UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 29, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-16255 JOHNSON WORLDWIDE ASSOCIATES, INC. (Exact name of Registrant as specified in its charter) Wisconsin 39-1536083 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1326 Willow Road, Sturtevant, Wisconsin 53177 (Address of principal executive offices) (414) 884-1500 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] As of February 1, 1996, 6,890,026 shares of Class A and 1,228,537 shares of Class B common stock of the Registrant were outstanding.
JOHNSON WORLDWIDE ASSOCIATES, INC. Page Index No. PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Operations - Three Months Ended December 29, 1995 and December 30, 1994 3 Consolidated Balance Sheets - December 29, 1995, September 29, 1995 and December 30, 1994 4 Consolidated Statements of Cash Flows - Three Months Ended December 29, 1995 and December 30, 1994 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended (thousands, except per share data) December 29 December 30 1995 1994 Net sales $56,405 $53,462 Cost of sales 35,084 33,278 ------ ------ Gross profit 21,321 20,184 ------ ------ Operating expenses: Marketing and selling 15,545 14,339 Financial and administrative management 6,057 5,951 Research and development 1,713 1,434 Profit sharing 43 58 Amortization of acquisition costs 681 384 ------ ------ Total operating expenses 24,039 22,166 ------ ------ Operating loss (2,718) (1,982) Interest income (167) (170) Interest expense 2,130 1,229 Other (income) expenses, net (50) 4 ------- ------ Loss before income taxes (4,631) (3,045) Income tax benefit (1,838) (1,104) ------- ------ Net loss $(2,793) $(1,941) ======= ======= Loss per common share $( .34) $( .24) ====== ====== The accompanying notes are an integral part of the consolidated financial statements.
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) (thousands, except December 29 September 29 December 30 share data) 1995 1995 1994 ASSETS Current assets: Cash and temporary cash investments $6,578 $8,944 $5,665 Accounts receivable, less allowance for doubtful accounts of $2,707, $2,610, and $2,429, respectively 63,632 61,456 58,894 Inventories 123,507 98,238 81,012 Deferred income taxes 7,458 7,423 7,332 Other current assets 11,443 9,319 9,712 ------- ------- ------- Total current assets 212,618 185,380 162,615 Property, plant and equipment 34,039 33,028 27,781 Intangible assets 58,309 58,691 34,563 Other assets 935 1,254 2,529 ------- ------- ------- Total assets $305,901 $278,353 $227,488 ======= ======= ======= December 29 September 29 December 30 1995 1995 1994 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable and current maturities of long-term obligations $55,399 $18,563 $32,820 Accounts payable 19,353 14,623 13,361 Accrued liabilities: Salaries and wages 5,195 5,792 4,567 Income taxes (476) 4,011 2,203 Other 14,283 20,866 12,770 ------ ------ ------ Total current liabilities 93,754 63,855 65,721 Long-term obligations, less current maturities 68,994 68,948 31,168 Other liabilities 4,324 4,288 5,605 ------ ------- ------- Total liabilities 167,072 137,091 102,494 ------- ------- ------- Shareholders' equity: Preferred stock: none issued -- -- -- Common stock: Class A shares issued: December 29, 1995, 6,896,959; September 29, 1995, 6,896,883; December 30, 1994, 6,866,196 345 345 343 Class B shares issued (convertible into Class A): December 29, 1995, 1,228,537; September 29, 1995, 1,228,613; December 30, 1994, 1,230,19 61 61 62 Capital in excess of par value 43,968 43,968 43,378 Retained earnings 86,387 89,525 77,597 Contingent compensation (224) (264) (201) Cumulative translation adjustment 8,294 7,869 4,379 Treasury stock: December 29, 1995, 100 Class A shares; September 29, 1995, 10,000 Class A shares; December 30, 1994, 25,000 Class A shares (2) (242) (564) ----- ----- ----- Total shareholders' equity 138,829 141,262 124,994 -------- ------- ------- Total liabilities and shareholders' equity $305,901 $278,353 $227,488 ======== ======= ======== The accompanying notes are an integral part of the consolidated financial statements.
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three Months Ended December 29 December 30 (thousands) 1995 1994 CASH USED FOR OPERATIONS Net loss $(2,793) $(1,941) Noncash items: Depreciation and amortization 2,723 1,908 Deferred income taxes 191 249 Change in: Accounts receivable, net (2,352) (4,355) Inventories (25,335) (10,928) Accrued restructuring expenses -- (684) Accounts payable and accrued liabilities (6,638) (6,074) Other, net (2,103) (1,525) ------- ------- (36,307) (23,350) ------- ------- CASH USED FOR INVESTING ACTIVITIES Net additions to property, plant and equipment (2,937) (2,755) ------- ------ CASH PROVIDED BY FINANCING ACTIVITIES Issuance of senior notes 45,000 -- Principal payments on revolving credit facilities (31,912) -- Net change in notes payable and other long-term obligations 23,799 16,811 Common stock transactions (2) (516) ------ ------ 36,885 16,295 Effect of foreign currency fluctuations on cash (7) (113) ------ ------- Decrease in cash and temporary cash investments (2,366) (9,923) CASH AND TEMPORARY CASH INVESTMENTS Beginning of period 8,944 15,588 ------ ------- End of period $6,578 $5,665 ======= ======= The accompanying notes are an integral part of the consolidated financial statements.
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1 Basis of Presentation The consolidated financial statements included herein are unaudited. In the opinion of management, these statements contain all adjustments (consisting of only normal recurring items) necessary to present fairly the financial position of Johnson Worldwide Associates, Inc. (the Company) as of December 29, 1995 and the results of operations and cash flows for the three months ended December 29, 1995. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1995 Annual Report. Because of seasonal and other factors, the results of operations for the three months ended December 29, 1995 are not necessarily indicative of the results to be expected for the full year. 2 Income Taxes The provision for income taxes includes deferred taxes and is based upon estimated annual effective tax rates in the tax jurisdictions in which the Company operates. 3 Inventories December 29 September 29 December 30 (thousands) 1995 1995 1994 Raw materials $ 36,282 $ 28,726 $ 21,713 Work in process 6,896 5,888 5,352 Finished goods 85,651 68,742 60,674 ------- ------- ------ 128,829 103,356 87,739 Less: reserves (5,322) (5,118) (6,727) ------- ------- ------ $123,507 $ 98,238 $ 81,012 ======= ======= ====== 4 Notes Payable and Long-Term Obligations In November 1995, the Company entered into a $90,000,000 multi-currency bank facility. Interest on borrowings is set periodically by reference to market rates such as the London Interbank Offered Rate. The facility also supports issuance of commercial paper by the Company. 5 Shareholders' Equity In December 1995, the Company granted options to purchase 105,000 shares of Class A common stock at $22.063 per share. 6 Earnings Per Share Earnings per share of common stock are computed on the basis of a weighted average number of common and common equivalent shares outstanding. Common stock equivalents are not significant in any period presented. (thousands) Three Months Ended December 29 December 30 1995 1994 Weighted average common and common 8,116 8,081 ===== ====== 7 Reclassification Certain amounts as previously reported have been reclassified to conform with the current period presentation.
JOHNSON WORLDWIDE ASSOCIATES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion includes comments and analysis relating to the Company s results of operations and financial condition for the three months ended December 29, 1995 and December 30, 1994. 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 1995 Annual Report. Foreign Operations The Company has significant foreign operations, for which the functional currencies are denominated primarily in French francs, German marks, Italian lire, Japanese yen and Canadian dollars. As the values of the currencies of the foreign countries in which the Company has operations increase or decrease relative to the U.S. dollar, the sales, expenses, profits, assets and liabilities of the Company s foreign operations, as reported in the Company s consolidated financial statements, increase or decrease, accordingly. The Company mitigates a portion of the fluctuations in certain foreign currencies through the purchase of forward contracts and options to hedge known commitments, primarily for purchases of inventory and loans denominated in foreign currencies. Results of Operations Net sales for the three months ended December 29, 1995 were $56.4 million, an increase of approximately 5.5% from net sales of $53.5 million for the three months ended December 30, 1994. Net sales of the Company s North American units for the three months ended December 29, 1995 decreased $2.0 million, or 6%, from the corresponding period in the prior year. Softness in the outdoor products business and a shift in order patterns of large customers in the fishing business contributed to the decline, as did availability issues related to a line of fishing products acquired in 1995. Net sales of the Company s European units increased $4.7 million, or 23%, compared to the corresponding period of the preceding year. Significant increases in sales in the European diving and outdoor products businesses were responsible for the increase. Relative to the U.S. dollar, the average value of most currencies of the European countries in which the Company has operations was higher for the three months ended December 29, 1995 as compared to the preceding year. Excluding the impact of foreign currencies, net sales increased 3% for the three months ended December 29, 1995. Gross profit for the three months ended December 29, 1995, as a percentage of sales, remained constant at 37.8%. No business unit or geographical area experienced significant growth or declines in gross profit. The Company incurred an operating loss of $2.7 million for the three months ended December 29, 1995, compared to an operating loss of $2.0 million for the corresponding period of the prior year. The increase in sales did not match the increased spending associated with such sales. In addition, amortization of intangible assets was $0.3 million greater in the current year as a result of acquisitions consummated in 1995. Interest expense of $2.1 million for the three months ended December 29, 1995 was $0.9 million higher than the prior year. Higher debt levels associated with acquisitions, higher levels of inventories and the growth of the business contributed to the increase. The Company incurred a net loss of $2.8 million in the three months ended December 29, 1995 compared to a loss of $1.9 million in the corresponding period of the preceding year. On a per share basis, the loss amounts to $0.34 compared to $0.24 in the preceding year. Financial Condition Accounts receivable increased from $61.5 million at September 29, 1995 to $63.6 million at December 29, 1995, in line with the increase in sales in the three months then ended. Inventory levels at December 29, 1995 were $25.3 million higher than the level at September 29, 1995, reflecting the seasonal buildup of products for the Company's peak selling season in the second and third quarters. The increase in inventory in the three months ended December 30, 1994 was $10.6 million. The increase in the seasonal buildup of inventory between years reflects the Company's decision to level load production of certain products in the current year and the growth of the Company s fishing tackle business, which requires longer sourcing lead times. As a result of this growth, inventory turns have declined 9% compared to the prior year. The effect of foreign currencies in Europe also contribute to the growth of inventory in the amount of $2.1 million. Accounts payable increased from the September 29, 1995 level for the same reasons. Debt levels at December 29, 1995 exceed the September 29, 1995 levels by $36.9 million due to the growth in accounts receivable and inventories discussed above, planned capital expenditures and the year to date losses incurred. The Company s debt is balanced between long-term, fixed rate obligations and short-term, floating rate facilities. Cash flows from operations and borrowings under existing credit facilities are sufficient to meet the Company s seasonal working capital and capital expenditure requirements. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 4.1: Note Agreement dated as of October 1, 1995 Exhibit 4.2: Credit Agreement dated as of November 29, 1995 Exhibit 27: Financial Data Schedule (b) There were no reports on Form 8-K filed for the three months ended December 29, 1995.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JOHNSON WORLDWIDE ASSOCIATES, Date: February 12, 1996 /s/ Carl G. Schmidt Carl G. Schmidt Senior Vice President and Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer)
EXHIBIT INDEX Exhibit Description 4.1 Note Agreement dated as of October 1, 1995 4.2 Credit Agreement dated as of November 29, 1995 27. Financial Data Schedule