Lacrosse Footwear, Inc. Business Information, Profile, and History

Company Perspectives:

LaCrosse stands for the highest quality rugged footwear you can find, built so people who work and play outdoors can do it without worrying about their feet. It's a reputation we're proud of because we earned it the hard way, by holding ourselves accountable for the performance of each and every boot we make.

After 100 years we're still protecting feet in adverse conditions--building tough, hard-working boots for people who need to get out earlier, go deeper and stay longer than the rest. Because if you can't stay out all day, you might as well stay inside.

History of La Crosse Footwear, Inc.

Named after its former hometown of La Crosse, Wisconsin, but now headquartered in Portland, Oregon, LaCrosse Footwear, Inc. is a leading designer, manufacturer, and marketer of rubber, leather, and vinyl footwear. It specializes in premium-quality protective footwear for the sporting, occupational, and recreational markets. It has three major brands: the original LaCrosse brand; the Danner brand, established in 1932 and acquired by LaCrosse in 1994; and the Rainfair brand, originally marketed through a joint venture established in 1996 between LaCrosse Footwear and Rainfair, Inc., of Racine, Wisconsin, before becoming wholly owned by LaCrosse in 1998. The product line of Rainfair, which now operates as the LaCrosse Safety & Industrial division, includes rainwear, footwear, and other protective clothing for occupational markets. Historically, LaCrosse Footwear manufactured most of its products at its own manufacturing plants in the United States. In the early 2000s, however, the company began shifting to outsourcing. By 2002, 70 percent of the products sold by LaCrosse were manufactured by third parties, most of them located in the Asia-Pacific region. LaCrosse continues to operate two U.S. factories, located in Portland and in Claremont, New Hampshire. Sales of the company's products are made through more than 4,300 accounts in the United States, including sporting goods and outdoor retailers, shoe stores, general merchandise stores, wholesalers, catalog merchants, and the U.S. government. Two factory outlet stores can be found in Portland and La Crosse. Less than 3 percent of the company's net sales originate overseas, principally from Japan. More than 44 percent of LaCrosse's common stock is owned by members of the family of George W. Schneider, through the Schneider Family Voting Trust; Schneider was the main investor and driving force behind the management-led group that bought the company in 1982 from the heirs of the founders.

Establishment in Late 1890s

The company was first established in 1897 as La Crosse Rubber Mills Company, a manufacturer of rubber horseshoes, by a group of local citizens in La Crosse, Wisconsin. Led by Albert Hirshheimer, Michael Funk, and George Zeisler, the company started with 25 employees working on 160 steam-powered sewing machines. It originally planned to manufacture rubber goods of every description, with the notable exception of footwear. It soon switched from producing horseshoes to making rubber-coated fabrics and raincoats. From the beginning, La Crosse stressed "quality goods, workmanship, and honest values."

Business was good for La Crosse Rubber Mills in the late 1890s, and by the beginning of the 20th century the company had expanded its facilities and increased its workforce to 400 people. It was producing about 850 rubber-coated garments a day. To reduce the risk of fire, it installed the city's first sprinkler system in its factory, which was reportedly located on land once owned by Buffalo Bill Cody. In 1898 the opening of a new addition was celebrated by a "rubber ball" for employees, complete with orchestral music. In 1899 Albert Hirshheimer took over as president of the Rubber Mills, as it was known locally.

Capitalizing on the popularity of a nonrubber rain garment called Laxette, the La Crosse Rubber Mills launched a national magazine advertising campaign in 1904 to market its clothing under the "Indian Hill Brand." Just two years later, however, the company discontinued making rubber-coated fabrics and raincoats and started producing canvas and rubber footwear. Its workforce was reduced to 150 employees, who could produce about 1,200 pairs of footwear a day. It adopted a new slogan, "Everything in Rubber Footwear," in 1908 and produced a line of 1,000 different styles of shoes. Among its most popular offerings were the Red Fibre Heel Brand of rubbers and overshoes built for long-lasting wear and the first buckle overshoes ever made. Showrooms were opened in a leased building on South Front Street in La Crosse, showing the company's line of clothing as well as its popular footwear.

In 1912 two of the company's founders, Michael Funk and Albert Hirshheimer, purchased controlling interest in the La Crosse Rubber Mills. They put Michael Funk's two sons, Albert P. Funk and Arthur S. Funk, in charge of management and operations. Arthur S. Funk had recently returned to La Crosse from studying at the University of Notre Dame in South Bend, Indiana, where he had pioneered the development of synthetic rubber, also known as neoprene.

Construction of New Concrete Facility in 1913

Until 1913 the company's manufacturing operations were housed in a wooden structure. That year the first of several concrete buildings was constructed on St. Andrew Street, directly north of the old facility. Originally three stories high and later expanded to four, the new building had twice as much space devoted to manufacturing, and the 350-member workforce began to produce 6,000 pairs of footwear a day. In 1916 a second concrete building was built, adding 75,000 square feet and doubling capacity yet again. The workforce grew to about 1,000 employees and was producing about 15,000 pairs of footwear a day. The company started its own bus line to transport workers, who had difficulty getting to work because of inadequate roads and too-short streetcar lines. With business booming, another "rubber ball" was held, with attendance reaching 5,000 people.

By 1921 production had leveled off to about 13,000 pairs per day, with a "rush" capacity of about 20,000 pairs. In the early 1920s the Funk family bought out Albert Hirshheimer, who retired as president in 1922. He was succeeded by Albert P. Funk. Soon the company started an aggressive building campaign, adding a one-story fireproof warehouse and cafeteria as well as research and test facilities. In 1923 a third four-story concrete building, plus powerhouse, warehouse, and laboratory buildings, added another 75,000 square feet. In 1927 a single-story building with a new mill room and storage areas added another 85,000 square feet. By this time the company was truly national, with a retail presence in every state. It also did a healthy export business under the direction of a New York City-based export manager.

Still growing in 1929, the company announced a 100,000-square-foot expansion that would add factory and office space as well as a new machine shop and vulcanizing area. Company President Albert P. Funk said at the time, "We are undoubtedly facing one of the brightest years in our history, with every department operating at full capacity." He noted that sales in tennis footwear were an especially bright spot for the company. With 2,000 employees on the payroll, La Crosse Rubber Mills was named the largest employer in La Crosse in 1930.

Awarding of First Army Contract in 1941

The company weathered the economic depression of the 1930s, and at the end of the decade it installed the latest conveyorized assembly-line equipment and shoe-making machinery. In 1941 it received a contract from the U.S. Army to produce 43,200 pairs of Arctic, rubbertop overshoes. It was the first of several government contracts that La Crosse Rubber Mills would fulfill over the coming years. During World War II it produced jungle rubber footwear, hip boots, four-buckle overshoes, tennis shoes, and rubbers for use by military personnel. When the war ended in 1945, the company promised all returning veterans who had worked for the company that they would either get their old jobs back or be hired for even better ones. The company also streamlined its manufacturing and fabricating processes by eliminating all bench work. Albert P. Funk died in 1945, and his brother, Arthur S. Funk, succeeded him as president of the company.

La Crosse Rubber Mills began the 1950s marketing a full line of rubber footwear, including sporting boots, tennis and basketball shoes, and novelty shoes. In 1951 it introduced the Big Chief hip boot and the Duluth work overshoe. In 1954 Albert P. Funk, Jr., became the company president, and annual sales totaled $4.5 million. Under a newly negotiated pension plan with the United Rubber Workers-CIO, 65-year-old workers with at least 25 years of service were given full payments. As the 1950s drew to a close, La Crosse Rubber Mills was offering 192 different products in eight product groups: insulated footwear, sporting boots and pacs, industrial and general business boots, farm and work overshoes, family fashion overshoes, rubber-soled canvas shoes, and vinyl plastic protective boots.

La Crosse Rubber Mills continued to grow steadily during the 1960s and 1970s at a rate of about 10 percent annually. The modern "Burly" knee-high rubber boot was introduced in 1963 and featured an innovative ankle-gripping design. During the mid-1960s the company maintained a production capacity of 20,000 pairs of footwear a day at its 350,000-square-foot facility in La Crosse and a workforce of 700 to 750 people. It advertised 31 styles of canvas shoes. By 1972 sales reached $10.5 million. The company's workforce grew to an average of 850 during the 1970s. In 1978 Frank J. Uhler, Jr., became president, and the company stopped manufacturing and started importing athletic footwear. At the same time, even more of the company's resources were channeled into boots, La Crosse's core line. By the end of the decade sales reached the $20 million mark, with 80 percent of sales from rubber footwear and 20 percent from canvas footwear.

Sale to New Owners Ended Hostile Takeover Bid in 1982

In 1980 sales of canvas footwear decreased to 10 percent of sales, with 90 percent attributed to rubber footwear. With 800 employees, La Crosse Rubber Mills was the third largest employer in La Crosse. In 1982 the company had to fight off a hostile takeover bid from Endicott Johnson Co., of Endicott, New York. To avoid a takeover, George W. Schneider and President and COO Frank J. Uhler, Jr., purchased the company from the heirs of the founding family and other shareholders in a leveraged buyout. Schneider was a member of the company's board of directors and husband of Virginia Funk, granddaughter of founder Michael Funk. He became chairman and Uhler remained president.

In 1983 the company acquired an injection-molding plant in Claremont, New Hampshire, that allowed it to produce low-priced boots to complement its higher-priced products made in La Crosse. Annual sales rose that year to $27 million, and the company was producing about 8,800 pairs of footwear per day, or 2.2 million pairs annually. The next year sales rose more than 10 percent to $30 million, and company employees enjoyed their first checks under a new profit-sharing plan. La Crosse also introduced the first waterproof boot with a removable liner for kids in 1984.

Adopting New Corporate Name for 1986

On December 26, 1985, the company adopted a new name, LaCrosse Footwear, Inc., eliminating the space between "La" and "Crosse" in its new logo. Under its LaCrosse label the company introduced the Iceman boot, which pioneered the use of double-insulation construction in rubber footwear. The popular Iceman boot would be worn by Iditarod dogsled winners and be used on an expedition in China that explored the frigid upper reaches of the Yangtze River. Five years later the company expanded the line with the Ice King, a triple-insulated boot rated to -100 degrees Fahrenheit. That was later followed by the LaCrosse Footwear "boot system," a line of rubber bottom performance footwear with interchangeable liners that was designed for use in hunting, fishing, and other rugged outdoor activities.

Toward the end of the decade LaCrosse stopped importing athletic shoes from the Far East. Sales continued to grow steadily and by 1989 had reached $50 million, boosted in part by a $4.7 million contract--the company's largest ever--with the U.S. government to produce more than 682,000 vinyl overshoes for U.S. military personnel. The company's 300-item product line reflected a shift in marketing strategy, as LaCrosse sought to offer products less dependent on weather conditions. Mild winters usually had a negative effect on LaCrosse's sales. As a result, the company tried to place greater emphasis on its industrial and sporting footwear as it entered the 1990s.

As the 1990s began, LaCrosse continued to enjoy good relations with the U.S. military. In 1990 it received a $3 million defense contract to manufacture 300,000 pairs of mustard gas-proof boots for the Persian Gulf War. A second defense contract was awarded in 1991 to produce an additional 700,000 pairs of the mustard gas-proof boots. As a result of its new marketing focus, LaCrosse achieved a leadership position in the sporting goods apparel industry by 1993. It had 1,465 full-time employees, who were producing 21,000 pairs of footwear a day. Sales reached $85 million, and the company was manufacturing more than 400 types of boots and rubber footwear from 170 compound formulas.

Acquisition of Danner in 1994

In March 1994 LaCrosse acquired the Danner Shoe Manufacturing Company, located in Portland, Oregon, which specialized in high-end leather footwear for hiking, hunting, fishing, and cross-training (the LaCrosse line was aimed more at the middle of the market). Danner was originally founded in 1932 in Chippewa Falls, Wisconsin, by Charles Danner and his father-in-law, William Weyenberg, as a small family factory that handcrafted work shoes. After Weyenberg passed away in 1933, Danner relocated his family and business to Portland in 1936. By the end of World War II, Danner had become established as a high-quality manufacturer of popular logger-style work boots. During the 1960s Danner produced leather hiking boots that were light and flexible, yet sturdy and comfortable. In the 1970s Danner designed and patented a unique way of making a waterproof boot using the first free-hanging Gore-Tex inner bootie.

LaCrosse acquired Danner for $13.5 million in cash, 277,778 shares of common stock ($13 per share market value), and the assumption of approximately $4.4 million in liabilities. In April LaCrosse completed its initial public offering (IPO), resulting in net proceeds to the company of $17.6 million, plus an additional $2.7 million the next month in connection with the exercise of an over-allotment option granted to the underwriters. LaCrosse used the proceeds from the IPO to reduce short-term debt taken on to finance the Danner acquisition, pay off $3.4 million of long-term debt, and plow into working capital. Sales for 1994 reached an all-time high of $108.3 million. New product introductions included the Firetech line, firefighting footwear that fit like a shoe and had a patented steel arch guard that offered greater protection against punctures. Frank J. Uhler, Jr., retired as president and CEO and was succeeded by Patrick K. Gantert.

Sales for 1995 were down about 9 percent to $98.6 million. Even though LaCrosse had been focusing on making its products less weather-dependent, sales were affected by the mild winter weather during the first quarter of the year. Sales were also affected by softening in the retail market during the fourth quarter of 1995. However, the harsher winter weather had a favorable impact on first quarter earnings in 1996. It had the effect of helping to clear retailers' shelves, resulting in larger advance orders for the fall.

String of Acquisitions: 1996-98

LaCrosse made two major acquisitions in the first half of 1996. The first was the acquisition of Louisville, Kentucky-headquartered Red Ball, Inc., a leading designer, manufacturer, and marketer of branded outdoor sporting and protective footwear used in hunting, fishing, and other outdoor activities. Red Ball, with 1995 revenues of $5.8 million, had been operating under the protection of Chapter 11 of the federal bankruptcy code since February 1996. The acquisition of Red Ball for approximately $5 million in cash provided LaCrosse with the opportunity to expand the distribution of the Red Ball brand to mass merchants as well as to introduce new products to the LaCrosse line. In July LaCrosse began manufacturing Red Ball products at its Claremont, New Hampshire, facility.

The second major acquisition involved establishing a joint venture in May 1996 with Racine, Wisconsin-based Rainfair, Inc., a leading designer, manufacturer, and marketer of protective clothing and footwear for the safety, industrial, and uniform markets. The company was established in 1879 as Chicago Rubber Co. and then moved to Racine in 1886; it changed its name to Rainfair in 1943. The joint venture between the two companies assumed the old Rainfair name and purchased the assets of the old Rainfair, Inc. Rainfair's owner and CEO, Craig L. Leipold, continued as CEO of the joint venture and gained a seat on LaCrosse's board of directors. The joint venture brought together complementary product lines and brand names, providing significant cross-selling opportunities, especially in the industrial market.

When LaCrosse celebrated its 100th anniversary in 1997, it occupied a leadership position in its established markets. The acquisitions of the previous few years had increased its product offerings and provided it with an even stronger position in the sporting and outdoor, farm and general utility, and occupational and children's markets for rubber, leather, and vinyl footwear and rainwear. By retiring all of its preferred stock in 1996 to lower its borrowing costs, LaCrosse had also enhanced its already excellent financial condition.

LaCrosse continued its acquisitive ways during its centenary year by acquiring Pro-Trak Corporation in July. Pro-Trak owned the Lake of the Woods brand, a line of leather boots for the outdoor and recreational markets. Over the next two years, the Lake of the Woods product line was merged into the LaCrosse line, expanding the company's flagship line to include leather boots. The acquisition spree ended in January 1998 with the purchase of the 50 percent interest in Rainfair not already owned, for about $2.4 million. Meantime, LaCrosse posted its best results ever in 1997: profits of $6.8 million on revenues of $145.5 million.

Shifting Production Overseas to Stem Losses: Late 1990s and Early 2000s

Sales slumped in the late 1990s because of mild and dry winters as well as increased competition from rivals importing into the United States less-expensive boots made in lower-cost countries. Sales and profits dropped in 1998, and then the following year LaCrosse suffered a net loss of $2.6 million. In addition to phasing out the Lake of the Woods brand, the company also significantly reduced its Red Ball line as it shifted its mix of products more toward leather boots, the sales of which are not tied to the weather as much as rubber and vinyl boots are. LaCrosse began to trim its workforce as well.

In August 2000, in the midst of another year in the red, Gantert resigned from his position as president and CEO. He was succeeded by George Schneider's son Joseph, who had most recently headed up the Danner subsidiary. During the remaining months of that year, LaCrosse eliminated about 350 jobs at its headquarters and factory in its hometown, shifting part of its production to a third-party manufacturer in China. The company earlier in the year had ended production at a plant in Clintonville, Wisconsin, and moved that work to Mexico.

Early in 2001 LaCrosse officially announced that it would follow the trend among U.S. footwear companies by shifting from a manufacturing and distribution model toward one focusing on product development and marketing--with the actual production of its products increasingly outsourced. Soon thereafter, in June 2001, another 140 manufacturing jobs were cut when the company took the historic move of closing down its plant in La Crosse, taking a $4.4 million charge to do so. Once again, production was shifted to contractors in the Far East. A smaller boot factory in Hillsboro, Wisconsin, was closed later in 2001. A further shift out of Wisconsin came in late 2001 when the company moved its headquarters to Portland, Oregon, ending more than 100 years as a La Crosse firm. Warehouse space, a distribution facility, and an outlet store remained located in the company's namesake town, which now had only 70 LaCrosse Footwear employees. The head office shift was made mainly for efficiency's sake, as it eliminated the need for separate offices for the LaCrosse and Danner brands. Company officials also cited two other advantages: the proximity to several other outdoor footwear brands as well as to the contract manufacturers in Asia. For 2001, LaCrosse Footwear reported a net loss of $7.9 million, with the poor economy now added to the company's woes.

LaCrosse remained in the red during 2002, and sales plunged 22 percent, to $97.8 million as a result of the weak economy and the elimination of several lower-margin product lines, such as children's insulated footwear. That year also saw the name of the Danner Shoe Manufacturing subsidiary changed to simply Danner, Inc. The most important event that year, however, involved the Rainfair division. In August, the 123-year-old Rainfair factory in Racine--LaCrosse's last Wisconsin plant--was shut down; all of Rainfair's products would now be made overseas, and the Rainfair division would be operated out of Portland. Craig Leipold, who had sold Rainfair to LaCrosse, resigned from the LaCrosse board of directors in protest over the decision to shut down the Racine plant. Later in 2002, the Rainfair division was renamed LaCrosse Safety & Industrial, although this unit continued to market its rainwear and other protective clothing under both the Rainfair and LaCrosse brands. This closure left LaCrosse Footwear with just two U.S. factories--in Portland and in Claremont, New Hampshire; 70 percent of its products were now produced by third-party manufacturers. Between 1997 and 2002, LaCrosse had slashed its workforce from 1,520 to 400--the bulk of the lost jobs coming on the manufacturing side.

Through the first nine months of 2003 LaCrosse Footwear posted net income of $1.5 million, compared to a net loss of $5.9 million for the same period in 2002. Revenues were down slightly, but LaCrosse was heartened by strong sales of the newly introduced Alpha line of rubber-clad neoprene sporting and occupational boots. LaCrosse hoped to maintain this forward momentum by continuing to focus on creating innovative new products and on using bold marketing strategies to sell them.

Principal Subsidiaries: Danner, Inc.

Principal Divisions: LaCrosse Safety & Industrial.

Principal Competitors: The Timberland Company; Wolverine World Wide, Inc.; C&J Clark International Ltd.; R. Griggs Limited; Red Wing Shoe Company, Inc.; L.L. Bean, Inc.; Columbia Sportswear Company; Rocky Shoes & Boots, Inc.

Chronology

• Key Dates:
• 1897: Albert Hirshheimer, Michael Funk, and George Zeisler found La Crosse Rubber Mills Company in La Crosse, Wisconsin, as a manufacturer of rubber horseshoes; company soon switches from producing horseshoes to making rubber-coated fabrics and raincoats.
• 1906: Company switches to the production of canvas and rubber footwear.
• 1912: Funk and Hirshheimer purchase controlling interest in La Crosse Rubber Mills.
• Early 1920s:The Funk family buys out Hirshheimer.
• 1930: Following several expansions, La Crosse Rubber Mills is the largest employer in La Crosse, with 2,000 workers.
• 1941: Company receives its first footwear contract from the U.S. Army.
• 1978: With shift away from athletic footwear, boots become an even more important core line.
• 1982: To fend off a hostile takeover bid by Endicott Johnson Co., a management buyout is engineered and led by George W. Schneider, husband of Virginia Funk, granddaughter of one of the cofounders.
• 1983: Company is incorporated as La Crosse Rubber Mills, Inc.; an injection-molding plant in Claremont, New Hampshire, is purchased for the production of low-priced boots.
• 1985: Company is renamed LaCrosse Footwear, Inc.
• 1994: Danner Shoe Manufacturing Company, a Portland, Oregon-based producer of high-quality leather footwear, is acquired; LaCrosse Footwear goes public through an IPO.
• 1996: Red Ball, Inc., maker of outdoor sporting and protective footwear, is purchased; LaCrosse establishes a joint venture with Racine, Wisconsin-based Rainfair, Inc., leading producer of protective clothing and footwear for the safety, industrial, and uniform markets.
• 1998: LaCrosse takes full control of the Rainfair venture.
• 2001: Company announces that it will shift from a manufacturing and distribution model toward one focusing on product development and marketing--with production increasingly outsourced; plant in La Crosse is shut down and production shifted to Asia; headquarters are moved from La Crosse to Portland, Oregon.
• 2002: Rainfair factory in Racine is shut down; the Rainfair division, now operating out of Portland, is renamed LaCrosse Safety & Industrial.