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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 2002
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 OUTDOORS 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)
(262) 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 April 26, 2002, 6,963,203 shares of Class A and 1,222,729 shares of Class
B common stock of the Registrant were outstanding.
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JOHNSON OUTDOORS INC.
Index Page No.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations - Three
months and six months ended March 29, 2002 and
March 30, 2001 1
Consolidated Balance Sheets - March 29, 2002,
September 28, 2001 and March 30, 2001 2
Consolidated Statements of Cash Flows - Three
months and six months ended March 29, 2002 and
March 30, 2001 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 12
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
JOHNSON OUTDOORS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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(thousands, except per share data) Three Months Ended Six Months Ended
- ----------------------------------------------------------------------------------------------------------------------------
March 29 March 30 March 29 March 30
2002 2001 2002 2001
- ----------------------------------------------------------------------------------------------------------------------------
Net sales $ 97,718 $ 98,719 $ 157,456 $ 157,470
Cost of sales 56,977 58,890 91,425 93,835
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Gross profit 40,741 39,829 66,031 63,635
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Operating expenses:
Marketing and selling 20,983 21,718 35,998 36,966
Administrative management, finance and
information systems 8,001 7,918 14,933 14,784
Research and development 1,643 2,089 3,258 3,912
Amortization and write-down of intangibles 93 696 176 3,923
Profit sharing 1,073 813 1,266 1,024
Strategic charges 690 -- 1,151 --
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Total operating expenses 32,483 33,234 56,782 60,609
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Operating profit 8,258 6,595 9,249 3,026
Interest income (230) (123) (376) (287)
Interest expense 1,909 2,867 3,461 4,949
Other expense, net 92 135 337 54
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before
income taxes and cumulative effect of change in
accounting principle 6,487 3,716 5,827 (1,690)
Income tax expense (benefit) 2,598 1,513 2,334 (664)
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before
cumulative effect of change in accounting
principle 3,889 2,203 3,493 (1,026)
Gain on disposal of discontinued operations, net of
tax of $255 495 -- 495 --
Cumulative effect of change in accounting principle,
net of tax of $(2,200) and $845 -- -- (22,876) 1,755
- ----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4,384 $ 2,203 $ (18,888) $ 729
- ----------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ 0.48 $ 0.27 $ 0.43 $ (0.13)
Discontinued operations 0.06 -- 0.06 --
Cumulative effect of change in accounting
principle -- -- (2.80) 0.22
- ----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.54 $ 0.27 $ (2.31) $ 0.09
- ----------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ 0.46 $ 0.27 $ 0.42 $ (0.13)
Discontinued operations 0.06 -- 0.06 --
Cumulative effect of change in accounting
principle -- -- (2.76) 0.22
- ----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.52 $ 0.27 $ (2.28) $ 0.09
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
-1-
JOHNSON OUTDOORS INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
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March 29 September 28 March 30
(thousands, except share data) 2002 2001 2001
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ASSETS
Current assets:
Cash and temporary cash investments $ 13,794 $ 16,069 $ 6,699
Accounts receivable, less allowance for doubtful accounts of
$3,662, $3,739 and $3,645, respectively 76,944 45,585 80,743
Inventories 68,378 61,700 81,525
Deferred income taxes 5,014 5,269 3,827
Other current assets 5,726 4,557 5,767
- ------------------------------------------------------------------------------------------------------------------------------
Total current assets 169,856 133,180 178,561
Property, plant and equipment 28,581 35,879 37,167
Deferred income taxes 21,835 19,577 17,411
Intangible assets 29,434 55,288 54,026
Other assets 1,012 989 993
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Total assets $ 250,718 $ 244,913 $ 288,158
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt $ 44,765 $ 12,985 $ 109,213
Accounts payable 19,210 12,157 17,119
Accrued liabilities:
Salaries and wages 6,188 5,968 5,684
Income taxes 1,523 1,206 --
Other 13,140 17,237 14,447
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Total current liabilities 84,826 49,553 146,463
Long-term debt, less current maturities 78,256 84,550 40,372
Other liabilities 4,558 5,031 4,619
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Total liabilities 167,640 139,134 191,454
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Shareholders' equity:
Preferred stock: none issued -- -- --
Common stock:
Class A shares issued:
March 29, 2002, 6,963,203;
September 28, 2001, 6,946,012;
March 30, 2001, 6,945,762 347 347 347
Class B shares issued (convertible into Class A): 1,222,729 61 61 61
Capital in excess of par value 44,411 44,411 44,410
Retained earnings 61,274 80,162 75,526
Contingent compensation 7 (44) (96)
Accumulated other comprehensive income:
Cumulative foreign currency translation adjustment (23,022) (19,158) (23,544)
- ------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 83,078 105,779 96,704
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 250,718 $ 244,913 $ 288,158
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
-2-
JOHNSON OUTDOORS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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(thousands) Six Months Ended
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March 29 March 30
2002 2001
- ----------------------------------------------------------------------------------------------------------------------------
CASH USED FOR OPERATIONS
Net income (loss) $ (18,888) $ 729
Less gain from discontinued operations 495 --
Less gain (loss) from cumulative effect of change in accounting principle (22,876) 1,755
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before cumulative effect of change in
accounting principle 3,493 (1,026)
Adjustments to reconcile income (loss) from continuing operations to net cash
used for operating activities of continuing operations:
Depreciation and amortization 4,472 6,300
Deferred income taxes 262 645
Impairment of goodwill -- 2,526
Change in assets and liabilities, net of effect of businesses acquired or sold:
Accounts receivable (32,529) (26,967)
Inventories (7,915) (19,630)
Accounts payable and accrued liabilities 3,886 (10,303)
Other, net (2,156) (1,919)
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(29,992) (50,374)
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CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 4,982 --
Payments for purchase of business, net of cash acquired -- (339)
Net additions to property, plant and equipment (2,373) (5,196)
- ----------------------------------------------------------------------------------------------------------------------------
2,609 (5,535)
- ----------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES
Issuance of senior notes 50,000 --
Principal payments on senior notes and other long-term debt (11,604) (6,000)
Net change in short-term debt (12,793) 51,146
Common stock transactions -- 70
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25,603 45,216
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Effect of foreign currency fluctuations on cash (495) 29
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Decrease in cash and temporary cash investments (2,275) (10,664)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 16,069 17,363
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End of period $ 13,794 $ 6,699
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The accompanying notes are an integral part of the consolidated financial
statements.
-3-
JOHNSON OUTDOORS 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 Outdoors Inc. and subsidiaries (the
Company) as of March 29, 2002 and the results of operations and cash flows
for the three months and six months ended March 29, 2002. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's 2001 Annual Report on Form 10-K.
Because of seasonal and other factors, the results of operations for the
three months and six months ended March 29, 2002 are not necessarily
indicative of the results to be expected for the full year.
All monetary 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.
2 Cumulative Effect of Changes in Accounting Principle
Effective September 29, 2001, the Company adopted Financial Accounting
Standards Board No. 142, "Goodwill and Other Intangible Assets" (SFAS
142). In response to the adoption of this new standard, the Company ceased
the amortization of goodwill. As such, net income for fiscal 2002 will be
increased by approximately $1,500 when compared to fiscal 2001. As
required under SFAS 142, the Company has performed an assessment of the
carrying value of goodwill using a number of criteria, including the value
of the overall enterprise as of September 29, 2001. This assessment
resulted in a write off of goodwill totaling $22,876, net of tax, and has
been reflected as a change in accounting principle. The write off is
associated with the Watercraft ($12,900) and Diving ($10,000) business
units. Future impairment charges from existing operations or other
acquisitions, if any, will be reflected as an operating expense in the
statement of operations.
Effective September 30, 2000, the Company adopted SFAS 133, which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and
for hedging activities. All derivatives, whether designated in hedging
relationships or not, are required to be recorded on the balance sheet at
fair value. If the derivative is designated as a fair value hedge, the
changes in fair value of the derivative and the hedged item are recognized
in earnings. If the derivative is designated as a cash flow hedge, changes
in the fair value of the derivative are recorded in other comprehensive
income and are recognized in earnings when the hedged item affects
earnings.
The adoption of SFAS 133 resulted in an effect of change in accounting
principle after tax gain of $1,755 in 2001.
3 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.
-4-
JOHNSON OUTDOORS INC.
4 Inventories
Inventories related to continuing operations at the end of the respective
periods consist of the following:
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March 29 September 28 March 30
2002 2001 2001
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Raw materials $ 22,514 $ 19,892 $ 26,295
Work in process 2,418 2,592 2,851
Finished goods 46,537 42,620 55,419
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71,469 65,104 84,565
Less reserves 3,091 3,404 3,040
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$ 68,378 $ 61,700 $ 81,525
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5 Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per common share from continuing operations before cumulative
effect of change in accounting principle:
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Three Months Ended Six Months Ended
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March 29 March 30 March 29 March 30
2002 2001 2002 2001
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Income from continuing operations before cumulative
effect of change in accounting principle for
basic and diluted earnings
per share $ 3,889 $ 2,203 $ 3,493 $ (1,026)
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Weighted average common shares outstanding
8,173,716 8,161,989 8,171,325 8,154,674
Less nonvested restricted stock 12,803 18,033 13,498 16,267
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Basic average common shares 8,160,913 8,143,956 8,157,827 8,138,407
Dilutive stock options and restricted stock 220,505 23,313 131,612 --
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Diluted average common shares 8,381,418 8,167,269 8,289,439 8,138,407
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Basic earnings per common share from continuing
operations before cumulative effect of
change in accounting principle $ 0.48 $ 0.27 $ 0.43 $ (0.13)
Diluted earnings per common share from
continuing operations before cumulative
effect of change in accounting principle $ 0.46 $ 0.27 $ 0.42 $ (0.13)
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-5-
JOHNSON OUTDOORS INC.
6 Stock Ownership Plans
A summary of stock option activity related to the Company's plans is as
follows:
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Weighted Average
Shares Exercise Price
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Outstanding at September 28, 2001 1,086,795 10.20
Granted 274,755 7.55
Cancelled (117,573) 15.22
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Outstanding at March 29, 2002 1,243,977 9.14
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Options to purchase 1,120,129 shares of common stock with a weighted
average exercise price of $10.43 per share were outstanding at March 30,
2001.
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 income (loss) for the respective periods consists of the
following:
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Three Months Ended Six Months Ended
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March 29 March 30 March 29 March 30
2002 2001 2002 2001
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Net income (loss) $ 4,384 $ 2,203 $ (18,888) $ 729
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Translation adjustment (452) (5,025) (3,684) (1,984)
Reclassification adjustment for change in
accounting principle -- -- -- (2,974)
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Comprehensive income (loss) $ 3,932 $ (2,822) $ (22,572) $ (4,229)
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8 Related Party Transaction
On November 30, 2001, the Company entered into a sale/leaseback
transaction for its headquarters facility with a related party. The
Company sold the facility for $4,982 in cash and entered into a
month-to-month lease agreement with the related party. The Company and the
related party engaged an independent appraiser to determine the sale price
of the facility. Additionally, due to the related party nature of the
transaction, the Company deferred the gain on the sale and will recognize
it over the useful life of the facility. The deferred gain is recorded as
a contra-asset within the property, plant and equipment section of the
balance sheet.
9 Discontinued Operations
The Company recognized a gain from discontinued operations of $495, net of
tax, for the three months ended March 29, 2002 related to the final
accounting for the sale of the Fishing business.
-6-
JOHNSON OUTDOORS INC.
10 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. The Company does not
believe it has unusual risk related to concentrations in volume of
business with a particular customer or supplier, or concentrations in
revenue from a particular product.
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.
A summary of the Company's operations by business unit is presented below:
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Three Months Ended Six Months Ended
--------------------------------------------------------------------------------------------------------------
March 29 March 30 March 29 March 30
2002 2001 2002 2001
--------------------------------------------------------------------------------------------------------------
Net sales:
Outdoor equipment:
Unaffiliated customers $ 32,815 $ 32,497 $ 55,530 $ 53,662
Interunit transfers 13 32 23 46
Motors:
Unaffiliated customers 25,545 22,557 38,037 32,562
Interunit transfers 204 257 265 421
Watercraft:
Unaffiliated customers 21,945 23,193 32,648 34,578
Interunit transfers 154 150 187 185
Diving:
Unaffiliated customers 17,469 20,470 31,292 36,637
Interunit transfers -- -- -- 1
Other (56) 2 (51) 31
Eliminations (371) (439) (475) (653)
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$ 97,718 $ 98,719 $ 157,456 $ 157,470
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Operating profit (loss):
Outdoor equipment $ 4,867 $ 3,683 $ 7,453 $ 4,981
Motors 3,190 2,300 3,740 (1,001)
Watercraft 842 1,514 (506) 400
Diving 2,508 1,669 3,992 3,485
Other (3,149) (2,571) (5,430) (4,839)
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$ 8,258 $ 6,595 $ 9,249 $ 3,026
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Identifiable assets (end of period):
Outdoor equipment $ 55,075 $ 57,490
Motors 36,411 39,210
Watercraft(1) 66,765 83,948
Diving(1) 71,596 83,634
Other 20,871 23,876
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$ 250,718 $ 288,158
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(1) March 29, 2002 reflects the goodwill write-offs related to the
adoption of SFAS 142.
-7-
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion includes comments and analysis relating to the
Company's results of operations and financial condition for the three months and
six months ended March 29, 2002 and March 30, 2001. 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 2001 Annual
Report on Form 10-K.
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 Operations
Net sales for the three months ended March 29, 2002 totaled $97.7 million, a
decrease of 1.0% or $1.0 million, compared to $98.7 million in the three months
ended March 30, 2001. The Motors business had a sales increase of $3.0 million
over the same period a year ago. The Outdoor Equipment group showed a slight
increase over the prior quarter sales from strong sales at Jack Wolfskin. The
Diving business continues to be adversely impacted by reduced travel as the
market has reacted to recent global events. Diving sales were down $3.0 million
(15%) from the year ago quarter.
Net sales for the six months ended March 29, 2002 totaled $157.5 million, which
was flat when compared to six months ended March 30, 2001. Two of the four
business units showed sales growth over the prior year. The growth was lead by
Motors, which had a $5.5 million (17%) increase over the first six months of the
prior year due to recovery in the OEM market as well as new products and a shift
in distributor buying patterns. Additionally, Outdoor Equipment sales were $1.9
million ahead of the same period a year ago, which was provided by continued
strong growth from Jack Wolfskin.
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
and six months ended March 29, 2002 as compared to the corresponding period of
the prior year. The Diving and Outdoor Equipment businesses were unfavorably
impacted by foreign currency movements. Excluding the impact of fluctuations in
foreign currencies, net sales for the Company increased 1.0% for both the three
months and six months ended March 29, 2002.
Gross profit as a percentage of sales was 41.7% for the three months ended March
29, 2002 compared to 40.3% in the corresponding period in the prior year.
Margins in the Diving, Outdoor Equipment and Motors businesses were improved
over the prior year, while the Watercraft business saw margins decline by one
percentage point. The Outdoor Equipment business benefited from improved margins
in nearly all companies led by Jack Wolfskin, which increased margins by 2.7
percentage points over the prior year quarter. The Motors business improved
margins by 2.9 percentage points over the year ago quarter primarily from new
products and product mix.
-8-
Gross profit as a percentage of sales was 41.9% for the six months ended March
29, 2002 compared to 40.4% in the corresponding period in the prior year. Margin
improvements in the Motors and Outdoor Equipment businesses helped to offset
slight declines in margins in the Diving and Watercraft businesses. The Motors
business was favorably impacted by a recovery in its OEM markets, product mix
and new products.
The Company recognized operating profit of $8.3 million for the three months
ended March 29, 2002 compared to an operating profit of $6.6 million for the
corresponding period of the prior year. The current quarter benefited from a
$0.7 million reduction in amortization expense related to the adoption of SFAS
No. 142. The current quarter also included $0.7 million of strategic charges
related to the ongoing consolidation efforts in the Watercraft business.
For the six months ended March 29, 2002 operating profit more than tripled the
prior year period at $9.2 million versus $3.0 million. Strong gross profits in
the Motors and Outdoor Equipment businesses drove the increase in operating
profits. Watercraft operating profit was $0.2 million below prior year, on lower
sales volume, excluding the impact of SFAS No. 142 and strategic charges. The
Diving business reduced operating expenses by $3.0 million, excluding the impact
of SFAS No. 142, mitigating a portion of the impact of sales and margin declines
on operating profits.
Interest expense totaled $1.9 million for the three months ended March 29, 2002
compared to $2.9 million for the corresponding period of the prior year. In the
current year, the Company benefited from reductions in overall debt due to
reductions in working capital. In addition, the Company benefited from declining
interest rates on the floating rate facilities. Interest expense totaled $3.5
million for the six months ended March 29, 2002 compared to $4.9 million for the
corresponding period of the prior year.
The Company's effective tax rate for the six months ended March 29, 2002 was
40.1%, up from 39.3% for the corresponding period of the prior year, primarily
due to the geographic mix of earnings occurring in higher tax jurisdictions.
The Company recognized income from continuing operations before cumulative
effect of change in accounting principle of $3.9 million in the three months
ended March 29, 2002, compared to income of $2.2 million in the corresponding
period of the prior year. Diluted earnings per common share from continuing
operations before cumulative effect of change in accounting principle totaled
$0.46 for the three months ended March 29, 2002 compared to $0.27 in the prior
year. The Company recognized income from continuing operations before cumulative
effect of change in accounting principle of $3.5 million in the six months ended
March 29, 2002, compared to a loss of $1.0 million in the corresponding period
of the prior year. Diluted earnings per common share from continuing operations
before cumulative effect of change in accounting principle totaled $0.42 for the
six months ended March 29, 2002 compared to $(0.13) in the prior year.
Discontinued Operations
The Company recognized a gain from discontinued operations of $0.5 million, net
of tax ($0.06 per diluted share), for the three months ended March 29, 2002
related to the final accounting for the sale of the Fishing business.
Change in Accounting Principle
Effective September 29, 2001, the Company adopted Financial Accounting Standards
Board No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). In response to
the adoption of this new standard, the Company ceased the amortization of
goodwill. As such, net income for fiscal 2002 will be increased by approximately
$1.5 million when compared to fiscal 2001. As required under SFAS 142, the
Company has performed an assessment of the carrying value of goodwill using a
number of criteria, including the value of the overall enterprise as of
September 29, 2001. This assessment resulted in a write off of goodwill totaling
$22.9 million, net of tax ($2.76 per diluted share) and has been reflected as a
change in accounting principle. The write off is associated with the Watercraft
($12.9 million) and Diving ($10.0 million) business units. Future impairment
charges from existing operations or other acquisitions, if any, will be
reflected as an operating expense in the statement of operations.
-9-
Effective September 30, 2000, the Company adopted SFAS 133, which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
All derivatives, whether designated in hedging relationships or not, are
required to be recorded on the balance sheet at fair value. If the derivative is
designated as a fair value hedge, the changes in fair value of the derivative
and the hedged item are recognized in earnings. If the derivative is designated
as a cash flow hedge, changes in the fair value of the derivative are recorded
in other comprehensive income and are recognized in earnings when the hedged
item affects earnings.
The adoption of SFAS 133 resulted in an effect of change in accounting principle
after tax gain of $1.8 million in 2001.
Net income (loss)
Net income for the three months ended March 29, 2002 was $4.4 million, or $0.52
per diluted share, compared to $2.2 million, or $0.27 per diluted share, for the
corresponding period of the prior year.
Net loss for the six months ended March 29, 2002 was $18.9 million, or $2.28 per
diluted share, compared to income of $0.7 million, or $0.09 per diluted share,
for the corresponding period of the prior year.
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 $30.0 million for the six months ended
March 29, 2002 and $50.4 million for the corresponding period of the prior year.
Accounts receivable seasonally increased $32.5 million for the six months ended
March 29, 2002, compared to an increase of $27.0 million in the year ago period.
However, the end-of-period balance is over $3.8 million lower than the
corresponding period of the prior year due to improved management of working
capital assets. Average days of sales outstanding are lower than the prior year
by 5 days. The Company has also worked to reduce inventory levels at all
businesses. Inventories increased by $7.9 million for the six months ended March
29, 2002 compared to an increase of $19.6 million in the prior year period.
Inventories at March 29, 2002 were $13.1 million lower than the same period a
year ago. The Company is producing products at levels adequate to meet consumer
demand for the upcoming outdoor season.
Accounts payable and accrued liabilities increased $3.9 million for the six
months ended March 29, 2002 and decreased $10.3 million for the corresponding
period of the prior year.
Depreciation and amortization charges were $4.4 million for the six months ended
March 29, 2002 and $6.3 million for the corresponding period of the prior year.
The decline from prior year is primarily related to the adoption of SFAS No.
142.
Investing Activities
Cash provided by investing activities totaled $2.6 million for the six months
ended March 29, 2002 versus cash used for investing activities of $5.5 million
for the corresponding period of the prior year.
Expenditures for property, plant and equipment were $2.4 million for the six
months ended March 29, 2002 and $5.2 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 2002, capitalized expenditures are
anticipated to be consistent with those of the prior year. These expenditures
are expected to be funded by working capital or existing credit facilities. The
Company sold its headquarters facility to a related party in
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the first quarter. Proceeds from the sale were $5.0 million. A gain on the sale
is being deferred due to the related party nature of the transaction.
Financing Activities
Cash flows provided from financing activities totaled $25.6 million for the six
months ended March 29, 2002 and $45.2 million for the corresponding period of
the prior year. The Company made principal payments on senior notes of $11.6
million in the current year and $6.0 million in the prior year. The Company
consummated a private placement of long-term debt totaling $50.0 million during
the first quarter. Proceeds from the debt were used to reduce outstanding
indebtedness under the Company's primary revolving credit facility.
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, plastics 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 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
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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 rates on market risk sensitive instruments
outstanding at March 29, 2002:
- -------------------------------------------------------------------------------
(millions) Estimated Impact on
- -------------------------------------------------------------------------------
Earnings Before Income
Fair Value Taxes
- -------------------------------------------------------------------------------
Foreign exchange rate instruments 0.4 0.4
Interest rate instruments 2.0 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 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.
Pending Accounting Change
In August 2001, the FASB issued SFAS No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets (SFAS 144). SFAS 144 establishes a single
accounting model for long-lived assets to be disposed of by sale and provides
additional implementation guidance for assets to be held and used and assets to
be disposed of other than by sale. There are not expected to be any financial
implications related to the adoption of SFAS 144, and the guidance will be
applied on a prospective basis. The Company is required to adopt SFAS 144 in the
first quarter of fiscal 2003.
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."
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PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting on February 19, 2002, the shareholders voted to
elect the following individuals as directors for terms that expire at the next
annual meeting and in favor of two separate proposals to amend certain employee
benefit plans:
- ------------------------------------------------------------------------------------------------------------------------
Votes Cast Votes Cast Votes Broker
For Against Withheld Abstentions Non-Votes
- ------------------------------------------------------------------------------------------------------------------------
Class A Directors:
- -----------------
Terry E. London 6,178,504 0 34,495 0 0
John M. Fahey, Jr. 6,178,704 0 34,295 0 0
Class B Directors:
- -----------------
Samuel C. Johnson 1,218,285 0 0 0 0
Helen P. Johnson-Leipold 1,218,285 0 0 0 0
Thomas F. Pyle, Jr. 1,218,285 0 0 0 0
Gregory E. Lawton 1,218,285 0 0 0 0
Proposal regarding the amendment to
the Johnson Outdoors Inc. 1987
Employees' Stock Purchase Plan to
increase the number of shares
authorized for issuance 18,282,909 93,019 0 20,021 0
Proposal regarding the amendment to
the Johnson Outdoors Inc. 1994
Non-Employee Director Stock
Ownership Plan to increase the
number of shares authorized for 18,092,584 278,096 0 25,269 0
issuance
Votes cast for or against and abstentions with respect to the proposals reflect
that holders of Class B shares are entitled to 10 votes per share for matters
other than the election of directors.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this Form 10-Q
None
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the three months and six
months ended March 29, 2002.
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JOHNSON OUTDOORS INC.
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 OUTDOORS INC.
Date: May 13, 2002
/s/ Helen P. Johnson-Leipold
--------------------------------------------
Helen P. Johnson-Leipold
Chairman and Chief Executive Officer
/s/ Paul A. Lehmann
--------------------------------------------
Paul A. Lehmann
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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