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 January 1, 1999
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 No.)
incorporation or organization)
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 January 31, 1999, 6,871,045 shares of Class A and 1,222,861 shares of
Class B common stock of the Registrant were outstanding.
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<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
Index Page No.
- - --------------------------------------------------------------------------------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations -
Three Months Ended January 1, 1999
and January 2, 1998 1
Consolidated Balance Sheets -
January 1, 1999, October 2, 1998 and
January 2, 1998 2
Consolidated Statements of Cash Flows -
Three Months Ended January 1, 1999 and
January 2, 1998 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 15
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signatures
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
- - --------------------------------------------------------------------------------
Three Months Ended
- - --------------------------------------------------------------------------------
January 1 January 2
(thousands, except per share data) 1999 1998
- - --------------------------------------------------------------------------------
Net sales $ 60,000 $ 51,841
Cost of sales 38,266 32,647
- - --------------------------------------------------------------------------------
Gross profit 21,734 19,194
- - --------------------------------------------------------------------------------
Operating expenses:
Marketing and selling 14,979 13,493
Finance, information systems and administrative
management
6,342 5,837
Research and development 1,944 1,543
Amortization of acquisition costs 1,025 912
Profit sharing 71 15
Nonrecurring charges 416 66
- - --------------------------------------------------------------------------------
Total operating expenses 24,777 21,866
- - --------------------------------------------------------------------------------
Operating loss (3,043) (2,672)
Interest income (104) (77)
Interest expense 2,283 2,194
Other income, net (5) (71)
- - --------------------------------------------------------------------------------
Loss before income taxes (5,217) (4,718)
Income tax benefit (2,198) (1,934)
- - --------------------------------------------------------------------------------
Net loss $ (3,019) $ (2,784)
- - --------------------------------------------------------------------------------
Basic loss per common share $ (0.37) $ (0.34)
- - --------------------------------------------------------------------------------
Diluted loss per common share $ (0.37) $ (0.34)
- - --------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated
financial statements.
-1-
<PAGE>
<TABLE>
<CAPTION>
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
- - -----------------------------------------------------------------------------------------------
January 1 October 2 January 2
(thousands, except share data) 1999 1998 1998
- - -----------------------------------------------------------------------------------------------
ASSETS
Current assets:
<S> <C> <C> <C>
Cash and temporary cash
investments $ 10,989 $ 11,496 $ 4,089
Accounts receivable, less allowance
for doubtful accounts of $2,709,
$2,570, and $2,733, respectively 62,093 53,421 49,587
Inventories 80,780 76,603 90,191
Deferred income taxes 6,836 6,067 5,140
Other current assets 8,834 6,933 7,407
- - -----------------------------------------------------------------------------------------------
Total current assets 169,532 154,520 156,414
Property, plant and equipment 35,772 35,469 32,144
Deferred income taxes 15,529 15,435 10,856
Intangible assets 91,007 90,101 81,463
Other assets 853 492 544
- - -----------------------------------------------------------------------------------------------
Total assets $ 312,693 $ 296,017 $ 281,421
- - -----------------------------------------------------------------------------------------------
continued
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JOHNSON WORLDWIDE ASSOCIATES, INC.
- - ------------------------------------------------------------------------------------------------------------
January 1 October 2 January 2
1999 1998 1998
- - ------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
<S> <C> <C> <C>
Short-term debt and current maturities of long-
term debt $ 76,462 $ 42,614 $ 45,224
Accounts payable 13,580 11,681 13,844
Accrued liabilities 21,286 30,724 17,614
- - ------------------------------------------------------------------------------------------------------------
Total current liabilities 111,328 85,019 76,682
Long-term debt, less current maturities 75,379 82,066 88,181
Other liabilities 4,575 4,546 4,290
- - ------------------------------------------------------------------------------------------------------------
Total liabilities 191,282 171,631 169,153
- - ------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock: none issued -- -- --
Common stock:
Class A shares issued:
January 1, 1999, 6,910,577;
October 2, 1998, 6,909,577;
January 2, 1998, 6,905,523 345 345 345
Class B shares issued (convertible into Class A):
January 1, 1999, 1,222,861:
October 2, 1998, 1,223,861;
January 2, 1998, 1,227,915 61 61 61
Capital in excess of par value 44,205 44,205 44,186
Retained earnings 82,048 85,068 77,096
Contingent compensation (15) (27) (58)
Other comprehensive income - cumulative
translation adjustment (4,618) (4,651) (9,060)
Treasury stock:
January 1, 1999, 39,532 Class A shares;
October 2, 1998, 39,532 Class A shares;
January 2, 1998, 22,919 Class A shares (615) (615) (302)
- - ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 121,411 124,386 112,268
- - ------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 312,693 $ 296,017 $ 281,421
- - ------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
- - ------------------------------------------------------------------------------------
Three Months Ended
- - ------------------------------------------------------------------------------------
January 1 January 2
(thousands) 1999 1998
- - ------------------------------------------------------------------------------------
CASH USED FOR OPERATIONS
<S> <C> <C>
Net loss $ (3,019) $ (2,784)
Noncash items:
Depreciation and amortization 3,527 3,216
Deferred income taxes (763) 2,148
Change in assets and liabilities, net of effect of
businesses acquired:
Accounts receivable, net (6,842) 786
Inventories (4,039) (11,263)
Accounts payable and accrued liabilities (8,788) (8,279)
Other, net (801) (483)
- - ------------------------------------------------------------------------------------
(20,725) (16,659)
- - ------------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES
Net assets of businesses acquired, net of cash (4,233) (3,034)
Net additions to property, plant and equipment (2,890) (2,072)
- - ------------------------------------------------------------------------------------
(7,123) (5,106)
- - ------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES
Issuance of senior notes -- 25,000
Net change in short-term debt 27,317 (6,081)
Common stock transactions -- 8
- - ------------------------------------------------------------------------------------
27,317 18,927
Effect of foreign currency fluctuations on cash 24 (203)
- - ------------------------------------------------------------------------------------
Decrease in cash and temporary cash investments (507) (3,041)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 11,496 7,130
- - ------------------------------------------------------------------------------------
End of period $ 10,989 $ 4,089
- - ------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
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<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. and
subsidiaries (the Company) as of January 1, 1999 and the results of
operations and cash flows for the three months ended January 1, 1999.
These consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in
the Company's 1998 Annual Report.
Because of seasonal and other factors, the results of operations for the
three months ended January 1, 1999 are not necessarily indicative of the
results to be expected for the full year.
All amounts, other than share and per share amounts, are stated in
thousands.
Certain amounts as previously reported have been reclassified to conform
with the current period presentation.
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:
---------------------------------------------------------------------
January 1 October 2 January 2
1999 1998 1998
---------------------------------------------------------------------
Raw materials $ 27,536 $ 27,834 $ 34,643
Work in process 3,502 4,753 7,012
Finished goods 55,192 49,875 58,073
---------------------------------------------------------------------
86,230 82,462 99,728
Less reserves 5,450 5,859 9,537
---------------------------------------------------------------------
$ 80,780 $ 76,603 $ 90,191
---------------------------------------------------------------------
-5-
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JOHNSON WORLDWIDE ASSOCIATES, INC.
4 Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings (loss) per common share:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Three Months Ended
-------------------------------------------------------------------------------------------
January 1 January 2
1999 1998
-------------------------------------------------------------------------------------------
<S> <C> <C>
Net loss for basic and diluted earnings per share $ (3,019) $ (2,784)
-------------------------------------------------------------------------------------------
Weighted average common shares outstanding 8,093,906 8,109,965
Less nonvested restricted stock 4,158 5,149
-------------------------------------------------------------------------------------------
Basic and diluted average common shares 8,089,748 8,104,816
-------------------------------------------------------------------------------------------
Basic loss per common share $ (0.37) $ (0.34)
-------------------------------------------------------------------------------------------
Diluted loss per common share $ (0.37) $ (0.34)
-------------------------------------------------------------------------------------------
</TABLE>
Options to purchase 733,005 shares of common stock with a weighted
average exercise price of $15.72 per share were outstanding at January 1,
1999. Options to purchase 627,457 shares of common stock with a weighted
average exercise price of $17.46 per share were outstanding at January 2,
1998. None of the options were included in the computation of diluted
loss per common share because the effect would be antidilutive.
5 Stock Ownership Plans
A summary of stock option activity related to the Company's plans is as
follows:
---------------------------------------------------------------------
Weighted Average
Shares Exercise Price
---------------------------------------------------------------------
Outstanding at October 2, 1998 602,061 $17.43
Granted 153,000 9.69
Cancelled (22,056) 20.49
---------------------------------------------------------------------
Outstanding at January 1, 1999 733,005 $15.72
---------------------------------------------------------------------
6 Acquisitions
In December 1998, the Company completed the acquisition of substantially
all of the assets and the assumption of certain liabilities of True North
Paddle & Necky Kayaks Ltd., a privately held manufacturer and marketer of
Necky Kayaks, and an affiliated entity. The purchase price, including
direct expenses, for the acquisition was approximately $5,700, of which
approximately $3,100 was recorded as intangible
-6-
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
assets and is being amortized over 25 years. Additional payments in the
years 1999 through 2003 are dependent upon the achievement of specified
levels of sales and profitability of the acquired products.
The acquisition was accounted for using the purchase method and,
accordingly, the Consolidated Financial Statements include the results of
operations since the date of acquisition. Additional payments, if
required, will increase intangible assets in future years.
7 Litigation
In 1998, certain businesses acquired by the Company became subject to
judgments in civil liability cases. In February 1999, these cases were
settled. All payments made as a result of these judgments reduced
payments otherwise due to selling shareholders of the businesses
acquired. Accordingly, these judgments did not impact the operating
results of the Company.
8 Comprehensive Income
The Company adopted Financial Accounting Standards Board Statement 130,
Reporting Comprehensive Income, in 1999. Comprehensive income includes
net income and changes in shareholders' equity from non-owner sources.
For the Company, the elements of comprehensive income excluded from net
income are represented primarily by the cumulative translation
adjustment.
Comprehensive income (loss) for the respective periods consists of the
following:
------------------------------------------------------------------------
Three Months Ended
------------------------------------------------------------------------
January 1 January 2
1999 1998
------------------------------------------------------------------------
Net loss $ (3,019) $ (2,784)
Translation adjustment 33 (2,704)
------------------------------------------------------------------------
Comprehensive income (loss) $ (2,986) $ (5,488)
------------------------------------------------------------------------
9 Segments of Business
The Company conducts its worldwide operations through five separate
global business units which represent major product lines. Operations are
conducted in the United States and various foreign countries, primarily
in Europe, Canada and the Pacific Basin.
-7-
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
Net sales and operating profit include both sales to customers, as
reported in the Company's consolidated statements of operations, and
interunit transfers, which are priced to recover cost plus an appropriate
profit margin. Identifiable assets represent assets that are used in the
Company's operations in each business unit at the end of the periods
presented.
A summary of the Company's operations by business unit is presented
below:
------------------------------------------------------------------------
Three Months Ended
------------------------------------------------------------------------
January 1 January 2
1999 1998
------------------------------------------------------------------------
Net sales:
Diving:
Unaffiliated customers $ 17,645 $ 19,430
Interunit transfers 3 108
Outdoor equipment:
Unaffiliated customers 15,000 12,392
Interunit transfers 11 1
Fishing:
Unaffiliated customers 11,856 9,269
Interunit transfers 123 187
Motors:
Unaffiliated customers 9,025 5,890
Interunit transfers 339 405
Watercraft:
Unaffiliated customers 5,782 4,227
Interunit transfers 12 --
Other 692 633
Eliminations (488) (701)
------------------------------------------------------------------------
$ 60,000 $ 51,841
------------------------------------------------------------------------
Operating profit (loss):
Diving $ (564) $ 1,606
Outdoor equipment (946) (687)
Fishing 79 (1,661)
Motors (942) (1,544)
Watercraft 150 137
Other (815) (523)
------------------------------------------------------------------------
$ (3,043) $ (2,672)
------------------------------------------------------------------------
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<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
--------------------------------------------------------------------------
January 1 October 2 January 2
1999 1998 1998
--------------------------------------------------------------------------
Identifiable assets:
Diving $ 105,330 $ 104,344 $ 94,137
Outdoor equipment 44,555 49,090 47,900
Fishing 65,833 62,099 73,552
Motors 27,356 22,905 27,414
Watercraft 40,114 29,340 19,649
Other 29,505 28,239 18,769
--------------------------------------------------------------------------
$ 312,693 $ 296,017 $ 281,421
--------------------------------------------------------------------------
-9-
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
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
ended January 1, 1999 and January 2, 1998. 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 1998 Annual Report.
Forward Looking Statements
Certain matters discussed in this 1998 Form 10-Q are "forward-looking
statements," intended to qualify for the safe harbors 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 the Company "expects," "believes" or other
words of similar meaning. Similarly, statements that describe the Company's
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. Factors that could affect actual results or outcomes include
changes in consumer spending patterns, the success of the Company's EVA program,
actions of companies that compete with JWA, the Company's success in managing
inventory, movements in foreign currencies or interest rates, the success of
suppliers, customers and others regarding compliance with year 2000 issues, and
adverse weather conditions. Shareholders, potential investors and other readers
are urged to consider these factors in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements included herein are only made as of
the date of this Form 10-Q and the Company undertakes no obligations to publicly
update such forward-looking statements to reflect subsequent events or
circumstances.
Results of Operations
Net sales for the three months ended January 1, 1999 totaled $60.0 million, an
increase of 16%, or $8.2 million, over the three months ended January 2, 1998.
Sales of all businesses except the Diving business exhibited strong sales
growth. The Diving business was adversely impacted by weakness in Asia, which
negatively impacted export sales.
Relative to the U.S. dollar, the average values of most currencies of the
countries in which the Company has operations were higher for the three months
ended January 1,
-10-
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
1999 as compared to the corresponding period of the prior year. Excluding the
impact of foreign currencies, net sales increased 14% for the three months ended
January 1, 1999. Gross profit as a percentage of sales decreased to 36.2% for
the three months ended January 1, 1999 compared to 37.0% in the corresponding
period in the prior year. The decrease in higher margin Diving sales relative to
total sales contributed to the decrease.
The Company incurred an operating loss of $3.0 million for the three months
ended January 1, 1999, compared to an operating loss of $2.7 million for the
corresponding period of the prior year. Seasonal losses of the Leisure Life
watercraft business, which the Company acquired in February 1998 and,
accordingly, did not impact prior year results, contributed to the decrease from
the prior year. Increased nonrecurring charges from integration of acquired
businesses also contributed to the decrease. The combination of these two
factors more than offset the positive impact of increased sales on operating
margins.
Interest expense totaled $2.3 million for the three months ended January 1, 1999
compared to $2.2 million for the corresponding period of the prior year.
Increased debt levels due to acquisitions consummated in 1998 were substantially
offset by improved management of working capital and a favorable interest rate
environment.
The Company incurred a net loss of $3.0 million in the three months ended
January 1, 1999 compared to a loss of $2.8 million in the corresponding period
of the prior year. On a per share basis, the loss totaled $0.37 compared to
$0.34 in the prior year.
Financial Condition
The following discusses changes in the Company's liquidity and capital
resources.
Operations
Cash flows used for operations totaled $20.7 million for the three months ended
January 1, 1999 and $16.7 million for the corresponding period of the prior
year. Growth in inventories of $4.0 million for the three months ended January
1, 1999 and $11.3 million for the corresponding period of the prior year account
for a significant amount of the net usage of funds. The build up of inventory in
anticipation of the selling season contributed to the increase in both years.
Inventory turns increased for the period ended January 1, 1999 compared to the
corresponding period of the prior year.
Accounts receivable increased $6.8 million for the three months ended January 1,
1999 and decreased $0.8 million for the corresponding period of the prior year.
The increase in the current year is related to the sales growth during the last
three months and seasonal dating programs.
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JOHNSON WORLDWIDE ASSOCIATES, INC.
Accounts payable and accrued liabilities decreased $8.8 million for the three
months ended January 1, 1999 and $8.3 million for the corresponding period of
the prior year, increasing the net outflow of cash from operations. These
outflows include seasonal payments for interest expense, incentive compensation
and retirement programs.
Depreciation and amortization charges were $3.5 million for the three months
ended January 1, 1999 and $3.2 million for the corresponding period of the prior
year, mitigating the net outflow of operating funds. The increase was due
primarily to increased amortization of intangible assets from businesses
acquired in 1998.
Investing Activities
Expenditures for property, plant and equipment were $2.9 million for the three
months ended January 1, 1999 and $2.1 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 1999, capitalized expenditures are
anticipated to total approximately $12 million. These expenditures are expected
to be funded by working capital or existing credit facilities. The Company
completed the acquisition of one business in the current year and two businesses
in the prior year, which increased tangible and intangible assets by $4.2
million and $3.0 million, respectively, net of cash and liabilities assumed.
Financing Activities
Cash flows from financing activities totaled $27.3 million for the three months
ended January 1, 1999 and $18.9 million for the corresponding period of the
prior year. In October 1997, the Company consummated a private placement of
long-term debt totaling $25 million. Payments on long-term debt required to be
made in 1999 total $7.8 million.
Market Risk Management
The Company is exposed to market risk stemming from changes in foreign exchange
rates, interest rates and, to a lesser extent, commodity prices. Changes in
these factors could cause fluctuations in earnings and cash flows. In the normal
course of business, exposure to certain of these market risks is managed by
entering into hedging transactions authorized under Company policies that place
controls on these activities. Hedging transactions involve the use of a variety
of derivative financial instruments. Derivatives are used only where there is an
underlying exposure: not for trading or speculative purposes.
-12-
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JOHNSON WORLDWIDE ASSOCIATES, INC.
Foreign Operations
The Company has significant foreign operations, for which the functional
currencies are denominated primarily in Swiss and 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 foreign currency swaps, forward contracts and options to
hedge known commitments, primarily for purchases of inventory and other assets
denominated in foreign currencies.
Interest Rates
The Company's debt structure and interest rate risk are managed through the use
of fixed and floating rate debt. The Company's primary exposure is to United
States interest rates. The Company also periodically enters into interest rate
swaps, caps or collars to hedge its exposure and lower financing costs.
Commodities
Certain components used in the Company's products are exposed to commodity price
changes. The Company manages this risk through instruments such as purchase
orders and non-cancelable supply contracts. Primary commodity price exposures
are metals and packaging materials.
Sensitivity to Changes in Value
The estimates that follow are intended to measure the maximum potential fair
value or earnings the Company could lose in one year from adverse changes in
foreign exchange rates or market interest rates under normal market conditions.
The calculations are not intended to represent actual losses in fair value or
earnings that the Company expects to incur. The estimates do not consider
favorable changes in market rates. Further, since the hedging instrument (the
derivative) inversely correlates with the underlying exposure, any loss or gain
in the fair value of derivatives would be generally offset by an increase or
decrease in the fair value of the underlying exposures. The positions included
in the calculations are foreign exchange forwards, currency swaps and fixed rate
debt. The calculations do not include the underlying foreign exchange positions
that are hedged by these market risk sensitive instruments. The table below
presents the estimated maximum potential one year loss in fair value and
earnings before income taxes from a 10% movement in foreign currencies and a 100
basis point movement in interest rate market risk sensitive instruments
outstanding at January 1, 1999:
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JOHNSON WORLDWIDE ASSOCIATES, INC.
- - --------------------------------------------------------------------------------
Estimated Impact on
- - --------------------------------------------------------------------------------
Earnings Before
(millions) Fair Value Income Taxes
- - --------------------------------------------------------------------------------
Foreign exchange rate instruments $3.2 $0.6
Interest rate instruments 3.9 0.8
- - --------------------------------------------------------------------------------
Other Factors
The Company has not been significantly impacted by inflationary pressures over
the last several years. The Company anticipates that changing costs of basic raw
materials may impact future 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. Price increases and, in certain
situations, price decreases are implemented for individual products, when
appropriate.
Year 2000
The year 2000 issue is the result of computer programs using two digits (rather
than four) to define years. Computers or other equipment with date sensitive
software may recognize "00" as the year 1900 rather than 2000. This could result
in system failures or miscalculations. If the Company or its significant
customers or suppliers fail to correct year 2000 issues, the Company's ability
to operate could be materially affected.
The Company has assessed the impact of year 2000 issues on the processing of
date-related information for all of its information systems infrastructure and
non-technical assets, such as production equipment. All systems and
non-technical assets are in the process of being inventoried and classified as
to their compliance with year 2000 data processing. Any systems found year 2000
deficient will be modified, upgraded or replaced. Project plans anticipate all
existing, critical information systems infrastructure and non-technical assets
to be year 2000 compliant before failure to comply would significantly disrupt
the Company's operations. Contingency plans will be developed to address any
failures resulting from relationships with customers, suppliers or other third
parties. The Company has made inquiries of its suppliers, customers and other
organizations which impact the Company's business, but cannot guarantee that
circumstances beyond its control will not have an adverse impact on its
operations.
Since 1993, the Company has invested approximately $10 million in information
systems improvements and has been migrating its businesses to systems that are
year 2000 compliant. Based on assessments and testing to date, the financial
impact of addressing any potential remaining internal system issues should not
be material to the Company's financial position, results of operations or cash
flows.
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<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information with respect to this item is included in Management's Discussion and
Analysis of Financial Condition and Results of Operations
under the heading "Market Risk Management."
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 4.17 Amendment No. 1 dated September 11, 1998 to the
Amended and Restated Credit Agreement dated as of
April 3, 1998.
Exhibit 27: Financial Data Schedule
(b) There were no reports on Form 8-K filed for the three months ended
January 1, 1999.
-15-
<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: February 15, 1999
/s/ Carl G. Schmidt
----------------------------------
Carl G. Schmidt
Senior Vice President and Chief Financial
Officer, Secretary and Treasurer
(Principal Financial and Accounting Officer)
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
EXHIBIT INDEX
Page
Exhibit Description Number
4.17 Amendment No. 1 dated September 11, 1998 to the -
Amended and Restated Credit Agreement dated as
of April 3, 1998.
27. Financial Data Schedule -
AMENDMENT NO. 1
TO
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Amendment"), dated as of September 11, 1998, among Johnson Worldwide
Associates, Inc., a Wisconsin corporation (the "Company"), certain consolidated
subsidiaries of the Company which may from time to time become parties thereto
(the "Subsidiaries"), The First National Bank of Chicago, Firstar Bank
Milwaukee, N.A., M&I Marshall & Ilsley Bank, The Northern Trust Company, and
Societe Generale (the "Lenders"), and Dresdner Bank ("Dresdner", and taken
together with the Lenders, the "Banks"), and The First National Bank of Chicago
in its capacity as contractual representative for itself and the other Lenders
(the "Agent") under that certain Amended and Restated Credit Agreement dated as
of April 3, 1998 by and among the Company, the Lenders and the Agent (the
"Credit Agreement"). Defined terms used herein and not otherwise defined herein
shall have the meaning given to them in the Credit Agreement.
WHEREAS, the Borrower, the Lenders and the Agent have entered the
Credit Agreement;
WHEREAS, pursuant to Section 2.16 of the Credit Agreement, the Company
has requested that the Credit Agreement be amended to increase the Aggregate
Commitment, the Aggregate Eurocurrency Commitment, the Aggregate Revolving
Commitment (collectively, the "Commitment Changes") and to add Dresdner as a new
Bank thereunder; and
WHEREAS, subject to the terms and conditions hereof, the undersigned
Lenders and the Agent have agreed to the Commitment Changes and the addition of
Dresdner;
NOW, THEREFORE, in consideration of the premises set forth above, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Amendment to the Credit Agreement. Effective as of the date first
above written and subject to the execution of this Amendment by the parties
hereto and the satisfaction of the conditions precedent set forth in Section 2
below, the Credit Agreement shall be and hereby is amended as follows:
(a) On and after the date first written above, Dresdner shall for all
purposes be a Bank party to the Credit Agreement and shall have all the rights
and obligations of a Bank under the Credit Agreement and the Notes, with a
Eurocurrency Commitment and Revolving Loan Commitment set forth opposite its
name on Schedule 4 to the Credit Agreement.
<PAGE>
(b) The Eurocurrency Commitments and Revolving Loan Commitments set
forth opposite each Lender's signature to the Credit Agreement are hereby
deleted. Such Commitments shall hereafter be recorded on Schedule 4 to the
Credit Agreement, a form of which is attached hereto.
(c) The Table of Contents is hereby amended to insert after "Schedule
2 -- ERISA (Article 3, paragraph i)" the following:
"Schedule 4 -- Commitments".
(d) Section 1.01 is hereby amended as follows:
(i) The definition of "Aggregate Commitment" is hereby modified
to delete therefrom the number "90,000,000" and to substitute therefor the
number "100,000,000".
(ii) The definition of "Aggregate Eurocurrency Commitment" is
hereby modified to delete therefrom the number "18,000,000" and to substitute
therefor the number "20,000,000".
(iii) The definition of "Aggregate Revolving Commitment" is
hereby modified to delete therefrom the number "72,000,000" and to substitute
therefor the number "80,000,000".
(iv) The definition of "Eurocurrency Commitment" is hereby
deleted and replaced with the following:
"Eurocurrency Commitment" shall mean, with respect to any Bank,
the amount set forth opposite such Bank's name on Schedule 4 in the column
entitled "Eurocurrency Commitment", as such amount may be modified from time to
time pursuant to the terms hereof.".
(v) The definition of "Revolving Loan Commitment" is hereby
deleted and replaced with the following:
"Revolving Loan Commitment" shall mean, with respect to any Bank,
the amount set forth opposite such Bank's name on Schedule 4 in the column
entitled "Revolving Loan Commitment", as such amount may be modified from time
to time pursuant to the terms hereof.".
(e) The Schedules to the Credit Agreement are hereby amended by
inserting therein "Schedule 4 -- Commitments" as attached to this Amendment.
(f) The attached Dresdner Bank signature page is hereby inserted
after Societe Generale's signature page to the Credit Agreement.
- 2 -
<PAGE>
2. Conditions of Effectiveness. This Amendment shall become effective
and be deemed effective as of the date hereof, if, and only if, the Agent shall
have received each of the following:
(a) duly executed originals of this Amendment from the Company,
Dresdner and the Agent;
(b) a Note payable to the order of Dresdner; and
(c) such other documents, instruments and agreements as the Agent may
reasonably request.
3. Notices. Pursuant to Section 10.08, Dresdner designates the address
set forth on the attached signature page marked as the "Dresdner Signature Page
for the Johnson Worldwide Credit Agreement" as its address for purposes of
notices and other communications under the Credit Agreement and the Notes.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants as follows:
(a) This Amendment and the Credit Agreement as previously executed and
as amended hereby, constitute legal, valid and binding obligations of the
Company and are enforceable against the Company in accordance with their terms.
(b) Upon the effectiveness of this Amendment, the Company hereby
reaffirms all covenants, representations and warranties made in the Credit
Agreement, to the extent the same are not amended hereby, and except as modified
by the supplemental disclosure made in Exhibit A to this Amendment agrees that
all such covenants, representations and warranties (as so modified) shall be
deemed to have been remade as of the effective date of this Amendment.
5. Reference to the Effect on the Credit Agreement.
(a) Upon the effectiveness of Section 1 hereof, on and after the date
hereof, each reference in the Credit Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a reference to the
Amended and Restated Credit Agreement dated as of April 3, 1998, as amended
hereby.
(b) Except as specifically amended above, the Amended and Restated
Credit Agreement dated as of April 3, 1998 and all other documents, instruments
and agreements executed and/or delivered in connection therewith shall remain in
full force and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the
- 3 -
<PAGE>
Agent or any of the Banks, nor constitute a waiver of any provision of the
Credit Agreement or any other documents, instruments and agreements executed
and/or delivered in connection therewith.
6. Costs and Expenses. The Company agrees to pay all reasonable costs,
fees and out-of-pocket expenses (including attorneys' fees and expenses charged
to the Agent) incurred by the Agent in connection with the preparation,
execution and enforcement of this Amendment.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws (as opposed to the conflict of law provisions)
of the State of Illinois.
8. Headings. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
9. Counterparts. This Amendment may be executed by one or more of the
parties to the Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
- 4 -
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered on the date first above written.
JOHNSON WORLDWIDE ASSOCIATES, INC.
By: /s/Carl G. Schmidt
Name:Carl G. Schmidt
Title:SENIOR VICE PRESIDENT
CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Agent
By: ____________________________
Name:
Title:
FIRSTAR BANK MILWAUKEE, N.A.
By: ___________________________
Name:
Title:
M&I MARSHALL & ILSLEY BANK
By: ____________________________
Name:
Title:
THE NORTHERN TRUST COMPANY
By: ____________________________
Name:
Title:
SOCIETE GENERALE
By: ____________________________
Name:
Title:
DRESDNER BANK
By: _____________________________
Name:
Title:
- 5 -
<PAGE>
SCHEDULE 4
COMMITMENTS
Name of Bank Eurocurrency Commitment Revolving Loan
Commitment
The First National Bank of $5,200,000 $20,800,000
Chicago
Firstar Bank Milwaukee, $3,600,000 $14,400,000
N.A.
M&I Marshall & Ilsley Bank $2,000,000 $8,000,000
The Northern Trust Company $2,000,000 $8,000,000
Societe Generale $3,600,000 $14,400,000
Dresdner Bank $3,600,000 $14,400,000
<PAGE>
DRESNDER BANK
By: ________________________
Name:
Title:
Dresdner Kleinwort Benson
75 Wall Street
New York, NY 10005-2889
Telex No.:
Telephone No.: 212-429-2242
Telecopier No.: 212-429-2524
Dresdner's Signature Page for the
Johnson Worldwide Credit Agreement
<PAGE>
Exhibit A to
Amendment No. 1
to the Credit Agreement
dated April 3, 1998
RE: Frank H. Marshall and Patricia Daugherty vs. Uwatec U.S.A., Inc. and
Uwatec A.G.
In June 1997, a jury in the above case rendered a judgment of $1
million against each of Uwatec U.S.A., Inc. and Uwatec A.G. for various
employment and termination of employment claims. Johnson Worldwide Associates,
Inc. believes that all lost costs and expenses are reimbursable under the Stock
Purchase Agreement dated July 11, 1997 between Johnson Worldwide Associates,
Inc. and Heinz Ruchti and Karl Leemann which includes $10 million for
reimbursement of warranty claims.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF JOHNSON WORLDWIDE ASSOCIATES, INC. AS OF
AND FOR THE PERIOD ENDED JANUARY 1, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-01-1999
<PERIOD-END> JAN-01-1999
<PERIOD-START> OCT-03-1998
<CASH> 10,989
<SECURITIES> 0
<RECEIVABLES> 64,802
<ALLOWANCES> (2,709)
<INVENTORY> 80,780
<CURRENT-ASSETS> 169,532
<PP&E> 98,787
<DEPRECIATION> (63,015)
<TOTAL-ASSETS> 312,693
<CURRENT-LIABILITIES> 111,328
<BONDS> 75,379
0
0
<COMMON> 406
<OTHER-SE> 121,005
<TOTAL-LIABILITY-AND-EQUITY> 312,693
<SALES> 59,847
<TOTAL-REVENUES> 60,000
<CGS> 38,266
<TOTAL-COSTS> 38,266
<OTHER-EXPENSES> 24,347
<LOSS-PROVISION> 321
<INTEREST-EXPENSE> 2,283
<INCOME-PRETAX> (5,217)
<INCOME-TAX> (2,198)
<INCOME-CONTINUING> (3,019)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,019)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
</TABLE>
