SEC Filing | Johnson Outdoors Inc.

================================================================================ 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 December 31, 1999 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 Identification No.) incorporation or organization) 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, 2000, 6,905,429 shares of Class A and 1,222,729 shares of Class B common stock of the Registrant were outstanding. ================================================================================

JOHNSON WORLDWIDE ASSOCIATES, IN. Index Page No. - --------------------------------------------------------------------- -------- PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Operations -Three Months Ended December 31, 1999 and January 1, 1999 1 Consolidated Balance Sheets - December 31, 1999, October 1, 1999 and January 1, 1999 2 Consolidated Statements of Cash Flows -Three Months Ended December 31, 1999 and January 1, 1999 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 11 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 12 Signatures

JOHNSON WORLDWIDE ASSOCIATES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - --------------------------------------------------------------------------------------------------------------------------------- Three Months Ended - --------------------------------------------------------------------------------------------------------------------------------- December 31 January 1 (thousands, except per share data) 1999 1999 - --------------------------------------------------------------------------------------------------------------------------------- Net sales $ 56,201 $ 48,144 Cost of sales 34,289 30,333 - --------------------------------------------------------------------------------------------------------------------------------- Gross profit 21,912 17,811 - --------------------------------------------------------------------------------------------------------------------------------- Operating expenses: Marketing and selling 13,134 12,101 Administrative management, finance and information systems 6,065 5,563 Research and development 1,651 1,583 Amortization of acquisition costs 761 708 Profit sharing 110 35 Strategic charges 52 942 - --------------------------------------------------------------------------------------------------------------------------------- Total operating expenses 21,773 20,932 - --------------------------------------------------------------------------------------------------------------------------------- Operating profit (loss) 139 (3,121) Interest income (105) (93) Interest expense 2,272 2,229 Other income, net (211) (6) - --------------------------------------------------------------------------------------------------------------------------------- Loss from continuing operations before income taxes (1,817) (5,251) Income tax benefit (782) (2,213) - --------------------------------------------------------------------------------------------------------------------------------- Loss from continuing operations (1,035) (3,038) Income (loss) from discontinued operations, net of income tax expense (benefit) of $(578) and $15, respectively (941) 19 Loss on disposal of discontinued operations, net of income tax benefit of $(2,801) (23,109) -- - --------------------------------------------------------------------------------------------------------------------------------- Net loss $ (25,085) $ (3,019) - --------------------------------------------------------------------------------------------------------------------------------- Basic loss per common share: Continuing operations $ (0.13) $ (0.37) Discontinued operations (2.96) -- - --------------------------------------------------------------------------------------------------------------------------------- Net loss $ (3.09) $ (0.37) - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Diluted loss per common share: Continuing operations $ (0.13) $ (0.37) Discontinued operations (2.96) -- - --------------------------------------------------------------------------------------------------------------------------------- Net loss $ (3.09) $ (0.37) - --------------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements. -1-

JOHNSON WORLDWIDE ASSOCIATES, INC. CONSOLIDATED BALANCE SHEETS (unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ December 31 October 1 January 1 (thousands, except share data) 1999 1999 1999 - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Current assets: Cash and temporary cash investments $ 8,936 $ 9,974 $ 10,955 Accounts receivable, less allowance for doubtful accounts of $3,340, $3,236 and $2,326, respectively 48,930 49,302 49,532 Inventories 72,604 59,981 66,375 Deferred income taxes 7,679 4,718 5,715 Other current assets 5,991 5,644 7,742 Net assets of discontinued operations 38,356 55,912 61,444 - ------------------------------------------------------------------------------------------------------------------------------------ Total current assets 182,496 185,531 201,763 Property, plant and equipment 36,227 35,322 32,171 Deferred income taxes 15,376 11,277 11,095 Intangible assets 61,712 65,599 62,422 Other assets 1,834 1,094 853 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets $ 297,645 $ 298,823 $ 308,304 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt and current maturities of long-term debt $ 88,210 $ 49,327 $ 75,902 Accounts payable 18,446 16,034 12,911 Accrued liabilities: Salaries and wages 5,017 6,912 4,278 Other 18,170 21,924 14,399 - ------------------------------------------------------------------------------------------------------------------------------------ Total current liabilities 129,843 94,197 107,490 Long-term debt, less current maturities 64,573 72,744 74,828 Other liabilities 4,796 4,704 4,575 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 199,212 171,645 186,893 - ------------------------------------------------------------------------------------------------------------------------------------ Shareholders' equity: Preferred stock: none issued -- -- -- Common stock: Class A shares issued: December 31, 1999, 6,910,709; October 1, 1999, 6,910,577; January 1, 1999, 6,910, 577 345 345 345 Class B shares issued (convertible into Class A): December 31, 1999, 1,222,729: October 1, 1999, 1,222,861; January 1, 1999, 1,222,861 61 61 61 Capital in excess of par value 44,205 44,205 44,205 Retained earnings 66,746 91,832 82,048 Contingent compensation (115) (134) (15) Other comprehensive income - cumulative foreign currency translation adjustment (12,727) (9,049) (4,618) Treasury stock, Class A shares, at cost: December 31, 1999, 5,280; October 1, 1999, 5,280; January 1, 1999, 39,532 (82) (82) (615) - ------------------------------------------------------------------------------------------------------------------------------------ Total shareholders' equity 98,433 127,178 121,411 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities and shareholders' equity $ 297,645 $ 298,823 $ 308,304 - ------------------------------------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of the consolidated financial statements. -2-

JOHNSON WORLDWIDE ASSOCIATES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Three Months Ended - ------------------------------------------------------------------------------------------------------------------------------------ December 31 January 1 (thousands) 1999 1999 - ------------------------------------------------------------------------------------------------------------------------------------ CASH USED FOR OPERATIONS Net loss $ (25,085) $ (3,019) Less income (loss) from discontinued operations (24,050) 19 - ------------------------------------------------------------------------------------------------------------------------------------ Loss from continuing operations (1,035) (3,038) Adjustments to reconcile net loss to net cash used for operating activities of continuing operations : Depreciation and amortization 3,073 2,775 Deferred income taxes (2,826) (537) Change in assets and liabilities, net of effect of businesses acquired or sold: Accounts receivable (499) (2,098) Inventories (14,131) (3,074) Accounts payable and accrued liabilities (2,761) (9,155) Other, net 728 (405) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash used for operating activities of continuing operations (17,451) (15,532) - ------------------------------------------------------------------------------------------------------------------------------------ CASH USED FOR INVESTING ACTIVITIES Net assets of businesses acquired, net of cash -- (4,233) Net additions to property, plant and equipment (3,449) (2,713) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities of continuing operations (3,449) (6,946) - ------------------------------------------------------------------------------------------------------------------------------------ CASH PROVIDED BY FINANCING ACTIVITIES Principal payments on senior notes and other long-term notes (5,500) -- Net change in short-term debt 36,823 26,876 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities of continuing operations 31,323 26,876 - ------------------------------------------------------------------------------------------------------------------------------------ Effect of foreign currency fluctuations on cash (485) 39 Net cash used for discontinued operations (10,976) (3,812) - ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in cash and temporary cash investments (1,038) 625 CASH AND TEMPORARY CASH INVESTMENTS Beginning of period 9,974 10,330 - ------------------------------------------------------------------------------------------------------------------------------------ End of period $ 8,936 $ 10,955 - ------------------------------------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of the consolidated financial statements. -3-

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 December 31, 1999 and the results of operations and cash flows for the three months ended December 31, 1999. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1999 Annual Report. Because of seasonal and other factors, the results of operations for the three months ended December 31, 1999 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. Certain amounts as previously reported have been reclassified to conform with the current period presentation. See Note 6. 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 related to continuing operations at the end of the respective periods consist of the following: -------------------------------------------------------------------------- December 31 October 1 January 1 1999 1999 1999 -------------------------------------------------------------------------- Raw materials $ 26,542 $ 22,702 $ 22,408 Work in process 3,127 3,176 3,169 Finished goods 47,652 39,014 45,679 -------------------------------------------------------------------------- 77,321 64,892 71,256 Less reserves 4,717 4,911 4,881 -------------------------------------------------------------------------- $ 72,604 $ 59,981 $ 66,375 -------------------------------------------------------------------------- -4-

4 Earnings Per Share The following table sets forth the computation of basic and diluted loss per common share from continuing operations: -------------------------------------------------------------------------------------------------------------- Three Months Ended -------------------------------------------------------------------------------------------------------------- December 31 January 1 1999 1999 -------------------------------------------------------------------------------------------------------------- Loss from continuing operations for basic and diluted earnings per share $ (1,035) $ (3,038) -------------------------------------------------------------------------------------------------------------- Weighted average common shares outstanding 8,128,158 8,093,906 Less nonvested restricted stock 20,500 4,158 -------------------------------------------------------------------------------------------------------------- Basic and diluted average common shares 8,107,658 8,089,748 -------------------------------------------------------------------------------------------------------------- Basic loss per common share from continuing operations $(0.13) $ (0.37) -------------------------------------------------------------------------------------------------------------- Diluted loss per common share from continuing operations $(0.13) $ (0.37) -------------------------------------------------------------------------------------------------------------- 5 Stock Ownership Plans A summary of stock option activity related to the Company's plans is as follows: --------------------------------------------------------------------------- Weighted Average Shares Exercise Price --------------------------------------------------------------------------- Outstanding at October 1, 1999 778,837 $14.02 Granted 165,500 7.63 Cancelled 23,032 18.11 --------------------------------------------------------------------------- Outstanding at December 31, 1999 921,305 $12.77 --------------------------------------------------------------------------- Options to purchase 733,005 shares of common stock with a weighted average exercise price of $15.72 per share were outstanding at January 1, 1999. 6 Sale of Fishing Business In January 2000, the Company entered into an agreement for the sale of its Fishing business. As a result, operations of the Fishing group have been classified as discontinued for all periods presented herein. The sale price totaled $34,500, subject to an adjustment for the level of net assets at closing. The Company recorded a loss of $23,109 related to the sale of the business, taking into account operating results expected to the date of disposal. Since the plan to divest the business was approved prior to the formal issuance of the Company's first quarter financial statements, the loss is required to be recognized in first quarter results. The transaction is expected to close in February 2000. Net sales of the Fishing group total $10,994 and $11,856 for the three months ended December 31, 1999 and January 1, 1999, respectively. Interest expense of $36 and $54, respectively, that is directly attributable to the Fishing group is allocated to discontinued operations. -5-

7 Comprehensive Income Comprehensive income includes net income and changes in shareholders' equity from non-owner sources. For the Company, the elements of comprehensive income excluded from net income are represented primarily by the cumulative foreign currency translation adjustment. Comprehensive loss for the respective periods consists of the following: --------------------------------------------------------------------------- Three Months Ended --------------------------------------------------------------------------- December 31 January 1 1999 1999 --------------------------------------------------------------------------- Net loss $ (25,085) $ (3,019) Translation adjustment (3,678) 33 --------------------------------------------------------------------------- Comprehensive loss $ (28,763) $ (2,986) --------------------------------------------------------------------------- 8 Segments of Business The Company conducts its worldwide operations through separate global business units, each of which represent major product lines. Operations are conducted in the United States and various foreign countries, primarily in Europe, Canada and the Pacific Basin. Net sales and operating profit include both sales to customers, as reported in the Company's consolidated statements of operations, and interunit 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 business unit at the end of the periods presented. -6-

A summary of the Company's continuing operations by business unit is presented below: --------------------------------------------------------------------------- Three Months Ended --------------------------------------------------------------------------- December 31 January 1 1999 1999 --------------------------------------------------------------------------- Net sales: Outdoor Equipment: Unaffiliated customers $ 18,007 $ 15,000 Interunit transfers 3 10 Diving: Unaffiliated customers 16,033 17,645 Interunit transfers -- 3 Motors: Unaffiliated customers 11,361 9,025 Interunit transfers 370 339 Watercraft: Unaffiliated customers 10,076 5,782 Interunit transfers 16 12 Other 724 692 Eliminations (389) (364) --------------------------------------------------------------------------- $ 56,201 $ 48,144 --------------------------------------------------------------------------- Operating profit (loss): Outdoor Equipment: $ 660 $ (946) Diving 1,639 (568) Motors (801) (942) Watercraft 273 150 Other (1,632) (815) --------------------------------------------------------------------------- $ 139 $ (3,121) --------------------------------------------------------------------------- Identifiable assets: Outdoor Equipment: $ 45,943 $ 44,555 Diving 89,018 105,330 Motors 32,092 27,356 Watercraft 63,128 40,114 Discontinued operations, net 38,356 61,444 Other 29,108 29,505 --------------------------------------------------------------------------- $ 297,645 $ 308,304 --------------------------------------------------------------------------- -7-

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 December 31, 1999 and January 1, 1999. 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 1999 Annual Report. 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 meaning. 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 changes in consumer spending patterns, actions of companies that compete with the Company, the Company's success in managing inventory, movements in foreign currencies or interest rates, and adverse weather conditions. 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. Results of Continuing Operations Net sales for the three months ended December 31, 1999 totaled $56.2 million, an increase of 16.7%, or $8.1 million, over the three months ended January 1, 1999. Sales of all businesses except the Diving business exhibited strong sales growth. Acquisitions consumated after December 1998 accounted for $2.6 million of the growth in sales in the current year. The Diving business, which did not experience an increase in sales, was adversely impacted primarily by weakness in foreign currency movements. 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 December 31, 1999 as compared to the corresponding period of the prior year. Excluding the impact of foreign currencies, net sales increased 21.7 % for the three months ended December 31, 1999. Gross profit as a percentage of sales increased to 39.0% for the three months ended December 31, 1999 compared to 37.0 % in the corresponding period in the prior year. Strong sales growth, an improved mix of products sold and improved factory utilization all contributed to the increase. The Company recorded an operating profit of $0.1 million for the three months ended December 31, 1999, compared to an operating loss of $3.1 million for the corresponding period of the prior year. Operating expense growth of 8.7% was substantially less than the growth rate of sales, which contributed to the improved operating results. Decreased strategic charges related to integration of acquired businesses in the prior year also contributed to the improvement. Interest expense totaled $2.3 million for the three months ended December 31, 1999 compared to $2.2 million for the corresponding period of the prior year. Increased debt levels due to acquisitions -8-

JOHNSON WORLDWIDE ASSOCIATES, INC. consummated in 1999 and an unfavorable interest rate environment were substantially offset by improved management of working capital. The Company incurred a loss from continuing operations of $1.0 million in the three months ended December 31, 1999 compared to a loss of $3.0 million in the corresponding period of the prior year. On a per share basis, the loss totaled $0.13 compared to $0.37 in the prior year. Discontinued Operations In January 2000, the Company entered into an agreement for the sale of its Fishing business. As a result, operations of the Fishing group have been classified as discontinued for all periods presented herein. The sale price totaled $34.5 million, subject to an adjustment for the level of net assets at closing. The Company recorded a loss of $23.1 million related to the sale of the business, taking into account operating results expected to the date of disposal. Since the plan to divest the business was approved prior to the formal issuance of the Company's first quarter financial statements, the loss is required to be recognized in first quarter results. The transaction is expected to close in February 2000. Net sales of the Fishing group total $11.0 million and $11.9 million for the three months ended December 31, 1999 and January 1, 1999, respectively. Interest expense of $36 thousand and $54 thousand, respectively, that is directly attributable to the Fishing group is allocated to discontinued operations. Financial Condition The following discusses changes in the Company's liquidity and capital resources related to continuing operations. Operations Cash flows used for operations totaled $17.5 million for the three months ended December 31, 1999 and $15.5 million for the corresponding period of the prior year. Growth in inventories of $14.1 million for the three months ended December 31, 1999 and $3.1 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 both years. Inventory turns increased for the period ended December 31, 1999 compared to the corresponding period of the prior year. Accounts receivable increased $0.5 million for the three months ended December 31, 1999 and $2.1 million for the corresponding period of the prior year. Accounts payable and accrued liabilities decreased $2.8 million for the three months ended December 31, 1999 and $9.2 million for the corresponding period of the prior year, increasing the net outflow of cash from operations. These outflows include seasonal payments for interest expense, incentive compensation and retirement programs. Depreciation and amortization charges were $3.1 million for the three months ended December 31, 1999 and $2.8 million for the corresponding period of the prior year. The increase was due primarily to increased depreciation and amortization of assets from businesses acquired in 1999. Deferred income taxes increased $2.8 million for the three months ended December 31, 1999 due primarily to losses incurred from the sale of the Fishing business. -9-

JOHNSON WORLDWIDE ASSOCIATES, INC. Investing Activities Expenditures for property, plant and equipment were $3.4 million for the three months ended December 31, 1999 and $2.7 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 2000, capitalized expenditures are anticipated to total approximately $12 million. These expenditures are expected to be funded by working capital or existing credit facilities. The Company completed the acquisition of one business in the prior year, which increased tangible and intangible assets by $4.2 million, net of cash and liabilities assumed. Financing Activities Cash flows from financing activities totaled $31.3 million for the three months ended December 31, 1999 and $26.9 million for the corresponding period of the prior year. The closing of the sale of the Fishing business will result in a substantal reduction of short-term debt and a $16 million reduction of long-term debt. Market Risk Management The Company is exposed to market risk stemming from changes in foreign exchange rates, interest rates and, to a lesser extent, commodity prices. Changes in these factors could cause fluctuations in earnings and cash flows. In the normal course of business, exposure to certain of these market risks is managed by entering into hedging transactions authorized under Company policies that place controls on these activities. Hedging transactions involve the use of a variety of derivative financial instruments. Derivatives are used only where there is an underlying exposure: not for trading or speculative purposes. 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. Interest Rates The Company's debt structure and interest rate risk are managed through the use of fixed and floating rate debt. The Company's primary exposure is to United States interest rates. The Company also periodically enters into interest rate swaps, caps or collars to hedge its exposure and lower financing costs. Commodities Certain components used in the Company's products are exposed to commodity price changes. The Company manages this risk through instruments such as purchase orders and non-cancelable supply contracts. Primary commodity price exposures are metals and packaging materials. Sensitivity to Changes in Value The estimates that follow are intended to measure the maximum potential fair value or earnings the Company could lose in one year from adverse changes in foreign exchange rates or market interest rates -10-

JOHNSON WORLDWIDE ASSOCIATES, INC. under normal market conditions. The calculations are not intended to represent actual losses in fair value or earnings that the Company expects to incur. The estimates do not consider favorable changes in market rates. Further, since the hedging instrument (the derivative) inversely correlates with the underlying exposure, any loss or gain in the fair value of derivatives would be generally offset by an increase or decrease in the fair value of the underlying exposures. The positions included in the calculations are foreign exchange forwards, currency swaps and fixed rate debt. The calculations do not include the underlying foreign exchange positions that are hedged by these market risk sensitive instruments. The table below presents the estimated maximum potential one year loss in fair value and earnings before income taxes from a 10% movement in foreign currencies and a 100 basis point movement in interest rate market risk sensitive instruments outstanding at December 31, 1999: - -------------------------------------------------------------------------------- Estimated Impact on - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Earnings Before Income (millions) Fair Value Taxes - -------------------------------------------------------------------------------- Foreign exchange rate instruments $2.7 $0.4 Interest rate instruments 2.7 0.7 - -------------------------------------------------------------------------------- Other Factors The Company has not been significantly impacted by inflationary pressures over the last several years. The Company anticipates that changing costs of basic raw materials may impact future operating costs and, accordingly, the prices and margins 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. Price increases and, in certain situations, price decreases are implemented for individual products, when appropriate. Year 2000 The year 2000 issue is the result of computer programs using two digits (rather than four) to define years. Computers or other equipment with date sensitive software may recognize "00" as the year 1900 rather than 2000. This could result in system failures or miscalculations. If the Company or its significant customers or suppliers fail to correct year 2000 issues, the Company's ability to operate could be materially affected. The Company did not experience any significant malfunctions or errors in its information or non-information technology systems when the date changed from 1999 to 2000, and the Company has not experienced any significant problems with its suppliers or customers as a result of the date change. Based on operations since December 31, 1999, the Company does not expect any significant impact on its business as a result of the year 2000 issue. Because it is possible that the full impact of the date change has not been fully recognized, the Company will continue to monitor the year 2000 situation through additional key dates, such as February 29, 2000. The Company believes, however, that any potential problems are likely to be minor and correctable. Item 3. Quantitative and Qualitative Disclosures About Market Risk Information with respect to this item is included in Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading "Market Risk Management." -11-

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 December 31, 1999. -12-

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 14, 2000 /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 Page Exhibit Description Number ------- ----------- ------ 27 Financial Data Schedule -

5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF JOHNSON WORLDWIDE ASSOCIATES, INC. AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS SEP-29-2000 OCT-02-1999 DEC-31-1999 8,936 0 52,270 3,340 72,604 182,496 94,843 58,616 297,645 129,843 64,573 0 0 407 98,026 297,645 56,087 56,201 34,289 34,289 21,178 279 2,272 (1,817) (782) (1,035) (24,050) 0 0 (25,085) (3.09) (3.09)