Five-Year Summary of Selected Financial Data

<TABLE>
Selected Income Statement Data
Year Ended December 31
<CAPTION>


(In Thousands)                             1999           1998           1997          1996           1995
-------------------------------------------------------------------------------------------------------------------
<S>                                    <C>            <C>            <C>           <C>             <C>
Net sales                              $124,328       $133,405       $145,503      $121,997        $98,571
Operating income (loss)                  (2,208)         5,598         13,156        10,088          6,662
Net income (loss)                        (2,637)         2,260          6,779         5,386          3,328
</TABLE>


<TABLE>
Selected Balance Sheet Data
Year Ended December 31
<CAPTION>



(In Thousands)                             1999           1998           1997          1996           1995
-------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>            <C>           <C>            <C>
Working capital                         $40,792        $44,801        $48,413       $46,811        $34,537
Total assets                             98,020         98,615        101,920        92,286         74,862
Long-term obligations                    10,702          9,827         12,499        16,002          4,893
Shareholders' equity                     56,388         63,035         61,848        55,936         51,322
</TABLE>



<TABLE>
Selected Share Data
Year Ended December 31
<CAPTION>

                                           1999           1998           1997          1996           1995
-------------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>           <C>            <C>
Basic earnings (loss) per share          $ (.41)        $  .34         $ 1.02        $  .80         $  .48
Diluted earnings (loss) per share        $ (.41)        $  .34         $ 1.01        $  .80         $  .48
Dividends per share                      $  .13         $  .13         $  .13        $  .11         $  .09
Shares used in basic
  per share calculation (000's)           6,465          6,662          6,668         6,668          6,680
Shares used in diluted
  per share calculation (000's)           6,465          6,676          6,713         6,674          6,680
</TABLE>


04
<PAGE>

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

Forward-Looking Statements
Certain matters  discussed below in this 1999 Annual Report (and,  thereby,  the
1999 Form 10-K) are  "forward-looking  statements"  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 the
Company  "believes,"  "expects"  or other  words of similar  import.  Similarly,
statements  that  describe the Company's  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.  Factors that could affect
actual results or outcomes include, without limitation:

 o Weather conditions
 o Dealer inventory levels
 o Actions of Company competitors
 o Changes in consumer buying patterns
 o Loss of a material customer
 o Imports of competitive foreign-sourced products

Shareholders,  potential investors and other readers are urged to consider these
factors in evaluating  the  forward-looking  statements and are cautioned not to
place undue reliance on such  forward-looking  statements.  The  forward-looking
statements included are made only as of the date of this 1999 Annual Report. The
Company is not obligated to publicly update such  forward-looking  statements to
reflect subsequent events or circumstances.

Overview
The Company markets and distributes its products through both the industrial and
retail channels of distribution.  The less weather sensitive  industrial channel
of distribution accounts for approximately 30% of total net sales and serves the
food  processing,  mining,  construction  and  industrial  end use markets  with
protective  footwear and clothing.  In order to build the less weather dependent
industrial business, the Company in 1996 acquired Rainfair, Inc., a manufacturer
and marketer of rainwear and protective  clothing.  In addition,  the Company is
gradually  shifting  its retail  product mix to become less  dependent on winter
weather.  This is being  accomplished  through  the faster  growth of the Danner
leather product line and the addition of leather and protective clothing product
offerings under the LaCrosse brand.

Net sales generated during the last five months of the year can account for over
55% of the Company's  net sales and have a  significant  impact on the Company's
results of operations.  Because consumers  generally purchase a large percentage
of the  Company's  products  from  September  through  January,  retail  dealers
generally want delivery of products from June through October for advance orders
and  from  October  through  December  for  restocking  (or  "fill-in")  orders.
Generally  mild or dry  weather  during  the late  fall and early  winter  has a
negative  impact on the Company's net sales for the current year,  while cold or
wet weather during such time has a favorable impact. Further, weather conditions
in  one  season  can  affect  future  net  sales,   particularly  where  weather
contributes  to high or low dealer  inventory  levels at the  season's  end.  To
satisfy demands for its products and to provide for uniform  production  levels,
the Company generally  manufactures its footwear products year-round.  To assist
in production scheduling, the Company's sales force calls on retail dealers from
January to June to present the product line, review inventory levels and prepare
an advance order.  The Company offers price discounts for orders placed prior to
July, although advance orders may be canceled at any time. To attempt to balance
the flow of  shipments  and the need for  warehouse  space,  the Company  offers
extended  terms on  receivables  relating  to  advance  orders to induce  retail
dealers to allow some shipments of seasonal  products prior to the peak shipment
period.  The advance order terms provide for payment by December 1 (January 1 in
the case of  Southern  dealers).  Because of  seasonal  fluctuations,  inventory
levels are highest at mid-year and accounts receivable levels are highest during
the fourth quarter.
<PAGE>

The Company is gradually shifting more of its production to offshore facilities.
This will result in decreased  domestically  produced products and thereby lower
investments  in plant and  equipment,  and provide a more  competitively  priced
product in the marketplace.  However,  the use of offshore  sourcing  facilities
will  require  placement  of  orders 4 to 6 months  in  advance  of the date the
customer  requires  delivery,   thus  increasing  the  emphasis  on  forecasting
capabilities.

Each year, the Company  introduces a number of new products.  A new product,  if
successful,  can generate  growing  amounts of net sales during the first two to
four years. In some cases, net sales of new products will help to offset adverse
factors, such as mild or dry weather or adverse economic conditions.

                                                                              05
<PAGE>

Results of Operations
The  following  table shows the  percentage  relationship  to net sales of items
derived from the Consolidated Statements of Operations and the percentage change
from year to year.
<TABLE>
<CAPTION>

                                          Percentage of Net Sales            Percentage of Increase (Decrease)
-------------------------------------------------------------------------------------------------------------------

Year Ended December 31               1999           1998           1997       1999 vs. 1998      1998 vs. 1997
-------------------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>            <C>               <C>                <C>
Net sales                           100.0%         100.0%         100.0%             (7)%               (8)%
Cost of goods sold                   76.5           74.1           72.0              (4)                (6)
Gross profit                         23.5           25.9           28.0             (16)               (15)
Selling and
  administrative expenses           (25.3)         (21.7)         (19.0)              8                  5
Operating income (loss)              (1.8)            4.2           9.0              --                (57)
Interest expense                     (1.8)          (1.7)          (1.4)             (2)                11
Other income                           .1             .3             .4             (76)               (36)
Income (loss) before
  income taxes                       (3.5)            2.8           8.0              --                (68)
Income taxes                          1.4          (1.1)           (3.1)             --                (68)
Minority interest                      --             --            (.2)             --                 --
Net income (loss)                    (2.1)%          1.7%           4.7%             --                (67)%
</TABLE>


Year Ended December 31, 1999
Compared to Year Ended December 31, 1998
Net Sales.  Net sales in 1999 decreased  $9.1 million,  or 7%, to $124.3 million
from $133.4  million in 1998.  The warm,  dry weather across most of the country
during the fourth  quarter  of 1998 and the first and  fourth  quarters  of 1999
resulted in reduced demand for weather-related boots and protective clothing. In
addition,  shipments  to L.L.  Bean  were down  approximately  $1.6  million  as
compared to 1998 as a result of L.L.  Bean's July 1998 decision to replace their
handcrafted  rubber bottoms  purchased from the Company with molded bottoms from
another vendor. The Company  antici-pates no further reduction in net sales from
L.L. Bean.  Consumer rainwear  shipments were down  approximately  $1.0 million,
largely as a result of a $1.5 million  shipment to a large mass merchant in 1998
which  did  not  reoccur  in  1999.   The  Company   anticipates   shipments  of
approximately $2.0 million to this mass merchant in 2000.  Partially  offsetting
these  declines  was a $2.4  million  increase in  shipments  of LaCrosse  brand
leather boots, driven largely by the introduction of the Gamemaster(TM) series.

Gross Profit.  Gross profit as a percentage  of net sales  decreased to 23.5% in
1999 from 25.9% in 1998. The lower gross profit margins were driven largely by a
$1.8 million charge taken in the fourth  quarter of 1999 in connection  with the
reduction of the LaCrosse rubber product line, the  discontinuation  of the Lake
of the Woods  brand and the  tighter  focus of the Red Ball  brand.  The charge,
based on managements' best estimate (subject to change),  relates to anticipated
disposition  costs on equipment and raw material used in the production of these
products and discontinued finished goods inventory.  In addition,  there was $.4
million of LIFO expense in 1999, compared to $.8 million of income in 1998. This
LIFO expense in 1999 was driven by inventory  mix (a higher  proportion of goods
with low base year costs) as compared to 1998,  when lower  inventory  levels in
the LIFO pool  resulted in income.  In addition,  gross  margins were  adversely
affected by unabsorbed  factory overhead (the result of lower production  levels
in response to lower demand) and start-up costs associated with the commencement
of  leather  footwear  production  in  the  Company's  Clintonville,   Wisconsin
manufacturing plant.
<PAGE>

Selling  and  Administrative  Expenses.   Selling  and  administrative  expenses
increased  $2.4  million,  or 8%, in 1999 as compared to 1998.  The  increase in
selling and  administrative  expenses  was driven by a $.5  million  increase in
product  development  spending due to the emphasis on new product  introductions
for the LaCrosse and Danner brands, a $.6 million increase in distribution costs
in support of the retail/industrial channels of distribution ($.3 million of the
increase  was a result  of  allocating  facility  costs  from  manufacturing  to
warehousing),  a $.6 million  increase in marketing and selling costs in support
of the Danner brand and the industrial channel of distribution and a $.4 million
increase  in  consulting  services  (primarily  in support  of a LaCrosse  brand
strategic  marketing  study,  the layout and  functionality  of the distribution
center  and IT  support  for the  implementation  of a new  Enterprise  Resource
Planning system currently in progress).  The Company does not expect significant
increases in product development or distribution costs in 2000.

Interest Expense. Interest expense decreased $55,000, or 2%, in 1999 as compared
to 1998. A slightly lower average  borrowing cost was the primary reason for the
decrease.

Income Tax Expense.  The Company's  effective income tax rate in 1999 was 39.0%,
compared to 39.2% in 1998.

06
<PAGE>

Year Ended December 31, 1998
Compared To Year Ended December 31, 1997
Net Sales. Net sales in 1998 decreased $12.1 million, or 8.3%, to $133.4 million
from $145.5  million in 1997. The mild winter weather across most of the country
from  December  1997  through the first  quarter of 1998  significantly  reduced
fill-in orders in early 1998 and also reduced advance orders for shipment in the
third quarter. In addition, the extremely warm and dry weather from mid-November
through  December  1998 lowered  retail demand and nearly  eliminated  late 1998
fill-in orders. While the Company's dealers ended 1998 with excessive inventory,
it is  believed  the  favorable  weather  conditions  in  January  1999  reduced
inventory levels below last year's levels. Shipments to L.L. Bean were also down
approximately $1.3 million as compared to 1997, the result of a decision by L.L.
Bean effective July 1998 to replace their  handcrafted  rubber bottoms purchased
from the Company  with molded  bottoms from another  vendor.  Further,  consumer
rainwear shipments were down  approximately $1.0 million,  primarily as a result
of lower  shipments to a large  discount mass  merchant.  These  decreases  were
partially  offset by a 10% increase in  shipments of our less weather  sensitive
Danner brand leather products, largely a result of new products.

Gross Profit.  Gross profit as a percentage  of net sales  decreased to 25.9% in
1998 from  28.0% in 1997.  Gross  profit  margins  were  adversely  affected  by
unabsorbed  factory overhead (the result of lower production  levels in response
to lower  demand),  a higher level of closeout sales  (primarily  related to the
transition  of the Lake of the Woods brand  product line to the LaCrosse  brand)
and a  reduced  volume  of higher  margin  fill-in  orders in both the first and
fourth  quarters.  In addition,  production  was  discontinued  at the Company's
factory  in  Virginia  and  transferred  to  another  Company  facility,   which
negatively impacted margins by approximately .2%.

Selling  and  Administrative  Expenses.   Selling  and  administrative  expenses
increased  $1.3  million,  or 5%, in 1998 as compared to 1997.  The  increase in
selling  and  administrative  expenses  was a result  of a planned  increase  in
consumer advertising, increased selling and marketing expenses in support of the
growth of the  Danner  brand,  increased  spending  on product  development  and
increased  warehousing  costs to  support  the Lake of the Woods  brand and as a
result of the  consolidation  of the  Company's  industrial  warehousing.  These
increases more than offset sales volume related  decreases in variable  expense.
As a percent of net sales,  selling and  administrative  expenses increased from
19.0% in 1997 to 21.7% in 1998,  largely as a result of higher planned  expenses
and lower sales volume.

Interest  Expense.  Interest  expense  increased  $220,000,  or 11%,  in 1998 as
compared to 1997.  The  increase  was  primarily  the result of $2.4  million in
additional  short-term borrowings for the January 1998 purchase of all Rainfair,
Inc.  common  stock held by the former  principal  owner.  In  addition,  higher
inventory  levels  throughout  the year,  primarily  the result of lower fill-in
sales during the winter of 1997-98, contributed to increased borrowings.

Income Tax Expense.  The Company's  effective income tax rate in 1998 was 39.2%,
the same as the 1997 income tax rate.

Liquidity and Capital Resources
The Company has  historically  financed its operations  with cash generated from
operations,  long-term lending arrangements and short-term  borrowings under its
line of credit.  The  Company  requires  working  capital  primarily  to support
fluctuating  accounts  receivable  and inventory  levels caused by the Company's
seasonal  business cycle. The Company's  working capital needs are lowest in the
first  quarter and highest  from August  through  October.  The Company  invests
excess cash balances in short-term commercial paper or money market investments.
<PAGE>

In May 1999,  the Company  renegotiated  its  unsecured  credit  agreement  with
Firstar Bank, N.A. as the lead bank.  Under the terms of the revised  agreement,
the maximum amount of borrowings  were  increased to $75.0 million,  including a
$12.5 million term loan, from the previous  maximum level of $62.5 million.  The
$12.5  million term loan was  primarily  used to repay the balance due under the
prior term loan and requires  quarterly  payments of $.4 million which commenced
in August 1999. The credit agreement expires on May 28, 2002.

Cash  generated by operations in 1999 amounted to $4.2 million  compared to $5.5
million in 1998.  Net income in 1999 decreased $4.9 million from the 1998 level,
however,  this was more  than  offset by a $2.4  million  increase  in  accounts
payable  (primarily  due to timing) as  compared to a $2.9  million  decrease in
1998. Accounts  receivable  decreased $2.7 million in 1999 as compared to a $4.2
million  decrease in 1998.  The  reduction  in  receivables  in both years was a
result of lower fourth quarter net sales, primarily as a result of the warm, dry
weather  in the  fourth  quarter  of both  years.  In 1998,  cash  generated  by
operations amounted to $5.5 million compared to $2.1 million in 1997. Net income
in 1998 decreased  $4.5 million from the 1997 level,  however this was more than
offset by a $4.2 million reduction in receivables (as compared to a $4.0 million
increase in 1997).  The  reduction  in  receivables  as of December 31, 1998 was
primarily the result of a 25% reduction in sales in December 1998 as compared to
the prior year. During 1998,  inventories increased $.6 million,  primarily as a
result of lower than  anticipated  net sales during  November and December 1998.
Accounts  payable  decreased $2.9 million from the 1997 level,  reflecting lower
production levels during December 1998.

                                                                              07
<PAGE>

Net cash used in investing  activities  during 1999 was $4.2 million,  down from
$6.6 million in 1998.  During 1999,  the Company  spent $2.5 million for capital
expenditures, which was down $1.8 million from the 1998 level. The reduced level
of sales the last two years and the absence of any new major  projects  were the
primary reasons for the decrease. Also contributing to the usage of cash in 1999
was a $1.1  million  payment to the former  shareholders  of Danner to satisfy a
guarantee  agreement  and $.5  million of other  payments.  In  addition to $4.3
million of capital  expenditures  in 1998, the Company also paid $2.4 million to
purchase all of the  Rainfair,  Inc.  common stock held by the former  principal
owner which made Rainfair,  Inc. a 100% owned  subsidiary of the Company.  It is
anticipated  that  capital  expenditures  during  2000 will be at about the same
level as in 1998.  During 1998,  net cash used in investing  activities was $6.6
million,  up from $3.7 million in 1997.  During  1998,  spending on property and
equipment was up approxi-mately $.9 million from the prior year,  primarily as a
result  of the  construction  of a  product  design/development  center  and the
purchase of Enterprise  Resource Planning (ERP) software.  The Company commenced
installation  of the  ERP  software  during  1999  and  several  phases  will be
completed  during 2000.  Also  contributing to the 1998 increase in cash used in
investing  activities  was the January 1998 purchase of the balance of Rainfair,
Inc. common stock not already owned for approximately $2.4 million.

Net cash provided by financing  activities  was $1.6 million in 1999 as compared
to $1.1 million in 1998. During 1999, $4.6 million of short-term borrowings were
used to purchase treasury stock ($2.0 million),  pay dividends ($.9 million) and
repay  long-term  debt  ($.1  million).  In 1998,  $5.5  million  of  short-term
borrowings were used to repay long-term debt ($3.3 million),  pay cash dividends
($.9 million) and purchase treasury stock ($.2 million).

In March 1995, the Company announced plans to repurchase up to 130,000 shares of
common stock in the open market.  During 1999,  55,000  shares were  repurchased
which  completed this  authorization.  In April 1999, the Company also announced
plans to repurchase up to an  additional  375,000  shares of common stock in the
open market.  During 1999,  the Company  repurchased  79,800 shares at a cost of
$587,000.

In April  1999,  the  Company  reported  that it had  repurchased  in a  private
transaction,  at the current  market price,  all of the 135,178 shares of common
stock issued in connection  with the Company's  1994  acquisition of Danner Shoe
Manufacturing Co. for a total cost of $1,042,000.

In March 2000, the Company  repurchased,  at the current  market price,  500,000
shares of common stock for a total cost of $2,125,000.

In March 1994, the Company  acquired  substantially  all of the assets of Danner
Shoe  Manufacturing  Co., in part by issuing 277,778 shares of common stock as a
portion of the purchase price. In the  acquisition,  the Company  guaranteed the
holders  of this  common  stock a market  price of at least  $16.20 per share by
March 1, 1999.  In March of 1999,  the Company made a payment of $1.1 million to
satisfy this guarantee.

The Company's debt to total capital ratio was 32.0% at December 31, 1999,  25.9%
at December 31, 1998 and 24.3% at December 31, 1997.

Currently  available  funds,  including  the line of credit,  together  with the
anticipated  cash flows  generated  from future  operations,  are believed to be
adequate to cover the Company's  anticipated  capital and working  capital needs
during 2000.
<PAGE>

From time to time, the Company  evaluates  acquisitions of businesses or product
lines that could complement the Company's  business.  The Company has no present
understandings,  commitments  or  agreements  with  respect to any  acquisition.
However,  if  the  Company  makes  significant  future  acquisitions,  it may be
required to raise funds  through  additional  bank  financing or the issuance of
debt or equity securities.

Year 2000
The year 2000 issue is the result of computer  programs using two digits (rather
than four) to define years.  Computers or other  equipment  with date  sensitive
software may recognize "00" as the year 1900 rather than 2000. This could result
in  system  failures  or  miscalculations.  If the  Company  or its  significant
customers or suppliers fail to correct year 2000 issues,  the Company's  ability
to operate could be adversely affected.

The Company spent  approximately  $250,000 during the years 1997 through 1999 to
address the year 2000 issue.  The Company  did not  experience  any  significant
malfunctions or errors in its information or non-information  technology systems
when the date changed from 1999 to 2000, and the Company has not experienced any
significant  problems  with its  suppliers  or customers as a result of the date
change.

Based on  operations  since  January 1, 2000,  the  Company  does not expect any
significant  impact on its business as a result of the year 2000 issue.  Because
it is  possible  that the full  impact  of the date  change  has not been  fully
recognized, the Company will continue to monitor the year 2000 situation through
additional key dates. The Company believes, however, that any potential problems
are likely to be minor and correctable.


08
<PAGE>
LaCrosse Footwear Financial Statements

Consolidated Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
(In Thousands, except for share data)                                               1999              1998
-------------------------------------------------------------------------------------------------------------
Assets
-------------------------------------------------------------------------------------------------------------
Current Assets
<S>                                                                             <C>               <C>
  Cash and cash equivalents                                                       $2,022              $364
  Trade accounts receivable, less allowances of $.9 and $1.0 million              20,445            23,151
  Inventories (Note 3)                                                            40,337            39,698
  Prepaid expenses, deferred tax assets and other (Note 4)                         5,725             4,289
                                                                              -------------------------------
         Total current assets                                                     68,529            67,502
                                                                              -------------------------------
Property and Equipment
  Land, land improvements and buildings                                            8,319             7,997
  Machinery and equipment                                                         31,478            29,389
                                                                              -------------------------------
                                                                                  39,797            37,386
  Less accumulated depreciation                                                   26,986            23,384
                                                                                  12,811            14,002
                                                                              -------------------------------
Other Assets
  Goodwill, net of amortization of $3.3 and $2.6 million (Note 2)                 13,446            14,125
  Deferred tax and other assets (Note 4)                                           3,234             2,986
                                                                              -------------------------------
                                                                                  16,680            17,111
                                                                              -------------------------------
                                                                                 $98,020           $98,615
                                                                              ===============================
Liabilities and Shareholders' Equity
-------------------------------------------------------------------------------------------------------------
Current Liabilities
  Current maturities of long-term obligations (Note 5)                            $1,712            $2,669
  Notes payable, bank (Note 5)                                                    14,088             9,500
  Accounts payable                                                                 5,910             3,469
  Accrued compensation                                                             2,383             3,000
  Accrued other                                                                    3,644             4,063
         Total current liabilities                                                27,737            22,701
                                                                              -------------------------------
Long-Term Obligations (Note 5)                                                    10,702             9,827

Compensation and Benefits (Note 8)                                                 3,193             3,052

Commitments and Contingencies (Notes 6, 7 and 8)

Shareholders' Equity (Notes 7 and 10)
  Common stock, par value $.01 per share;
   authorized 50,000,000 shares; issued 6,717,627 shares                              67                67
  Additional paid-in capital                                                      26,434            27,582
  Retained earnings                                                               32,575            36,041
  Less cost of 343,178 and 73,200 shares of treasury stock                       (2,688)             (655)
                                                                              -------------------------------
         Total shareholders' equity                                               56,388            63,035
                                                                              -------------------------------
                                                                                 $98,020           $98,615
                                                                              ===============================

See Notes to Consolidated Financial Statements.
</TABLE>
                                                                              09
<PAGE>
LaCrosse Footwear Financial Statements

<TABLE>

Consolidated Statements of Operations
Years Ended December 31, 1999, 1998 and 1997
<CAPTION>


(In Thousands, except for share and per share data)                1999             1998              1997
-------------------------------------------------------------------------------------------------------------
<S>                                                          <C>              <C>               <C>
Net sales                                                    $  124,328       $  133,405        $  145,503
Cost of goods sold                                               95,129           98,829           104,692
-------------------------------------------------------------------------------------------------------------
    Gross profit                                                 29,199           34,576            40,811
Selling and administrative expenses                              31,407           28,978            27,655
-------------------------------------------------------------------------------------------------------------
    Operating income (loss)                                      (2,208)           5,598            13,156
Non-operating income (expense):
  Interest expense                                               (2,208)          (2,263)           (2,043)
  Miscellaneous                                                      92              381               593
-------------------------------------------------------------------------------------------------------------
                                                                 (2,116)          (1,882)           (1,450)
-------------------------------------------------------------------------------------------------------------
    Income (loss) before income taxes (benefit)                  (4,324)           3,716            11,706
Provision for income taxes (benefit) (Note 4)                    (1,687)           1,456             4,588
-------------------------------------------------------------------------------------------------------------
    Net income (loss) before minority interest                   (2,637)           2,260             7,118
Minority interest in net income of subsidiary                        --               --              (339)
-------------------------------------------------------------------------------------------------------------
    Net income (loss)                                        $   (2,637)      $    2,260        $    6,779
----------------------------------------------------------------------------------------------------------
Basic earnings (loss) per share                              $     (.41)      $      .34        $     1.02
-------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per share                            $     (.41)      $      .34        $     1.01
-------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding:
  Basic earnings per share                                    6,464,685        6,661,683         6,667,702
  Diluted earnings per share                                  6,464,685        6,675,708         6,712,975
</TABLE>

See Notes to Consolidated Financial Statements.

10
<PAGE>
<TABLE>
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1999, 1998 and 1997

<CAPTION>
                                                    Additional                                       Total
(In Thousands, except for                Common        Paid-In       Retained     Treasury   Shareholders'
share and per share data)                 Stock        Capital       Earnings        Stock          Equity
-------------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>            <C>            <C>           <C>
Balance, December 31, 1996                  $67        $27,579        $28,733        $(443)        $55,936
  Net income                                 --             --          6,779           --           6,779
  Dividends ($.13 per share)                 --             --           (867)          --            (867)
                                         ---------------------------------------------------------------------------

Balance, December 31, 1997                   67         27,579         34,645         (443)         61,848
  Net income                                 --             --          2,260           --           2,260
  Dividends ($.13 per share)                 --             --           (864)          --            (864)
  Purchase of 25,000
   shares of treasury stock                  --             --             --         (227)           (227)
Issuance of 1,700
  shares of treasury stock                   --              3             --           15             18
                                         ---------------------------------------------------------------------------

Balance, December 31, 1998                   67         27,582         36,041         (655)         63,035
  Net (loss)                                 --             --         (2,637)          --          (2,637)
  Dividends ($.13 per share)                 --             --           (829)          --            (829)
  Purchase of 269,978
   shares of treasury stock                  --             --             --       (2,033)         (2,033)
  Settlement of Danner
   acquisition contingency
   (Note 7)                                  --        (1,148)             --           --          (1,148)
                                         ---------------------------------------------------------------------------

Balance, December 31, 1999                  $67        $26,434        $32,575      $(2,688)        $56,388
                                         ===========================================================================
</TABLE>

See Notes to Consolidated Financial Statements.
                                                                              11
<PAGE>
LaCrosse Footwear Financial Statements
<TABLE>
Consolidated Statements of Cash Flows
Years Ended December 31, 1999, 1998 and 1997
<CAPTION>
(In Thousands)                                                     1999             1998              1997
------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
<S>                                                            <C>               <C>               <C>
  Net income (loss)                                            $ (2,637)         $ 2,260           $ 6,779
  Adjustments to reconcile net income (loss)
   to net cash provided by operating activities:
   Depreciation                                                   3,660            3,437             3,180
   Amortization                                                     679              680               572
   Other154                                                         126              386
   Deferred income taxes                                           (725)             207                86
   Change in assets and liabilities,
    net of effects from acquisition in 1997:
    Trade accounts receivable                                     2,706            4,239            (4,033)
    Inventories                                                    (639)            (625)           (3,316)
    Accounts payable                                              2,441           (2,916)           (1,065)
    Accrued expenses and other                                   (1,405)          (1,900)             (462)
                                                             -----------------------------------------------
       Net cash provided by operating activities                  4,234            5,508             2,127

Cash Flows from Investing Activities
  Settlement of Danner acquisition contingency                   (1,148)              --                --
  Purchase of the minority interest in Rainfair, Inc.                --          (2,365)                --
  Acquisition of Pro-Trak Corporation,
   net of cash acquired                                              --               --                77
  Purchase of property and equipment                             (2,513)          (4,288)           (3,364)
  Other                                                            (507)              11              (416)
                                                             -----------------------------------------------
       Net cash (used in) investing activities                   (4,168)          (6,642)           (3,703)

Cash Flows from Financing Activities
  Proceeds from long-term obligations                            12,755               --                --
  Principal payments on long-term obligations                   (12,837)          (3,352)           (7,981)
  Net proceeds from short-term borrowings                         4,588            5,500             4,000
  Cash dividends paid                                              (864)            (867)             (733)
  Purchase of treasury stock                                     (2,033)            (209)               --
  Other                                                             (17)              --                --
                                                             -----------------------------------------------
       Net cash provided by (used in)
        financing activities                                      1,592            1,072            (4,714)
                                                             -----------------------------------------------
        Increase (decrease) in cash
        and cash equivalents                                      1,658              (62)           (6,290)

Cash and cash equivalents:
  Beginning                                                         364              426             6,716
                                                             -----------------------------------------------
  Ending                                                       $  2,022          $   364           $   426
                                                             -----------------------------------------------
Supplemental Information
  Cash payments for:
   Interest                                                    $  2,032          $ 2,178           $ 1,891
   Income taxes                                                $    610          $ 2,101           $ 4,055
</TABLE>

See Notes to Consolidated Financial Statements.

12
<PAGE>

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies

Nature of business
The  Company  designs,  manufactures  and  markets  premium  quality  protective
footwear and clothing for sale principally throughout the United States.

Significant accounting policies
Principles of consolidation
The 1999 and 1998  consolidated  financial  statements  include the  accounts of
LaCrosse Footwear,  Inc. and its wholly owned subsidiaries (the "Company").  The
1997 consolidated  financial statements include a 50% owned subsidiary where the
Company had board,  operating and financial  control.  The Company acquired 100%
ownership  of its 50% owned  subsidiary  in January  1998 (Note 2). 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 generally  accepted
accounting principles 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.
Actual results could differ from those estimates.

Fair value of financial instruments
The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments:

The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of those investments.

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.

The fair value of the  interest  rate swap  agreements  was not  material to the
financial  position of the Company based upon the  estimated  amount the Company
would pay or receive to terminate these agreements.

Concentrations of credit risk
The Company grants credit to its customers,  who are primarily  domestic  retail
stores, direct mail catalog merchants and wholesalers, based on an evaluation of
the  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.

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 Company maintains
its cash in bank deposit  accounts which,  at times,  exceed  federally  insured
limits. The Company has not experienced any losses in such accounts.

Inventories
Inventories are stated at the lower of cost or market.  All inventories,  except
for vinyl  products,  boot liners,  leather boots,  leather boot  components and
rainwear, are valued using the last-in, first-out (LIFO) method. Vinyl products,
boot liners,  leather  boots,  leather boot  components  and rainwear are valued
using the first-in, first-out (FIFO) method.
<PAGE>

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,  20 to 40
years; and machinery and equipment, 3 to 7 years.

Intangible assets
Goodwill,  representing  the excess of cost over net assets  acquired,  is being
amortized on a straight-line basis over periods of 8 to 30 years. Trademarks are
being amortized on a straight-line basis over 15 years.

Impairment of long-lived assets
The Company  reviews  its  long-lived  assets and  intangibles  periodically  to
determine  potential  impairment by comparing the carrying value of these assets
with  expected  future net cash flows  provided by operating  activities  of the
business.  Should the sum of the expected future net cash flows be less than the
carrying value, the Company would determine whether an impairment loss should be
recognized.  An  impairment  loss would be measured by  comparing  the amount by
which the carrying  value  exceeds the fair value of the  long-lived  assets and
intangibles based on appraised market value.

Interest rate swap agreements
The Company uses interest rate swap agreements to manage its exposure to certain
interest  rate  changes.  As interest  rates change,  the  differential  paid or
received is recognized in interest expense of the period.

                                                                              13
<PAGE>
Notes to Consolidated Financial Statements

Revenue recognition and product warranty
Revenue is recognized at the time products are shipped to customers.  Revenue is
recorded net of freight,  estimated discounts and returns.  The Company warrants
its products against defects in design,  materials and workmanship generally for
one year. A provision  for  estimated  future  warranty  costs is recorded  when
products are shipped.

Income taxes
Deferred taxes are provided on a 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.

Advertising and promotion
The Company  advertises and promotes its products  through national and regional
media,  displays,  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, 1999,
1998 and 1997 is approximately $2.8, $2.9, and $2.2 million, respectively.

Stock-based compensation
The Company  accounts for  stock-based  compensation  using the intrinsic  value
method  prescribed  in APB  Opinion  No.  25,  "Accounting  for Stock  Issued to
Employees," and related interpretations.  Accordingly,  since the Company grants
options where the exercise price is equal to the market price at the date of the
grant, no compensation costs have been recognized.

Earnings per share
Statement of Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings  per
Share,"  requires the  presentation  of earnings per share by all entities  that
have common  stock or potential  common  stock (such as options and  convertible
securities)  outstanding that trade in a public market.  Because the Company has
potential  common  stock  outstanding,  as  discussed  in Note 7, the Company is
required to present  basic and  diluted  earnings  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  numerators  are the same for the  basic  and  diluted  earnings  per  share
computations  for all years  presented.  The impact of the stock  options on the
denominators of the diluted  earnings per share  computation was to increase the
shares  outstanding by 0 shares,  14,025 shares, and 45,273 shares for the years
ended  December  31,  1999,  1998 and 1997,  respectively.  Options to  purchase
415,863 shares of common stock at $7.63 to $14.50 per share were  outstanding at
December 31, 1999 but were not included in the  computation of diluted  earnings
per share because to do so would be antidilutive.

Recent accounting pronouncements
In June 1998, the Financial  Accounting  Standards  Board (FASB) issued SFAS No.
133,  "Accounting  for Derivative  Instruments  and Hedging  Activities,"  which
establishes  accounting and reporting  standards for derivative  instruments and
hedging  activities.  It requires that an entity  recognize all  derivatives  as
either assets or liabilities in the balance sheet and measure those  instruments
at fair value.  Management  does not believe this will have a material effect on
the  Company's  operations.  Implementation  of this  standard has recently been
delayed by the FASB for a 12-month  period.  The Company will adopt SFAS No. 133
as required for its first quarterly filing of fiscal year 2001.
<PAGE>

Note 2. Acquisitions

In July 1997,  the Company  acquired  all of the  outstanding  shares of capital
stock of Pro-Trak Corporation,  which operated under the Lake of the Woods trade
name. The total purchase price was approximately $7.3 million which included the
immediate  paydown of  liabilities  of $6.6 million.  The  acquisition  has been
accounted for as a purchase.  Accordingly, the purchase price has been allocated
to assets and liabilities based on their estimated fair values as of the date of
acquisition.

In January 1998, the Company  purchased all Rainfair,  Inc. common stock held by
the former principal owner for approxi-mately $2.4 million, which made Rainfair,
Inc. a wholly  owned  subsidiary  of the  Company.  Prior to January  1998,  the
Company owned 50% of Rainfair, Inc.

Note 3. Inventories

A summary of inventories is as follows:

                                   December 31,
(In Thousands)                     1999        1998
------------------------------------------------------
Finished goods                  $32,487     $29,622
Work in process                   1,496       1,536
Raw materials                     6,354       8,540
                               -----------------------
  Total inventories             $40,337     $39,698
                               -----------------------

If all inventories  were valued on the FIFO method,  total  inventories for 1999
and 1998 would have been $43.8 and $42.5 million, respectively.

14
<PAGE>

Note 4. Income Tax Matters

Net deferred tax assets and liabilities consist of the following components:

                                    December 31,
(In Thousands)                     1999        1998
------------------------------------------------------
Deferred tax assets:
  Receivable allowances          $  322      $  455
  Inventory differences           1,024         324
  Compensation and benefits       2,055       1,997
  Insurance reserves and other      713         453
                               -----------------------
                                  4,114       3,229
Deferred tax liabilities,
  principally intangibles           979         819
                               -----------------------
                                 $3,135      $2,410
                               -----------------------

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,
(In Thousands)                     1999        1998
------------------------------------------------------
Current assets                   $2,747      $1,993
Noncurrent assets                   388         417
                               -----------------------
                                 $3,135      $2,410
                               -----------------------

The provision for income taxes (benefit) consists of the following:

               Years Ended December 31,
------------------------------------------------------
(In Thousands)          1999       1998        1997
------------------------------------------------------
Current:
  Federal            $  (820)     $  892      $3,684
  State                 (142)        357         818
Deferred                (725)        207          86
                    -----------------------------------
                     $(1,687)     $1,456      $4,588
                    -----------------------------------

The differences  between statutory federal tax rates and the effective tax rates
are as follows:

                           Years Ending December 31,
                            1999        1998        1997
-----------------------------------------------------------
Statutory federal
  tax rate                 (35.0)%      35.0%       35.0%
State taxes, net of
  federal tax benefit
  and other                 (4.0)        4.2         4.2
                           --------------------------------
Effective tax rate         (39.0)%      39.2%       39.2%
                           --------------------------------


Note 5. Financing Arrangements

Credit agreement
The Company has a $75 million unsecured credit  agreement.  Under the agreement,
the Company has (1) a $62.5  million  revolving  line of credit which expires on
May 28,  2002 ($12.5  million of which can be used to support  letters of credit
and $22.5 million which can be used to issue unsecured commercial paper) and (2)
a $12.5  million  term  loan due May 28,  2004.  At the  Company's  option,  the
interest rate is either the bank's prime rate or Eurodollar rate plus .75% or 1%
for the revolving line of credit and  Eurodollar  rate plus 1.125% or 1.375% for
the term loan, depending upon the Company's leverage ratio (Eurodollar rate plus
 .75% and  Eurodollar  rate plus 1.125% for the revolving line of credit and term
loan, as of December 31, 1999).  Interest is payable monthly on prime rate loans
and at maturity on Eurodollar loans.
<PAGE>

The credit agreement contains various covenants,  including minimum consolidated
tangible net worth,  sale of assets,  indebtedness,  interest coverage ratio and
leverage  ratio.  At December  31,  1999,  the Company did not meet the interest
coverage ratio, but this covenant violation was subsequently waived. At December
31,  1999 and 1998,  there was $14.1  million  and $9.5  million,  respectively,
outstanding  under the revolving  line of credit.  In addition,  at December 31,
1999 and 1998,  there  were  letter of credit  commitments  outstanding  of $3.3
million  and $3.7  million,  respectively.  In 1998,  the Company  entered  into
interest  rate  swap   agreements  to  manage  its  exposure  to  interest  rate
fluctuations on its floating rate debt. As of December 31, 1999, the Company had
swap  agreements in effect  totaling $11.0  million,  of which $7.0 million will
mature in 2002 with the remaining $4.0 million  maturing in 2003. The Company is
exposed to credit loss in the event of nonperformance by the counterparty to the
interest  rate  swap  agreements.  However,  the  Company  does  not  anticipate
nonperformance by the  counterparty.  The variable rate borrowings not offset by
swap  agreements  at December 31, 1999 and 1998 totaled  $14.8  million and $9.4
million, respectively.

Long-term obligations
                                      December 31,
(In Thousands)                     1999        1998
------------------------------------------------------
Term loan under credit
 agreement, due in quarterly
 payments of $.4 million
 with a final principal
 payment of $4.9 million
 on May 28, 2004                $11,700     $    --
Term loan under
  credit agreement                   --      10,900
Notes payable, paid in 1999          --       1,028
Other                               714         568
                              ------------------------
                                 12,414      12,496
Less current maturities           1,712       2,669
                              ------------------------
                                $10,702      $9,827
                              ------------------------

Maturities of long-term  obligations  for the next five years are as follows (in
millions):  2000,  $1.7; 2001, $1.7; 2002, $1.7; 2003, $1.7; 2004, $5.3; and $.3
thereafter.

                                                                              15
<PAGE>
Notes to Consolidated Financial Statements

Note 6. Lease Commitments and Total Rental Expense

The Company  leases  office  space,  retail  stores,  manufacturing  facilities,
equipment and warehouse space under  non-cancelable  agreements  which expire on
various  dates  through  2009 and are recorded as  operating  leases.  The total
rental  expense  included in the  consolidated  statements of operations for the
years ended December 31, 1999, 1998 and 1997 is  approximately  $1.8,  $1.9, and
$1.8 million,  respectively.  Approximate  future  minimum lease payments are as
follows (in millions):  2000,  $1.8; 2001, $.9 , 2002, $.7; 2003, $.5; 2004, $.5
and $1.5 thereafter.

Note 7. Stock Options and
Shareholders' Equity

Stock options
The Company has granted stock  options to officers and key  employees  under its
1993 and 1997 stock  option  plans  pursuant to which  options for up to 550,000
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 10 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 Average
                        Shares       Exercise Price
--------------------------------------------------------
December 31, 1996      208,125               $11.12
  Granted               63,500                11.59
  Canceled              (3,300)                9.06
  Exercised               (100)                9.06
                     ---------
December 31, 1997      268,225                11.26
  Granted               58,563                13.84
  Canceled             (23,275)               12.10
  Exercised             (1,700)                9.88
                     ---------
December 31, 1998      301,813                11.70
  Granted              116,750                 8.54
  Canceled              (2,700)                9.78
                     ---------
December 31, 1999      415,863                10.83

The weighted  average  remaining life of outstanding  options is 6.7 years as of
December  31, 1999.  Options  exercisable  as of December 31 were  approximately
189,000  shares in 1999,  128,000  shares in 1998 and 82,000 shares in 1997 at a
weighted average exercise price of $11.63, $11.66 and $11.89, respectively.

Compensation  expense under the plans is accounted for following the  provisions
of  APB  Opinion  No.  25  and  its  related  interpretations.  Accordingly,  no
compensation  cost has been  recognized  for grants made to date. If the Company
had  elected  to  recognize  compensation  cost  based on the fair  value of the
options granted at the grant date as provided by SFAS No. 123, the Company's net
income  (loss) for the years ended  December 31, 1999,  1998 and 1997 would have
been $(2,816), 2,124 and 6,678, respectively.  Pro forma diluted earnings (loss)
per share for the years ended  December 31, 1999,  1998 and 1997 would have been
$(.44), $.32 and $.99, respectively.
<PAGE>

The  weighted  average  fair value at date of grant for options  granted  during
1999, 1998 and 1997 was $3.87, $5.81 and $5.18 per share, respectively. The fair
value  of  each  option  is  estimated  on the  date  of  the  grant  using  the
Black-Scholes option-pricing model with the following assumptions:

                        1999       1998        1997
-------------------------------------------------------------------------------
Expected
  dividend yield          1%         1%          1%
Expected stock
  price volatility       20%        25%         25%
Risk-free
  interest rate         6.5%       6.5%        6.5%
Expected life
  of options         7 years    7 years     8 years


Settlement of acquisition contingency
In 1994,  the Company  acquired  substantially  all of the assets of Danner Shoe
Manufacturing Co. ("Danner") in part by issuing common stock as a portion of the
purchase price. In the acquisition,  the Company  guaranteed the holders of this
common stock a market  price of at least $16.20 per share by March 1, 1999.  The
fair  value of this  guarantee  was  measured  by the  Company as of the date of
acquisition.  On March 1, 1999,  the market price of the Company's  common stock
was less than  $16.20  per share and the  Company  was  required  to make a cash
payment of approximately  $1.1 million to the former  shareholders of Danner who
were  parties to the  guarantee.  As a result,  additional  paid-in  capital was
reduced by approximately $1.1 million.


16
<PAGE>

Note 8. Compensation and Benefit Agreements

The Company has defined benefit pension plans covering  approximately 50% of its
employees. Eligible employees are entitled to monthly pension benefits beginning
at normal  retirement  age (65).  The  monthly  benefit  payable  at the  normal
retirement date under the Company's pension plans is equal to a specified dollar
amount or percentage of average monthly  compensation,  as defined in the plans,
multiplied  by years of benefit  service  (maximum of 38 years).  The  Company's
funding  policy  is to make  not  less  than the  minimum  contribution  that is
required  by  applicable  regulations,  plus such  amounts  as the  Company  may
determine to be appropriate from time to time. In 1999, the Company's retirement
plan was amended to increase the monthly benefit payable and the eligibility age
for disability  benefits.  In 1998, the Company's union pension plan was amended
to increase  the benefit rate for  participants  retiring or  terminating  after
September 30, 1998. These amendments  resulted in increases of approximately $.7
and $1.0 million in both  unrecognized  prior service cost and projected benefit
obligation as of December 31, 1999 and 1998, respectively.

The Company sponsors an unfunded defined benefit postretirement medical and life
insurance  plan that covers a majority of its  employees  until they qualify for
Medicare.  The plan is contributory for retirees with contributions  established
annually as a specified  dollar  amount.  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.

<TABLE>
<CAPTION>
                                                              Pension Benefits           Other Benefits
                                                                December 31,              December 31,
(In Thousands)                                                  1999        1998          1999        1998
------------------------------------------------------------------------------------------------------------
Changes in benefit obligations:
<S>                                                         <C>          <C>           <C>         <C>
  Obligations at beginning of year                           $13,952     $12,568       $ 1,395     $   797
  Service cost                                                   558         443            65          74
  Interest cost                                                1,017         856            70          89
  Plan amendment                                                 662         996           370          --
  Benefits paid                                                 (655)       (603)          (36)        (34)
  Actuarial losses (gains)                                       245        (308)         (746)        469
------------------------------------------------------------------------------------------------------------
  Obligations at end of year                                 $15,779     $13,952       $ 1,118     $ 1,395
------------------------------------------------------------------------------------------------------------
Changes in plan assets:
  Fair value of assets at beginning of year                  $16,127     $14,719       $    --     $    --
  Actual return on assets                                        716       1,977            --          --
  Company contributions                                            5          34            36          34
  Participant contributions                                       --          --            21          27
  Benefits paid                                                 (655)       (603)          (57)        (61)
------------------------------------------------------------------------------------------------------------
  Fair value of assets at end of year                        $16,193     $16,127       $    --     $    --
------------------------------------------------------------------------------------------------------------
Funded status at end of year:
  Plan assets in excess of (less than) obligations           $   414      $2,175       $(1,118)    $(1,395)
  Unrecognized gains                                          (3,316)     (4,267)       (1,550)       (914)
  Unrecognized prior service cost                              1,816       1,291           318          --
  Unrecognized transition obligation                              61         112           777         847
------------------------------------------------------------------------------------------------------------
  Accrued benefit cost                                      $(1,025)     $  (689)      $(1,573)    $(1,462)
------------------------------------------------------------------------------------------------------------
</TABLE>
                                                                              17
<PAGE>
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
                                                Pension Benefits                       Other Benefits
                                            Years Ending December 31,             Years Ending December 31,
(In Thousands)                             1999        1998        1997          1999        1998        1997
--------------------------------------------------------------------------------------------------------------
Cost recognized during the year:
<S>                                     <C>         <C>         <C>             <C>         <C>          <C>
  Service cost                          $   558     $   443     $   471         $  65       $  74        $ 22
  Interest cost                           1,017         856         844            70          89          60
  Expected return on plan assets         (1,264)     (1,156)     (1,017)           --          --          --
  Amortization of prior gains              (159)       (106)         30          (111)       (101)        (66)
  Amortization of prior service cost        137          47          31            53          --          --
  Amortization of transition obligation      51          51          51            70          70          70
                                        ----------------------------------------------------------------------
  Net periodic benefit cost             $   340     $   135     $   410         $ 147       $ 132        $ 86
                                        ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
                                                Pension Benefits                       Other Benefits
                                                  December 31,                          December 31,
                                           1999        1998        1997          1999        1998        1997
--------------------------------------------------------------------------------------------------------------
Assumptions used in computations:
<S>                                        <C>         <C>         <C>           <C>         <C>         <C>
  Discount rate                            7.0%        7.0%        7.0%          7.0%        7.0%        7.0%
  Rate of compensation increase            4.5%        4.5%        4.5%           N/A         N/A         N/A
  Expected 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.
</TABLE>


<PAGE>

For measurement  purposes of other  benefits,  a 9.0% annual rate of increase in
the cost of covered  health care  benefits  was  assumed for 1999.  The rate was
assumed  to  decrease  gradually  to 5.0%  at  2007  and  remain  at that  level
thereafter. A one-percentage-point  change in the assumed health care cost trend
rates would have the following  effects for the year ended December 31, 1999 (in
thousands):

                               Increase    Decrease
------------------------------------------------------------------
Effect on total of
  service and interest
  cost components                   $14       $(12)
Effect on postretirement
  benefit obligation                 80        (71)


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,
(In Thousands)          1999       1998        1997
-----------------------------------------------------------
Footwear            $108,314   $115,643    $126,750
Protective
  Clothing            16,014     17,762      18,753
-----------------------------------------------------------
                    $124,328   $133,405    $145,503
-----------------------------------------------------------

The following table presents  information about the Company's revenue attributed
to countries based on the location of the customer.

                       Years Ending December 31,
(In Thousands)          1999       1998        1997
--------------------------------------------------------
United States       $119,981   $128,570    $142,459
Foreign
  Countries            4,347      4,835       3,044
--------------------------------------------------------
                    $124,328   $133,405    $145,503
--------------------------------------------------------

Long-lived assets located outside of the United States totaled approximately $.5
million at December 31, 1999.

No single customer  provided revenue of 10% or more of consolidated  revenues in
any of the years presented.

Note 10. Subsequent Event

On March 14, 2000,  the Company  repurchased  500,000 shares of its common stock
for approximately $2.1 million.

18
<PAGE>


Independent Auditors' Report


To the Board of Directors and Shareholders of LaCrosse Footwear, Inc.

We have  audited  the  accompanying  consolidated  balance  sheets  of  LaCrosse
Footwear,  Inc.  and  Subsidiaries  as of December  31,  1999 and 1998,  and the
related consolidated  statements of operations,  shareholders'  equity, and cash
flows for each of the three years in the period ended  December 31, 1999.  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  generally   accepted  auditing
standards.  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 provide 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 Subsidiaries as of December 31, 1999 and 1998, and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.



                                                         McGLADREY & PULLEN, LLP

La Crosse, Wisconsin
February 10, 2000, except for Note 10, as to which
the date is March 14, 2000

                                                                              19
<PAGE>
Quarterly Results of Operations (Unaudited)

The Company reports its quarterly  results of operations on the basis of 13-week
periods  for each of the first three  quarters  with the year ending on December
31st.
<TABLE>
The following tabulation presents the Company's unaudited quarterly results of operations for 1999 and 1998.
<CAPTION>
Thousands of dollars except per share data-1999  First Quarter Second Quarter Third Quarter Fourth Quarter
------------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>           <C>            <C>
Net sales                                              $27,946        $26,788       $37,024        $32,570
Gross profit                                             7,472          7,087         9,790          4,850
Operating income (loss)                                    102          (141)         1,959        (4,128)
Net income (loss)                                        (150)          (320)           813        (2,980)
Basic and diluted earnings (loss) per share              (.02)          (.05)           .13          (.47)

<CAPTION>
Thousands of dollars except per share data-1998  First Quarter Second Quarter Third Quarter Fourth Quarter
------------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>           <C>            <C>
Net sales                                              $29,936        $29,461       $37,506        $36,502
Gross profit                                             7,767          7,689        10,160          8,960
Operating income                                           633            483         2,836          1,646
Net income                                                 189             12         1,321            738
Basic and diluted earnings per share                       .03            .00           .20            .11
</TABLE>

Market Information

The  Company's  common  stock trades on the Nasdaq  National  Market tier of The
Nasdaq Stock Market under the symbol BOOT.  The  following  table shows the high
and low  transaction  prices by calendar  quarter for the past three  years.  On
March 24,  2000,  there  were  approximately  300  shareholders  of  record  and
approximately 2,000 beneficial owners of the Company's common stock.
<TABLE>
<CAPTION>
                     1st                 2nd                     3rd                    4th      Year-end
------------------------------------------------------------------------------------------------------------
<S>     <C>                 <C>                     <C>                   <C>                    <C>
1997    $10 3/4 - 14 3/8    $11     - 13 1/2        $12 1/2 - 17 1/4      $14     - 16           $14 1/2
1998    $11 1/2 - 14 1/8    $11 3/8 - 12 1/2        $7 3/4  - 11 1/2      $7 3/4  - 10           $9 1/4
1999    $6 1/4  - 9 1/2     $6 5/8  - 9             $4 9/16 - 8 1/4       $4 1/4  - 6 23/32      $4 7/16
</TABLE>

Cash Dividends Declared Per Share

It is the Company's  policy to pay annual cash dividends.  The chart below shows
annual cash dividends declared per share for the past three years:

                                            1999          1998           1997
--------------------------------------------------------------------------------
Dividends declared per share                $.13          $.13           $.13

Market Risk Management

The Company enters into interest rate swap  agreements  ("Swap  Agreements")  to
reduce its exposure to interest rate fluctuations on its floating rate debt. The
Swap  Agreements  exchange  floating  rate  for  fixed  rate  interest  payments
periodically over the life of the agreements  without exchange of the underlying
notional  amounts.  The notional amounts of interest rate agreements are used to
measure  interest  to be paid or  received  and do not  represent  an  amount of
exposure to credit loss. For interest rate instruments  that  effectively  hedge
interest rate exposures, the net cash amounts paid or received on the agreements
are accrued and recognized as an adjustment to interest expense.  As of December
31, 1999,  the Company had Swap  Agreements  in effect  totaling  $11.0  million
notional  amount,  of which $7.0  million  will mature in 2002 with another $4.0
million  maturing  in 2003.  The  variable  rate  borrowings  not offset by Swap
Agreements at December 31, 1999 totaled $14.8 million.  Swap Agreement rates are
based on the three-month  LIBOR rate.  Based on average floating rate borrowings
outstanding throughout fiscal year 1999, a 100-basis point change in LIBOR would
have caused the Company's  monthly  interest  expense to change by approximately
$16,500.  The  Company  believes  that these  amounts  are not  material  to the
earnings of the Company.

20