================================================================================
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 December 31, 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, 2000, 6,905,429 shares of Class A and 1,222,729 shares of
Class B common stock of the Registrant were outstanding.
================================================================================
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, IN.
Index Page No.
- --------------------------------------------------------------------- --------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations -Three
Months Ended December 31, 1999 and January 1,
1999 1
Consolidated Balance Sheets - December 31,
1999, October 1, 1999 and January 1, 1999 2
Consolidated Statements of Cash Flows -Three
Months Ended December 31, 1999 and January 1,
1999 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures
<PAGE>
<TABLE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
- ---------------------------------------------------------------------------------------------------------------------------------
December 31 January 1
(thousands, except per share data) 1999 1999
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 56,201 $ 48,144
Cost of sales 34,289 30,333
- ---------------------------------------------------------------------------------------------------------------------------------
Gross profit 21,912 17,811
- ---------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Marketing and selling 13,134 12,101
Administrative management, finance and information systems 6,065 5,563
Research and development 1,651 1,583
Amortization of acquisition costs 761 708
Profit sharing 110 35
Strategic charges 52 942
- ---------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 21,773 20,932
- ---------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss) 139 (3,121)
Interest income (105) (93)
Interest expense 2,272 2,229
Other income, net (211) (6)
- ---------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations before income taxes (1,817) (5,251)
Income tax benefit (782) (2,213)
- ---------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (1,035) (3,038)
Income (loss) from discontinued operations, net of income tax expense (benefit)
of $(578) and $15, respectively (941) 19
Loss on disposal of discontinued operations, net of income tax benefit of $(2,801) (23,109) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net loss $ (25,085) $ (3,019)
- ---------------------------------------------------------------------------------------------------------------------------------
Basic loss per common share:
Continuing operations $ (0.13) $ (0.37)
Discontinued operations (2.96) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net loss $ (3.09) $ (0.37)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Diluted loss per common share:
Continuing operations $ (0.13) $ (0.37)
Discontinued operations (2.96) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net loss $ (3.09) $ (0.37)
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
-1-
<PAGE>
<TABLE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31 October 1 January 1
(thousands, except share data) 1999 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
<S> <C> <C> <C>
Cash and temporary cash investments $ 8,936 $ 9,974 $ 10,955
Accounts receivable, less allowance for doubtful accounts of
$3,340, $3,236 and $2,326, respectively 48,930 49,302 49,532
Inventories 72,604 59,981 66,375
Deferred income taxes 7,679 4,718 5,715
Other current assets 5,991 5,644 7,742
Net assets of discontinued operations 38,356 55,912 61,444
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 182,496 185,531 201,763
Property, plant and equipment 36,227 35,322 32,171
Deferred income taxes 15,376 11,277 11,095
Intangible assets 61,712 65,599 62,422
Other assets 1,834 1,094 853
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 297,645 $ 298,823 $ 308,304
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt $ 88,210 $ 49,327 $ 75,902
Accounts payable 18,446 16,034 12,911
Accrued liabilities:
Salaries and wages 5,017 6,912 4,278
Other 18,170 21,924 14,399
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 129,843 94,197 107,490
Long-term debt, less current maturities 64,573 72,744 74,828
Other liabilities 4,796 4,704 4,575
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 199,212 171,645 186,893
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock: none issued -- -- --
Common stock:
Class A shares issued:
December 31, 1999, 6,910,709;
October 1, 1999, 6,910,577;
January 1, 1999, 6,910, 577 345 345 345
Class B shares issued (convertible into Class A):
December 31, 1999, 1,222,729:
October 1, 1999, 1,222,861;
January 1, 1999, 1,222,861 61 61 61
Capital in excess of par value 44,205 44,205 44,205
Retained earnings 66,746 91,832 82,048
Contingent compensation (115) (134) (15)
Other comprehensive income - cumulative foreign currency
translation adjustment (12,727) (9,049) (4,618)
Treasury stock, Class A shares, at cost:
December 31, 1999, 5,280;
October 1, 1999, 5,280;
January 1, 1999, 39,532 (82) (82) (615)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 98,433 127,178 121,411
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 297,645 $ 298,823 $ 308,304
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
-2-
<PAGE>
<TABLE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
- ------------------------------------------------------------------------------------------------------------------------------------
December 31 January 1
(thousands) 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
CASH USED FOR OPERATIONS
<S> <C> <C>
Net loss $ (25,085) $ (3,019)
Less income (loss) from discontinued operations (24,050) 19
- ------------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (1,035) (3,038)
Adjustments to reconcile net loss to net cash used for operating activities of
continuing operations :
Depreciation and amortization 3,073 2,775
Deferred income taxes (2,826) (537)
Change in assets and liabilities, net of effect of businesses acquired or sold:
Accounts receivable (499) (2,098)
Inventories (14,131) (3,074)
Accounts payable and accrued liabilities (2,761) (9,155)
Other, net 728 (405)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used for operating activities of continuing operations (17,451) (15,532)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES
Net assets of businesses acquired, net of cash -- (4,233)
Net additions to property, plant and equipment (3,449) (2,713)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities of continuing operations (3,449) (6,946)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES
Principal payments on senior notes and other long-term notes (5,500) --
Net change in short-term debt 36,823 26,876
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities of continuing operations 31,323 26,876
- ------------------------------------------------------------------------------------------------------------------------------------
Effect of foreign currency fluctuations on cash (485) 39
Net cash used for discontinued operations (10,976) (3,812)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and temporary cash investments (1,038) 625
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 9,974 10,330
- ------------------------------------------------------------------------------------------------------------------------------------
End of period $ 8,936 $ 10,955
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
-3-
<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 December 31, 1999 and the results of operations and cash
flows for the three months ended December 31, 1999. 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 ended December 31, 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. See Note 6.
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 related to continuing operations at the end of the respective
periods consist of the following:
--------------------------------------------------------------------------
December 31 October 1 January 1
1999 1999 1999
--------------------------------------------------------------------------
Raw materials $ 26,542 $ 22,702 $ 22,408
Work in process 3,127 3,176 3,169
Finished goods 47,652 39,014 45,679
--------------------------------------------------------------------------
77,321 64,892 71,256
Less reserves 4,717 4,911 4,881
--------------------------------------------------------------------------
$ 72,604 $ 59,981 $ 66,375
--------------------------------------------------------------------------
-4-
<PAGE>
4 Earnings Per Share
The following table sets forth the computation of basic and diluted loss
per common share from continuing operations:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Three Months Ended
--------------------------------------------------------------------------------------------------------------
December 31 January 1
1999 1999
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loss from continuing operations for basic and diluted
earnings per share $ (1,035) $ (3,038)
--------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 8,128,158 8,093,906
Less nonvested restricted stock 20,500 4,158
--------------------------------------------------------------------------------------------------------------
Basic and diluted average common shares 8,107,658 8,089,748
--------------------------------------------------------------------------------------------------------------
Basic loss per common share from continuing operations $(0.13) $ (0.37)
--------------------------------------------------------------------------------------------------------------
Diluted loss per common share from continuing operations $(0.13) $ (0.37)
--------------------------------------------------------------------------------------------------------------
</TABLE>
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 1, 1999 778,837 $14.02
Granted 165,500 7.63
Cancelled 23,032 18.11
---------------------------------------------------------------------------
Outstanding at December 31, 1999 921,305 $12.77
---------------------------------------------------------------------------
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.
6 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 $34,500, subject to an adjustment for the level of net assets at
closing. The Company recorded a loss of $23,109 related to the sale of the
business, taking into account operating results expected 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 is required to be recognized in first quarter results. The transaction
is expected to close in February 2000.
Net sales of the Fishing group total $10,994 and $11,856 for the three
months ended December 31, 1999 and January 1, 1999, respectively. Interest
expense of $36 and $54, respectively, that is directly attributable to the
Fishing group is allocated to discontinued operations.
-5-
<PAGE>
7 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 loss for the respective periods consists of the following:
---------------------------------------------------------------------------
Three Months Ended
---------------------------------------------------------------------------
December 31 January 1
1999 1999
---------------------------------------------------------------------------
Net loss $ (25,085) $ (3,019)
Translation adjustment (3,678) 33
---------------------------------------------------------------------------
Comprehensive loss $ (28,763) $ (2,986)
---------------------------------------------------------------------------
8 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.
-6-
<PAGE>
A summary of the Company's continuing operations by business unit is
presented below:
---------------------------------------------------------------------------
Three Months Ended
---------------------------------------------------------------------------
December 31 January 1
1999 1999
---------------------------------------------------------------------------
Net sales:
Outdoor Equipment:
Unaffiliated customers $ 18,007 $ 15,000
Interunit transfers 3 10
Diving:
Unaffiliated customers 16,033 17,645
Interunit transfers -- 3
Motors:
Unaffiliated customers 11,361 9,025
Interunit transfers 370 339
Watercraft:
Unaffiliated customers 10,076 5,782
Interunit transfers 16 12
Other 724 692
Eliminations (389) (364)
---------------------------------------------------------------------------
$ 56,201 $ 48,144
---------------------------------------------------------------------------
Operating profit (loss):
Outdoor Equipment: $ 660 $ (946)
Diving 1,639 (568)
Motors (801) (942)
Watercraft 273 150
Other (1,632) (815)
---------------------------------------------------------------------------
$ 139 $ (3,121)
---------------------------------------------------------------------------
Identifiable assets:
Outdoor Equipment: $ 45,943 $ 44,555
Diving 89,018 105,330
Motors 32,092 27,356
Watercraft 63,128 40,114
Discontinued operations, net 38,356 61,444
Other 29,108 29,505
---------------------------------------------------------------------------
$ 297,645 $ 308,304
---------------------------------------------------------------------------
-7-
<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 December 31, 1999 and January 1, 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 December 31, 1999 totaled $56.2 million, an
increase of 16.7%, or $8.1 million, over the three months ended January 1, 1999.
Sales of all businesses except the Diving business exhibited strong sales
growth. Acquisitions consumated after December 1998 accounted for $2.6 million
of the growth in sales in the current year. The Diving business, which did not
experience an increase in sales, was adversely impacted primarily by weakness in
foreign currency movements.
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
ended December 31, 1999 as compared to the corresponding period of the prior
year. Excluding the impact of foreign currencies, net sales increased 21.7 % for
the three months ended December 31, 1999.
Gross profit as a percentage of sales increased to 39.0% for the three months
ended December 31, 1999 compared to 37.0 % in the corresponding period in the
prior year. Strong sales growth, an improved mix of products sold and improved
factory utilization all contributed to the increase.
The Company recorded an operating profit of $0.1 million for the three months
ended December 31, 1999, compared to an operating loss of $3.1 million for the
corresponding period of the prior year. Operating expense growth of 8.7% was
substantially less than the growth rate of sales, which contributed to the
improved operating results. Decreased strategic charges related to integration
of acquired businesses in the prior year also contributed to the improvement.
Interest expense totaled $2.3 million for the three months ended December 31,
1999 compared to $2.2 million for the corresponding period of the prior year.
Increased debt levels due to acquisitions
-8-
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
consummated in 1999 and an unfavorable interest rate environment were
substantially offset by improved management of working capital.
The Company incurred a loss from continuing operations of $1.0 million in the
three months ended December 31, 1999 compared to a loss of $3.0 million in the
corresponding period of the prior year. On a per share basis, the loss totaled
$0.13 compared to $0.37 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 $34.5 million, subject to an adjustment for the level of net assets at
closing. The Company recorded a loss of $23.1 million related to the sale of the
business, taking into account operating results expected 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 is
required to be recognized in first quarter results. The transaction is expected
to close in February 2000.
Net sales of the Fishing group total $11.0 million and $11.9 million for the
three months ended December 31, 1999 and January 1, 1999, respectively. Interest
expense of $36 thousand and $54 thousand, respectively, that is directly
attributable to the Fishing group 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 $17.5 million for the three months ended
December 31, 1999 and $15.5 million for the corresponding period of the prior
year. Growth in inventories of $14.1 million for the three months ended December
31, 1999 and $3.1 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 December 31, 1999 compared to the
corresponding period of the prior year.
Accounts receivable increased $0.5 million for the three months ended December
31, 1999 and $2.1 million for the corresponding period of the prior year.
Accounts payable and accrued liabilities decreased $2.8 million for the three
months ended December 31, 1999 and $9.2 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 $3.1 million for the three months
ended December 31, 1999 and $2.8 million for the corresponding period of the
prior year. The increase was due primarily to increased depreciation and
amortization of assets from businesses acquired in 1999.
Deferred income taxes increased $2.8 million for the three months ended December
31, 1999 due primarily to losses incurred from the sale of the Fishing business.
-9-
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
Investing Activities
Expenditures for property, plant and equipment were $3.4 million for the three
months ended December 31, 1999 and $2.7 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 2000, 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 prior year, which increased
tangible and intangible assets by $4.2 million, net of cash and liabilities
assumed.
Financing Activities
Cash flows from financing activities totaled $31.3 million for the three months
ended December 31, 1999 and $26.9 million for the corresponding period of the
prior year. The closing of the sale of the Fishing business will result in a
substantal reduction of short-term debt and a $16 million reduction of long-term
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 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
-10-
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
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 December 31, 1999:
- --------------------------------------------------------------------------------
Estimated Impact on
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Earnings Before Income
(millions) Fair Value Taxes
- --------------------------------------------------------------------------------
Foreign exchange rate instruments $2.7 $0.4
Interest rate instruments 2.7 0.7
- --------------------------------------------------------------------------------
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.
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 did not experience any significant malfunctions or errors in its
information or non-information technology systems when the date changed from
1999 to 2000, and the Company has not experienced any significant problems with
its suppliers or customers as a result of the date change.
Based on operations since December 31, 1999, the Company does not expect any
significant impact on its business as a result of the year 2000 issue. Because
it is possible that the full impact of the date change has not been fully
recognized, the Company will continue to monitor the year 2000 situation through
additional key dates, such as February 29, 2000. The Company believes, however,
that any potential problems are likely to be minor and correctable.
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."
-11-
<PAGE>
JOHNSON WORLDWIDE ASSOCIATES, INC.
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) There were no reports on Form 8-K filed for the three months ended December
31, 1999.
-12-
<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 14, 2000
/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
------- ----------- ------
27 Financial Data Schedule -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF JOHNSON WORLDWIDE ASSOCIATES,
INC. AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-29-2000
<PERIOD-START> OCT-02-1999
<PERIOD-END> DEC-31-1999
<CASH> 8,936
<SECURITIES> 0
<RECEIVABLES> 52,270
<ALLOWANCES> 3,340
<INVENTORY> 72,604
<CURRENT-ASSETS> 182,496
<PP&E> 94,843
<DEPRECIATION> 58,616
<TOTAL-ASSETS> 297,645
<CURRENT-LIABILITIES> 129,843
<BONDS> 64,573
0
0
<COMMON> 407
<OTHER-SE> 98,026
<TOTAL-LIABILITY-AND-EQUITY> 297,645
<SALES> 56,087
<TOTAL-REVENUES> 56,201
<CGS> 34,289
<TOTAL-COSTS> 34,289
<OTHER-EXPENSES> 21,178
<LOSS-PROVISION> 279
<INTEREST-EXPENSE> 2,272
<INCOME-PRETAX> (1,817)
<INCOME-TAX> (782)
<INCOME-CONTINUING> (1,035)
<DISCONTINUED> (24,050)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,085)
<EPS-BASIC> (3.09)
<EPS-DILUTED> (3.09)
</TABLE>
