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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-16255
JOHNSON WORLDWIDE ASSOCIATES, INC.
(Exact name of Registrant as specified in its charter)
Wisconsin 39-1536083
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 Main Street, Racine, Wisconsin 53403
(Address of principal executive offices)
(414) 631-2100
(Registrant's telephone number, including area code)
_________________________
(Former name, former address and former fiscal year, if changed
since last report)
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 ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at August 2,
Class 1994
Class A Common Stock
($.05 par value) 6,810,393
Class B Common Stock
($.05 par value) 1,230,599
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
Index Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of
Operations - Three Months and
Nine Months Ended July 1, 1994
and July 2, 1993 3
Consolidated Balance Sheets -
July 1, 1994, October 1, 1993
and July 2, 1993 4
Consolidated Statements of
Cash Flows - Nine Months Ended
July 1, 1994 and July 2, 1993 6
Notes to Consolidated
Financial Statements 7
Item 2. Management's Discussion and 8
Analysis of Financial
Condition and Results of
Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form
8-K 11
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
(thousands of dollars, July 1, July 2, July 1, July 2,
except per share data) 1994 1993 1994 1993
Net sales $95,083 $93,297 $223,397 $225,485
Cost of sales 54,862 54,315 129,242 130,944
------- ------- ------- -------
Gross profit 40,221 38,982 94,155 94,541
------- ------- ------- ------
Operating expenses:
Marketing and selling 17,425 16,953 45,638 45,372
Financial and
administrative management 5,836 7,002 17,548 20,135
Research and development 1,231 1,260 3,690 3,986
Profit sharing 636 1,011 1,300 1,611
Amortization of
acquisition costs 375 426 1,119 1,253
-------- ------- ------- -------
Total operating
expenses 25,503 26,652 69,295 72,357
------- ------- ------- -------
Operating profit 14,718 12,330 24,860 22,184
Interest income (48) (49) (238) (306)
Interest expense 1,777 2,291 5,573 6,450
Other expenses, net 98 298 142 771
------- ------- ------- --------
Income from continuing
operations before income
taxes 12,891 9,790 19,383 15,269
Income tax expense 4,952 3,608 7,339 5,838
------- ------- ------- -------
Income from continuing
operations 7,939 6,182 12,044 9,431
Income from
discontinued operations,
net of tax expense of
$581 and $2,590,
respectively -- 836 -- 3,564
Gain on disposal of
discontinued operations,
including tax benefit of
$1,549 4,052 -- 4,052 --
-------- --------- -------------------
Net income $11,991 $ 7,018 $ 16,096 $ 12,995
======= ======= ======== ========
Earnings per common share
Continuing operations $ .98 $ .77 $ 1.49 $ 1.18
Discontinued operations -- .11 -- .45
Gain on disposal of
discontinued operations .50 -- .50 --
------ ----- ------ ------
Net income $ 1.48 $ .88 $ 1.99 $ 1.63
====== ===== ====== ======
The accompanying notes are an integral part of the
consolidated financial statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS July 1, October 1, July 2,
(thousands of dollars) 1994 1993 1993
Current assets:
Cash and temporary cash
investments $ 18,907 $ 4,415 $ 5,908
Accounts receivable, less allowance
for doubtful accounts of $2,092,
$1,606 and $2,063, respectively 77,764 44,803 70,446
Inventories 75,620 67,323 69,993
Other current assets 12,313 19,523 12,447
Net assets of discontinued
operations -- 46,504 51,991
---------- -------- --------
Total current assets 184,604 182,568 210,785
Property, plant and equipment 22,074 19,052 19,867
Intangible assets 33,933 34,957 36,887
Other assets 2,185 2,544 1,870
--------- -------- --------
$242,796 $239,121 $269,409
======== ======== ========
Continued
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY July 1, October 1, July 2,
(thousands of dollars) 1994 1993 1993
Current liabilities:
Notes payable and current
maturities of long-term
obligations $ 23,977 $ 37,123 $ 50,096
Accounts payable 17,288 11,874 13,820
Accrued income taxes 5,257 4,214 5,049
Accrued restructuring expenses 2,814 8,905 2,469
Other accrued liabilities 19,833 16,325 18,201
-------- -------- --------
Total current liabilities 69,169 78,441 89,635
Long-term obligations, less current
maturities 37,389 44,543 49,019
Other liabilities 6,825 5,319 6,061
--------- --------- ---------
Total liabilities 113,383 128,303 144,715
-------- -------- --------
Shareholders' equity:
Preferred stock: none issued --- --- ---
Common Stock:
Class A shares issued:
July 1, 1994, 6,800,793;
October 1, 1993, 6,758,346;
July 2, 1993, 6,728,279 341 338 336
Class B shares issued
(convertible into
Class A):
July 1, 1994, 1,230,599;
October 1, 1993, 1,230,883;
July 2, 1993, 1,231,850 61 61 62
Capital in excess of par value 42,258 41,696 41,236
Retained earnings 83,436 67,340 81,526
Contingent compensation (304) (350) (159)
Cumulative translation adjustment 3,621 1,733 1,693
-------- ------- --------
Total shareholders' equity 129,413 110,818 124,694
-------- -------- --------
Total liabilities and
shareholders' equity $242,796 $239,121 $269,409
======== ======== ========
The accompanying notes are an integral part of the
consolidated financial statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(thousands of dollars) Nine Months Ended
July 1, July 2,
1994 1993
Cash used for operations:
Net income $16,096 $12,995
Noncash items:
Depreciation and amortization 5,600 5,994
Deferred income taxes 3,581 342
Income from discontinued
operations (4,052) (3,564)
Change in:
Accounts receivable, net (31,129) (32,314)
Inventories (7,023) ( 5,661)
Restructuring accrual (6,091) (2,031)
Accounts payable and
accrued liabilities 9,594 8,952
Net assets of discontinued
operations 4,036 (6,703)
Other, net 3,256 2,137
------- -------
(6,132) (19,853)
------- -------
Cash provided from (used for) investment
activities:
Proceeds from sale of discontinued
operations 46,520 --
Additions to property, plant and
equipment (6,939) (4,449)
Other, net 612 (248)
------- -------
40,193 (4,697)
------- -------
Cash provided from (used for) financing
activities:
Changes in notes payable and long-
term obligations (20,229) 27,444
Issuance of common stock 476 254
------- -------
(19,753) 27,506
------- -------
Effect of foreign currency fluctuations
on cash 184 (593)
------- -------
Increase in cash and temporary cash
investments 14,492 2,363
Cash and temporary cash investments:
Beginning of period 4,415 3,545
------- -------
End of period $18,907 $ 5,908
======= =======
The accompanying notes are an integral part of
the consolidated financial statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1) Basis of Presentation
The consolidated financial statements included herein are unaudited.
In the opinion of management, these statements contain all
adjustments (consisting of only normal recurring items) necessary to
present fairly the financial position of Johnson Worldwide
Associates, Inc. (the Company) as of July 1, 1994, the results of
operations for the three months and nine months ended July 1, 1994
and cash flows for the nine months ended July 1, 1994. These
consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in
the Company's Annual Report for the year ended October 1, 1993.
Because of seasonal and other factors, the results of operations for
the three months and nine months ended July 1, 1994 are not
necessarily indicative of the results to be expected for the full
year.
2) Income Taxes
The provision for income taxes includes deferred taxes and is based
upon estimated annual effective tax rates in the tax jurisdictions in
which the Company operates.
3) Inventories
July 1, October 1, July 2,
(thousands of dollars) 1994 1993 1993
Raw materials $18,871 $16,622 $19,765
Work in process 5,174 4,834 5,971
Finished goods 51,575 45,867 44,257
------- ------- -------
$75,620 $67,323 $69,993
======= ======= =======
4) Discontinued Operations
During the three months ended July 1, 1994, the Company completed the
sale of the Company's Marking Systems group. The net assets of these
businesses were classified as discontinued operations as of October
1, 1993 and July 2, 1993. The proceeds from these businesses were
used to reduce current notes payable or placed in temporary
investments.
5) Reclassification
Certain amounts as previously reported have been reclassified to
conform with the current period presentation.
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales were $95.1 million for the three months ended July 1, 1994, an
increase of approximately $1.8 million or 2% from net sales of $93.3
million for the corresponding period in 1993. North American sales for
the three months ended July 1, 1994 increased approximately $758,000 or 1%
over the corresponding period in 1993. The sales of North American
operations for the quarter ended July 2, 1993, however, included
approximately $5.2 million of sales from non-strategic recreation product
lines, primarily Elliot commercial life rafts, which the Company has sold
or otherwise exited. Sales of North American fishing products for the
quarter ended July 1, 1994 increased 25% over the corresponding period in
1993. For the quarter ended July 1, 1994, sales of diving products in
Japan increased approximately 36% over the corresponding period in 1993
principally due to the easing of supply problems. The U.S. dollar value
of sales in Japan also benefited from the increase in the average value of
the Japanese yen relative to the U.S. dollar for the quarter ended July 1,
1994 as compared with the corresponding period in 1993. Net sales of
$223.4 million for the nine months ended July 1, 1994 decreased
approximately $2.1 million or 1% from net sales of $225.5 million for the
corresponding period in 1993. However, net sales for the nine months
ended July 2, 1993 included approximately $10.2 million of sales from non-
strategic recreation product lines, primarily Elliot commercial life
rafts, which the Company has sold or otherwise exited.
Gross profit for the three months ended July 1, 1994 increased
approximately $1.2 million or 3% over the corresponding period in 1993
primarily because of the sales increase. Operating profit for the quarter
ended July 1, 1994 increased approximately $2.4 million or 19% from the
corresponding period in 1993. Operating profit for the quarter ended July
1, 1994 increased both because of the $1.2 million additional gross profit
and because operating expenses were reduced approximately $1.1 million or
4% as compared to the corresponding period in 1993. Operating profit for
the nine months ended July 1, 1994 increased approximately $2.7 million or
12% over the corresponding period in 1993. Net reductions in operating
expenses for the three months and nine months ended July 1, 1994 resulted
primarily from reductions in administrative expenses due to repositioning
actions described in the Company's 1993 Annual Report. Certain amounts as
previously reported, primarily amortization of acquisition costs, have
been reclassified to conform with the current period presentation.
Interest expense for the three months ended July 1, 1994 decreased
approximately $514,000 or 22% from the corresponding period in 1993. The
Company used approximately $39.8 million of the proceeds from the sale of
the Marking Systems group to reduce debt levels, especially in the U.S.,
which resulted in reduced interest expense for the quarter ended July 1,
1994 as compared to the corresponding period in 1993. Although U.S.
interest rates have increased, the Company expects interest expense in the
fourth quarter to be less than the corresponding period in 1993. In
addition, the Company will earn interest on invested funds until such time
as those funds are used for seasonal working capital needs or for other
corporate purposes.
Other expenses, net for the three months and nine months ended July 1,
1994 decreased approximately $200,000 and $629,000, respectively, compared
to the corresponding periods in the prior year, principally as a result of
a reduction in foreign currency translation losses.
Income from continuing operations for the three months and nine months
ended July 1, 1994 was approximately $7.9 million and $12.0 million,
respectively, as compared to $6.2 million and $9.4 million for the
corresponding periods in 1993.
On July 28, 1993 the Company's Board of Directors approved a formal plan
to divest the Company's Marking Systems group. As a result, all
operations of the Marking Systems group have been classified as
discontinued operations for all periods presented. At that time, the
Company recorded a loss on disposal of discontinued operations of $3.0
million. During the three months ended July 1, 1994 the Company completed
the sales of the businesses comprising the Marking Systems group and
recorded a gain on disposition of approximately $4.1 million as net sales
proceeds exceeded expectations.
Financial Condition
Cash and temporary investments totaled $18.9 million on July 1, 1994 or
approximately $14.5 million higher than cash and temporary investments on
October 1, 1993 and $13.0 million higher than cash and temporary
investments on July 2, 1993. The increase in cash and temporary
investments is primarily due to the proceeds from the sale of the
Company's Marking Systems group. Inventories and accounts receivable were
$153.4 million on July 1, 1994 or $41.3 million or 37% higher than
inventory and accounts receivable levels on October 1, 1993 and $12.9
million or 9% higher than inventory and accounts receivable levels on July
2, 1993. The increase from the October 1, 1993 levels reflects normal
seasonal increases in connection with the Company's peak selling season in
the second and third quarters. The increase from the July 2, 1993 levels
is largely the result of sales occurring later during the current year
quarter as compared to the prior year quarter, increased inventory levels
of diving products in North America established during the reorganization
of the manufacturing and distribution operations of the North America
diving business and the changing relationship between the U.S. dollar and
countries in which the Company has operations. Values of the currencies
in several countries in which the Company has operations have increased
relative to the U.S. dollar as of July 1, 1994 in comparison to their
values as of July 1, 1993. Current notes payable as of July 1, 1994 were
approximately $12.8 million lower than October 1, 1993 and $26.0 million
lower than July 2, 1993, principally because the Company used a portion of
the proceeds from the sale of the Company's Marking Systems group to
reduce current notes payable.
Cash from temporary investments, operations and borrowings under existing
credit facilities are sufficient to meet the Company's seasonal working
capital needs.
The Company is completing construction of a new office and research and
development facility for employees located in Racine. Construction costs
through July 1, 1994 were approximately $2.0 million and the Company
estimates the remaining construction and related equipment costs of the
new facility are $3.5 million. Cash from temporary investments,
operations and borrowings under existing credit facilities are sufficient
to meet the Company's expected capital expenditures.
Restructuring Reserves
As a result of the desire of management and the Board of Directors to
strategically reposition the Company as an integrated global recreation
products company, restructuring reserves totaling $13 million and $4.5
million were recorded in 1993 and 1992, respectively. The key components
of these charges were losses on the disposal of non-strategic recreation
product lines totaling $6.4 million, creation of a centralized management
structure totaling $2.3 million, severance costs of $3.6 million and
facilities closing costs of $1.1 million. The majority of the
restructuring charges were for future cash outlays, however, provisions
were included for inventory and equipment writedowns and a $2.1 million
writeoff of goodwill associated with non-strategic recreation product
lines. As of July 1, 1994, approximately $2.8 million of unexpended
reserves remained as a liability of the Company. Such liabilities are
expected to be satisfied over the next twelve months from the working
capital or existing bank lines of credit of the Company.
In the aggregate, the Company expects its obligations for restructuring to
approximate the amounts accrued in 1993 and 1992. However, certain
estimates of the cost of components of the charges will vary from the
amounts previously determined. In particular, the extent of restructuring
of European operations (and the related cost) will be less than originally
anticipated. This was offset by additional costs from the disposal of the
Elliot commercial life raft operation, which was consummated in the three
months ended July 1, 1994. The repositioning strategy of the Company has
resulted in reduced operating costs.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. 11: Computation of Earnings Per Share
(b) There were no reports on Form 8-K filed for the three months
ended July 1, 1994.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
JOHNSON WORLDWIDE ASSOCIATES,
INC.
Date: August 12, 1994
/s/ Carl G. Schmidt
Carl G. Schmidt
Vice-President, Secretary and Treasurer
(Principal Financial and Accounting
Officer)
EXHIBIT INDEX
Exhibit Description Page Number
11. Computation of Earnings Per
Share __
Exhibit 11
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
Computation of Earnings Per Share
Three Months Ended Nine Months Ended
(thousands of dollars,
except share and per July 1, July 2, July 1, July 2,
share data) 1994 1993 1994 1993
Primary:
Weighted average
common shares
outstanding 8,023,210 7,936,678 8,005,826 7,924,662
Common equivalent
shares 70,996 57,485 59,636 47,154
--------- --------- --------- ---------
Weighted average
common and common
equivalent shares
outstanding 8,094,206 7,994,163 8,065,462 7,971,816
========= ========= ========= =========
Income from continuing
operations $ 7,939 $ 6,182 $ 12,044 $ 9,431
========= ========= ========= =========
Primary earnings per
share from continuing
operations $ .98 $ .77 $ 1.49 $ 1.18
========= ========= ========= ========
Fully diluted:
Weighted average
common shares
outstanding 8,023,210 7,936,678 8,005,826 7,924,662
Common equivalent
shares 86,538 60,875 64,816 50,790
--------- --------- --------- ---------
Weighted average
common and common
equivalent shares
outstanding 8,109,748 7,997,553 8,070,642 7,975,452
========= ========= ========= =========
Income from continuing
operations $ 7,939 $ 6,182 $ 12,044 $ 9,431
======== ======= ========= ========
Fully diluted earnings
per share from
continuing
operations $ .98 $ .77 $ 1.49 $ 1.18
========= ======== ========== ========
Earnings per share from discontinued operations and from gain on disposal
of discontinued operations are computed by dividing the income from
discontinued operations or the gain on disposal of discontinued operations
by the applicable primary or fully diluted weighted average common and
common equivalent shares outstanding.