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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 2, 2021

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 incorporation or organization)						(I.R.S. Employer Identification No.)

555 Main Street, Racine, Wisconsin 53403

(Address of principal executive offices)

(262) 631-6600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol			Name of each exchange on which registered
Class A Common Stock, $.05 par value per share			JOUT			NASDAQ Global Select MarketSM

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 ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒   No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act: Large accelerated filer ☐Accelerated filer ☒Non-accelerated filer ☐Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

As of August 2, 2021, 8,915,636 shares of Class A and 1,211,564 shares of Class B common stock of the Registrant were outstanding. 

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			JOHNSON OUTDOORS INC.

Index									Page No.
PART I			FINANCIAL INFORMATION
			Item 1.			Financial Statements
						Condensed Consolidated Statements of Operations - Three and nine months ended July 2, 2021 and June 26, 2020			- 1
						Condensed Consolidated Statements of Comprehensive Income - Three and nine months ended July 2, 2021 and June 26, 2020			- 2
						Condensed Consolidated Balance Sheets - July 2, 2021, October 2, 2020, and June 26, 2020			- 3
						Condensed Consolidated Statements of Shareholders' Equity - Three and nine months ended July 2, 2021 and June 26, 2020			- 4
						Condensed Consolidated Statements of Cash Flows - Nine months ended July 2, 2021 and June 26, 2020			- 6
						Notes to Condensed Consolidated Financial Statements			- 7
			Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			- 22
			Item 3.			Quantitative and Qualitative Disclosures about Market Risk			- 28
			Item 4.			Controls and Procedures			- 29
PART II			OTHER INFORMATION
			Item 1.			Legal Proceedings			- 30
			Item 1A.			Risk Factors			- 30
			Item 6.			Exhibits			- 31
						Signatures			- 31
						Exhibit Index			- 32

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Index			JOHNSON OUTDOORS INC.

PART I      FINANCIAL INFORMATION

Item 1.     Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

			Three Months Ended						Nine Months Ended
(thousands, except per share data)			July 2, 2021			June 26, 2020			July 2, 2021			June 26, 2020
Net sales			$	213,568		$	138,390		$	585,391		$	429,528
Cost of sales			116,057			75,828			319,596			238,222
Gross profit			97,511			62,562			265,795			191,306
Operating expenses:
Marketing and selling			37,604			27,863			106,205			90,874
Administrative management, finance and information systems			15,646			14,867			42,848			31,032
Research and development			6,162			6,903			19,050			17,876
Total operating expenses			59,412			49,633			168,103			139,782
Operating profit			38,099			12,929			97,692			51,524
Interest income			(76)			(170)			(238)			(1,309)
Interest expense			35			35			102			105
Other (income) expense, net			(934)			(2,493)			(4,567)			205
Profit before income taxes			39,074			15,557			102,395			52,523
Income tax expense			10,300			2,688			25,940			12,837
Net income			$	28,774		$	12,869		$	76,455		$	39,686
Weighted average common shares - Basic:
Class A			8,875			8,831			8,859			8,818
Class B			1,212			1,212			1,212			1,212
Participating securities			49			31			42			25
Weighted average common shares - Dilutive			10,136			10,074			10,113			10,055
Net income per common share - Basic:
Class A			$	2.87		$	1.29		$	7.65		$	3.99
Class B			$	2.61		$	1.17		$	6.94		$	3.62
Net income per common share - Diluted:
Class A			$	2.83		$	1.27		$	7.53		$	3.93
Class B			$	2.83		$	1.27		$	7.53		$	3.93

The accompanying notes are an integral part of the condensed consolidated financial statements.

- 1 -

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Index			JOHNSON OUTDOORS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

 

			Three Months Ended						Nine Months Ended
(thousands)			July 2, 2021			June 26, 2020			July 2, 2021			June 26, 2020
Net income			$	28,774		$	12,869		$	76,455		$	39,686
Other comprehensive income:
Foreign currency translation			742			1,537			1,672			630
Defined benefit pension plan:
Change in pension plans, net of tax of $41, $60, $108, and $101, respectively			123			180			325			303
Total other comprehensive income			865			1,717			1,997			933
Total comprehensive income			$	29,639		$	14,586		$	78,452		$	40,619

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Index			JOHNSON OUTDOORS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(thousands, except share data)			July 2, 2021			October 2, 2020			June 26, 2020
ASSETS
Current assets:
Cash and cash equivalents			$	249,016		$	212,437		$	181,445
Accounts receivable, net			94,750			67,292			82,577
Inventories			130,742			97,437			94,218
Other current assets			12,056			11,372			7,641
Total current assets			486,564			388,538			365,881
Property, plant and equipment, net of accumulated depreciation of $165,017, $156,541 and $152,646, respectively			68,296			63,037			61,373
Right of use assets			43,741			40,666			37,669
Deferred income taxes			11,526			10,679			11,482
Goodwill			11,242			11,184			11,163
Other intangible assets, net			8,699			9,052			9,196
Other assets			29,327			22,870			20,845
Total assets			$	659,395		$	546,026		$	517,609
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	54,991		$	37,327		$	31,026
Current lease liability			5,281			6,587			5,900
Accrued liabilities:
Salaries, wages and benefits			23,380			23,275			15,395
Accrued warranty			13,773			10,849			10,913
Income taxes payable			12,641			6,681			16,032
Accrued discounts and returns			6,224			5,113			5,751
Accrued customer programs			7,033			4,426			5,409
Other			9,392			11,349			8,373
Total current liabilities			132,715			105,607			98,799
Non-current lease liability			39,382			34,931			32,474
Deferred income taxes			1,411			1,418			1,642
Retirement benefits			954			853			1,042
Deferred compensation liability			27,881			21,585			19,525
Other liabilities			4,728			3,532			2,593
Total liabilities			207,071			167,926			156,075
Shareholders’ equity:
Common stock:
Class A shares issued and outstanding: 8,915,636, 8,873,235 and 8,873,197, respectively			448			443			443
Class B shares issued and outstanding: 1,211,564, 1,211,564 and 1,211,602, respectively			61			61			61
Capital in excess of par value			81,309			78,668			77,780
Retained earnings			366,582			296,431			282,980
Accumulated other comprehensive income			6,714			4,717			2,491
Treasury stock at cost, shares of Class A common stock: 42,598, 36,316 and 36,354, respectively			(2,790)			(2,220)			(2,221)
Total shareholders’ equity			452,324			378,100			361,534
Total liabilities and shareholders’ equity			$	659,395		$	546,026		$	517,609

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Index			JOHNSON OUTDOORS INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited)

Nine Months Ended July 2, 2021
(thousands except for shares)			Shares						Common Stock						Capital in Excess of Par Value						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Treasury Stock
BALANCE AT OCTOBER 2, 2020			10,084,799						$	504					$	78,668					$	296,431					$	4,717					$	(2,220)
Net income			—						—						—						19,847						—						—
Dividends declared			—						—						—						(2,094)						—						—
Award of non-vested shares			33,034						—						—						—						—						—
Stock-based compensation			—						—						711						—						—						—
Currency translation adjustment			—						—						—						—						2,442						—
Change in pension plans, net of tax of $34			—						—						—						—						101						—
Purchase of treasury stock at cost			(5,661)						—						—						—						—						(495)
BALANCE AT JANUARY 1, 2021			10,112,172						$	504					$	79,379					$	314,184					$	7,260					$	(2,715)
Net income			—						—						—						27,834						—						—
Dividends declared			—						—						—						(2,107)						—						—
Award of non-vested shares			6,016						4						(4)						—						—						—
Stock-based compensation			—						—						808						—						—						—
Currency translation adjustment			—						—						—						—						(1,512)						—
Change in pension plans, net of tax of $33			—						—						—						—						101						—
BALANCE AT APRIL 2, 2021			10,118,188						$	508					$	80,183					$	339,911					$	5,849					$	(2,715)
Net income			—						—						—						28,774						—						—
Dividends declared			—						—						—						(2,103)						—						—
Award of non-vested shares			9,633						1						(1)						—						—						—
Stock-based compensation			—						—						1,052						—						—						—
Restricted stock forfeitures			(621)						—						75						—						—						(75)
Currency translation adjustment			—						—						—						—						742						—
Change in pension plans, net of tax of $41									—						—						—						123						—
BALANCE AT JULY 2, 2021			10,127,200						$	509					$	81,309					$	366,582					$	6,714					$	(2,790)

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Index			JOHNSON OUTDOORS INC.

Nine Months Ended June 26, 2020
(thousands except for shares)			Shares						Common Stock						Capital in Excess of Par Value						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Treasury Stock
BALANCE AT SEPTEMBER 27, 2019			10,045,771						$	504					$	75,856					$	248,377					$	1,558					$	(1,761)
Net income			—						—						—						6,430						—						—
Dividends declared			—						—						—						(1,693)						—						—
Award of non-vested shares			31,571						—						—						—						—						—
Stock-based compensation			—						—						667						—						—						—
Currency translation adjustment			—						—						—						—						700						—
Change in pension plans, net of tax of $21			—						—						—						—						61						—
Purchase of treasury stock at cost			(7,129)						—						—						—						—						(460)
BALANCE AT DECEMBER 27, 2019			10,070,213						$	504					$	76,523					$	253,114					$	2,319					$	(2,221)
Net income			—						—						—						20,387						—						—
Dividends declared			—						—						—						(1,693)						—						—
Award of non-vested shares			12,396						—						—						—						—						—
Stock-based compensation			—						—						(286)						—						—						—
Currency translation adjustment			—						—						—						—						(1,607)						—
Change in pension plans, net of tax of $20			—						—						—						—						62						—
BALANCE AT MARCH 27, 2020			10,082,609						$	504					$	76,237					$	271,808					$	774					$	(2,221)
Net income			—						—						—						12,869						—						—
Dividends declared			—						—						—						(1,697)						—						—
Issuance of stock under employee stock purchase plan			2,190						—						126						—						—						—
Stock-based compensation			—						—						1,417						—						—						—
Currency translation adjustment			—						—						—						—						1,537						—
Change in pension plans, net of tax of $60			—						—						—						—						180						—
BALANCE AT JUNE 26, 2020			10,084,799						$	504					$	77,780					$	282,980					$	2,491					$	(2,221)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Index			JOHNSON OUTDOORS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

			Nine Months Ended
(thousands)			July 2, 2021			June 26, 2020
CASH PROVIDED BY OPERATING ACTIVITIES
Net income			$	76,455		$	39,686
Adjustments to reconcile net income to net cash used for operating activities:
Depreciation			9,660			9,303
Amortization of intangible assets			355			2,186
Amortization of deferred financing costs			20			20
Stock based compensation			2,571			1,798
Loss on disposal of productive assets			44			149
Deferred income taxes			(860)			(65)
Change in operating assets and liabilities:
Accounts receivable, net			(26,789)			(38,209)
Inventories, net			(32,905)			417
Accounts payable and accrued liabilities			26,502			5,613
Other current assets			(659)			3,710
Other non-current assets			(6,077)			(55)
Other long-term liabilities			9,970			752
Other, net			(676)			255
			57,611			25,560
CASH USED FOR INVESTING ACTIVITIES
Proceeds from sale of productive assets			13			10
Capital expenditures			(15,481)			(11,350)
			(15,468)			(11,340)
CASH USED FOR FINANCING ACTIVITIES
Common stock transactions			—			126
Dividends paid			(6,297)			(5,078)
Purchases of treasury stock			(495)			(460)
			(6,792)			(5,412)
Effect of foreign currency rate changes on cash			1,228			255
Increase in cash and cash equivalents			36,579			9,063
CASH AND CASH EQUIVALENTS
Beginning of period			212,437			172,382
End of period			$	249,016		$	181,445
Supplemental Disclosure:
Non-cash treasury stock activity			$	75		$	—
Non-cash dividends			7			5
Cash paid for taxes			18,828			4,418
Cash paid for interest			86			86

The accompanying notes are an integral part of the condensed consolidated financial statements. 

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Index			JOHNSON OUTDOORS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1    BASIS OF PRESENTATION

The condensed 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 (collectively, the “Company”) as of July 2, 2021 and June 26, 2020, and their results of operations for the three and nine month periods then ended and cash flows for the nine month periods then ended. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2020 which was filed with the Securities and Exchange Commission on December 11, 2020.

Due to seasonal variations and other factors, some of which are described herein, including related to the ongoing coronavirus (COVID-19) outbreak and resulting pandemic, the results of operations for the three and nine months ended July 2, 2021 are not necessarily indicative of the results to be expected for the Company’s full 2021 fiscal year.  See "Coronavirus (COVID-19)" below and “Seasonality” and "Coronavirus (COVID-19)" in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein for additional information.

The Company considers all short-term investments in interest-bearing accounts and all securities and other instruments with an original maturity of three months or less, to be equivalent to cash. Cash equivalents are stated at cost which approximates market value.

All monetary amounts, other than share and per share amounts, are stated in thousands.

Coronavirus (COVID-19)

In March 2020, the World Health Organization recognized the current coronavirus (COVID-19) outbreak as a global pandemic. In response to the COVID-19 outbreak, the governments of many countries, states, cities and other geographic regions imposed varying degrees of restrictions on social and commercial activity, including imposing travel restrictions, issuing quarantine, shelter-in-place and stay at home orders and guidelines and related actions, mandating mask wearing, limiting business capacity and generally restricting freedom of movement, in order to promote social distancing and other similar programs all in an effort to slow the spread of the illness.

While some government mandates eased in the latter half of fiscal 2020, these mandates continued to emphasize social distancing measures to the general public. As a result, in the latter part of fiscal 2020 we saw increased participation in fishing, camping and watercraft recreation and the related demand for our products in these business segments, largely driven by consumer desire to engage in socially distant and safe activities in the great outdoors. This trend in increased demand for our outdoor recreation products continued into fiscal 2021.

Despite the availability of vaccines, and the overall reduction in restrictions on economic and social activities that were implemented at the start of the pandemic, COVID-19 continues to be a serious global health concern and has a significant impact on macroeconomic and societal developments, including on economic activity and supply chain continuity, in various key regions of the world and related to certain raw materials and components. As a result, the Company cannot reasonably estimate the full impact of the COVID-19 pandemic on Company operations and profitability for the remainder of fiscal 2021 and beyond as the situation is dynamic and constantly changing. The Company will continue to monitor evolving economic and general business conditions stemming from the COVID-19 pandemic and the actual and potential impacts on our financial position, results of operations and cash flows.

2    ACCOUNTS RECEIVABLE

Accounts receivable are stated net of allowances for doubtful accounts of $1,446, $2,697 and $2,834 as of July 2, 2021, October 2, 2020 and June 26, 2020, respectively. The increase in net accounts receivable to $94,750 as of July 2, 2021 from $67,292 as of October 2, 2020 is attributable to the seasonal nature of the Company’s business and the resulting increases in sales volumes between periods. The determination of the allowance for doubtful accounts is based on a combination of factors. In circumstances where specific collection concerns about a receivable exist, a reserve is established to value the affected account receivable at an amount the Company believes will be collected. For all other customers, the Company recognizes allowances for doubtful accounts based on historical experience of bad debts as a percent of accounts receivable outstanding for each business segment. Uncollectible accounts are

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Index			JOHNSON OUTDOORS INC.

written off against the allowance for doubtful accounts after collection efforts have been exhausted. The Company typically does not require collateral on its accounts receivable.

3    EARNINGS PER SHARE (“EPS”)

Net income or loss per share of Class A common stock and Class B common stock is computed using the two-class method.  Grants of restricted stock which receive non-forfeitable dividends are classified as participating securities and are required to be included as part of the basic weighted average share calculation under the two-class method.

Holders of Class A common stock are entitled to cash dividends equal to 110% of all dividends declared and paid on each share of Class B common stock. The Company grants shares of unvested restricted stock in the form of Class A shares, which carry the same distribution rights as the Class A common stock described above.  As such, the undistributed earnings for each period are allocated to each class of common stock based on the proportionate share of the amount of cash dividends that each such class is entitled to receive.

 

Basic EPS

Basic net income or loss per share is computed by dividing net income or loss allocated to Class A common stock and Class B common stock by the weighted-average number of shares of Class A common stock and Class B common stock outstanding, respectively.  In periods with cumulative year to date net income and undistributed income, the undistributed income for each period is allocated to each class of common stock based on the proportionate share of the amount of cash dividends that each such class is entitled to receive.  In periods where there is a cumulative year to date net loss or no undistributed income because distributions through dividends exceed net income, Class B shares are treated as anti-dilutive and, therefore, net losses are allocated equally on a per share basis among all participating securities.

For the three and nine month periods ended July 2, 2021 and June 26, 2020, basic income per share for the Class A and Class B shares has been presented using the two class method and reflects the allocation of undistributed income described above. 

Diluted EPS

Diluted net income per share is computed by dividing allocated net income by the weighted-average number of common shares outstanding, adjusted for the effect of dilutive stock options, restricted stock units (“stock units” or “units”) and non-vested restricted stock.  Anti-dilutive stock options, units and non-vested stock are excluded from the calculation of diluted EPS.  The computation of diluted net income per share of Class A common stock assumes that Class B common stock is converted into Class A common stock.  Therefore, diluted net income per share is the same for both Class A and Class B common shares.  In periods where the Company reports a net loss, the effect of anti-dilutive stock options and units is excluded and diluted loss per share is equal to basic loss per share for both classes of stock.

For the three and nine month periods ended July 2, 2021 and June 26, 2020, diluted net income per share reflects the effect of dilutive stock units and assumes the conversion of Class B common stock into Class A common stock. 

Shares of non-vested stock that could potentially dilute earnings per share in the future which were not included in the fully diluted computation because they would have been anti-dilutive totaled 40,743 and 41,390 for the three months ended July 2, 2021 and June 26, 2020, respectively, and 40,471 and 40,260 for the nine months ended July 2, 2021 and June 26, 2020, respectively. Stock units that could potentially dilute earnings per share in the future and which were not included in the fully diluted computation because they would have been anti-dilutive were 20,277 and 36,495 for the three month periods ended July 2, 2021 and June 26, 2020, respectively, and 27,411 and 42,368 for the nine months ended July 2, 2021 and June 26, 2020, respectively.

Dividends per share

Dividends per share for the three and nine month periods ended July 2, 2021 and June 26, 2020 were as follows:

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Index			JOHNSON OUTDOORS INC.

			Three Months Ended						Nine months ended
			July 2, 2021			June 26, 2020			July 2, 2021			June 26, 2020
Dividends declared per common share:
Class A			$	0.21		$	0.17		$	0.63		$	0.51
Class B			$	0.19		$	0.15		$	0.57		$	0.46

4    STOCK-BASED COMPENSATION AND STOCK OWNERSHIP PLANS

The Company’s current stock ownership plans allow for issuance of stock options to acquire shares of Class A common stock by key executives and non-employee directors. Current plans also allow for issuance of shares of restricted stock, restricted stock units or stock appreciation rights in lieu of stock options.

Under the Company’s 2012 Non-Employee Director Stock Ownership Plan and the 2020 Long-Term Incentive Plan (the only plans where shares currently remain available for future equity incentive awards) there were a total of 501,314 shares of the Company’s Class A common stock available for future grant to non-employee directors and key executives at July 2, 2021. Share awards previously made under the Company's 2010 Long-Term Stock Incentive Plan, which no longer allows for additional share grants, also remain outstanding.

 

Non-vested Stock

All shares of non-vested restricted stock awarded by the Company have been granted in the form of shares of Class A common stock at their fair market value on the date of grant and vest within one year from the date of grant for stock granted to directors and four years from the date of grant for stock granted to officers and employees.  The fair value at date of grant is based on the number of shares granted and the average of the Company’s high and low Class A common stock price on the date of grant or, if the Company’s Class A shares did not trade on the date of grant, the average of the Company’s high and low Class A common stock price on the last preceding date on which the Company’s Class A shares traded.

A summary of non-vested stock activity for the nine months ended July 2, 2021 related to the Company’s stock ownership plans is as follows:

			Shares			Weighted Average Grant Price
Non-vested stock at October 2, 2020			40,492			$	62.15
Non-vested stock grants			14,954			101.97
Restricted stock vested			(17,234)			53.79
Forfeitures			(621)			120.77
Non-vested stock at July 2, 2021			37,591			80.86

 

Non-vested stock grantees may elect to reimburse the Company for withholding taxes due as a result of the vesting of shares by tendering a portion of the vested shares back to the Company.  Shares tendered back to the Company were 2,341 and 4,054 during the nine month periods ended July 2, 2021 and June 26, 2020, respectively.

Stock compensation expense, net of forfeitures, related to non-vested stock was $286 and $270 for the three month periods ended July 2, 2021 and June 26, 2020, respectively, and $862 and $762 for the nine months ended July 2, 2021 and June 26, 2020, respectively. Unrecognized compensation cost related to non-vested stock as of July 2, 2021 was $1,764, which amount will be amortized to expense through November 2024 or adjusted for changes in future estimated or actual forfeitures.

The fair value of restricted stock vested during the nine month periods ended July 2, 2021 and June 26, 2020 was $1,950 and $1,329, respectively.

Restricted Stock Units

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Index			JOHNSON OUTDOORS INC.

All restricted stock units (RSUs) awarded by the Company have been granted in the form of units payable in shares of Class A common stock upon vesting. The units are valued at the fair market value of a share of Class A common stock on the date of grant and vest within one year from the date of grant for RSUs granted to directors and three years from the date of grant for RSUs granted to employees.  The fair value at the date of grant is based on the number of units granted and the average of the Company’s high and low Class A common stock trading price on the date of grant or, if the Company’s Class A shares did not trade on the date of grant, the average of the Company’s high and low Class A common stock trading price on the last preceding date on which the Company’s Class A shares traded.

A summary of RSU activity for the nine months ended July 2, 2021 follows:

			Number of RSUs			Weighted Average Grant Price
RSUs at October 2, 2020			67,821			$	68.34
RSUs granted			20,059			88.49
RSUs vested			(18,112)			43.49
RSUs at July 2, 2021			69,768			80.58

 

Stock compensation expense, net of forfeitures, related to RSUs was $735 and $1,678 for the three and nine months ended July 2, 2021, respectively. For the three and nine months ended June 26, 2020, the Company recognized expense of $1,161 and $992, respectively. Unrecognized compensation cost related to non-vested RSUs as of July 2, 2021 was $3,111, which amount will be amortized to expense through September 2023 or adjusted for changes in future estimated or actual forfeitures.

RSU grantees may elect to reimburse the Company for withholding taxes due as a result of the vesting of units and issuance of unrestricted shares of Class A common stock by tendering a portion of such unrestricted shares back to the Company. Shares tendered back to the Company for this purpose were 3,320 and 3,075 during the nine month periods ended July 2, 2021 and June 26, 2020, respectively.

The fair value of restricted stock units recognized as a tax deduction during the nine month periods ended July 2, 2021 and June 26, 2020 was $3,353 and $1,426, respectively.

Compensation expense related to units earned by employees (as opposed to grants to outside directors) is based upon the attainment of certain Company financial goals related to cumulative net sales and cumulative operating profit over a three-year performance period. Awards are only paid if at least 80% of the target levels are met and maximum payouts are made if 120% or more of target levels are achieved. The payouts for achievement at the threshold levels of performance are equal to 50% of the target award amount. The payouts for achievement at maximum levels of performance are equal to 150% of the target award amount. To the extent earned, awards are issued in shares of Company Class A common stock after the end of the three-year performance period.

Employees’ Stock Purchase Plan

The Company’s shareholders have adopted the Johnson Outdoors Inc. 2009 Employees’ Stock Purchase Plan, which was most recently amended on March 2, 2017, and which provides for the issuance of shares of Class A common stock at a purchase price of not less than 85% of the fair market value of such shares on the date of grant or on the date of purchase, whichever is lower.

During the three month period ended July 2, 2021, the Company issued 0 shares of Class A common stock and recognized $31 of expense in connection with the Employees' Stock Purchase Plan. During the nine month period ended July 2, 2021, the Company issued 0 shares of Class A common stock and recognized $31 of expense in connection with the Plan. During the three month period ended June 26, 2020, the Company issued 2,190 shares of Class A common stock and recognized $14 of income in connection with the Plan. During the nine month period ended June 26, 2020, the Company issued 2,190 shares of Class A common stock and recognized $44 of expense in connection with the Plan.

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Index			JOHNSON OUTDOORS INC.

5    PENSION PLANS

The Company has two non-contributory defined benefit pension plans covering certain of its U.S. employees. Retirement benefits are generally provided based on the employees’ years of service and average earnings. Normal retirement age is 65, with provisions for earlier retirement.

The Company made contributions of $42 and $44 to its pension plans for the three months ended July 2, 2021 and June 26, 2020, respectively, and contributions of $130 and $132 for the nine months ended July 2, 2021 and June 26, 2020, respectively.

During the first quarter of fiscal 2021, Company management commenced actions to terminate both of the pension plans. As part of the termination of these plans, plan participants that are not currently in pay status will have the option of taking a lump sum payment or receiving payout pursuant to an annuity contract. When the termination and related payouts occur, which is subject to numerous conditions under the plan document and applicable law, they are estimated to unfavorably impact net income by approximately $4 to $5 million.

The components of net periodic benefit cost related to Company sponsored defined benefit plans for the three and nine month periods ended July 2, 2021 and June 26, 2020 were as follows:

			Three Months Ended						Nine Months Ended
			July 2, 2021			June 26, 2020			July 2, 2021			June 26, 2020
Components of net periodic benefit cost:
Service cost			$	—		$	—		$	—		$	—
Interest on projected benefit obligation			163			423			629			698
Less estimated return on plan assets			6			267			327			481
Amortization of unrecognized losses (gains)			163			321			432			403
Net periodic benefit cost			$	320		$	477		$	734		$	620

6    INCOME TAXES

For the three and nine months ended July 2, 2021 and June 26, 2020, the Company’s earnings before income taxes, income tax expense and effective income tax rate were as follows:

			Three Months Ended						Nine Months Ended
(thousands, except tax rate data)			July 2, 2021			June 26, 2020			July 2, 2021			June 26, 2020
Profit before income taxes			$	39,074		$	15,557		$	102,395		$	52,523
Income tax expense			10,300			2,688			25,940			12,837
Effective income tax rate			26.4		%	17.3		%	25.3		%	24.4		%

 

The effective tax rate was higher for the three and nine months ended July 2, 2021 compared to the prior year periods due to the favorable impact from a decrease in reserves for unrecognized tax benefits reported in the prior year periods.

The impact of the Company’s operations in jurisdictions where a valuation allowance is assessed is removed from the overall effective tax rate methodology and recorded directly based on year to date results for the year for which no tax expense or benefit can be recognized.  The significant tax jurisdictions that have a valuation allowance for the periods ended July 2, 2021 and June 26, 2020 were:

 

July 2, 2021			June 26, 2020
France			France
Indonesia			Indonesia
Switzerland			Switzerland

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Index			JOHNSON OUTDOORS INC.

The Company regularly assesses the adequacy of its provisions for income tax contingencies in accordance with the applicable authoritative guidance on accounting for income taxes.  As a result, the Company may adjust the reserves for unrecognized tax benefits due to the impact of changes in its assumptions or as a result of new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities and lapses of statutes of limitation.  The Company’s 2021 fiscal year tax expense is anticipated to be unchanged related to uncertain income tax positions.

In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized benefits as a component of income tax expense.  The Company is projecting accrued interest of $300 related to uncertain income tax positions for the fiscal year ending October 1, 2021.

The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign taxing jurisdictions.   As of the date of this report, the following tax years remain open to examination by the respective significant tax jurisdictions:

 

Jurisdiction			Fiscal Years
United States			2017-2020
Canada			2017-2020
France			2017-2020
Germany			2017-2020
Italy			2018-2020
Switzerland			2010-2020

 

7    INVENTORIES

The Company values inventory at the lower of cost (determined using the first-in first-out method) or net realizable value. Inventories at the end of the respective periods consisted of the following:

			July 2, 2021			October 2, 2020			June 26, 2020
Raw materials			$	82,648		$	48,874		$	46,232
Work in process			87			39			153
Finished goods			48,007			48,524			47,833
			$	130,742		$	97,437		$	94,218

8    GOODWILL

The changes in goodwill during the nine months ended July 2, 2021 and June 26, 2020 were as follows:

			July 2, 2021			June 26, 2020
Balance at beginning of period			$	11,184		$	11,186
Amount attributable to movements in foreign currency rates			58			(23)
Balance at end of period			$	11,242		$	11,163

The Company evaluates the carrying value of goodwill for a reporting unit on an annual basis or more frequently when events and circumstances warrant such an evaluation.  In conducting this analysis, the Company uses the income approach to compare the reporting unit's carrying value to its indicated fair value. Fair value is determined primarily by using a discounted cash flow methodology that requires considerable management judgment and long-term assumptions and is considered a Level 3 (unobservable) fair value determination in the fair value hierarchy (see Note 13) below.

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9    WARRANTIES

 

The Company provides warranties on certain of its products as they are sold. The following table summarizes the Company’s warranty activity for the nine months ended July 2, 2021 and June 26, 2020.

			July 2, 2021			June 26, 2020
Balance at beginning of period			$	10,849		$	9,190
Expense accruals for warranties issued during the period			9,776			8,252
Less current period warranty claims paid			6,852			6,529
Balance at end of period			$	13,773		$	10,913

10    CONTINGENCIES

The Company is subject to various legal actions and proceedings in the normal course of business, including those related to commercial disputes, product liability, intellectual property and regulatory matters. The Company is insured against loss for certain of these matters. Although litigation is subject to many uncertainties and the ultimate exposure with respect to these matters cannot be ascertained, management does not believe the final outcome of any pending litigation will have a material adverse effect on the financial condition, results of operations, liquidity or cash flows of the Company.

11    INDEBTEDNESS

The Company had no debt outstanding at July 2, 2021, October 2, 2020, or June 26, 2020.

Revolvers

The Company and certain of its subsidiaries have entered into an unsecured credit facility with PNC Bank National Association and Associated Bank, N.A. ("the Lending Group").  This credit facility consists of a $75 million Revolving Credit Facility among the Company, certain of the Company’s subsidiaries, PNC Bank National Association, as lender and as administrative agent, and the other lender named therein (as amended, the “Credit Agreement” or “Revolver”). The Revolver provides for borrowing of up to an aggregate principal amount not to exceed $75,000 with a $50,000 accordion feature that gives the Company the option to increase the maximum financing availability (i.e., an aggregate borrowing amount of $125,000) subject to the conditions of the Credit Agreement and subject to the approval of the lenders. On July 15, 2021, the Company entered into a First Amendment to this credit facility that extended its expiration date from November 15, 2022, to July 15, 2026. Other key provisions of the credit facility remained as outlined above and the description herein is qualified in its entirety by the terms and conditions of the original Debt Agreement (a copy of which was filed as Exhibit 99.1 to the current report on Form 8-K dated and filed with the Securities and Exchange Commission on November 20, 2017) and the Amendment, (a copy of which was filed as Exhibit 10.1 to the current report on Form 8-K dated and filed with the Securities and Exchange Commission on July 16, 2021).

 

The interest rate on the Revolver is based on LIBOR plus an applicable margin, which margin resets each quarter.  The applicable margin ranges from 1.00% to 1.75% and is dependent on the Company’s leverage ratio for the trailing twelve month period.  The interest rates on the Revolver at July 2, 2021 and June 26, 2020 were approximately 1.1% and 1.2%, respectively.

The Credit Agreement restricts the Company's ability to incur additional debt, includes maximum leverage ratio and minimum interest coverage ratio covenants and is unsecured.

Other Borrowings

The Company had no unsecured revolving credit facilities at its foreign subsidiaries as of July 2, 2021 or June 26, 2020.  The Company utilizes letters of credit primarily as security for the payment of future claims under its workers’ compensation insurance, which totaled approximately $181 and $181 as of July 2, 2021 and June 26, 2020, respectively.

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12    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The following disclosures describe the Company’s objectives in using derivative instruments, the business purpose or context for using derivative instruments, and how the Company believes the use of derivative instruments helps achieve the stated objectives.  In addition, the following disclosures describe the effects of the Company’s use of derivative instruments and hedging activities on its financial statements.

 

Foreign Exchange Risk

The Company has significant foreign operations, for which the functional currencies are denominated primarily in euros, Swiss francs, Hong Kong dollars 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, losses, assets and liabilities of the Company’s foreign operations, as reported in the Company’s consolidated financial statements, increase or decrease, accordingly.  Approximately 12% of the Company’s revenues for the nine month period ended July 2, 2021 were denominated in currencies other than the U.S. dollar. Approximately 4% were denominated in euros, approximately 7% were denominated in Canadian dollars and approximately 1% were denominated in Hong Kong dollars, with the remaining revenues denominated in various other foreign currencies. Changes in foreign currency exchange rates can cause the Company to experience unexpected financial losses or cash flow needs.

The Company may mitigate a portion of the fluctuations in certain foreign currencies through the use of foreign currency forward contracts.  Foreign currency forward contracts enable the Company to lock in the foreign currency exchange rate to be paid or received for a fixed amount of currency at a specified date in the future. The Company may use such foreign currency forward contracts to mitigate the risk associated with changes in foreign currency exchange rates on financial instruments and known commitments, including commitments for inventory purchases, denominated in foreign currencies. As of July 2, 2021 and June 26, 2020, the Company held no foreign currency forward contracts.

13    FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy has been established based on three levels of inputs, of which the first two are considered observable and the last unobservable.

•Level 1 - Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets or liabilities.

•Level 2 - Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments.

•Level 3 - Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

The carrying amounts of cash, cash equivalents, short term investments, accounts receivable, and accounts payable approximated their fair values at July 2, 2021, October 2, 2020 and June 26, 2020 due to the short term maturities of these instruments. When indicators of impairment are present, the Company may be required to value certain long-lived assets such as property, plant, and equipment, and other intangibles at their fair value.

Valuation Techniques

Rabbi Trust Assets

Rabbi trust assets are classified as trading securities and are comprised of marketable debt and equity securities that are marked to fair value based on unadjusted quoted prices in active markets.  The rabbi trust assets are used to fund amounts the Company owes to certain officers and other employees under the Company’s non-qualified deferred compensation plan.  These assets are included in "Other assets" in the accompanying Company's Condensed Consolidated Balance Sheets, and the mark to market adjustments on the assets are recorded in “Other income, net” in the accompanying Condensed Consolidated Statements of Operations. The offsetting deferred compensation liability

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is also reported at fair value as "Deferred compensation liability" in the Company's accompanying Condensed Consolidated Balance Sheets. Changes in the liability are recorded in "Administrative management, finance and information systems" expense in the accompanying Condensed Consolidated Statements of Operations.

 

The following table summarizes the Company’s financial assets measured at fair value as of July 2, 2021:

 

			Level 1			Level 2			Level 3			Total
Assets:
Rabbi trust assets			$	27,879		$	—		$	—		$	27,879

 

The following table summarizes the Company’s financial assets measured at fair value as of October 2, 2020:

 

			Level 1			Level 2			Level 3			Total
Assets:
Rabbi trust assets			$	21,550		$	—		$	—		$	21,550

 

The following table summarizes the Company’s financial assets measured at fair value as of June 26, 2020:

 

			Level 1			Level 2			Level 3			Total
Assets:
Rabbi trust assets			$	19,493		$	—		$	—		$	19,493

The effect of changes in the fair value of financial instruments on the accompanying Condensed Consolidated Statements of Operations for the three and nine month periods ended July 2, 2021 and June 26, 2020 was:

						Three Months Ended						Nine months ended
			Location of (income) loss recognized in Statement of Operations			July 2, 2021			June 26, 2020			July 2, 2021			June 26, 2020
Rabbi trust assets			Other (income) expense, net			$	(1,351)		$	(2,732)		$	(5,151)		$	(398)

There were no assets or liabilities measured at fair value on a non-recurring basis in periods subsequent to their initial recognition for either of the nine month periods ended July 2, 2021 or June 26, 2020.

14    NEW ACCOUNTING PRONOUNCEMENTS

    Recently adopted accounting pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). In July 2018, the FASB also issued ASU 2018-10 Codification Improvements to Topic 842, Leases and ASU 2018-11 Leases (Topic 842) Targeted Improvements. In February 2019, the FASB also issued ASU 2019-01 Leases (Topic 842): Codification Improvements. This ASU and the updates to this ASU require organizations to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. This guidance was effective for the Company in the first quarter of fiscal year 2020, and may be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with certain practical expedients available. The Company adopted the provisions of these ASU's using the modified retrospective approach at the beginning of the first quarter of fiscal 2020, coinciding with the standard's effective date. The additional disclosures required by the ASU and its updates are included in Note 18 "Leases" of these Notes to the Condensed Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326)” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05 (collectively Topic 326). Topic 326 requires the measurement and recognition of expected credit losses for financial assets held at

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amortized cost. This replaces the existing incurred loss model with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates. This guidance was effective for the Company in the first quarter of fiscal year 2021, and must be adopted by applying a cumulative effect adjustment to retained earnings. The Company adopted the provisions of this ASU at the beginning of the first quarter of fiscal 2021, however the ASU did not have a significant impact on its financial statements, and therefore no adjustment to retained earnings was necessary.

    Recently issued accounting pronouncements

In August 2018, the FASB issued ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans (Topic 715), which modifies the disclosure requirements for employers that sponsor defined pension or postretirement plans. The amendments in this guidance are effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on its disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. The Company does not expect adoption of the new guidance to have a significant impact on its financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 is intended to provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (LIBOR) or by another reference rate expected to be discontinued. The amendments in this guidance were effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the potential impact of this guidance on its financial statements and disclosures.

15    REVENUES

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our goods at a point in time based on shipping terms and transfer of title. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. The amount of consideration received can vary, primarily because of customer incentive or rebate arrangements. The Company estimates variable consideration based on the expected value of total consideration to which customers are likely to be entitled based on historical experience and projected market expectations. Included in the estimate is an assessment as to whether any variable consideration is constrained. Revenue estimates are adjusted at the earlier of a change in the expected value of consideration or when the consideration becomes fixed. For all contracts with customers, the Company has not adjusted the promised amount of consideration for the effects of a significant financing component as the period between the transfer of the promised goods and the customer's payment is expected to be one year or less. Sales are made on normal and customary short-term credit terms, generally ranging from 30 to 90 days, or upon delivery of point of sale transactions. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

The Company enters into contractual arrangements with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms. The Company does not have contracts which are satisfied over time. Due to the nature of these contracts, no significant judgment exists in relation to the identification of the customer contract, satisfaction of the performance obligation, or transaction price. The Company expenses incremental costs of obtaining a contract due to the short-term nature of the contracts.

Estimated costs of returns, allowances and discounts, based on historic experience, are accrued as a reduction to sales when revenue is recognized. The Company provides customers the right to return eligible products under certain circumstances. At July 2, 2021, the right to returns asset was $1,105 and the accrued returns liability was $3,043. At June 26, 2020, the right to returns asset was $1,082 and the accrued returns liability was $3,207. The Company also offers assurance-type warranties relating to its products sold to end customers that continue to be accounted for under ASC 460 Guarantees.

The Company generally accounts for shipping and handling activities as a fulfillment activity, consistent with the timing of revenue recognition; that is, when a customer takes control of the transferred goods. In the event that a

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customer were to take control of a product upon or after shipment, the Company has made an accounting policy election to treat such shipping and handling activities as a fulfillment cost. Shipping and handling fees billed to customers are included in "Net Sales," and shipping and handling costs are recognized within "Marketing and selling expenses" in the same period the related revenue is recognized.

The Company has a wide variety of seasonal, outdoor recreation products used primarily for fishing from a boat, diving, paddling, hiking and camping, that are sold to a variety of customers in multiple end markets. Nonetheless, the revenue recognition policies are similar among all the various products sold by the Company.

See Note 16 for required disclosures of disaggregated revenue.

16    SEGMENTS OF BUSINESS

The Company conducts its worldwide operations through separate business segments, each of which represents major product lines. Operations are conducted in the United States and various foreign countries, primarily in Europe, Canada and the Pacific Basin.  During the three and nine month periods ended July 2, 2021, combined net sales to one customer of the Company's Fishing, Camping and Watercraft Recreation segments represented approximately $25,138 and $88,649, respectively, of the Company's consolidated revenues. During the three and nine month periods ended June 26, 2020, combined net sales to one customer of the Company's Fishing, Camping and Watercraft Recreation segments represented approximately $20,433 and $70,269, respectively, of the Company's consolidated revenues.

Net sales and operating profit include both sales to customers, as reported in the Company’s accompanying Condensed Consolidated Statements of Operations, and interunit transfers, which are priced to recover cost plus an appropriate profit margin. Total assets represent assets that are used in the Company’s operations in each business segment at the end of the periods presented.

 

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A summary of the Company’s operations by business segment is presented below:

 

			Three Months Ended						Nine Months Ended
			July 2, 2021			June 26, 2020			July 2, 2021			June 26, 2020			October 2, 2020
Net sales:
Fishing:
Unaffiliated customers			$	155,098		$	102,542		$	441,727		$	335,445
Interunit transfers			250			199			636			529
Camping:
Unaffiliated customers			17,744			9,653			44,160			25,999
Interunit transfers			13			12			35			29
Watercraft Recreation:
Unaffiliated customers			19,783			15,238			49,948			26,104
Interunit transfers			90			29			146			36
Diving
Unaffiliated customers			20,678			10,694			48,973			41,405
Interunit transfers			2			2			8			11
Other / Corporate			265			263			583			575
Eliminations			(355)			(242)			(825)			(605)
Total			$	213,568		$	138,390		$	585,391		$	429,528
Operating profit (loss):
Fishing			$	39,390		$	23,273		$	107,553		$	71,208
Camping			4,305			828			10,075			1,603
Watercraft Recreation			3,446			1,181			7,329			(2,021)
Diving			1,978			(2,595)			384			(3,202)
Other / Corporate			(11,020)			(9,758)			(27,649)			(16,064)
			$	38,099		$	12,929		$	97,692		$	51,524
Total assets (end of period):
Fishing									$	264,364		$	204,406		$	206,244
Camping									48,352			35,670			37,514
Watercraft Recreation									29,519			24,003			21,038
Diving									67,927			63,079			67,393
Other / Corporate									249,233			190,451			213,837
									$	659,395		$	517,609		$	546,026

1

17    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in Accumulated Other Comprehensive Income (“AOCI”) by component, net of tax, for the three months ended July 2, 2021 were as follows:

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			Foreign Currency Translation Adjustment			Unamortized Loss on Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
Balance at April 2, 2021			$	8,253		$	(2,404)		$	5,849
Other comprehensive income before reclassifications			742			—			742
Amounts reclassified from accumulated other comprehensive income			—			164			164
Tax effects			—			(41)			(41)
Balance at July 2, 2021			$	8,995		$	(2,281)		$	6,714

 

The changes in AOCI by component, net of tax, for the three months ended June 26, 2020 were as follows: 

			Foreign Currency Translation Adjustment			Unamortized Loss on Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
Balance at March 27, 2020			$	3,883		$	(3,109)		$	774
Other comprehensive income before reclassifications			1,537			—			1,537
Amounts reclassified from accumulated other comprehensive income			—			240			240
Tax effects			—			(60)			(60)
Balance at June 26, 2020			$	5,420		$	(2,929)		$	2,491

The changes in AOCI by component, net of tax, for the nine months ended July 2, 2021 were as follows:

			Foreign Currency Translation Adjustment			Unamortized Loss on Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
Balance at October 2, 2020			$	7,323		$	(2,606)		$	4,717
Other comprehensive loss before reclassifications			1,672			—			1,672
Amounts reclassified from accumulated other comprehensive income			—			433			433
Tax effects			—			(108)			(108)
Balance at July 2, 2021			$	8,995		$	(2,281)		$	6,714

The changes in AOCI by component, net of tax, for the nine months ended June 26, 2020 were as follows:    

			Foreign Currency Translation Adjustment			Unamortized Loss on Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
September 27, 2019			$	4,790		$	(3,232)		$	1,558
Other comprehensive loss before reclassifications			630			—			630
Amounts reclassified from accumulated other comprehensive income			—			404			404
Tax effects			—			(101)			(101)
Balance at June 26, 2020			$	5,420		$	(2,929)		$	2,491

    The reclassifications out of AOCI for the three months ended July 2, 2021 and June 26, 2020 were as follows: 

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			Three Months Ended
			July 2, 2021			June 26, 2020			Statement of Operations Presentation
Unamortized loss on defined benefit pension plans:
Amortization of loss			$	164		$	240		Other income and expense
Tax effects			(41)			(60)			Income tax expense
Total reclassifications for the period			$	123		$	180

The reclassifications out of AOCI for the nine months ended July 2, 2021 and June 26, 2020 were as follows: 

 

			Nine Months Ended
			July 2, 2021			June 26, 2020			Statement of Operations Presentation
Unamortized loss on defined benefit pension plans:
Amortization of loss			$	433		$	404		Other income and expense
Tax effects			(108)			(101)			Income tax expense
Total reclassifications for the period			$	325		$	303

18    LEASES

    Adoption of Topic 842

At the beginning of fiscal year 2020, the Company adopted ASU 2016-02 and all subsequent ASUs that modified accounting standards Topic 842 using a modified retrospective adoption method, in which right-of-use ("ROU") assets and lease liabilities are recognized in the condensed consolidated balance sheets. Under the effective date transition method, financial results reported in periods prior to fiscal year 2020 are unchanged. The Company also elected the package of practical expedients permitted under the standard, which does not require reassessment of prior conclusions related to contracts containing a lease, lease classification and initial direct lease costs. As an ongoing accounting policy election, the Company will exclude short-term leases (terms of 12 months or less) from the balance sheet presentation and will account for non-lease and lease components in a contract as a single lease component for most asset classes. All leases in which the Company is the lessee are classified as operating leases, and the Company does not have any finance leases or sublease agreements. Additionally, the Company does not have any leases in which it is the lessor.

The adoption of the new standard had a significant impact on the Company's condensed consolidated balance sheet in fiscal year 2020 due to the initial recognition of approximately $41 million of lease liabilities with corresponding ROU assets for operating leases. The new standard did not have a significant impact on the condensed consolidated statements of operations or cash flows, and did not impact our debt covenant compliance under our current credit agreements.

The Company determines if an arrangement is a lease at inception. The Company leases certain facilities and machinery and equipment under long-term, non-cancelable operating leases. As of July 2, 2021, the Company had approximately 200 leases, with remaining terms ranging from less than one year to 18 years. Some of the leases contain variable payment terms, such as payments based on fluctuations in the Consumer Price Index (CPI). Some leases also contain options to extend or terminate the lease. To the extent the Company is reasonably certain to exercise these options, they have been considered in the calculation of the ROU assets and lease liabilities. Under current lease agreements, there are no residual value guarantees or restrictive lease covenants. In calculating the ROU assets and lease liabilities, several assumptions and judgments were made by the Company, including whether a contract is or contains a lease under the new definition, and the determination of the discount rate, which is assumed to be the incremental borrowing rate. The incremental borrowing rate is derived from information available to the Company at the lease commencement date based on lease length and location.

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The components of lease expense recognized in the accompanying Condensed Consolidated Statements of Operations for the three and nine months ended July 2, 2021 and June 26, 2020 were as follows:

			Three months ended						Nine months ended
			July 2, 2021			June 26, 2020			July 2, 2021			June 26, 2020
Lease Cost
Operating lease costs			$	2,107		$	1,792		$	6,184		$	5,355
Short-term lease costs			403			478			1,206			1,435
Variable lease costs			46			42			138			129
Total lease cost			$	2,556		$	2,312		$	7,528		$	6,919

Included in the amounts in the table above were rent expense to related parties of $262 and $778 for the three and nine months ended July 2, 2021, respectively, and $246 and $739 for the three and nine months ended June 26, 2020, respectively.

As of July 2, 2021, the Company did not have any finance leases. There were no significant new leases entered into during the quarter ended July 2, 2021. Supplemental balance sheet, cash flow, and other information related to operating leases was as follows:

			Nine months ended
			July 2, 2021			June 26, 2020
Operating leases:
Operating lease ROU assets			$	43,741		$	37,669
Current operating lease liabilities			5,281			5,900
Non-current operating lease liabilities			39,382			32,474
Total operating lease liabilities			$	44,663		$	38,374
Weighted average remaining lease term (in years)			13.24			10.50
Weighted average discount rate			3.15		%	2.86		%
Cash paid for amounts included in the measurement of lease liabilities			$	5,680		$	4,726

Future minimum rental commitments under non-cancelable operating leases with an initial lease term in excess of one year at July 2, 2021 were as follows:

Year			Related parties included in total						Total
Remainder of 2021			$	289					$	2,428
2022			193						6,631
2023			—						5,825
2024			—						5,263
2025			—						3,927
Thereafter			—						32,563
Total undiscounted lease payments			482						56,637
Less: Imputed interest			(2)						(11,974)
Total net lease liability			$	480					$	44,663

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During the second quarter of fiscal 2021, the Company amended its agreement with the landlord on an existing leased facility. Payments under the amended agreement are expected to begin in fiscal year 2022 and go through June 2039, and total estimated rental payments, not included in the amounts above, will be approximately $14 million over the course of the lease as amended. As of July 2, 2021, the Company did not have any other additional significant operating lease commitments that have not yet commenced.

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) includes comments and analysis relating to the results of operations and financial condition of Johnson Outdoors Inc. and its subsidiaries (collectively, the “Company”) as of and for the three and nine month periods ended July 2, 2021 and June 26, 2020. All monetary amounts, other than share and per share amounts, are stated in thousands.

Our MD&A is presented in the following sections:

•Forward Looking Statements

•Trademarks

•Overview

•Results of Operations

•Liquidity and Financial Condition

•Contractual Obligations and Off Balance Sheet Arrangements

•Critical Accounting Policies and Estimates

This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and related notes that immediately precede this section, as well as the Company’s Annual Report on Form 10-K for the fiscal year ended October 2, 2020 which was filed with the Securities and Exchange Commission on December 11, 2020.

Forward Looking Statements

Certain matters discussed in this Form 10-Q are “forward-looking statements,” and the Company intends these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of those safe harbor provisions. These forward-looking statements can generally be identified as such because they include phrases such as the Company “expects,” “believes,” “anticipates,” “intends,” use of words such as “confident,” “could,” “may,” “planned,” “potential,” “should,” “will,” “would” or the negative of such words 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 the matters described under the caption “Risk Factors” in Item 1A of the Company’s Form 10-K which was filed with the Securities and Exchange Commission on December 11, 2020, the update to such "Risk Factors" section in Part II, Item 1A in this Form 10-Q and the following:  changes in economic conditions, consumer confidence levels and discretionary spending patterns in key markets; uncertainties stemming from changes in U.S. trade policies, tariffs, and the reaction of other countries to such changes; the global outbreaks of disease, such as the COVID-19 pandemic which has affected, and may continue to affect, market and economic conditions, and the timing, pricing and continued availability of raw materials and components from our supply chain, along with wide-ranging impacts on employees, customers and various aspects of our operations; the Company’s success in implementing its strategic plan, including its targeted sales growth platforms, innovation focus and its increasing digital presence; litigation costs related to actions of and disputes with third parties, including competitors; the Company’s continued success in its working capital management and cost-structure reductions; the Company’s success in integrating strategic acquisitions; the risk of future writedowns of goodwill or other long-lived assets; the ability of the Company’s customers to meet payment obligations; the impact of actions of the Company's competitors with respect to product development or enhancement or the introduction of new products into the Company's markets; movements in foreign currencies, interest rates or commodity costs; fluctuations in the prices of raw materials or the availability of raw materials used by the Company; any disruptions in the Company's supply chain as a result of material fluctuations in the Company's order volumes and requirements for (as well as limitations on the availability of) raw materials and other components necessary to manufacture and produce the Company's products; the success of the Company’s suppliers and customers and the impact of any consolidation in the industries of the Company's suppliers and customers; the ability of the Company to deploy its capital successfully; unanticipated outcomes related to outsourcing certain manufacturing processes; unanticipated outcomes related to litigation matters; 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

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as of the date of this filing. The Company assumes no obligation, and disclaims any obligation, to update such forward-looking statements to reflect subsequent events or circumstances.

 

Trademarks

We have registered the following trademarks, among others, which may be used in this report: Minn Kota®, Cannon®, Humminbird®, Eureka!®, Jetboil®, Old Town®, Ocean Kayak®, Carlisle®, and SCUBAPRO®.

Overview

The Company is a leading global manufacturer and marketer of branded seasonal outdoor recreation products used primarily for fishing, diving, paddling and camping.  The Company’s portfolio of well-known consumer brands has attained leading market positions due to continuous innovation, marketing excellence, product performance and quality.  The Company’s values and culture support innovation in all areas, promoting and leveraging best practices and synergies within and across its subsidiaries to advance the Company’s strategic vision set by executive management and approved by the Company’s Board of Directors.  The Company is controlled by Helen P. Johnson-Leipold, the Company’s Chairman and Chief Executive Officer, members of her family and related entities.

Coronavirus (COVID-19) 

In March 2020, the World Health Organization announced the COVID-19 outbreak had become a world-wide pandemic. Various government mandates resulted in travel limitations and business and government shutdowns which had significant negative economic impacts around the world. The Company temporarily halted certain production operations at the end of the second fiscal quarter and beginning of the third fiscal quarter of 2020, and saw a significant decline in demand and sales volumes during that time.

Although later during our 2020 third fiscal quarter, stay-at-home orders were lifted, government prescriptions for the general public to maintain social distancing and avoid activities involving large crowds or being in confined spaces with others to mitigate the spread of the virus continued and, as a result, the outdoor recreation industry has benefited from increased participation. As consumers took advantage of being outdoors, the Company saw an increase in demand for many of its warm weather outdoor recreational products and each of our Fishing, Camping and Watercraft Recreation segments began to experience increased sales volumes toward the end of fiscal 2020. As a result, our customers’ inventory levels were drawn down, and accordingly, we continued to experience strong orders from our customers during the first three quarters of fiscal 2021 to satisfy strong consumer demand for our products across these segments. Nonetheless, COVID-19 has caused widely-documented supply chain and logistics disruptions across industries, including those in which we operate, which have been exacerbated due to the recent higher demand for our outdoor recreation products. As a result of these disruptions, the Company is focused on managing its supply chain to meet the continued strong consumer demand; however, such disruptions may affect our ability to fill such demand across our segments.

Highlights

Net sales of $213,568 for the third quarter of fiscal 2021 increased $75,178, or 54%, from the same period in the prior year. The prior year third quarter was heavily impacted by COVID-19 related shutdowns, resulting in unusually low sales volumes for the quarter. Due to this, as well as increased participation in outdoor recreation activities in the current fiscal year as a result of social distancing and other indoor activity restrictions related to the ongoing COVID-19 pandemic, there was a significant increase in third quarter sales volumes across all businesses over the prior year quarter. This sales volume increase was the primary driver of the increase of $25,170 in operating profit over the prior year quarter.

Seasonality

The Company’s business is seasonal in nature. The third fiscal quarter traditionally falls within the Company’s primary selling season for its warm-weather outdoor recreation products.  The table below sets forth a historical view of the Company’s seasonality during the last three fiscal years. See “Coronavirus (COVID-19)” above for additional information of the impact of COVID-19 on changes to the Company’s seasonality for fiscal 2020 which changes have continued into fiscal 2021 and which changes are expected to continue to evolve over the remainder of fiscal 2021.

 

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			Fiscal Year
			2020						2019						2018
Quarter Ended			Net Sales			Operating Profit			Net Sales			Operating Profit			Net Sales			Operating Profit
December			22		%	10		%	19		%	9		%	21		%	11		%
March			27		%	45		%	32		%	43		%	31		%	41		%
June			23		%	17		%	31		%	43		%	31		%	51		%
September			28		%	28		%	18		%	5		%	17		%	-3		%
			100		%	100		%	100		%	100		%	100		%	100		%

 

Results of Operations

The Company’s net sales and operating profit (loss) by business segment for the periods shown below were as follows:

			Three Months Ended						Nine Months Ended
			July 2, 2021			June 26, 2020			July 2, 2021			June 26, 2020
Net sales:
Fishing			$	155,348		$	102,741		$	442,363		$	335,974
Camping			17,757			9,665			44,195			26,028
Watercraft Recreation			19,873			15,267			50,094			26,140
Diving			20,680			10,696			48,981			41,416
Other / Eliminations			(90)			21			(242)			(30)
Total			$	213,568		$	138,390		$	585,391		$	429,528
Operating profit (loss):
Fishing			$	39,390		$	23,273		$	107,553		$	71,208
Camping			4,305			828			10,075			1,603
Watercraft Recreation			3,446			1,181			7,329			(2,021)
Diving			1,978			(2,595)			384			(3,202)
Other / Eliminations			(11,020)			(9,758)			(27,649)			(16,064)
Total			$	38,099		$	12,929		$	97,692		$	51,524

See “Note 16 – Segments of Business” of the notes to the accompanying Condensed Consolidated Financial Statements for the definition of segment net sales and operating profit.

Net Sales

Consolidated net sales for the three months ended July 2, 2021 were $213,568, an increase of $75,178, or 54%, compared to $138,390 for the three months ended June 26, 2020. As described above, the prior year third quarter was impacted negatively by COVID-19 related shutdowns. However, the current year quarter has seen strong sales volumes due to increased participation in outdoor recreation, as consumers continue to take advantage of being outdoors. Foreign currency translation had a favorable impact of approximately 1% on current year third quarter net sales compared to the prior year's third quarter net sales.

Net sales for the three months ended July 2, 2021 for the Fishing business were $155,348, an increase of $52,607, or 51%, from $102,741 during the third fiscal quarter of the prior year. The increase was driven by favorable comparison to the prior year quarter as explained above and due to COVID-19 related shutdowns in the prior year quarter, as well as increased participation in outdoor recreation, principally as a result of the effect of COVID-19 on consumer recreation and leisure choices which resulted in a significant increase in demand for our fishing products between quarters.

Net sales for the Camping business were $17,757 for the third quarter of the current fiscal year, an increase of $8,092, or 84%, from the prior year net sales during the same period of $9,665. COVID-19 related shutdowns unfavorably impacted both production and demand in the prior year period for this segment. In the current fiscal year third quarter, increased sales of

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Jetboil and Eureka! consumer camping products as a result of increased participation in outdoor recreation activities described above were the primary drivers of the increase.

Net sales for the third quarter of fiscal 2021 for the Watercraft Recreation business were $19,873, an increase of $4,606, or 30%, compared to $15,267 in the prior year same period. COVID-19 related shutdowns unfavorably impacted both production and demand in the prior year period for this segment. During the current fiscal year third quarter, increased participation in outdoor recreation activities and successful offerings of new products further drove the significant increase over the prior year quarter.

Net sales for Diving, our most global business, for the third quarter of fiscal 2021were $20,680, an increase of $9,984 or 93% versus $10,696 for the three months ended June 26, 2020. In the prior year third quarter, demand was severely deflated due to the effects of COVID-19 which caused the closure of destination travel locations and resulted in lower tourism activities. As several regions around the world have started to re-open, sales volumes have begun increasing. Additionally, there was a favorable foreign currency translation impact on sales in this segment of approximately 5% versus the prior year quarter.

 

For the nine months ended July 2, 2021, consolidated net sales of $585,391 increased $155,863 or 36% compared to $429,528 for the nine months ended June 26, 2020. Foreign currency translation had a favorable impact of less than 1% on net sales of the current year to date period versus the prior year to date period. Similar to the results for the fiscal third quarter as noted above, the prior year-to-date period experienced low sales volumes as a result of COVID-19 related shutdowns. Due to increased participation in outdoor recreation, the current fiscal 2021 year-to-date period has resulted in significant increased demand and sales volumes.

Net sales for the nine months ended July 2, 2021 for the Fishing business were $442,363, an increase of $106,389, or 32% from $335,974 during the same period of the prior year. The increase over the prior year to date period was driven by increased participation in outdoor recreation, principally as a result of the effect of COVID-19 on consumer recreation and leisure choices, resulting in higher demand across all product lines in this segment.

Net sales for the Camping business were $44,195 for the nine months ended July 2, 2021, an increase of $18,167, or 70%, from the prior year net sales during the same period of $26,028. Increased sales of Jetboil and Eureka! consumer camping products as a result of increased participation in outdoor recreation activities were the primary driver of the increase.

Net sales for the nine months ended July 2, 2021 for the Watercraft Recreation business were $50,094, an increase of $23,954, or 92%, compared to $26,140 in the prior year same period. Increased demand as a result of increased participation in watercraft recreation during the COVID-19 pandemic drove the overall increase over the prior year to date period.

Diving net sales were $48,981 for the nine months ended July 2, 2021 versus $41,416 for the nine months ended June 26, 2020, an increase of $7,565, or 18%. As explained earlier, this segment was heavily impacted by COVID-19 shutdowns and restrictions in the prior year-to-date period, due to disruptions to the global tourism industry. As the industry slowly begins to recover, increased demand in the current fiscal year-to-date period drove the increase in sales over the prior year period. There was a favorable effect of foreign currency translation of approximately 5% versus the prior year to date period.

Cost of Sales

Cost of sales for the three months ended July 2, 2021 was $116,057 compared to $75,828 for the three months ended June 26, 2020.  The increase year over year was driven primarily by increases in variable costs due to the higher sales volume in the current year quarter over the prior year quarter. Furthermore, the Company incurred $2,600 of additional tariff costs versus the prior year quarter and experienced increased inbound air freight costs as the Company continues to manage disruptions in its supply chain to ensure the availability of necessary components, parts and other raw materials across our segments to meet sales demand for our products.

For the nine months ended July 2, 2021, cost of sales was $319,596 compared to $238,222 in the same period of the prior year. The increase year over year was primarily driven by increased sales volumes in the current year versus the prior year as described above. The Company also incurred $4,600 of additional tariff costs and experienced increased inbound air freight costs versus the prior year quarter all as described above.

Gross Profit Margin

For the three months ended July 2, 2021, gross profit as a percentage of net sales was 45.7% compared to 45.2% in the three month period ended June 26, 2020. The gross profit impact of cost increases noted above was more than offset by increased sales volume-related efficiencies.

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For the nine months ended July 2, 2021, gross profit as a percentage of net sales was 45.4% compared to 44.5% in the prior nine month period, mainly due to increased sales volume efficiencies and favorable product mix, which more than offset the increase in tariffs and inbound air freight costs over the prior year to date period noted above.

At current expected rates, the Company anticipates an aggregate negative impact of Section 301 tariffs on China sourced goods, net of mitigation actions, on the Company's full fiscal 2021 gross profit of approximately $9 million, compared to approximately $3.5 million during the full previous fiscal year. The expiration of tariff exclusions that the Company secured in prior periods, combined with the application of tariffs on a broader assortment of goods, as well as additional purchase volume are driving the expected year over year increase in tariff costs.

Operating Expenses

Operating expenses were $59,412 for the three months ended July 2, 2021, compared to $49,633 for the three months ended June 26, 2020.  The increase of $9,779 was primarily due to the impact of higher sales volume-driven expenses and approximately $2,000 of higher health insurance claims expense in the current year quarter.

Operating expenses were $168,103 for the nine months ended July 2, 2021, compared to $139,782 for the nine months ended June 26, 2020. The increase of $28,321 was primarily due to the impact of higher sales volume-driven expenses, as well as higher variable and deferred compensation expense and higher health benefit costs between periods. Furthermore, favorable market conditions on the Company's deferred compensation plan assets resulted in approximately $4,900 of higher deferred compensation expense in the current year to date period as compared to the prior year to date period, which was entirely offset by a gain in Other (Income) Expense, net related to marking these deferred compensation plan assets to market.

Operating Profit

Operating profit on a consolidated basis for the three month period ended July 2, 2021 was $38,099, compared to an operating profit of $12,929 in the third quarter of the prior fiscal year.   Higher sales volumes and the other factors discussed above were the primary drivers of the increase in operating profit between quarters.

Operating profit on a consolidated basis for the nine months ended July 2, 2021 was $97,692, compared to an operating profit of $51,524 in the prior year to date period. The improvement year over year was driven primarily by increased sales volumes as well as the other factors discussed above.

Interest

Interest expense remained flat at $35 for each of the three months ended July 2, 2021 and June 26, 2020. Interest expense was $102 for the nine months ended July 2, 2021 compared to $105 for the nine months ended June 26, 2020.

Interest income for the three month periods ended July 2, 2021 and June 26, 2020 was $76 and $170, respectively. For the nine months ended July 2, 2021, interest income was $238, compared to $1,309 for the nine months ended June 26, 2020. The decrease in interest income year over year was mainly driven by the decrease in interest rates in fiscal 2021 versus the corresponding period of fiscal 2020.

Other Income, net

Other income was $934 for the three months ended July 2, 2021 compared to $2,493 in the prior year period.  Investment gains and earnings on the assets related to the Company’s non-qualified deferred compensation plan were $1,550 in the three month period ended July 2, 2021 compared to $2,791 in the three month period ended June 26, 2020. The change year over year in the investment value of these assets was offset by the deferred compensation expense included in the Company's Operating expenses during the same periods. For the three months ended July 2, 2021, foreign currency exchange losses were $220 compared to gains of $74 for the three months ended June 26, 2020. 

For the nine months ended July 2, 2021, other income was $4,567 compared to expense of $205 in the nine months ended June 26, 2020. Net investment gains and earnings on the assets related to the Company’s non-qualified deferred compensation plan in the nine months ended July 2, 2021 were $5,554, compared to $648 in the nine months ended June 26, 2020. Foreign currency exchange losses were $99 for the nine months ended July 2, 2021, compared to losses of $224 for the nine months ended June 26, 2020.

Income Tax Expense

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The Company’s provision for income taxes is based upon estimated annual effective tax rates in the tax jurisdictions in which the Company operates.  The effective tax rate for the three and nine month periods ended July 2, 2021 were 26.4% and 25.3%, respectively, compared to 17.3% and 24.4% in the corresponding periods of the prior year. The key factor impacting the effective tax rate for the three and nine months ended July 2, 2021 was the favorable impact from a decrease in reserves for unrecognized tax benefits reported in the prior year periods.

Net Income

Net income for the three months ended July 2, 2021 was $28,774, or $2.83 per diluted common class A and B share, compared to net income of $12,869, or $1.27 per diluted common class A and B share, for the third quarter of the prior fiscal year.

Net income for the nine months ended July 2, 2021 was $76,455, or $7.53 per diluted common class A and B share, compared to net income of $39,686, or $3.93 per diluted common class A and B share, for the nine months ended June 26, 2020.

Liquidity and Financial Condition

Cash and cash equivalents totaled $249,016 as of July 2, 2021, compared to cash and cash equivalents of $181,445 as of June 26, 2020.  The increase in cash year over year was due primarily to increased operating profits earned over the prior year period. The Company’s debt to total capitalization ratio was 0% as of July 2, 2021 and June 26, 2020.  The Company’s total debt balance was $0 as of each of July 2, 2021 and June 26, 2020.  See “Note 11 – Indebtedness” in the notes to the Company’s accompanying condensed consolidated financial statements for further discussion.

Accounts receivable, net of allowance for doubtful accounts, were $94,750 as of July 2, 2021, an increase of $12,173 compared to $82,577 as of June 26, 2020.  The increase is consistent with increased sales volumes year over year. Inventories were $130,742 as of July 2, 2021, an increase of $36,524, compared to $94,218 as of June 26, 2020. The increase in our inventory balances over the prior year period is due to increased raw material and other component purchases in an effort to meet increased demand for products in the current year period. Accounts payable were $54,991 at July 2, 2021 compared to $31,026 as of June 26, 2020, which increase corresponded with the increase in inventory balances between periods.

The Company’s cash flows from operating, investing and financing activities, as presented in the Company’s accompanying Condensed Consolidated Statements of Cash Flows, are summarized in the following table:

			Nine months ended
(thousands)			July 2, 2021			June 26, 2020
Cash provided by (used for):
Operating activities			$	57,611		$	25,560
Investing activities			(15,468)			(11,340)
Financing activities			(6,792)			(5,412)
Effect of foreign currency rate changes on cash			1,228			255
Increase in cash and cash equivalents			$	36,579		$	9,063

Operating Activities

Cash provided by operations totaled $57,611 for the nine months ended July 2, 2021 compared to $25,560 during the corresponding period of the prior fiscal year.  The increase in cash provided by operations over the prior year nine month period was due primarily to increased net income between periods, offset in part by changes in working capital balances between periods. Depreciation and amortization charges were $10,015 for the nine month period ended July 2, 2021 compared to $11,489 for the corresponding period of the prior year. 

Investing Activities

Cash used for investing activities totaled $15,468 for the nine months ended July 2, 2021 compared to cash used for investing activities of $11,340 for the corresponding period of the prior fiscal year.  Cash usage for capital expenditures totaled $15,481 for the current year nine month period and $11,350 for the prior year period.  Any additional capital expenditures in fiscal 2021 are expected to be funded by working capital.

 

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Financing Activities

Cash used for financing activities totaled $6,792 for the nine months ended July 2, 2021 compared to $5,412 for the nine month period ended June 26, 2020 and represents the payment of dividends and purchase of treasury stock. The Company had no debt during either quarter ended July 2, 2021 and June 26, 2020. See Note 11 "Indebtedness" to the accompanying Condensed Consolidated Financial Statements for additional information on our credit facilities.

As of July 2, 2021 the Company held approximately $54,656 of cash and cash equivalents in bank accounts in foreign taxing jurisdictions.

Contractual Obligations and Off Balance Sheet Arrangements

The Company has contractual obligations and commitments to make future payments including under operating leases and open purchase orders.  There have been no changes outside of the ordinary course of business in the specified contractual obligations during the quarter ended July 2, 2021.

 

The Company utilizes letters of credit primarily as security for the payment of future claims under its workers compensation insurance.  Letters of credit outstanding were approximately $181 and $181 as of July 2, 2021 and June 26, 2020, respectively.

The Company anticipates making contributions of $41 to its defined benefit pension plans during the remainder of fiscal 2021.

The Company has no other off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The Company’s critical accounting policies and estimates are identified in the Company’s Annual Report on Form 10-K for the fiscal year ending October 2, 2020 in Management’s Discussion and Analysis of Financial Condition and Results of Operations under the heading “Critical Accounting Estimates”, which was filed with the Securities and Exchange Commission on December 11, 2020. There were no significant changes to the Company’s critical accounting policies and estimates during the nine months ended July 2, 2021.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Except as noted below with respect to the COVID-19 outbreak, the Company’s exposure to market risk is limited to fluctuations in raw material commodity prices, interest rate fluctuations on borrowings under our unsecured credit facilities and foreign currency exchange rate risk associated with our foreign operations.  The Company does not utilize financial instruments for trading purposes.

Coronavirus outbreak

As disclosed in our prior filings with the Securities and Exchange Commission and elsewhere herein, in December 2019, a new strain of coronavirus ("COVID-19") began to spread globally, leaving no region or part of the world unaffected by the pandemic it has created. Governments and health authorities have been taking, and continue to take, measures to prevent the spread of this virus, and have approved the use of vaccines to help curb the spread of this virus, but it is presently unknown to what extent the vaccines and these other actions will be successful or the potential timing of completion of these measures and their outcome and impact on the Company's business in the future, including related to demand for the Company's products and any continued disruption in the supply of necessary components and raw materials for the Company to produce products to meet sales demand. If COVID-19 is not contained, among other things, the ability of the Company’s suppliers to manufacture and deliver the products that it sells to the Company (at the quantities and pricing demanded by the Company), the ability of the Company to manufacture and deliver its products to its customers, the Company's ability to display its products at trade shows and similar events, the Company's ability to conduct meetings with its customers and prospective customers, and, if a significant number of its employees at a particular facility or location were to contract coronavirus, the Company’s ability to conduct its day-to-day operations could all be adversely impacted. The continued financial impact of the coronavirus pandemic on the Company (including with respect to the continued heightened demand for the Company’s outdoor recreation products and any continued disruption in its supply chain) will depend on future developments and cannot be reasonably predicted or estimated at this time, but could materially and adversely affect its results for an unknown but possibly extended period. See the section "Risk Factors" identified in Part I, Item 1A in our Form 10-K filed with the Securities and Exchange Commission on December 11, 2020 for more information.

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Foreign Exchange Risk

The Company has significant foreign operations, for which the functional currencies are denominated primarily in euros, Swiss francs, Hong Kong dollars, 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, losses, assets and liabilities of the Company’s foreign operations, as reported in the Company’s consolidated financial statements, increase or decrease, accordingly. Approximately 12% of the Company’s revenues for the nine month period ended July 2, 2021 were denominated in currencies other than the U.S. dollar. Approximately 4% were denominated in euros, approximately 7% in Canadian dollars and approximately 1% in Hong Kong dollars, with the remaining revenues denominated in various other foreign currencies. Changes in foreign currency exchange rates can cause unexpected financial losses or cash flow needs.  The Company may mitigate a portion of the fluctuations in certain foreign currencies through the use of foreign currency forward contracts.  Foreign currency forward contracts enable the Company to lock in the foreign currency exchange rate to be paid or received for a fixed amount of currency at a specified date in the future. The Company may use such foreign currency forward contracts to mitigate the risk associated with changes in foreign currency exchange rates on financial instruments and known commitments, including commitments for inventory purchases, denominated in foreign currencies. As of July 2, 2021 and June 26, 2020, the Company held no foreign currency forward contracts.

Interest Rate Risk

The Company operates in a seasonal business and experiences significant fluctuations in operating cash flow as working capital needs increase in advance of the Company’s primary selling and cash generation season, and decline as accounts receivable are collected and cash is accumulated or debt is repaid.  The Company is subject to interest rate risk on its seasonal working capital needs if such needs are funded with short term floating rate debt.

 

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 include costs associated with metals, resins and packaging materials.

Impact of Inflation

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.

The Company’s results of operations and financial condition are presented based on historical cost.  The Company does not believe that inflation has significantly affected its results of operations.

Supply Chain Sourcing Risk

As described elsewhere herein, the COVID-19 pandemic has disrupted the normal seasonal selling patterns for the Company’s warm-weather outdoor recreation products. As stay at home restrictions were lifted, the Company has seen an increase in demand for its products that has continued into fiscal 2021. This higher than normal level of demand has (along with demand for certain raw materials and components used in our products from third parties in other industries unrelated to our products) placed strain on the Company’s supply chain, which has resulted in, and may continue to result in, limited availability of key raw materials and components that may ultimately result in delays in fulfilling orders or higher purchase prices (including increased expediting costs) to get the raw material and other components needed for the Company to fulfill orders and meet demand. The Company is monitoring this risk and planning for alternative sources of supply of critical components where feasible.

Item 4.    Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is accumulated and communicated to its

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management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective at reaching a level of reasonable assurance. It should be noted that in designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures. The Company has designed its disclosure controls and procedures to reach a level of reasonable assurance of achieving the desired control objectives.

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II    OTHER INFORMATION

Item 1.    Legal Proceedings

In the normal course of business, the Company may be involved in various legal proceedings from time to time.  We do not believe we are currently involved in any claim or action the ultimate disposition of which would have a material adverse effect on our financial statements.

Item 1A. Risk Factors

The following risk factor is in addition to the risk factors previously disclosed in our annual report on Form 10-K as filed with the Securities and Exchange Commission on December 11, 2020. The risk factor set forth below should be read in conjunction with the risk factors section and the Management's Discussion and Analysis section included in our annual report on Form 10-K as filed with the Securities and Exchange Commission on December 11, 2020.

Our stock price is volatile and our shareholders may not be able to resell shares of Class A Common Stock at or above the price they paid.

The trading price of our Class A Common Stock is highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include those discussed in this Report, those discussed under the “Risk Factors” section of our 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 11, 2020 and others such as:

•announcements relating to our earnings trends or with respect to any cost-cutting actions or other strategic transactions involving Johnson Outdoors;

•announcements relating to product development efforts of Johnson Outdoors or competitors;

•announcements relating to the receipt, modification or termination of customer or supplier contracts, including with respect to any government contracts or grants;

•prevailing economic conditions;

•business disruptions caused by weather events, pandemics, or other natural disasters;

•disputes concerning Johnson Outdoors's or its competitors' intellectual property or other proprietary rights;

•sales of our Class A Common Stock by our executive officers and directors or our significant shareholders in the future;

•the lack of an active, liquid, and orderly market in our Class A Common Stock;

•fluctuations in our quarterly operating results; and

•the issuance of new or change securities analysts' reports or recommendations regarding the shares of our Class A Common Stock

In addition, the stock markets in general, and the markets for equity securities in companies principally operating in the outdoor leisure or recreational product markets, have experienced periods of high volatility that have been often unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our Class A Common Stock.

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Index			JOHNSON OUTDOORS INC.

Except as noted above, there have been no other material changes to the risk factors disclosed in our Form 10-K as filed with the Securities and Exchange Commission on December 11, 2020.

Item 6.    Exhibits

See Exhibit Index to this Form 10-Q report.

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.
Signatures Dated: August 9, 2021
			/s/ Helen P. Johnson-Leipold
			Helen P. Johnson-Leipold
			Chairman and Chief Executive Officer
			(Principal Executive Officer)
			/s/ David W. Johnson
			David W. Johnson
			Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)

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Index			JOHNSON OUTDOORS INC.

Exhibit Index to Quarterly Report on Form 10-Q

Exhibit Number			Description
3.1			Articles of Incorporation of the Company as amended through February 17, 2000. (Filed as Exhibit 3.1(a) to the Company’s Form 10-Q for the quarter ended March 31, 2000 and incorporated herein by reference.)
3.2			Bylaws of the Company as amended and restated through December 6, 2010. (Filed as Exhibit 3.2 to the Company’s Form 10-K for the year ended October 1, 2010 and incorporated herein by reference.)
10.1			First Amendment dated July 15, 2021 to Amended and Restated Credit Agreement dated as of November 15, 2017 among the Company, certain of the Company’s subsidiaries named therein, PNC Bank, National Association, as lender and as administrative agent, PNC Capital Markets LLC, as sole lead arranger and bookrunner, and the other lender named therein. (Filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 16, 2021 and incorporated herein by reference.)
31.1			Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 (1)			Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101			The following materials from Johnson Outdoors Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 2021 formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive Income; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Shareholders' Equity and (vi) Notes to Condensed Consolidated Financial Statements. XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104			The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 2, 2021, formatted in Inline XBRL (included in Exhibit 101).

 

(1) This certification is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

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