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 January 2, 1998
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 January 31, 1998, 6,886,466 shares of Class A and 1,227,915 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 Ended January 2, 1998
and December 27, 1996 1
Consolidated Balance Sheets -
January 2, 1998, October 3, 1997
and December 27, 1996 2
Consolidated Statements of Cash Flows -
Three Months Ended January 2, 1998 and
December 27, 1996 4
Notes to Consolidated Financial
Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
January 2 December 27
(thousands, except per share data) 1998 1996
Net sales $51,841 $51,817
Cost of sales 32,647 33,688
------- -------
Gross profit 19,194 18,129
------- -------
Operating expenses:
Marketing and selling 13,493 14,280
Financial and administrative
management 5,837 5,653
Research and development 1,543 1,277
Profit sharing 15 103
Amortization of acquisition costs 912 603
Nonrecurring charges 66 --
------- -------
Total operating expenses 21,866 21,916
------- -------
Operating loss (2,672) (3,787)
Interest income (77) (121)
Interest expense 2,194 2,083
Other (income) expenses, net (71) 65
------- -------
Loss before income taxes (4,718) (5,814)
Income tax benefit (1,934) (1,948)
------- -------
Net loss $(2,784) $(3,866)
======= =======
Basic loss per common share $ (0.34) $ (0.48)
======= =======
Diluted loss per common share $ (0.34) $ (0.48)
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
January 2 October 3 December 27
(thousands, except share data) 1998 1997 1996
Assets
Current assets:
Cash and temporary cash
investments $ 4,089 $ 7,130 $ 9,278
Accounts receivable, less
allowance for doubtful
accounts of $2,733, $2,693,
and $2,284, respectively 49,587 51,168 58,057
Inventories 90,191 78,694 110,350
Deferred income taxes 5,140 7,976 9,763
Other current assets 7,415 7,781 8,119
------- ------- -------
Total current assets 156,422 152,749 195,567
Property, plant and equipment 32,144 31,360 30,356
Deferred income taxes 11,126 10,221 5,651
Intangible assets 81,463 82,127 53,436
Other assets 544 562 644
------- ------- -------
Total assets $ 281,699 $277,019 $ 285,654
======= ======= ======+
continued
JOHNSON WORLDWIDE ASSOCIATES, INC.
January 2 October 3 December 27
1998 1997 1996
Liabilities and Shareholders'
Equity
Current liabilities:
Short-term debt and current
maturities of long-term debt $ 45,224 $ 26,082 $ 63,323
Accounts payable 13,844 10,672 10,945
Accrued liabilities 17,614 29,355 24,802
------- ------- -------
Total current liabilities 76,682 66,109 99,070
Long-term debt, less current
maturities 88,181 88,753 61,472
Other liabilities 4,560 4,426 4,414
------- ------- -------
Total liabilities 169,423 159,288 164,956
------- ------- -------
Shareholders' equity:
Preferred stock: none issued -- -- --
Common stock:
Class A shares issued:
January 2, 1998, 6,905,523;
October 3, 1997, 6,905,523;
December 27, 1996,
6,901,885 345 345 345
Class B shares issued
(convertible into Class A):
January 2, 1998, ,
1,227,915;
October 3, 1997, 1,227,915;
December 27, 1996, 1,228,053 61 61 61
Capital in excess of par value 44,186 44,186 44,087
Retained earnings 77,096 79,882 74,065
Contingent compensation (58) (85) (94)
Cumulative translation
adjustment (9,061) (6,356) 2,500
Treasury stock:
January 2, 1998, 22,919 Class A
shares;
October 3, 1997, 23,600 Class A
shares;
December 27, 1996, 23,400 Class
A shares (293) (302) (266)
------- ------- -------
Total shareholders' equity 112,276 117,731 120,698
------- ------- -------
Total liabilities and
shareholders' equity $281,699 $ 277,019 $ 285,654
======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
January 2 December 27
(thousands) 1998 1996
Cash used for Operations
Net loss $ (2,784) $ (3,866)
Noncash items:
Depreciation and amortization 3,216 2,810
Deferred income taxes 2,148 (642)
Change in assets and liabilities, net
of effect of businesses acquired or
sold:
Accounts receivable, net 786 (2,770)
Inventories (11,263) (9,256)
Accounts payable and accrued
liabilities (8,279) (8,987)
Other, net (483) 1,876
------- --------
(16,659) (20,835)
------- --------
Cash used for Investing
Activities
Net assets of businesses acquired, net
of cash (3,034) --
Net additions to property, plant and
equipment (2,072) (2,521)
------- --------
(5,106) (2,521)
------- --------
Cash Provided by Financing Activities
Issuance of senior notes 25,000 --
Net change in short-term debt (6,081) 20,337
Common stock transactions 8 (272)
------- --------
18,927 20,065
Effect of foreign currency fluctuations
on cash (203) (128)
------- --------
Decrease in cash and temporary cash
investments (3,041) (3,419)
Cash and Temporary Cash Investments
Beginning of period 7,130 12,697
------- --------
End of period $ 4,089 $ 9,278
======= ========
The accompanying notes are an integral part of the consolidated financial
statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
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. and subsidiaries (the Company) as of January 2,
1998 and the results of operations and cash flows for the three
months ended January 2, 1998. These consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
1997 Annual Report.
Because of seasonal and other factors, the results of operations for
the three months ended January 2, 1998 are not necessarily
indicative of the results to be expected for the full year.
All amounts, other than share and per share amounts, are stated in
thousands.
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
Inventories at the end of the respective periods consist of the
following:
January 2 October 3 December 27
1998 1997 1996
Raw materials $ 34,643 $ 27,032 $ 41,120
Work in process 7,012 5,036 6,217
Finished goods 58,073 56,846 76,936
------- ------- -------
99,728 88,914 124,273
Less reserves 9,537 10,220 13,923
------- ------- -------
$ 90,191 $ 78,694 $110,350
======= ======= =======
4 Indebtedness
In October 1997, the Company issued unsecured senior notes totaling
$25,000 with an interest rate of 7.15%. The funding commitment for
the senior notes was received in July 1997. The senior notes have
annual principal payments of $2,000 to $7,000 beginning October 2001
with a final payment due October 2007. Simultaneous with the
commitment of the senior notes, the Company executed a foreign
currency swap, denominating in Swiss francs all principal and
interest payments required under the senior notes. The fixed,
effective interest rate to be paid on the senior notes as a result
of the currency swap is 4.32%. Proceeds from issuance of the senior
notes were used to reduce outstanding indebtedness under the
Company's primary revolving credit facility. Outstanding short-term
debt totaling $25,000 at October 3, 1997 was classified as long-term
in anticipation of refinancing with the proceeds of the senior
notes.
5 Earnings Per Share
In 1998, the Company adopted FASB Statement 128, Earnings Per Share,
which replaced the previously reported earnings per share with basic
and diluted earnings per share. Basic earnings per share excludes
any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is similar to the previously
reported fully diluted earnings per share. All per share amounts for
all periods have been restated to conform to the requirements of
Statement 128.
The following table sets forth the computation of basic and diluted
earnings per share:
Three Months Ended
January 2 December 27
1998 1996
Net loss for basic and diluted
earnings per share $ (2,784) $ (3,866)
========= =========
Weighted average shares outstanding 8,109,965 8,120,470
Less nonvested restricted stock (5,149) (5,443)
--------- ---------
Basic and diluted shares 8,104,816 8,115,027
========= =========
Basic loss per common share $ (0.34) $ (0.48)
======= ======
Diluted loss per common share $ (0.34) $ (0.48)
====== ======
Options to purchase 627,457 shares of common stock with a weighted
average exercise price of $17.46 per share were outstanding at January
2, 1998. Options to purchase 777,754 shares of common stock with a
weighted average exercise price of $17.92 per share were outstanding at
December 27, 1996. None of the options were included in the
computation of diluted earnings per share because the effect would be
antidilutive.
6 Stock Ownership Plans
A summary of stock option activity related to the Company's plan is as
follows:
Weighted Average
Shares Exercise Price
Outstanding at October 3, 1997 686,521 $18.32
Granted 217,000 16.84
Exercised (681) 17.00
Cancelled (275,383) 19.12
-------- ------
Outstanding at January 2, 1998 627,457 $17.46
======== ======
7 Acquisitions
In January 1998, the Company completed the acquisition of the common
stock of Leisure Life Limited, a privately held manufacturer and
marketer of small recreational boats. The purchase price, including
direct expenses, for the acquisition was approximately $10,200, of
which approximately $7,000 was recorded as intangible assets and is
being amortized over 25 years.
In October 1997, the Company completed the acquisition of certain
assets of Soniform, Inc., a manufacturer of diving buoyancy
compensators, and the common stock of Plastiques L.P.A. Limitee, a
privately held Canadian manufacturer of kayaks. The purchase prices
for the acquisitions totaled approximately $3,256.
8 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 ended January 2, 1998 and December 27, 1996. 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 1997 Annual Report.
Foreign Operations
The Company has significant foreign operations, for which the functional
currencies are denominated primarily in Swiss and 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 foreign currency swaps, forward contracts and options to hedge
known commitments, primarily for purchases of inventory and other assets
denominated in foreign currencies.
Results of Operations
Net sales for the three months ended January 2, 1998 totaled $51.8
million, the same as the three months ended December 27, 1996. Sales of
businesses acquired in 1998 and 1997 and strong European outdoor equipment
and diving business sales offset the absence of the Plastimo business,
which was sold in January 1997, and weakness in Japan. Net sales of the
Company's North American units for the three months ended January 2, 1998
decreased $1.7 million, or 6%, from the corresponding period in the prior
year. Net sales of the Company's European units increased $2.4 million,
or 10%, compared to the corresponding period of the prior year. All
European businesses contributed to the increase.
Relative to the U.S. dollar, the average values of most currencies of the
countries in which the Company has operations were lower for the three
months ended January 2, 1998 as compared to the corresponding period of
the prior year. Excluding the impact of foreign currencies, net sales
increased 5% for the three months ended January 2, 1998.
Gross profit as a percentage of sales increased to 37.0% for the three
months ended January 2, 1998 compared to 35.0% in the corresponding period
in the prior year. Acquired businesses, which have higher gross profit
margins than historical Company levels, and the European fishing and
outdoor equipment businesses contributed to the increase.
The Company incurred an operating loss of $2.7 million for the three
months ended January 2, 1998, compared to an operating loss of $3.8
million for the corresponding period of the prior year. The increase in
gross profit led to the reduced operating loss as operating expenses were
only nominally lower than the prior year.
Interest expense totaled $2.2 million for the three months ended January
2, 1998 compared to $2.1 million for the corresponding period of the prior
year. Increased debt levels due to acquisitions consummated in 1998 and
1997, offset by improved management of working capital and a favorable
interest rate environment, accounted for the change. The Company's tax
position improved due to a rate reduction in Italy and an increase in
profits in Switzerland.
The Company incurred a net loss of $2.8 million in the three months ended
January 2, 1998 compared to a loss of $3.9 million in the corresponding
period of the prior year. On a per share basis, the loss amounts to $0.34
compared to $0.48 in the prior year.
Financial Condition
The following discusses changes in the Company's liquidity and capital
resources.
Operations
Cash flows used for operations totaled $16.7 million for the three months
ended January 2, 1998 and $20.8 million for the corresponding period of
the prior year. Growth in inventories of $11.3 million for the three
months ended January 2, 1998 and $9.3 million for the corresponding period
of the prior year account for a significant amount of the net usage of
funds. The build up of inventory in anticipation of the selling season
contributed to the increase in the current year. Inventory turns increased
for the period ended January 2, 1998 compared to the corresponding period
of the prior year.
Accounts receivable decreased $0.8 million for the three months ended
January 2, 1998 and increased $2.8 million for the corresponding period of
the prior year. Cash discounts related to early season buying programs
account for much of the decrease in accounts receivable in the current
year.
Accounts payable and accrued liabilities decreased $8.3 million for the
three months ended January 2, 1998 and $9.0 million for the corresponding
period of the prior year, increasing the net outflow of cash from
operations.
Depreciation and amortization charges were $3.2 million for the three
months ended January 2, 1998 and $2.8 million for the corresponding period
of the prior year, mitigating the net outflow of operating funds. The
increase was due primarily to increased amortization of intangible assets
from businesses acquired in 1998 and 1997.
Investing Activities
Expenditures for property, plant and equipment were $2.1 million for the
three months ended January 2, 1998 and $2.5 million for the corresponding
period of the prior year. The Company's recurring investments are made
primarily for tooling for new products and enhancements. In 1998,
capitalized expenditures are anticipated to total approximately $9
million. These expenditures are expected to be funded by working capital
or existing credit facilities.
The Company completed the acquisition of two businesses in the three month
period ended January 2, 1998, resulting in a use of cash of $3.0 million.
Financing Activities
Cash flows from financing activities totaled $18.9 million for the three
months ended January 2, 1998 and $20.1 million for the corresponding
period of the prior year. In October 1997, the Company consummated a
private placement of long-term debt totaling $25 million. Payments on
long-term debt required to be made in 1998 total $8 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 1998 operating costs and, accordingly, the prices of
its products. Fluctuations in foreign currencies may also impact the cost
of the Company's products. The Company is involved in continuing programs
to mitigate the impact of cost increases through changes in product
design, identification of sourcing and manufacturing efficiencies and
foreign currency hedges.
Forward-Looking Statements
Certain matters discussed in this Form 10-Q are "forward-looking
statements," intended to qualify for the safe harbors from liability
established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such
because the context of the statement includes phrases such as the Company
"expects", "believes" or other words of similar import. Similarly,
statements that describe the Company's future plans, objectives or goals
are also forward-looking statements. Such forward-looking statements are
subject to certain risks and uncertainties which could cause actual
results or outcomes to differ materially from those currently anticipated.
Factors that could affect actual results or outcomes include adverse
weather conditions, changes in consumer spending patterns, the success of
the Company's EVA and JWAction programs, actions of companies that compete
with JWA and the Company's success in managing inventory. Shareholders,
potential investors and other readers are urged to consider these factors
in evaluating the forward-looking statements and are cautioned not to
place undue reliance on such forward-looking statements. The forward-
looking statements included herein are only made as of the date of this
Form 10-Q and the Company undertakes no obligations to publicly update
such forward-looking statements to reflect subsequent events or
circumstances.
JOHNSON WORLDWIDE ASSOCIATES, INC.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this
Form 10-Q
Exhibit 27:Financial Data Schedule
(b) There were no reports on Form 8-K filed for the three
months ended January 2, 1998.
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: February 17, 1998
/s/ Carl G. Schmidt
Carl G. Schmidt
Senior Vice President and Chief Financial
Officer, Secretary and Treasurer
(Principal Financial and Accounting
Officer)
EXHIBIT INDEX
Page
Exhibit Description Number
27. Financial Data Schedule --
5
1,000
3-MOS
OCT-02-1998
OCT-04-1997
JAN-02-1998
4,089
0
52,320
(2,733)
90,191
156,422
84,449
(52,305)
281,699
76,682
88,181
0
0
406
111,870
281,699
51,841
51,841
32,647
32,647
21,456
262
2,194
(4,718)
(1,934)
(2,784)
0
0
0
(2,784)
(0.34)
(0.34)
