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 27, 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 January 31, 1997, 6,901,785 shares of Class A and 1,228,053 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 Ended December 27, 1996 and December 29, 1995 3 Consolidated Balance Sheets - December 27, 1996, September 27, 1996 and December 29, 1995 4 Consolidated Statements of Cash Flows - Three Months Ended December 27, 1996 and December 29, 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 6. Exhibits and Reports on Form 8-K 12
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended (thousands, except per share data) December 27 December 29 1996 1995 Net sales $51,817 $56,405 Cost of sales 33,688 35,084 ------- ------- Gross profit 18,129 21,321 ------- ------- Operating expenses: Marketing and selling 14,280 15,545 Financial and administrative 5,653 6,057 management Research and development 1,277 1,713 Profit sharing 103 43 Amortization of acquisition costs 603 681 ------- ------- Total operating expenses 21,916 24,039 ------- ------- Operating loss (3,787) (2,718) Interest income (121) (167) Interest expense 2,083 2,130 Other (income) expenses, net 65 (50) ------- ------- Loss before income taxes (5,814) (4,631) Income tax benefit (1,948) (1,838) ------- ------- Net loss $(3,866) $(2,793) ======= ======= Loss per common share $( .48) $( .34) ======= ======= The accompanying notes are an integral part of the consolidated financial statements.
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) (thousands, except share data) December 27 September 27 December 29 1996 1996 1995 ASSETS Current assets: Cash and temporary cash investments $9,278 $12,697 $6,578 Accounts receivable, less allowance for doubtful accounts of $2,284, $2,235, and $2,707, respectively 58,057 55,847 63,632 Inventories 110,350 101,903 123,507 Deferred income taxes 14,428 13,561 7,458 Other current assets 8,119 10,336 11,443 ------- ------- ------- Total current assets 200,232 194,344 212,618 Property, plant and equipment 30,356 30,154 34,039 Intangible assets 53,436 54,422 58,309 Other assets 1,630 1,848 935 ------- ------- ------- Total assets $285,654 $280,768 $305,901 ======= ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt and current maturities of long-term debt $63,323 $43,118 $55,399 Accounts payable 10,945 11,086 19,353 Accrued liabilities: Salaries and wages 4,942 6,260 5,195 Income taxes 352 4,283 (476) Other 19,508 23,659 14,283 ------- ------- ------- Total current liabilities 99,070 88,406 93,754 Long-term debt, less current maturities 61,472 61,501 68,994 Other liabilities 4,414 4,437 4,324 ------- ------- ------- Total liabilities 164,956 154,344 167,072 ------- ------- ------- Shareholders' equity: Preferred stock: none issued - - - Common stock: Class A shares issued: December 27, 1996, 6,901,885; September 27, 1996, 6,901,801; December 29, 1995, 6,896,959 345 345 345 Class B shares issued (convertible into Class A): December 27, 1996, 1,228,053; September 27, 1996, 1,228,137; December 29, 1995, 1,228,537 61 61 61 Capital in excess of par value 44,087 44,084 43,968 Retained earnings 74,065 77,940 86,387 Contingent compensation (94) (121) (224) Cumulative translation adjustment 2,500 4,115 8,294 Treasury stock: December 27, 1996, 23,400 Class A shares; December 29, 1995, 100 Class A shares (266) - (2) ------- ------- ------- Total shareholders' equity 120,698 126,424 138,829 ------- ------- ------- Total liabilities and shareholders' equity $285,654 $280,768 $305,901 ======= ======= ======= 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 27 December 29 (thousands) 1996 1995 CASH USED FOR OPERATIONS Net loss $(3,866) $(2,793) Noncash items: Depreciation and amortization 2,810 2,723 Deferred income taxes (642) 191 Change in: Accounts receivable, net (2,770) (2,352) Inventories (9,256) (25,335) Accounts payable and accrued liabilities (8,987) (6,638) Other, net 1,876 (2,103) ------- ------- (20,835) (36,307) ------- ------- CASH USED FOR INVESTING ACTIVITIES Net additions to property, plant and (2,521) (2,937) equipment CASH PROVIDED BY FINANCING ACTIVITIES Issuance of senior notes - 45,000 Repayment of revolving credit facilities - (13,412) Net change in short-term debt 20,337 5,299 Common stock transactions (272) (2) ------- ------- 20,065 36,885 Effect of foreign currency fluctuations on cash (128) (7) ------- ------- Decrease in cash and temporary cash investments (3,419) (2,366) CASH AND TEMPORARY CASH INVESTMENTS Beginning of period 12,697 8,944 ------- ------- End of period $9,278 $6,578 ======= ======= 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 27, 1996 and the results of operations and cash flows for the three months ended December 27, 1996. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1996 Annual Report. Because of seasonal and other factors, the results of operations for the three months ended December 27, 1996 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 Inventories at the end of the respective periods consist of the following: December 27 September 27 December 29 (thousands) 1996 1996 1995 Raw materials $41,120 $30,102 $36,282 Work in process 6,217 6,167 6,896 Finished goods 76,936 79,299 85,651 ------- ------- ------- 124,273 115,568 128,829 Less: reserves 13,923 13,665 5,322 ------- ------- ------- $110,350 $101,903 $123,507 ======= ======= ======= 4 Shareholders' Equity In October 1996, the Company granted options to purchase 75,000 shares of Class A common stock at $13.125 per share. In December 1996, the Company granted options to purchase 156,000 shares of Class A common stock at $11.50 per share and 10,000 shares of Class A common stock at $13.125 per share. In January 1997, the Company granted 5,500 shares of restricted Class A common stock. 5 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 December 27 December 29 1996 1995 Weighted average common shares 8,120 8,116 ======= ======= 6 Sale of Plastimo Business In 1996, the Board of Directors approved a plan to divest the Company's Plastimo business, which manufactured navigation and safety equipment and distributed these products and other products to the marine industry, primarily in Europe. The Company estimated that the sale of this business would result in a loss of approximately $2,000,000. Accordingly, this loss was recognized in 1996 operating results. The Company completed the divestiture in January 1997. Net sales and operating losses of the Plastimo business for the three months ended December 27, 1996 were $4.7 million and $1.1 million, respectively. Net assets of this business totaled $15.5 million at December 27, 1996. 7 Acquisition of Uwatec AG In January 1997, the Company announced it has entered into an arrangement to acquire the common stock of Uwatec AG, a privately held manufacturer and marketer of diving electronic instruments sold under the Aladin and Uwatec trademarks. The acquisition is subject to finalization of a definitive agreement and satisfaction of certain preclosing conditions. 8 Reclassification Certain amounts as previously reported have been reclassified to conform with the current period presentation.
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES 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 27, 1996 and December 29, 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 1996 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 27, 1996 totaled $51.8 million, a decrease of approximately 8% from net sales of $56.4 million for the three months ended December 29, 1995. Net sales of the Company's North American units for the three months ended December 27, 1996 decreased $3.1 million, or 11%, over the corresponding period in the prior year. Higher inventory levels at retail, along with continued softness in the outdoor products business, contributed to the decline. Net sales of the Company's European units decreased $1.4 million, or 6%, compared to the corresponding period of the preceding year. Increases in sales in the European outdoor products and marine businesses were more than offset by sales declines in the diving and fishing businesses. Relative to the U.S. dollar, the average values of most currencies of the European countries in which the Company has operations were lower for the three months ended December 27, 1996 as compared to the preceding year. Excluding the impact of foreign currencies, net sales decreased 6% for the three months ended December 27, 1996. Gross profit as a percentage of sales decreased to 35.0% for the three months ended December 27, 1996 compared to 37.8% over the corresponding period in the prior year. Most business units and all geographical areas experienced a decline. Underabsorption of overhead expenses due to lower sales volume and sales of excess inventory at lower than normal margins contributed to the decline. The Company incurred an operating loss of $3.8 million for the three months ended December 27, 1996, compared to an operating loss of $2.7 million for the corresponding period of the prior year. The decreases in sales and gross profit were partially offset by a $2.1 million decrease in operating expenses. The decrease in operating expenses is attributable to the decline in sales and also to management's efforts to control such expenses. Interest expense of $2.1 million for the three months ended December 27, 1996 remained level with the prior year. The Company incurred a net loss of $3.9 million in the three months ended December 27, 1996 compared to a loss of $2.8 million in the corresponding period of the preceding year. On a per share basis, the loss amounts to $0.48 compared to $0.34 in the preceding year. Financial Condition The following discusses changes in the Company's liquidity and capital resources. Operations Cash flows used for operations totaled $20.8 million for the three months ended December 27, 1996 and $36.3 million for the corresponding period of the prior year. Growth in inventories of $9.3 million for the three months ended December 27, 1996 and $25.3 million for the corresponding period of the prior year account for a significant amount of the net usage of funds. Accelerated delivery schedules for certain new products, inventories of acquired product lines, and level loading of production at certain of the Company's manufacturing operations contributed to the increase in 1995. Inventory turns decreased for the three months ended December 27, 1996 compared to the corresponding period of the prior year. Accounts receivable increased $2.8 million for the three months ended December 27, 1996 and $2.4 million for the corresponding period of the prior year. Early season buying programs account for the increase in accounts receivable in 1996 and 1995. Accounts payable and accrued liabilities decreased $9.0 million for the three months ended December 27, 1996 and $6.6 million for the corresponding period of the prior year, increasing the net outflow of cash from operations. Reduced inventory procurement accounts for a significant amount of the change between years. Depreciation and amortization charges were $2.8 million for the three months ended December 27, 1996 and $2.7 million for the corresponding period of the prior year, mitigating the net outflow of operating funds. Investing Activities Expenditures for property, plant and equipment were $2.5 million for the three months ended December 27, 1996 and $2.9 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 1997, capitalized expenditures are anticipated to total approximately $10.0 million. These expenditures are expected to be funded by working capital or existing bank lines of credit. Financing Activities Cash flows from financing activities totaled $20.1 million for the three months ended December 27, 1996 and $36.9 million for the corresponding period of the prior year. In October 1995, the Company consummated private placements of long-term debt totaling $45 million. Payments on long-term debt required to be made in 1997 total $7.5 million. Net proceeds totaling approximately $16 million from the sale of the Company's Plastimo business are expected to be used to reduce indebtedness in 1997. Other Factors The Company has not been significantly impacted by inflationary pressures over the last several years. However, from time to time the Company faces changes in the prices of commodities. Price increases and, in certain situations, price decreases are implemented for individual products, when appropriate. The Company anticipates that rising costs of basic raw materials may impact 1997 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.
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) The following documents are filed as part of this Form 10-Q Exhibit 4.1 Second Amendment dated October 31, 1996 to Note Agreements dated May 1, 1991 Exhibit 4.2 Second Amendment dated October 31, 1996 to Note Agreements dated May 1, 1993 Exhibit 4.3 First Amendment dated October 31, 1996 to Note Agreement dated October 1, 1995 Exhibit 27: Financial Data Schedule (b) There were no reports on Form 8-K filed for the three months ended December 27, 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: February 10, 1997 /s/ Carl G. Schmidt Carl G. Schmidt Senior Vice President and Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer)
JOHNSON WORLDWIDE ASSOCIATES, INC. AND SUBSIDIARIES EXHIBIT INDEX Page Exhibit Description Number 4.1 Second Amendment dated October 31, 1996 to Note Agreements dated May 1, 1991 4.2 Second Amendment dated October 31, 1996 to Note Agreements dated May 1, 1993 4.3 First Amendment dated October 31, 1996 to Note Agreements dated October 1, 1995 27. Financial Data Schedule