================================================================================
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 30, 2000
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 OUTDOORS 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)
(262) 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 17, 2000, 6,924,630 shares of Class A and 1,222,729 shares of Class B
common stock of the Registrant were outstanding.
================================================================================
<PAGE>
JOHNSON OUTDOORS INC.
(formerly 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 30, 2000 and July 2, 1999 1
Consolidated Balance Sheets - June 30,
2000, October 1, 1999 and July 2, 1999 2
Consolidated Statements of Cash Flows
- Nine months ended June 30, 2000 and
July 2, 1999 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures
<PAGE>
<TABLE>
JOHNSON OUTDOORS INC.
(formerly Johnson Worldwide Associates, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
----------------------------------------------------------------------------------------------------------
(thousands, except per share data) Three Months Ended Nine Months Ended
----------------------------------------------------------------------------------------------------------
June 30 July 2 June 30 July 2
2000 1999 2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $114,003 $101,134 $266,906 $233,922
Cost of sales 68,666 59,027 160,587 139,374
----------------------------------------------------------------------------------------------------------
Gross profit 45,337 42,107 106,319 94,548
----------------------------------------------------------------------------------------------------------
Operating expenses:
Marketing and selling 19,025 17,232 50,558 45,752
Administrative management, finance and
information systems 7,324 7,465 20,497 18,864
Research and development 2,273 1,673 5,744 4,852
Amortization of acquisition costs 723 727 2,224 2,147
Profit sharing 1,465 1,271 2,325 1,953
Strategic charges 615 49 1,336 2,123
----------------------------------------------------------------------------------------------------------
Total operating expenses 31,425 28,417 82,684 75,691
----------------------------------------------------------------------------------------------------------
Operating profit 13,912 13,690 23,635 18,857
Interest income (101) (53) (350) (202)
Interest expense 2,423 2,577 7,608 7,362
Other expense, net 289 96 164 183
----------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 11,301 11,070 16,213 11,514
Income tax expense 5,343 4,711 7,395 4,973
----------------------------------------------------------------------------------------------------------
Income from continuing operations 5,958 6,359 8,818 6,541
Income (loss) from discontinued operations, net of
income tax expense (benefit) of $483,
$(563) and $1,340, respectively -- 725 (941) 1,900
Loss on disposal of discontinued operations, net of
income tax benefit of $(1,840) -- -- (24,418) --
----------------------------------------------------------------------------------------------------------
Net income (loss) $ 5,958 $ 7,084 $(16,541) $ 8,441
==========================================================================================================
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ 0.73 $ 0.79 $ 1.09 $ 0.81
Discontinued operations -- 0.09 (3.12) 0.23
----------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.73 $ 0.88 $ (2.03) $ 1.04
==========================================================================================================
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ 0.73 $ 0.78 $ 1.08 $ 0.81
Discontinued operations -- 0.09 (3.12) 0.23
----------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.73 $ 0.87 $ (2.04) $ 1.04
==========================================================================================================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
1
<PAGE>
JOHNSON OUTDOORS INC.
(formerly Johnson Worldwide Associates, Inc.)
CONSOLIDATED BALANCE SHEETS
(unaudited)
------------------------------------------------------------------------------
June 30 October 1 July 2
(thousands, except share data) 2000 1999 1999
------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and temporary cash investments $ 6,806 $ 9,974 $ 8,609
Accounts receivable, less allowance
for doubtful accounts of $3,727,
$3,236 and $2,885, respectively 78,144 49,302 68,929
Inventories 71,537 59,981 60,626
Deferred income taxes 7,804 4,718 4,864
Other current assets 3,252 5,644 6,261
Net assets of discontinued operations 1,038 56,114 60,205
------------------------------------------------------------------------------
Total current assets 168,581 185,733 209,494
Property, plant and equipment 37,940 35,323 32,474
Deferred income taxes 15,492 11,277 11,127
Intangible assets 60,450 65,599 60,140
Other assets 1,381 1,093 1,950
------------------------------------------------------------------------------
Total assets $283,844 $299,025 $315,185
==============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current
maturities of long-term debt $ 76,382 $ 49,327 $ 73,078
Accounts payable 18,286 16,034 14,468
Accrued liabilities:
Salaries and wages 6,821 6,912 5,655
Other 23,412 22,126 21,625
------------------------------------------------------------------------------
Total current liabilities 124,901 94,399 114,826
Long-term debt, less current maturities 48,013 72,744 71,563
Other liabilities 4,871 4,704 4,656
------------------------------------------------------------------------------
Total liabilities 177,785 171,847 191,045
------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock: none issued -- -- --
Common stock:
Class A shares issued:
June 30, 2000, 6,924,630;
October 1, 1999, 6,910,577;
July 2, 1999, 6,910,577 346 345 345
Class B shares issued
(convertible into Class A):
June 30, 2000, 1,222,729;
October 1, 1999, 1,222,861;
July 2, 1999, 1,222,861 61 61 61
Capital in excess of par value 44,291 44,205 44,068
Retained earnings 75,240 91,832 93,388
Contingent compensation (96) (134) (153)
Other comprehensive income
- cumulative foreign currency
translation adjustment (13,783) (9,049) (13,487)
Treasury stock: Class A shares,
at cost:
October 1, 1999, 5,280;
July 2, 1999, 5,280 -- (82) (82)
------------------------------------------------------------------------------
Total shareholders' equity 106,059 127,178 124,140
------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $283,844 $299,025 $315,185
==============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
JOHNSON OUTDOORS INC.
(formerly Johnson Worldwide Associates, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
--------------------------------------------------------------------------------
(thousands) Nine Months Ended
--------------------------------------------------------------------------------
June 30 July 2
2000 1999
-------------------------------------------------------------------------------
CASH USED FOR OPERATIONS
Net income (loss) $(16,541) $ 8,441
Less income (loss) from discontinued operations (25,359) 1,900
-------------------------------------------------------------------------------
Income from continuing operations 8,818 6,541
Adjustments to reconcile income from
continuing operations to net cash used
for operating activities of continuing
operations :
Depreciation and amortization 9,241 9,262
Deferred income taxes (2,631) 580
Change in assets and liabilities, net of
effect of businesses acquired or sold:
Accounts receivable (30,875) (22,954)
Inventories (14,377) (958)
Accounts payable and accrued liabilities 5,373 3,180
Other, net 4,047 765
-------------------------------------------------------------------------------
Net cash used for operating activities
of continuing operations (20,404) (3,584)
-------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES
Proceeds from sale of business, net of cash 33,126 --
Net assets of businesses acquired, net of cash (835) (10,210)
Net additions to property, plant and equipment (9,895) (7,457)
-------------------------------------------------------------------------------
Net cash provided by (used for) investing
activities of continuing operations 22,396 (17,667)
-------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES
Principal payments on senior notes
and other long-term debt (21,500) --
Net change in short-term debt 25,048 22,127
Common stock transactions 98 91
-------------------------------------------------------------------------------
Net cash provided by financing activities
of continuing operations 3,646 22,218
-------------------------------------------------------------------------------
Effect of foreign currency fluctuations on cash (805) (790)
Net cash used for discontinued operations (8,001) (1,898)
-------------------------------------------------------------------------------
Decrease in cash and temporary cash investments (3,168) (1,721)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 9,974 10,330
-------------------------------------------------------------------------------
End of period $ 6,806 $ 8,609
===============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
JOHNSON OUTDOORS INC.
(formerly Johnson Worldwide Associates, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1 Name Change
In February 2000, the shareholders approved a change in the name of the
Company to Johnson Outdoors Inc. The change is intended to better represent
the nature of the Company's business.
2 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 Outdoors Inc. and subsidiaries (the Company) as of June
30, 2000 and the results of operations and cash flows for the three months
and nine months ended June 30, 2000. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's 1999 Annual Report.
Because of seasonal and other factors, the results of operations for the
three months and nine months ended June 30, 2000 are not necessarily
indicative of the results to be expected for the full year.
All monetary 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. See Note 7.
3 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.
4 Inventories
Inventories related to continuing operations at the end of the respective
periods consist of the following:
--------------------------------------------------------------------------
June 30 October 1 July 2
2000 1999 1999
--------------------------------------------------------------------------
Raw materials $ 27,659 $ 22,702 $ 21,427
Work in process 2,865 3,176 2,713
Finished goods 45,749 39,014 41,305
--------------------------------------------------------------------------
76,273 64,892 65,445
Less reserves (4,736) (4,911) (4,819)
--------------------------------------------------------------------------
$ 71,537 $ 59,981 $ 60,626
==========================================================================
4
<PAGE>
5 Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings from continuing operations per common share:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
--------------------------------------------------------------------------------------------------------------
June 30 July 2 June 30 July 2
2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income from continuing operations for basic
and diluted earnings per share $ 5,958 $ 6,359 $ 8,818 $ 6,541
==============================================================================================================
Weighted average common shares outstanding
8,147,359 8,112,455 8,136,665 8,102,320
Less nonvested restricted stock (14,632) (20,203) (18,187) (9,366)
-----------------------------------------------------------------------------------------------------------
Basic average common shares 8,132,727 8,092,252 8,118,478 8,092,954
Dilutive stock options and restricted stock 9,618 17,122 10,423 6,983
-----------------------------------------------------------------------------------------------------------
Diluted average common shares 8,142,345 8,109,374 8,128,901 8,099,937
==============================================================================================================
Basic earnings per common share $ 0.73 $ 0.79 $ 1.09 $ 0.81
==============================================================================================================
Diluted earnings per common share $ 0.73 $ 0.78 $ 1.08 $ 0.81
==============================================================================================================
</TABLE>
6 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 1, 1999 778,837 $14.02
Granted 250,500 7.66
Cancelled (72,108) 15.43
---------------------------------------------------------------------------
Outstanding at June 30, 2000 957,229 $12.25
===========================================================================
Options to purchase 795,005 shares of common stock with a weighted average
exercise price of $14.06 per share were outstanding at July 2, 1999.
7 Sale of Fishing Business
In January 2000, the Company entered into an agreement for the sale of its
Fishing business. As a result, operations of the Fishing group have been
classified as discontinued for all periods presented herein. The sale price
totaled $47,300, including $14,100 of accounts receivable retained by the
Company and $2,400 of debt assumed by the buyer. The Company recorded a
loss of $24,418 related to the sale of the business, taking into account
operating results from the measurement date to the date of disposal. Since
the plan to divest the business was approved prior to the formal issuance
of the Company's first quarter financial statements, the loss was
recognized in first quarter results to the extent determinable. The
transaction closed in March 2000.
Net sales of the Fishing group totaled $10,994 for the three months ended
December 31, 1999, and $18,707 and $50,130 for the three months and nine
months ended July 2, 1999, respectively. Interest expense of $36, $43 and
$189, respectively, that is directly attributable to the Fishing business
is allocated to discontinued operations.
5
<PAGE>
8 Strategic Charges
In the second and third quarters of fiscal 2000, the Company recorded
severance and other exit costs totaling $1,336, relating primarily to the
closure and relocation of a manufacturing facility in the Motors business.
The Company expects charges related to this action will total approximately
$1,700 in fiscal 2000. Approximately 90 employees are impacted.
9 Comprehensive Income
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 foreign currency translation adjustment.
Comprehensive income (loss) for the respective periods consists of the
following:
--------------------------------------------------------------------------
Three Months Ended Nine Months Ended
--------------------------------------------------------------------------
June 30 July 2 June 30 July 2
2000 1999 2000 1999
--------------------------------------------------------------------------
Net income (loss) $5,958 $ 7,084 $(16,541) $ 8,441
Translation adjustment 332 (3,676) (4,734) (8,836)
--------------------------------------------------------------------------
Comprehensive income (loss) $6,290 $ 3,408 $(21,275) $ (395)
==========================================================================
6
<PAGE>
10 Segments of Business
The Company conducts its worldwide operations through separate global
business units, each of which represent major product lines. Operations are
conducted in the United States and various foreign countries, primarily in
Europe, Canada and the Pacific Basin.
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 Nine Months Ended
--------------------------------------------------------------------------
June 30 July 2 June 30 July 2
2000 1999 2000 1999
--------------------------------------------------------------------------
Net sales:
Outdoor equipment:
Unaffiliated customers $ 31,069 $ 28,749 $ 78,471 $ 69,885
Interunit transfers 18 (16) 41 14
Watercraft:
Unaffiliated customers 33,070 28,442 64,762 50,097
Interunit transfers 93 57 362 237
Motors:
Unaffiliated customers 26,085 21,283 62,015 52,710
Interunit transfers 183 498 1,366 1,482
Diving:
Unaffiliated customers 23,769 22,327 60,520 59,886
Interunit transfers 1 -- 3 9
Other 10 333 1,138 1,344
Eliminations (295) (539) (1,772) (1,742)
--------------------------------------------------------------------------
$114,003 $101,134 $266,906 $233,922
==========================================================================
Operating profit (loss):
Outdoor equipment $ 3,208 $ 2,092 $ 6,825 $ 2,927
Watercraft 6,648 7,741 10,670 11,063
Motors 2,807 1,797 5,043 4,177
Diving 3,607 3,493 7,011 3,645
Other (2,358) (1,433) (5,914) (2,955)
--------------------------------------------------------------------------
$ 13,912 $ 13,690 $ 23,635 $ 18,857
==========================================================================
Identifiable assets
(end of period):
Outdoor equipment $ 54,635 $ 52,745
Watercraft 74,367 54,306
Motors 37,736 27,910
Diving 91,080 93,577
Discontinued operations,
net 1,038 60,205
Other 24,993 26,442
--------------------------------------------------------------------------
$283,844 $315,185
==========================================================================
7
<PAGE>
11 Selected Financial Data
A summary of the Company's operating results and key balance sheet data for
each of the years in the four-year period ended October 1, 1999 is
presented below. All years have been reclassified to reflect the Company's
Fishing business as a discontinued operation.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Year Ended
------------------------------------------------------------------------------------------------------------
October 1 October 2 October 3 September 27
1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING RESULTS (1)
Net sales $ 305,094 $ 270,017 $ 239,322 $ 274,637
Gross profit 120,670 106,801 91,118 102,041
Operating expenses (2) 101,157 88,445 77,237 91,138
------------------------------------------------------------------------------------------------------------
Operating profit 19,513 18,356 13,881 10,903
Interest expense 9,565 9,631 8,413 9,563
Other income, net (71) (539) (624) (498)
------------------------------------------------------------------------------------------------------------
Income from continuing operations before
income taxes 10,019 9,264 6,092 1,838
Income tax expense 4,158 3,885 2,721 2,740
------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 5,861 5,379 3,371 (902)
Income (loss) from discontinued operations
1,161 (167) (1,315) (10,453)
------------------------------------------------------------------------------------------------------------
Net income (loss) $ 7,022 $ 5,212 $ 2,056 $ (11,355)
============================================================================================================
Basic earnings (loss) per common share:
Continuing operations $ 0.72 $ 0.66 $ 0.42 $ (0.11)
Discontinued operations 0.14 (0.02) (0.17) (1.29)
------------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.87 $ 0.64 $ 0.25 $ (1.40)
============================================================================================================
Diluted earnings (loss) per common share:
Continuing operations $ 0.72 $ 0.66 $ 0.42 $ (0.11)
Discontinued operations 0.14 (0.02) (0.17) (1.29)
------------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.87 $ 0.64 $ 0.25 $ (1.40)
============================================================================================================
Average common shares outstanding:
Basic 8,096,575 8,094,906 8,102,100 8,101,564
Diluted 8,108,228 8,113,830 8,115,318 8,129,543
============================================================================================================
BALANCE SHEET DATA
Current assets (3) $ 185,733 $ 188,224 $ 184,555 $ 221,798
Total assets 299,025 292,380 272,605 272,119
Current liabilities (4) 45,072 39,448 36,772 41,773
Long-term debt, less current maturities 72,744 81,508 87,926 60,194
Total debt 122,071 124,001 113,676 99,485
Shareholders' equity 127,178 124,386 117,731 126,424
============================================================================================================
(1) The year ended October 3, 1997 includes 53 weeks. All other years include 52 weeks.
(2) Includes strategic charges of $2,773, $1,388, $335 and $4,487 in 1999, 1998, 1997 and 1996, respectively.
(3) Includes net assets of discontinued operations of $56,114, $58,462, $66,057 and $84,851 in 1999, 1998,
1997 and 1996, respectively.
(4) Excludes short-term debt and current maturities of long-term debt.
</TABLE>
8
<PAGE>
12 Quarterly Financial Summary
The following summarizes quarterly operating results for the year ended
October 1, 1999. All periods have been reclassified to reflect the
Company's Fishing business as a discontinued operation.
-------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------------------------------------------------------------------------
Net sales $48,144 $84,644 $101,134 $71,172
Gross profit 17,811 34,629 42,107 26,123
Operating expenses (1) 20,932 26,341 28,417 25,466
Operating profit (loss) (3,121) 8,288 13,690 656
Income (loss) from
continuing operations (3,038) 3,220 6,359 (680)
Income (loss) from
discontinued operations 19 1,157 725 (740)
-------------------------------------------------------------------------
Net income (loss) $(3,019) $ 4,377 $ 7,084 $(1,420)
=========================================================================
Basic earnings (loss)
per common share:
Continuing operations $ (0.37) $ 0.40 $ 0.79 $ (0.09)
Discontinued operations -- 0.14 0.09 (0.09)
-------------------------------------------------------------------------
Net income (loss) $ (0.37) $ 0.54 $ 0.88 $ (0.18)
=========================================================================
Diluted earnings (loss)
per common share:
Continuing operations $ (0.37) $ 0.40 $ 0.78 $ (0.09)
Discontinued operations -- 0.14 0.09 (0.09)
-------------------------------------------------------------------------
Net income (loss) $ (0.37) $ 0.54 $ 0.87 $ (0.18)
=========================================================================
(1) Includes strategic charges of $942, $1,133, $49 and $649, respectively.
9
<PAGE>
JOHNSON OUTDOORS INC.
(formerly 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 and
nine months ended June 30, 2000 and July 2, 1999. 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 1999 Annual Report.
Forward Looking Statements
Certain matters discussed in this 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, actions of companies that compete with
the Company, the Company's success in managing inventory, movements in foreign
currencies or interest rates, 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 Continuing Operations
Net sales for the three months ended June 30, 2000 totaled $114 million, an
increase of 13%, or $12.9 million, compared to $101.1 million in the three
months ended July 2, 1999. Net sales for the nine months ended June 30, 2000
totaled $266.9 million, an increase of 14%, or $33 million, over the nine months
ended July 2, 1999. Sales of all businesses exhibited growth. The Company also
continues to experience strong sales growth excluding recently acquired
businesses, totaling 12% for both the three month and nine month periods of the
current year. Timing of acquisitions consummated in 2000 and 1999 accounted for
$1.6 million and $6 million of the growth in sales for the three months and nine
months ended June 30, 2000, respectively.
The Diving business and, to a lesser extent, the Outdoor Equipment business were
adversely impacted by foreign currency movements, resulting in more moderate
increases in sales for the three months ended June 30, 2000, and year to date.
Relative to the U.S. dollar, the average values of most currencies of the
countries in which the Company has operations were lower for the three months
and nine months ended June 30, 2000 as compared to the corresponding periods of
the prior year. Excluding the impact of fluctuations in foreign currencies, net
sales increased 15% and 17% for the three months and nine months ended June 30,
2000, respectively.
Gross profit as a percentage of sales was 39.8% for the three months ended June
30, 2000 compared to 41.6% in the corresponding period in the prior year. Gross
profit for the nine months ended June 30, 2000 decreased to 39.8% from 40.4% in
the prior year. Margin decline in the Watercraft business accounts for the
overall decline, due to an unfavorable overall sales mix and inability to
efficiently meet strong demand.
10
<PAGE>
The Company recognized an operating profit of $13.9 million for the three months
ended June 30, 2000, compared to an operating profit of $13.7 million for the
corresponding period of the prior year. For the nine months ended June 30, 2000,
operating profit increased to $23.6 million, or 8.9% of sales, an 80 basis point
improvement, from $18.9 million in the prior year. Year to date operating
expense growth of 10.6%, excluding strategic charges, was less than the growth
rate of sales, which contributed to the improved operating results, as did sales
growth. Decreased strategic charges related to closure and relocation of a
manufacturing facility in the current year and integration of acquired
businesses in the prior year, also contributed to the improvement in
profitability for the nine month period.
Interest expense totaled $7.6 million for the nine months ended June 30, 2000
compared to $7.4 million for the corresponding period of the prior year.
Increased debt levels due to acquisitions consummated in 1999, an unfavorable
interest rate environment and higher working capital all contributed to the
increase. The Company's effective tax rate is increasing due to the geographic
mix of earnings occurring in higher tax jurisdictions..
The Company recognized income from continuing operations of $6 million in the
three months ended June 30, 2000 compared to $6.4 million in the corresponding
period of the prior year. Diluted earnings per common share from continuing
operations totaled $0.73 for the three months ended June 30, 2000 compared to
$0.78 in the prior year. The Company recognized income from continuing
operations of $8.8 million in the nine months ended June 30, 2000 compared to
$6.5 million in the corresponding period of the prior year. Year to date diluted
earnings per common share from continuing operations increased to $1.08 from
$0.81 in the prior year.
Discontinued Operations
In January 2000, the Company entered into an agreement for the sale of its
Fishing business. As a result, operations of the Fishing group have been
classified as discontinued for all periods presented herein. The sale price
totaled $47.3 million, including $14.1 million of accounts receivable retained
by the Company and $2.4 million of debt assumed by the buyer. The Company
recorded a loss of $24.4 million related to the sale of the business, taking
into account operating results from the measurement date to the date of
disposal. Since the plan to divest the business was approved prior to the formal
issuance of the Company's first quarter financial statements, the loss was
recognized in first quarter results to the extent determinable. The transaction
closed in March 2000.
Net sales of the Fishing group totaled $11.0 million for the three months ended
December 31, 1999, and $18.7 million and $50.1 million for the three months and
nine months ended July 2, 1999, respectively. Interest expense of $36 thousand,
$43 thousand and $189 thousand, respectively, that is directly attributable to
the Fishing business is allocated to discontinued operations.
Financial Condition
The following discusses changes in the Company's liquidity and capital resources
related to continuing operations.
Operations
Cash flows used for operations totaled $20.4 million for the nine months ended
June 30, 2000 and $3.6 million for the corresponding period of the prior year.
Accounts receivable seasonally increased $30.9 million for the nine months ended
June 30, 2000 and $23.0 million for the corresponding period of the prior year
due to strong sales growth. Average days of
11
<PAGE>
sales outstanding are improved over the prior year. Seasonal growth in
inventories of $14.4 million for the nine months ended June 30, 2000 and $1
million for the corresponding period of the prior year also accounted for a
significant portion of the net usage of funds. Inventory turns increased for the
nine month period ended June 30, 2000 compared to the corresponding period of
the prior year. The Company has increased production of its products over the
prior year level in order to meet seasonal demand, primarily in Watercraft and
Outdoor Equipment.
Depreciation and amortization charges were $9.2 million for the nine months
ended June 30, 2000 compared to $9.3 million for the corresponding period of the
prior year.
Accounts payable and accrued liabilities increased $5.4 million for the nine
months ended June 30, 2000, decreasing the net outflow of cash from operations,
and increased $3.2 million for the corresponding period of the prior year.
Deferred income tax assets increased $2.6 million for the nine months ended June
30, 2000 due primarily to losses incurred from the sale of the Fishing business
which have been tax benefited.
Investing Activities
Expenditures for property, plant and equipment were $9.9 million for the nine
months ended June 30, 2000 and $7.5 million for the corresponding period of the
prior year. The Company's recurring investments are made primarily for tooling
for new products and enhancements. The increase in capital expenditures in the
current year is due primarily to investments to increase manufacturing capacity
in the Company's Watercraft business. In 2000, capitalized expenditures are
anticipated to total approximately $13 million. These expenditures are expected
to be funded by working capital or existing credit facilities. The Company
completed the acquisition of two businesses in the corresponding period of the
prior year, which increased tangible and intangible assets by $10.2 million, net
of cash and liabilities assumed.
Financing Activities
Cash flows from financing activities totaled $3.6 million for the nine months
ended June 30, 2000 and $22.2 million for the corresponding period of the prior
year. The closing of the sale of the Fishing business resulted in a $14.0
million reduction of short-term debt and a $15.2 million reduction of long-term
debt. The buyer assumed an additional $2.4 million of debt.
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.
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
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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, resins 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 rates on market risk sensitive instruments
outstanding at June 30, 2000:
--------------------------------------------------------------------------------
(millions) Estimated Impact on
--------------------------------------------------------------------------------
Earnings Before
Fair Value Income Taxes
--------------------------------------------------------------------------------
Foreign exchange rate instruments $2.4 $0.7
Interest rate instruments 1.5 0.5
================================================================================
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 and
margins 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.
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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."
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 for the nine months ended
June 30, 2000
(b) Reports on Form 8-K.
On April 17, 2000, the Company filed a Current Report on Form 8-K
dated March 31, 2000 to reflect (under Item 2 of Form 8-K) the
Company's disposition of substantially all of the operating assets and
properties held directly or indirectly by the Company of its worldwide
Fishing business to Berkley Inc. pursuant to a Stock Purchase
Agreement, dated as of January 12, 2000, as amended. The report
included (under Item 7 of Form 8-K) the following financial
statements: Unaudited Pro Forma Condensed Consolidated Balance Sheet
at December 31, 1999 and Pro Forma Condensed Consolidated Statements
of Operations for the year ended October 1, 1999 and three months
ended December 31, 1999.
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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 OUTDOORS INC.
Date: August 14, 2000
/s/ Helen P. Johnson-Leipold
---------------------------------------------
Helen P. Johnson-Leipold
Chairman and Chief Executive Officer
/s/ Scott M. Vos
---------------------------------------------
Scott M. Vos
Director of Financial Reporting
(Principal Accounting Officer)
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JOHNSON OUTDOORS INC.
(formerly Johnson Worldwide Associates, Inc.)
EXHIBIT INDEX
Page
Exhibit Description Number
--------------------------------------------------------------------------------
27 Financial Data Schedule for the -
nine months ended June 30, 2000
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