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
For the quarterly period ended March 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-16255
JOHNSON WORLDWIDE ASSOCIATES, INC.
(Exact name of Registrant as specified in its charter)
Wisconsin 39-1536083
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
1326 Willow Road, Sturtevant, Wisconsin 53177
(Address of principal executive offices)
(414) 884-1500
(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 [ ]
As of May 1, 1997, 6,877,985 shares of Class A and 1,228,053 shares of
Class B common stock of the Registrant were outstanding.
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
Index Page
No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations -
Three Months and Six Months Ended March 28,
1997 and March 29, 1996 3
Consolidated Balance Sheets -
March 28, 1997, September 27, 1996
and March 29, 1996 4
Consolidated Statements of Cash Flows -
Six Months Ended March 28, 1997 and March
29, 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
<TABLE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION> Three Months Ended Six Months Ended
March 28 March 29 March 28 March 29
(thousands, except per 1997 1996 1997 1996
share data)
<S> <C> <C> <C> <C>
Net sales $96,111 $111,229 $147,928 $167,634
Cost of sales 58,978 66,897 92,666 101,981
-------- -------- -------- --------
Gross profit 37,133 44,332 55,262 65,653
-------- -------- -------- --------
Operating expenses:
Marketing and selling 19,023 22,564 33,303 38,109
Financial and administrative
management 5,891 6,622 11,544 12,679
Research and development 1,224 1,576 2,501 3,289
Profit sharing 741 404 844 447
Nonrecurring charges - 2,400 - 2,400
Amortization of acquisition costs 563 624 1,166 1,305
Total operating expenses 27,442 34,190 49,358 58,229
------- ------- ------ ------
Operating profit 9,691 10,142 5,904 7,424
Interest income (98) (148) (219) (315)
Interest expense 2,344 2,862 4,427 4,992
Other (income) expenses, net (105) 26 (40) (24)
------- ------- ------ -------
Income before income taxes 7,550 7,402 1,736 2,771
Income tax expense 3,222 3,312 1,274 1,474
------- ------- ------ --------
Net income $4,328 $4,090 $ 462 $1,297
======= ======= ====== ========
Earnings per common share $0.53 $0.50 $0.06 $0.16
======= ======= ====== ========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(thousands, except share data) March 28 September 27 March 29
1997 1996 1996
ASSETS
Current assets:
Cash and temporary cash
investments $5,362 $12,697 $3,629
Accounts receivable, less
allowance for doubtful
accounts of $2,003, $2,235,
and $2,874, respectively 83,254 55,847 112,653
Inventories 92,606 101,903 126,623
Deferred income taxes 14,261 13,561 7,174
Other current assets 7,570 10,336 9,722
--------- --------- ---------
Total current assets 203,053 194,344 259,801
Property, plant and equipment 28,774 30,154 33,122
Intangible assets 48,482 54,422 56,146
Other assets 2,086 1,848 945
--------- --------- ---------
Total assets $282,395 $280,768 $350,014
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current
maturities of long-term debt $58,160 $43,118 $89,326
Accounts payable 12,987 11,086 19,360
Accrued liabilities:
Salaries and wages 4,484 6,260 5,788
Income taxes 3,585 4,283 2,138
Other 20,583 23,659 19,890
--------- --------- ---------
Total current liabilities 99,799 88,406 136,502
Long-term debt, less current
maturities 61,323 61,501 68,936
Other liabilities 3,765 4,437 4,232
--------- --------- ---------
Total liabilities 164,887 154,344 209,670
--------- --------- ---------
Shareholders' equity:
Preferred stock: none issued -- -- --
Common stock:
Class A shares issued:
March 28, 1997, 6,905,385;
September 27, 1996, 6,901,801;
March 29, 1996, 6,896,959 346 345 345
Class B shares issued (convertible
into Class A):
March 28, 1997, 1,228,053;
September 27, 1996, 1,228,137;
March 29, 1996, 1,228,537 61 61 61
Capital in excess of par
value 44,172 44,084 43,968
Retained earnings 78,307 77,940 90,784
Contingent compensation (131) (121) (236)
Cumulative translation
adjustment (4,846) 4,115 5,713
Treasury stock:
March 28, 1997, 27,400 Class
A shares; March 29, 1996,
12,933 Class A shares (401) -- (291)
--------- --------- ---------
Total shareholders' equity 117,508 126,424 140,344
--------- --------- ---------
Total liabilities and
shareholders' equity $282,395 $280,768 $350,014
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
(thousands) March 28 March 29
1997 1996
CASH USED FOR OPERATIONS
Net income $462 $1,297
Noncash items:
Depreciation and amortization 5,397 5,420
Writedown of property, plant
and equipment -- 630
Writedown of intangible assets - 1,070
Deferred income taxes (1,145) 464
Change in:
Accounts receivable, net (36,963) (52,190)
Inventories (4,549) (29,364)
Accounts payable and accrued
liabilities 3,992 2,424
Other, net (176) (1,079)
--------- ---------
(32,982) (71,328)
--------- ---------
CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES
Net proceeds from sale of business 13,937 -
Net additions to property, plant
and equipment (4,521) (4,890)
--------- ---------
9,416 (4,890)
--------- ---------
CASH PROVIDED BY FINANCING ACTIVITIES
Issuance of senior notes - 45,000
Repayment of revolving credit
facilities - (13,412)
Net change in short-term debt 17,639 39,521
Common stock transactions (474) (51)
--------- ---------
17,165 71,058
Effect of foreign currency
fluctuations on cash (934) (155)
--------- ---------
Decrease in cash and temporary
cash investments (7,335) (5,315)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 12,697 8,944
--------- ---------
End of period $5,362 $3,629
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1 Basis of Presentation
The consolidated financial statements included herein are unaudited. In
the opinion of management, these statements contain all adjustments
(consisting of only normal recurring items) necessary to present fairly
the financial position of Johnson Worldwide Associates, Inc. (the Company)
as of March 28, 1997, the results of operations for the three months and
six months ended March 28, 1997 and cash flows for the six months ended
March 28, 1997. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 1996 Annual Report.
Because of seasonal and other factors, the results of operations for the
three months and six months ended March 28, 1997 are not necessarily
indicative of the results to be expected for the full year.
2 Income Taxes
The provision for income taxes includes deferred taxes and is based upon
estimated annual effective tax rates in the tax jurisdictions in which the
Company operates.
3 Inventories
Inventories at the end of the respective periods consist of the following:
March 28 September 27 March 29
(thousands) 1997 1996 1996
Raw materials $32,425 $30,102 $36,118
Work in process 6,177 6,167 6,359
Finished goods 64,176 79,299 89,050
--------- --------- ---------
102,778 115,568 131,527
Less: reserves 10,172 13,665 4,904
--------- --------- ---------
$92,606 $101,903 $126,623
========= ========= =========
4 Shareholders' Equity
In October 1996, the Company granted options to purchase 75,000 shares of
Class A common stock at $13.125 per share. In December 1996, the Company
granted options to purchase 156,000 shares of Class A common stock at
$11.50 per share and 10,000 shares of Class A common stock at $13.125 per
share. In January 1997, the Company granted 5,500 shares of restricted
Class A common stock.
5 Earnings Per Share
Earnings per share of common stock are computed on the basis of a weighted
average number of common shares outstanding. Common stock equivalents are
not significant in any period presented.
(thousands) Three Months Ended Six Months Ended
March 28 March 29 March 28 March 29
1997 1996 1997 1996
Weighted average common shares 8,112 8,112 8,116 8,114
======= ======= ======= ========
In 1997, the FASB issued Statement 128, Earnings Per Share, which requires
changes in the current method of computation of, and disclosures with
regard to, earnings per share. The company will adopt Statement 128 in
1998, as required. The calculation of basic earnings per share required
under Statement 128 will be substantially the same as the amounts of
earnings per common share currently being reported by the Company. The
amounts calculated as diluted earnings per share under Statement 128 will
be nominally lower than the related basic earnings per share.
6 Sale of Plastimo Business
In 1996, the Board of Directors approved a plan to divest the Company's
Plastimo business, which manufactured navigation and safety equipment and
distributed these products and other products to the marine industry,
primarily in Europe. The Company estimated that the sale of this business
would result in a loss of approximately $2,000,000. Accordingly, this
loss was recognized in 1996 operating results. The Company completed the
divestiture in January 1997. Net sales and operating losses of the
Plastimo business for the four months ended January 31, 1997 were $7.9
million and $1.2 million, respectively.
7 Acquisition of Uwatec AG
In March 1997, the Company entered into a definitive agreement to acquire
the common stock of Uwatec AG, a privately held manufacturer and marketer
of diving electronic instruments sold under the Aladin and Uwatec
trademarks. The acquisition is subject to satisfaction of certain
preclosing conditions. Sales of Uwatec AG in the year ended December 31,
1996 totaled approximately $24 million.
8 Reclassification
Certain amounts as previously reported have been reclassified to conform
with the current period presentation.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion includes comments and analysis relating to the
Company's results of operations and financial condition for the three
months and six months ended March 28, 1997 and March 29, 1996. This
discussion should be read in conjunction with the consolidated financial
statements and related notes that immediately precede this section, as
well as the Company's 1996 Annual Report.
Foreign Operations
The Company has significant foreign operations, for which the functional
currencies are denominated primarily in French francs, German marks,
Italian lire, Japanese yen and Canadian dollars. As the values of the
currencies of the foreign countries in which the Company has operations
increase or decrease relative to the U.S. dollar, the sales, expenses,
profits, assets and liabilities of the Company's foreign operations, as
reported in the Company's consolidated financial statements, increase or
decrease, accordingly. The Company mitigates a portion of the
fluctuations in certain foreign currencies through the purchase of forward
contracts and options to hedge known commitments, primarily for purchases
of inventory and loans denominated in foreign currencies. The significant
appreciation of the U.S. dollar during the six months ended March 28, 1997
and the sale of the Plastimo business reduced the cumulative translation
component of shareholders' equity by $9.0 million since the end of the
1996 fiscal year.
Results of Operations
Net sales for the three months ended March 28, 1997 totaled $96.1 million,
a decrease of approximately 14% from net sales of $111.2 million for the
three months ended March 29, 1996. Net sales of the Company's North
American units for the three months ended March 28, 1997 decreased $2.2
million, or 3%, over the corresponding period in the prior year. Higher
inventory levels through all stages of distribution contributed to the
decline. Net sales of the Company's European units decreased $12.7
million, or 31%, compared to the corresponding period of the preceding
year. Nearly all businesses reflected lower sales. The sale of the
Plastimo business in January 1997 accounted for $8.5 million of the sales
shortfall.
Net sales for the six months ended March 28, 1997 decreased 12% to $147.9
million, from $167.6 million in the prior year.
Relative to the U.S. dollar, the average values of most currencies of the
European countries in which the Company has operations were lower for the
three months ended March 28, 1997 as compared to the preceding year.
Excluding the impact of foreign currencies and the sale of the Plastimo
business, net sales decreased 3% and 4% for the three months and six
months ended March 28, 1997, respectively.
Gross profit as a percentage of sales decreased to 38.6% for the three
months ended March 28, 1997 compared to 39.9% in the corresponding period
in the prior year. Business unit results were mixed with all product
categories reflecting both increases and decreases, dependent upon
geographic areas. Gross profit for the six months ended March 28, 1997
decreased to 37.4% compared to 39.2% in the prior year. Underabsorption
of overhead expenses due to lower sales volume and sales of excess
inventory at lower than normal margins contributed to the overall decline.
The Company earned an operating profit of $9.7 million for the three
months ended March 28, 1997, compared to an operating profit of $10.1
million for the corresponding period of the prior year. The decreases in
sales and gross profit were partially offset by a $6.7 million decrease in
operating expenses. The Company earned an operating profit of $5.9
million for the six months ended March 28, 1997, compared to an operating
profit of $7.4 million for the corresponding period of the prior year.
The decrease in operating expenses is attributable to the decline in
sales, management's efforts to control such expenses, nonrecurring charges
of $2.4 million recorded in the prior year and the sale of Plastimo in
January 1997.
Interest expense of $2.3 million for the three months ended March 28, 1997
was lower than the prior year due to lower working capital levels and the
use of proceeds from the sale of Plastimo to reduce short-term debt.
The Company earned net income of $4.3 million in the three months ended
March 28, 1997 compared to income of $4.1 million in the corresponding
period of the preceding year. On a per share basis, the earnings amounted
to $0.53 compared to $0.50 in the preceding year.
The Company earned net income of $0.5 million in the six months ended
March 28, 1997 compared to net income of $1.3 million in the corresponding
period of the preceding year. On a per share basis, the earnings amounted
to $0.06 compared to $0.16 in the preceding year.
Financial Condition
The following discusses changes in the Company's liquidity and capital
resources.
Operations
Cash flows used for operations totaled $33.0 million for the six months
ended March 28, 1997 and $71.3 million for the corresponding period of the
prior year. Seasonal growth in accounts receivable of $37.0 million for
the six months ended March 28, 1997 and $52.2 million for the
corresponding period of the prior year account for a portion of the net
usage of funds.
Accelerated delivery schedules for certain new products, inventories of
acquired product lines, and level loading of production at certain of the
Company's manufacturing operations contributed to the increase in 1996.
Inventory turns decreased for the six months ended March 28, 1997 compared
to the corresponding period of the prior year.
Accounts payable and accrued liabilities increased $4.0 million for the
six months ended March 28, 1997 and $2.4 million for the corresponding
period of the prior year, decreasing the net outflow of cash from
operations. Reduced inventory procurement accounts for a significant
amount of the change between years.
Depreciation and amortization charges were $5.4 million for the six months
ended March 28, 1997 and the corresponding period of the prior year,
mitigating the net outflow of operating funds.
Investing Activities
Net proceeds from the sale of the Plastimo business provided a cash
increase of $13.9 million. Expenditures for property, plant and equipment
were $4.5 million for the six months ended March 28, 1997 and $4.9 million
for the corresponding period of the prior year. The Company's recurring
investments are made primarily for tooling for new products and
enhancements. In 1997, capital expenditures are anticipated to total
approximately $10.0 million. These expenditures are expected to be funded
by working capital or existing bank lines of credit.
Financing Activities
Cash flows from financing activities totaled $17.2 million for the six
months ended March 28, 1997 and $71.1 million for the corresponding
period of the prior year. In October 1995, the Company consummated
private placements of long-term debt totaling $45 million. Payments on
long-term debt required to be made in 1997 total $7.5 million. Proceeds
totaling approximately $16 million from the sale of the Company's Plastimo
business were used to reduce short-term indebtedness in 1997. The
acquisition of Uwatec AG is expected to be funded from existing bank lines
of credit or a new facility.
Other Factors
The Company has not been significantly impacted by inflationary pressures
over the last several years. However, from time to time the Company faces
changes in the prices of commodities. Price increases and, in certain
situations, price decreases are implemented for individual products, when
appropriate. The Company anticipates that rising costs of basic raw
materials may impact 1997 operating costs and, accordingly, the prices of
its products. The Company is involved in continuing programs to mitigate
the impact of cost increases through changes in product design and
identification of sourcing and manufacturing efficiencies.
<PAGE>
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting on January 22, 1997, the
shareholders voted to elect the following individuals as
Directors for terms that expire at the next annual
meeting:
Votes Votes
Cast Cast Votes Broker
for Against Withheld Abstentions Non-Votes
Class A Directors:
------------------------
Donald W. Brinckman 5,029,825 0 30,781 0 0
Thomas F. Pyle, Jr. 5,029,825 0 30,781 0 0
Class B Directors:
------------------------
Samuel C. Johnson 1,220,043 0 0 0 0
Helen P. Johnson-Leipold 1,220,043 0 0 0 0
Raymond F. Farley 1,220,043 0 0 0 0
Ronald C. Whitaker 1,220,043 0 0 0 0
Item 6.Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this Form 10-Q
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K.
On February 14, 1997, the Company filed a Current Report on Form
8-K dated January 30, 1997 to reflect (under Item 2 of Form 8-K)
the Company's disposition of all of the issued and outstanding
shares of capital stock of Plastimo, S.A. and Plastimo
Manufacturing (UK) Ltd. to Societe Figeacoise de Participations,
S.A. The report included (under Item 7 of Form 8-K) the
following financial statements: Unaudited Pro Forma Condensed
Consolidated Balance Sheet at December 27, 1996 and Unaudited
Pro Forma Condensed Consolidated Statements of Operations for
the year ended September 27, 1996 and for the three months ended
December 27, 1996.
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.
JOHNSON WORLDWIDE ASSOCIATES, INC.
Date: May 12, 1997
/s/ Carl G. Schmidt
Carl G. Schmidt
Senior Vice President and
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
Number
27. Financial Data Schedule --
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JOHNSON WORLDWIDE ASSOCIATE, INC. AS OF AND
FOR THE SIX MONTHS ENDED MARCH 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-03-1997
<PERIOD-START> SEP-28-1996
<PERIOD-END> MAR-28-1997
<CASH> 5,362
<SECURITIES> 0
<RECEIVABLES> 85,257
<ALLOWANCES> (2,003)
<INVENTORY> 92,606
<CURRENT-ASSETS> 203,053
<PP&E> 72,194
<DEPRECIATION> (43,420)
<TOTAL-ASSETS> 282,395
<CURRENT-LIABILITIES> 99,799
<BONDS> 61,323
0
0
<COMMON> 407
<OTHER-SE> 117,101
<TOTAL-LIABILITY-AND-EQUITY> 282,395
<SALES> 147,928
<TOTAL-REVENUES> 147,928
<CGS> 92,666
<TOTAL-COSTS> 92,666
<OTHER-EXPENSES> 48,441
<LOSS-PROVISION> 658
<INTEREST-EXPENSE> 4,427
<INCOME-PRETAX> 1,736
<INCOME-TAX> 1,274
<INCOME-CONTINUING> 462
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 462
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
