,640
    
    
    
    3,666
    
    
    
    (3,999
    )
    
    
    (5,308
    )
    
    
    (2,126
    )Net income (loss)
    
    
    6,973
    
    
    
    2,630
    
    
    
    (5,086
    )
    
    
    (7,949
    )
    
    
    (4,769
    )
 Selected Balance Sheet DataYear Ended as of December 31
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000($ in thousands)Working capital
    
    $
    34,989
    
    
    $
    25,753
    
    
    $
    25,607
    
    
    $
    27,853
    
    
    $
    27,760Total assets
    
    
    57,788
    
    
    
    55,241
    
    
    
    60,845
    
    
    
    79,925
    
    
    
    97,598Notes payable, bank
    
    
    
    
    
    
    5,319
    
    
    
    8,378
    
    
    
    17,645
    
    
    
    20,840Long-term obligations,
including current maturities
    
    
    
    
    
    
    2,219
    
    
    
    4,432
    
    
    
    6,031
    
    
    
    10,406Shareholders equity
    
    
    45,151
    
    
    
    37,876
    
    
    
    35,089
    
    
    
    41,545
    
    
    
    49,494
 Selected Share DataYear Ended December 31
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Basic earnings (loss) per
common share
    
    $
    1.18
    
    
    $
    0.45
    
    
    $
    (0.87
    )
    
    $
    (1.35
    )
    
    $
    (0.80
    )Diluted earnings (loss) per
common share
    
    $
    1.15
    
    
    $
    0.44
    
    
    $
    (0.87
    )
    
    $
    (1.35
    )
    
    $
    (0.80
    )Dividends per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Basic weighted average shares
outstanding (in thousands)
    
    
    5,891
    
    
    
    5,874
    
    
    
    5,874
    
    
    
    5,874
    
    
    
    5,974Diluted weighted average
shares outstanding (in
thousands)
    
    
    6,070
    
    
    
    5,939
    
    
    
    5,874
    
    
    
    5,874
    
    
    
    5,974
 
 Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following table sets forth selected financial information derived from our consolidated
financial statements. The discussion that follows the table should be read in conjunction with the
consolidated financial statements: -11-




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Year Ended December 31
    
    2004
    
    
    2003
    
    
    2002($ in thousands)Net sales
    
    $
    105,470
    
    
    $
    95,687
    
    
    $
    97,785Cost of goods sold
    
    
    69,822
    
    
    
    66,201
    
    
    
    71,574Gross profit
    
    
    35,648
    
    
    
    29,486
    
    
    
    26,211Gross margin
    
    
    33.8
    %
    
    
    30.8
    %
    
    
    26.8
    %Net income (loss)
    
    
    6,973
    
    
    
    2,630
    
    
    
    (5,086
    )Selling and administrative expenses
    
    
    28,008
    
    
    
    25,820
    
    
    
    30,210Non-operating expense, net
    
    
    398
    
    
    
    1,036
    
    
    
    1,597Income tax expense (benefit)
    
    
    269
    
    
    
    
    
    
    
    (1,538
    )Days sales outstanding
    
    
    53
    
    
    
    46
    
    
    
    55Inventory turns
    
    
    3.4
    
    
    
    2.8
    
    
    
    2.5
 Overview LaCrosse Footwear, Inc. (LaCrosse or the Company) is a leader in the design, development,
marketing and manufacturing of premium quality protective footwear and clothing for the work and
outdoor markets. The Companys products are directed at both the retail consumer channel and the
safety and industrial channel of distribution. Economic indicators that are important to our business include consumer confidence and unemployment
rate trends. Increasing consumer confidence trends improve retail channel product sales, and
increasing employment trends improve safety and industrial channel sales. Operationally, gross margins are an important determining factor in funding marketing, sales and
product development costs, in addition to producing profits. In 2004, margin growth of 300 basis
points, in part, contributed to the Companys ability to achieve improved profitable growth.
Overall, the Company has realized margin improvements of over 700 basis points, as compared to
2002. From a working capital and return on equity standpoint, management of our accounts receivable and
inventory is key. We are focused on improving asset turns as evidenced by our increased inventory
turnover (as measured by cost of goods sold divided by average inventory). Our inventory turns for
2004 improved to 3.4 from 2.8 turns in 2003, or 22%. Without the GSA delivery orders, turns were
3.2 for 2004, an increase of 13%. Due to continued improvements in systems, forecasting and management processes, in 2004 we reduced
inventory by $7.1 million from the end of 2003. As a result of improved profitability and asset
management, operating cash flow for the year was $15.5 million, which allowed us to eliminate our
funded debt and achieve a cash balance of $7.1 million at the end of 2004. Our sales are generally higher in the second half of the year, due to our cold and wet weather
product offerings. We are continuing to augment our offerings with more year-round work products,
as well as spring offerings of outdoor products. Weather, especially in the fall and winter, has
been and will continue to be a contributing factor in our results. -12-




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We principally examine success of products and markets by reviewing the growth of our channels of
distribution and brands. The Company has successfully increased sales of both its work (formerly
called occupational) and outdoor (formerly called recreational) footwear. Work sales were
$60.7 million for the full year 2004, up from $51.9 million in 2003. The growth in work sales for
the year spanned multiple product categories, including boots for public safety, general work and
firefighting. Work sales were led by a $9.8 million increase due to the GSA delivery orders.
Outdoor sales were $44.8 million for the full year 2004, up from $43.8 million in 2003. The growth
in outdoor sales for the year included stronger penetration into the outdoor rugged/casual and
hunting markets. FISCAL 2004 COMPARED TO FISCAL 2003 Net Sales Net sales in 2004 increased $9.8 million, or 10.2%, to $105.5 million from $95.7 million in 2003.
The increase in net sales was primarily due to a 16.7% increase in the work channel of LaCrosse
and Danner brand products, which spanned multiple product categories including $11.7 million
related to boots for public safety including $9.8 million of GSA delivery orders. Net sales in the
outdoor channel of LaCrosse and Danner brand products in 2004 increased 2.3% from 2003. We believe
the overall increase is the result of a refocus on profitable sales growth and increasing brand
equity. During 2004 we launched several successful new innovative products. In addition, during
2004, the Company fulfilled two GSA delivery orders to the United States government. GSA delivery
orders are not a core business for the Company. Sales to the GSA accounted for approximately 11%
and 2% of consolidated revenues in fiscal years 2004 and 2003, respectively. No other single
customer provided revenue of 10% or more of consolidated revenues in any of the years presented. Gross Profit Gross profit in 2004 increased $6.2 million, or 20.9%, to $35.6 million from $29.5 million in 2003.
As a percent of sales, gross profit improved to 33.8% in 2004, from 30.8% in 2003, an improvement
of 300 basis points. The increase in gross profit as a percent of sales is a reflection of the
increased sales of the Companys new high-margin products and improved factory utilization due to
increased production volume, related to the GSA delivery orders. Selling and Administrative Expenses Selling and administrative expenses increased $2.2 million, or 8.5%, to $28.0 million from $25.8
million in 2003. However, as a percent of sales, selling and administration remained consistent at
27%. The dollar increase is primarily due to charges for compensation, marketing, and selling
expenses related to increased sales volumes and profitability. Non-operating Expenses Non-operating expenses in 2004 decreased $0.6 million, or 61.6%, to $0.4 million from $1.0 million
in 2003. The decrease was primarily the result of lower interest expense from $1.1 million in 2003
to $0.5 million in 2004, due to lower average borrowings and lower interest rates. At the end of
2004, the Company had no outstanding borrowing, under its line of credit. -13-




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Income Taxes During 2003, all of the Companys taxable income was offset by available net operating loss (NOL)
carryforwards. At December 31, 2003, The Company had recorded a $3.6 million valuation allowance
against its deferred tax assets due to the uncertainty of the realization and timing of the
benefits from those deferred tax assets, as the Company had not achieved a sustained level of
profitability. During 2004, management concluded that the Company had attained a sufficient level
of sustained annual profitability to allow the valuation allowance to be reduced to reflect
managements estimate of the amount of deferred tax assets that will be realized in the near term.
Additionally, the valuation allowance was further reduced by approximately $0.4 million associated
with the estimated income tax benefit relative to the minimum pension liability recorded in equity,
which had no effect on net income. Considering the projected levels of future income as well as
the nature of the net deferred tax assets, management has now concluded that the deferred assets
are fully realizable except for the deferred tax asset that relates to the majority of the
Companys state NOL carryforwards. The realization of these state NOL carryforwards is dependent
upon yet to be developed tax strategies as well as having taxable income in years well into the
future. In future periods of earnings, the Company will report income tax expense at statutory
rates offset by any further reductions in the valuation allowance based on an ongoing assessment of
the future realization of the state NOL deferred tax assets. Direct Charge To Equity In 2002, the Company recorded a $1.4 million charge directly to equity as a result of recognizing
the minimum pension liability. In 2003, this charge was reduced by $0.2 million to $1.2 million.
In 2004, the charge to equity decreased $0.2 million for an additional minimum pension liability
charge of $0.2 million offset by an income tax benefit of $0.4 million. The charge is necessary
when the accumulated benefit obligation is in excess of the sums of the respective plan assets and
accrued pension liabilities. See Note 7 to the consolidated financial statements for more
information. Net Income Net income for 2004 increased to $7.0 million or 6.6% of net sales in 2004 from $2.6 million or
2.7% of net sales in 2003. This increase in net income is based primarily on increased net sales,
improved gross margins, and lower interest expense. FISCAL 2003 COMPARED TO FISCAL 2002 Net Sales Net sales in 2003 decreased $2.1 million, or 2.1%, to $95.7 million from $97.8 million in 2002.
The decrease in net sales was due to a 23.9% decrease in the Safety and Industrial channel of
LaCrosse and Rainfair brand products, partially offset by a 13.5% increase in Danner brand products
over 2002. Net sales in the retail channel of LaCrosse brand products in 2003 were essentially
equal to 2002. The overall decrease is the result of a strategic reduction in lower margin sales,
and a reduction in the number of products being offered for sale, particularly in the private label
and mass merchant markets in the Safety and Industrial channel of distribution. -14-




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Gross Profit Gross profit in 2003 increased $3.3 million, or 12.5%, to $29.5 million from $26.2 million in 2002.
As a percent of sales, gross profit improved to 30.8% in 2003, from 26.8% in 2002, an improvement
of 400 basis points. The increase in gross profit as a percent of sales is primarily due to
improvements in our sourcing capabilities, lower manufacturing variances and a reduction in sales
of lower-margin products. Both 2003 and 2002 were favorably impacted by a $0.1 million and $0.4
million reduction in the LIFO inventory reserve, as the manufactured pool of inventory was reduced. Selling and Administrative Expenses Selling and administrative expenses decreased $4.4 million, or 14.5%, to $25.8 million from $30.2
million in 2002. During 2002, we recorded $3.0 million of charges associated with the move of the
corporate headquarters to Portland, Oregon from La Crosse, Wisconsin ($1.9 million) and the move of
the Safety and Industrial division to Portland, Oregon from Racine, Wisconsin ($1.1 million).
Factoring out one-time charges in 2002, the Company decreased selling and administrative expenses
approximately $1.4 million, mainly as a result of the consolidation of company functions from
several facilities to locations in Portland, Oregon and La Crosse, Wisconsin and leveraging
internal systems and operating efficiencies. Non-operating Expenses Non-operating expenses in 2003 decreased $0.6 million, or 35.1%, to $1.0 million from $1.6 million
in 2002. The decrease is primarily the result of lower interest expense, due to lower average
borrowings and lower interest rates. Income Taxes No income tax provision was presented for 2003 due to the utilization of net operating loss
carryforwards and a reduction in the deferred tax asset valuation allowance. The Company had a
valuation allowance on its otherwise recognizable deferred tax assets. During 2002, the Company
recognized an income tax benefit of $1.5 million due to tax provisions enacted as part of the Job
Creation and Worker Assistance Act of 2002. The law extended the loss carryback period for certain
losses from two to five years allowing the Company to carryback certain losses incurred during 2002
to reduce taxable income from 1997 and 1998. As a result, the Company received a tax refund of
approximately $2.9 million during 2003. Direct Charge To Equity During 2002, the Company recorded a $1.4 million charge directly to equity as a result of
recognizing our minimum pension liability. In 2003, the charge to equity was reduced by $0.2
million to $1.2 million. The charge is necessary when the accumulated benefit obligation is in
excess of the sums of the respective plan assets and accrued pension liabilities. See Note 7 to
the consolidated financial statements for more information. -15-




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Net Income Net income for 2003 increased to $2.6 million or 2.7% of net sales in 2003 from a net loss of $5.1
million in 2002. This increase in net income was based primarily on improved gross margins and
decreased selling and administrative expenses. LIQUIDITY AND CAPITAL RESOURCES We have historically funded working capital requirements and capital expenditures with cash
generated from operations and borrowings under a revolving credit agreement or other long-term
lending arrangements. We require working capital to support fluctuating accounts receivable and
inventory levels caused by our seasonal business cycle. Borrowing requirements are generally the
lowest in the first quarter and the highest during the third quarter. On June 1, 2004, we entered into a three-year credit agreement with Wells Fargo Bank, N.A., to
refinance our previous bank revolving line of credit. Amounts borrowed under the agreement are
primarily secured by all of the assets of the Company. Borrowing limits against the line of credit
are the lesser of $30.0 million or agreed upon percentages of qualified receivables and inventory.
We had unused borrowing availability of $18.9 million at December 31, 2004. At our option, the
credit agreement provides for interest rate options of prime rate or LIBOR plus 1.50%. Excess cash
flows from operations are used to pay down the credit agreement. As of December 31, 2004, we had no
outstanding balance under our current line of credit as compared with an outstanding balance of
$5.3 million at December 31, 2003 under our former line of credit agreement. As of December 31,
2004, we were in compliance with all covenants related to our credit agreement. Existing cash
balances, borrowings under the current credit agreement, and cash flows generated from operations
are expected to be sufficient to meet our cash requirements for the next 12 months. Net cash provided by operating activities was $15.5 million in 2004, compared to $6.4 million for
2003. The 2004 sum consisted of net income of $7.0 million, adjusted for non-cash items including
depreciation and amortization totaling $1.5 million, and changes in working capital components,
primarily an increase in accounts receivable of $2.2 million, a decrease in inventory of $7.1
million, and an increase in accounts payable and accrued expenses of $2.0 million. The decrease in
inventory was primarily the result of close-out sales and improved management processes, systems,
and forecasting. The increase in accounts payable and accrued expenses is due mainly to an
increase in compensation expenses. In 2003, the Company earned net income of $2.6 million, adjusted for non-cash items including
depreciation and amortization totaling $1.7 million, and changes in working capital components,
primarily a decrease in accounts receivable of $1.9 million, a decrease in refundable income taxes
of $2.9 million, an increase in inventory of $0.6 million, and a decrease in accounts payable and
accrued expenses of $2.3 million. Net cash used in investing activities was $0.7 million in 2004
compared to $1.1 million during 2003. The majority of the cash used in both years was for capital
expenditures. Net cash used in financing activities was $7.7 million in 2004 compared to $5.3 million in 2003.
During 2004, we repaid $5.3 million of short-term borrowings and $2.2 million of long-term
obligations -16-




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compared to repayments of $3.1 million of short-term borrowings and $2.2 million of long-term
obligations in 2003. At December 31, 2004, the Companys pension plan had accumulated benefit obligations in excess of
the respective plan assets and accrued pension liabilities. This obligation in excess of plan
assets and accrued liabilities has resulted in a cumulative direct charge to equity net of tax of
$1.0 million as of December 31, 2004. A summary of our contractual cash obligations at December 31, 2004 is as follows: (in Thousands)
    
    
    Payments due by period2009 andContractual Obligations
    
    
    Total
    
    
    
    2005
    
    
    
    2006
    
    
    
    2007
    
    
    
    2008
    
    
    
    ThereafterOperating leases (1)(2)
    
    
    $
    3,300
    
    
    
    $
    1,400
    
    
    
    $
    1,000
    
    
    
    $
    600
    
    
    
    $
    200
    
    
    
    $
    100
   (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 received $0.1 million
in 2004 and is scheduled to receive $0.2 million in 2005 and $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 received
$0.1 million in 2004, and is scheduled to receive $0.1 million in 2005, $0.1 million in
2006, and $0.1 million in 2007. We also have a commercial commitment as described below:  (In Thousands)Other Commercial
    
    
    Total AmountCommitment
    
    
    Committed
    
    
    
    Outstanding at 12/31/04
    
    
    
    Date of ExpirationLine of credit
    
    
    $
    30,000
    
    
    
    $
    
    
    
    
    June 2007
 As of December 31, 2004, the Company had a cash balance of $7.1 million. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our significant accounting policies and estimates are summarized in the footnotes to our annual
consolidated financial statements. Some of our accounting policies require management to exercise
significant judgment in selecting the appropriate assumptions for calculating financial estimates.
Such judgments are subject to an inherent degree of uncertainty. These judgments are based on our
historical experience, known trends in our industry, terms of existing contracts and other
information from outside sources, as appropriate. Actual results may differ from these estimates
under different assumptions and conditions. Certain of the most critical policies that require
significant judgment are as follows: Revenue Recognition.We recognize revenue upon shipment of products to our customers. Revenue is
recorded net of estimated discounts and returns. Revenues are recognized when all of the following
criteria are met: when persuasive evidence of an arrangement exists, delivery has occurred, the
selling price is fixed or determinable and collectibility is reasonably assured. -17-




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Allowance for Doubtful Accounts.We establish estimates of the uncollectibility of accounts
receivable. Our management analyzes accounts receivable, historical write-offs as bad debts,
customer concentrations, customer credit-worthiness, current economic trends and changes in
customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. We
maintain an allowance for doubtful accounts at an amount that we estimate to be sufficient to
provide adequate protection against losses resulting from collecting less than full payment on
receivables. A considerable amount of judgment is required when assessing the realizability of
receivables, including assessing the probability of collection and the current credit-worthiness of
each customer. If the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, an additional provision for doubtful accounts may be
required. We have not experienced significant bad debts expense and our reserve for doubtful
accounts of $0.3 million is considered adequate for any exposure to loss in our December 31, 2004
accounts receivable. Product Warranties.We provide a limited warranty for the replacement of defective products. Our
standard warranties require us to repair or replace defective products at no cost to the consumer.
We estimate the costs that may be incurred under our basic limited warranty and record a liability
in the amount of such costs at the time product revenue is recognized. Factors that affect our
warranty liability include the number of units sold, historical and anticipated rates of warranty
claims, and cost per claim. We periodically assess the adequacy of our recorded warranty
liabilities and adjust the amounts as necessary. We utilize historical trends and information
received from customers to assist in determining the appropriate loss reserve levels. We believe
our warranty liability of $0.8 million at December 31, 2004 is considered adequate to cover the
estimated costs we will incur in the future for warranty claims on products sold before December
31, 2004. Pension and Other Postretirement Benefit Plans.The determination of our obligation and expense
for pension and other postretirement benefits is dependent on our selection of certain assumptions
used by actuaries in calculating such amounts. Those assumptions are described in Note 7 to our
annual consolidated financial statements and include, among others, the discount rate and expected
long-term rate of return on plan assets. In accordance with accounting principles generally
accepted in the United States of America, actual results that differ from our assumptions are
accumulated and amortized over future periods and therefore, generally affect our recognized
expense and recorded obligation in such future periods. While we believe that our assumptions are
appropriate, significant differences in our actual experience or significant changes in our
assumptions may materially affect our pension and other postretirement obligations, our future
expense and equity. See also Item 7A in this 10-K for further sensitivity analysis regarding our
estimated pension obligation. Allowance for Slow-Moving Inventory.On a periodic basis, we analyze the level of inventory on
hand, its cost in relation to market value and estimated customer requirements to determine whether
write-downs for slow-moving inventory are required. Actual customer requirements in any future
periods are inherently uncertain and thus may differ from estimates. If actual or expected
requirements were significantly greater or lower than the established reserves, a reduction or
increase to the allowance would be recorded in the period in which such a determination was made.
We have established reserves for slow-moving inventories and believe the reserve of $1.7 million at
December 31, 2004 is adequate. Valuation of Long-Lived and Intangible Assets.As a matter of policy, we review our major assets
for impairment at least annually, and whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Our major long-lived and intangible assets are goodwill and
property and -18-




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equipment. We depreciate our property and equipment over their estimated useful lives. In
assessing the recoverability of our goodwill of $10.8 million related to Danner, Inc. subsidiary
and the investments we have made in our other long-term investments, primarily property and
equipment of $3.6 million, we have made assumptions regarding estimated future cash flows and other
factors to determine the fair value of the respective assets. If these estimates or their related
assumptions change in the future, we may be required to record impairment charges for these assets
not previously recorded. Please refer to the Forward-Looking Statements caption below for a
discussion of factors that will have an effect on our ability to attain future levels of product
sales and cash flows. Deferred Tax Asset Valuation Allowance.Our deferred taxes are reduced by a valuation allowance
when, in our opinion, we believe that it is more likely than not that some portion or all of the
deferred tax assets will not be realized. During 2004, we reduced our valuation allowance to
reflect our estimate of the amount of deferred taxes that will be realized in the near term.
Considering the projected levels of future income as well the net deferred tax assets, we have
concluded that our deferred assets are fully realizable except for the deferred tax asset that
relates to the majority of our state NOL carryforwards. The realization of these state NOL
carryforwards is dependent on yet to be developed tax strategies as well as having taxable income
in years well into the future. In future periods of earnings, we will report income tax expense
computed at statutory rates offset by any further reductions in the valuation allowance based on an
ongoing assessment of the future realization of the state NOL deferred tax assets. Recently Issued Accounting Pronouncements In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment. This statement revises SFAS
No. 123, Accounting for Stock-Based Compensation, and requires companies to expense the value of
employee stock options and similar awards using the fair value method. The effective date of this
standard is interim and annual periods beginning after June 15, 2005. Although management has not
fully analyzed the effect this new statement will have on our consolidated financial statements in
the future, the pro forma net income effect of using the fair value method for the past three
fiscal years is presented in Note 1 to our consolidated financial statements. In November 2004, the FASB issued SFAS No. 151, Inventory Costs,an amendment of ARB No. 43,
Chapter 4. The amendments made by the SFAS No. 151 require that abnormal amounts of idle facility
expense, freight, handling costs and wasted materials (spoilage) be recognized as current-period
charges. This Statement requires the allocation of fixed production overhead to inventory based on
the normal capacity of production facilities. SFAS No. 151 is effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. Management does not believe the
adoption of SFAS No. 151 will have a material effect on our financial position or results of
operations. 
 Item 7A.Quantitative and Qualitative Disclosures About Market Risk Our primary market risk results from fluctuations in interest rates. At our option, the line of
credit interest rate is either the prime rate or the LIBOR rate plus 1.50%. We are exposed to
market risk related to interest rates. Based on average floating rate borrowing of $10.0 million,
a one percent change in the applicable rate would have caused the Companys interest expense to
change by approximately $0.1 million. The Company believes that these amounts are not material to
the earnings of the Company. -19-




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We are also exposed to market risk related to the assumptions we make in estimating our pension
liability. The assumed discount rate used, in part, to calculate the pension plan obligation is
related to the prevailing long-term interest rates. At December 31, 2004, we used an estimated
discount rate of 6.25%. A one-percentage point reduction in the discount rate would result in an
increase in the actuarial present value of projected pension benefits of approximately $2.0 million
at December 31, 2004 with a similar charge to equity. Furthermore, a plus or minus one percent
change (increase or decrease) in the actual rate of return on pension plan assets would affect the
additional minimum pension plan liability by approximately $0.1 million. 
 Item 8.Financial Statements and Supplementary Data The consolidated statements of operations, shareholders equity and comprehensive income (loss),
and cash flows for each of the years in the three-year period ended December 31, 2004, and the
related consolidated balance sheets of the Company as of December 31, 2004 and 2003, together with
the related notes thereto and the Public Accounting Firm appears
on pages F-1 through F-21 hereof. The following tabulation presents the Companys unaudited quarterly results of operations for 2004
and 2003: Thousands of dollars except per share data  2004 Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4Net sales

    $
    23,726
    
    
    $
    18,600
    
    
    $
    34,484
    
    
    $
    28,660Gross profit

    
    7,233
    
    
    
    5,970
    
    
    
    12,109
    
    
    
    10,336Operating income (loss)
    
    
    1,236
    
    
    
    (87
    )
    
    
    3,890
    
    
    
    2,601Net income (loss)
    
    
    1,095
    
    
    
    (237
    )
    
    
    3,892
    
    
    
    2,223Basic earnings (loss) per common share
    
    
    0.19
    
    
    
    (0.04
    )
    
    
    0.66
    
    
    
    0.38Diluted earnings (loss) per common share
    
    
    0.18
    
    
    
    (0.04
    )
    
    
    0.64
    
    
    
    0.37
 Thousands of dollars except per share data  2003 Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4Net sales
    
    $
    19,874
    
    
    $
    18,588
    
    
    $
    29,900
    
    
    $
    27,325Gross profit
    
    
    5,986
    
    
    
    5,607
    
    
    
    9,391
    
    
    
    8,502Operating income (loss)

    
    
    (343
    )
    
    
    197
    
    
    
    2,412
    
    
    
    1,400Net income (loss)
    
    
    (649
    )
    
    
    4
    
    
    
    2,140
    
    
    
    1,135Basic and diluted
earnings (loss) per
common share
    
    
    (0.11
    )
    
    
    
    
    
    
    0.36
    
    
    
    0.19
 
 Item 9.Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure None. -20-




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##### Table of Contents



Item 9A. Controls and Procedures (a) Evaluation of disclosure controls and procedures. In accordance with Rule 13a-15(b) of
the Securities Exchange Act of 1934 (the Exchange Act), as of the end of the period covered by
this Annual Report on Form 10-K, the Companys management evaluated, with the participation of the
Companys President and Chief Executive Officer and Executive Vice President and Chief Financial
Officer, the effectiveness of the design and operation of the Companys disclosure controls and
procedures (as defined in Rule 13a- 15(e) under the Exchange Act). Based upon their evaluation of
these disclosure controls and procedures, the President and Chief Executive Officer and the
Executive Vice President and Chief Financial Officer have concluded that the disclosure controls
and procedures were effective as of the date of such evaluation in ensuring that information
required to be disclosed in the Companys Exchange Act reports is (1) recorded, processed,
summarized and reported in a timely manner, and (2) accumulated and communicated to management,
including the Companys President and Chief Executive Officer and Executive Vice President and
Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. (b) Changes in internal control. There was no change in the Companys internal control over
financial reporting that occurred during the period covered by this Annual Report on Form 10-K that
has materially affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting. 
 Item 9B.Other Information None. 
 PART III 
 Item 10.Directors and Executive Officers of the Registrant The information required by
this Item with respect to executive officers, directors and Section 16 compliance is
included under the captions Election of Directors,
Board of Directors, Executive Compensation, and Section
16(a) Beneficial Ownership Reporting Compliance, respectively, in the Companys definitive Proxy
Statement for its 2005 Annual Meeting of Shareholders (Proxy Statement) and when the Proxy
Statement is filed with the Securities and Exchange Commission will be incorporated herein by
reference. The Company has adopted a Code of Ethics for Senior Financial Officers that covers the principal
executive officer, the principal financial officer and the principal accounting officer. This Code
of Ethics for Senior Financial Officers is posted on the Companys website at
http://www.lacrossefootwearinc.com. If any substantive amendments are made to the Code of Ethics
for Senior Financial Officers or the Board of Directors grants any waiver from a provision of the
Code of Ethics to any of the officers of the Company, then the Company will disclose the nature of
such amendment or waiver on its website at the above address. -21-




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##### Table of Contents



Item 11.Executive Compensation The information required by this Item is included under the captions Board of DirectorsDirector
Compensation and Executive Compensation in the Proxy Statement and when the Proxy Statement is
filed with the Securities and Exchange Commission will be incorporated herein by reference;
provided, however, that the subsection entitled Executive CompensationReport on Executive
Compensation shall not be deemed to be incorporated herein by reference. 
 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters The information required by this Item with respect to Security Ownership of Certain Beneficial
Owners and Management is included under the caption Principal Shareholders in the Proxy Statement
and when the Proxy Statement is filed with the Securities and Exchange Commission will be
incorporated herein by reference. The following table provides information about the Companys equity compensation plans (including
individual compensation arrangements) as of December 31, 2004. Number of securitiesremaining availablefor future issuanceNumber of securities to
    
    
    
    
    
    
    under equitybe issued upon
    
    
    Weighted-average
    
    
    compensation plansthe exercise of
    
    
    exercise price of
    

    
    (excluding securitiesoutstanding options,
    
    
    outstanding options,
    
    
    reflected in the firstPlan category
    
    warrants and rights(1)
    
    
    warrants and rights
    
    
    column)(2)Equity compensation
plans approved by
security holders
    
    
    591,191
    
    
    $
    5.23
    
    
    
    225,560Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    591,191
    
    
    $
    5.23
    
    
    
    225,560
   (1)
    
    Represents options to purchase the Companys Common Stock granted under the Companys 1993
Employee Stock Incentive Plan (the 1993 Plan), 1997 Employee Stock Incentive Plan (the 1997
Plan), 2001 Stock Incentive Plan (the 2001 Plan) and 2001 Non-Employee Director Stock Option Plan
(the Director Plan).(2)
    
    Includes 26,135 shares of the Companys Common Stock available for issuance under the 1997 Plan;
153,425 shares of the Companys Common Stock available for issuance under the 2001 Plan; and 46,000
shares of the Companys Common Stock available for issuance under the Director Plan. -22-




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##### Table of Contents



Item 13.Certain Relationships and Related Transactions The information required by this Item is included under the captions Certain Transactions and
Executive CompensationCompensation Committee Interlocks and Insider Participation in the Proxy
Statement and when the Proxy Statement is filed with the Securities and Exchange Commission will be
incorporated herein by reference. 
 Item 14.Principal Accountant Fees and Services The information required by this Item is included under the caption Miscellaneous-Independent
Auditor Fees in the Proxy Statement and, when the Proxy Statement is filed, will be incorporated
herein by reference. -23-




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##### Table of Contents



PART IV 
 Item 15.Exhibits and Financial Statement Schedules  Financial Statements(a)1. The following financial statements are included in this Annual Report on Form 10-K beginning
on the pages indicated below: Report of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets as of December 31, 2004 and 2003
    
    
    F-2Consolidated Statements of Operations for the Years ended December 31,
2004, 2003 and 2002
    
    
    F-4Consolidated Statements of Shareholders Equity and ComprehensiveIncome (Loss) for the Years ended December 31, 2004, 2003 and 2002
    
    
    F-5Consolidated Statements of Cash Flows for the Years ended December 31,
2004, 2003 and 2002
    
    
    F-6Notes to Consolidated Financial Statements for the Years ended
December 31, 2004, 2003 and 2002
    
    
    F-7
  2.
    Financial Statement ScheduleThe financial statement schedule for the years ended December 31, 2004, 2003 and 2002
is included in this Annual Report on Form 10-K and should be read in conjunction with
the Consolidated Financial Statements. Report of Independent Registered Public Accounting Firm on Financial
Statement Schedule
    
    
    28Schedule II Valuation and Qualifying Accounts
    
    
    29
  All other financial statement schedules are omitted since the required information is
not present or is not present in amounts sufficient to require submission of the
schedules, or because the information required is included in the consolidated
financial statements and notes thereto. -24-




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##### Table of Contents



Exhibits3.
    The following exhibits are filed herewith: Exhibit
    
    
    
    Sequential PageNumber
    
    Exhibit Description
    
    Number(3.1
    )
    
    Restated Articles of
Incorporation of LaCrosse
Footwear, Inc. [Incorporated
by reference to Exhibit (3.0)
to LaCrosse Footwear, Inc.s
Form S-1 Registration
Statement (Registration No.
33-75534)]
    
    (3.2
    )
    
    By-Laws of LaCrosse Footwear,
Inc., as amended to date.
[Incorporated by reference to
Exhibit (3.1) to LaCrosse
Footwear, Inc.s Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2001]
    
    (4.1
    )
    
    Credit Agreement, dated as of
April 15, 2004, by and among
LaCrosse Footwear, Inc. as
borrowers, and Wells Fargo
Bank, National Association,
as lenders. [Incorporated by
reference to Exhibit (4.1) to
LaCrosse Footwear, Inc.s
Quarterly Report on Form 10-Q
for the quarter ended March
27, 2004]
    
    (10.1
    )*
    
    LaCrosse Footwear, Inc. Retirement Plan [Incorporated by
reference to Exhibit (10.18) to LaCrosse Footwear, Inc.s Form
S-1 Registration Statement (Registration No. 33-75534)]
    
    (10.2
    )*
    
    LaCrosse Footwear, Inc. Employees Retirement Savings Plan
[Incorporated by reference to Exhibit (10.19) to LaCrosse
Footwear, Inc.s Form S-1 Registration Statement (Registration
No. 33-75534)]
    
    (10.3
    )*
    
    LaCrosse Footwear, Inc. 1993 Employee Stock Incentive Plan
[Incorporated by reference to Exhibit (10.20) to LaCrosse
Footwear, Inc.s Form S-1 Registration Statement (Registration
No. 33-75534)]
    
    (10.4
    )*
    
    LaCrosse Footwear, Inc. 1997 Employee Stock Incentive Plan
[Incorporated by reference to Exhibit (10.17) to LaCrosse
Footwear, Inc.s Annual Report on Form 10-K for the year ended
December 31, 1996]
    
    (10.5
    )*
    
    LaCrosse Footwear, Inc. 2001 Stock Incentive Plan [Incorporated
by reference to Appendix B of LaCrosse Footwear, Inc.s
Definitive Proxy Statement on Schedule 14A for the 2001 Annual
Meeting of Shareholders]
    
    (10.6
    )*
    
    LaCrosse Footwear, Inc. 2001 Non-Employee Director Stock Option
Plan as amended [Incorporated by reference to Appendix B of
LaCrosse Footwear, Inc.s Definitive Proxy Statement on Schedule
14A for the 2004 Annual Meeting of Shareholders]
    
    (10.7
    )
    
    Lease, dated as of March 14, 1994, between JEPCO Development Co.
and LaCrosse Footwear, Inc. [Incorporated by reference to
Exhibit (10.22) to LaCrosse Footwear, Inc.s Form S-1
Registration Statement (Registration No. 33-75534)]
    
    
   *
    
    A management contract or compensatory plan or arrangement. -25-




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##### Table of Contents



Exhibit
    
    
    
    Sequential PageNumber
    
    Exhibit Description
    
    Number(10.8
    )
    
    Amendment, dated as of March 17, 1998, to Lease between JEPCO
Development Co., LLC and LaCrosse Footwear, Inc. [Incorporated
by reference to Exhibit (10.17) to LaCrosse Footwear, Inc.s
Annual Report on Form 10-K for the year ended December 31, 1998]
    
    (10.9
    )
    
    Manufacturing Certification Agreement, dated as of October 19,
1993, between W.L. Gore & Associates, Inc. and Danner Shoe
Manufacturing Co. [Incorporated by reference to Exhibit (10.23)
to LaCrosse Footwear, Inc.s Form S-1 Registration Statement
(Registration No. 33-75534)]
    
    (10.10
    )
    
    Trademark License, dated as of October 19, 1993, between W.L.
Gore & Associates, Inc. and Danner Shoe Manufacturing Co.
[Incorporated by reference to Exhibit (10.24) to LaCrosse
Footwear, Inc.s Form S-1 Registration Statement (Registration
No. 33-75534)]
    
    (21
    )
    
    List of subsidiaries of LaCrosse Footwear, Inc.(23
    )
    
    Consent of McGladrey & Pullen, LLP(31.1
    )
    
    Certification of the President & Chief Executive Officer pursuant
to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act
of 1934(31.2
    )
    
    Certification of the Executive Vice President & 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 & Chief Executive Officer pursuant to 18
U.S.C. § 1350(32.2
    )
    
    Certification of the Executive Vice President & Chief Financial Officer pursuant to 18
U.S.C. § 1350(99
    )
    
    Proxy Statement for the 2005 Annual Meeting of Shareholders
[The Proxy Statement for the 2005 Annual Meeting of Shareholders
will be filed with the Securities and Exchange Commission under
Regulation 14A within 120 days after the end of the Companys
fiscal year. Except to the extent specifically incorporated by
reference, the Proxy Statement for the 2005 Annual Meeting of
Shareholders shall not be deemed to be filed with the Securities
and Exchange Commission as part of this Annual Report on Form
10-K.]
 -26-




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on this 25th day of March 2005. LACROSSE FOOTWEAR, INC.By

/s/ Joseph P. SchneiderJoseph P. SchneiderPresident and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated. Signature
    
    Title
    
    Date/s/ Richard A. Rosenthal

Richard A. Rosenthal
    
    Chairman of the Board and Director
    
    March 25, 2005/s/ Joseph P. Schneider

Joseph P. Schneider
    
    President, Chief Executive
Officer and Director (Principal
Executive Officer)
    
    March 25, 2005/s/ David P. Carlson

David P. Carlson
    
    Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
    
    March 25, 2005/s/Stephen F. Loughlin

Stephen F. Loughlin
    
    Director
    
    March 25, 2005/s/ Luke E. Sims

Luke E. Sims
    
    Director
    
    March 25, 2005/s/ John D. Whitcombe

John D. Whitcombe
    
    Director
    
    March 25, 2005/s/ Charles W. Smith

Charles W. Smith
    
    Director
    
    March 25, 2005
 -27-




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##### Table of Contents



REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Shareholders of
LaCrosse Footwear, Inc.
Portland, Oregon Our audits were conducted in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated supplemental schedule II is
presented for purposes of complying with the Securities and Exchange Commissions rules and is not
a part of the basic consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in our audits of the basic consolidated financial statements and, in
our opinion, is fairly stated in all material respects in relation to the basic consolidated
financial statements taken as a whole. /s/ McGladrey & Pullen, LLPMcGLADREY & PULLEN, LLP Minneapolis, Minnesota
January 28, 2005 -28-




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands) Balance at
    
    
    Additions
    
    
    
    

    
    
    BalanceBeginning
    
    
    Charged To Costs
    
    
    Charged To
    
    
    
    
    
    
    at EndDescription
    
    of Period
    
    
    and Expenses
    
    
    Other Accounts
    
    
    Deductions
    
    
    of PeriodYear ended December 31, 2002:Accounts receivable allowances:Allowance for doubtful accounts
    
    $
    389
    
    
    $
    275
    
    
    $
    
    
    
    $
    249
    
    
    $
    415Allowance for uncollectible interest
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    Total
    
    $
    422
    
    
    $
    275
    
    
    $
    
    
    
    $
    282
    
    
    $
    415Inventory allowance:Allowance for slow-moving inventory
    
    $
    3,846
    
    
    $
    559
    
    
    $
    
    
    
    $
    2,860
    
    
    $
    1,545Property and equipment allowance:Reserve for excess property and equipment
    
    $
    484
    
    
    $
    625
    
    
    $
    
    
    
    $
    1,109
    
    
    $
    Deferred income taxes:Deferred tax asset valuation allowance
    
    $
    3,629
    
    
    $
    601
    
    
    $
    
    
    
    $
    
    
    
    $
    4,230Allowance for warranties
    
    $
    1,112
    
    
    $
    2,860
    
    
    $
    
    
    
    $
    2,973
    
    
    $
    999Year ended December 31, 2003:Accounts receivable allowances:Allowance for discounts
    
    $
    
    
    
    $
    297
    
    
    $
    
    
    
    $
    250
    
    
    $
    47Allowance for doubtful accounts
    
    
    415
    
    
    
    412
    
    
    
    
    
    
    
    476
    
    
    
    351Total
    
    $
    415
    
    
    $
    709
    
    
    $
    
    
    
    $
    726
    
    
    $
    398Inventory allowance:Allowance for slow-moving inventory
    
    $
    1,545
    
    
    $
    1,151
    
    
    $
    
    
    
    $
    1,022
    
    
    $
    1,674Deferred income taxes:Deferred tax asset valuation allowance
    
    $
    4,230
    
    
    $
    
    
    
    $
    
    
    
    $
    670
    
    
    $
    3,560Allowance for warranties
    
    $
    999
    
    
    $
    1,835
    
    
    $
    
    
    
    $
    1,982
    
    
    $
    852
 -29-




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##### Table of Contents



(In Thousands) SCHEDULE II - continued Balance at
    
    

    Additions
    
    
    
    

    
    
    BalanceBeginning
    
    
    Charged To Costs
    
    
    Charged To
    
    
    
    
    
    
    at EndDescription
    
    of Period
    
    
    and Expenses
    
    
    Other Accounts
    
    
    Deductions
    
    
    of PeriodYear ended December 31, 2004:Accounts receivable allowances:Allowance for discounts
    
    $
    47
    
    
    $
    1,344
    
    
    $
    
    
    
    $
    1,204
    
    
    $
    187Allowance for doubtful accounts
    
    
    351
    
    
    
    108
    
    
    
    
    
    
    
    126
    
    
    
    333Total
    
    $
    398
    
    
    $
    1,452
    
    
    $
    
    
    
    $
    1,330
    
    
    $
    520Inventory allowance:Allowance for slow-moving inventory
    
    $
    1,674
    
    
    $
    1,068
    
    
    $
    
    
    
    $
    1,044
    
    
    $
    1,698Deferred income taxes:Deferred tax asset valuation allowance
    
    $
    3,560
    
    
    $
    
    
    
    $
    
    
    
    $
    2,472
    
    
    $
    1,088Allowance for warranties
    
    $
    852
    
    
    $
    1,840
    
    
    $
    
    
    
    $
    1,846
    
    
    $
    846
 The accounts receivable, inventory, property and equipment and deferred tax asset allowances above
were deducted from the applicable asset accounts. -30-




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##### Table of Contents



EXHIBIT INDEX Exhibit
    
    
    
    Sequential PageNumber
    
    Exhibit Description
    
    Number(3.1)
    
    Restated Articles of
Incorporation of LaCrosse
Footwear, Inc. [Incorporated
by reference to Exhibit (3.0)
to LaCrosse Footwear, Inc.s
Form S-1 Registration
Statement (Registration No.
33-75534)]
    
    (3.2)
    
    By-Laws of LaCrosse Footwear,
Inc., as amended to date.
[Incorporated by reference to
Exhibit (3.1) to LaCrosse
Footwear, Inc.s Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2001]
    
    (4.1)
    
    Credit Agreement, dated as of
April 15, 2004, by and among
LaCrosse Footwear, Inc. as
borrowers, and Wells Fargo
Bank, National Association,
as lenders. [Incorporated by
reference to Exhibit (4.1) to
LaCrosse Footwear, Inc.s
Quarterly Report on Form 10-Q
for the quarter ended March
27, 2004]
    
    (10.1)*
    
    LaCrosse Footwear, Inc. Retirement Plan [Incorporated by
reference to Exhibit (10.18) to LaCrosse Footwear, Inc.s Form
S-1 Registration Statement (Registration No. 33-75534)]
    
    (10.2)*
    
    LaCrosse Footwear, Inc. Employees Retirement Savings Plan
[Incorporated by reference to Exhibit (10.19) to LaCrosse
Footwear, Inc.s Form S-1 Registration Statement (Registration
No. 33-75534)]
    
    (10.3)*
    
    LaCrosse Footwear, Inc. 1993 Employee Stock Incentive Plan
[Incorporated by reference to Exhibit (10.20) to LaCrosse
Footwear, Inc.s Form S-1 Registration Statement (Registration
No. 33-75534)]
    
    (10.4)*
    
    LaCrosse Footwear, Inc. 1997 Employee Stock Incentive Plan
[Incorporated by reference to Exhibit (10.17) to LaCrosse
Footwear, Inc.s Annual Report on Form 10-K for the year ended
December 31, 1996]
    
    (10.5)*
    
    LaCrosse Footwear, Inc. 2001 Stock Incentive Plan [Incorporated
by reference to Appendix B of LaCrosse Footwear, Inc.s
Definitive Proxy Statement on Schedule 14A for the 2001 Annual
Meeting of Shareholders]
    
    (10.6)*
    
    LaCrosse Footwear, Inc. 2001 Non-Employee Director Stock Option
Plan [Incorporated by reference to Appendix B of LaCrosse
Footwear, Inc.s Definitive Proxy Statement on Schedule 14A for
the 2004 Annual Meeting of Shareholders]
    
    (10.7)
    
    Lease, dated as of March 14, 1994, between JEPCO Development Co.
and LaCrosse Footwear, Inc. [Incorporated by reference to
Exhibit (10.22) to LaCrosse Footwear, Inc.s Form S-1
Registration Statement (Registration No. 33-75534)]
    
    (10.8)
    
    Amendment, dated as of March 17, 1998, to Lease between JEPCO
Development Co., LLC and LaCrosse Footwear, Inc. [Incorporated
by reference to Exhibit (10.17) to LaCrosse Footwear, Inc.s
Annual Report on Form 10-K for the year ended December 31,
1998]
    
    
   *
    
    A management contract or
compensatory plan or arrangement. -31-




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##### Table of Contents



Exhibit
    
    
    
    Sequential PageNumber
    
    Exhibit Description
    
    Number(10.9)
    
    Manufacturing Certification Agreement, dated as of October 19,
1993, between W.L. Gore & Associates, Inc. and Danner Shoe
Manufacturing Co. [Incorporated by reference to Exhibit (10.23)
to LaCrosse Footwear, Inc.s Form S-1 Registration Statement
(Registration No. 33-75534)]
    
    (10.10)
    
    Trademark License, dated as of October 19, 1993, between W.L.
Gore & Associates, Inc. and Danner Shoe Manufacturing Co.
[Incorporated by reference to Exhibit (10.24) to LaCrosse
Footwear, Inc.s Form S-1 Registration Statement (Registration
No. 33-75534)]
    
    (21)
    
    List of subsidiaries of LaCrosse Footwear, Inc.(23)
    
    Consent of McGladrey & Pullen, LLP(31.1)
    
    Certification of the President & Chief Executive Officer pursuant
to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act
of 1934(31.2)
    
    Certification of the Executive Vice President & 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 & Chief Executive Officer pursuant to 18 U.S.C. § 1350(32.2)
    
    Certification of the Executive Vice President & Chief Financial Officer pursuant to 18
U.S.C. § 1350(99)
    
    Proxy Statement for the 2005 Annual Meeting of Shareholders
[The Proxy Statement for the 2005 Annual Meeting of Shareholders
will be filed with the Securities and Exchange Commission under
Regulation 14A within 120 days after the end of the Companys
fiscal year. Except to the extent specifically incorporated by
reference, the Proxy Statement for the 2005 Annual Meeting of
Shareholders shall not be deemed to be filed with the Securities
and Exchange Commission as part of this Annual Report on Form
10-K.]
 -32-




---



INDEX   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    F-1CONSOLIDATED FINANCIAL STATEMENTSConsolidated balance sheets
    
    F-2 and F-3Consolidated statements of operations
    
    
    F-4Consolidated statements of shareholders equity
and comprehensive income (loss)
    
    
    F-5Consolidated statements of cash flows
    
    
    F-6Notes to consolidated financial statements
    
    
    F-7  F-21




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of
LaCrosse Footwear, Inc.
Portland, Oregon We have audited the consolidated balance sheets of LaCrosse Footwear, Inc. and Subsidiary as of
December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders
equity and comprehensive income (loss), and cash flows for each of the three years in the period
ended December 31, 2004. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements based on our
audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provided a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of LaCrosse Footwear, Inc. and Subsidiary as of December
31, 2004 and 2003, and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting
principles. McGLADREY & PULLEN, LLP Minneapolis, Minnesota
January 28, 2005 F-1




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY 
 CONSOLIDATED BALANCE SHEETS December 31, 2004
and 2003

(In Thousands, except share and per share data)
 ASSETS (Note 4)
    
    2004
    
    
    2003CURRENT ASSETSCash and cash equivalents
    
    $
    7,149
    
    
    $
    Trade accounts receivable, less allowances of
$0.5 million in 2004 and $0.4 million in 2003
    
    
    15,613
    
    
    
    13,412Inventories (Note 2)
    
    
    16,962
    
    
    
    24,042Prepaid expenses and other
    
    
    622
    
    
    
    667Deferred tax assets (Note 3)
    
    
    2,170
    
    
    
    748Total current assets
    
    
    42,516
    
    
    
    38,869PROPERTY AND EQUIPMENTLand, land improvements and building
    
    
    2,439
    
    
    
    2,862Machinery and equipment
    
    
    12,352
    
    
    
    18,52014,791
    
    
    
    21,382Less accumulated depreciation
    
    
    11,234
    
    
    
    16,738Net property and equipment
    
    
    3,557
    
    
    
    4,644OTHER ASSETSGoodwill
    
    
    10,753
    
    
    
    10,753Other assets (Note 7)
    
    
    962
    
    
    
    975Total other assets
    
    
    11,715
    
    
    
    11,728TOTAL ASSETS
    
    $
    57,788
    
    
    $
    55,241
 See Notes to Consolidated Financial Statements. F-2




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##### Table of Contents



LIABILITIES AND SHAREHOLDERS EQUITY
    
    2004
    
    
    2003CURRENT LIABILITIESCurrent maturities of long-term obligations (Note 4)
    
    $
    
    
    
    $
    2,219Notes payable (Note 4)
    
    
    
    
    
    
    5,319Accounts payable
    
    
    3,348
    
    
    
    2,727Accrued compensation
    
    
    2,360
    
    
    
    1,502Other accruals
    
    
    1,819
    
    
    
    1,349Total current liabilities
    
    
    7,527
    
    
    
    13,116COMPENSATION AND BENEFITS (Note 7)
    
    
    3,708
    
    
    
    3,501DEFERRED TAX LIABILITY (Note 3)
    
    
    1,402
    
    
    
    748Total liabilities
    
    
    12,637
    
    
    
    17,365COMMITMENTS AND CONTINGENCIES
(Notes 5, 6 and 7)SHAREHOLDERS EQUITY (Note 6)Common stock, par value $.01 per share; authorized
50,000,000 shares; issued 6,717,627 shares
    
    
    67
    
    
    
    67Additional paid-in capital
    
    
    26,255
    
    
    
    26,430Accumulated other comprehensive loss (Note 7)
    
    
    (1,015
    )
    
    
    (1,215
    )Retained earnings
    
    
    24,374
    
    
    
    17,401Less cost of 811,251 and 842,454 shares of treasury stock
    
    
    (4,530
    )
    
    
    (4,807
    )Total shareholders equity
    
    
    45,151
    
    
    
    37,876TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    57,788
    
    
    $
    55,241
 F-3




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY 
 CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2004, 2003 and 2002
(In Thousands, except share and per share data)
 2004
    
    
    2003
    
    
    2002Net sales (Note 9)
    
    $
    105,470
    
    
    $
    95,687
    
    
    $
    97,785Cost of goods sold
    
    
    69,822
    
    
    

    66,201
    
    
    
    71,574Gross profit
    
    
    35,648
    
    
    
    29,486
    
    
    
    26,211Selling and administrative expenses (Note 8)
    
    
    28,008
    
    
    
    25,820
    
    
    
    30,210Operating income (loss)
    
    
    7,640
    
    
    
    3,666
    
    
    
    (3,999
    )Non-operating income (expense):Interest expense
    
    
    (543
    )
    
    
    (1,136
    )
    
    
    (1,777
    )Miscellaneous
    
    
    145
    
    
    
    100
    
    
    
    180(398
    )
    
    
    (1,036
    )
    
    
    (1,597
    )Income (loss) before income tax expense (benefit)
and cumulative effect of accounting change
    
    
    7,242
    
    
    
    2,630
    
    
    
    (5,596
    )Income tax expense (benefit) (Note 3)
    
    
    269
    
    
    
    
    
    
    
    (1,538
    )Net income (loss) before cumulative effect of
accounting change
    
    
    6,973
    
    
    
    2,630
    
    
    
    (4,058
    )Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    (1,028
    )Net income (loss)
    
    $
    6,973
    
    
    $
    2,630
    
    
    $
    (5,086
    )Net income (loss) per common share before
cumulative effect of change in accounting
principleBasic
    
    $
    1.18
    
    
    $
    0.45
    
    
    $
    (0.69
    )Diluted
    
    $
    1.15
    
    
    $
    0.44
    
    
    $
    (0.69
    )Cumulative effect of change in accounting principleBasic
    
    $
    
    
    
    $
    
    
    
    $
    (0.18
    )Diluted
    
    $
    
    
    
    $
    
    
    
    $
    (0.18
    )Net income (loss) per common shareBasic
    
    $
    1.18
    
    
    $
    0.45
    
    
    $
    (0.87
    )Diluted
    
    $
    1.15
    
    
    $
    0.44
    
    
    $
    (0.87
    )Basic weighted average shares outstanding
    
    
    5,890,721
    
    
    
    5,874,477
    
    
    
    5,874,449Diluted weighted average shares outstanding
    
    
    6,070,167
    
    
    
    5,939,175
    
    
    
    5,874,449
 See Notes to Consolidated Financial Statements. F-4




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2004, 2003 and 2002
(In Thousands)
 AccumulatedAdditional
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Retained
    
    
    Treasury
    
    
    Shareholders
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Loss
    
    
    Earnings
    
    
    Stock
    
    
    Equity
    
    
    Income (Loss)Balance, December 31, 2001
    
    $
    67
    
    
    $
    26,434
    
    
    $
    
    
    
    $
    19,857
    
    
    $
    (4,813
    )
    
    $
    41,545Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,086
    )
    
    
    
    
    
    
    (5,086
    )
    
    $
    (5,086
    )Minimum pension
liability
    
    
    
    
    
    
    
    
    
    
    (1,370
    )
    
    
    
    
    
    
    
    
    
    
    (1,370
    )
    
    
    (1,370
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,456
    )Balance, December 31, 2002
    
    
    67
    
    
    
    26,434
    
    
    
    (1,370
    )
    
    
    14,771
    
    
    
    (4,813
    )
    
    
    35,089Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,630
    
    
    
    
    
    
    
    2,630
    
    
    
    2,630Minimum pension
liability
    
    
    
    
    
    
    
    
    
    
    155
    
    
    
    
    
    
    
    
    
    
    
    155
    
    
    
    155Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,785Exercise of stock options
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    2Balance, December 31, 2003
    
    
    67
    
    
    
    26,430
    
    
    
    (1,215
    )
    
    
    17,401
    
    
    
    (4,807
    )
    
    
    37,876Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,973
    
    
    
    
    
    
    
    6,973
    
    
    
    6,973Minimum pension
liability
    
    
    
    
    
    
    
    
    
    
    (250
    )
    
    
    
    
    
    
    
    
    
    
    (250
    )
    
    
    (250
    )Income tax benefit on
minimum
pension liability (Note 3)
    
    
    
    
    
    
    
    
    
    
    450
    
    
    
    
    
    
    
    
    
    
    
    450
    
    
    
    450Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,173Exercise of stock options
    
    
    
    
    
    
    (175
    )
    
    
    
    
    
    
    
    
    
    
    277
    
    
    
    102Balance, December 31, 2004
    
    $
    67
    
    
    $
    26,255
    
    
    $
    (1,015
    )
    
    $
    24,374
    
    
    $
    (4,530
    )
    
    $
    45,151
 See Notes to Consolidated Financial Statements. F-5




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY 
 CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2004, 2003 and 2002
(In Thousands)
 2004
    
    
    2003
    
    
    2002Cash Flows from Operating ActivitiesNet income (loss)
    
    $
    6,973
    
    
    $
    2,630
    
    
    $
    (5,086
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation
    
    
    1,255
    
    
    
    1,417
    
    
    
    2,773Amortization
    
    
    216
    
    
    
    304
    
    
    
    363Loss on disposal/impairment of property and equipment
    
    
    540
    
    
    
    55
    
    
    
    624Intangibles impairment charge
    
    
    
    
    
    
    
    
    
    
    1,028Deferred income taxes
    
    
    (318
    )
    
    
    
    
    
    
    3,695Other
    
    
    
    
    
    
    95
    
    
    
    14Changes in current assets and liabilities:Trade accounts receivable
    
    
    (2,201
    )
    
    
    1,890
    
    
    
    4,172Inventories
    
    
    7,080
    
    
    
    (582
    )
    
    
    10,911Refundable income taxes
    
    
    
    
    
    
    2,888
    
    
    
    (2,888
    )Accounts payable
    
    
    621
    
    
    
    (1,940
    )
    
    
    (1,538
    )Accrued expenses and other
    
    
    1,344
    
    
    
    (348
    )
    
    
    (2,298
    )Net cash provided by operating activities
    
    
    15,510
    
    
    
    6,409
    
    
    
    11,770Cash Flows from Investing ActivitiesPurchase of property and equipment
    
    
    (934
    )
    
    
    (1,165
    )
    
    
    (1,161
    )Proceeds from sale of property and equipment
    
    
    226
    
    
    
    28
    
    
    
    8Other
    
    
    
    
    
    
    
    
    
    
    (22
    )Net cash used in investing activities
    
    
    (708
    )
    
    
    (1,137
    )
    
    
    (1,175
    )Cash Flows from Financing ActivitiesPrincipal payments on long-term obligations
    
    
    (2,219
    )
    
    
    (2,213
    )
    
    
    (1,599
    )Net payments on short-term borrowings
    
    
    (5,319
    )
    
    
    (3,059
    )
    
    
    (9,267
    )Payment of deferred financing costs
    
    
    (217
    )
    
    
    
    
    
    
    Proceeds from exercise of stock options
    
    
    102
    
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    (7,653
    )
    
    
    (5,272
    )
    
    
    (10,866
    )Increase (decrease) in cash and cash equivalents
    
    
    7,149
    
    
    
    
    
    
    
    (271
    )Cash and cash equivalents:Beginning
    
    
    
    
    
    
    
    
    
    
    271Ending
    
    $
    7,149
    
    
    $
    
    
    
    $
    SUPPLEMENTAL INFORMATIONCash payments (refunds) of:Interest
    
    $
    602
    
    
    $
    1,402
    
    
    $
    1,962Income taxes
    
    $
    318
    
    
    $
    (2,888
    )
    
    $
    (2,297
    )Non-cash deferred income tax benefit from minimum
pension liability (Note 3)
    
    $
    (450
    )
    
    $
    
    
    
    $
    
 See Notes to Consolidated Financial Statements. F-6




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, except share and per share data)
 Note 1. Nature of Business and Significant Accounting Policies Nature of business: The Company designs, manufactures and markets premium quality footwear and apparel for the expert
work and outdoor users through a nationwide network of specialty retailers and distributors
throughout the United States. Significant accounting policies: Principles of consolidation: The consolidated financial statements include the accounts of LaCrosse Footwear, Inc. and its
wholly owned subsidiary (the Company). All material intercompany accounts and transactions
have been eliminated in consolidation. Use of estimates in the preparation of financial statements: The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant items subject to estimates and
assumptions include valuation allowances for inventories and deferred tax assets, facility
shutdown reserves, pension assumptions and estimated future cash flows used in the annual
impairment test of goodwill. Actual results could differ from those estimates. Fair value of financial instruments: The carrying amount of long-term debt approximates fair value based on the interest rates,
maturities and collateral requirements currently available for similar financial instruments. Outsourced production and concentrations of supply: Approximately 65% of the Companys sales in 2004 were of outsourced products. A significant
portion of the outsourced products were purchased from a limited number of foreign
manufacturers. Sources of capacity related to these products are available worldwide and
management has identified alternative sources for these products. F-7




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 1. Nature of Business and Significant Accounting Policies, Continued Cash and cash equivalents: The Company considers all highly liquid debt instruments (including short-term investment grade
securities and money market instruments) purchased with maturities of three months or less to
be cash equivalents. The carrying amount of those assets are a reasonable estimate of their
fair value due to the short term to maturity and readily available market for these types of
investments. The Company maintains its cash in money market accounts which, at times, exceed
federally insured limits. The Company has not experienced any losses in such accounts. Trade receivables: Trade receivables are carried at original invoice amount less an estimated allowance for
doubtful receivables based on a review of all outstanding amounts on a monthly basis.
Management determines the allowance for doubtful accounts after reviewing individual customer
accounts as well as considering both historical and expected credit loss experience. Trade
receivables are written off when deemed uncollectible. Recoveries of trade receivables
previously written off are recorded when received. The Company grants credit to its customers, who are primarily domestic retail stores, direct
mail catalog merchants and wholesalers, based on an evaluation of each customers financial
condition. Exposure to losses on receivables is principally dependent on each customers
financial condition. The Company monitors its exposure for credit losses and maintains an
allowance for anticipated losses. Inventories: Inventories are stated at the lower of cost or market. All inventories, except for
rubber-based product are valued using the first-in, first-out (FIFO) method. Rubber based
product inventory is valued using the last-in, first-out (LIFO) method. Provision for
potentially slow-moving inventory is made based on managements analysis of inventory levels
and future sales forecasts. Inventories have been reduced by slow-moving inventory reserves of
approximately $1.7 million at December 31, 2004 and 2003. Property and equipment: Property and equipment are carried at cost and are being depreciated using straight-line and
accelerated methods over their estimated useful lives as follows: land improvements, 15 years;
buildings and improvements, 10 to 25 years; and machinery and equipment, 3 to 7 years. Goodwill: Goodwill represents the excess of cost over net assets acquired of Danner, Inc. In accordance
with Financial Accounting Standards Board (FASB) Statement No. 142, goodwill is tested for
impairment annually and additionally if an event occurs or circumstances change that would
indicate the carrying amount may be impaired. An impairment loss would generally be recognized
when the carrying F-8




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 1. Nature of Business and Significant Accounting Policies, Continued amount of the reporting units net assets exceeds the estimated fair value of the reporting
unit. The fair value of Danner was established based upon a projection of profitability based
on the market it operates. Using these procedures, the Company determined that the fair value
of Danner exceeds its
carrying value for both the year-end December 31, 2004 and 2003 and therefore no write-down was
required. The net carrying amount of goodwill for the Danner unit was $10.8 million for each
respective year. The Company completed the goodwill transitional impairment test during 2002 for the Safety and
Industrial and Danner divisions goodwill. The impairment test, which was conducted using
information that included a valuation performed by an independent appraiser, indicated that the
Safety and Industrial division goodwill was impaired. Accordingly, the Company recorded a $1.0
million charge as a cumulative effect of change in accounting principle in the first quarter of
2002. Impairment of long-lived assets: The Company periodically reviews long-lived assets to determine any potential impairment. The
asset carrying values are compared with the expected future cash flows resulting from their
use. The expected future cash flows include cash flows resulting from the assets disposition.
The Company would recognize an impairment loss if an assets carrying value exceeded its
expected future cash flow. The Company recognized an impairment loss in 2004 (See Note 8). Product warranties: The Company provides a limited warranty for the replacement of defective products. The
Companys standard warranties require the Company to repair or replace defective products at no
cost to the consumer. The Company estimates the costs that may be incurred under its basic
limited warranty and records a liability in the amount of such costs at the time product
revenue is recognized. Factors that affect the Companys warranty liability include the number
of units sold, historical and anticipated rates of warranty claims, and cost per claim. The
Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the
amounts as necessary. The Company utilizes historical trends and information received from its
customers to assist in determining the appropriate loss reserve levels. Changes in the carrying amount of accrued product warranty cost for the years ended December
31, 2004 and 2003 are summarized as follows: December 31,2004
    
    
    2003Balance, beginning
    
    $
    852
    
    
    $
    999Accruals for products sold
    
    
    1,840
    
    
    
    1,835Costs incurred
    
    
    (1,846
    )
    
    
    (1,982
    )Balance, ending
    
    $
    846
    
    
    $
    852
 F-9




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 1. Nature of Business and Significant Accounting Policies, Continued Employee stock-based compensation: At December 31, 2004, the Company has stock-based employee compensation plans (See Note 6). The
Company accounts for those plans under the APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. No stock-based employee compensation cost is
reflected in the consolidated statements of operations, as all options granted under those
plans had an exercise price equal to the market value of the underlying common stock on the
date of grant. The following table illustrates the effect on net income (loss) and income
(loss) per common share if the Company had applied the fair value recognition provisions of
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation. 2004
    
    
    2003
    
    
    2002Net income (loss)  as reported
    
    $
    6,973
    
    
    $
    2,630
    
    
    $
    (5,086
    )Deduct: Total stock-based employee compensation
expense determined under the fair value
based method for all awards,
net of the related tax effects
    
    
    (386
    )
    
    
    (152
    )
    
    
    (83
    )Pro forma net income (loss)
    
    $
    6,587
    
    
    $
    2,478
    
    
    $
    (5,169
    )Net income (loss) per common share:Basic  as reported
    
    $
    1.18
    
    
    $
    0.45
    
    
    $
    (0.87
    )Diluted  as reported
    
    $
    1.15
    
    
    $
    0.44
    
    
    $
    (0.87
    )Basic  pro forma
    
    $
    1.12
    
    
    $
    0.42
    
    
    $
    (0.88
    )Diluted  pro forma
    
    $
    1.09
    
    
    $
    0.42
    
    
    $
    (0.88
    )
 The above pro forma effects on net income (loss) and net income (loss) per common share
are not likely to be representative of the effects on reported net income (loss) for future
years because options vest over several years and additional awards generally are made each
year. In December 2004, the Financial Accounting Standards Board (FASB) published FASB Statement
No. 123 (revised 2004), Share-Based Payment (FAS 123(R) or the Statement). FAS 123(R)
requires that the compensation cost relating to share-based payment transactions, including
grants of employee stock options, be recognized in financial statements. That cost will be
measured based on the fair value of the equity or liability instruments issued. FAS 123(R)
covers a wide range of share-based compensation arrangements including stock options,
restricted share plans, performance-based awards, share appreciation rights, and employee share
purchase plans. FAS 123(R) is a replacement of FASB Statement No. 123, Accounting for
Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees, and its related interpretive guidance. The effect of the Statement will be to
require entities to measure the cost of employee services received in exchange for stock
options based on the grant-date fair value of the award, and to recognize the cost over the
period the employee is required to provide services for the award. FAS 123(R) permits entities
to use any option-pricing model that meets the fair value objective in the Statement. F-10




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 1. Nature of Business and Significant Accounting Policies, Continued The Company will be required to apply FAS 123(R) as of the beginning of its first interim
period that begins after June 15, 2005, which will be the third quarter of 2005. FAS 123(R)
allows two methods for determining the effects of the transition: the modified prospective
transition method and the modified retrospective method of transition. Under the modified
prospective transition method, an entity would use the fair value based accounting method for
all employee awards granted, modified, or settled after the effective date. As of the effective
date, compensation cost related to the nonvested portion of awards outstanding as of that date
would be based on the grant-date fair value of those awards as calculated under the original
provisions of Statement No. 123; that is, an entity would not remeasure the grant-date fair
value estimate of the unvested portion of awards granted prior to the effective date of FAS
123(R). An entity will have the further option to either apply the Statement to only the
quarters in the period of adoption and subsequent periods, or apply the Statement to all
quarters in the fiscal year of adoption. Under the modified retrospective method of transition,
an entity would revise its previously issued financial statements to recognize employee
compensation cost for prior periods presented in accordance with the original provisions of
Statement No. 123. Management has not yet completed their study of the transition methods or made any decisions
about how the Company will adopt FAS 123. However, the pro forma net income effect of using
the fair value method for the past three fiscal years is presented in the table above. The pro
forma compensation costs presented in the table above and in prior filings for the Company have
been calculated using a Black-Scholes option pricing model and may not be indicative of amounts
which should be expected in future years. No decisions have been made as to which
option-pricing model is most appropriate for the Company for future awards. Revenue recognition: Revenue is recognized at the time products are shipped to customers. Revenue is recorded net
of estimated discounts and returns. Amounts billed to customers relating to shipping and
handling are classified as revenue. Costs incurred by the Company for shipping and handling
are classified as cost of goods sold. Income taxes: Deferred taxes are provided on an asset and liability method whereby deferred tax assets and
liabilities are recognized for temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment. F-11




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 1. Nature of Business and Significant Accounting Policies, Continued Advertising and promotion: The Company advertises and promotes its products through national and regional media, displays,
and catalogs and through cooperative advertising programs with retailers. Costs for these
advertising and promotional programs are generally charged to expense as incurred. Advertising and
promotional expense included in the consolidated statements of operations for the years ended
December 31, 2004, 2003 and 2002 were approximately $2.2, $2.0 and $2.1 million, respectively. Net income (loss) per common share: Because the Company has potential common stock outstanding, as discussed in Note 6, it is
required to present basic and diluted net income (loss) per share. Diluted per share amounts
assume the conversion, exercise or issuance of all potential common stock instruments unless
the effect is to reduce the loss or increase the income per common share from continuing
operations. The impact of the stock options on the diluted weighted average shares was to increase the
weighted average shares outstanding by 179,446 and 64,698 shares for the years ended December
31, 2004 and 2003, respectively. Options to purchase shares of common stock were not included
in the computation of diluted net loss per share in 2002 because their effect would be
antidilutive. Recent accounting pronouncements: In November 2004, the FASB issued SFAS No. 151, Inventory Costs,an amendment of ARB No. 43,
Chapter 4. The amendments made by the SFAS No. 151 require that abnormal amounts of idle
facility expense, freight, handling costs and wasted materials (spoilage) be recognized as
current-period charges. This Statement requires the allocation of fixed production overhead to
inventory based on the normal capacity of production facilities. SFAS No. 151 is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. Management does not
believe the adoption of SFAS No. 151 will have a material effect on the Companys financial
position or results of operations. Note 2. Inventories A summary of inventories is as follows: December 31,2004
    
    
    2003Raw materials
    
    $
    1,365
    
    
    $
    1,539Work in process
    
    
    188
    
    
    
    177Finished goods
    
    
    15,409
    
    
    
    22,326Total inventories
    
    $
    16,962
    
    
    $
    24,042
 If all inventories were valued on the FIFO method, total inventories for 2004 and 2003 would have
been $16.8 and $23.7 million, respectively. F-12




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 3. Income Tax Matters Net deferred tax assets and liabilities consist of the following components: December 31,2004
    
    
    2003Deferred tax assets:Receivable allowances
    
    $
    202
    
    
    $
    155Inventory differences
    
    
    942
    
    
    
    1,052Compensation and benefits
    
    
    1,500
    
    
    
    1,512Warranty reserves and other
    
    
    648
    
    
    
    733Net operating loss carryforwards
    
    
    1,309
    
    
    
    2,248Valuation allowance
    
    
    (1,088
    )
    
    
    (3,560
    )3,513
    
    
    
    2,140Deferred tax liabilities, principally intangibles
    
    
    2,745
    
    
    
    2,140$
    768
    
    
    $
    
 During 2003, all of the Companys taxable income was offset by available net operating loss (NOL)
carryforwards. At December 31, 2003, the Company had recorded a $3.6 million valuation allowance
against its deferred tax assets due to the uncertainty of the realization and timing of the
benefits from those deferred tax assets, as the Company had not achieved a sustained level of
profitability. During 2004, management concluded that the Company had attained a sufficient level
of sustained annual profitability to allow the valuation allowance to be reduced to reflect
managements estimate of the amount of deferred tax assets that will be realized in the near term.
Additionally, the valuation allowance was further reduced by approximately $0.4 million associated
with the estimated income tax benefit on the minimum pension liability recorded in equity (Note 7),
which had no effect on net income.
Considering the projected levels of future income as well as the nature of the net deferred tax
assets, management has now concluded that the deferred assets are fully realizable except for the
deferred tax asset that relates to the majority of the Companys state NOL carryforwards. The
realization of these state NOL carryforwards is dependent on yet to be developed tax strategies as
well as having taxable income in years well into the future. In future periods of earnings, the
Company will report income tax expense offset by any further reductions in the valuation allowance
based on an ongoing assessment of the future realization of the state NOL deferred tax assets. F-13




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, except share and per share data) Note 3. Income Tax Matters, Continued The components giving rise to the net deferred tax assets described above have been included in the
accompanying consolidated balance sheets as follows: December 31,2004
    
    
    2003Current assets
    
    $
    2,170
    
    
    $
    748Noncurrent liabilities
    
    
    (1,402
    )
    
    
    (748
    )$
    768
    
    
    $
    
 The provision (benefit) for income taxes consists of the following: Years Ending December 31,2004
    
    
    2003
    
    
    2002CurrentFederal
    
    $
    587
    
    
    $
    
    
    
    $
    (5,227
    )State
    
    
    
    
    
    
    
    
    
    
    (6
    )Deferred
    
    
    (318
    )
    
    
    
    
    
    
    3,695$
    269
    
    
    $
    
    
    
    $
    (1,538
    )
 The current federal income tax benefit of approximately $5.2 million in 2002 was due to tax changes
enacted as part of the Job Creation and Worker Assistance Act of 2002. The law extended the loss
carryback period for certain losses from two to five years. The Company was able to carry back tax
losses incurred in 2001 to reduce taxable income from 1996 and, in May of 2002, received an income
tax refund of $2.3 million. The Company also carried back losses incurred during 2002 to reduce
taxable income from 1997 and 1998, and in June of 2003, received an income tax refund of $2.9
million. The differences between statutory federal tax rates and the effective tax rates reflected in the
consolidated statements of operations are as follows: Years Ending December 31,2004
    
    
    2003
    
    
    2002Statutory federal tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    (35.0
    )%State rate, net of federal tax effect
    
    
    4.2
    
    
    
    4.2
    
    
    
    (2.4
    )Benefit of net operating loss carryforwards
    
    

    (18.0
    )
    
    
    (5.5
    )
    
    
    Valuation allowance
    
    
    (15.9
    )
    
    
    (33.7
    )
    
    
    10.7Other, net
    
    
    (1.6
    )
    
    
    
    
    
    
    Effective tax (benefit) rate
    
    
    3.7
    %
    
    
    0.0
    %
    
    
    (26.7
    )%
 F-14




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 3. Income Tax Matters, Continued In the year ended December 31, 2004, the Company fully utilized its federal net operating loss
carryforward of approximately $3.5 million. In addition, the Company has state net operating loss carryforwards of approximately $28.3 million
which will expire as follows: $2.0 million in 2014, $2.7 million in 2015, $6.0 million in 2016,
$13.1 million in 2017, $2.4 million in 2018, and $2.1 million in 2019. Note 4. Financing Arrangements Line of credit agreement: On June 1, 2004, the Company entered into a three-year credit agreement with Wells Fargo Bank,
N.A., to refinance its previous bank revolving line of credit. Amounts borrowed under the
agreement are primarily secured by all of the assets of the Company. Borrowing limits against the
line of credit are the lesser of $30.0 million or agreed upon percentages of qualified receivables
and inventory. At the Companys option, the credit agreement provides for interest rate options of
prime rate or LIBOR plus 1.50%. At December 31, 2004, the Company has no outstanding balance due
under its current line of credit as compared with an outstanding balance of $5.3 million at
December 31, 2003 under its former line of credit agreement. Long-term obligations: In 2003, the Company had a term loan that was due in the second quarter of 2004. In the first
quarter of 2004, the Company repaid the remaining $2.2 million balance of the term loan. The credit agreement contains certain restrictive covenants, which among other things, require the
Company to maintain certain levels of net availability (depending on the time of the year), to meet
certain tangible net worth requirements and earnings requirements (earnings before interest,
depreciation and amortization) on an annual basis and to limit capital spending to less than $3.5
million per year. The Company had unused borrowing availability of $18.9 million at December 31,
2004. Note 5. Lease Commitments and Contingencies Lease Commitments:The Company leases office space, retail stores, a manufacturing facility,
equipment and warehouse space under non-cancelable agreements expiring on various dates through
2009 which are recorded as operating leases. The total rental expense included in the
consolidated statements of operations for the years ended December 31, 2004, 2003 and 2002 is
approximately $1.6, $1.9, and $2.4 million, respectively. Approximate future minimum lease
payments of $3.3 million are due as follows (in millions): 2005, $1.4; 2006, $1.0; 2007, $0.6;
2008, $0.2; and $0.1 thereafter. Contingencies:In the normal course of business, the Company is subject to claims and litigation.
Management believes that such matters will not have a material adverse effect on the Companys
results of operations, liquidity or financial condition. In January 2004, the Company settled a dispute with a former vendor and thereafter received a
one-time, nonrecurring cash payment of $0.9 million. This settlement was recorded as a reduction
of selling and administrative expenses in the first quarter of 2004 and was used to pay down debt. F-15




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 6. Stock Options The Company has granted stock options to officers, directors and key employees under the 1993, 1997
and 2001 stock option plans pursuant to which options for up to 950,000 shares of common stock may
be granted. The option price per share shall not be less than 100% of the fair market value at the
date of grant and the options expire ten years after grant or such shorter period as the
compensation committee of the Board so determines. Substantially
all of the options vest in equal increments over a five-year period. The following summarizes all stock options granted under the plans: Common
    
    
    Weighted AverageShares
    
    
    Exercise PriceDecember 31, 2001
    
    
    320,603
    
    
    $
    7.57Granted
    
    
    178,010
    
    
    
    3.31Canceled
    
    
    (150,484
    )
    
    
    6.90December 31, 2002
    
    
    348,129
    
    
    
    5.69Granted
    
    
    194,350
    
    
    
    2.63Canceled
    
    
    (84,661
    )
    
    
    7.09Exercised
    
    
    (724
    )
    
    

    3.13December 31, 2003
    
    
    457,094
    
    
    
    4.14Granted
    
    
    249,350
    
    
    
    7.78Canceled
    
    
    (84,050
    )
    
    
    7.61Exercised
    
    
    (31,203
    )
    
    
    3.29December 31, 2004
    
    
    591,191
    
    
    $
    5.23
 The weighted average remaining life of outstanding options is 8.0 years as of December 31, 2004. Options exercisable as of December 31, 2004, 2003 and 2002 were approximately 166,000 shares,
155,000 shares and 133,000 shares, respectively, at a weighted average exercise price of $4.57,
$6.30 and $8.60, respectively. The weighted-average fair values at date of grant for options granted during 2004, 2003 and 2002
were $3.58, $1.28 and $1.61 per share, respectively. The fair value of each option was estimated on the
date of the grant using the Black-Scholes option-pricing model with the following assumptions: 2004
    
    
    2003
    
    
    2002Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected stock price volatility
    
    
    55
    %
    
    
    25
    %
    
    
    25
    %Risk-free interest rate
    
    
    3.6
    %
    
    
    6.5
    %
    
    
    6.5
    %Expected life of options
    
    4 years
    
    6 years
    
    6 years
 F-16




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 7. Compensation and Benefit Agreements The Company has a defined benefit pension plan covering eligible past employees and approximately
12% of its current employees. Eligible participants are entitled to monthly pension benefits
beginning at normal retirement age (65). The monthly benefit payable at the normal retirement date
under the plan is equal to a specified dollar amount or percentage of average monthly compensation,
as defined in the plan, multiplied by years of benefit service (maximum of 38 years). The
Companys funding policy is to make not less than the minimum contribution required by applicable
regulations, plus such amounts as the Company may determine to be appropriate from time to time.
The Company froze the plan during 2003 and participants do not accrue any additional years of
service regardless of any increases in their compensation or completion of additional years of
credited service. The Company sponsors an unfunded defined benefit postretirement death benefit plan that covers
eligible past employees. The Company funds the postretirement benefit obligation as the costs are
incurred. Information relative to the Companys defined pension and other postretirement benefit plans is
presented below . Pension Benefits
    
    
    Other BenefitsDecember 31,
    
    December 31,2004
    
    
    2003
    
    
    2004
    
    
    2003Changes in benefit obligations:Obligations at beginning of year
    
    $
    15,936
    
    
    $
    15,310
    
    
    $
    278
    
    
    $
    478Service cost
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    2Interest cost
    
    
    999
    
    
    
    1,029
    
    
    
    18
    
    
    
    25Plan amendments
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    Benefits paid
    
    
    (1,478
    )
    
    
    (1,317
    )
    
    
    (15
    )
    
    
    (36
    )Curtailment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (191
    )Actuarial (gains) losses
    
    
    432
    
    
    
    842
    
    
    
    
    
    
    
    Obligations at end of year
    
    $
    15,889
    
    
    $
    15,936
    
    
    $
    281
    
    
    $
    278Changes in plan assets:Fair value of assets at beginning of year
    
    $
    12,883
    
    
    $
    12,174
    
    
    $
    
    
    
    $
    Actual return on assets
    
    
    1,170
    
    
    
    1,932
    
    
    
    
    
    
    
    Company contributions
    
    
    
    
    
    
    94
    
    
    
    15
    
    
    
    36Benefits paid
    
    
    (1,478
    )
    
    
    (1,317
    )
    
    
    (15
    )
    
    
    (36
    )Fair value of assets at end of year
    
    $
    12,575
    
    
    $
    12,883
    
    
    $
    
    
    
    $
    Funded status at end of year:Plan assets less than obligations, included
in accrued liabilities
    
    $
    (3,314
    )
    
    $
    (3,053
    )
    
    $
    (267
    )
    
    $
    (278
    )Unrecognized (gain) loss
    
    
    1,465
    
    
    
    1,215
    
    
    
    (14
    )
    
    
    Unrecognized prior service cost
    
    
    153
    
    
    
    168
    
    
    
    
    
    
    
    Accrued benefit cost
    
    $
    (1,696
    )
    
    $
    (1,670
    )
    
    $
    (281
    )
    
    $
    (278
    )
 F-17




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 7. Compensation and Benefit Agreements, Continued At December 31, 2004 and 2003, the Companys pension plan had accumulated benefit obligations in
excess of the sum of the respective plan assets and accrued pension liabilities, such that
additional minimum liabilities, intangible assets, a deferred income tax asset, and equity
reduction components as follows are reflected in these consolidated financial statements: December 31,2004
    
    
    2003Accumulated benefit obligations
    
    $
    15,889
    
    
    $
    15,936Plan assets
    
    
    (12,575
    )
    
    
    (12,883
    )Accrued pension liability
    
    

    (1,696
    )
    
    
    (1,670
    )Additional minimum liability
    
    
    1,618
    
    
    
    1,383Recorded as intangible asset
    
    
    (153
    )
    
    
    (168
    )Recorded as a deferred tax asset (Note 3)
    
    
    (450
    )
    
    
    Cumulative equity reduction component
    
    $
    1,015
    
    
    $
    1,215
 Pension Benefits
    
    
    Other BenefitsYears Ending December 31,
    
    Years Ending December 31,2004
    
    
    2003
    
    
    2002
    
    
    2004
    
    
    2003
    
    
    2002Cost recognized during the year:Service cost
    
    $
    
    
    
    $
    28
    
    
    $
    62
    
    
    $
    
    
    
    $
    2
    
    
    $
    5Interest cost
    
    
    999
    
    
    
    1,029
    
    
    
    1,082
    
    
    
    18
    
    
    
    25
    
    
    
    47Expected return on plan assets
    
    
    (989
    )
    
    
    (936
    )
    
    
    (1,161
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of prior gains
    
    
    
    
    
    
    
    
    
    
    (26
    )
    
    
    
    
    
    
    101
    
    
    
    206Amortization of prior service cost
    
    
    15
    
    
    
    16
    
    
    
    14
    
    
    
    
    
    
    
    (352
    )
    
    
    (675
    )Curtailment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (349
    )
    
    
    (355
    )Net period cost (benefit)
    
    $
    25
    
    
    $
    137
    
    
    $
    (29
    )
    
    $
    18
    
    
    $
    (573
    )
    
    $
    (772
    )
 Pension Benefits
    
    
    
    
    
    
    
    
    
    
    Other BenefitsDecember 31,
    
    December 31,2004
    
    
    2003
    
    
    2002
    
    
    2004
    
    
    2003
    
    
    2002Assumptions used in computations:Discount rate
    
    
    6.25
    %
    
    
    6.5
    %
    
    
    7.0
    %
    
    
    6.25
    %
    
    
    6.5
    %
    
    
    7.0
    %Rate of compensation increase
    
    
    N/A
    
    
    
    N/A
    
    
    
    4.5
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AExpected return on plan assets
    
    
    8.0
    %
    
    
    8.0
    %
    
    
    8.0
    %
    
    
    *
    
    
    
    *
    
    
    
    *
  *This plan does not have separate assets, so there is no actual or expected return on plan assets. F-18




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 7. Compensation and Benefit Agreements, Continued The discount rate used is based on a hypothetical portfolio of high quality bonds with cash
flows matching expected benefit payments. The expected return on plan assets is based on the asset
allocation mix and historical return, taking into account current and expected market conditions.
The actual return on pension plan assets was approximately 11% in 2004, compared to 17% in 2003.
The historical annualized ten-year rate of return on pension plan assets is approximately 9%. The Companys pension plan asset allocation at December 31, 2004 and 2003 and target allocation for
2005 are as follows: Percentage of Plan AssetsTarget Allocation
    
    
    December 31,2005
    
    
    2004
    
    
    2003Asset Category:Equity securities
    
    46% to 59%
    
    
    55
    %
    
    
    54
    %Debt securities
    
    41% to 54%
    
    
    45
    %
    
    
    46
    %Cash and cash equivalents
    
    
    0%
    
    
    0
    %
    
    
    0
    %Total
    
    
    
    
    
    
    100
    %
    
    
    100
    %
 The pension plan investment strategy is to maintain a diversified portfolio designed to achieve an
average long-term rate of return of 8%. The assets of the plan are strategically allocated between
asset categories according to the target minimum and maximum allocations. Asset allocation target
ranges for each asset category are monitored and may be changed from time to time based on asset
allocation studies performed by the plans investment advisor, with evaluations of the risk and
return expectations for various weightings of the authorized asset categories. Additional asset
categories may also be added to the plan within the context of the investment objectives. The Company may contribute to the pension plan during 2005. The following benefit payments are expected to be paid from the plans: Year(s)
    
    Pension Benefits
    
    
    Other Benefits2005
    
    $
    1,025
    
    
    $
    152006
    
    
    1,015
    
    
    
    162007
    
    
    1,005
    
    
    
    172008
    
    
    1,005
    
    
    
    182009
    
    
    1,005
    
    
    
    182010-2014
    
    
    5,110
    
    
    
    103
 F-19




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LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 8. Sourcing Realignment and Facility Shutdown Charges During 2002, the Company announced a strategic decision to relocate the Racine, Wisconsin
administrative and distribution functions as well as close the manufacturing facility at that
location. This decision led to an expense of $1.1 million including a $0.6 million leasehold
improvements impairment charge. The expense was recorded in selling and administrative expenses.
The Company eliminated 91 administrative, distribution and production positions in Racine. The
activity in the related reserves for the current year is as follows: Balance
    
    
    
    
    
    
    Payments or
    
    
    BalanceDecember 31,
    
    
    New
    
    
    Reserves
    
    
    December 31,2003
    
    
    Charges
    
    
    Used
    
    
    2004Facility shutdown reserves
    
    $
    477
    
    
    $
    
    
    
    $
    209
    
    
    $
    268
 On August 23, 2004, the Company announced the sale of certain assets of its PVC boot line. In
connection with this sale, the Company ceased manufacturing at its Claremont, New Hampshire
manufacturing facility. Approximately 70 administrative, distribution and production positions
were eliminated at this facility. This strategic decision led to charges of $0.9 million recorded
in selling and administrative expenses as follows: Severance and related costs
    
    $
    465Property and equipment write-down
    
    
    385Other exit costs
    
    
    50Total
    
    $
    900
 The activity in the related reserves for the current year is as follows: Balance
    
    
    
    
    
    
    Payments or
    
    
    BalanceDecember 31,
    
    
    New
    
    
    Reserves
    
    
    December 31,2003
    
    
    Charges
    
    
    Used
    
    
    2004Facility shutdown reserves
    
    $
    
    
    
    $
    900
    
    
    $
    514
    
    
    $
    386
 F-20




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##### Table of Contents



LACROSSE FOOTWEAR, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except share and per share data) Note 9. Enterprise-wide Disclosures Segment information is not presented since all of the Companys revenue is attributed to a single
reportable segment. Information about the Companys groups of products within its one segment is
presented below. Years Ending December 31,2004
    
    
    2003
    
    
    2002Footwear
    
    $
    100,969
    
    
    $
    88,137
    
    
    $
    86,406Protective clothing
    
    
    4,501
    
    
    
    7,550
    
    
    
    11,379$
    105,470
    
    
    $
    95,687
    
    
    $
    97,785
 The following table presents information about the Companys revenue attributed to countries based
on the location of the customer. Years Ending December 31,2004
    
    
    2003
    
    
    2002United States
    
    $
    101,644
    
    
    $
    92,639
    
    
    $
    95,054Foreign Countries
    
    
    3,826
    
    
    
    3,048
    
    
    
    2,731$
    105,470
    
    
    $
    95,687
    
    
    $
    97,785
 Long-lived assets located outside of the United States totaled approximately $0.1 million at
December 31, 2004 and 2003. Sales to the General Service Administration accounted for approximately 11%, 2%, and 1% of
consolidated revenues in fiscal years 2004, 2003, and 2002, respectively. No other single customer
provided revenue of 10% or more of consolidated revenues in any of the years presented. F-21