10-Q 1 jout-20220701.htm 10-Q jout-20220701
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2022

OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 0-16255

JOHNSON OUTDOORS INC.
(Exact name of Registrant as specified in its charter)
 
Wisconsin 39-1536083
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

555 Main Street, Racine, Wisconsin 53403
(Address of principal executive offices)

(262) 631-6600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, $.05 par value per shareJOUT
NASDAQ Global Select MarketSM

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No

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

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

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

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

As of July 29, 2022, 8,965,300 shares of Class A and 1,207,798 shares of Class B common stock of the Registrant were outstanding. 



JOHNSON OUTDOORS INC.


IndexPage No.
  
PART IFINANCIAL INFORMATION 
   
 Item 1.Financial Statements
   
  
- 1
   
  
- 2
   
  
- 3
   
- 4
  
- 6
   
  
- 7
   
 Item 2.
- 21
   
 Item 3.
- 28
   
 Item 4.
- 29
   
PART IIOTHER INFORMATION
  
 Item 1.
- 30
   
 Item 1A.
- 30
   
 Item 6.
- 30
   
  
- 30
   
  
- 31



JOHNSON OUTDOORS INC.
PART I      FINANCIAL INFORMATION
Item 1.     Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

 Three Months EndedNine Months Ended
(thousands, except per share data)July 1, 2022July 2, 2021July 1, 2022July 2, 2021
Net sales$203,819 $213,568 $546,966 $585,391 
Cost of sales130,310 116,057 344,241 319,596 
Gross profit73,509 97,511 202,725 265,795 
Operating expenses:    
Marketing and selling34,823 37,604 98,746 106,205 
Administrative management, finance and information systems8,273 15,646 30,752 42,848 
Research and development6,614 6,162 20,239 19,050 
Total operating expenses49,710 59,412 149,737 168,103 
Operating profit23,799 38,099 52,988 97,692 
Interest income(144)(76)(339)(238)
Interest expense30 35 117 102 
Other expense (income), net4,669 (934)6,167 (4,567)
Profit before income taxes19,244 39,074 47,043 102,395 
Income tax expense5,162 10,300 12,205 25,940 
Net income$14,082 $28,774 $34,838 $76,455 
Weighted average common shares - Basic:  
Class A8,924 8,875 8,909 8,859 
Class B1,208 1,212 1,208 1,212 
Participating securities29 49 31 42 
Weighted average common shares - Dilutive10,161 10,136 10,148 10,113 
Net income per common share - Basic:  
Class A$1.40 $2.87 $3.47 $7.65 
Class B$1.27 $2.61 $3.15 $6.94 
Net income per common share - Diluted: 
Class A$1.38 $2.83 $3.42 $7.53 
Class B$1.38 $2.83 $3.42 $7.53 

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

- 1 -


JOHNSON OUTDOORS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
 
 Three Months EndedNine Months Ended
(thousands)July 1, 2022July 2, 2021July 1, 2022July 2, 2021
Net income$14,082 $28,774 $34,838 $76,455 
Other comprehensive income (loss):  
 Foreign currency translation (2,770)742 (3,025)1,672 
   Defined benefit pension plan:
Change in pension plans, net of tax of $(2), $41, $9, and $108 respectively
(7)123 25 325 
Total other comprehensive (loss) income (2,777)865 (3,000)1,997 
Total comprehensive income$11,305 $29,639 $31,838 $78,452 

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

- 2 -


JOHNSON OUTDOORS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(thousands, except share data)July 1, 2022October 1, 2021July 2, 2021
ASSETS   
Current assets:   
Cash and cash equivalents$117,567 $240,448 $249,016 
Accounts receivable, net103,244 71,321 94,750 
Inventories250,956 166,615 130,742 
Other current assets9,447 12,880 12,056 
Total current assets481,214 491,264 486,564 
Property, plant and equipment, net of accumulated depreciation of $170,201, $163,891 and $165,017, respectively
85,879 71,510 68,296 
Right of use assets50,284 49,032 43,741 
Deferred income taxes13,097 13,129 11,526 
Goodwill11,209 11,221 11,242 
Other intangible assets, net8,438 8,633 8,699 
Other assets25,721 29,498 29,327 
Total assets$675,842 $674,287 $659,395 
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$50,780 $56,744 $54,991 
Current lease liability6,348 5,938 5,281 
Accrued liabilities:   
Salaries, wages and benefits20,883 26,820 23,380 
Accrued warranty10,863 14,073 13,773 
Income taxes payable5,238 9,436 12,641 
Accrued discounts and returns8,088 6,633 6,224 
Accrued customer programs4,822 6,874 7,033 
Other10,006 11,052 9,392 
Total current liabilities117,028 137,570 132,715 
Non-current lease liability45,111 44,056 39,382 
Deferred income taxes1,599 1,599 1,411 
Retirement benefits1,679 1,389 954 
Deferred compensation liability24,240 27,885 27,881 
Other liabilities1,919 3,283 4,728 
Total liabilities191,576 215,782 207,071 
Shareholders’ equity:   
Common stock:   
Class A shares issued and outstanding: 8,965,300, 8,915,636 and 8,915,636, respectively
450 448 448 
Class B shares issued and outstanding: 1,207,798, 1,211,564 and 1,211,564, respectively
61 61 61 
Capital in excess of par value86,369 82,899 81,309 
Retained earnings396,290 370,501 366,582 
Accumulated other comprehensive income4,386 7,386 6,714 
Treasury stock at cost, shares of Class A common stock: 45,961, 42,598 and 42,598, respectively
(3,290)(2,790)(2,790)
Total shareholders’ equity484,266 458,505 452,324 
Total liabilities and shareholders’ equity$675,842 $674,287 $659,395 

The accompanying notes are an integral part of the condensed consolidated financial statements.
- 3 -


JOHNSON OUTDOORS INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)

Nine Months Ended July 1, 2022
(thousands except for shares)SharesCommon StockCapital in
Excess of Par
Value
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
BALANCE AT OCTOBER 1, 202110,127,200 $509 $82,899 $370,501 $7,386 $(2,790)
Net income— — — 10,856 — — 
Dividends declared— — — (3,005)— — 
Award of non-vested shares34,422 1 (2)— — — 
B to A conversion— — (154)— — 154 
Stock-based compensation— — 1,126 — — — 
Currency translation adjustment— — — — (423)— 
Change in pension plans, net of tax of $5
— — — — 16 — 
Purchase of treasury stock at cost(4,577)— — — — (461)
BALANCE AT DECEMBER 31, 202110,157,045 $510 $83,869 $378,352 $6,979 $(3,097)
Net income— — — 9,900 — — 
Dividends declared— — — (3,023)— — 
Award of non-vested shares13,493 1 — — — — 
Stock-based compensation— — 959 — — — 
Currency translation adjustment— — — — 168 — 
Change in pension plans, net of tax of $6
— — — — 16 — 
Non-vested stock forfeitures(2,040)— 150 — — (150)
Purchase of treasury stock at cost(512)— — — — (48)
BALANCE AT APRIL 1, 202210,167,986 $511 $84,978 $385,229 $7,163 $(3,295)
Net income— — — 14,082 — — 
Dividends declared— — — (3,021)— — 
Issuance of stock under employee stock purchase plan5,112 — 332 — — — 
B to A conversion—  (2)— — 2 
Stock-based compensation— — 1,061 — — — 
Currency translation adjustment— — — — (2,770)— 
Change in pension plans, net of tax of $(2)
— — — — (7)— 
Treasury stock adjustment— — — — — 3 
BALANCE AT JULY 1, 202210,173,098 $511 $86,369 $396,290 $4,386 $(3,290)
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JOHNSON OUTDOORS INC.
Nine Months Ended July 2, 2021
(thousands except for shares)SharesCommon StockCapital in
Excess of Par
Value
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
BALANCE AT OCTOBER 2, 202010,084,799 $504 $78,668 $296,431 $4,717 $(2,220)
Net income— — — 19,847 — — 
Dividends declared— — — (2,094)— — 
Award of non-vested shares33,034 — — — — — 
Stock-based compensation— — 711 — — — 
Currency translation adjustment— — — — 2,442 — 
Change in pension plans, net of tax of $34
— — — — 101 — 
Purchase of treasury stock at cost(5,661)— — — — (495)
BALANCE AT JANUARY 1, 202110,112,172 $504 $79,379 $314,184 $7,260 $(2,715)
Net income— — — 27,834 — — 
Dividends declared— — — (2,107)— — 
Award of non-vested shares6,016 4 (4)— — — 
Stock-based compensation— — 808 — — — 
Currency translation adjustment— — — — (1,512)— 
Change in pension plans, net of tax of $33
— — — — 101 — 
BALANCE AT APRIL 2, 202110,118,188 $508 $80,183 $339,911 $5,849 $(2,715)
Net income— — — 28,774 — — 
Dividends declared— — — (2,103)— — 
Award of non-vested shares9,633 1 (1)— — — 
Stock-based compensation— — 1,052 — — — 
Restricted stock forfeitures(621)— 75 — — (75)
Currency translation adjustment— — — — 742 — 
Change in pension plans, net of tax of $41
— — — 123 — 
BALANCE AT JULY 2, 202110,127,200 $509 $81,309 $366,582 $6,714 $(2,790)
The accompanying notes are an integral part of the condensed consolidated financial statements.
- 5 -


JOHNSON OUTDOORS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Nine Months Ended
(thousands)July 1, 2022July 2, 2021
CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES  
Net income$34,838 $76,455 
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation10,239 9,660 
Amortization of intangible assets195 355 
Amortization of deferred financing costs26 20 
Stock based compensation3,146 2,571 
Loss on disposal of productive assets90 44 
Deferred income taxes6 (860)
Change in operating assets and liabilities:
Accounts receivable, net(32,590)(26,789)
Inventories, net(85,671)(32,905)
Accounts payable and accrued liabilities(18,381)28,844 
Other current assets3,360 (659)
Other non-current assets104 (149)
Other long-term liabilities(2,300)1,700 
Other, net525 (676)
 (86,413)57,611 
CASH USED FOR INVESTING ACTIVITIES  
Proceeds from sale of productive assets12 13 
Capital expenditures(25,162)(15,481)
 (25,150)(15,468)
CASH USED FOR FINANCING ACTIVITIES  
Common stock transactions332  
Dividends paid(9,037)(6,297)
Purchases of treasury stock(509)(495)
 (9,214)(6,792)
Effect of foreign currency rate changes on cash(2,104)1,228 
(Decrease) Increase in cash and cash equivalents(122,881)36,579 
CASH AND CASH EQUIVALENTS
Beginning of period240,448 212,437 
End of period$117,567 $249,016 
Supplemental Disclosure:  
Non-cash treasury stock activity$(9)$75 
Non-cash dividends12 7 
Cash paid for taxes16,386 18,828 
Cash paid for interest86 86 

The accompanying notes are an integral part of the condensed consolidated financial statements. 
- 6 -


JOHNSON OUTDOORS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1    BASIS OF PRESENTATION

The condensed consolidated financial statements included herein are unaudited. In the opinion of management, these statements contain all adjustments (consisting of only normal recurring items) necessary to present fairly the financial position of Johnson Outdoors Inc. and subsidiaries (collectively, the “Company”) as of July 1, 2022 and July 2, 2021, and their results of operations for the three and nine month periods then ended and cash flows for the nine month periods then ended. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 1, 2021 which was filed with the Securities and Exchange Commission on December 10, 2021.

Due to seasonal variations and other factors, some of which are described herein, including related to the ongoing coronavirus (COVID-19) outbreak and resulting pandemic and the continued disruption to the global supply chain and logistics infrastructure, the results of operations for the three and nine months ended July 1, 2022 are not necessarily indicative of the results to be expected for the Company’s full 2022 fiscal year.  See "Coronavirus (COVID-19)" below and “Seasonality” and "Coronavirus (COVID-19)" in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein for additional information.

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

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

Coronavirus (COVID-19)
In March 2020, the World Health Organization recognized the coronavirus (COVID-19) outbreak as a global pandemic. In response to the COVID-19 outbreak, the governments of many countries, states, cities and other geographic regions imposed varying degrees of restrictions on social and commercial activity, including travel restrictions, quarantine guidelines, and related actions. These actions promoted social distancing, and subsequently resulted in adopting programs and taking actions to encourage and promote vaccination and implementing other similar programs all in an effort to slow the spread of the virus. These measures have had significant adverse impacts upon many sectors of the economy, including manufacturing and retail commerce.

While government mandates eased in the latter half of fiscal 2020, these mandates continued to emphasize social distancing measures to the general public. As a result, because we sell products that are used in a safe and socially distant manner in the great outdoors, the COVID-19 pandemic has had an overall favorable effect on our sales levels and the demand for our products starting at the end of our fiscal 2020 and continuing into fiscal 2022. Nonetheless, the continued evolution of the pandemic has resulted in disruptions to the global supply chain and the logistics infrastructure (including with respect to the sourcing, timing, availability and cost of raw materials and components that are necessary to manufacture our products). The lingering impact of these disruptions is not fully known as they, along with certain inflationary pressures in the economy, have resulted in increased costs associated with building certain items of our inventory, and may result in future economic slowdowns and ultimately lower demand for discretionary goods like our outdoor recreational products. Furthermore, the continued impact of the pandemic on the global supply chain (including with respect to impacting the sourcing, timing, availability and cost of raw materials and components that are necessary to manufacture our products) is beyond our control and remains highly uncertain and cannot be predicted at his time.

2    ACCOUNTS RECEIVABLE

Accounts receivable are stated net of allowances for doubtful accounts of $1,208, $2,494 and $1,446 as of July 1, 2022, October 1, 2021 and July 2, 2021, respectively. The increase in net accounts receivable to $103,244 as of July 1, 2022 from $71,321 as of October 1, 2021 is attributable to the seasonal nature of the Company’s business. The determination of the allowance for doubtful accounts is based on a combination of factors. In circumstances where specific collection concerns about a receivable exist, a reserve is established to value the affected account receivable at an amount the Company believes will be collected. For all other customers, the Company recognizes allowances for doubtful accounts based on historical experience of bad debts as a percent of accounts receivable outstanding for each
- 7 -


JOHNSON OUTDOORS INC.
business segment. Uncollectible accounts are written off against the allowance for doubtful accounts after collection efforts have been exhausted. The Company typically does not require collateral on its accounts receivable.

3    EARNINGS PER SHARE (“EPS”)

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

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

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

For the three and nine month periods ended July 1, 2022 and July 2, 2021, basic income per share for the Class A and Class B shares has been presented using the two class method and reflects the allocation of undistributed income described above. 

Diluted EPS

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

For the three and nine month periods ended July 1, 2022 and July 2, 2021, diluted net income per share reflects the effect of dilutive stock units and assumes the conversion of Class B common stock into Class A common stock. 

Shares of non-vested stock that could potentially dilute earnings per share in the future which were not included in the fully diluted computation because they would have been anti-dilutive totaled 38,353 and 40,743 for the Third months ended July 1, 2022 and July 2, 2021, respectively, and 38,477 and 40,471 for the nine months ended July 1, 2022 and July 2, 2021, respectively. Stock units that could potentially dilute earnings per share in the future and which were not included in the fully diluted computation because they would have been anti-dilutive were 37,152 and 20,277 for the Third month periods ended July 1, 2022 and July 2, 2021, respectively, and 35,413 and 27,411 for the nine month periods ended July 1, 2022 and July 2, 2021, respectively.

Dividends per share

Dividends per share for the three and nine month periods ended July 1, 2022 and July 2, 2021 were as follows:

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JOHNSON OUTDOORS INC.
 Three Months EndedNine months ended
July 1, 2022July 2, 2021July 1, 2022July 2, 2021
Dividends declared per common share: 
Class A$0.30 $0.21 $0.90 $0.63 
Class B$0.27 $0.19 $0.82 $0.57 


4    STOCK-BASED COMPENSATION AND STOCK OWNERSHIP PLANS

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

Under the Company’s 2012 Non-Employee Director Stock Ownership Plan and the 2020 Long-Term Incentive Plan (the only plans where shares currently remain available for future equity incentive awards) there were a total of 466,598 shares of the Company’s Class A common stock available for future grant to non-employee directors and key executives at July 1, 2022. Share awards previously made under the Company's 2010 Long-Term Stock Incentive Plan, which no longer allows for additional share grants, also remain outstanding.
 
Non-vested Stock

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

A summary of non-vested stock activity for the nine months ended July 1, 2022 related to the Company’s stock ownership plans is as follows:
 SharesWeighted Average
Grant Price
Non-vested stock at October 1, 202137,591 $80.86 
Non-vested stock grants14,958 90.58 
Restricted stock vested(11,326)95.33 
Forfeitures(2,040)73.52 
Non-vested stock at July 1, 202239,183 80.76 
 
Non-vested stock grantees may elect to reimburse the Company for withholding taxes due as a result of the vesting of shares by tendering a portion of the vested shares back to the Company.  Shares tendered back to the Company were 1,778 and 2,341 during the nine month periods ended July 1, 2022 and July 2, 2021, respectively.

Stock compensation expense, net of forfeitures, related to non-vested stock was $335 and $286 for the three month periods ended July 1, 2022 and July 2, 2021, respectively, and $896 and $862 for the nine month periods ended July 1, 2022 and July 2, 2021, respectively. Unrecognized compensation cost related to non-vested stock as of July 1, 2022 was $1,737, which amount will be amortized to expense through February 2026 or adjusted for changes in future estimated or actual forfeitures.

The fair value of restricted stock vested during the nine month periods ended July 1, 2022 and July 2, 2021 was $1,002 and $1,950, respectively.

Restricted Stock Units

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

A summary of RSU activity for the nine months ended July 1, 2022 follows:
 Number of RSUsWeighted Average
Grant Price
RSUs at October 1, 202169,768 $73.60 
RSUs granted19,758 101.22 
RSUs vested(22,192)71.42 
RSU's forfeited(1,340)74.62 
RSUs at July 1, 202265,994 82.58 
 
Stock compensation expense, net of forfeitures, related to RSUs was $636 and $735 for the three month periods ended July 1, 2022 and July 2, 2021, respectively, and $1,961 and $1,678 for the nine month periods ended July 1, 2022 and July 2, 2021, respectively. Unrecognized compensation cost related to non-vested RSUs as of July 1, 2022 was $2,746, which amount will be amortized to expense through September 2024 or adjusted for changes in future estimated or actual forfeitures.

RSU grantees may elect to reimburse the Company for withholding taxes due as a result of the vesting of units and issuance of unrestricted shares of Class A common stock by tendering a portion of such unrestricted shares back to the Company. Shares tendered back to the Company for this purpose were 3,311 and 3,320 during the nine month periods ended July 1, 2022 and July 2, 2021, respectively.

The fair value of restricted stock units recognized as a tax deduction during the nine month periods ended July 1, 2022 and July 2, 2021 was $3,240 and $3,353, respectively.

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

Employees’ Stock Purchase Plan

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

During the Third month period ended July 1, 2022, the Company issued 5,112 shares of Class A common stock and recognized $90 of expense in connection with the Employees' Stock Purchase Plan. During the nine month period ended July 1, 2022, the Company issued 5,112 shares of Class A common stock and recognized $289 of expense in connection with the Employees' Stock Purchase Plan. During the Third month period ended July 2, 2021, the Company issued 0 shares of Class A common stock and recognized $31 of expense in connection with the Plan. During the nine month period ended July 2, 2021, the Company issued 0 shares of Class A common stock and recognized $31 of expense in connection with the Plan.

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JOHNSON OUTDOORS INC.
5    PENSION PLANS

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

During the fourth quarter of fiscal 2021, the Company terminated its Johnson Outdoors Inc. Mankato Operations Pension Plan and Old Town Canoe Company Pension Plan (collectively, "the Terminated Plans"), both of which were frozen defined benefit pension plans at the time of termination. In connection with the plan terminations, the Company settled all future obligations under the Terminated Plans through a combination of lump-sum payments to eligible participants who elected to receive them, and the transfer of any remaining benefit obligations under the Terminated Plans to a third-party insurance company under a group annuity contract.

The Company still maintains the Johnson Outdoors Inc. Supplemental Executive Retirement Plan ("SERP"), and all future benefit payments to participants under this plan are made from the Company's general assets.

The Company made contributions of $25 and $42 to its pension plans for the three months ended July 1, 2022 and July 2, 2021, respectively, and contributions of $74 and $130 for the nine months ended July 1, 2022 and July 2, 2021, respectively.

The components of net periodic benefit cost related to Company sponsored defined benefit plans for the three and nine month periods ended July 1, 2022 and July 2, 2021 were as follows:
 Three Months EndedNine Months Ended
 July 1, 2022July 2, 2021July 1, 2022July 2, 2021
Components of net periodic benefit cost:  
Service cost$ $ $ $ 
Interest on projected benefit obligation(1)163 13 629 
Less estimated return on plan assets 6  327 
Amortization of unrecognized losses(9)163 34 432 
Net periodic benefit cost$(10)$320 $47 $734 

6    INCOME TAXES

For the three and nine months ended July 1, 2022 and July 2, 2021, the Company’s earnings before income taxes, income tax expense and effective income tax rate were as follows:

 Three Months EndedNine Months Ended
 
(thousands, except tax rate data)
July 1, 2022July 2, 2021July 1, 2022July 2, 2021
Profit before income taxes$19,244 $39,074 $47,043 $102,395 
Income tax expense5,162 10,300 12,205 25,940 
Effective income tax rate26.8 %26.4 %25.9 %25.3 %
 
The effective tax rates for the three and nine months ended July 1, 2022 and the prior year periods were relatively consistent with no primary factors materially impacting the rate.

The impact of the Company’s operations in jurisdictions where a valuation allowance is assessed is removed from the overall effective tax rate methodology and recorded directly based on year to date results for the year for which no tax expense or benefit can be recognized.  The significant tax jurisdictions that have a valuation allowance for the periods ended July 1, 2022 and July 2, 2021 were:
 
- 11 -


JOHNSON OUTDOORS INC.
July 1, 2022July 2, 2021
FranceFrance
IndonesiaIndonesia
SwitzerlandSwitzerland

The Company regularly assesses the adequacy of its provisions for income tax contingencies in accordance with the applicable authoritative guidance on accounting for income taxes.  As a result, the Company may adjust the reserves for unrecognized tax benefits due to the impact of changes in its assumptions or as a result of new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities and lapses of statutes of limitation.  The Company’s 2022 fiscal year tax expense is anticipated to be unchanged related to uncertain income tax positions.

In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized benefits as a component of income tax expense.  The Company is projecting accrued interest of $100 related to uncertain income tax positions for the fiscal year ending September 30, 2022.

The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign taxing jurisdictions.   As of the date of this report, the following tax years remain open to examination by the respective significant tax jurisdictions:
 
JurisdictionFiscal Years
United States2018-2021
Canada2018-2021
France2018-2021
Germany2019-2021
Italy2019-2021
Switzerland2011-2021
 
7    INVENTORIES

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

 July 1,
2022
October 1,
2021
July 2,
2021
Raw materials$175,261 $110,974 $82,648 
Work in process258 116 87 
Finished goods75,437 55,525 48,007 
 $250,956 $166,615 $130,742 

8    GOODWILL

The changes in goodwill during the nine months ended July 1, 2022 and July 2, 2021 were as follows:

 July 1, 2022July 2, 2021
Balance at beginning of period$11,221 $11,184 
Amount attributable to movements in foreign currency rates(12)58 
Balance at end of period$11,209 $11,242 

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

9    WARRANTIES
 
The Company provides warranties on certain of its products as they are sold. The following table summarizes the Company’s warranty activity for the nine months ended July 1, 2022 and July 2, 2021.
 July 1, 2022July 2, 2021
Balance at beginning of period$14,073 $10,849 
Expense accruals for warranties issued during the period3,007 9,776 
Less current period warranty claims paid6,217 6,852 
Balance at end of period$10,863 $13,773 

10    CONTINGENCIES

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

11    INDEBTEDNESS

The Company had no debt outstanding at July 1, 2022, October 1, 2021, or July 2, 2021.

Revolvers
The Company and certain of its subsidiaries have entered into an unsecured credit facility with PNC Bank National Association and Associated Bank, N.A. ("the Lending Group").  This credit facility consists of a $75 million Revolving Credit Facility among the Company, certain of the Company’s subsidiaries, PNC Bank National Association, as lender and as administrative agent, and the other lender named therein (as amended, the “Credit Agreement” or “Revolver”). The Revolver provides for borrowing of up to an aggregate principal amount not to exceed $75,000 with a $50,000 accordion feature that gives the Company the option to increase the maximum financing availability (i.e., an aggregate borrowing amount of $125,000) subject to the conditions of the Credit Agreement and subject to the approval of the lenders. On July 15, 2021, the Company entered into a First Amendment to this credit facility that extended its expiration date from November 15, 2022, to July 15, 2026. Other key provisions of the credit facility remained as outlined herein and the description herein is qualified in its entirety by the terms and conditions of the original Debt Agreement (a copy of which was filed as Exhibit 99.1 to the current report on Form 8-K dated and filed with the Securities and Exchange Commission on November 20, 2017) and the Amendment, (a copy of which was filed as Exhibit 10.1 to the current report on Form 8-K dated and filed with the Securities and Exchange Commission on July 16, 2021).
 
The interest rate on the Revolver is based on LIBOR plus an applicable margin, which margin resets each quarter.  The applicable margin ranges from 1.00% to 1.75% and is dependent on the Company’s leverage ratio for the trailing twelve month period.  The interest rates on the Revolver at both July 1, 2022 and July 2, 2021 were approximately 2.8% and 1.1%, respectively.

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

Other Borrowings
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JOHNSON OUTDOORS INC.
The Company had no unsecured revolving credit facilities at its foreign subsidiaries as of July 1, 2022 or July 2, 2021.  The Company utilizes letters of credit primarily as security for the payment of future claims under its workers’ compensation insurance, which totaled approximately $173 and $181 as of July 1, 2022 and July 2, 2021, respectively.


12    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The following disclosures describe the Company’s objectives in using derivative instruments, the business purpose or context for using derivative instruments, and how the Company believes the use of derivative instruments helps achieve the stated objectives.  In addition, the following disclosures describe the effects of the Company’s use of derivative instruments and hedging activities on its financial statements.
 
Foreign Exchange Risk
The Company has significant foreign operations, for which the functional currencies are denominated primarily in euros, Swiss francs, Hong Kong dollars and Canadian dollars. As the values of the currencies of the foreign countries in which the Company has operations increase or decrease relative to the U.S. dollar, the sales, expenses, profits, losses, assets and liabilities of the Company’s foreign operations, as reported in the Company’s consolidated financial statements, increase or decrease, accordingly.  Approximately 13% of the Company’s revenues for the nine month period ended July 1, 2022 were denominated in currencies other than the U.S. dollar. Approximately 4% were denominated in euros, approximately