UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K/A
Amendment No. 1 to
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 27, 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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.05 par value
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K, or any amendment to this Form 10-K. [ ]
As of November 15, 1996, 6,901,885 shares of Class A and 1,228,053
shares of Class B common stock of the Registrant were outstanding. The
aggregate market value of voting stock of the Registrant held by
non-affiliates of the Registrant was approximately $50,902,000 on
November 15, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Part and Item Number of Form 10-K
Document into which Incorporated
1. Johnson Worldwide Associates, Part I, Items 1 and 2, and Part
Inc. 1996 Annual Report II, Items 5, 6, 7 and 8
2. Johnson Worldwide Associates, Inc. Part III, Items 10, 11, 12 and 13
Notice of Annual Meeting of
Shareholders and Proxy Statement
for the Annual Meeting of
Shareholders on January 22, 1997
The undersigned Registrant hereby amends Exhibit 13 to its Annual
Report on Form 10-K for the fiscal year ended September 27, 1996 to provide
in its entirety as filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
Town of Mount Pleasant and State of Wisconsin, on the 2nd day of
January, 1997.
JOHNSON WORLDWIDE ASSOCIATES, INC.
(Registrant)
/s/ Carl G. Schmidt
(Carl G. Schmidt)
Senior Vice President and
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
JOHNSON WORLDWIDE ASSOCIATES, INC.
EXHIBIT INDEX
Exhibits Title Page No.
3.1 Articles of Incorporation of the Company. (Filed as
Exhibit 3.1 to the Company's Form S-1 Registration
Statement No. 33-16998, and incorporated herein by
reference.) *
3.2 Amendments to Bylaws of the Company, dated June 24,
1996. #
3.3 Bylaws of the Company as amended through June 24,
1996. #
4.1 Note Agreement dated May 1, 1991. (Filed as Exhibit 4
to the Company's Form 10-Q for the quarter ended
June 28, 1991 and incorporated herein by reference). *
4.2 Letter Amendment No. 1 dated September 30, 1993 to
Note Agreement dated May 1, 1991. (Filed as
Exhibit 4.5 to the Company's Form 10-K for the year
ended October 1, 1993 and incorporated herein by
reference). *
4.3 Note Agreement dated May 1, 1993. (Filed as Exhibit 4
to the Company's Form 10-Q for the quarter ended
July 2, 1993 and incorporated herein by reference.) *
4.4 Letter Amendment dated September 30, 1993 to Note
Agreement dated May 1, 1993. (Filed as Exhibit 4.8 to
the Company's Form 10-K for the year ended October 1,
1993 and incorporated herein by reference). *
4.5 Note Agreement dated October 1, 1995. (Filed as
Exhibit 4.1 to the Company's Form 10-Q for the quarter
ended December 29, 1995 and incorporated herein by
reference.) *
4.6 Credit Agreement dated November 29, 1995. (Filed as
Exhibit 4.2 to the Company's Form 10-Q for the quarter
ended December 29, 1995 and incorporated herein by
reference.) *
4.7 Amendment No. 1 dated July 1, 1996 to Credit Agreement
dated November 29, 1995. #
9. Johnson Worldwide Associates, Inc. Class B Common
Stock Voting Trust Agreement, dated December 30, 1993
(Filed as Exhibit 9 to the Company's Form 10-Q for the
quarter ended December 31, 1993 and incorporated
herein by reference.) *
10.1 Asset Purchase Agreement between Johnson Worldwide
Associates, Inc. and Safari Land Ltd., Inc. dated as
of March 31, 1995 (Filed as Exhibit 2 to the Company's
Form 10-Q for the quarter ended March 31, 1995 and
incorporated herein by reference.) *
10.2+ Discretionary Bonus Option Plan. (Filed as
Exhibit 10-2 to the Company's Form S-1 Registration
Statement No. 33-16998, and incorporated herein by
reference.) *
10.3+ Johnson Worldwide Associates, Inc. Amended and
Restated 1986 Stock Option Plan. (Filed as Exhibit 10
to the Company's Form 10-Q for the quarter ended
July 2, 1993 and incorporated herein by reference.) *
10.4 Registration Rights Agreement regarding Johnson
Worldwide Associates, Inc. Common Stock issued to the
Johnson family prior to the acquisition of Johnson
Diversified, Inc. (Filed as Exhibit 10.6 to the
Company's Form S-1 Registration Statement No.
33-16998, and incorporated herein by reference.) *
10.5 Registration Rights Agreement regarding Johnson
Worldwide Associate, Inc. Class A Common Stock held by
Mr. Samuel C. Johnson. (Filed as Exhibit 28 to the
Company's Form 10-Q for the quarter ended March 29,
1991 and incorporated herein by reference.) *
10.6+ Form of Restricted Stock Agreement. (Filed as Exhibit
10.8 to the Company's Form S-1 Registration Statement
No. 33-23299, and incorporated herein by reference.) *
10.7+ Form of Supplemental Retirement Agreement of Johnson
Diversified, Inc. (Filed as Exhibit 10.9 to the
Company's Form S-1 Registration Statement No.
33-16998, and incorporated herein by reference.) *
10.8+ Johnson Worldwide Associates Retirement and Savings
Plan. (Filed as Exhibit 10.9 to the Company's
Form 10-K for the year ended September 29, 1989 and
incorporated herein by reference.) *
10.9+ Form of Agreement of Indemnity and Exoneration with
Directors and Officers. (Filed as Exhibit 10.11 to
the Company's Form S-1 Registration Statement No.
33-16998, and incorporated herein by reference.) *
10.10 Consulting and administrative agreements with
S. C. Johnson & Son, Inc. (Filed as Exhibit 10.12 to
the Company's Form S-1 Registration Statement No.
33-16998, and incorporated herein by reference.) *
10.11+ Johnson Worldwide Associates, Inc. Stock Option Plan
for Non-Employee Directors. (Filed as Exhibit 4.2 to
the Company's Form S-8 Registration Statement No.
33-19805 and incorporated herein by reference.) *
10.12+ Johnson Worldwide Associates, Inc. 1994 Long-Term
Stock Incentive Plan (Filed as Exhibit 4 to the
Company's S-8 Registration Statement No. 33-52073 and
incorporated herein by reference.) *
10.13+ Separation agreement, dated July 18, 1996, between the
Company and John D. Crabb. #
11. Statement regarding computation of per share earnings.
(Incorporated by reference to Note 14 to the
Consolidated Financial Statements on page 30 of the
Company's 1996 Annual Report.) *
13. Portions of the Johnson Worldwide Associates, Inc.
1996 Annual Report that are incorporated herein by
reference. --
21. Subsidiaries of the Company as of September 27, 1996. #
23. Consent of KPMG Peat Marwick LLP. #
27. Financial Data Schedule #
99. Definitive Proxy Statement for the 1996 Annual Meeting
of Shareholders (Previously filed via the EDGAR system
and incorporated herein by reference). Except to the
extent incorporated herein by reference, the Proxy
Statement for the 1996 Annual Meeting of Shareholders
shall not be deemed to be filed with the Securities
and Exchange Commission as part of this Annual Report
on Form 10-K. *
___________
* Incorporated herein by reference.
+ A management contract or compensatory plan or arrangement.
# Previously filed with this Annual Report on Form 10-K.
[Page 17]
Management's Discussion and Analysis
JOHNSON WORLDWIDE ASSOCIATES, INC. and Subsidiaries
The following discussion includes comments and analysis relating to the
Company's results of operations and financial condition for the three
years ended September 27, 1996. This discussion should be read in
conjunction with the consolidated financial statements and related notes
that immediately follow this section. Comparisons reflect results from
continuing operations.
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
Summary consolidated financial results are as follows:
[millions, except per share data] 1996 1995 1994
Net sales $344.4 $347.2 $284.3
Gross profit 119.7 138.2 110.5
Operating expenses(1) 121.2 114.4 91.5
Operating profit (loss) (1.5) 23.7 18.9
Interest expense 10.2 7.6 6.8
Income (loss) from
continuing operations (11.4) 10.1 8.1
Per common share (1.40) 1.25 1.01
(1) Includes nonrecurring charges of $6.8 million in 1996.
1996 vs 1995
Net Sales
Net sales were $344.4 million in 1996 compared to $347.2 million in 1995,
a decrease of 1%. The sales decrease as measured in U.S. dollars was
negatively impacted by the effect of weaker foreign currencies relative to
the U.S. dollar in comparison to 1995. Excluding the effects of foreign
currency movements, worldwide sales increased nominally over 1995.
Poor spring weather in North America contributed to a decline in sales of
4% in that region in 1996. Both the fishing and camping businesses were
impacted. The delay, until February 1996, in the introduction of a new
fishing line product due to production problems encountered by the
supplier, also negatively impacted revenue in 1996.
European sales as measured in U. S. dollars increased 6% in 1996, led by
strong growth in the camping and diving businesses. Excluding currency
effects, European sales increased 7% in 1996.
The Company's Asian business, which is concentrated in Japan and
Australia, recognized a decline in sales of 11% in 1996 due to the
significant decline in the Japanese yen relative to the U.S. dollar.
Excluding the impact of foreign currencies, sales in Asia increased 2% as
the Australian business generated significant sales growth.
Operating Profit
The Company recognized an operating loss of $1.5 million in 1996 compared
to operating profit of $23.7 million in 1995. Several factors accounted
for the operating loss. Gross profit margins declined from 39.8% in 1995
to 34.8% in 1996. Unusual charges related to reduction of inventories to
their net realizable value reduced the gross profit by $11 million, or
3.2%. Most significantly impacted was the North American fishing business,
which had the most significant buildup of inventory and recognized the
bulk of the losses. Changes in management and the end of the peak selling
season contributed to the timing of the loss, which was recognized in the
fourth quarter. The Company also continues to experience margin pressure
in all of its businesses due to increasing competition from other
businesses.
Operating expenses, excluding nonrecurring charges, totaled $114.4
million, or 33% of sales in both 1996 and 1995. While overall operating
expenses remained level, financial and administrative management expenses
increased $0.8 million. Amortization expense increased $0.5 million in
1996 due to a full year of amortization of intangible assets related to
acquisitions completed in 1995.
The Company recognized nonrecurring charges totaling $6.8 million in 1996.
These charges resulted from writedowns totaling $2.9 million of long-lived
assets related to adoption of FASB Statement 121, which the Company
adopted in 1996, and closure of a subsidiary, the expected loss of $2
million on the sale of one of the Company's businesses, and charges
totaling $1.9 million related to the relocation of one of its
manufacturing locations and the outsourcing of the distribution function
of another business.
Other Income and Expenses
Interest expense increased $2.6 million in 1996, reflecting higher debt
levels resulting from the full year impact of acquisitions consummated in
1995 and due to higher levels of working capital, primarily inventory. The
issuance of long-term senior notes in October 1995 increased the average
interest rate of the Company's indebtedness, as this debt was used to
repay short-term debt which generally carried lower interest rates.
[Page 18]
Income From Continuing Operations
The Company recognized a loss from continuing operations of $11.4 million
in 1996, or $1.40 per share, compared to earnings of $10.1 million, or
$1.25 per share in 1995. The Company recognized income tax expense of $0.2
million in 1996, despite a pretax loss, due to earnings in foreign
jurisdictions that are taxed at higher rates than in the U.S. The tax
benefit of operating losses generated in the U.S. did not fully offset the
taxes in these foreign jurisdictions. In addition, the Company recognized
income tax expense totaling $0.5 million on the expected disposition of a
business, despite a pretax loss of $2 million, due to differences between
the tax basis and financial statement carrying values of the related
assets. The disproportionate contribution of earnings from foreign
businesses is attributable to the inventory writedowns and nonrecurring
charges noted above, which are largely being recognized in the United
States.
1995 vs 1994
Net Sales
Net sales were $347.2 million in 1995 compared to $284.3 million in 1994,
an increase of 22%. The sales increase as measured in U.S. dollars was
positively impacted by the effect of stronger foreign currencies relative
to the U.S. dollar in comparison to 1994. Strong new product programs
contributed to the increase in sales in all businesses, as did sales from
acquired product lines in the fishing business. Excluding the effects of
foreign currency movements, worldwide sales increased 17% over 1994.
In North America, an overall increase in sales of 22% was led by fishing
products, primarily on the strength of increased sales of Mitchell and
Johnson rod and reel products and sales of SpiderWire, a product line
acquired in April 1995. While sales of Minn Kota electric motors were
improved over 1994, sales growth was inhibited by an extended work
stoppage at a key component supplier, which limited product availability.
Sales of camping products in North America increased moderately overall,
led by Old Town watercraft products, as did sales of diving and marine
products.
European sales as measured in U.S. dollars increased 26% from 1994, but
increased less in local currencies. Measured in U.S. dollars, all product
categories recorded gains in sales of at least 20%.
The Company's Asian business recorded modest sales growth, reflecting
problems in the Japanese economy and the effects of the Kobe earthquake.
Operating Profit
The Company's operating profit of $23.7 million in 1995 was $4.8 million,
or 25% more than 1994. Gross profit margins increased from 38.9% to 39.8%
of sales, reflecting declines in margins in the North American and
European fishing businesses which were offset by increases in gross profit
margins in the camping, diving and marine businesses in all major
geographic areas. Margins in the fishing business were negatively impacted
by changes in product mix, the work stoppage noted above, increased
incoming freight costs and early season selling programs. Gross margins in
1994 were negatively impacted by inventory adjustments totaling $5.4
million.
Operating expenses totaled $114.4 million or 33% of sales in 1995 compared
to $91.5 million or 32% of sales in 1994. The increase in expenses was
concentrated primarily in marketing and selling expenses and, to a lesser
extent, research and development. Financial and administrative management
expenses, which had been stable for several years, increased in 1995 due
to increased information technology expenditures. Amortization of
intangible assets increased from $1.5 million to $2 million due to
acquisitions consummated in 1995. The increase in operating expenses was
also magnified by foreign currency movements relative to the U.S. dollar.
Other Income and Expenses
Interest expense increased in 1995 reflecting higher debt levels resulting
from the April 1995 acquisition of the SpiderWire product line and the
July 1995 acquisition of the Neptune Technologies product line, as well as
increased working capital needs from internal growth. Other income, net of
other expenses, increased from the prior year, primarily due to higher
interest income and lower foreign exchange losses.
Income From Continuing Operations
Income from continuing operations of $10.1 million or $1.25 per share in
1995 was $2 million or 24% more than the $1.01 per share earned in 1994.
The Company's effective tax rate of 40.6% in 1995, compared to 34.7% in
1994, reflected the disproportionate contribution to earnings in 1995 from
European and Asian operations, which generally have higher marginal tax
rates than the U.S.
Discontinued Operations
In 1993, the Company's Board of Directors approved a formal plan to divest
the Company's Marking Systems businesses. During 1994, the Company
completed the divestiture and recorded a gain on disposition of
approximately $4.1 million as net sales proceeds exceeded expectations.
[Page 19]
Financial Condition
The following discusses changes in the Company's liquidity and capital
resources.
Operations
The following table sets forth the Company's working capital position at
the end of each of the past three years:
[millions] 1996 1995 1994
Current assets $194.3 $185.4 $155.4
Current liabilities 88.4 63.9 54.0
Working capital $105.9 $121.5 $101.4
Current ratio 2.2 to 1 2.9 to 1 2.9 to 1
Cash flows used for operations totaled $6.5 million in 1996 and $6.3
million in 1995. Growth in inventories of $17.6 million in 1996 and $23.4
million in 1995 accounted for a significant amount of the net usage of
funds. Sales below expectations contributed to the growth in inventory in
1996. Accelerated delivery schedules for certain new products, inventories
of acquired product lines, and level loading of production at certain of
the Company's manufacturing operations contributed to the increase in
1995. Foreign currency fluctuations also contributed to the increase in
1995. Inventory turns decreased in 1996 and increased in 1995.
Accounts receivable decreased $2.4 million in 1996, providing a source of
funds, while increasing $6.6 million in 1995. Significant growth in third
and fourth quarter sales accounted for the increase in accounts receivable
in 1995.
Accounts payable and accrued liabilities decreased $1.1 million in 1996
and increased $7.3 million in 1995, impacting the net outflow of cash from
operations. Usage of liabilities established for restructuring in 1993
offset the increase in 1995.
Depreciation and amortization charges were $10.6 million in 1996, $8.3
million in 1995 and $7 million in 1994, mitigating the net outflow of
operating funds. The increase over 1994 reflects additional amortization
of intangible assets arising from the Company's 1995 acquisitions and
increased depreciation from capital spending in 1996, 1995 and 1994.
Investing Activities
Expenditures for property, plant and equipment were $10.7 million in 1996,
$15.5 million in 1995 and $14 million in 1994. The Company's recurring
investments are made primarily for tooling for new products and
enhancements. In 1996, 1995 and 1994, capital spending was increased due
to investments in data processing improvements. In 1994, the Company also
constructed and occupied an office and research facility to replace rented
space. In 1997, capitalized expenditures are anticipated to total
approximately $10 million. These expenditures are expected to be funded by
working capital or existing bank lines of credit.
The Company completed the acquisitions of two product lines in 1995, which
increased tangible and intangible assets and long-term debt by $28
million. No acquisitions were completed in 1996 or 1994.
Financing Activities
The following table sets forth the Company's debt and capital structure at
the end of the past three years:
[millions] 1996 1995 1994
Current debt $43.1 $18.6 $16.1
Long-term debt 61.5 68.9 31.2
Total debt 104.6 87.5 47.3
Shareholders' equity 126.4 141.3 128.2
Total capitalization $231.0 $228.8 $175.5
Total debt to total
capital ratio 45.3% 38.2% 27.0%
Cash flows from financing activities totaled $17.6 million in 1996 and
$39.5 million in 1995. In October 1995, the Company consummated private
placements of long-term debt totaling $45 million. In anticipation of this
financing, short-term debt to be repaid totaling $32 million at September
29, 1995 was classified as long-term. Payments on long-term debt required
to be made in 1997 total $7.5 million. Net proceeds totaling approximately
$17 million from the sale of one of the Company's businesses are expected
to be used to reduce indebtedness in 1997. At September 27, 1996, the
Company had available, unused credit facilities in excess of $112 million.
Other Factors
The Company has not been significantly impacted by inflationary pressures
over the last several years. However, from time to time the Company faces
changes in the prices of commodities. Price increases and, in certain
situations, price decreases are implemented for individual products, when
appropriate. The Company anticipates that rising costs of basic raw
materials may impact 1997 operating costs and, accordingly, the prices 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.
[Page 20]
Consolidated Balance Sheets
JOHNSON WORLDWIDE ASSOCIATES, INC. and Subsidiaries
September 27 September 29
[thousands, except share data] 1996 1995
Assets
Current assets:
Cash and temporary cash investments $12,697 $8,944
Accounts receivable, less allowance
for doubtful accounts of $2,235
and $2,610, respectively 55,847 61,456
Inventories 101,903 98,238
Deferred income taxes 13,561 7,423
Other current assets 10,336 9,319
------- -------
Total current assets 194,344 185,380
Property, plant and equipment 30,154 33,028
Intangible assets 54,422 58,691
Other assets 1,848 1,254
------- -------
Total assets $280,768 $278,353
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt and current
maturities of long-term debt $43,118 $18,563
Accounts payable 11,086 14,623
Accrued liabilities:
Salaries and wages 6,260 5,792
Income taxes 4,283 4,011
Other 23,659 20,866
------- -------
Total current liabilities 88,406 63,855
Long-term debt, less current maturities 61,501 68,948
Other liabilities 4,437 4,288
------- -------
Total liabilities 154,344 137,091
------- -------
Shareholders' equity:
Preferred stock: none issued - -
Common stock:
Class A shares issued: September
27, 1996, 6,901,801; September 29,
1995, 6,896,883 345 345
Class B shares issued (convertible
into Class A): September 27, 1996,
1,228,137; September 29, 1995,
1,228,613 61 61
Capital in excess of par value 44,084 43,968
Retained earnings 77,940 89,525
Contingent compensation (121) (264)
Cumulative translation adjustment 4,115 7,869
Treasury stock, at cost: September 29,
1995, 10,000 Class A shares - (242)
------- -------
Total shareholders' equity 126,424 141,262
------- -------
Total liabilities and shareholders'
equity $280,768 $278,353
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
[Page 21]
Consolidated Statements of Operations
JOHNSON WORLDWIDE ASSOCIATES, INC. and Subsidiaries
Year Ended
September 27 September 29 September 30
[thousands, except per share data] 1996 1995 1994
Net sales $ 344,373 $ 347,190 $ 284,343
Cost of sales 224,649 209,035 173,869
Gross profit 119,724 138,155 110,474
Operating expenses:
Marketing and selling 78,348 78,743 59,629
Financial and administrative
management 26,139 25,304 23,482
Research and development 6,537 6,531 5,304
Amortization of acquisition costs 2,500 2,003 1,482
Nonrecurring charges 6,768 - -
Profit sharing 908 1,830 1,639
------- ------- -------
Total operating expenses 121,200 114,411 91,536
------- ------- -------
Operating profit (loss) (1,476) 23,744 18,938
Interest income (612) (774) (531)
Interest expense 10,181 7,613 6,845
Other (income) expenses, net 116 (87) 140
------- ------- -------
Income (loss) from continuing operations
before income taxes (11,161) 16,992 12,484
Income tax expense 194 6,903 4,338
------- ------- -------
Income (loss) from continuing operations (11,355) 10,089 8,146
Gain on disposal of discontinued operations,
including income tax benefit of $2,277 - - 4,052
------- ------- ------
Net income (loss) $ (11,355) $ 10,089 $ 12,198
------- ------- ------
Earnings (loss) Per Common Share
Continuing operations $ (1.40) $ 1.25 $ 1.01
Discontinued operations - - .50
------- ------- -------
Net income (loss) $ (1.40) $ 1.25 $ 1.51
------- ------- -------
The accompanying notes are an integral part of the consolidated financial
statements.
[Page 22]
Consolidated Statements of Shareholders' Equity
JOHNSON WORLDWIDE ASSOCIATES, INC. and subsidiaries
Capital in Cumulative
Common Excess of Retained Contingent Translation Treasury
[thousands] Stock Par Value Earnings Compensation Adjustment Stock
BALANCE AT OCTOBER 1, 1993 $399 $41,696 $67,340 $(350) $1,733 $ -
Net income - - 12,198 - - -
Exercise of stock options 5 1,226 - - - -
Tax benefit of stock options exercised - 150 - - - -
Issuance of restricted stock - 70 - (70) - -
Issuance of stock under employee stock
purchase plan 1 188 - - - -
Amortization of contingent compensation - - - 178 - -
Translation adjustment - - - - 3,433 -
---- ------ ------ ---- ------ -----
Balance at September 30, 1994 405 43,330 79,538 (242) 5,166 -
Net income - - 10,089 - - -
Exercise of stock options 1 384 (95) - - 910
Tax benefit of stock options exercised - 118 - - - -
Issuance of restricted stock - - (7) (222) - 229
Issuance of stock under employee
stock purchase plan - 136 - - - -
Amortization of contingent
compensation - - - 200 - -
Other treasury stock transactions - - - - - (1,381)
Translation adjustment - - - - 2,703 -
---- ------ ------ ---- ------ ------
Balance at September 29, 1995 406 43,968 89,525 (264) 7,869 (242)
Net loss - - (11,355) - - -
Exercise of stock options - - (98) - - 295
Tax benefit of stock options exercised - 61 - - - -
Issuance of restricted stock - - - (67) - 67
Issuance of stock under employee
stock purchase plan - 55 (132) - - 291
Amortization of contingent
compensation - - - 210 - -
Other treasury stock transactions - - - - - (411)
Translation adjustment - - - - (3,754) -
---- ------ ------ ---- ----- -----
Balance at September 27, 1996 $406 $44,084 $77,940 $(121) $4,115 $ -
==== ====== ====== ==== ===== =====
The accompanying notes are an integral part of the consolidated financial
statements.
[Page 23]
Consolidated Statements of Cash Flows
JOHNSON WORLDWIDE ASSOCIATES, INC. and Subsidiaries
Year Ended
September 27 September 29 September 30
[thousands] 1996 1995 1994
Cash Provided By (Used For) Operations
Net income (loss) $ (11,355) $ 10,089 $ 12,198
Noncash items:
Depreciation and amortization 10,561 8,314 6,987
Provision for doubtful accounts
receivable 1,662 1,567 1,421
Provision for inventory reserves 12,202 1,561 6,318
Deferred income taxes (6,842) 179 (694)
Writedown of property, plant and
equipment 1,846 - -
Writedown of intangible assets 1,070 - -
Loss on sale of business 2,000 - -
Gain on disposal of discontinued
operations - - (4,052)
Change in:
Accounts receivable 2,412 (6,637) (9,818)
Inventories (17,571) (23,386) (7,311)
Accounts payable and other accrued
liabilities (1,128) 7,256 3,576
Restructuring accrual - (1,077) (7,828)
Net assets of discontinued operations - - 4,036
Other, net (1,332) (4,147) 2,763
------- ------- -------
(6,475) (6,281) 7,596
------- ------- -------
Cash Provided By (Used For) Investing
Activities
Net assets of businesses acquired - (28,070) -
Proceeds from sale of discontinued
operations and other businesses - - 48,076
Additions to property, plant and
equipment (10,685) (15,501) (13,970)
Sales and retirements of property,
plant and equipment 3,583 3,403 1,676
------- ------- -------
(7,102) (40,168) 35,782
------- ------- -------
Cash Provided By (Used For)
Financing Activities
Issuance of senior notes 45,000 - -
Principal payments on senior notes
and notes payable (7,341) (6,662) (5,231)
Proceeds from revolving credit facilities - 13,172 -
Repayment of revolving credit facilities (13,412) - (7,237)
Net change in short-term debt (6,717) 32,928 (21,816)
Common stock transactions 61 73 1,570
------- ------- -------
17,591 39,511 (32,714)
Effect of foreign currency fluctuations
on cash (261) 294 509
------- ------- -------
Increase (decrease) in cash and temporary
cash investments 3,753 (6,644) 11,173
Cash and Temporary Cash Investments
Beginning of year 8,944 15,588 4,415
------- ------- -------
End of year $ 12,697 $ 8,944 $ 15,588
------- ------- -------
The accompanying notes are an integral part of the consolidated financial
statements.
[Page 24]
Notes to Consolidated Financial Statements
JOHNSON WORLDWIDE ASSOCIATES, INC. and Subsidiaries
Johnson Worldwide Associates, Inc. is an integrated, global outdoor
recreation products company engaged in the design, manufacture and
marketing of brand name fishing and marine, camping and diving products.
1 Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Johnson
Worldwide Associates, Inc. and all majority owned subsidiaries (the
Company). Significant intercompany accounts and transactions have been
eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that impact the reported amounts of assets, liabilities and
operating results and the disclosure of commitments and contingent
liabilities. Actual results could differ significantly from those
estimates. For the Company, significant estimates include the allowance
for doubtful accounts receivable and reserves for inventory valuation.
The Company's fiscal year ends on the Friday nearest September 30. The
fiscal years ended September 27, 1996, September 29, 1995 and September
30, 1994 (hereinafter 1996, 1995 and 1994, respectively) each comprise 52
weeks.
Cash and Temporary Cash Investments
For purposes of the consolidated statements of cash flows, the Company
considers all short-term investments in interest-bearing bank accounts,
securities and other instruments with an original maturity of three months
or less, to be equivalent to cash.
Inventories
Inventories are stated at the lower of cost (determined using the
first-in, first-out method) or market.
Inventories at the end of the respective years consist of the following:
[thousands] 1996 1995
Raw materials $ 30,102 $ 28,726
Work in process 6,167 5,888
Finished goods 79,299 68,742
--------- ---------
115,568 103,356
Less reserves 13,665 5,118
--------- ---------
$ 101,903 $ 98,238
========= =========
In 1996, the Company recorded charges totaling $11,000,000 to reduce the
carrying value of certain elements of inventory to their net realizable
value.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation of plant and equipment is determined by
straight-line and accelerated methods over estimated useful lives, which
range from 3 to 30 years.
Upon retirement or disposition, cost and the related accumulated
depreciation are removed from the accounts and any resulting gain or loss
is recognized in operating results.
Property, plant and equipment at the end of the respective years consist
of the following:
[thousands] 1996 1995
Property and improvements $ 987 $ 969
Buildings and improvements 15,685 15,642
Furniture, fixtures and equipment 61,009 59,275
--------- ---------
77,681 75,886
Less accumulated depreciation 47,527 42,858
--------- ---------
$ 30,154 $ 33,028
========= =========
Intangible Assets
Intangible assets are stated at cost less accumulated amortization.
Amortization is computed using the straight-line method with periods
ranging from 15 to 40 years for goodwill and 3 to 16 years for patents,
trademarks and other intangible assets.
The Company annually assesses the recoverability of intangible assets,
primarily by determining whether the amortization of the balance over its
remaining life can be recovered through undiscounted future operating cash
flows of the acquired operation. The amount of impairment, if any, is
measured primarily based on the deficiency of projected discounted future
operating cash flows relative to the value of the asset, using a discount
rate reflecting the Company's cost of capital, which is currently 12%.
Intangible assets at the end of the respective years consist of the
following:
[thousands] 1996 1995
Goodwill $ 66,260 $ 68,784
Patents, trademarks and other 4,357 4,604
-------- --------
70,617 73,388
Less accumulated amortization 16,195 14,697
-------- --------
$ 54,422 $ 58,691
======== ========
[Page 25]
Income Taxes
The Company provides for income taxes currently payable, and deferred
income taxes resulting from temporary differences between financial
statement and taxable income, using the asset and liability method.
Federal and state income taxes are provided on foreign subsidiary income
distributed to or taxable in the United States during the year. At
September 27, 1996, net undistributed earnings of foreign subsidiaries
total approximately $39,973,000. A substantial portion of these unremitted
earnings have been permanently invested abroad and no provision for
federal or state taxes is made on these amounts. With respect to that
portion of foreign earnings which may be returned to the United States,
provision is made for taxes if the amounts are significant.
The Company's United States entities file a consolidated federal income
tax return.
Employee Benefits
The Company and certain of its subsidiaries have various retirement and
profit sharing plans. U.S. pension obligations, which are generally based
on compensation and years of service, are funded by payments to pension
fund trustees. Other foreign pensions are funded as expenses are incurred.
The Company's policy is generally to fund the minimum amount required
under the Employee Retirement Income Security Act of 1974 for plans
subject thereto. Profit sharing costs are funded at least annually.
Foreign Operations
The Company operates internationally, which gives rise to exposure to
market risk from movements in foreign exchange rates. The Company uses
foreign currency forward contracts and foreign currency options in its
selective hedging of foreign exchange exposure. Gains and losses on
contracts that qualify as hedges are recognized as an adjustment of the
carrying amount of the item hedged. The Company primarily hedges inventory
purchases and loans denominated in foreign currencies. The Company does
not enter into foreign exchange contracts for trading purposes.
At September 27, 1996, foreign currency forward contracts and options with
a notional value of approximately $4,716,000 are in place, hedging
existing and anticipated transactions. All of these contracts mature in
1997. Failure of the counterparties to perform their obligations under
these contracts would expose the Company to the risk of foreign currency
rate movements for those contracts. The Company does not believe the risk
is significant.
Assets and liabilities of foreign operations are translated into United
States dollars at the rate of exchange existing at the end of the year.
Results of operations are translated at monthly average exchange rates.
Gains and losses resulting from the translation of foreign currency
financial statements are classified as a separate component of
shareholders' equity.
Revenue Recognition
Revenue from sales is recognized on the accrual basis, primarily upon the
shipment of products, net of estimated costs of returns and allowances.
Advertising
The Company expenses substantially all costs of production of advertising
the first time the advertising takes place. Cooperative promotional
arrangements are accrued in relation to sales.
Advertising expense in 1996, 1995 and 1994 totals $26,657,000, $26,151,000
and $19,901,000, respectively. Capitalized costs at September 27, 1996 and
September 29, 1995 total $2,036,000 and $2,605,000, respectively, and
primarily include catalogs and costs of advertising which has not yet run
for the first time.
Research and Development
Research and development costs are expensed as incurred.
Reclassification
Certain reclassifications have been made to prior years' amounts to
conform with the current year presentation.
Pending Accounting Changes
In 1996, the FASB issued Statement 123, Accounting for Stock-Based
Compensation, which requires accounting for employee stock compensation
plans using either the fair value method or the intrinsic value based
method. The Company will adopt Statement 123 in 1997 and, based on current
circumstances, anticipates retaining the intrinsic value based method of
accounting for stock options, which is currently in use.
2 Nonrecurring Charges
In 1995, the FASB issued Statement 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which
requires impairment losses to 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. In addition, Statement 121 requires that long-lived
assets to be disposed of be reported at the lower of the carrying amount
or fair value (less estimated selling expenses). The Company adopted
Statement 121 in 1996 and determined that certain of its products would be
discontinued. As a result, assets totaling $1,846,000, consisting
primarily of tooling, were written off.
The Company also determined that the carrying value of goodwill of one of
its subsidiaries, which the Company subsequently closed, could not be
recovered through undiscounted future cash flows. Accordingly, the related
intangible assets, totaling $1,070,000, were written off.
[Page 26]
In 1996, the Company recorded involuntary severance and other exit costs
totaling $1,852,000 related to the relocation of one of its manufacturing
locations and the outsourcing of the distribution function of another
business. Substantially all of the $1,389,000 remaining accrued liability
at September 27, 1996 is to be disbursed by December 1996. Approximately
80 employees are impacted by these actions.
In 1996, the Board of Directors approved a plan to divest one of the
Company's businesses. The Company estimates the sale of this business will
result in a loss of approximately $2,000,000. Accordingly, this loss is
recognized in 1996 operating results. The Company expects the sale of this
business will be consummated in 1997. Net sales and operating profit of
this business were $36,391,000 and $3,043,000, respectively, in 1996. Net
assets of this business totaled $16,885,000 at September 27, 1996.
3 Discontinued Operations
In 1993, the Board of Directors approved a formal plan to divest the
Company's Marking Systems businesses, which manufactured and marketed hand
stamps, ink rolls, ink cartridges and liquid ink jets. As a result of the
adoption of the plan of divestiture, the Marking Systems operations have
been classified as discontinued for all years presented. The Company
completed the divestiture in two separate transactions in 1994, resulting
in a gain of $4,052,000 as net sales proceeds exceeded expectations. Net
sales of the Marking Systems businesses to the disposal dates were
$36,075,000 for 1994. Interest expense of $41,000 for 1994 that was
directly attributable to the Marking Systems businesses was allocated to
discontinued operations.
4 Acquisitions
In April 1995, the Company acquired substantially all the assets of a line
of fishing tackle products. The initial purchase price, including direct
expenses, of the acquisition was $25,470,000, of which $22,042,000 was
recorded as intangible assets and will be amortized over 25 years.
Additional payments in the years 1997 through 2001 are dependent upon the
achievement of specified levels of sales and profitability of certain of
the acquired products. No additional payments were required in 1996. In
connection with the acquisition, the Company entered into an exclusive
supply agreement for certain of the products with the third-party
manufacturer of such products.
In June 1995, the Company acquired substantially all the assets of a line
of electric motors and marine accessories. The purchase price of the
acquisition was $2,600,000, of which $2,231,000 was recorded as intangible
assets and will be amortized over 15 years. Additional payments in the
years 1997 through 2000 are dependent upon achievement of specified levels
of sales of the acquired product line. No additional payments were
required in 1996.
The acquisitions were accounted for using the purchase method and,
accordingly, the consolidated financial statements include the results of
operations since the respective dates of acquisition. Additional payments,
if required, will increase intangible assets in future years.
5 Indebtedness
Short-term debt at the end of the respective years consists of the
following:
[thousands] 1996 1995
Commercial paper and bank loans $ 35,599 $ 42,978
Current maturities of long-term debt 7,519 7,413
-------- --------
43,118 50,391
Less short-term debt to be refinanced - 31,828
-------- --------
$ 43,118 $ 18,563
======== ========
Short-term arrangements provide for borrowings with interest rates set
periodically by reference to market rates. The weighted average interest
rate on short-term indebtedness was 5.8% and 7.0% at September 27, 1996
and September 29, 1995, respectively. The Company's primary facility is a
$100,000,000 revolving credit agreement expiring in 2001, which includes
$70,000,000 in support of commercial paper issuance. The Company has lines
of credit, both foreign and domestic, totaling $150,764,000, of which
$112,713,000 is available at September 27, 1996. The Company also has
available letters of credit for trade financing purposes.
Long-term debt at the end of the respective years consists of the
following:
[thousands] 1996 1995
Senior notes $ 67,000 $ 29,000
Short-term debt to be refinanced - 31,828
Revolving credit facility - 13,172
Notes payable 4.8% to 10.9%
maturing through December 2005 2,020 2,361
-------- --------
69,020 76,361
Less current maturities 7,519 7,413
-------- --------
$ 61,501 $ 68,948
======== ========
In 1996, the Company issued unsecured senior notes of $30,000,000 with an
interest rate of 7.77% and $15,000,000 with an interest rate of 6.98%.
Total annual principal payments ranging from $5,500,000 to $7,500,000 are
due beginning in 2000 through 2006. Proceeds from issuance of the senior
notes were used to retire an interim revolving credit facility established
in 1995 to fund acquisitions and to reduce outstanding borrowings under
the Company's primary revolving credit facility. Outstanding
[Page 27]
short-term debt totaling $31,828,000 at September 29, 1995 was classified
as long-term in anticipation of refinancing with the proceeds of the
senior notes.
In 1993 and 1991, respectively, the Company issued unsecured senior notes
of $15,000,000 with an interest rate of 6.58% and $25,000,000 with an
interest rate of 9.16%. Equal annual principal payments of $7,500,000 for
the 1993 senior notes are due in 1998 and 1999. The remaining annual
principal payment for the 1991 senior notes is $7,000,000 in 1997.
Principal amounts payable on long-term debt in each of the five years
ending September 2001 are as follows:
Year [thousands]
1997 $ 7,519
1998 7,868
1999 7,679
2000 5,880
2001 6,161
Interest paid was $8,853,211, $6,775,000 and $6,864,000 for 1996, 1995 and
1994, respectively.
Based on the borrowing rates currently available to the Company for debt
with similar terms and average maturities, the fair value of the Company's
long-term debt as of September 27, 1996 and September 29, 1995 is
$69,151,000 and $76,804,000, respectively. The carrying value of all other
financial instruments approximates the fair value.
Certain of the Company's loan agreements require that Samuel C. Johnson,
members of his family and related entities (Johnson Family) continue to
own stock having votes sufficient to elect a 51% majority of the
directors. At September 27, 1996, the Johnson Family held approximately
2,169,000 shares or 31% of the Class A common stock, approximately
1,160,000 shares or 94% of the Class B common stock and approximately 72%
of the voting power of both classes of common stock taken as a whole. The
agreements also contain restrictive covenants regarding the Company's
tangible net worth, indebtedness, fixed charge coverage and distribution
of earnings. The Company is in compliance with the restrictive covenants
of such agreements, as amended.
6 Leases and Other Commitments
The Company leases certain operating facilities and machinery and
equipment under long-term, noncancelable operating leases. Future minimum
rental commitments under noncancelable operating leases having an initial
or remaining term in excess of one year at September 27, 1996 are as
follows:
Year [thousands]
1997 $ 4,098
1998 2,354
1999 1,628
2000 1,167
2001 862
Thereafter 2,093
Rental expense under all leases was approximately $5,309,000, $5,141,000
and $5,145,000 for 1996, 1995 and 1994, respectively.
The Company makes commitments in a broad variety of areas, including
capital expenditures, contracts for services, sponsorship of broadcast
media and supply of finished products and components, all of which are in
the ordinary course of business.
7 Income Taxes
Income tax expense (benefit) for the respective years attributable to
income (loss) from continuing operations consists of the following:
[thousands] 1996 1995 1994
Current:
Federal $ 518 $ 309 $ (2,045)
State 346 (100) 439
Foreign 6,239 6,489 5,382
Deferred (6,909) 205 562
------ ------- -------
$ 194 $ 6,903 $ 4,338
====== ======= =======
The significant components of deferred tax expense (benefit) attributable
to income (loss) from continuing operations are as follows:
[thousands] 1996 1995 1994
Deferred tax expense
(benefit) (exclusive
of effects of
other components
listed below) $(7,304) $ 325 $ 998
Adjustments to deferred
tax assets and
liabilities for
enacted changes in
tax laws or rates - 10 (18)
Increase (decrease) in
beginning of the
year balance of the
valuation allowance
for deferred tax assets 395 (130) (418)
------ ------- -------
$(6,909) $ 205 $ 562
------ ------- -------
[Page 28]
In assessing the realizability of deferred tax assets, the Company
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the years in which those temporary differences become
deductible. The Company considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies
in making this assessment.
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at the end of
the respective years are presented below:
[thousands] 1996 1995 1994
Deferred tax assets:
Inventories $ 6,126 $ 1,867 $ 2,836
Compensation 2,240 1,782 1,816
Restructuring - - 377
Foreign income taxes 595 988 1,489
Foreign tax credit
carryforwards 2,681 1,129 1,331
Net operating loss
carryforwards 2,996 407 360
Other 5,250 4,607 2,870
Total gross deferred
tax assets 19,888 10,780 11,079
Less valuation allowance 2,941 1,107 1,591
------- ------- -------
16,947 9,673 9,488
------- ------- -------
Deferred tax liabilities:
Foreign statutory
reserves 1,371 1,204 891
Acquisition accounting 836 638 561
------- ------- -------
Total deferred
tax liabilities 2,207 1,842 1,452
------- ------- -------
Net deferred tax asset $14,740 $ 7,831 $ 8,036
======= ======= =======
Following is the income (loss) from continuing operations before income
taxes for domestic and foreign operations:
[thousands] 1996 1995 1994
United States $ (25,276) $ 1,164 $ 350
Foreign 14,115 15,828 12,134
-------- ------- -------
$ (11,161) $ 16,992 $ 12,484
======== ======= =======
The significant differences between the statutory federal tax rates and
the effective income tax rates are as follows:
1996 1995 1994
Statutory U.S. federal
income tax rate (34.0)% 34.0% 34.0%
State income taxes,
net of federal income
tax benefit (3.4) (0.9) 1.9
Foreign rate differential 22.8 7.9 5.2
Basis difference on
divestiture of business 7.5 - -
Change in beginning
of year valuation
allowance for
foreign tax credits 3.9 - -
Foreign operating
losses (benefit) 1.2 0.9 (2.7)
Tax credits - (1.6) (0.7)
Other 3.7 0.3 (3.0)
---- ---- ----
1.7% 40.6% 34.7%
---- ---- ----
At September 27, 1996, the Company has $2,681,000 of foreign tax credit
carryforwards related to continuing operations available to be offset
against future U.S. tax liability. The credits begin expiring in 1999, if
not utilized.
During 1996, 1995 and 1994, foreign net operating loss carryforwards
related to continuing operations were utilized, resulting in a reduction
in income tax expense of $34,000, $130,000 and $428,000, respectively. At
September 27, 1996, the Company has a U.S. federal operating loss
carryforward of $6,925,000. In addition, certain of the Company's foreign
subsidiaries have net operating loss carryforwards totaling $790,000.
These amounts are available to offset future taxable income over the next
8 to 15 years and are anticipated to be utilized during this period.
Taxes paid related to continuing operations were $6,816,000, $7,318,000
and $5,896,000 for 1996, 1995 and 1994, respectively.
8 Employee Benefits
Net periodic pension cost for noncontributory pension plans related to
continuing operations includes the following components:
[thousands] 1996 1995 1994
Service cost $ 282 $ 254 $ 265
Interest on projected
benefit obligation 599 582 568
Return on plan assets (436) (457) (411)
Net amortization
and deferral (72) (19) 3
Effect of plan curtailment - - 177
------- ------- ------
$ 373 $ 360 $ 602
[Page 29]
The funded status of the plans related to continuing operations is as
follows at the end of the respective years:
[thousands] 1996 1995
Actuarial present value of
benefit obligations:
Vested benefits $ 7,031 $ 6,030
Non-vested benefits 187 174
Accumulated benefit
obligation 7,218 6,204
Effect of projected
compensation levels 1,779 1,681
Projected benefit obligation 8,997 7,885
Plan assets at fair value 6,235 5,697
Projected benefit
obligation In excess of
plan assets (2,762) (2,188)
Unrecognized net loss 1,756 1,209
Unrecognized prior service
cost 252 278
Unrecognized net asset (584) (661)
Pension liability recognized
in the consolidated balance
sheets $(1,338) $ (1,362)
Plan assets are invested primarily in stock and bond mutual funds and
insurance contracts.
Actuarial assumptions used to determine the projected benefit obligation
and the expected net periodic pension cost are as follows:
1996 1995 1994
Discount rate 8% 8% 8%
Rate of increase in
compensation levels 5% 5% 5%
Expected long-term rate
of return on plan assets 8% 8% 8%
A majority of the Company's full-time employees are covered by profit
sharing programs. Participating entities determine a profit sharing
distribution under various performance and service based formulas.
9 Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock in
various classes and series, of which there are none currently issued or
outstanding.
10 Common Stock
Common stock at the end of the respective years consists of the following:
1996 1995
Class A, $.05 par value:
Authorized 20,000,000 20,000,000
Outstanding 6,901,801 6,886,883
Class B, $.05 par value:
Authorized 3,000,000 3,000,000
Outstanding 1,228,137 1,228,613
Holders of Class A common stock are entitled to elect 25% of the members
of the Board of Directors and holders of Class B common stock are entitled
to elect the remaining directors. With respect to matters other than the
election of directors or any matters for which class voting is required by
law, holders of Class A common stock are entitled to one vote per share
while holders of Class B common stock are entitled to ten votes per share.
If any dividends (other than dividends paid in shares of the Company) are
paid by the Company on its common stock, a dividend would be paid on each
share of Class A common stock equal to 110% of the amount paid on each
share of Class B common stock. Each share of Class B common stock is
convertible at any time into one share of Class A common stock. During
1996, 1995 and 1994, respectively, 476, 1,986 and 284 shares of Class B
common stock were converted into Class A common stock.
11 Stock Ownership Plans
The Company's current stock ownership plans provide for issuance of
options to acquire shares of Class A common stock by key executives and
non-employee directors. Current plans also allow for issuance of
restricted stock or stock appreciation rights in lieu of options. All
options have been granted at a price not less than fair market value at
the date of grant and become exercisable over periods of one to four years
from the date of grant, unless accelerated. Stock options generally have a
term of 10 years. A summary of stock option activity related to the
Company's plans is as follows:
Shares Exercise Price
Outstanding at October 1, 1993 594,830 $ 3.50 - 23.25
Granted 122,000 23.00 - 24.38
Exercised (88,663) 3.50 - 23.25
Cancelled (40,558) 17.13 - 22.00
Outstanding at September 30, 1994 587,609 3.50 - 24.38
Granted 119,000 18.63 - 21.75
Exercised (70,138) 3.50 - 23.75
Cancelled (37,525) 17.13 - 23.75
Outstanding at September 29, 1995 598,946 4.44 - 24.38
Granted 162,000 22.06 - 25.31
Exercised (12,567) 20.25 - 23.50
Cancelled (182,158) 17.13 - 23.25
Outstanding at September 27, 1996 566,221 $ 4.44 - 25.31
Exercisable at September 27, 1996 356,756 $ 4.44 - 24.38
[Page 30]
In October 1996, options to acquire 75,000 shares of Class A common stock
at an exercise price of $13.125 per share were granted. At September 27,
1996, September 29, 1995 and September 30, 1994, 289,833, 286,833, and
276,333 shares, respectively, of restricted Class A common stock were
issued under the Company's stock ownership plans. The fair value of the
shares awarded in excess of the amount paid for such shares is recognized
as contingent compensation and is being amortized over three years from
the dates of award, unless accelerated, the period after which all
restrictions will have lapsed. At September 27, 1996, 457,500 shares are
available for future issuance under all Company stock ownership plans.
The Company's employee stock purchase plan provides for the issuance of up
to 150,000 shares of Class A common stock at a purchase price of not less
than 85% of the fair market value at the date of grant. During 1996, 1995
and 1994, 17,375, 6,701 and 9,432 shares, respectively, were issued under
this plan.
12 Related Party Transactions
The Company and S.C. Johnson & Son, Inc. are controlled by the Johnson
Family. Various transactions are conducted between the Company and
organizations controlled by the Johnson Family. These include consulting
services, office rental, certain administrative activities and, in 1994,
the purchase of land for the Company's headquarters facility.
Total costs of these transactions are $440,000, $523,000 and $1,548,000
for 1996, 1995 and 1994, respectively, of which $106,000 and $125,000 are
outstanding at September 27, 1996 and September 29, 1995, respectively.
13 Geographic Segments of Business
The Company conducts its worldwide operations through separate geographic
area organizations which represent major markets or combinations of
markets. The operations are conducted in the United States and various
foreign countries, primarily in Europe, Canada and the Pacific Basin.
Net sales and operating profit by geographic area include both sales to
customers, as reported in the Company's consolidated statements of
operations, and inter-area 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 geographic area at the end of the years presented.
A summary of the Company's operations by geographic area is presented
below:
[thousands] 1996 1995 1994
Net sales:
United States:
Unaffiliated customers $ 184,372 $ 192,426 $ 157,191
Inter-area transfers 6,718 5,749 4,966
Europe:
Unaffiliated customers 134,048 126,103 100,297
Inter-area transfers 3,107 3,365 3,622
Other 25,976 28,674 26,926
Eliminations (9,848) (9,127) (8,659)
------- ------- -------
$ 344,373 $ 347,190 $ 284,343
------- ------- -------
Operating profit (loss):
United States $ (17,347) $ 6,004 $ 3,807
Europe 13,013 14,409 11,643
Other 2,858 3,331 3,488
------- ------- -------
$ (1,476) $ 23,744 $ 18,938
------- ------- -------
Identifiable assets:
United States $ 150,959 $ 150,691
Europe 109,026 106,426
Other 20,783 21,236
------- -------
$ 280,768 $ 278,353
======= =======
Export sales in each geographic area total less than 10% of sales to
unaffiliated customers. Sales to a single customer and its affiliated
entities totaled $34,902,000 in 1995. No customer accounted for 10% or
more of sales in 1996 or 1994.
14 Earnings Per Share
Earnings (loss) per share of common stock are computed on the basis of a
weighted average number of common and common equivalent shares
outstanding. Primary and fully diluted earnings per share are the same.
The per share effect of discontinued operations is calculated by dividing
the applicable income or loss from discontinued operations by the weighted
average common and common equivalent shares outstanding.
The weighted average common and common equivalent shares used in the
computation of earnings per common share are 8,113,776, 8,080,684 and
8,067,629 in 1996, 1995 and 1994, respectively. Common stock equivalents
are not significant in any year presented.
15 Litigation
The Company is subject to various legal actions and proceedings in the
normal course of business, including those related to environmental
matters. Although litigation is subject to many uncertainties and the
ultimate exposure with respect to these matters cannot be ascertained,
management does not believe the final outcome will have a significant
effect on the consolidated financial statements.
[Page 31]
Auditors' and Management's Reports
JOHNSON WORLDWIDE ASSOCIATES, INC. and Subsidiaries
Independent Auditors' Report
Shareholders and Board of Directors
Johnson Worldwide Associates, Inc.:
We have audited the consolidated balance sheets of Johnson Worldwide
Associates, Inc. and subsidiaries as of September 27, 1996 and September
29, 1995 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the years in the
three-year period ended September 27, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Johnson Worldwide Associates, Inc. and subsidiaries as of September 27,
1996 and September 29, 1995, and the results of their operations and their
cash flows for each of the years in the three-year period ended September
27, 1996, in conformity with generally accepted accounting principles.
As discussed in note 2 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 121 Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of during the year ended September 27, 1996.
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
November 8, 1996
Report of Management
The management of Johnson Worldwide Associates, Inc. is responsible for
the preparation and integrity of all financial statements and other
information contained in this Annual Report. We rely on a system of
internal financial controls to meet the responsibility of providing
accurate financial statements. The system provides reasonable assurances
that assets are safeguarded, that transactions are executed in accordance
with management's authorization and that the financial statements are
prepared on a worldwide basis in accordance with generally accepted
accounting principles.
The financial statements for each of the years covered in this Annual
Report have been audited by independent auditors, who have provided an
independent assessment as to the fairness of the financial statements,
after obtaining an understanding of the Company's systems and procedures
and performing such other tests as deemed necessary.
The Audit Committee of the Board of Directors, which is composed solely of
directors who are not officers of the Company, meets with management and
the independent auditors to review the results of their work and to
satisfy itself that their respective responsibilities are being properly
discharged. The independent auditors have full and free access to the
Audit Committee and have regular discussions with the Committee regarding
appropriate auditing and financial reporting matters.
Ronald C. Whitaker
President and Chief Executive Officer
Carl G. Schmidt
Senior Vice President and Chief Financial Officer
[Page 32]
Five Year Financial Summary
JOHNSON WORLDWIDE ASSOCIATES, INC. and Subsidiaries
Year Ended
September 27 September 29 September 30 October 1 October 2
[thousands, except per share data] 1996 1995 1994 1993 1992
Income Statement Data(1)
Net sales $344,373 $347,190 $284,343 $280,292 $275,845
Gross profit 119,724 138,155 110,474 114,780 112,185
Operating expenses(2) 121,200 114,411 91,536 103,587 92,621
Operating profit (loss) (1,476) 23,744 18,938 11,193 19,564
Interest expense 10,181 7,613 6,845 8,309 10,180
Other (income) expense, net (496) (861) (391) 189 (491)
Income (loss) from continuing
operations before income taxes (11,161) 16,992 12,484 2,695 9,875
Income tax expense 194 6,903 4,338 2,055 4,509
Income (loss) from continuing
operations (11,355) 10,089 8,146 640 5,366
Income from discontinued operations - - - 1,169 2,304
Gain (loss) on disposal of
discontinued operations - - 4,052 (3,000) -
Net income (loss) $(11,355) $10,089 $12,198 $(1,191) $7,670
Earnings (loss) per common share:
Continuing operations $(1.40) $1.25 $1.01 $.08 $.67
Discontinued operations - - .50 (.23) .29
Net income (loss) $(1.40) $1.25 $1.51 $(.15) $.96
Weighted average common and
common equivalent shares
outstanding 8,114 8,081 8,068 7,974 7,953
Balance Sheet Data(1)
Total assets $280,768 $278,353 $219,681 $239,121 $236,281
Long-term debt, less current
maturities 61,501 68,948 31,190 44,543 43,327
Shareholders' equity 126,424 141,262 128,197 110,818 118,669
(1) All periods have been reclassified to reflect the discontinuation of
the Company's Marking Systems businesses.
(2) Includes nonrecurring charges of $6,768,000, $13,000,000 and
$4,500,000 in 1996, 1993 and 1992, respectively.
Quarterly Financial Summary
JOHNSON WORLDWIDE ASSOCIATES, INC. and Subsidiaries
First Second Third Fourth
[thousands, except per share data] 1996 1995 1996 1995 1996 1995 1996 1995
Net sales $56,405 $53,462 $111,229 $105,797 $110,705 $117,844 $66,034 $70,087
Gross profit 21,321 20,184 44,332 42,480 42,423 48,745 11,648 26,746
Net income (loss) (2,793) (1,941) 4,090 6,453 4,202 8,239 (16,854) (2,662)
Earnings (loss) per
common share $ (.34) $ (.24) $ .50 $ .80 $ .52 $ 1.02 $ (2.08) $ (.33)
Stock prices:
High $ 24.25 $ 25.75 $ 23.00 $ 23.75 $ 19.50 $ 23.75 $ 15.25 $ 24.75
Low 21.75 18.25 17.50 19.00 13.50 20.50 13.75 22.50
