BOOT – First Look

Initially attracted to the stock for the following reasons
-strong operational improvement from quarter to quarter
-strong momentum in the form of rising earnings estimates, positive price momentum, and earnings surprises
-hidden assets in the form of NOL
-premium brands trading at discount valuation

Currently:
Share Price: $17.2
Market Value: $108M
Enterprise Value: $98M
Investment Type: Long term holding

LaCrosse Footwear (BOOT) has been making boots for over a hundred years. In 1994 the company acquired Danner, Inc an its line up of premium leather boots. Currently the company’s revenue is almost evenly split between the work and outdoor market. The LaCrosse branded boots are sold at lower price points while the Danner boots have a strong brand name and sell at a substantial premium.

Fast forwarding to the most recent past, BOOT has undergone a substantial turnaround and has drastically improved margins. Over the last 5 years the company jettisoned a substantial number of businesses (PVC boots, children boots, mass market apparel, etc.) and has concentrated on its highest margin products.

The turnaround has been pronounced ……

Looking at the 2002 annual report, a year in which the stock hit $1 per share, the company reported 22% decline in sales due to both weakening economy and discontinuation of several business lines and retail outlets. Gross margins were reported at 26.8% (which was actually a 270 bps improvement from the previous year) and EBITDA was a negative $4 million. In 2002 and 2001 the company relocated its headquarters and most of the remaining U.S. manufacturing to Portland, Oregon and shut down a number of plants in Wisconsin (the company was originally founded as a rubber shoe manufacturer based in Wisconsin).

What a difference 4 years makes …..

Looking over the latest 10K, BOOT reported gross margins of 39.2% and EBITDA of positive $8.84 million. Also, based on the latest filling the company manufactures 80% of its products (by sales dollars) outside of the U.S. and has re-positioned itself into a designer and innovator rather than a sub par manufacturer.

* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.