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 June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-16255
JOHNSON WORLDWIDE ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1536083
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1326 Willow Road, Sturtevant, Wisconsin 53177
(Address of principal executive offices)
(414) 884-1500
(Registrant's telephone number, including area code)
(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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class August 1, 1995
Class A Common Stock 6,870,693
($.05 par value)
Class B Common Stock 1,222,877
($.05 par value)
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, 1995 and July 1, 1994 3
Consolidated Balance Sheets -
June 30, 1995, September 30, 1994
and July 1, 1994 4
Consolidated Statements of Cash Flows -
Nine Months Ended June 30, 1995 and
July 1, 1994 6
Notes to Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
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
June 30, July 1, June 30, July 1,
(thousands of dollars,
except per share data) 1995 1994 1995 1994
Net sales $117,844 $ 95,083 $277,103 $223,397
Cost of sales 69,099 54,953 165,694 129,512
-------- -------- -------- --------
Gross profit 48,745 40,130 111,409 93,885
-------- -------- -------- --------
Operating expenses:
Marketing and selling 23,061 17,501 59,027 45,834
Financial and
administrative
management 6,927 5,669 19,169 17,080
Research and
development 1,754 1,231 4,804 3,690
Profit sharing 731 636 1,455 1,302
Amortization of
acquisition costs 634 375 1,388 1,119
------- ------- ------- -------
Total operating
expenses 33,107 25,412 85,843 69,025
------- ------- ------- -------
Operating profit 15,638 14,718 25,566 24,860
Interest income (170) (48) (527) (238)
Interest expense 2,425 1,777 5,447 5,573
Other (income) expenses,
net (2) 98 (111) 142
------ ------- ------ -------
Income before income
taxes 13,385 12,891 20,757 19,383
Income tax expense 5,146 4,952 8,006 7,339
------ ------- ------- -------
Income from continuing
operations 8,239 7,939 12,751 12,044
Gain on disposal of
discontinued
operations,
including tax
benefit of $2,277 -- 4,052 -- 4,052
------- ------- ------- -------
Net income $ 8,239 $11,991 $12,751 $16,096
======= ======= ======= =======
Earnings per common
share:
Continuing operations $ 1.02 $ 0.98 $ 1.58 $ 1.49
Gain on disposal of
discontinued
operations -- 0.50 -- 0.50
------ ------- ------ -------
Net income $ 1.02 $ 1.48 $ 1.58 $ 1.99
====== ======= ====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
June 30, September 30, July 1,
(thousands of dollars) 1995 1994 1994
Current assets:
Cash and temporary cash
investments $ 6,241 $ 15,588 $ 18,907
Accounts receivable, less
allowance for doubtful
accounts of $2,802, $2,317,
and $2,092 respectively 100,348 54,942 77,764
Inventories 94,275 70,389 75,620
Other current assets 13,551 14,449 12,313
-------- -------- --------
Total current assets 214,415 155,368 184,604
Property, plant and equipment 30,433 26,579 22,074
Intangible assets 59,753 35,009 33,933
Other assets 2,467 2,725 2,185
-------- -------- --------
Total assets $307,068 $219,681 $242,796
======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
(thousands of dollars)
Current liabilities:
Notes payable and current
maturities of
long-term obligations $51,127 $16,097 $23,977
Accounts payable 15,239 13,467 17,288
Accrued income taxes 6,898 5,145 5,257
Accrued restructuring
expenses 89 1,077 2,814
Other accrued liabilities 27,707 18,248 19,833
------- ------- -------
Total current
liabilities 101,060 54,034 69,169
Long-term obligations, less
current maturities 56,384 31,190 37,389
Other liabilities 4,310 6,260 6,825
------- ------- -------
Total liabilities 161,754 91,484 113,383
------- ------- -------
Shareholders' equity:
Preferred stock: none
issued
Common stock:
Class A shares issued:
June 30, 1995:
6,866,296
September 30, 1994:
6,859,558
July 1, 1994:
6,800,793 343 343 340
Class B shares issued
(convertible into
Class A):
June 30, 1995:
1,230,099
September 30, 1994:
1,230,599
July 1, 1994:
1,230,599 62 62 62
Capital in excess of par
value 43,380 43,330 42,258
Retained earnings 92,179 79,538 83,436
Contingent compensation (323) (242) (304)
Cumulative translation
adjustment 9,943 5,166 3,621
Treasury stock:
June 30, 1995: 12,625
Class A shares (270) -- --
------- ------- --------
Total shareholders'
equity 145,314 128,197 129,413
-------- -------- --------
Total liabilities and
shareholders'
equity $307,068 $219,681 $242,796
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
(thousands of dollars)
June 30, July 1,
1995 1994
Cash used for operations:
Net income $12,751 $16,096
Noncash items:
Depreciation and amortization 6,459 5,600
Deferred income taxes 213 3,581
Gain on disposal of discontinued
operations -- (4,052)
Change in:
Accounts receivable, net (41,927) (31,129)
Inventories (17,000) (7,023)
Accrued restructuring expenses (988) (6,091)
Accounts payable and accrued
liabilities 10,098 9,460
Net assets of discontinued
operations -- 4,036
Other, net (3,394) 4,813
-------- --------
(33,788) (4,709)
-------- --------
Cash provided by (used for) investment
activities:
Net additions to property, plant and
equipment (8,107) (6,939)
Net assets of businesses acquired (26,243) --
Proceeds from sales of discontinued
operations and other businesses -- 46,520
------- -------
(34,350) 39,581
------- -------
Cash provided by (used for) financing
activities:
Proceeds from unsecured revolving
credit facility 25,000 --
Net change in notes payable and
other long-term obligations 33,786 (21,042)
Common stock transactions (552) 478
------- --------
58,234 (20,564)
Effect of foreign currency
fluctuations on cash 557 184
------- -------
Increase (decrease) in cash and
temporary cash investments (9,347) 14,492
Cash and temporary cash investments:
Beginning of period 15,588 4,415
------- -------
End of period $ 6,241 $18,907
======= =======
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 June 30, 1995, the results of
operations for the three months and nine months ended June 30, 1995
and cash flows for the nine months ended June 30, 1995. 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 September 30, 1994.
Because of seasonal and other factors, the results of operations for
the three months and nine months ended June 30, 1995 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
(thousands of dollars) June 30, September 30, July 1,
1995 1994 1994
Raw materials $22,209 $19,058 $18,871
Work in process 5,732 4,625 5,174
Finished goods 72,207 54,260 54,374
------- ------- -------
100,148 77,943 78,419
Less: reserves 5,873 7,554 2,799
------- ------- -------
Total inventory $94,275 $70,389 $75,620
======= ======= =======
4) Shareholders' Equity
In December 1994 the Company granted options to purchase 114,000
shares of Class A common stock at $18.625 per share.
5) Acquisitions
On April 11, 1995, the Company completed the acquisition of the
assets of a line of fishing tackle products. The initial purchase
price for the acquisition was approximately $25.4 million, of which a
substantial amount was recorded as intangible assets. Additional
payments in the fiscal years 1996 through 2001 are dependent upon
achievement of specified levels of sales and profitability of certain
of the acquired products. Such payments, if required, will increase
intangible assets. The acquisition was accounted for using the
purchase method of accounting and, accordingly, the financial
statements include the results of operations since April 1, 1995, the
effective date of the acquisition.
On June 30, 1995, the Company completed the acquisition of a line of
electric motor and other marine products. The initial purchase price
for the acquisition was approximately $2,500,000. Additional payments
in the fiscal years 1996 through 2000 are dependent upon achievement
of specified levels of sales of the acquired product line. Such
payments, if required, will increase intangible assets. The
acquisition was accounted for using the purchase method of accounting
and, accordingly, the financial statements will include the results
of operations beginning on July 1, 1995.
In conjunction with the acquisitions, the Company entered into an
unsecured revolving credit facility in the amount of $30,000,000 to
provide interim financing. Interest rates are set periodically by
reference to market rates. Committed permanent financing for the
acquisitions, in the form of $30,000,000 of unsecured senior notes
bearing interest at 7.77%, will be issued October 15, 1995, at which
time any amounts outstanding under the revolving credit facility will
be retired. The senior notes will have annual principal payments of
$3,000,000 to $5,000,000 beginning October 1999 with a final payment
due in October 2005.
Pro forma operating results for the nine months ended June 30, 1995,
as if the acquisitions had been consumated as of October 1, 1994 are
as follows (thousands of dollars, except per share data):
Net sales $288,962
========
Income from continuing operations $ 11,417
========
Earnings per common share $ 1.41
========
Pro forma operating results for the year ended September 30, 1994,
as if the acquisitions had been consumated as of October 2, 1993 are
as follows (thousands of dollars, except per share data):
Net sales $292,812
========
Income from continuing operations $ 5,237
========
Earnings per common share $ 0.65
========
6) Earnings Per Share
Earnings per share of common stock are computed on the basis of a
weighted average number of common and common equivalent shares
outstanding. Weighted average common and common equivalent shares
used in the computation of earnings per share are shown below:
Three Months Ended Nine Months Ended
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
(thousands)
8,077 8,110 8,076 8,071
====== ====== ====== ======
7) 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
This discussion should be read in conjunction with the unaudited
consolidated financial statements and related notes that immediately
precede this section. Comparisons reflect results from continuing
operations.
The Company has significant foreign operations, for which the functional
currencies are denominated in French francs, German marks, Italian lire,
Japanese yen and Canadian dollars. As the value of the currencies of the
foreign countries in which the Company has operations increases 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. Likewise, as the value of
the currencies of these foreign countries decrease relative to the U.S.
dollar, the elements of the Company's foreign operations, as reported in
the Company's consolidated financial statements, decrease. The Company
mitigates a portion of the fluctuations in certain foreign currencies
through purchase of forward contracts to hedge known commitments,
primarily for product purchases and debt denominated in other currencies.
Results of Operations
Net sales for the three months ended June 30, 1995 were $117.8 million, an
increase of approximately 24% from net sales of $95.1 million for the
corresponding period in 1994. Net sales of the Company's North American
group for the three months ended June 30, 1995 increased $13.9 million or
approximately 24% over the corresponding period in 1994. Fishing products
sold by the Company's North American group were the principal cause of
this increase. New products and sales of an acquired product line
contributed substantially to the increase. Net sales of the Company's
European group for the three months ended June 30, 1995 increased $8.8
million or approximately 27% over the corresponding period in 1994. All
of the European businesses contributed to the increase which was magnified
by the effects of foreign currency movements.
Net sales of $277.1 million for the nine months ended June 30, 1995
increased $53.7 million or approximately 24% from net sales of $223.4
million for the corresponding period in 1994. Net sales of the Company's
North American group for the nine months ended June 30, 1995 increased
$33.1 million or approximately 24% over the corresponding period in 1994.
New fishing products were the principal cause of this increase, although
all businesses experienced sales growth. Net sales of the Company's
European group for the nine months ended June 30, 1995 increased $20.2
million or approximately 25% over the corresponding period in 1994. All
of the European businesses contributed to the increase, which was
magnified by the effects of foreign currency movements.
Relative to the U.S. dollar, the average value of most currencies of the
European countries in which the Company has operations was higher for the
three months and nine months ended June 30, 1995 as compared to the
corresponding periods in 1994. Excluding the impact of foreign
currencies, net sales for the Company increased 17% and 18% for the three
months and nine months ended June 30, 1995, respectively, compared to the
corresponding periods in 1994.
Gross profit for the three months ended June 30, 1995 increased $8.6
million or approximately 22% as compared to the corresponding period in
1994. Gross profit for the nine months ended June 30, 1995 increased
$17.5 million or approximately 19% as compared to the corresponding period
in 1994. The increased gross profit in both the three months and nine
months ended June 30, 1995 is due to increased sales. However, gross
profit percentages for both the three months and the nine months ended
June 30, 1995 declined as compared to the corresponding periods in 1994
primarily due to changes in product mix, new early season selling
programs, increased costs for purchased items and increased freight costs
for certain of the Company's fishing products.
Operating profit for the three months ended June 30, 1995 increased
$920,000 or approximately 6% over the corresponding period in 1994.
Operating profit for the nine months ended June 30, 1995 increased by
$706,000 or approximately 3% from the corresponding period in 1994. The
increased gross profit was partially offset by increased operating
expenses, particularly marketing and selling expenses associated with the
Company's North American fishing products.
Interest expense of $2.4 million and $5.4 million for the three months and
nine months ended June 30, 1995 respectively, represents an increase of
$648,000 and a decrease of $126,000, respectively, over the corresponding
periods in 1994. The increase in interest expense for the three months
ended June 30, 1995 is a result of higher debt levels due to acquisitions
and increased working capital needs, as well as higher interest rates on
short-term debt. The decrease in interest expense year-to-date is
primarily a result of lower average debt levels, partially offset by
higher interest rates on short-term debt, particularly in the United
States. Due to these increased interest rates and the increased debt
levels from the Company's acquisition and other business activities, the
Company expects higher interest costs for at least the remainder of this
year and fiscal 1996 as compared to the corresponding periods in 1994.
Income from continuing operations for the three months ended June 30, 1995
was $8.2 million as compared to $7.9 million for the corresponding period
in 1994. Income from continuing operations for the nine months ended June
30, 1995 was $12.8 million as compared to $12.0 million for the
corresponding period in 1994.
Financial Condition
Inventory and accounts receivable totaled $194.6 million on June 30, 1995
or $41.2 million higher than inventory and accounts receivable levels on
July 1, 1994. The increase from the prior year levels is due to higher
sales for the nine months ended June 30, 1995 as compared to the
corresponding period in 1994 and because of the changing relationship
between the U.S. dollar and the currencies of the European countries in
which the Company has operations. The change in the foreign currencies'
values relative to the U.S. dollar caused approximately $9.2 million of
the $41.2 million increase in the June 30, 1995 inventory and accounts
receivable levels as compared to the July 1, 1994 levels. The increase
from the September 30, 1994 inventory and accounts receivable levels
reflects seasonal increases in connection with the Company's peak selling
periods in the second and third quarters. Inventory turns improved for
the nine months ended June 30, 1995 compared to the corresponding period
in 1994. Property, plant and equipment at June 30, 1995 exceeded the
September 30, 1994 levels due to purchases of information technology and
tooling and manufacturing equipment. Intangible assets have increased
primarily due to acquisitions. Current notes payable as of June 30, 1995
were approximately $35 million higher than the September 30, 1994 levels,
due primarily to the need to finance the Company's seasonal increase in
inventories and accounts receivable. Long-term obligations have increased
approximately $25.2 million from the September 30, 1994 level due to
financing of acquisitions. Cash flow from operations and borrowings under
existing and new committed credit facilities are sufficient to meet the
Company's seasonal working capital, acquisition and capital expenditure
requirements.
PART II OTHER INFORMATION
Item Exhibits and Reports on Form 8-K
(a) Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
On May 26, 1995, the Company filed a Current
Report on Form 8-K dated May 11, 1995 to reflect
(under Item 2 of Form 8-K) the Company's
acquisition of the assets of the SpiderWire/TM/
product line of Safari Land Ltd., Inc. On July
25, 1995, the Company filed an amendment on Form
8-K/A to the Company's Current Report on Form 8-K
dated May 11, 1995. The report, as amended,
included (under Item 7 of Form 8-K) the following
financial statements: Statement of Assets
Acquired as of March 31, 1995, Statements of
Revenues and Direct Operating Expenses for the
year ended September 30, 1994 and the six months
ended March 31, 1995, Pro Forma Condensed
Consolidated Balance Sheet as of March 31, 1995
and Pro Forma Condensed Consolidated Statements
of Operations for the year ended September 30,
1994 and for the six months ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JOHNSON WORLDWIDE ASSOCIATES, INC.
Date: August 14, 1995
/s/ Carl G. Schmidt
Carl G. Schmidt
Senior Vice President and Chief
Financial Officer, Secretary and
Treasurer (Principal Financial and
Accounting Officer)
EXHIBIT INDEX
Exhibit Description
27 Financial Data Schedule
5
1,000
9-MOS
SEP-29-1995
OCT-01-1994
JUN-30-1995
6,241
0
103,150
2,802
94,275
214,415
74,358
43,925
307,068
101,060
56,384
405
0
0
144,909
307,068
277,103
277,103
165,694
165,694
84,312
893
5,447
20,757
8,006
12,751
0
0
0
12,751
1.58
1.58
