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 March 29, 1996
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)
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 May 1, 1996, 6,884,026 shares of Class A and 1,228,537 shares of
Class B common stock of the Registrant were outstanding.
JOHNSON WORLDWIDE ASSOCIATES, INC.
Index Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations -
Three Months and Six Months Ended March 29,
1996 and March 31, 1995 3
Consolidated Balance Sheets -
March 29, 1996, September 29, 1995
and March 31, 1995 4
Consolidated Statements of Cash Flows -
Six Months Ended March 29, 1996 and
March 31, 1995 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 4. Submission of Matters to a Vote of 11
Security Holders
Item 6. Exhibits and Reports on Form 8-K 11
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
(thousands, except March 29 March 31 March 29 March 31
per share data) 1996 1995 1996 1995
Net sales $111,229 $105,797 $167,634 $159,259
Cost of sales 66,897 63,317 101,981 96,595
-------- -------- -------- --------
Gross profit 44,332 42,480 65,653 62,664
-------- -------- -------- --------
Operating expenses:
Marketing and selling 22,564 21,627 38,109 35,966
Financial and
administrative management 6,622 6,291 12,679 12,242
Research and development 1,576 1,616 3,289 3,050
Profit sharing 404 666 447 724
Special charges 2,400 -- 2,400 --
Amortization of acquisition
costs 624 370 1,305 754
-------- -------- -------- --------
Total operating expenses 34,190 30,570 58,229 52,736
-------- -------- -------- --------
Operating profit 10,142 11,910 7,424 9,928
Interest income (148) (187) (315) (357)
Interest expense 2,862 1,793 4,992 3,022
Other (income) expenses, net 26 (113) (24) (109)
-------- -------- -------- --------
Income before income taxes 7,402 10,417 2,771 7,372
Income tax expense 3,312 3,964 1,474 2,860
-------- -------- -------- --------
Net income $ 4,090 $ 6,453 $ 1,297 $ 4,512
======== ======== ======== ========
Earnings per common share $ 0.50 $ 0.80 $ 0.16 $ 0.56
======== ======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 29 September 29 March 31
(thousands, except share data) 1996 1995 1995
ASSETS
Current assets:
Cash and temporary cash investments $ 3,629 $ 8,944 $ 2,280
Accounts receivable, less allowance
for doubtful accounts of $2,874,
$2,610, and $2,704, respectively 112,653 61,456 109,238
Inventories 126,623 98,238 96,275
Deferred income taxes 7,174 7,423 7,188
Other current assets 9,722 9,319 6,704
-------- -------- --------
Total current assets 259,801 185,380 221,685
Property, plant and equipment 33,122 33,028 29,389
Intangible assets 56,146 58,691 36,432
Other assets 945 1,254 3,172
-------- -------- --------
Total assets $350,014 $278,353 $290,678
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities
of long-term obligations $ 89,326 $ 18,563 $ 65,751
Accounts payable 19,360 14,623 18,751
Accrued liabilities:
Salaries 5,788 5,792 5,334
Income 2,138 4,011 5,322
Other 19,890 20,866 16,836
-------- -------- --------
Total current liabilities 136,502 63,855 111,994
Long-term obligations, less current 68,936 68,948 36,407
Other liabilities 4,232 4,288 5,708
-------- -------- --------
Total liabilities 209,670 137,091 154,109
-------- -------- --------
Shareholders' equity:
Preferred stock: none issued -- -- --
Common stock:
Class A shares issued:
March 29, 1996, 6,896,959;
September 29, 1995, 6,896,883;
March 31, 1995, 6,866,296 345 345 343
Class B shares issued (convertible into
Class A): March 29, 1996, 1,228,537;
September 29, 1995, 1,228,613;
March 31, 1995, 1,230,099 61 61 62
Capital in excess of par value 43,968 43,968 43,380
Retained earnings 90,784 89,525 84,031
Contingent compensation (236) (264) (210)
Cumulative translation adjustment 5,713 7,869 9,600
Treasury stock, at cost:
March 29, 1996, 12,933 Class A shares;
September 29, 1995, 10,000 Class A
shares; March 31, 1995, 29,525
Class A shares (291) (242) (637)
-------- -------- --------
Total shareholders' equity 140,344 141,262 136,569
-------- -------- --------
Total liabilities and
shareholders' equity $350,014 $278,353 $290,678
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
March 29 March 31
(thousands) 1996 1995
CASH USED FOR OPERATIONS
Net income $ 1,297 $ 4,512
Noncash items:
Depreciation and amortization 5,420 3,800
Writedown of intangible assets 1,070 --
Deferred income taxes 464 655
Change in:
Accounts receivable, net (52,190) (50,741)
Inventories (29,364) (22,510)
Accrued restructuring expenses -- (933)
Accounts payable and accrued liabilities 2,424 6,074
Other, net (1,079) (1,463)
-------- -------
(71,958) (60,606)
-------- -------
CASH USED FOR INVESTING ACTIVITIES
Net additions to property, plant and equipment (4,260) (5,221)
CASH PROVIDED BY FINANCING ACTIVITIES
Issuance of senior notes 45,000 --
Principal payments on revolving credit facilities (31,912) --
Net change in notes payable 58,021 52,890
Common stock transactions (51) (606)
-------- -------
71,058 52,284
Effect of foreign currency fluctuations on cash (155) 235
-------- -------
Decrease in cash and temporary cash investments (5,315) (13,308)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 8,944 15,588
-------- -------
End of period $ 3,629 $ 2,280
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
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 March 29, 1996, the results of
operations for the three months and six months ended March 29, 1996
and cash flows for the six months ended March 29, 1996. These
consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in
the Company's 1995 Annual Report.
Because of seasonal and other factors, the results of operations for
the three months and six months ended March 29, 1996 are not
necessarily indicative of the results to be expected for the full
year.
During the three months ended March 29, 1996, the Company adopted
Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of, which requires impairment losses be recorded on long-
lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amount. During the three
months ended March 29, 1996, the Company determined that certain of
its marine products would be discontinued. The Company also
determined that the carrying value of goodwill of one of its
subsidiaries could not be recovered through undiscounted future cash
flows. Accordingly, the related tangible and intangible assets,
totaling $1.7 million, were written down.
In addition, during the three months ended March 29, 1996, the
Company recorded severance and other costs totaling $0.7 million
related to the closing of one of its manufacturing locations.
Additional costs related to closing this facility totaling $0.4
million will be incurred over the remaining six months of this fiscal
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
March 29 September 29 March 31
(thousands) 1996 1995 1995
Raw materials $ 36,118 $ 28,726 $ 27,569
Work in process 6,359 5,888 6,400
Finished goods 89,050 68,742 68,381
-------- -------- --------
131,527 103,356 102,350
Less: reserves (4,904) (5,118) (6,075)
-------- -------- --------
$126,623 $ 98,238 $ 96,275
======== ======== ========
4 Notes Payable and Long-Term Obligations
In November 1995, the Company entered into a $90,000,000 multi-
currency bank facility. Interest on borrowings is set periodically
by reference to market rates such as the London Interbank Offered
Rate. The facility also supports issuance of commercial paper by the
Company.
5 Shareholders' Equity
In December 1995, the Company granted options to purchase 105,000
shares of Class A common stock at $22.063 per share. In February
1996, the Company granted options to purchase 17,000 shares of Class
A common stock at $25.3125 per share.
6 Earnings Per Share
Earnings per share of common stock are computed on the basis of a
weighted average number of common shares outstanding. Common
stock equivalents are not significant in any period presented.
(thousands) Three Months Ended Six Months Ended
March 29 March 31 March 29 March 31
1996 1995 1996 1995
Weighted average common shares 8,112 8,070 8,114 8,075
===== ===== ===== =====
7 Reclassification
Certain amounts as previously reported have been reclassified to
conform with the current period presentation.
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 six months ended March 29, 1996 and March 31, 1995. 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 1995 Annual Report.
Foreign Operations
The Company has significant foreign operations, for which the functional
currencies are denominated primarily in 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 forward
contracts and options to hedge known commitments, primarily for purchases
of inventory and loans denominated in foreign currencies.
Results of Operations
Net sales for the three months ended March 29, 1996 totaled $111.2
million, an increase of approximately 5% from net sales of $105.8 million
for the three months ended March 31, 1995. Net sales of the Company's
North American units for the three months ended March 29, 1996 increased
$2.4 million, or 4%, from the corresponding period in the prior year.
Softness in the outdoor products business and a shift in order patterns of
large customers in the North American fishing business contributed to the
low growth in sales, as did availability issues in January 1996 related to
a line of fishing products acquired in 1995. Net sales of the Company's
European units increased $3.3 million, or 9%, compared to the
corresponding period of the preceding year. Increases in sales in the
European diving and outdoor products businesses were responsible for the
increase.
Net sales for the six months ended March 29, 1996 increased 5% to $167.6
million, from $159.3 million in the prior year. Increases in sales in the
North American fishing business and the European outdoor products and
diving businesses were responsible for the increase.
Relative to the U.S. dollar, the average value of most currencies of the
European countries in which the Company has operations was lower for the
three months ended March 29, 1996 as compared to the preceding year.
Excluding the impact of foreign currencies, net sales increased 6% for the
three months ended March 29, 1996. Foreign currency translation had no
appreciable impact on sales for the six months ended March 29, 1996.
Gross profit for the three months ended March 29, 1996, as a percentage of
sales, declined modestly to 39.9% from 40.2% in the prior year. No
business unit or geographical area experienced significant growth or
declines in gross profit. Gross profit for the six months ended March 29,
1996 was comparable to the prior year.
The Company earned an operating profit of $10.1 million for the three
months ended March 29, 1996, compared to an operating profit of $11.9
million for the corresponding period of the prior year. During the three
months ended March 29, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of, which requires
impairment losses be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying
amount. During the three months ended March 29, 1996, the Company
determined that certain of its marine products would be discontinued. The
Company also determined that the carrying value of goodwill of one of its
subsidiaries could not be recovered through undiscounted future cash
flows. Accordingly, the related tangible and intangible assets, totaling
$1.7 million, were written down.
In addition, during the three months ended March 29, 1996, the Company
recorded severance and other costs totaling $0.7 million related to the
closing of one of its manufacturing locations. Additional costs related
to closing this facility totaling $0.4 million will be incurred over the
remaining six months of this fiscal year.
For the six months ended March 29, 1996 the Company earned an operating
profit of $7.4 million, compared to $9.9 million in the prior year. The
special charges recorded in the three months ended March 29, 1996
contributed to the decline in operating profit. In addition, amortization
of intangible assets was $0.6 million greater in the current year as a
result of acquisitions consummated in 1995. The Company's operating
profit for the three months and six months ended March 29, 1996 has been
generated primarily in foreign jurisdictions due to higher overall rates
of sales growth in those jurisdictions and the special charges incurred in
the Company's North American operations.
Interest expense of $2.9 million and $5.0 million for the three months and
six months ended March 29, 1996, respectively, was $1.1 million and $2.0
million, respectively, higher than the prior year. Higher debt levels
associated with 1995 acquisitions, higher levels of inventories and the
growth of the business contributed to the increase.
The Company earned net income of $4.1 million in the three months ended
March 29, 1996 compared to $6.5 million in the corresponding period of the
preceding year. On a per share basis, the earnings amount to $0.50
compared to $0.80 in the preceding year. For the six months ended March
29, 1996, the Company earned net income of $1.3 million, or $0.16 per
share, compared to $4.5 million, or $0.56 per share, in the prior year.
The Company's effective tax rate increased as the special charges reduced
earnings in countries with lower statutory tax rates.
Financial Condition
Accounts receivable increased from $61.5 million at September 29, 1995 to
$112.7 million at March 29, 1996, in line with the level at this time in
the prior year.
Inventory levels at March 29, 1996 were $28.4 million higher than the
level at September 29, 1995, reflecting the seasonal buildup of products
for the Company's peak selling season in the second and third quarters.
The increase in inventory in the six months ended March 31, 1995 was $25.9
million. The increase in the seasonal buildup of inventory between years
reflects slower than expected sales growth. Inventory turns have declined
compared to the prior year. Accounts payable increased from the September
29, 1995 level for the same reasons.
Debt levels at March 29, 1996 exceed the September 29, 1995 levels by
$70.8 million due to the growth in accounts receivable and inventories
discussed above and planned capital expenditures. The Company's debt is
balanced between long-term, fixed rate obligations and short-term,
floating rate facilities. Cash flows from operations and borrowings under
existing credit facilities are sufficient to meet the Company's seasonal
working capital and capital expenditure requirements.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting on January 24, 1996, the shareholders
voted to elect the following individuals as Directors for terms that
expire at the next annual meeting:
Votes Votes
Cast Cast Votes Broker
for Against Withheld Abstentions Non-Votes
Class A Directors:
Donald W. Brinckman 6,141,649 0 6,233 0 0
Thomas F. Pyle, Jr. 6,141,849 0 6,033 0 0
Class B Directors:
Samuel C. Johnson 1,222,335 0 0 0 0
Helen P. Johnson- 1,222,335 0 0 0 0
Leipold
Raymond F. Farley 1,222,335 0 0 0 0
John D. Crabb 1,222,335 0 0 0 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27: Financial Data Schedule
(b) There were no reports on Form 8-K filed for the three
months ended March 29, 1996.
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: May 13, 1996
/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
6-MOS
SEP-27-1996
SEP-30-1995
MAR-29-1996
3,629
0
115,527
2,874
126,623
259,801
79,561
46,439
350,014
136,502
68,936
0
0
406
139,938
350,014
167,634
167,634
101,981
101,981
57,297
593
4,992
2,771
1,474
1,297
0
0
0
4,090
.50
.50
