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 June 27, 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
incorporation or organization) Identification 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 July 22, 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 Nine Months Ended June
27, 1997 and June 28, 1996 3
Consolidated Balance Sheets -
June 27, 1997, September 27, 1996
and June 28, 1996 4
Consolidated Statements of Cash Flows -
Nine Months Ended June 27, 1997 and
June 28, 1996 6
Notes to Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
(thousands, except per June 27 June 28 June 27 June 28
share data) 1997 1996 1997 1996
Net sales $86,894 $110,705 $234,822 $278,339
Cost of sales 54,422 68,282 147,088 170,263
------- ------- ------- -------
Gross profit 32,472 42,423 87,734 108,076
------- ------- ------- -------
Operating expenses:
Marketing and selling 17,430 23,077 50,733 61,186
Financial and
administrative
management 4,907 6,445 16,451 19,124
Research and development 1,255 1,524 3,756 4,813
Profit sharing 409 384 1,253 831
Nonrecurring charges - 60 - 2,460
Amortization of
acquisition costs 562 611 1,728 1,916
------- ------- ------- -------
Total operating expenses 24,563 32,101 73,921 90,330
------- ------- ------- -------
Operating profit 7,909 10,322 13,813 17,746
Interest income (105) (165) (324) (480)
Interest expense 2,153 2,885 6,580 7,877
Other expenses, net 196 104 156 80
------- ------- ------- -------
Income before income
taxes 5,665 7,498 7,401 10,269
Income tax expense 2,379 3,296 3,653 4,770
------- ------- ------- -------
Net income $3,286 $4,202 $3,748 $5,499
======= ======= ======= =======
Earnings per common share $0.41 $0.52 $0.46 $0.68
======= ======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 27 September 27 June 28
(thousands, except share data) 1997 1996 1996
ASSETS
Current assets:
Cash and temporary cash
investments $10,635 $12,697 $11,303
Accounts receivable, less
allowance for doubtful accounts
of $2,195, $2,235 and $3,186,
respectively 71,528 55,847 97,002
Inventories 82,352 101,903 119,016
Deferred income taxes 14,370 13,561 6,666
Other current assets 4,318 10,336 7,041
------- ------- -------
Total current assets 183,203 194,344 241,028
Property, plant and equipment 28,479 30,154 31,956
Intangible assets 47,477 54,422 54,986
Other assets 2,151 1,848 1,013
------- ------- -------
Total assets $261,310 $280,768 $328,983
------- ------- -------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Short-term debt and current
maturities of long-term debt $35,376 $43,118 $70,545
Accounts payable 11,101 11,086 15,205
Accrued liabilities:
Salaries and wages 4,045 6,260 5,878
Income taxes 5,152 4,283 2,057
Other 20,396 23,659 19,163
------- ------- -------
Total current liabilities 76,070 88,406 112,848
Long-term debt, less current
maturities 61,278 61,501 68,866
Other liabilities 3,827 4,437 4,296
------- ------- -------
Total liabilities 141,175 154,344 186,010
Shareholders' equity:
Preferred stock: none issued - - -
Common stock:
Class A shares issued:
June 27, 1997, 6,905,385;
September 27, 1996, 6,901,801;
June 28, 1996, 6,897,359 346 345 345
Class B shares issued
(convertible into Class A):
June 27, 1997, 1,228,053;
September 27, 1996, 1,228,137;
June 28, 1996, 1,228,137 61 61 61
Capital in excess of par value 44,172 44,084 43,968
Retained earnings 81,616 77,940 94,986
Contingent compensation (110) (121) (179)
Cumulative translation adjustment (5,599) 4,115 4,083
Treasury stock:
June 27, 1997, 27,400 Class A
shares;
June 28, 1996, 12,933 Class A
shares (351) - (291)
------- ------- -------
Total shareholders' equity 120,135 126,424 142,973
------- ------- -------
Total liabilities and
shareholders' equity $261,310 $280,768 $328,983
======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
June 27 June 28
(thousands) 1997 1996
CASH USED FOR OPERATIONS
Net income $3,748 $5,499
Noncash items:
Depreciation and amortization 7,904 8,054
Writedown of property, plant and equipment - 630
Writedown of intangible assets - 1,070
Deferred income taxes (1,250) 928
Change in:
Accounts receivable, net (25,461) (37,405)
Inventories 5,063 (22,664)
Accounts payable and accrued liabilities 3,444 (1,897)
Other, net 4,698 1,641
------- -------
(1,854) (44,144)
------- -------
CASH PROVIDED BY (USED FOR) INVESTING
ACTIVITIES
Net proceeds from sale of business 13,937 -
Net additions to property, plant and
equipment (7,330) (5,797)
------- -------
6,607 (5,797)
------- -------
CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES
Issuance of senior notes - 45,000
Repayment of revolving credit facilities - (13,412)
Net change in short-term debt (5,123) 21,125
Common stock transactions (462) (154)
------- -------
(5,585) 52,559
Effect of foreign currency fluctuations on
cash (1,230) (259)
------- -------
Increase (decrease) in cash and temporary
cash investments (2,062) 2,359
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 12,697 8,944
------- -------
End of period $10,635 $11,303
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
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 June 27, 1997, the results of operations for the three months and
nine months ended June 27, 1997 and cash flows for the nine months ended
June 27, 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 nine months ended June 27, 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:
June 27 September 27 June 28
(thousands) 1997 1996 1996
Raw materials $31,076 $30,102 $33,341
Work in process 6,348 6,167 6,601
Finished goods 54,626 79,299 83,790
------- ------- -------
92,050 115,568 123,732
Less reserves 9,698 13,665 4,716
------- ------- -------
$82,352 $101,903 $119,016
======= ======= =======
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. In May 1997, the Company granted options to
purchase 5,000 shares of Class A common stock at $11.25 per share and
10,000 shares of Class A common stock at $12.94 per share. Since September
27, 1996, options to purchase 76,400 Class A common shares have been
exercised or canceled.
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 Nine Months Ended
June 27 June 28 June 27 June 28
1997 1996 1997 1996
Weighted average common
shares 8,106 8,113 8,113 8,113
====== ====== ====== ======
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 1997 were $7,910,000
and $1,184,000, respectively.
7 Acquisitions
In July 1997, the Company completed the acquisition of substantially all
of the assets of Ocean Kayak, Inc., a privately held manufacturer and
marketer of kayaks. The initial purchase price for the acquisition was
approximately $4,500,000. Additional payments in the years 1998 and 1999
are dependent upon achievement of specified levels of sales of the
acquired products.
In July 1997, the Company completed the acquisition of the common stock of
Uwatec AG (Uwatec), a privately held manufacturer and marketer of diving
computers and other electronic instruments sold under the Aladin and
Uwatec trademarks. The initial purchase price for the acquisition was
approximately $33,000,000, substantially all of which will be recorded as
intangible assets. The Swiss franc equivalent of $10,000,000 of the
initial purchase price is deferred with payments due in 2000 and 2002.
Interest on the deferred amounts is payable annually at 6%. Additional
payments in 1998 through 2000 are dependent upon achievement of specified
levels of profitability of the acquired business.
In connection with the acquisition, the Company entered into a long-term
product development and intellectual property agreement with an
unaffiliated party with which Uwatec conducts business and an employment
agreement with a key employee and shareholder of Uwatec prior to the
acquisition.
To provide interim financing for the acquisitions, retire existing debt of
Uwatec and to pay costs associated with the acquisitions, the Company
utilized existing credit facilities. Committed permanent financing, in the
form of $25,000,000 of unsecured senior notes bearing interest at 7.15%,
will be issued in October 1997, at which time up to $25,000,000 borrowed
under the Company's existing facilities will be repaid. The senior notes
will have annual principal payments of $2,000,000 to $7,000,000 beginning
October 2001 with a final payment due October 2007. Simultaneous with the
commitment of the senior notes, the Company executed a currency swap,
effectively denominating in Swiss francs all of the principal and interest
payments required under the senior notes. The fixed, effective interest
rate to be paid on the senior notes as a result of the currency swap is
4.32%.
Unaudited pro forma operating results for the nine months ended June 1997,
as if the acquisition of Uwatec and sale of Plastimo had been consummated
in September 1996 are as follows:
(thousands, except per share
data)
Net sales $243,782
Net income 674
Earning per common share 0.08
=======
Unaudited pro forma operating results for the year ended September 1996,
as if the acquisition of Uwatec and sale of Plastimo had been consummated
in September 1995 are as follows:
(thousands, except per share
data)
Net sales $332,700
Net loss (12,526)
Loss per common share (1.54)
=======
Additional payments, if required, will increase intangible assets in
future years. The acquisitions were accounted for using the purchase
method of accounting and, accordingly, the financial statements will
include the results of operations from the respective dates of
acquisition.
The Company anticipates nonrecurring charges totaling $2,000,000 will be
incurred over the next two years to integrate Uwatec into its business.
8 Reclassification
Certain amounts as previously reported have been reclassified to conform
with the current period presentation.
<PAGE>
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 nine months ended June 27, 1997 and June 28, 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, Swiss
francs, 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
nine months ended June 27, 1997 and the sale of the Plastimo business
reduced the cumulative translation component of shareholders' equity by
$9.7 million since the end of the 1996 fiscal year.
Results of Operations
Net sales for the three months ended June 27, 1997 totaled $86.9 million,
a decrease of approximately 21% from net sales of $110.7 million for the
three months ended June 28, 1996. Net sales of the Company's North
American units for the three months ended June 27, 1997 decreased $8.5
million, or 13%, over the corresponding period in the prior year. Net
sales of the Company's European units decreased $15.0 million, or 38%,
compared to the corresponding period of the preceding year. The sale of
the Plastimo business in January 1997 accounted for $13.3 million of the
sales shortfall.
Net sales for the nine months ended June 27, 1997 decreased 16% to $234.8
million, from $278.3 million in the prior year. The sale of the Plastimo
business accounted for $21.3 million of the sales shortfall.
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 June 27, 1997 as compared to the preceding year.
Excluding the impact of foreign currencies and the sale of the Plastimo
business, net sales decreased 7% and 5% for the three months and nine
months ended June 27, 1997, respectively.
Gross profit as a percentage of sales decreased to 37.4% for the three
months ended June 27, 1997 compared to 38.3% in the corresponding period
in the prior year. Gross profit for the nine months ended June 27, 1997
decreased to 37.4% compared to 38.8% 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 $7.9 million for the three
months ended June 27, 1997, compared to an operating profit of $10.3
million for the corresponding period of the prior year. The decreases in
sales and gross profit margin were partially offset by a $7.5 million
decrease in operating expenses. The decrease in operating expenses is
attributable to the decline in sales, management's efforts to control such
expenses and the sale of Plastimo in January 1997. The Company earned an
operating profit of $13.8 million for the nine months ended June 27, 1997,
compared to an operating profit of $17.7 million for the corresponding
period of the prior year. Excluding the Plastimo business, operating
profit as a percentage of sales increased for the three months and nine
months ended June 27, 1997 compared to the prior year.
Interest expense of $2.2 million for the three months ended June 27, 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 $3.3 million in the three months ended
June 27, 1997 compared to income of $4.2 million in the corresponding
period of the preceding year. On a per share basis, the earnings amounted
to $0.41 compared to $0.52 in the preceding year.
The Company earned net income of $3.7 million in the nine months ended
June 27, 1997 compared to net income of $5.5 million in the corresponding
period of the preceding year. On a per share basis, the earnings amounted
to $0.46 compared to $0.68 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 $1.9 million for the nine months
ended June 27, 1997 and $44.1 million for the corresponding period of the
prior year. Seasonal growth in accounts receivable of $25.5 million for
the nine months ended June 27, 1997 and $37.4 million for the
corresponding period of the prior year account for a portion of the net
usage of funds.
Inventory decreased $5.1 million for the nine months ended June 27, 1997
versus an inventory increase of $22.7 million for the corresponding period
of the prior year. Improved order quantity management contributed to the
inventory decrease. 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.
Accounts payable and accrued liabilities increased $3.4 million for the
nine months ended June 27, 1997 and decreased $1.9 million for the
corresponding period of the prior year. Trade accounts payable accounted
for the majority of the increase in the current year.
Depreciation and amortization charges were $7.9 million for the nine
months ended June 27, 1997 and $8.1 million for 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 $7.3 million for the nine months ended June 27, 1997 and $5.8 million
for the corresponding period of the prior year. The Company s recurring
investments are made primarily for tooling for new products and
enhancements and information systems. In 1997, capital expenditures are
anticipated to total approximately $10.0 million. These expenditures are
expected to be funded by working capital or existing credit facilities.
Financing Activities
Financing activities used $5.6 million of cash flows for the nine months
ended June 27, 1997 and provided $52.6 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
acquisitions of Uwatec and Ocean Kayak in July 1997 were funded from
existing credit facilities.
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 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
None
<PAGE>
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: August 11, 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
Page
Exhibit Description Number
27. Financial Data Schedule -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-03-1997
<PERIOD-START> SEP-28-1996
<PERIOD-END> JUN-27-1997
<CASH> 10,635
<SECURITIES> 0
<RECEIVABLES> 73,723
<ALLOWANCES> (2,195)
<INVENTORY> 82,352
<CURRENT-ASSETS> 183,203
<PP&E> 73,595
<DEPRECIATION> (45,116)
<TOTAL-ASSETS> 261,310
<CURRENT-LIABILITIES> 76,070
<BONDS> 61,278
0
0
<COMMON> 407
<OTHER-SE> 119,728
<TOTAL-LIABILITY-AND-EQUITY> 261,310
<SALES> 234,822
<TOTAL-REVENUES> 234,822
<CGS> 147,088
<TOTAL-COSTS> 147,088
<OTHER-EXPENSES> 72,723
<LOSS-PROVISION> 1,030
<INTEREST-EXPENSE> 6,580
<INCOME-PRETAX> 7,401
<INCOME-TAX> 3,653
<INCOME-CONTINUING> 3,748
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,748
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
