UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 29, 1996 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 May 1, 1996, 6,884,026 shares of Class A and 1,228,537 shares of Class B common stock of the Registrant were outstanding.
JOHNSON WORLDWIDE ASSOCIATES, INC. Index Page No. PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Operations - Three Months and Six Months Ended March 29, 1996 and March 31, 1995 3 Consolidated Balance Sheets - March 29, 1996, September 29, 1995 and March 31, 1995 4 Consolidated Statements of Cash Flows - Six Months Ended March 29, 1996 and March 31, 1995 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 4. Submission of Matters to a Vote of 11 Security Holders Item 6. Exhibits and Reports on Form 8-K 11
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended Six Months Ended (thousands, except March 29 March 31 March 29 March 31 per share data) 1996 1995 1996 1995 Net sales $111,229 $105,797 $167,634 $159,259 Cost of sales 66,897 63,317 101,981 96,595 -------- -------- -------- -------- Gross profit 44,332 42,480 65,653 62,664 -------- -------- -------- -------- Operating expenses: Marketing and selling 22,564 21,627 38,109 35,966 Financial and administrative management 6,622 6,291 12,679 12,242 Research and development 1,576 1,616 3,289 3,050 Profit sharing 404 666 447 724 Special charges 2,400 -- 2,400 -- Amortization of acquisition costs 624 370 1,305 754 -------- -------- -------- -------- Total operating expenses 34,190 30,570 58,229 52,736 -------- -------- -------- -------- Operating profit 10,142 11,910 7,424 9,928 Interest income (148) (187) (315) (357) Interest expense 2,862 1,793 4,992 3,022 Other (income) expenses, net 26 (113) (24) (109) -------- -------- -------- -------- Income before income taxes 7,402 10,417 2,771 7,372 Income tax expense 3,312 3,964 1,474 2,860 -------- -------- -------- -------- Net income $ 4,090 $ 6,453 $ 1,297 $ 4,512 ======== ======== ======== ======== Earnings per common share $ 0.50 $ 0.80 $ 0.16 $ 0.56 ======== ======== ======== ======== The accompanying notes are an integral part of the consolidated financial statements.
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) March 29 September 29 March 31 (thousands, except share data) 1996 1995 1995 ASSETS Current assets: Cash and temporary cash investments $ 3,629 $ 8,944 $ 2,280 Accounts receivable, less allowance for doubtful accounts of $2,874, $2,610, and $2,704, respectively 112,653 61,456 109,238 Inventories 126,623 98,238 96,275 Deferred income taxes 7,174 7,423 7,188 Other current assets 9,722 9,319 6,704 -------- -------- -------- Total current assets 259,801 185,380 221,685 Property, plant and equipment 33,122 33,028 29,389 Intangible assets 56,146 58,691 36,432 Other assets 945 1,254 3,172 -------- -------- -------- Total assets $350,014 $278,353 $290,678 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable and current maturities of long-term obligations $ 89,326 $ 18,563 $ 65,751 Accounts payable 19,360 14,623 18,751 Accrued liabilities: Salaries 5,788 5,792 5,334 Income 2,138 4,011 5,322 Other 19,890 20,866 16,836 -------- -------- -------- Total current liabilities 136,502 63,855 111,994 Long-term obligations, less current 68,936 68,948 36,407 Other liabilities 4,232 4,288 5,708 -------- -------- -------- Total liabilities 209,670 137,091 154,109 -------- -------- -------- Shareholders' equity: Preferred stock: none issued -- -- -- Common stock: Class A shares issued: March 29, 1996, 6,896,959; September 29, 1995, 6,896,883; March 31, 1995, 6,866,296 345 345 343 Class B shares issued (convertible into Class A): March 29, 1996, 1,228,537; September 29, 1995, 1,228,613; March 31, 1995, 1,230,099 61 61 62 Capital in excess of par value 43,968 43,968 43,380 Retained earnings 90,784 89,525 84,031 Contingent compensation (236) (264) (210) Cumulative translation adjustment 5,713 7,869 9,600 Treasury stock, at cost: March 29, 1996, 12,933 Class A shares; September 29, 1995, 10,000 Class A shares; March 31, 1995, 29,525 Class A shares (291) (242) (637) -------- -------- -------- Total shareholders' equity 140,344 141,262 136,569 -------- -------- -------- Total liabilities and shareholders' equity $350,014 $278,353 $290,678 ======== ======== ======== The accompanying notes are an integral part of the consolidated financial statements.
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended March 29 March 31 (thousands) 1996 1995 CASH USED FOR OPERATIONS Net income $ 1,297 $ 4,512 Noncash items: Depreciation and amortization 5,420 3,800 Writedown of intangible assets 1,070 -- Deferred income taxes 464 655 Change in: Accounts receivable, net (52,190) (50,741) Inventories (29,364) (22,510) Accrued restructuring expenses -- (933) Accounts payable and accrued liabilities 2,424 6,074 Other, net (1,079) (1,463) -------- ------- (71,958) (60,606) -------- ------- CASH USED FOR INVESTING ACTIVITIES Net additions to property, plant and equipment (4,260) (5,221) CASH PROVIDED BY FINANCING ACTIVITIES Issuance of senior notes 45,000 -- Principal payments on revolving credit facilities (31,912) -- Net change in notes payable 58,021 52,890 Common stock transactions (51) (606) -------- ------- 71,058 52,284 Effect of foreign currency fluctuations on cash (155) 235 -------- ------- Decrease in cash and temporary cash investments (5,315) (13,308) CASH AND TEMPORARY CASH INVESTMENTS Beginning of period 8,944 15,588 -------- ------- End of period $ 3,629 $ 2,280 ======== ======== The accompanying notes are an integral part of the consolidated financial statements.
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 March 29, 1996, the results of operations for the three months and six months ended March 29, 1996 and cash flows for the six months ended March 29, 1996. 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 and six months ended March 29, 1996 are not necessarily indicative of the results to be expected for the full year. During the three months ended March 29, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, which requires impairment losses be recorded on long- lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount. During the three months ended March 29, 1996, the Company determined that certain of its marine products would be discontinued. The Company also determined that the carrying value of goodwill of one of its subsidiaries could not be recovered through undiscounted future cash flows. Accordingly, the related tangible and intangible assets, totaling $1.7 million, were written down. In addition, during the three months ended March 29, 1996, the Company recorded severance and other costs totaling $0.7 million related to the closing of one of its manufacturing locations. Additional costs related to closing this facility totaling $0.4 million will be incurred over the remaining six months of this fiscal 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 March 29 September 29 March 31 (thousands) 1996 1995 1995 Raw materials $ 36,118 $ 28,726 $ 27,569 Work in process 6,359 5,888 6,400 Finished goods 89,050 68,742 68,381 -------- -------- -------- 131,527 103,356 102,350 Less: reserves (4,904) (5,118) (6,075) -------- -------- -------- $126,623 $ 98,238 $ 96,275 ======== ======== ======== 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. In February 1996, the Company granted options to purchase 17,000 shares of Class A common stock at $25.3125 per share. 6 Earnings Per Share Earnings per share of common stock are computed on the basis of a weighted average number of common shares outstanding. Common stock equivalents are not significant in any period presented. (thousands) Three Months Ended Six Months Ended March 29 March 31 March 29 March 31 1996 1995 1996 1995 Weighted average common shares 8,112 8,070 8,114 8,075 ===== ===== ===== ===== 7 Reclassification Certain amounts as previously reported have been reclassified to conform with the current period presentation. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion includes comments and analysis relating to the Company's results of operations and financial condition for the three months and six months ended March 29, 1996 and March 31, 1995. 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 March 29, 1996 totaled $111.2 million, an increase of approximately 5% from net sales of $105.8 million for the three months ended March 31, 1995. Net sales of the Company's North American units for the three months ended March 29, 1996 increased $2.4 million, or 4%, 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 North American fishing business contributed to the low growth in sales, as did availability issues in January 1996 related to a line of fishing products acquired in 1995. Net sales of the Company's European units increased $3.3 million, or 9%, compared to the corresponding period of the preceding year. Increases in sales in the European diving and outdoor products businesses were responsible for the increase. Net sales for the six months ended March 29, 1996 increased 5% to $167.6 million, from $159.3 million in the prior year. Increases in sales in the North American fishing business and the European outdoor products and diving 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 lower for the three months ended March 29, 1996 as compared to the preceding year. Excluding the impact of foreign currencies, net sales increased 6% for the three months ended March 29, 1996. Foreign currency translation had no appreciable impact on sales for the six months ended March 29, 1996. Gross profit for the three months ended March 29, 1996, as a percentage of sales, declined modestly to 39.9% from 40.2% in the prior year. No business unit or geographical area experienced significant growth or declines in gross profit. Gross profit for the six months ended March 29, 1996 was comparable to the prior year. The Company earned an operating profit of $10.1 million for the three months ended March 29, 1996, compared to an operating profit of $11.9 million for the corresponding period of the prior year. During the three months ended March 29, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, which requires impairment losses be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount. During the three months ended March 29, 1996, the Company determined that certain of its marine products would be discontinued. The Company also determined that the carrying value of goodwill of one of its subsidiaries could not be recovered through undiscounted future cash flows. Accordingly, the related tangible and intangible assets, totaling $1.7 million, were written down. In addition, during the three months ended March 29, 1996, the Company recorded severance and other costs totaling $0.7 million related to the closing of one of its manufacturing locations. Additional costs related to closing this facility totaling $0.4 million will be incurred over the remaining six months of this fiscal year. For the six months ended March 29, 1996 the Company earned an operating profit of $7.4 million, compared to $9.9 million in the prior year. The special charges recorded in the three months ended March 29, 1996 contributed to the decline in operating profit. In addition, amortization of intangible assets was $0.6 million greater in the current year as a result of acquisitions consummated in 1995. The Company's operating profit for the three months and six months ended March 29, 1996 has been generated primarily in foreign jurisdictions due to higher overall rates of sales growth in those jurisdictions and the special charges incurred in the Company's North American operations. Interest expense of $2.9 million and $5.0 million for the three months and six months ended March 29, 1996, respectively, was $1.1 million and $2.0 million, respectively, higher than the prior year. Higher debt levels associated with 1995 acquisitions, higher levels of inventories and the growth of the business contributed to the increase. The Company earned net income of $4.1 million in the three months ended March 29, 1996 compared to $6.5 million in the corresponding period of the preceding year. On a per share basis, the earnings amount to $0.50 compared to $0.80 in the preceding year. For the six months ended March 29, 1996, the Company earned net income of $1.3 million, or $0.16 per share, compared to $4.5 million, or $0.56 per share, in the prior year. The Company's effective tax rate increased as the special charges reduced earnings in countries with lower statutory tax rates. Financial Condition Accounts receivable increased from $61.5 million at September 29, 1995 to $112.7 million at March 29, 1996, in line with the level at this time in the prior year. Inventory levels at March 29, 1996 were $28.4 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 six months ended March 31, 1995 was $25.9 million. The increase in the seasonal buildup of inventory between years reflects slower than expected sales growth. Inventory turns have declined compared to the prior year. Accounts payable increased from the September 29, 1995 level for the same reasons. Debt levels at March 29, 1996 exceed the September 29, 1995 levels by $70.8 million due to the growth in accounts receivable and inventories discussed above and planned capital expenditures. 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 4. Submission of Matters to a Vote of Security Holders At the Company's Annual Meeting on January 24, 1996, the shareholders voted to elect the following individuals as Directors for terms that expire at the next annual meeting: Votes Votes Cast Cast Votes Broker for Against Withheld Abstentions Non-Votes Class A Directors: Donald W. Brinckman 6,141,649 0 6,233 0 0 Thomas F. Pyle, Jr. 6,141,849 0 6,033 0 0 Class B Directors: Samuel C. Johnson 1,222,335 0 0 0 0 Helen P. Johnson- 1,222,335 0 0 0 0 Leipold Raymond F. Farley 1,222,335 0 0 0 0 John D. Crabb 1,222,335 0 0 0 0 Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27: Financial Data Schedule (b) There were no reports on Form 8-K filed for the three months ended March 29, 1996.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JOHNSON WORLDWIDE ASSOCIATES, INC. Date: May 13, 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 27 Financial Data Schedule