EXHIBIT (13)


                [Pages 12-28 of 1996 Annual Report to Shareholders]

   [Page 12]
   <TABLE>
   Five Year Summary of Selected Financial Data
   <CAPTION> 

   Selected Income Statement Data

   In Thousands - Year Ended 
   December 31                    1996         1995          1994            1993          1992

   <S>                         <C>           <C>          <C>              <C>           <C>
   Net sales                   $121,997      $98,571      $108,319         $82,422       $68,831
   Operating income              10,088        6,662        11,230           7,250         5,771
   Net income                     5,386        3,328         6,152           3,700         2,707

   Selected Balance Sheet Data                                                                  

   In Thousands - Year Ended 
   December 31                     1996         1995          1994            1993          1992

   Working capital             $ 46,811      $34,537      $ 35,382         $26,725       $26,099
   Total assets                  92,286       74,862        74,822          46,488        37,849
   Long-term obligations         16,002        4,893         7,340          10,751        12,693
   Redeemable preferred 
     stock                            -        1,957         1,957           1,957         1,957
   Shareholders' equity          55,936       51,322        49,154          19,658        15,953


   Selected Share Data                                                                          

   Year Ended December 31          1996         1995          1994            1993          1992

   Net income per share        $    .80      $   .48      $    .98          $  .76        $  .53
   Dividends per share         $    .11      $   .09      $    .09          $  .08        $  .07

   Shares used in per 
     share calculation (000)      6,674        6,680         6,158           4,694         4,979

   </TABLE>

   <PAGE>

   [Pages 13-16]

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

   Overview

          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.

          Each year, the Company introduces a number of new products.  A new
   product, if successful, often generates growing amounts of net sales
   during the first three to five 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.  In addition, the Company's Rainfair, Inc. subsidiary, which
   is primarily in the rainwear business, provides products which react
   differently to the weather elements than the footwear business.

          In May 1996, a Company subsidiary, which is 50% owned by the
   Company, purchased the assets of Rainfair, Inc. and then was renamed
   Rainfair, Inc. (Rainfair).  Rainfair designs, manufacturers and
   distributes rainwear, protective clothing and boots.  If the acquisition
   had occurred on January 1, 1996, net sales and net income reported by the
   Company would have been $128.1 million and $5.5 million, respectively.

          In May 1996, the Company also acquired certain of the operating
   assets and trademarks of Red Ball, Inc. (Red Ball).  The Company accounted
   for this transaction as a purchase of assets rather than the acquisition
   of a business since there is limited continuity of the sale of Red Ball
   products, no facility leases were assumed and there is no continuity of
   the Red Ball cost structure.  During 1996, Red Ball products added $.5
   million and $3.0 million to the Company's net sales for the third and
   fourth quarters, respectively.

          The Company does not anticipate the future seasonality of sales
   will be significantly impacted by the net sales of Rainfair and Red Ball.

   Results of Operations

   The following table shows the percentage relationship to net sales of
   items derived from the Consolidated Statements of Income and the
   percentage change from year to year.

   <TABLE>
   <CAPTION>
                                        
                                          Percentage of Net Sales            Percentage of Increase
                                                                                   (Decrease)
   Year Ended December 31           1996           1995           1994        1996 vs. 1995   1995 vs. 1994

   <S>                             <C>            <C>            <C>          <C>             <C>              
   Net sales                       100.0%         100.0%         100.0%            24%             (9)%
   Cost of goods sold               72.3           73.1           71.4             22              (7)
   Gross profit                     27.7           26.9           28.6             27             (14)
   Selling and 
     administrative expenses       (19.4)         (20.2)         (18.2)            19               1
   Operating income                  8.3            6.7           10.4             51             (41)
   Interest expense                 (1.4)          (1.5)          (1.4)            15              (5)
   Other income                       .3             .3             .3             36             (19)
   Income before income taxes        7.2            5.5            9.3             60             (45)
   Income taxes                     (2.8)          (2.1)          (3.6)            61             (45)
   Net income                        4.4%           3.4%           5.7%            62%            (46)%

   </TABLE>

   Year Ended December 31, 1996 Compared to 
   Year Ended December 31, 1995

   Net Sales.  Net sales in 1996 increased $23.4 million, or 24.0%, to $122.0
   million from $98.6 million in 1995.  The increase in net sales was largely
   attributable to the May 1996 acquisitions of Rainfair and certain assets
   of Red Ball.  These acquisitions added $11.1 million and $3.5 million,
   respectively, of net sales in 1996.  Net sales of LaCrosse products
   increased $7.3 million in 1996 as compared to 1995, as a result of a $4.7
   million increase in sales through the retail channel of distribution due
   to (i) more favorable weather conditions, (ii) an improved retail climate
   and (iii) new product offerings, and a $3.0 million improvement in sales
   through the industrial channel of distribution, mainly as a result of new
   products.  Danner product sales increased $1.5 million in 1996 compared to
   1995 resulting mainly from the introduction of the Dri-Foot boot series.

   Gross Profit.  Gross profit as a percentage of net sales increased to
   27.7% in 1996 from 26.9% in 1995.  Gross profit margins as a percentage of
   net sales on LaCrosse products were up 1.5%, primarily the result of a $.4
   million reduction in the LIFO reserve, more favorable pricing on key raw
   materials and improved productivity at the La Crosse, Wisconsin factory. 
   This was partially offset by the lower margin rainwear business and lower
   margins on Red Ball brand sales, which were impacted by start-up
   inefficiencies.

   Selling and Administrative Expenses.   

   Selling and administrative expenses increased $3.8 million, or 19%, in
   1996 as compared to 1995, primarily resulting from the acquisitions of
   Rainfair and Red Ball, which added $.6 million and $2.2 million,
   respectively, to operating expenses in 1996.  As a percent of net sales,
   operating expenses decreased from 20.2% of net sales in 1995 to 19.4% of
   net sales in 1996.  The ability to leverage the LaCrosse operating
   expenses across a greater sales base was the primary reason for the
   reduction in operating expenses as a percent of net sales.  This allowed
   for a planned increase in advertising expenses.

   Interest Expense.  Interest expense increased $223,000, or 15%, in 1996 as
   compared to 1995.  The increase was the result of a $12.5 million increase
   in long-term debt to finance the Rainfair acquisition and the purchase of
   Red Ball assets, which was partially offset by lower short-term borrowings
   resulting from the reduced inventory levels of LaCrosse products during
   the year.

   Income Tax Expense.  The Company's effective income tax rate in 1996 was
   39.2%, the same as the 1995 income tax rate.

   Year Ended December 31, 1995 Compared to 
   Year Ended December 31, 1994

   Net Sales.  Net sales in 1995 decreased $9.7 million, or 9%, to $98.6
   million from $108.3 million in 1994 despite a $2.9 million increase in
   reported sales of Danner products due to including Danner results for the
   entire year of 1995.  The decrease in net sales was primarily due to the
   mild winter weather conditions during the 1994/95 winter which reduced the
   demand for LaCrosse protective footwear and left dealers with carryover
   inventory.  The primary products affected were rubber or vinyl
   bottom/leather top cold weather boots.  Net sales under government
   contracts were down $2.4 million, as a result of the completion of a
   government contract in 1994.

   Gross Profit.   Gross profit as a percentage of net sales decreased to
   26.9% in 1995 from 28.6% in 1994.  Margins on LaCrosse products were down
   primarily as a result of lower production levels and increases in raw
   material costs (primarily crude rubber) in excess of plan.  Margins on
   Danner products were down due to lower than planned production levels and
   start-up costs associated with new products.

   Selling and Administrative Expenses.   

   Selling and administrative expenses increased $.2 million, or 1%, in 1995
   as compared to 1994, primarily due to a $900,000 increase in expenses
   reported for Danner in 1995 as compared to 1994 when expenses were
   included from the date of acquisition, March 14, 1994.  This increase was
   partially offset by a $493,000 reduction in phantom stock compensation,
   primarily due to the lower level of profitability in 1995 as compared to
   1994.  As a percent of net sales, operating expenses increased from 18.2%
   in 1994 to 20.2% in 1995 primarily due to the reduced sales volume of
   LaCrosse products coupled with an additional $300,000 of planned marketing
   and advertising expense in support of our dealers.

   Interest Expense.   Interest expense decreased $72,000, or 5% in 1995 as
   compared to 1994.  The decrease was primarily the result of lower short-
   term interest rates.

   Income Tax Expense.   The Company's effective income tax rate in 1995
   increased to 39.2% from 38.7% in 1994 primarily due to a slight increase
   in non-deductible expenses and a higher effective state 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 in the third
   quarter.  The Company invests excess cash balances in short-term
   investment grade securities or money market investments.

          In May 1996, the Company invested $10.9 million in Rainfair.  Of
   this investment, approximately $8.0 million was for a secured loan to the
   subsidiary to support working capital requirements, consistent with the
   Company's intention to fund the working capital requirements of Rainfair
   through intercompany loans.  It is not anticipated that these loans will
   increase substantially during the next two years.  Rainfair is a designer,
   light manufacturer and distributor of industrial and consumer rainwear,
   protective clothing and boots.

          In May 1996, the Company also acquired certain of the operating
   assets and trademarks of Red Ball for approximately $5.5 million,
   including $.3 million paid for equipment leased from a third party and $.5
   million for relocation costs.  Red Ball was a designer, manufacturer and
   distributor of waders, pac boots and children's footwear.

          In May 1996, the Company renegotiated its unsecured credit
   agreement with Firstar Bank Milwaukee, N.A. as the lead bank.  Under the
   terms of the revised agreement, the maximum amount of borrowings were
   increased to $62.5 million, including a $12.5 million term loan, from the
   previous maximum level of $30.0 million.  The $12.5 million term loan,
   which is outstanding at December 31, 1996, was primarily used to fund the
   investment in Rainfair and the acquisition of assets of Red Ball.  The
   term loan requires quarterly payments of $.4 million commencing in March
   1998.

          Cash generated by operations amounted to $9.7 million in 1996, an
   increase from the $5.7 million and $1.6 million generated in 1995 and
   1994, respectively.  The improved operating cash flow in 1996 is primarily
   attributable to a $2.0 million increase in net income and a $2.1 million
   reduction in inventories (excluding the effect of the Rainfair inventories
   purchased).  The inventory reduction was the result of improved production
   planning and accurate sales forecasts.  The improvement in inventory
   levels was achieved despite adding over $3.0 million of inventory to
   support the Red Ball brand.  Due to sales growth anticipated in 1997,
   further inventory reductions are not anticipated.  A $2.1 million increase
   in accounts receivable, due to the increased fourth quarter sales volume,
   was largely offset by an increase in accrued expenses and depreciation.

          Net cash used in investing activities during 1996 was $14.2
   million, up significantly from $3.8 million in 1995.  The Rainfair
   acquisition and the purchase of the Red Ball trademarks, coupled with $3.1
   million of capital spending, accounted for the spending during 1996.  The
   $3.1 million of capital spending was $.7 million below the 1995 level,
   however, it is anticipated 1997 capital spending will increase above the
   $4.0 million level.

          Net cash provided by financing activities amounted to $8.1 million
   during 1996.  The $12.5 million of long-term debt incurred to finance the
   Rainfair and Red Ball acquisitions was partially offset by a $1.7 million
   principal payment on long-term debt and the repurchase of 100% of the
   outstanding preferred stock for $2.0 million.  In addition, the Company
   paid cash dividends of $668,000, including $68,000 on the preferred stock,
   during 1996.

          The March 1994 acquisition agreement for the purchase of the assets
   of Danner Shoe Manufacturing, Co. provides that in the event the cash and
   aggregate market value of the Company's common stock (valued as of March
   1, 1999) delivered in the Danner acquisition is less than $18.0 million,
   the Company will be obligated to make an additional cash payment equal to
   the difference.  To the extent the aggregate market value of the 277,778
   shares of the Company's common stock delivered as part of the purchase
   agreement equals or exceeds $4.5 million at or prior to March 1, 1999, the
   Company's obligation to make such payment can be reduced or eliminated. 
   This obligation can be reduced or eliminated by the sale of those shares
   by the former Danner shareholders under a Company-filed registration
   statement or under Rule 144 promulgated under the Securities Act of 1933,
   as amended, prior to March 31, 1999.

          The Company's debt to total capital ratio was 24.2% at December 31,
   1996, 11.5% at December 31, 1995 and 15.6% at December 31, 1994.

          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 for 1997 and 1998.

          From time to time, the Company evaluates acquisitions of businesses
   or product lines that could complement the Company's business, such as the
   Rainfair acquisition.  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.

   <PAGE>
   [Pages 17-27]

   Consolidated Balance Sheets
   December 31, 1996 and 1995
                                                            (In Thousands)   
   Assets                                                   1996       1995
   Current Assets
        Cash and cash equivalents                        $ 6,716    $ 3,036
        Trade accounts receivable, 
          less allowances of $1.5 and $.8 million         20,705     15,563
        Inventories (Note 3)                              31,549     26,007
        Prepaid expenses and deferred tax assets 
          (Note 4)                                         4,016      3,281
                                                         -------    -------
              Total current assets                        62,986     47,887
                                                         -------    -------
   Property and Equipment
        Land and land improvements and buildings           6,501      5,818
        Machinery and equipment                           23,391     20,994
                                                        --------    -------
                                                          29,892     26,812
        Less accumulated depreciation                     17,262     14,964
                                                        --------    -------
                                                          12,630     11,848
                                                        --------    -------
   Other Assets
        Goodwill, net of amortization of $1.4 and 
          $.9 million                                     13,823     13,653
        Deferred tax and other assets (Note 4)             2,847      1,474
                                                         -------    -------
                                                          16,670     15,127
                                                         -------    -------
                                                         $92,286    $74,862
                                                         =======    =======

   Liabilities and Common Shareholders' Equity                               
   Current Liabilities
        Current maturities of long-term obligations 
          (Note 5)                                       $ 1,851    $ 1,761
        Accounts payable                                   5,755      4,812
        Accrued expenses (Note 7)                          8,569      6,777
                                                         -------    -------
            Total current liabilities                     16,175     13,350
                                                         -------    -------

   Long-Term Obligations (Note 5)                         16,002      4,893
   Compensation and Benefits (Note 9)                      2,980      3,340
                                                         -------    -------
            Total liabilities                             35,157     21,583
                                                         -------    -------
   Commitments and Contingencies 
        (Notes 6, 8, 9 and 10)
   Minority Interest in Subsidiary                         1,193          -
   Redeemable Preferred Stock, at redemption price             -      1,957
   Common Shareholders' Equity
        Common stock, par value $.01 per share; 
          authorized 50,000,000 shares; 
          issued and outstanding, 6,667,627 shares, 
          respectively (Notes 8 and 10)                       67         67
        Additional paid-in capital                        27,579     27,579
        Retained earnings (Note 5)                        28,733     24,119
        Less cost of 50,000 shares of treasury stock        (443)      (443)
                                                        --------   --------
            Total common shareholders' equity             55,936     51,322
                                                        --------   --------
                                                         $92,286    $74,862
                                                        ========   ========

   See Notes to Consolidated Financial Statements.

   <PAGE>

   Consolidated Statements of Income
   Years Ended December 31, 1996, 1995 and 1994
                                             
                                               (In Thousands, 
                                     except for share and per share data)

                                            1996        1995      1994
   Net sales                            $121,997     $98,571  $108,319
   Cost of goods sold                     88,176      72,011    77,386
                                         -------     -------   -------
          Gross profit                    33,821      26,560    30,933
   Selling and administrative expenses    23,733      19,898    19,703
                                         -------     -------   -------
          Operating income                10,088       6,662    11,230
   Non-operating income (expense):
          Interest expense                (1,680)     (1,457)   (1,529)
          Miscellaneous                      361         266       330
                                         -------     -------    ------
                                          (1,319)     (1,191)   (1,199)
                                         -------     -------    ------
          Income before income 
          taxes                            8,769       5,471    10,031
   Provision for income taxes (Note 4)     3,440       2,143     3,879
                                         -------     -------    ------
          Net income before minority 
          interest                         5,329       3,328     6,152
   Minority interest in net loss 
     of subsidiary                            57           -         -
                                         =======     =======   =======
          Net income                    $  5,386     $ 3,328  $  6,152
   Earnings per common and 
     common equivalent share                $.80        $.48      $.98
                                         =======     =======   =======
   Weighted average common and 
     common equivalent shares 
          outstanding                  6,673,539   6,679,545 6,158,175
                                       =========   ========= =========

   See Notes to Consolidated Financial Statements.

   <PAGE>

   <TABLE>
    Consolidated Statements of Common Shareholders' Equity
    Years Ended December 31, 1996, 1995 and 1994
   
   <CAPTION>
                                      
                                           (In Thousands, except for share and per share data)
                                                                            Common                        Total
                                          Additional                        Stock                        Common
                                Common      Paid-In      Retained         Acquisition      Treasury   Shareholders'
                                 Stock      Capital      Earnings            Notes         Stock          Equity

   <S>                             <C>       <C>          <C>                <C>              <C>      <C>
   Balance, December 31, 1993      $47       $3,723       $16,078            $(190)           $-       $19,658
      Net income                     -            -         6,152                -             -         6,152
      Issuance of common 
         stock, including 
         1,725,000 shares 
         issued to the public 
         at $13 per share, 
         net of offering costs      20       23,856             -                -             -        23,876
      Common stock dividends 
         ($.09 per share)            -            -          (605)               -             -          (605)
      6% preferred stock 
         dividends                   -            -          (117)               -             -          (117)
      Payment received on 
         stock subscription note     -            -             -              190             -           190
                                  ----     --------      --------         --------      --------      --------
   Balance, December 31, 1994       67       27,579        21,508                -             -        49,154
      Net income                     -            -         3,328                -             -         3,328
      Common stock dividends 
         ($.09 per share)            -            -          (600)               -             -          (600)
      6% preferred stock 
         dividends                   -            -          (117)               -             -          (117)
      Purchase of 50,000 shares 
         of treasury stock           -            -             -                -          (443)         (443)
                                  ----     --------      --------         --------      --------      --------

   Balance, December 31, 1995       67       27,579        24,119                -          (443)       51,322
      Net income                     -            -         5,386                -             -         5,386
      Common stock dividends 
         ($.11 per share)            -            -          (733)               -             -          (733)
      6% preferred stock 
         dividends                   -            -           (39)               -             -           (39)
                                  ----     --------      --------         --------      --------      --------

   Balance, December 31, 1996      $67      $27,579       $28,733               $0         $(443)      $55,936
                                  ====     ========      ========         ========      ========      ========

   See Notes to Consolidated Financial Statements.
   </TABLE>

   <PAGE>

   Consolidated Statements of Cash Flows
   Years Ended December 31, 1996, 1995 and 1994

                                                    (In Thousands)     
                                             1996       1995           1994  

   Cash Flows from Operating Activities
    Net income                             $ 5,386     $3,328        $ 6,152
    Adjustments to reconcile net 
      income to net cash provided
      by operating activities:
        Depreciation                         2,925      2,523          2,274
        Amortization                           513        484            362
        Other                                  (34)        21             46
        Deferred income taxes                  (62)       (62)          (239)
        Change in assets and 
        liabilities, net of 
        effects from acquisition 
        of Danner Shoe Manufacturing
        Co. and Rainfair, Inc.:
          Trade accounts receivable         (2,145)        93         (1,117)
          Inventories                        2,136       (936)        (4,268)
          Accounts payable                     279        382         (2,492)
          Other                                712       (139)           923
                                           -------    -------        -------
            Net cash provided by 
            operating activities             9,710      5,694          1,641

   Cash Flows from Investing Activities
    Acquisition of Rainfair, Inc., 
      net of cash acquired                  (9,597)         -              -
    Purchase of property and equipment      (3,060)    (3,779)        (4,942)
    Purchase of trademarks                  (1,439)         -              -
    Acquisition of Danner Shoe 
      Manufacturing Co., net of cash 
        acquired                                 -          -        (13,569)
    Other                                      (67)       (13)           (35)
                                           -------    -------        -------
            Net cash (used in) investing 
            activities                     (14,163)    (3,792)       (18,546)

   Cash Flows from Financing Activities
    Proceeds from long-term obligations     12,500          -              -
    Principal payments on long-term 
      obligations                           (1,742)    (2,444)        (3,457)
    Cash dividends paid                       (668)      (722)          (494)
    Purchase of redeemable preferred 
      stock                                 (1,957)         -              -
    Purchase of treasury stock                   -       (443)             -
    Net proceeds from issuance of 
      common stock                               -          -         20,265
    Proceeds from common stock acquisition 
      notes                                      -          -            190
    Other                                        -          -            (47)
                                           -------    -------        -------
            Net cash provided by 
            (used in) financing 
            activities                       8,133     (3,609)        16,457
                                           -------    -------        -------

            Increase (decrease) in cash 
            and cash equivalents             3,680     (1,707)          (448)

   Cash and cash equivalents:
    Beginning                                3,036      4,743          5,191
                                           -------    -------        -------
    Ending                                 $ 6,716    $ 3,036        $ 4,743
                                           =======    =======        =======
   Supplemental Information
    Cash payments for:
      Interest                             $ 1,594    $ 1,396        $ 1,542
      Income taxes                         $ 2,939    $ 1,762        $ 3,985
   Supplemental Schedule of Noncash 
    Investing Activity
      Issuance of 277,778 shares of 
      common stock for Danner 
      acquisition                          $     -    $     -        $ 3,611
                                           -------    -------        -------

   See Notes to Consolidated Financial Statements.

   <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 rainwear for sale principally 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 and 50% owned subsidiaries (the
   "Company").  The Company consolidates 50% owned subsidiaries where it has
   board, operating and financial control.  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.

   Concentrations of credit risk:

   The Company grants credit to its customers, who are primarily domestic
   retail stores, direct mail catalog merchants, wholesalers, industrial and
   private label customers, 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.

   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 39
   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 30 years for the Danner
   acquisition and 15 years for the Rainfair acquisition.  The Red Ball
   trademarks are being amortized on a straight-line basis over 15 years.

   Impairment of long-lived assets:

   The Company was required to adopt SFAS No. 121 "Accounting for Impairment
   of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of",
   effective January 1, 1996.  SFAS No. 121 requires that long-lived assets
   and certain identified intangibles held and used by a company be reviewed
   for possible impairment whenever events or changes in circumstances
   indicate that the carrying amount of an asset may not be recoverable.  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 intangible based on appraised
   market value.

   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.

   Stock-based compensation:

   SFAS No. 123 "Accounting for Stock-Based Compensation" which the Company
   adopted in 1996 encourages, but does not require, companies to record
   compensation cost for stock-based employee compensation plans at fair
   value.  The Company has continued to account 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 exercise price is equal to the market price at the
   date of the grant, no compensation costs have been recognized.

   Earnings per common and common equivalent share:

   Per share earnings are based on the weighted average number of common and
   common equivalent shares outstanding during each year, after reducing net
   income by dividends on preferred stock.  Common equivalent shares consist
   of the dilutive effect of common stock options.

   Note 2.   Acquisitions

   In May 1996, the Company and the former principal owner of Rainfair, Inc.
   established a new corporation and each purchased one-half of the new
   corporation's common stock for $1,250,000.  The Company also purchased all
   of the new corporation's outstanding preferred stock for $500,000.  On May
   31, 1996, this 50% owned subsidiary of the Company purchased substantially
   all of the assets of Rainfair, Inc. for approximately $10.9 million in
   cash and approximately $1.4 million in assumed liabilities for an
   aggregate purchase price of approximately $12.3 million.  The name of the
   subsidiary was changed to Rainfair, Inc. (Rainfair) in June 1996 after
   completion of the acquisition.  The Company loaned Rainfair approximately
   $8.0 million (secured by all assets of Rainfair) to fund the portion of
   the purchase price which was not funded by the initial capital
   contributions.  The acquisition has been accounted for as a purchase. 
   Accordingly, the purchase price was allocated to assets and liabilities
   based on 50% of their estimated fair values and 50% of the predecessor's
   historical cost as of the date of acquisition.  The cost in excess of net
   assets acquired of approximately $.7 million is being amortized on a
   straight-line basis over a 15-year term.

   The value of assets acquired (net of cash of $64,617) and liabilities
   assumed is as follows (in thousands):

   Current assets                                    $10,774
   Leasehold improvements 
     and equipment                                       659
   Deferred taxes                                        151
   Goodwill                                              683
   Current liabilities                                  (965)
   Long-term liabilities                                (455)
                                                     -------

                                                      10,847

   Less minority interest contribution                (1,250)
                                                     -------
                                                      $9,597
                                                     =======


   In connection with the purchase, the Company entered into a shareholders'
   agreement with the former principal owner which prohibits (1) the
   declaration or payment of dividends on Rainfair common stock and (2) the
   disposal or transfer of Rainfair stock by either party.  The shareholders'
   agreement contains a put and call provision which may be exercised after 3
   years with the purchase price determined based upon the provision in the
   shareholders' agreement.

   The Company's consolidated statement of income for the year ended December
   31, 1996 includes Rainfair's results of operations since its acquisition
   in May, 1996.  The following unaudited pro forma information presents the
   consolidated results of operations as if the acquisition had occurred as
   of the beginning of 1995 and does not purport to be indicative of what
   would have occurred had the acquisition been made as of that date or of
   results which may occur in the future.

                                                     (In Thousands, Except
                                                     For Earnings Per Share)
                                                    Years Ending December 31,

                                                        1996         1995 
                                                           (Unaudited)

   Net sales                                         $128,147      $114,947
   Net income                                           5,465         3,377
   Earnings per common and 
     common equivalent share                              .81           .49


   In May 1996, the Company also acquired trade accounts receivable,
   inventories, machinery and equipment and trademarks from Red Ball, Inc.
   for a cash price of approximately $5.5 million.  The Company has accounted
   for the transaction as a purchase of assets rather than the acquisition of
   a business.  The primary purpose of the transaction was to purchase the
   Red Ball trademarks and there is limited continuity of the sale of Red
   Ball products, no facility leases were assumed and there is no continuity
   of Red Ball's sales, production or cost structure.  The purchase price is
   being allocated to the assets based on their fair values as of the date of
   acquisition.  The Company's consolidated statement of income for the year
   ended December 31, 1996 includes net sales of Red Ball products of
   approximately $3.5 million and the effect on net income is immaterial.

   Note 3.   Inventories
   A summary of inventories is as follows:

                                                          (In Thousands)
                                                           December 31,       
                                                       1996           1995

   Finished goods                                    $22,188        $18,371
   Work-in process                                     2,222          1,922
   Raw materials                                       7,139          5,714
                                                     -------        -------
   Total inventories                                 $31,549        $26,007
                                                     =======        =======

   If all inventories were valued on the FIFO method, total inventories for
   1996 and 1995 would have been $35.3 and $30.1 million, respectively.

   Note 4.   Income Tax Matters
   Net deferred tax assets and liabilities consist of the following
   components:

                                                           (In Thousands)
                                                            December 31,   
  
                                                          1996         1995
   Deferred tax assets:
     Receivable allowances                                $523         $366
     Inventory differences                                 525          493
     Compensation and benefits                           1,752        1,661
     Insurance reserves and other                          500          497
                                                       -------      -------
                                                         3,300        3,017
   Deferred tax liabilities, 
   principally intangibles                                 597          527
                                                       -------      -------
                                                        $2,703       $2,490
                                                       =======      =======

   The components giving rise to the net deferred tax assets described above
   have been included in the accompanying consolidated balance sheets as
   follows:

                                                           (In Thousands)
                                                            December 31, 
                                                          1996         1995
   Current assets                                       $2,017       $1,621
   Noncurrent assets                                       686          869
                                                       -------      -------
                                                        $2,703       $2,490
                                                       =======      =======

   No valuation allowance is required on the deferred tax assets as of
   December 31, 1996 and 1995.


   The provision for income taxes consists of 
   the following:

                                                   (In Thousands)
                                               Years Ended December 31,
                                             1996        1995          1994
   Current:
       Federal                             $2,947      $1,723        $3,539
       State                                  555         482           579
   Deferred                                   (62)        (62)         (239)
                                          -------     -------       -------
                                           $3,440      $2,143        $3,879
                                          =======     =======       =======

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

                                                Years Ending December 31,
                                             1996        1995          1994
   Statutory federal 
     tax rate                               35.0%       35.0%         35.0%
   State taxes, net 
     of federal tax 
     benefit and other                        4.2         4.2           3.7
                                          -------     -------       -------
   Effective tax rate                      39.20%       39.2%         38.7%
                                          =======     =======       =======

   Note 5.   Long-Term Obligations
   Credit agreement:

   The Company has a $62.5 million unsecured credit agreement.  Under the
   agreement, the Company has (1) a $50 million revolving line of credit
   which expires on December 31, 1999 ($10 million of which can be used to
   support letters of credit) and (2) a $12.5 million term loan due December
   31, 2001.  At the Company's option, the interest rate is either the bank's
   prime rate or LIBOR plus .75% or 1% for the revolving line of credit and
   LIBOR plus 1% or 1.25% for the term loan, depending upon the Company's
   leverage ratio.  (LIBOR plus .75% and LIBOR plus 1% for the revolving line
   of credit and term loan, respectively, as of December 31, 1996).  The
   credit agreement contains various covenants, including minimum
   consolidated tangible net worth, sale of assets, indebtedness, current
   ratio, interest coverage ratio and leverage ratio.  The revolving line of
   credit is used to finance peak inventory and accounts receivable levels
   and commitments for letters of credit.  At December 31, 1996 and 1995,
   there were no amounts outstanding under the revolving line of credit but
   there were letter of credit commitments outstanding of $1.0 and $2.7
   million, respectively.

   Long-term obligations:

                                                         (In Thousands)
                                                           December 31,
     
                                                        1996          1995
   Term loan under credit 
     agreement, due in quarterly 
     installments of $.4 million 
     commencing in March 1998, 
     interest payable monthly                          $12,500           $-

   10.26% unsecured note 
     payable, due in annual 
     installments of $1.4 million 
     excluding interest, interest 
     payable semi-annually (a)                           3,714        5,143

   10.73% unsecured note 
     payable, due in annual 
     installments of $.3 million 
     excluding interest, interest 
     payable semi-annually (a)                             743        1,028

   Other                                                   896          483
                                                       -------      -------
                                                        17,853        6,654
   Less current maturities                               1,851        1,761
                                                       -------      -------
                                                       $16,002       $4,893
                                                       =======      =======

   (a) The loan agreement contains various covenants, including minimum
   tangible net worth, working capital, current ratio, permitted
   indebtedness, net income before income taxes to interest expense and total
   permitted investments and restricted payments.  Retained earnings
   available for dividends under these agreements amount to approximately
   $10.2 million at December 31, 1996.

   Maturities of long-term obligations for the next five years are as follows
   (in millions): 1997, $1.9; 1998, $3.4; 1999, $2.7; 2000, $1.7; 2001, $7.8
   and $.4 thereafter.

   Note 6.   Lease Commitments and 
   Total Rental Expense

   The Company leases office space, retail stores, a manufacturing facility,
   equipment and warehouse space under non-cancelable agreements, which
   expire on various dates through 2004, and are recorded as operating
   leases.  The total rental expense included in the consolidated statements
   of income for the years ended December 31, 1996, 1995 and 1994 is
   approximately $1.6, $1.2 and $1.0 million, respectively.  Approximate
   future minimum lease payments, estimated utilities and real estate taxes
   are as follows (in millions): 1997, $1.6; 1998, $1.4; 1999, $1.4; 2000,
   $1.3; 2001, $.5 and $.7 thereafter.

   Note 7.   Accrued Expenses
   Accrued expenses are comprised of the following:

                                                          (In Thousands)
                                                            December 31,   
  
                                                          1996         1995
   Compensation                                         $4,423       $3,301
   Workers' compensation insurance                         889        1,174
   Income taxes payable                                  1,066          504
   Other, including dividends                            2,191        1,798
                                                       -------      -------
     Total accrued expenses                             $8,569       $6,777
                                                       =======      =======

   Note 8.   Stock Options

   In December 1993, the Board of Directors adopted a 1993 Employee Stock
   Incentive Plan pursuant to which options for up to 250,000 shares of
   common stock may be granted to officers and key employees of the Company,
   of which no more than 125,000 shares may be granted to any one employee. 
   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.  The options vest in equal increments over a five-year period.

   The following summarizes all stock options granted under the above plan:

                                                   Common         Per Share
                                                   Shares      Option Price
   December 31, 1994                               87,500            $13.00
     Granted                                       41,500       10.25-11.25
                                                  -------
   December 31, 1995                              129,000       10.25-13.00
     Granted                                       89,125        9.06-10.38
     Canceled                                     (10,000)       9.06-13.00
                                                  -------
   December 31, 1996                              208,125        9.06-13.00


   Options for 41,100 shares were exercisable at December 31, 1996.

   Grants under the plan are 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 prescribed by SFAS No. 123,
   pro forma net income would have been reduced by less than $.1 million and
   the pro forma earnings per share would have been $.79 and $.48 for the
   years ended December 31, 1996 and 1995, 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:

   Expected dividend yield                   1%
   Expected stock price volatility           25%
   Risk-free interest rate                   7.0%
   Expected life of options                  8 years

   The weighted average exercise price of the options granted during 1996 is
   $9.29 per share.

   Note 9.   Compensation and 
   Benefit Agreements

   The Company has defined benefit pension plans covering a majority 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.

   The following table sets forth the funded status of the plans and the
   amount recognized in the Company's consolidated balance sheets:

                                                         (In Thousands)
                                                           December 31,     
                                                        1996         1995
   Actuarial present value 
   of benefit obligations:
     Vested benefits                                   $10,543       $8,479
                                                       =======      =======
     Accumulated benefits                              $11,103       $9,046
                                                       =======      =======
   Projected benefits                                 ($12,574)    ($10,757)
   Plan assets at fair value 
     (equity securities and 
      pooled funds)                                     12,948       10,469
                                                       -------      -------
   Plan assets in excess of 
     (less than) projected 
      benefit obligation                                   374         (288)
   Unrecognized net gain                                (1,362)        (414)
   Unrecognized transition 
     obligation                                            214          264
   Unrecognized prior 
     service costs                                         383          415
                                                       -------      -------
     (Accrued) pension cost                              ($391)        ($23)
                                                       =======      =======


   Actuarial assumptions used at December 31, 1996 and 1995 were as follows:
   discount rate of 7%, rate of increase in compensation levels of 5.25% and
   expected long-term rate of return on plan assets of 8%.

   Net pension expense for these plans for each of the years ended December
   31, 1996, 1995 and 1994 approximates $.4 million.

   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.  The accrued postretirement benefit cost is approximately $1.4
   million and $1.3 million at December 31, 1996 and 1995, respectively and
   the related expense is approximately $.2, $.2 and $.4 million for the
   years ended December 31, 1996, 1995 and 1994, respectively.  The assumed
   discount rate and annual rate of increase in cost of covered health care
   benefits used by the Company in the determination of postretirement
   benefit information was 7.0% as of December 31, 1996 and 1995 and 8% as of
   December 31, 1994.

   Note 10.   Commitments

   In March 1994, the Company acquired substantially all of the assets of
   Danner Shoe Manufacturing Co. for an aggregate purchase price of
   approximately $21.5 million.  The acquisition has been accounted for as a
   purchase.  The acquisition agreement provides that in the event the cash
   and aggregate market value of the common stock (valued as of March 1,
   1999) delivered in the Danner acquisition is less than $18.0 million, the
   Company will make an additional cash payment on March 1, 1999 equal to the
   difference.  If the Danner shareholders have the opportunity to sell their
   common stock under a Company-filed registration statement or under Rule
   144 promulgated under the Securities Act of 1933, as amended, and choose
   not to sell after receiving a Company request to sell, then the Company's
   obligation can be reduced or eliminated to the extent of the number of
   shares permitted to be sold based upon the then prevailing market price
   for the common stock.  The Company has also guaranteed that Danner's
   shareholders will realize, by March 31, 1999, after-tax proceeds from this
   transaction of not less than $10.0 million.

   <PAGE>

   Independent Auditor's 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, 1996 and 1995, and the
   related consolidated statements of income, common shareholders' equity,
   and cash flows for each of the three years in the period ended December
   31, 1996.  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, 1996 and 1995,
   and the results of their operations and their cash flows for each of the
   three years in the period ended December 31, 1996 in conformity with
   generally accepted accounting principles.



                                       McGLADREY & PULLEN, LLP

   La Crosse, Wisconsin
   February 3, 1997

   [Page 28]

   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.

   The following tabulation presents the Company's unaudited quarterly
   results of operations for 1996 and 1995.


   Thousands of dollars                                                      
   except per share 
   data - 1996                First        Second        Third       Fourth
                             Quarter      Quarter      Quarter      Quarter  

   Net sales                 $22,131      $23,054      $35,714      $41,098
   Gross profit                5,807        6,107       10,315       11,592
   Operating income              554          651        3,965        4,918
   Net income                    297          276        2,125        2,688
   Net income per share         $.04         $.04         $.32         $.40


   Thousands of dollars                                                      
   except per share 
   data - 1995                First        Second        Third       Fourth
                             Quarter      Quarter      Quarter      Quarter

   Net sales                 $19,676      $20,486      $31,092      $27,317
   Gross profit                5,092        5,055        8,854        7,559
   Operating income               34          389        3,595        2,644
   Net income                    (52)         106        1,958        1,316
   Net income per share        $(.01)        $.01         $.29         $.19


   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 since the stock
   started trading publicly in April 1994.  The approximate number of holders
   of record of common stock on March 20, 1997 was 400.

   <TABLE>
   <CAPTION>


                                                                                                                                 
                    1st               2nd                    3rd                    4th              Year end
   <S>          <C>             <C>                    <C>                    
   1994         $     -         $10 7/8-14 3/4         $11    -14 3/16        $10 3/4-14 1/4          $    11
   1995         $    8-12       $ 8 3/4-11 1/4         $10 1/4-11 3/4         $ 8 1/2-12              $ 8 3/4
   1996         $8 3/4-12       $ 9 1/4-11 3/4         $ 9 1/2-10 3/4         $10    -12 1/4          $10 3/4

   </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 five years:

                         
                          1996     1995     1994      1993     1992

   Dividends declared 
     per share            $.11     $.09     $.09      $.08     $.07