UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 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 July 25, 1996, 6,884,426 shares of Class A and 1,228,137 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 Nine Months Ended June 28, 1996
and June 30, 1995 3
Consolidated Balance Sheets -
June 28, 1996, September 29, 1995
and June 30, 1995 4
Consolidated Statements of Cash Flows -
Nine Months Ended June 28, 1996 and June 30,
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 5. Other Information 11
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, except per June 28 June 30 June 28 June 30
share data) 1996 1995 1996 1995
Net sales $110,705 $117,844 $278,339 $277,103
Cost of sales 68,282 69,099 170,263 165,694
------- ------- ------- -------
Gross profit 42,423 48,745 108,076 111,409
------- ------- ------- -------
Operating expenses:
Marketing and selling 23,077 23,061 61,186 59,027
Financial and administrative
management 6,445 6,927 19,124 19,169
Research and development 1,524 1,754 4,813 4,804
Profit sharing 384 731 831 1,455
Special charges 60 -- 2,460 --
Amortization of acquisition
costs 611 634 1,916 1,388
------- ------- ------- -------
Total operating expenses 32,101 33,107 90,330 85,843
------- ------- ------- -------
Operating profit 10,322 15,638 17,746 25,566
Interest income (165) (170) (480) (527)
Interest expense 2,885 2,425 7,877 5,447
Other (income) expenses, net 104 (2) 80 (111)
------- ------- ------- -------
Income before income taxes 7,498 13,385 10,269 20,757
Income tax expense 3,296 5,146 4,770 8,006
------- ------- ------ ------
Net income $4,202 $8,239 $5,499 $12,751
======= ======= ====== ======
Earnings per common share $ .52 $ 1.02 $0.68 $1.58
======= ======= ====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(thousands, except share data) June 28 September 29 June 30
1996 1995 1995
ASSETS
Current assets:
Cash and temporary cash
investments $ 11,303 $ 8,944 $ 6,241
Accounts receivable, less
allowance for doubtful
accounts of $3,186, $2,610,
and $2,802, respectively 97,002 61,456 100,348
Inventories 119,016 98,238 94,275
Deferred income taxes 6,666 7,423 6,782
Other current assets 7,041 9,319 6,769
-------- -------- --------
Total current assets 241,028 185,380 214,415
Property, plant and equipment 31,956 33,028 30,433
Intangible assets 54,986 58,691 59,753
Other assets 1,013 1,254 2,467
-------- -------- --------
Total assets $328,983 $278,353 $307,068
======== ======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Notes payable and current
maturities of long-term
obligations $ 70,545 $ 18,563 $ 51,127
Accounts payable 15,205 14,623 15,239
Accrued liabilities:
Salaries and wages 5,878 5,792 6,344
Income taxes 2,057 4,011 6,898
Other 19,163 20,866 21,452
-------- -------- --------
Total current liabilities 112,848 63,855 101,060
Long-term obligations, less
current maturities 68,866 68,948 56,384
Other liabilities 4,296 4,288 4,310
-------- -------- --------
Total liabilities 186,010 137,091 161,754
-------- -------- --------
Shareholders' equity:
Preferred stock: none
issued -- -- --
Common stock:
Class A shares issued:
June 28, 1996, 6,897,359;
September 29, 1995,
6,896,883; June 30,
1995, 6,866,296 345 345 343
Class B shares issued
(convertible into
Class A): June 28,
1996, 1,228,137;
September 29, 1995,
1,228,613; June 30,
1995, 1,230,099 61 61 62
Capital in excess of par value 43,968 43,968 43,380
Retained earnings 94,986 89,525 92,179
Contingent compensation (179) (264) (323)
Cumulative translation
adjustment 4,083 7,869 9,943
Treasury stock, at cost:
June 28, 1996, 12,933 Class
A shares; September 29,
1995, 10,000 Class A
shares; June 30, 1995,
12,625 Class A shares (291) (242) (270)
-------- -------- --------
Total shareholders' equity 142,973 141,262 145,314
-------- -------- --------
Total liabilities and
shareholders' equity $328,983 $278,353 $307,068
======== ======== ========
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) June 28 June 30
1996 1995
CASH USED FOR OPERATIONS
Net income $ 5,499 $12,751
Noncash items:
Depreciation and amortization 8,054 6,459
Writedown of intangible assets 1,070 --
Deferred income taxes 928 213
Change in:
Accounts receivable, net (37,405) (41,927)
Inventories (22,664) (17,000)
Accrued restructuring expenses -- (988)
Accounts payable and accrued liabilities (1,897) 10,098
Other, net 1,641 (3,394)
------- -------
(44,774) (33,788)
------- -------
CASH USED FOR INVESTING ACTIVITIES
Net additions to property, plant and equipment (5,167) (8,107)
Net assets of businesses acquired -- (26,243)
------- -------
(5,167) (34,350)
------- -------
CASH PROVIDED BY FINANCING ACTIVITIES
Issuance of senior notes 45,000 25,000
Principal payments on revolving credit
facilities (31,912) --
Net change in notes payable 39,625 33,786
Common stock transactions (154) (552)
------- -------
52,559 58,234
Effect of foreign currency fluctuations
on cash (259) 557
------- -------
Increase (decrease) in cash and
temporary cash investments 2,359 (9,347)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 8,944 15,588
------- ------
End of period $11,303 $ 6,241
======= ======
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 June 28, 1996, the results of operations for the three
months and nine months ended June 28, 1996 and cash flows for the nine
months ended June 28, 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 nine months ended June 28, 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. During the three months
ended June 28, 1996, the Company incurred additional costs totaling
$60,000 related to closing this facility and estimates an additional
$340,000 will be incurred over the remaining three months of the 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
June 28 September 29 June 30
(thousands) 1996 1995 1995
Raw materials $ 33,341 $ 28,726 $ 22,209
Work in process 6,601 5,888 5,732
Finished goods 83,790 68,742 72,207
------- ------- -------
123,732 103,356 100,148
Less: reserves (4,716) (5,118) (5,873)
------- ------- -------
$119,016 $ 98,238 $ 94,275
======= ======= =======
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 Nine Months Ended
June 28 June 30 June 28 June 30
1996 1995 1996 1995
Weighted average common
shares 8,113 8,077 8,113 8,076
===== ===== ===== =====
7 Reclassification
Certain amounts as previously reported have been reclassified to
conform with the current period presentation.
JOHNSON WORLDWIDE ASSOCIATES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion includes comments and analysis relating to the
Company's results of operations and financial condition for the three
months and nine months ended June 28, 1996 and June 30, 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 June 28, 1996 totaled $110.7 million,
a decrease of approximately 6% from net sales of $117.8 million for the
three months ended June 30, 1995. Net sales of the Company's North
American units for the three months ended June 28, 1996 decreased $4.5
million, or 6%, from the corresponding period in the prior year. Adverse
weather conditions in much of the North American market and a shift in
order patterns of large customers in the North American fishing business
contributed to the decrease in sales. Net sales of the Company's European
units decreased $1.1 million, or 3%, compared to the corresponding period
of the preceding year.
Net sales for the nine months ended June 28, 1996 increased nominally to
$278.3 million, from $277.1 million in the prior year. Net sales of the
Company's European units for the nine months ended June 28, 1996 increased
$6.8 million, or 7% from the corresponding period in the prior year. The
European outdoor products and diving businesses were responsible for the
increase. The increases in Europe were offset by net sales decreases in
the North American fishing and outdoor products businesses, as well as in
the Company's Japanese operations.
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 and nine months ended June 28, 1996 as compared to the
preceding year. The dollar has also increased significantly relative to
the Japanese yen. Excluding the impact of foreign currencies, net sales
decreased 3% for the three months ended June 28, 1996 and increased 1% for
the nine months ended June 28, 1996.
Gross profit for the three months ended June 28, 1996, as a percentage of
sales, declined to 38.3% from 41.4% in the prior year. Product mix
changes, the decline in sales and unfavorable production variances in the
North American fishing and outdoor products businesses, as well as
increased sales returns in the North American fishing business,
contributed to the decline. Gross profit for the nine months ended June
28, 1996, as a percentage of sales, declined to 38.8% from 40.2% in the
prior year.
The Company earned an operating profit of $10.3 million for the three
months ended June 28, 1996, compared to an operating profit of $15.6
million for the corresponding period of the prior year. The operating
profit shortfall from the prior year was related to the sales and gross
profit shortfall. Operating expenses for the three months ended June 28,
1996 were $1.0 million less than the corresponding period in the prior
year. For the nine months ended June 28, 1996 the Company earned an
operating profit of $17.7 million, compared to $25.6 million in 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. During the three months
ended June 28, 1996, the Company incurred additional costs totaling
$60,000 related to closing this facility and estimates an additional
$340,000 will be incurred over the remaining three months of the fiscal
year. Amortization of intangible assets was $0.5 million greater in the
current nine month period as a result of acquisitions consummated in 1995.
The Company's operating profit for the three months and nine months ended
June 28, 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 $7.9 million for the three months and
nine months ended June 28, 1996, respectively, was $0.5 million and $2.4
million, respectively, higher than the prior year. Higher debt levels
associated with 1995 acquisitions and higher levels of inventories
contributed to the increase.
The Company earned net income of $4.2 million in the three months ended
June 28, 1996 compared to $8.2 million in the corresponding period of the
preceding year. On a per share basis, the earnings amount to $0.52
compared to $1.02 in the preceding year. For the nine months ended June
28, 1996, the Company earned net income of $5.5 million, or $0.68 per
share, compared to $12.8 million, or $1.58 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
$97.0 million at June 28, 1996, $3.3 million lower than the June 30, 1995
level. The decrease resulted from the change in the foreign currencies'
value relative to the U.S. dollar.
Inventory levels at June 28, 1996 were $20.8 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 nine months ended June 30, 1995 was $23.9
million. Inventory levels at June 28, 1996 were $24.7 million higher than
the level at June 30, 1995, reflecting slower than expected sales growth
in most of the Company's businesses and in all geographic areas.
Inventory turns have declined compared to the prior year.
Debt levels at June 28, 1996 exceed the September 29, 1995 levels by $51.9
million due to the growth in inventories discussed above. 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 5. Other Information
On June 24, 1996, the Company announced the resignation of John
D. Crabb as President and Chief Executive Officer and as a
Director of the Company.
The Company also announced that Samuel C. Johnson, Chairman of
the Board of JWA, had formed an Office of the Chairman.
Joining Mr. Johnson in the Office of the Chairman are Helen P.
Johnson-Leipold, Executive Vice President - North American
Businesses and a member of the Board of Directors; Philippe
Blime, Vice President of the Company and President of JWA
Europe; Michael E. Klockenga, Vice President Operations; and
Carl G. Schmidt, Senior Vice President and Chief Financial
Officer. The Office of the Chairman has assumed the
responsibilities formerly held by the Chief Executive Officer.
A committee of the Board of Directors, chaired by Thomas F.
Pyle, Jr., who is Chairman, President and Chief Executive
Officer of Rayovac Corporation, is conducting an extensive
search to identify a new President and Chief Executive Officer.
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 June 28, 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: August 12, 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
9-MOS
SEP-27-1996
SEP-30-1995
JUN-28-1996
11,303
0
100,188
(3,186)
119,016
241,028
80,035
(48,079)
328,983
112,848
68,866
0
0
406
142,567
328,983
278,339
278,339
170,263
170,263
88,934
996
7,877
10,269
4,770
5,499
0
0
0
5,499
.68
.68
