================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 28, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 0-16255 JOHNSON OUTDOORS INC. (Exact name of Registrant as specified in its charter) Wisconsin 39-1536083 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 555 Main Street, Racine, Wisconsin 53403 (Address of principal executive offices) (262) 631-6600 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] As of April 24, 2003, 7,194,649 shares of Class A and 1,222,647 shares of Class B common stock of the Registrant were outstanding. ================================================================================
<TABLE> <CAPTION> JOHNSON OUTDOORS INC. Index Page No. - ------------------------------------------------------------------------------- ----------------- <S> <C> PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Operations - Three months and six months ended March 28, 2003 and March 29, 2002 1 Consolidated Balance Sheets - March 28, 2003, September 27, 2002 and March 29, 2002 2 Consolidated Statements of Cash Flows - Six months ended March 28, 2003 and March 29, 2002 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 Item 4. Controls and Procedures 17 PART II OTHER INFORMATION Item 1. Legal Proceedings 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18 Certifications 19 Exhibit Index 21 </TABLE>
PART I FINANCIAL INFORMATION Item 1. Financial Statements <TABLE> <CAPTION> JOHNSON OUTDOORS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - ---------------------------------------------------------------------------------------------------------------------------- (thousands, except per share data) Three Months Ended Six Months Ended - ---------------------------------------------------------------------------------------------------------------------------- March 28 March 29 March 28 March 29 2003 2002 2003 2002 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Net sales $ 83,265 $ 97,718 $ 138,160 $ 157,456 Cost of sales 47,072 56,977 78,284 91,425 - ---------------------------------------------------------------------------------------------------------------------------- Gross profit 36,193 40,741 59,876 66,031 - ---------------------------------------------------------------------------------------------------------------------------- Operating expenses: Marketing and selling 19,034 20,983 33,485 35,998 Administrative management, finance and information systems 8,372 8,001 15,806 14,933 Research and development 1,638 1,643 3,163 3,258 Amortization and write-down of intangibles 87 93 164 176 Profit sharing 938 1,073 968 1,266 Strategic charges -- 690 -- 1,151 - ---------------------------------------------------------------------------------------------------------------------------- Total operating expenses 30,069 32,483 53,586 56,782 - ---------------------------------------------------------------------------------------------------------------------------- Operating profit 6,124 8,258 6,290 9,249 Interest income (225) (230) (578) (376) Interest expense 1,339 1,909 2,710 3,461 Other (income) expense, net (2,115) 92 (2,471) 337 - ---------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes and cumulative effect of change in accounting principle 7,125 6,487 6,629 5,827 Income tax expense 2,828 2,598 2,612 2,334 - ---------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before cumulative effect of change in accounting principle 4,297 3,889 4,017 3,493 Gain on disposal of discontinued operations, net of tax of $255 -- 495 -- 495 Cumulative effect of change in accounting principle, net of tax of $(2,200) -- -- -- (22,876) - ---------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 4,297 $ 4,384 $ 4,017 $ (18,888) - ---------------------------------------------------------------------------------------------------------------------------- BASIC EARNINGS (LOSS) PER COMMON SHARE: Continuing operations $ 0.51 $ 0.48 $ 0.48 $ 0.43 Discontinued operations -- 0.06 -- 0.06 Cumulative effect of change in accounting principle -- -- -- (2.80) - ---------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 0.51 $ 0.54 $ 0.48 $ (2.31) - ---------------------------------------------------------------------------------------------------------------------------- DILUTED EARNINGS (LOSS) PER COMMON SHARE: Continuing operations $ 0.50 $ 0.46 $ 0.47 $ 0.42 Discontinued operations -- 0.06 -- 0.06 Cumulative effect of change in accounting principle -- -- -- (2.76) - ---------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 0.50 $ 0.52 $ 0.47 $ (2.28) - ---------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements. </TABLE> -1-
<TABLE> <CAPTION> JOHNSON OUTDOORS INC. CONSOLIDATED BALANCE SHEETS (unaudited) - -------------------------------------------------------------------------------------------------------------------------------- March 28 September 27 March 29 (thousands, except share data) 2003 2002 2002 - -------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> ASSETS Current assets: Cash and temporary cash investments $ 44,821 $ 100,830 $ 13,794 Accounts receivable, less allowance for doubtful accounts of $4,110, $4,028 and $3,662, respectively 71,520 39,972 76,944 Inventories 62,655 42,231 68,378 Deferred income taxes 4,985 5,083 5,014 Other current assets 6,245 4,021 5,726 - -------------------------------------------------------------------------------------------------------------------------------- Total current assets 190,226 192,137 169,856 Property, plant and equipment 29,795 29,611 30,358 Deferred income taxes 19,520 19,588 21,835 Intangible assets 28,930 27,139 29,434 Other assets 2,822 2,810 1,012 - -------------------------------------------------------------------------------------------------------------------------------- Total assets $ 271,293 $ 271,285 $ 252,495 - -------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt and current maturities of long-term debt $ 9,538 $ 8,058 $ 44,765 Accounts payable 20,715 13,589 19,210 Accrued liabilities: Salaries and wages 7,119 9,428 6,188 Income taxes 5,009 6,567 1,523 Other 18,629 24,005 13,140 - -------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 61,010 61,647 84,826 Long-term debt, less current maturities 68,488 80,195 78,256 Other liabilities 5,599 5,298 4,558 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities 135,097 147,140 167,640 - -------------------------------------------------------------------------------------------------------------------------------- Shareholders' equity: Preferred stock: none issued -- -- -- Common stock: Class A shares issued: March 28, 2003, 7,194,649; September 27, 2002, 7,112,155; March 29, 2002, 6,963,203 360 355 347 Class B shares issued (convertible into Class A): March 28, 2003, 1,222,647; September 27, 2002, 1,222,729; March 29, 2002, 1,222,729 61 61 61 Capital in excess of par value 48,277 47,583 46,188 Retained earnings 92,105 88,089 61,274 Contingent compensation 5 (22) 7 Accumulated other comprehensive loss: (4,612) (11,921) (23,022) - -------------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 136,196 124,145 84,855 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 271,293 $ 271,285 $ 252,495 - -------------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements. </TABLE> -2-
<TABLE> <CAPTION> JOHNSON OUTDOORS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - ---------------------------------------------------------------------------------------------------------------------------- (thousands) Six Months Ended - ---------------------------------------------------------------------------------------------------------------------------- March 28 March 29 2003 2002 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> CASH USED FOR OPERATIONS Net income (loss) $ 4,017 $ (18,888) Less gain from discontinued operations -- 495 Less loss from cumulative effect of change in accounting principle -- (22,876) - ---------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before cumulative effect of change in accounting principle 4,017 3,493 Adjustments to reconcile income from continuing operations before cumulative effect of change in accounting principle to net cash used for operating activities of continuing operations: Depreciation and amortization 3,981 4,472 Deferred income taxes 139 262 Change in assets and liabilities, net of effect of businesses acquired or sold: Accounts receivable (30,186) (32,529) Inventories (18,933) (7,915) Accounts payable and accrued liabilities (5,413) 4,491 Other, net (5,159) (2,156) - ---------------------------------------------------------------------------------------------------------------------------- (51,554) (29,387) - ---------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment -- 4,982 Net additions to property, plant and equipment (3,351) (4,150) - ---------------------------------------------------------------------------------------------------------------------------- (3,351) 832 - ---------------------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES Issuance of senior notes -- 50,000 Principal payments on senior notes and other long-term debt (8,000) (11,604) Net change in short-term debt (38) (12,793) Common stock transactions 620 1,172 - ---------------------------------------------------------------------------------------------------------------------------- (7,418) 26,775 - ---------------------------------------------------------------------------------------------------------------------------- Effect of foreign currency fluctuations on cash 6,314 (495) - ---------------------------------------------------------------------------------------------------------------------------- Decrease in cash and temporary cash investments (56,009) (2,275) CASH AND TEMPORARY CASH INVESTMENTS Beginning of period 100,830 16,069 - ---------------------------------------------------------------------------------------------------------------------------- End of period $ 44,821 $ 13,794 - ---------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements. </TABLE> -3-
JOHNSON OUTDOORS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1 Basis of Presentation The consolidated financial statements included herein are unaudited. In the opinion of management, these statements contain all adjustments (consisting of only normal recurring items) necessary to present fairly the financial position of Johnson Outdoors Inc. and subsidiaries (the Company) as of March 28, 2003 and the results of operations and cash flows for the three months and six months ended March 28, 2003. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2002 Annual Report on Form 10-K. Because of seasonal and other factors, the results of operations for the three months and six months ended March 28, 2003 are not necessarily indicative of the results to be expected for the full year. All monetary amounts, other than share and per share amounts, are stated in thousands. Certain amounts as previously reported have been reclassified to conform to the current period presentation. 2 Change in Accounting Principle Effective September 29, 2001, the Company adopted SFAS 142. In accordance with the adoption of this new standard, the Company ceased the amortization of goodwill. As required under SFAS 142, the Company performed an assessment of the carrying value of goodwill using a number of criteria, including the value of the overall enterprise as of September 29, 2001. This assessment resulted in a write off of goodwill during the quarter ended December 28, 2001 totaling $22,876, net of tax ($2.76 per diluted share) and was reflected as a change in accounting principle. The write off was associated with the Watercraft ($12,900) and Diving ($10,000) business units. Future impairment charges from existing operations or other acquisitions, if any, will be reflected as an operating expense in the statement of operations. 3 Income Taxes The provision for income taxes includes deferred taxes and is based upon estimated annual effective tax rates in the tax jurisdictions in which the Company operates. 4 Inventories Inventories at the end of the respective periods consist of the following: <TABLE> <CAPTION> --------------------------------------------------------------------------------------------------------------- March 28 September 27 March 29 2003 2002 2002 --------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Raw materials $ 24,719 $ 17,709 $ 22,514 Work in process 1,339 1,072 2,418 Finished goods 39,452 25,633 46,537 --------------------------------------------------------------------------------------------------------------- 65,510 44,414 71,469 Less reserves 2,855 2,183 3,091 --------------------------------------------------------------------------------------------------------------- $ 62,655 $ 42,231 $ 68,378 --------------------------------------------------------------------------------------------------------------- </TABLE> -4-
JOHNSON OUTDOORS INC. 5 Warranties The Company has recorded product warranty accruals of $1,947 as of March 28, 2003. The Company provides for warranties of certain products as they are sold in accordance with SFAS No. 5, Accounting for Contingencies. The following table summarizes the warranty activity for the six months ended March 28, 2003. <TABLE> <CAPTION> -------------------------------------------------------------------------------------------------------------- <S> <C> Balance at September 27, 2002 $ 1,571 Expense accruals for warranties issued during the year 1,144 Less current year warranty claims paid 767 -------------------------------------------------------------------------------------------------------------- Balance at March 28, 2003 $ 1,947 -------------------------------------------------------------------------------------------------------------- </TABLE> 6 Earnings per Share The following table sets forth the computation of basic and diluted earnings per common share from continuing operations before cumulative effect of change in accounting principle: <TABLE> <CAPTION> -------------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended -------------------------------------------------------------------------------------------------------------- March 28 March 29 March 28 March 29 2003 2002 2003 2002 -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Income from continuing operations before cumulative effect of change in accounting principle for basic and diluted earnings per share $ 4,297 $ 3,889 $ 4,017 $ 3,493 -------------------------------------------------------------------------------------------------------------- Weighted average common shares outstanding 8,402,851 8,173,716 8,379,135 8,171,325 Less nonvested restricted stock 6,895 12,803 7,813 13,498 -------------------------------------------------------------------------------------------------------------- Basic average common shares 8,395,956 8,160,913 8,371,322 8,157,827 Dilutive stock options and restricted stock 164,925 220,505 153,679 131,612 -------------------------------------------------------------------------------------------------------------- Diluted average common shares 8,560,881 8,381,418 8,525,001 8,289,439 -------------------------------------------------------------------------------------------------------------- Basic earnings per common share from continuing operations before cumulative effect of change in accounting principle $ 0.51 $ 0.48 $ 0.48 $ 0.43 Diluted earnings per common share from continuing operations before cumulative effect of change in accounting principle $ 0.50 $ 0.46 $ 0.47 $ 0.42 -------------------------------------------------------------------------------------------------------------- </TABLE> 7 Stock Ownership Plans/Accounting for Stock-Based Compensation The Company's current stock ownership plans provide for issuance of options to acquire shares of Class A common stock by key executives and non-employee directors. All stock options have been granted at a price not less than fair market value at the date of grant and become exercisable over periods of one to four years from the date of grant. Stock options generally have a term of 10 years. Current plans also allow for issuance of restricted stock or stock appreciation rights in lieu of options. Grants of restricted shares are not significant in any year presented. The Company adopted a phantom stock plan during fiscal 2003. Under this plan, certain employees earn cash bonus awards based upon the performance of the Company's Class A common stock. -5-
JOHNSON OUTDOORS INC. <TABLE> <CAPTION> A summary of stock option activity related to the Company's plans is as follows: -------------------------------------------------------------------------------------------------------------- Weighted Average Shares Exercise Price -------------------------------------------------------------------------------------------------------------- <S> <C> <C> Outstanding at September 28, 2001 1,086,795 $ 10.20 Granted 277,755 7.64 Exercised (148,952) 10.15 Cancelled (151,579) 13.54 -------------------------------------------------------------------------------------------------------------- Outstanding at September 27, 2002 1,064,019 9.06 Granted 20,750 10.36 Exercised (67,997) 7.25 Cancelled (22,721) 12.39 -------------------------------------------------------------------------------------------------------------- Outstanding at March 28, 2003 994,051 $ 9.12 -------------------------------------------------------------------------------------------------------------- </TABLE> Options to purchase 1,243,977 shares of common stock with a weighted average exercise price of $9.14 per share were outstanding at March 29, 2002. The Company accounts for its stock-based compensation plans under Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. The pro forma information below was determined using the fair value method based on provisions of Statement of Financial Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, issued in December 2002. <TABLE> <CAPTION> -------------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended -------------------------------------------------------------------------------------------------------------- March 28 March 29 March 28 March 29 2003 2002 2003 2002 -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Income from continuing operations before cumulative effect of change in accounting principle $ 4,297 $ 3,889 $ 4,017 $ 3,493 Total stock-based employee compensation expense determined under fair value method for all awards, net of tax (79) (137) (144) (259) -------------------------------------------------------------------------------------------------------------- Pro forma income from continuing operations before cumulative effect of change in accounting principle $ 4,218 $ 3,752 $ 3,873 $ 3,234 -------------------------------------------------------------------------------------------------------------- Basicearnings per common share from continuing operations before cumulative effect of change in accounting principle As reported $ 0.51 $ 0.48 $ 0.48 $ 0.43 Pro forma $ 0.50 $ 0.46 $ 0.46 $ 0.40 Diluted earnings per common share from continuing operations before cumulative effect of change in accounting principle As reported $ 0.50 $ 0.46 $ 0.47 $ 0.42 Pro forma $ 0.50 $ 0.46 $ 0.46 $ 0.40 -------------------------------------------------------------------------------------------------------------- </TABLE> -6-
JOHNSON OUTDOORS INC. 8 Comprehensive Income Comprehensive income includes net income and changes in shareholders' equity from non-owner sources. For the Company, the elements of comprehensive income excluded from net income are represented primarily by the cumulative foreign currency translation adjustment. Comprehensive income (loss) for the respective periods consists of the following: <TABLE> <CAPTION> -------------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended -------------------------------------------------------------------------------------------------------------- March 28 March 29 March 28 March 29 2003 2002 2003 2002 -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Net income (loss) $ 4,297 $ 4,384 $ 4,017 $ (18,888) Translation adjustment 1,320 (452) 7,309 (3,684) -------------------------------------------------------------------------------------------------------------- Comprehensive income (loss) $ 5,617 $ 3,932 $ 11,326 $ (22,572) -------------------------------------------------------------------------------------------------------------- </TABLE> 9 Discontinued Operations The Company recognized a gain from discontinued operations of $495, net of tax, for the three months ended March 29, 2002 related to the final accounting for the sale of the Fishing business. 10 Segments of Business The Company conducts its worldwide operations through separate global business units, each of which represent major product lines. Operations are conducted in the United States and various foreign countries, primarily in Europe, Canada and the Pacific Basin. The Company does not believe it has unusual risk related to concentrations in volume of business with a particular customer or supplier, or concentrations in revenue from a particular product. Net sales and operating profit include both sales to customers, as reported in the Company's consolidated statements of operations, and interunit transfers, which are priced to recover cost plus an appropriate profit margin. Identifiable assets represent assets that are used in the Company's operations in each business unit at the end of the periods presented. -7-
JOHNSON OUTDOORS INC. A summary of the Company's operations by business unit is presented below: <TABLE> <CAPTION> -------------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended -------------------------------------------------------------------------------------------------------------- March 28 March 29 March 28 March 29 2003 2002 2003 2002 -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Net sales: Outdoor equipment: Unaffiliated customers $ 18,809 $ 32,815 $ 30,666 $ 55,530 Interunit transfers 11 13 44 23 Motors: Unaffiliated customers 27,088 25,545 41,817 38,037 Interunit transfers 243 204 520 265 Watercraft: Unaffiliated customers 19,599 21,945 31,333 32,648 Interunit transfers 350 154 525 187 Diving: Unaffiliated customers 17,673 17,469 34,132 31,292 Interunit transfers 13 -- 29 -- Other 96 (56) 212 (51) Eliminations (617) (371) (1,118) (475) -------------------------------------------------------------------------------------------------------------- $ 83,265 $ 97,718 $ 138,160 $ 157,456 -------------------------------------------------------------------------------------------------------------- Operating profit (loss): Outdoor equipment $ 3,039 $ 4,867 $ 4,440 $ 7,453 Motors 4,296 3,190 5,873 3,740 Watercraft (1,111) 842 (3,040) (506) Diving 3,157 2,508 5,183 3,992 Other (3,257) (3,149) (6,166) (5,430) -------------------------------------------------------------------------------------------------------------- $ 6,124 $ 8,258 $ 6,290 $ 9,249 -------------------------------------------------------------------------------------------------------------- Identifiable assets (end of period): Outdoor equipment $ 28,855 $ 55,075 Motors 41,738 36,411 Watercraft 74,379 66,765 Diving 87,409 71,596 Other 38,912 22,648 -------------------------------------------------------------------------------------------------------------- $ 271,293 $ 252,495 -------------------------------------------------------------------------------------------------------------- </TABLE> 11 LITIGATION The Company is subject to various legal actions and proceedings in the normal course of business, including those related to environmental 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. On February 21, 2003, the competition department of the European Commission initiated formal proceedings in a case concerning certain provisions in the former distribution arrangements of the Company's European Scubapro/Uwatec subsidiaries. The Company is currently reviewing the Commission's initial views. The Company has been and will respond accordingly, aggressively pursuing its position. At this preliminary stage in the procedure, the Commission has indicated that it is considering imposing an unspecified fine on the Company and its European Scubapro/Uwatec subsidiaries. The Company cannot currently predict the outcome of the investigation. -8-
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion includes comments and analysis relating to the Company's results of operations and financial condition for the three months and six months ended March 28, 2003 and March 29, 2002. This discussion should be read in conjunction with the consolidated financial statements and related notes that immediately precede this section, as well as the Company's 2002 Annual Report on Form 10-K. Forward Looking Statements Certain matters discussed in this Form 10-Q are "forward-looking statements," intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement includes phrases such as the Company "expects," "believes" or other words of similar meaning. Similarly, statements that describe the Company's future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results or outcomes to differ materially from those currently anticipated. Factors that could affect actual results or outcomes include changes in consumer spending patterns, actions of companies that compete with the Company, the Company's success in managing inventory, movements in foreign currencies or interest rates, the success of suppliers and customers, the ability of the Company to deploy its capital successfully, unanticipated outcomes related to outstanding litigation matters and the European Commission investigation, and adverse weather conditions. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this Form 10-Q and the Company undertakes no obligations to publicly update such forward-looking statements to reflect subsequent events or circumstances. Non-GAAP Financial Measures Included in this Form 10-Q are certain non-GAAP financial measures related to the Company's results excluding the Jack Wolfskin business, which was sold in the fourth quarter of fiscal 2002. The Company believes that excluding the Jack Wolfskin business is useful to the readers of this Form 10-Q because it provides comparable year over year financial information to evaluate performance of the Company's underlying and continuing business. The presentation of the non-GAAP financial information should not be considered in isolation or in lieu of the results prepared in accordance with GAAP, but should be considered in conjunction with these results. Results of Operations Net sales for the three months ended March 28, 2003 totaled $83.3 million, a decrease of 14.8% or $14.4 million, compared to $97.7 million in the three months ended March 29, 2002. Excluding the results of the Company's Jack Wolfskin subsidiary, which was sold in the fourth quarter of the prior year, sales of the Company's continuing business increased $1.6 million, or 1.8%, for the quarter over the prior year. A reconciliation of the Company's sales excluding Jack Wolfskin to sales as reported in the statement of operations is set forth below. Foreign currency translations favorably impacted quarterly sales by $2.7 million. Three of the Company's continuing business units had sales growth over the prior year. The Outdoor Equipment business as a whole saw sales decline $14.0 million, or 42.7%. This year over year decline for the quarter is directly attributable to the disposition of the Company's Jack Wolfskin subsidiary. Sales for the continuing portion of the Company's Outdoor Equipment business increased $2.0 million, or 11.6%, to $18.8 million. Military sales in the current fiscal year contributed to these results; however, the Company does not necessarily expect the same level of growth in this channel in future years. The Motors business sales increased $1.6 million, or 6.1%, to $27.3 million as a result of strength in new products as well as continued market share gains. The Diving business sales increased $0.2 million, or 1.2%, to $17.7 million helped by the strengthening of the Euro against the U.S. Dollar. The Watercraft business sales declined $2.1 million, or 9.7%, to $19.9 million. The Watercraft business has experienced continued -9-
market softness. For the quarter, these soft market conditions were compounded by an operating issue associated with system integration at one of the Watercraft business locations. Net sales for the six months ended March 28, 2003 totaled $138.2 million, a decrease of 12.3% or $19.3 million, compared to $157.5 million in the six months ended March 29, 2002. Excluding the results of the Company's Jack Wolfskin subsidiary, which was sold in the fourth quarter of the prior year, sales of the Company's continuing business increased $8.6 million, or 6.7%, year-to-date over the prior year. Foreign currency translations favorably impacted year-to-date sales by $3.8 million. Three of the Company's continuing business units had sales growth over the prior year. The Outdoor Equipment business as a whole saw sales decline $24.8 million, or 44.7%. This decline is directly attributable to the disposition of the Company's Jack Wolfskin subsidiary. Sales for the continuing portion of the Company's Outdoor Equipment business increased $3.1 million, or 11.4%, to $30.4 million mainly as a result of strength in military sales. The Motors business sales increased $4.0 million, or 10.5%, to $42.3 million as a result of strength in new products as well as continued market share gains. The Diving business sales increased $2.9 million, or 9.2%, to $34.2 million as a result of new product sales as well as currency impacts helped by the strengthening of the Euro against the U.S. Dollar. The Watercraft business sales declined $1.0 million, or 3.0%, to $31.9 million, primarily related to the current quarter shortfall. Relative to the U.S. dollar, the average values of most currencies of the countries in which the Company has operations were higher for the three months and six months ended March 28, 2003 as compared to the corresponding period of the prior year. The Diving business was favorably impacted by foreign currency movements. Excluding the impact of fluctuations in foreign currencies, net sales for the Company's continuing businesses decreased 1.4% for the three months ended March 28, 2003 and increased 3.8% for the six months ended March 28, 2003. Gross profit as a percentage of sales was 43.5% for the three months ended March 28, 2003 compared to 41.7% in the corresponding period in the prior year. Margins in the Diving, Outdoor Equipment and Motors businesses were improved over the prior year, while the Watercraft business saw margins decline by 4.4 percentage points due to continued market softness. The Motors business improved margins by 3.0 percentage points over the year ago quarter primarily from new products and product mix. The Diving business improved margins by 7.5 percentage points over the year ago quarter, primarily through manufacturing efficiencies and currency gains. Forecasting for the Diving business remains difficult in light of the impact of the war in Iraq and uncertainty relating to the timing of the economic recovery. Gross profit as a percentage of sales was 43.3% for the six months ended March 28, 2003 compared to 41.9% in the corresponding period in the prior year. Margin improvements in the Motors and Diving businesses helped to offset declines in margins in the Outdoor Equipment and Watercraft businesses. The Company recognized operating profit of $6.1 million for the three months ended March 28, 2003 compared to an operating profit of $8.3 million for the corresponding period of the prior year. On a continuing business basis operating profit rose 8.0% from the corresponding period a year ago. For the six months ended March 28, 2003 operating profit declined when compared to the prior year period at $6.3 million versus $9.2 million. On a continuing business basis operating profit rose 19.6% from the corresponding period a year ago. Strong gross profits in the Motors and Diving businesses drove the increase in operating profits. Watercraft operating profit was substantially below prior year, due to soft market conditions and operating issues associated with the implementation of a new operating system. Interest expense totaled $1.3 million for the three months ended March 28, 2003 compared to $1.9 million for the corresponding period of the prior year. In the current year, the Company benefited from reductions in overall debt due to reductions in working capital. In addition, the Company benefited from declining interest rates on the floating rate facilities. Interest expense totaled $2.7 million for the six months ended March 28, 2003 compared to $3.5 million for the corresponding period of the prior year. The Company's other income of $2.1 million for the three months ended March 28, 2003 resulted primarily from the currency gains on the settlement of an intercompany loan related to the sale of Jack Wolfskin. The Company's effective tax rate for the six months ended March 28, 2003 was 39.7%, down from 40.1% for the corresponding period of the prior year, primarily due to the geographic mix of earnings. -10-
The Company recognized income from continuing operations before cumulative effect of change in accounting principle of $4.3 million in the three months ended March 28, 2003, compared to income of $3.9 million in the corresponding period of the prior year. Diluted earnings per common share from continuing operations before cumulative effect of change in accounting principle totaled $0.50 for the three months ended March 28, 2003 compared to $0.46 in the prior year. The Company recognized income from continuing operations before cumulative effect of change in accounting principle of $4.0 million in the six months ended March 28, 2003, compared to income of $3.5 million in the corresponding period of the prior year. Diluted earnings per common share from continuing operations before cumulative effect of change in accounting principle totaled $0.47 for the six months ended March 28, 2003 compared to $0.42 in the prior year. Discontinued Operations The Company recognized a gain from discontinued operations of $0.5 million, net of tax ($0.06 per diluted share), for the three months ended March 29, 2002 related to the final accounting for the sale of the Company's Fishing business. Change in Accounting Principle Effective September 29, 2001, the Company adopted SFAS 142. In accordance with the adoption of this new standard, the Company ceased the amortization of goodwill. As required under SFAS 142, the Company performed an assessment of the carrying value of goodwill using a number of criteria, including the value of the overall enterprise as of September 29, 2001. This assessment resulted in a write off of goodwill during the quarter ended December 28, 2001 totaling $22.9 million, net of tax ($2.76 per diluted share) and was reflected as a change in accounting principle. The write off was associated with the Watercraft ($12.9 million) and Diving ($10.0 million) business units. Future impairment charges from existing operations or other acquisitions, if any, will be reflected as an operating expense in the statement of operations. Net Income (Loss) Net income for the three months ended March 28, 2003 was $4.3 million, or $0.50 per diluted share, compared to $4.4 million, or $0.52 per diluted share, for the corresponding period of the prior year. Net income for the six months ended March 28, 2003 was $4.0 million, or $0.47 per diluted share, compared to a loss of $18.9 million, or $2.28 per diluted share, for the corresponding period of the prior year. -11-
Results on a Continuing Business Basis The following tables show second quarter and year-to-date comparisons of as reported results and results from continuing business basis for the Company. Second Quarter Comparisons - As Reported and on Continuing Business Basis (Amounts in millions, except per share data) <TABLE> <CAPTION> - -------------------------------------------------------------------------------------------------------------------- Three Months Ended March 28, 2003 Three Months Ended March 29, 2002 - -------------------------------------------------------------------------------------------------------------------- As Jack Continuing As Jack Continuing Reported Wolfskin Business(1) Reported Wolfskin Business(1) - -------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Net sales $ 83.3 $ - $ 83.3 $ 97.7 $ 16.0 $ 81.7 Gross profit 36.2 - 36.2 40.7 6.7 34.0 Operating profit 6.1 - 6.1 8.3 2.6 5.7 Income (2) 4.3 - 4.3 3.9 1.7 2.2 Earnings per share (2) $ 0.50 $ - $ 0.50 $ 0.46 $ 0.20 $ 0.26 - -------------------------------------------------------------------------------------------------------------------- </TABLE> (1) Continuing Business for the second quarter of both years excludes results from the Jack Wolfskin operation, which was sold in the fourth quarter of fiscal 2002, but was not treated as a discontinued operation according to GAAP. (2) Income and earnings per share are from continuing operations. Six Month Comparisons - As Reported and on Continuing Business Basis (Amounts in millions, except per share data) <TABLE> <CAPTION> - -------------------------------------------------------------------------------------------------------------------- Six Months Ended March 28, 2003 Six Months Ended March 29, 2002 - -------------------------------------------------------------------------------------------------------------------- As Jack Continuing As Jack Continuing Reported Wolfskin Business(1) Reported Wolfskin Business(1) - -------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Net sales $ 138.2 $ 0.4 $ 137.8 $ 157.5 $ 28.3 $ 129.2 Gross profit 59.9 - 59.9 66.0 11.4 54.6 Operating profit (loss) 6.3 (0.1) 6.4 9.2 3.9 5.3 Income (loss) (2) 4.0 (0.1) 4.1 3.5 2.4 1.1 Earnings (loss) per share (2) $ 0.47 $ (0.01) $ 0.48 $ 0.42 $ 0.29 $ 0.13 - -------------------------------------------------------------------------------------------------------------------- </TABLE> (1)Continuing Business for the six months of both years excludes results from the Jack Wolfskin operation, which was sold in the fourth quarter of fiscal 2002, but was not treated as a discontinued operation according to GAAP. (2) Income and earnings per share are from continuing operations before cumulative effect of change in accounting principle. The following tables show second quarter and year to date comparisons of as reported results and results from a continuing business basis for the Outdoor Equipment business unit. Outdoor Equipment Segment Second Quarter Comparisons - As Reported and on Continuing Business Basis (Amounts in millions) <TABLE> <CAPTION> - -------------------------------------------------------------------------------------------------------------------- Three Months Ended March 28, 2003 Three Months Ended March 29, 2002 - -------------------------------------------------------------------------------------------------------------------- As Jack Continuing As Jack Continuing Reported Wolfskin Business(1) Reported Wolfskin Business(1) - -------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Net sales $ 18.8 $ - $ 18.8 $ 32.8 $ 16.0 $ 16.8 Operating profit (loss) 3.0 - 3.0 4.9 2.6 2.3 - -------------------------------------------------------------------------------------------------------------------- </TABLE> (1) Continuing Business for the second quarter of both years excludes results from the Jack Wolfskin operation, which was sold in the fourth quarter of fiscal 2002, but was not treated as a discontinued operation according to GAAP. -12-
Outdoor Equipment Segment Six Month Comparisons - As Reported and on Continuing Business Basis (Amounts in millions) <TABLE> <CAPTION> - -------------------------------------------------------------------------------------------------------------------- Six Months Ended March 28, 2003 Six Months Ended March 29, 2002 - -------------------------------------------------------------------------------------------------------------------- As Jack Continuing As Jack Continuing Reported Wolfskin Business(1) Reported Wolfskin Business(1) - -------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Net sales $ 30.7 $ 0.4 $ 30.3 $ 55.6 $ 28.3 $ 27.3 Operating profit (loss) 4.4 (0.1) 4.5 7.5 3.9 3.6 - -------------------------------------------------------------------------------------------------------------------- </TABLE> (1)Continuing Business for the six months of both years excludes results from the Jack Wolfskin operation, which was sold in the fourth quarter of fiscal 2002, but was not treated as a discontinued operation according to GAAP. Financial Condition The following discusses changes in the Company's liquidity and capital resources related to continuing operations. Operations Cash flows used for operations totaled $51.6 million for the six months ended March 28, 2003 and $30.0 million for the corresponding period of the prior year. Accounts receivable seasonally increased $30.2 million for the six months ended March 28, 2003, compared to an increase of $32.5 million in the year ago period. Inventories seasonally increased by $18.9 million for the six months ended March 28, 2003 compared to an increase of $7.9 million in the prior year period. The additional build in the current year is primarily related to operational issues in the Watercraft segment and timing of orders in the Outdoor Equipment business. The Company believes it is producing products at levels adequate to meet expected consumer demand for the upcoming outdoor season. Accounts payable and accrued liabilities decreased $5.4 million for the six months ended March 28, 2003 versus an increase of $4.5 million for the corresponding period of the prior year. Depreciation and amortization charges were $4.0 million for the six months ended March 28, 2003 and $4.5 million for the corresponding period of the prior year. Investing Activities Cash used for investing activities totaled $3.4 million for the six months ended March 28, 2003 versus cash provided by investing activities of $0.8 million for the corresponding period of the prior year. Expenditures for property, plant and equipment were $3.4 million for the six months ended March 28, 2003 and $2.4 million for the corresponding period of the prior year. The Company's recurring investments are made primarily for tooling for new products and enhancements. In 2003, capitalized expenditures are anticipated to approach $10.0 million. These expenditures are expected to be funded by working capital or existing credit facilities. The Company sold its former headquarters facility to a related party in the first quarter of the prior year. Proceeds from the sale were $5.0 million. Financing Activities Cash flows used for financing activities totaled $7.4 million for the six months ended March 28, 2003 versus cash provided by financing activities of $26.8 million for the corresponding period of the prior year. The Company made principal payments on senior notes of $8.0 million in the current year and $11.6 million in the prior year. The Company consummated a private placement of long-term debt totaling $50.0 million during the first quarter of the prior year. Proceeds from the debt were used to reduce outstanding indebtedness under the Company's primary revolving credit facility. -13-
Litigation The Company is subject to various legal actions and proceedings in the normal course of business, including those related to environmental 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. On February 21, 2003, the competition department of the European Commission initiated formal proceedings in a case concerning certain provisions in the former distribution arrangements of the Company's European Scubapro/Uwatec subsidiaries. The Company is currently reviewing the Commission's initial views. The Company has been and will respond accordingly, aggressively pursuing its position. At this preliminary stage in the procedure, the Commission has indicated that it is considering imposing an unspecified fine on the Company and its European Scubapro/Uwatec subsidiaries. The Company cannot currently predict the outcome of the investigation. Market Risk Management The Company is exposed to market risk stemming from changes in foreign exchange rates, interest rates and, to a lesser extent, commodity prices. Changes in these factors could cause fluctuations in earnings and cash flows. In the normal course of business, exposure to certain of these market risks is managed by entering into hedging transactions authorized under Company policies that place controls on these activities. Hedging transactions involve the use of a variety of derivative financial instruments. Derivatives are used only where there is an underlying exposure, not for trading or speculative purposes. Foreign Operations The Company has significant foreign operations, for which the functional currencies are denominated primarily in Euros, Swiss francs, Japanese yen and Canadian dollars. As the values of the currencies of the foreign countries in which the Company has operations increase or decrease relative to the U.S. dollar, the sales, expenses, profits, assets and liabilities of the Company's foreign operations, as reported in the Company's Consolidated Financial Statements, increase or decrease, accordingly. The Company may mitigate a portion of the fluctuations in certain foreign currencies through the purchase of foreign currency swaps, forward contracts and options to hedge known commitments, primarily for purchases of inventory and other assets denominated in foreign currencies. Interest Rates The Company's debt structure and interest rate risk are managed through the use of fixed and floating rate debt. The Company's primary exposure is to United States interest rates. The Company also periodically enters into interest rate swaps, caps or collars to hedge its exposure and lower financing costs. Commodities Certain components used in the Company's products are exposed to commodity price changes. The Company manages this risk through instruments such as purchase orders and non-cancelable supply contracts. Primary commodity price exposures are metals, plastics and packaging materials. Sensitivity to Changes in Value The estimates that follow are intended to measure the maximum potential fair value or earnings the Company could lose in one year from adverse changes in foreign exchange rates or market interest rates under normal market conditions. The calculations are not intended to represent actual losses in fair value or earnings that the Company expects to incur. The estimates do not consider favorable changes in -14-
market rates. Further, since the hedging instrument (the derivative) inversely correlates with the underlying exposure, any loss or gain in the fair value of derivatives would be generally offset by an increase or decrease in the fair value of the underlying exposures. The positions included in the calculations are currency swaps and fixed rate debt. The calculations do not include the underlying foreign exchange positions that are hedged by these market risk sensitive instruments. The table below presents the estimated maximum potential one year loss in fair value and earnings before income taxes from a 10% movement in foreign currencies and a 100 basis point movement in interest rates on market risk sensitive instruments outstanding at March 28, 2003: - -------------------------------------------------------------------------- (millions) Estimated Impact on - -------------------------------------------------------------------------- Earnings Before Fair Value Income Taxes - -------------------------------------------------------------------------- Interest rate instruments $1.9 $0.8 - -------------------------------------------------------------------------- Other Factors The Company has not been significantly impacted by inflationary pressures over the last several years. The Company anticipates that changing costs of basic raw materials may impact future operating costs and, accordingly, the prices of its products. The Company is involved in continuing programs to mitigate the impact of cost increases through changes in product design and identification of sourcing and manufacturing efficiencies. Price increases and, in certain situations, price decreases are implemented for individual products, when appropriate. Critical Accounting Policies and Estimates The Company's management discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related footnote disclosures. On an on-going basis, the Company evaluates its estimates, including those related to customer programs and incentives, product returns, bad debts, inventories, intangible assets, income taxes, warranty obligations, pensions and other post-retirement benefits, and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. Allowance for Doubtful Accounts The Company recognizes revenue when title and risk of ownership have passed to the buyer. Allowances for doubtful accounts are estimated at the individual operating companies based on estimates of losses related to customer receivable balances. Estimates are developed by using standard quantitative measures based on historical losses, adjusting for current economic conditions and, in some cases, evaluating specific customer accounts for risk of loss. The establishment of reserves requires the use of judgment and assumptions regarding the potential for losses on receivable balances. Though the Company considers these balances adequate and proper, changes in economic conditions in specific markets in which the Company operates could have a favorable or unfavorable effect on reserve balances required. -15-
Inventories The Company values inventory at the lower of cost (determined using the first-in first-out method) or market. Management judgment is required to determine the reserve for obsolete or excess inventory. Inventory on hand may exceed future demand either because the product is outdated or because the amount on hand is more than can be used to meet future needs. Inventory reserves are estimated at the individual operating companies using standard quantitative measures based on criteria established by the Company. The Company also considers current forecast plans, as well as, market and industry conditions in establishing reserve levels. Though the Company considers these balances to be adequate, changes in economic conditions, customer inventory levels or competitive conditions could have a favorable or unfavorable effect on reserve balances required. Deferred Taxes The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would not be able to realize all or part of its net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made. Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Goodwill and Intangible Impairment In assessing the recoverability of the Company's goodwill and other intangibles the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for these assets not previously recorded. On September 29, 2001 the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," and was required to analyze its goodwill for impairment issues during the first six months of fiscal 2002, and then on a periodic basis thereafter. As a result of this analysis, the Company recorded a goodwill impairment charge of $22.9 million, net of tax, in the first quarter of fiscal 2002. Warranties The Company accrues a warranty reserve for estimated costs to provide warranty services. The Company's estimate of costs to service its warranty obligations is based on historical experience, expectation of future conditions and known product issues. To the extent the Company experiences increased warranty claim activity or increased costs associated with servicing those claims, revisions to the estimated warranty reserve would be required. The Company engages in product quality programs and processes, including monitoring and evaluating the quality of its suppliers, to help minimize warranty obligations. Item 3. Quantitative and Qualitative Disclosures about Market Risk Information with respect to this item is included in Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading "Market Risk Management." -16-
Item 4. Controls and Procedures (a) Within the 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Company's principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Company's principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information relating to our Company (including our consolidated subsidiaries) required to be included in our periodic SEC filings. (b) There have been no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the date we carried out this evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II OTHER INFORMATION Item 1. Legal Proceedings On February 21, 2003, the competition department of the European Commission initiated formal proceedings in a case concerning certain provisions in the former distribution arrangements of the Company's European Scubapro/Uwatec subsidiaries. The Company is currently reviewing the Commission's initial views. The Company has been and will respond accordingly, aggressively pursuing its position. At this preliminary stage in the procedure, the Commission has indicated that it is considering imposing an unspecified fine on the Company and its European Scubapro/Uwatec subsidiaries. The Company cannot currently predict the outcome of the investigation. Item 4. Submission of Matters to a Vote of Security Holders At the Company's Annual Meeting on February 19, 2003, the shareholders voted to elect the following individuals as directors for terms that expire at the next annual meeting: <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------- Votes Cast For Votes Withheld Broker Non-Votes - ------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Class A Directors: Terry E. London 6,674,777 124,956 0 John M. Fahey, Jr. 6,674,762 124,971 0 Class B Directors: Samuel C. Johnson 1,203,969 0 0 Helen P. Johnson-Leipold 1,203,969 0 0 Thomas F. Pyle, Jr. 1,203,969 0 0 Gregory E. Lawton 1,203,969 0 0 - ------------------------------------------------------------------------------------------------------------------- </TABLE> Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits are filed as part of this Form 10-Q 10.1 Johnson Outdoors Inc. Worldwide Key Executive Phantom Share Long-Term Incentive Plan 10.2 Johnson Outdoors Inc. Worldwide Key Executives' Discretionary Bonus Plan 99.1 Certification of Chairman and CEO pursuant to 18 U.S.C.ss.1350 99.2 Certification of Vice President and CFO pursuant to 18 U.S.C.ss.1350 (b) Reports on Form 8-K. No reports on Form 8-K were filed during the second quarter. -17-
JOHNSON OUTDOORS INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JOHNSON OUTDOORS INC. Date: May 12, 2003 /s/ Helen P. Johnson-Leipold --------------------------------------------- Helen P. Johnson-Leipold Chairman and Chief Executive Officer /s/ Paul A. Lehmann --------------------------------------------- Paul A. Lehmann Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) -18-
I, Helen P. Johnson-Leipold, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Johnson Outdoors Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Helen P. Johnson-Leipold - ----------------------------------------------------- Helen P. Johnson-Leipold Chairman and Chief Executive Officer May 12, 2003
I, Paul A. Lehmann, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Johnson Outdoors Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Paul A. Lehmann - ----------------------------------------------------- Paul A. Lehmann Vice President and Chief Financial Officer May 12, 2003
Exhibit Index to Quarterly Report on Form 10-Q Exhibit Number Description - ------ ----------- 10.1 Johnson Outdoors Inc. Worldwide Key Executive Phantom Share Long-Term Incentive Plan 10.2 Johnson Outdoors Inc. Worldwide Key Executives' Discretionary Bonus Plan 99.1 Certification of Chairman and CEO pursuant to 18 U.S.C.ss.1350 99.2 Certification of Vice President and CFO pursuant to 18 U.S.C.ss.1350