Lacrosse Footwear, Inc.

LaCrosse Footwear, Inc. (Nasdaq: BOOT) is a leading developer and marketer of branded, premium and innovative footwear for expert work and outdoor users. The Company’s trusted Danner® and LaCrosse® brands are sold through a network of specialty retailers and distributors in the United States, Canada, Europe and Asia.

LaCrosse has been successful in increasing its brand equity in niche segments of the work and outdoor footwear markets that are quality and performance driven, which offer opportunities for sustainable and profitable growth over the long term. The Company is executing a growth strategy based on leveraging its powerful brands with technology innovation, compelling marketing initiatives and enhanced customer service.

Annual Sales Growth
In Millions

For the first quarter of 2009, LaCrosse reported consolidated net sales of $25.9 million, up 5% from $24.7 million in the first quarter of 2008. For the full year 2008, consolidated net sales were $128.0 million, up 8% from $118.2 million in 2007.

While the Company continued to grow its revenue in the first quarter of 2009, the challenging near-term retail environment and LaCrosse’s significant investments in strengthening its foundation for long-term growth resulted in its first quarterly net loss since fiscal 2004. The net loss was $0.7 million or ($0.11) per diluted share in the first quarter of 2009, compared to net income of $0.8 million or $0.12 per diluted share in the first quarter of 2008. For the full year 2008, net income was $6.2 million or $0.96 per diluted share, compared to $7.3 million or $1.15 per diluted share in 2007.

Annual Net Income
In Millions

Work Footwear Market

LaCrosse competes in two market segments of the footwear industry. With total annual sales of approximately $3 billion, the work-related footwear market is much larger than the outdoor market. The Company’s work customers include people employed in law enforcement, transportation, mining, oil and gas, military services and and other occupations that need high-performance and protective footwear as a critical tool for the job. Unlike the outdoor market, the work market has year-around demand. For the full year 2008, sales to the work market were $74.9 million, up 23% from $60.9 million in 2007. The strong annual growth in work sales reflects increased shipments to the government channel, including $9.6 million to the United States Marine Corps and the U.S. Army, related to previously announced delivery orders. In addition, the Company continued to penetrate into a variety of targeted, niche work markets.

Outdoor Footwear Market

The outdoor footwear market is the smaller segement, with total annual sales of approximately $1 billion. The Company’s outdoor customers include people active in hunting, fishing, camping and other outdoor recreational activities. Outdoor customers are extremely brand conscious and innovation-driven, seeking products that have specific benefits, such as waterproof, ultra-lightweight and other high-tech materials designed for a specialized outdoor activity. This business tends to be quite seasonal, with the strongest sales in the second half of the year. For the full year of 2008, sales to the outdoor market were $53.1 million, compared to $57.3 million in 2007. While the Company continued to see growth in at-once demand in certain segments and geographies of the outdoor market, the overall decline in outdoor sales reflected the widespread decline in retail sales during 2008.

Strong Brands and Technology

One of the Company's biggest assets is its powerful brands. The Danner brand is known nationwide as the "expert's choice" in premium outdoor footwear, with rugged designs that exceed customer expectations for performance and quality, and with classic outdoor heritage and authentic character. Among its target customers, the LaCrosse brand is known throughout the U.S. for high performance in the field and on the job. Designed for durability and reliability, LaCrosse boots are built to satisfy specific end-user needs, such as being protective against water, extreme cold, chemicals or fire, and other harsh environments.

In addition to its strong brands, LaCrosse continues to differentiate its products by incorporating substantive technology into its productsand then migrating that technology across different product categories. In recent years, the Company introduced such technology as its Alpha^TM, Quad Comfort^TM and TERRA FORCE^TM platforms, which were first incorporated one product category and later successfully used in others. For 2006, the Company announced its new EXO^TM technology, combining exceptional durability with the performance of an athletic shoe. EXO?s pioneering sport-outdoor fusion design replaces a standard shank system with an ultra-light exoskeleton chassis. EXO will initially be featured in uniform boots and later introduced into hunting boots. In coming periods, LaCrosse expects to continue to bring more groundbreaking, performance-oriented technology to the marketplace that clearly differentiates its products.

Leveraging Innovation and Brand Power

By competing in the recreational market, LaCrosse is forced to remain highly innovative and continuously work to strengthen brand loyalty for its occupational products. The Company sees strong crossover of brand awareness and sales between recreational customers and occupational customers.

Corporate History and Transformation

The Company traces its roots back to 1897, with the founding of La Crosse Rubber Mills, which eventually focused on the manufacture of rubber and vinyl footwear. Located in LaCrosse, Wisconsin, the original company was purchased from the founders in 1982 by a new management group and legally incorporated in Wisconsin in 1983. LaCrosse established a loyal following among Midwestern laborers and outdoorsmen operating in severe cold or wet environments. In 1994, the Company acquired Danner Shoe Manufacturing, a premium maker of leather boots since 1932, which was located in Portland, Oregon since 1936. Danner built a strong reputation among Pacific Northwest loggers, shipyard workers and early outdoor enthusiasts. By the late 1990s, the two brands were associated nationwide with time-honored quality and performance, but the Company was operating at a growing loss and straddled by increasing debt.

In recent years, the Company business restructuring has resulted in significantly improved operating efficiencies, as it moved from being a manufacturer to being primarily a developer and marketer: increasing its outsourced production from approximately 50% to 80%; evolving from fixed to variable business model; consolidating its operations and facilities; and dramatically reducing its cost structure. During 2004, LaCrosse continued to trim less profitable parts of its business, including its former PVC boot line and related facility. While the remaining domestic manufacturing facility in Portland, Oregon, provides tremendous flexibility, the Company is positioned for increased low-cost, high-quality sourcing from China.

To strengthen both customer responsiveness and product quality, the Company operates an international office in China to oversee its outsourced manufacturing and ensure high quality standards, as well as continue to work to reduce product development lead-times -- a key to remaining competitive in today’s ever-changing marketplace.

In line with our long-term strategy to diversify and strengthen our sales channels, the Company recently announced plans for a new European sales office in order to expand its international business. In addition, LaCrosse intends to build a new world-class distribution facility in the Midwest to improve operating efficiencies, increase speed of delivery and better serve its customers.

Improved Operating Efficiencies and Strong Balance Sheet

For the first quarter of 2009, gross margins were 37.9% of net sales, compared to 40.7% in the same period of 2008. The decline in gross margins was primarily due to the impact of the Company’s investments in its Portland factory, increased costs as a result of re-sourcing due to the closure of one of its third party manufacturing facilities in 2008, an increase in markdown sales, and certain product cost and mix changes. For the full year, gross margins were 39.6% of net sales, compared to 39.7% in 2007.

LaCrosse’s operating expenses were $10.9 million in the first quarter of 2009, up $1.9 million from the first quarter of 2008. The year-over-year increase reflects expenditures of $1.0 million for the Company’s new European subsidiary, $0.5 million for the new Midwest distribution center and $0.3 million for increased provision for bad debts, as well as the increased investment in sales, merchandizing and product development resources.

The Company continued to maintain a strong balance sheet. At the end of the first quarter of 2009, LaCrosse had cash and cash equivalents of $12.1 million, up from $10.3 million at the end of the first quarter of 2008, despite cash outlays during the past twelve months of $3.1 million in dividends to its shareholders and $3.2 million for the inventories and operations of its former European distributor.

Growth Strategy

LaCrosse's long-term objective is to become the premier work and outdoor footwear company in the world. Management believes LaCrosse Footwear is well positioned to continue to execute its growth strategy:

Extend product offering by leveraging strong brands.
Infuse innovative technology across multiple product categories.
Increase brand equity through intensified marketing.
Grow footwear business through existing channels.
Continue to enhance customer service.

We caution you that this document contains forward-looking statements within the meaning of the Securities and Exchange Act of 1934. Forward-looking statements are only predictions or statements of our current plans, which we review on a continual basis. Forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement includes phrases such as we "believe," "expect," or other words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward looking statements. Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results or outcomes to differ materially from those currently anticipated. All forward-looking statements may differ from actual results due to, but not limited to: Consumer demand for outdoor footwear; Weather and its impact on the demand for outdoor footwear; Dealer inventory levels; Company inventory levels, including (i) inventory levels required for foreign-sourced product and the related need for accurate forecasting and (ii) the limited ability to resupply dealers for fill-in orders for foreign-sourced product; potential problems associated with the manufacture, transportation and delivery of foreign-sourced product; United States and/or foreign trading rules, regulations and policies, including export/import regulations and regulations affecting manufacturers and/or importers; and General domestic economic conditions, including interest rates and foreign currency exchange rates. You should consider these important factors in evaluating any statement contained in this report and/or made by us or on our behalf. The Company has no obligation to update or revise forward-looking statements to reflect the occurrence of future events or circumstances.