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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-238001

          LaCrosse Footwear, Inc.          
(Exact name of Registrant as specified in its charter)

18550 NE Riverside Parkway
          Portland, Oregon 97230          
(Address, zip code of principal executive offices)

          (503) 766-1010          
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X   No ___

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes ___   No X

_________________

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value, outstanding as of October 31, 2003: 5,874,449 shares

LaCrosse Footwear, Inc.

Form 10-Q Index

For the Quarter Ended September 27, 2003

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PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

LACROSSE FOOTWEAR, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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LACROSSE FOOTWEAR, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)
(Unaudited)

        The accompanying notes are an integral part of the condensed consolidated financial statements.

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LACROSSE FOOTWEAR, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of the condensed consolidated financial statements.

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LACROSSE FOOTWEAR, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

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ITEM  2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

The following table sets forth selected financial information derived from our condensed consolidated financial statements. The discussion that follows the table should be read in conjunction with the condensed consolidated financial statements. In addition, please see Management’s Discussion and Analysis of Financial Condition and Results of Operations, audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2002.

Our business is seasonal with lower revenues historically being generated during the first two quarters of the year. As a result, revenue for the first three quarters ended September 27, 2003 should not be considered indicative of results to be reported for the balance of the fiscal year.

Net Sales

Net sales for the quarter ended September 27, 2003 increased $0.7 million, or 2.6%, to $29.9 million from $29.2 million from the same period in 2002. Net sales for the retail channel of the LaCrosse brand improved 10.7%, and net sales for the Danner brand improved 7.1% over the same period last year. The LaCrosse® brand retail channel experienced an increase in net sales from the third quarter of 2002 due to stronger sales in the rubber boot categories, fueled primarily by sales of the Company’s new, patent-pending Alpha line of sporting and occupational rubber clad neoprene boots. The net sales increase for the Danner® brand was primarily related to improved product offerings for the hunting and uniform markets. Net sales for the Safety and Industrial channel of distribution declined by 24.5% from the third quarter of the previous year due to a strategic reduction in sales of lower-margin products, including a reduction in the number of products being offered for sale in the private label and mass merchant markets, and the strategic elimination of low-margin accounts.

Net sales for three quarters ended September 27, 2003 decreased $3.6 million, or 5.0%, to $68.4 million from $72.0 million from the respective period in 2002. The decrease in net sales was due to an 0.3% decrease in the retail channel of LaCrosse brand products and a 28.3% decrease in the Safety and Industrial channel of LaCrosse and Rainfair brand products, partially offset by a 9.5% increase in Danner brand products over the same period of last year. The overall decrease is the result of a strategic reduction in lower margin sales, and a reduction in the number of products being offered in the Safety and Industrial channel for sale, particularly in the private label and mass merchant markets in the Safety and Industrial channel of distribution.

Gross Profit

Gross profit for the quarter ended September 27, 2003 increased to $9.4 million, or 31.4% of net sales, from $8.9 million, or 30.5% of net sales, for the third quarter of 2002. Gross margins as a percent of net sales have improved due to an increase in sales of new, more profitable products, the elimination of lower-margin product lines, and elimination of lower margin sales. The elimination of lower margin products included an increase of $0.5 million in the reserve for slow-moving inventory, this decreased margins by 1.7% for the quarter.

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Gross profit for the three quarters ended September 27, 2003 increased to $21.0 million, or 30.7% of net sales, from $18.9 million, or 26.3% of net sales, for the first three quarters of 2002. Gross margins as a percent of net sales have improved due to an increase in sales of new, more profitable products, the elimination of lower-margin product lines, and elimination of lower margin sales.

Selling and Administrative Expenses

Selling and administrative expenses decreased $0.6 million, or 8.1%, to $7.0 million for the quarter ended September 27, 2003 compared to $7.6 million for the same period a year ago. The decrease in expenses resulted from consolidation of LaCrosse Safety and Industrial operations from Racine, Wisconsin, to other company facilities in Portland, Oregon, and La Crosse, Wisconsin.

Selling and administrative expenses decreased $4.9 million, or 20.7%, to $18.7 million for the first three quarters ended September 27, 2003 compared to $23.6 million for the same period a year ago. The decrease is a result of the absence of one-time charges from the prior year ($2.9 million), a one-time credit due to the elimination of the retiree health care liability ($0.3 million), reductions in sales commissions and distribution costs associated with the reduced sales volume, consolidation of the Retail and Safety and Industrial operations in Portland, Oregon, and consolidation of distribution in La Crosse, Wisconsin for LaCrosse Retail and Safety and Industrial. In the first three quarters of 2002, we recorded $2.9 million of charges associated with the move of the corporate headquarters to Portland, Oregon from La Crosse, Wisconsin ($1.9 million) and the move of the Safety and Industrial division to Portland, Oregon from Racine, Wisconsin ($1.0 million). This includes one-time charges of $1.1 million of depreciation expense related to a change in the estimated life of our former enterprise software package and a non-cash property and equipment impairment charge of $0.6 million.

Non-Operating Expenses

Non-operating expenses of $0.3 million decreased by 37.5% to 0.9% of net sales for the quarter ended September 27, 2003, from $0.4 million, or 1.5% of net sales for the quarter ended September 28, 2002. In the third quarter of 2003 as compared to the same period of 2002, interest expense has decreased due to lower interest rates and lower average borrowings.

Non-operating expenses of $0.8 million decreased by 36.1% to 1.1% of net sales for the first three quarters ended September 27, 2003, from $1.2 million, or 1.7% of net sales for the first three quarters ended September 28, 2002. In the first three quarters of 2003 as compared to the same period of 2002, interest expense has decreased due to lower interest rates and lower average borrowings.

Income Taxes

No income tax provision has been presented for the quarter and the three quarter periods ended September 27, 2003 primarily due to the utilization of net operating loss carry-forwards. During the first three quarters of 2002, we generated a $2.3 million deferred tax asset related to net operating losses, but $1.3 million of this was offset by a corresponding increase in the deferred tax valuation allowance. Due to the uncertainty surrounding the realization and timing of the benefits from our deferred income tax assets, we have placed a valuation allowance to fully offset these otherwise recognizable deferred tax assets. Once we have attained a sustained level of profitability, we will reconsider the need for such a valuation allowance. A reduction in the valuation allowance would result in the recognition of an income benefit. Deferred tax assets are described in detail in our Annual Report on Form 10-K for the year ended December 31, 2002.

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Liquidity and Capital Resources

We have historically funded working capital requirements and capital expenditures with cash generated from operations and borrowings under a revolving credit agreement or other long-term lending arrangements. We require working capital to support fluctuating accounts receivable and inventory levels caused by our seasonal business cycle. Our borrowing requirements are generally the lowest in the first quarter and the highest during the third quarter.

Our revolving credit agreement provides for advances based on a percentage of eligible accounts receivable and inventory with maximum borrowings of $47.5 million. The credit agreement is used to support working capital requirements. Borrowing availability under the credit agreement and cash flows generated from operations are expected to be sufficient to meet our cash requirements for the next 12 months. Excess cash flows from operations are used to pay down the credit agreement. At September 27, 2003, we had $18.7 million of outstanding borrowings under the credit agreement and unused availability of $7.7 million. Our current credit agreement expires in June of 2004. We are in the process of reviewing with lenders a credit facility that will meet our future credit needs when our current agreement expires.

Net cash used in operating activities was $7.9 million in the first three quarters of 2003 compared to $2.4 million used in operating activities in the same period of 2002. In the first three quarters of 2003, accounts receivable and inventories increased by $8.7 million and $4.0 million, respectively. These were offset by net income of $1.5 million, depreciation and amortization of $1.3 million, and a decrease of $0.4 million in accounts payable. The $4.0 million increase in inventory is a seasonal build up for third and fourth quarter sales. The increase in accounts receivable is normal for the period. In the first three quarters of 2002, inventory decreased by $7.1 million (due to improved inventory management practices) and we recorded a non-cash goodwill impairment charge of $1.0 million. These were offset by a net loss of $5.9 million, an increase in accounts receivable of $6.0 million and a decrease of $1.6 million in accounts payable.

Net cash used in investing activities was $0.9 million in the first three quarters of 2003 compared to $0.6 million for the same period of 2002. The majority of the cash used in both years was for capital expenditures.

Net cash provided by financing activities was $8.9 million in the first three quarters of 2003 compared to $2.8 million for the same period of 2002. During the first three quarters of 2003, we borrowed $10.3 million in short-term borrowings and repaid $1.4 million in long-term obligations. During the same period of 2002, we borrowed $3.6 million in short-term borrowings and repaid $0.8 million in long-term obligations. In the first quarter of 2003, we redeemed the cash surrender value of certain of our life insurance policies for cash totaling approximately $0.6 million. Such cash was applied directly to pay down a portion of the principal balance of our term loan, thereby reducing the amount due in 2004 to $2.2 million.

At the end of the third quarter of 2003, we were in compliance with all covenants in our credit agreements.

A summary of our contractual cash obligations at September 27, 2003 is as follows:

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We also have a commercial commitment as described below:

(In thousands)

Critical Accounting Policies

Our significant accounting policies are summarized in the footnotes to our annual consolidated financial statements. Some of our accounting policies require management to exercise significant judgment in selecting the appropriate assumptions for calculating financial estimates. Such judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, known trends in our industry, terms of existing contracts and other information from outside sources, as appropriate. Actual results may differ from these estimates under different assumptions and conditions. Certain of the most critical policies that require significant judgment are as follows:

Revenue Recognition.  We recognize revenue in accordance with Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements. Revenues are recognized when all of the following criteria are met: when persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable and collectibility is reasonably assured. Revenue for our product sales is recognized at the time products are shipped to customers. Revenue is recorded net of freight, estimated discounts and returns.

Allowance for Doubtful Accounts.  We establish estimates of the uncollectibility of accounts receivable. Our management analyzes accounts receivable, historical write-offs as bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. We maintain an allowance for doubtful accounts at an amount that we estimate to be sufficient to provide adequate protection against losses resulting from collecting less than full payment on receivables. A considerable amount of judgment is required when assessing the realizability of receivables, including assessing the probability of collection and the current credit-worthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, an additional provision for doubtful accounts may be required. We have not experienced significant bad debts expense and our reserve for doubtful accounts of $0.4 million should be adequate for any exposure to loss in our September 27, 2003 accounts receivable.

Product Warranties.  We provide a limited warranty for the replacement of defective products. Our standard warranties require us to repair or replace defective products at no cost to the consumer. We estimate the costs that may be incurred under our basic limited warranty and record a liability in the amount of such costs at the time product revenue is recognized. Factors that affect our warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. We periodically assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary. We utilize historical trends and information received from customers to assist in determining the appropriate loss reserve levels. We believe our warranty liability of $1.0 million at September 27, 2003 should be adequate to cover the estimated costs we will incur in the future for warranty claims on products sold before September 27, 2003.

Pension and Other Postretirement Benefit Plans.  The determination of our obligation and expense for pension and other postretirement benefits is dependent on our selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are described in Note 7 to the annual consolidated financial statements and include, among others, the discount rate, expected long-term rate of return on plan assets and rates of increase in compensation and healthcare costs. In accordance with accounting principles generally accepted in the United States of America, actual results that differ from our assumptions are accumulated and amortized over future periods and therefore, generally affect our recognized expense and recorded obligation in such future periods. While we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect our pension and other postretirement obligations, our future expense and equity. See Item 3 in this Form 10-Q for sensitivity analysis relating to the effects of possible changes to our assumptions regarding such obligations.

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Allowance for Excess and Obsolete Inventory. On a periodic basis, we analyze the level of inventory on hand, its cost in relation to market value and estimated customer requirements to determine whether write-downs for excess or obsolete inventory are required. Actual customer requirements in any future periods are inherently uncertain and thus may differ from estimates. If actual or expected requirements were significantly greater or lower than the established reserves, a reduction or increase to the obsolescence allowance would be recorded in the period in which such a determination was made. We have established reserves for slow moving and obsolete inventories and believe the reserve of $2.0 million at September 27, 2003 is adequate.

Valuation of Long-Lived and Intangible Assets. As a matter of policy, we review our major assets for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our major long-lived and intangible assets are goodwill and property and equipment. We depreciate our property and equipment over their estimated useful lives. In connection with the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets” we determined that the goodwill associated with our Safety and Industrial Division was impaired. Accordingly, we recorded a $1.0 million charge in the first quarter of 2002. In assessing the recoverability of our remaining goodwill of $10.8 million related to Danner subsidiary and the investments we have made in our other long-term investments, primarily property and equipment of $4.8 million, we have made assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets not previously recorded. Please refer to the “Forward-Looking Statements” caption below for a discussion of factors that will have an effect on our ability to attain future levels of product sales and cash flows.

Forward-Looking Statements

We caution you that this quarterly report on Form 10-Q 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:

You should consider these important factors in evaluating any statement contained in this report and/or made by us or on our behalf.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Our primary market risk results from fluctuations in interest rates. We enter into interest rate swap agreements (swap agreements) to reduce our exposure to interest rate fluctuations on our 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. In addition, we record the fair value of the swap agreements each month as an adjustment to interest expense. As of September 27, 2003, we had one swap agreement in effect with a $4.0 million notional amount maturing October 15, 2003. The variable rate borrowings not offset by the swap agreement at September 27, 2003 totaled $17.7 million. Swap agreement rates are based on the three-month LIBOR rate. Based on average floating rate borrowings outstanding throughout the third quarter of 2003, a 100-basis point (one percentage point) change in LIBOR would have caused our monthly interest expense to change by approximately $12,000. We believe that these amounts are not material to our earnings.

We are also exposed to market risk related to the assumptions we make in estimating our pension liability. The assumed discount rate used, in part, to calculate the pension plan obligation is related to the prevailing long-term interest rates. At December 31, 2002, we used an estimated discount rate of 7 percent. A one-percentage point (100 basis points) reduction in the discount rate would result in an increase in the actuarial present value of projected pension benefits of approximately $2.0 million at December 31, 2003 with a similar charge to equity. Furthermore, a plus or minus one percent change in the expected rate of return on pension plan assets would affect the pension plan liability by approximately $0.1 million.

ITEM 4. Controls and Procedures

(a)    Evaluation of disclosure controls and procedures. In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management evaluated, with the participation of the Company’s President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a- 15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the date of such evaluation to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared.

(b)    Changes in internal controls. There was no change in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

We are party to routine litigation arising in the normal course of business. We do not expect these matters, individually or in the aggregate, to have a material adverse effect on our financial position, results of operations or cash flows.

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ITEM 6. Exhibits and Reports on Form 8-K

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 7, 2003

Date: November 7, 2003

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LaCrosse Footwear, Inc.

Exhibit Index to Quarterly Report on Form 10-Q

For the Quarter Ended September 27, 2003

      Exhibit No.                      Exhibit Description

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