Company Quick10K Filing
Quick10K
Johnson Outdoors
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$82.55 9 $730
10-Q 2019-06-28 Quarter: 2019-06-28
10-Q 2019-03-29 Quarter: 2019-03-29
10-Q 2018-12-28 Quarter: 2018-12-28
10-K 2018-09-28 Annual: 2018-09-28
10-Q 2018-06-29 Quarter: 2018-06-29
10-Q 2018-03-30 Quarter: 2018-03-30
10-Q 2017-12-29 Quarter: 2017-12-29
10-K 2017-09-29 Annual: 2017-09-29
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-30 Quarter: 2016-12-30
10-K 2016-09-30 Annual: 2016-09-30
10-Q 2016-07-01 Quarter: 2016-07-01
10-Q 2016-04-01 Quarter: 2016-04-01
10-Q 2016-01-01 Quarter: 2016-01-01
10-K 2015-10-02 Annual: 2015-10-02
10-Q 2015-07-03 Quarter: 2015-07-03
10-Q 2015-01-02 Quarter: 2015-01-02
10-K 2014-10-03 Annual: 2014-10-03
10-Q 2014-06-27 Quarter: 2014-06-27
10-Q 2014-06-27 Quarter: 2014-06-27
10-Q 2014-03-28 Quarter: 2014-03-28
10-Q 2013-12-27 Quarter: 2013-12-27
8-K 2019-08-02 Earnings, Exhibits
8-K 2019-05-31 Regulation FD, Exhibits
8-K 2019-05-03 Earnings, Exhibits
8-K 2019-02-04 Earnings, Exhibits
8-K 2018-12-07 Earnings, Exhibits
8-K 2018-12-06 Regulation FD, Exhibits
8-K 2018-09-26 Regulation FD, Exhibits
8-K 2018-06-01 Regulation FD, Exhibits
8-K 2018-03-02 Shareholder Vote
HXL Hexcel 5,990
KEX Kirby 4,970
KLXE KLX Energy Services Holdings 599
TRXC Transenterix 456
CSV Carriage Services 350
CIK Pinnacle Foods 163
PROV Provident Financial 151
VERU Veru 97
EFSI Eagle Financial Services 0
CPA17 Corporate Property Associates 17 - Global 0
JOUT 2019-06-28
Part I Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 ex31_1.htm
EX-31.2 ex31_2.htm
EX-32 ex32.htm

Johnson Outdoors Earnings 2019-06-28

JOUT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10q.htm 10-Q

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 June 28, 2019

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 class
Trading Symbol
Name of each exchange on which registered
Class A Common Stock, $.05 par value per share
JOUT
NASDAQ Global Select Market SM

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 26, 2019, 8,838,459 shares of Class A and 1,211,602 shares of Class B common stock of the Registrant were outstanding.
 


JOHNSON OUTDOORS INC.

Index
Page No.
   
PART I
FINANCIAL INFORMATION
 
     
 
Item 1.
 
       
    1
       
    2
       
    3
       
    4
       
    6
       
    7
       
 
Item 2.
19
       
 
Item 3.
26
       
 
Item 4.
26
       
PART II
OTHER INFORMATION
 
     
 
Item 1.
27
       
 
Item 1A.
27
       
 
Item 6.
27
       
    27
       
    28

JOHNSON OUTDOORS INC.

PART I
FINANCIAL INFORMATION
Item 1.
Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

   
Three Months Ended
   
Nine Months Ended
 
(thousands, except per share data)
 
June 28,
2019
   
June 29,
2018
   
June 28,
2019
   
June 29,
2018
 
Net sales
 
$
176,253
   
$
170,779
   
$
458,400
   
$
453,136
 
Cost of sales
   
96,528
     
91,446
     
255,227
     
250,797
 
Gross profit
   
79,725
     
79,333
     
203,173
     
202,339
 
Operating expenses:
                               
Marketing and selling
   
36,484
     
31,191
     
94,273
     
89,280
 
Administrative management, finance and information systems
   
9,879
     
11,071
     
30,864
     
32,713
 
Research and development
   
5,333
     
5,116
     
16,185
     
15,352
 
Total operating expenses
   
51,696
     
47,378
     
141,322
     
137,345
 
Operating profit
   
28,029
     
31,955
     
61,851
     
64,994
 
Interest income
   
(434
)
   
(172
)
   
(1,291
)
   
(493
)
Interest expense
   
64
     
55
     
137
     
170
 
Other (income) expense, net
   
(493
)
   
293
     
(238
)
   
(4,231
)
Profit before income taxes
   
28,892
     
31,779
     
63,243
     
69,548
 
Income tax expense
   
6,826
     
8,009
     
15,733
     
23,923
 
Net income
 
$
22,066
   
$
23,770
   
$
47,510
   
$
45,625
 
                                 
Weighted average common shares - Basic:
                               
Class A
   
8,792
     
8,739
     
8,779
     
8,727
 
Class B
   
1,212
     
1,212
     
1,212
     
1,212
 
Participating securities
   
33
     
50
     
30
     
49
 
Weighted average common shares - Dilutive
   
10,037
     
10,001
     
10,021
     
9,988
 
Net income per common share - Basic:
                               
Class A
 
$
2.22
   
$
2.40
   
$
4.79
   
$
4.62
 
Class B
 
$
2.02
   
$
2.19
   
$
4.35
   
$
4.20
 
Net income per common share - Diluted:
                               
Class A
 
$
2.19
   
$
2.37
   
$
4.72
   
$
4.54
 
Class B
 
$
2.19
   
$
2.37
   
$
4.72
   
$
4.54
 

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 Ended
   
Nine Months Ended
 
(thousands)
 
June 28,
2019
   
June 29,
2018
   
June 28,
2019
   
June 29,
2018
 
Net income
 
$
22,066
   
$
23,770
   
$
47,510
   
$
45,625
 
Other comprehensive income (loss):
                               
Foreign currency translation:
                               
Foreign currency translation
   
1,047
     
(2,442
)
   
(801
)
   
(2,213
)
Reclassification adjustment for currency translation losses (gains) related to the liquidation of foreign entities included in net income
   
     
61
     
     
(2,290
)
Defined benefit pension plan:
                               
Change in pension plans, net of tax of ($7), $12, $59 and $100, respectively
   
(23
)
   
38
     
187
     
315
 
Total other comprehensive income (loss)
   
1,024
     
(2,343
)
   
(614
)
   
(4,188
)
Total comprehensive income
 
$
23,090
   
$
21,427
   
$
46,896
   
$
41,437
 
 
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)
 
June 28,
2019
   
September 28,
2018
   
June 29,
2018
 
ASSETS
                 
Current assets:
                 
Cash and cash equivalents
 
$
148,968
   
$
121,877
   
$
104,277
 
Short term investments
   
     
28,714
     
25,000
 
Accounts receivable, net
   
82,860
     
40,866
     
80,877
 
Inventories
   
95,833
     
88,864
     
77,299
 
Other current assets
   
5,519
     
5,373
     
1,012
 
Total current assets
   
333,180
     
285,694
     
288,465
 
Property, plant and equipment, net of accumulated depreciation of $140,316, $131,322 and $129,028, respectively
   
58,143
     
55,934
     
54,152
 
Deferred income taxes
   
11,198
     
11,748
     
12,829
 
Goodwill
   
11,195
     
11,199
     
11,184
 
Other intangible assets, net
   
11,538
     
12,341
     
12,716
 
Other assets
   
20,304
     
19,020
     
18,205
 
Total assets
 
$
445,558
   
$
395,936
   
$
397,551
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                       
Current liabilities:
                       
Accounts payable
 
$
37,190
   
$
34,160
   
$
32,978
 
Accrued liabilities:
                       
Salaries, wages and benefits
   
16,824
     
22,315
     
17,590
 
Accrued warranty
   
9,588
     
8,499
     
8,897
 
Income taxes payable
   
11,318
     
7,739
     
11,551
 
Accrued discounts and returns
   
7,864
     
7,505
     
6,450
 
Other
   
14,220
     
12,566
     
14,780
 
Total current liabilities
   
97,004
     
92,784
     
92,246
 
Deferred income taxes
   
1,700
     
1,715
     
1,775
 
Retirement benefits
   
1,964
     
1,945
     
3,788
 
Other liabilities
   
21,918
     
20,295
     
17,682
 
Total liabilities
   
122,586
     
116,739
     
115,491
 
Shareholders’ equity:
                       
Common stock:
                       
Class A shares issued and outstanding:
   
443
     
442
     
442
 
June 28, 2019:  8,838,459
                       
September 28, 2018:  8,787,360
                       
June 29, 2018:  8,785,735
                       
Class B shares issued and outstanding:
   
61
     
61
     
61
 
June 28, 2019:  1,211,602
                       
September 28, 2018:  1,211,686
                       
June 29, 2018:  1,211,686
                       
Capital in excess of par value
   
75,192
     
75,025
     
74,229
 
Retained earnings
   
246,164
     
202,828
     
209,169
 
Accumulated other comprehensive income
   
2,873
     
3,487
     
805
 
Treasury stock at cost, shares of Class A common stock: 29,225, 67,655 and 67,655, respectively
   
(1,761
)
   
(2,646
)
   
(2,646
)
Total shareholders’ equity
   
322,972
     
279,197
     
282,060
 
Total liabilities and shareholders’ equity
 
$
445,558
   
$
395,936
   
$
397,551
 
 
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 June 29, 2018
 
(thousands except for shares)
 
Shares
   
Common Stock
   
Capital in
Excess of Par
Value
   
Retained
Earnings
   
Treasury
Stock
   
Accumulated
Other
Comprehensive
Income (Loss)
 
BALANCE AT SEPTEMBER 29, 2017
   
9,996,199
   
$
503
   
$
72,801
   
$
166,905
   
$
(2,198
)
 
$
4,993
 
Net income
   
     
     
     
235
     
     
 
Dividends declared
   
     
     
     
(989
)
   
     
 
Award of non-vested shares
   
6,532
     
     
(164
)
   
     
164
     
 
Stock-based compensation
   
     
     
508
     
     
     
 
Currency translation adjustment
   
     
     
     
     
     
(276
)
Change in pension plans, net of tax of $44
   
     
     
     
     
     
139
 
Purchase of treasury stock at cost
   
(9,377
)
   
     
     
     
(675
)
   
 
BALANCE AT DECEMBER 29, 2017
   
9,993,354
     
503
     
73,145
     
166,151
     
(2,709
)
   
4,856
 
Net income
   
     
     
     
21,620
     
     
 
Dividends declared
   
     
     
     
(1,187
)
   
     
 
Issuance of stock under employee stock purchase plan
   
1,740
     
     
68
     
     
     
 
Award of non-vested shares
   
2,327
     
     
(63
)
   
     
63
     
 
Stock-based compensation
   
     
     
506
     
     
     
 
Currency translation adjustment
   
     
     
     
     
     
505
 
Write off of currency translation adjustment
   
     
     
     
     
     
(2,351
)
Change in pension plans, net of tax of $44
   
     
     
     
     
     
138
 
BALANCE AT MARCH 30, 2018
   
9,997,421
     
503
     
73,656
     
186,584
     
(2,646
)
   
3,148
 
Net income
   
     
     
     
23,770
     
     
 
Dividends declared
   
     
     
     
(1,185
)
   
     
 
Stock-based compensation
   
     
     
573
     
     
     
 
Currency translation adjustment
   
     
     
     
     
     
(2,442
)
Write off of currency translation adjustment
   
     
     
     
     
     
61
 
Change in pension plans, net of tax of $12
   
     
     
     
     
     
38
 
BALANCE AT JUNE 29, 2018
   
9,997,421
   
$
503
   
$
74,229
   
$
209,169
   
$
(2,646
)
 
$
805
 
 
The accompanying notes are an integral part of the condensed consolidated financial statements.

- 4 -

JOHNSON OUTDOORS INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(unaudited)
 
Nine Months Ended June 28, 2019
 
(thousands except for shares)
 
Shares
   
Common Stock
   
Capital in
Excess of Par
Value
   
Retained
Earnings
   
Treasury
Stock
   
Accumulated
Other
Comprehensive
Income (Loss)
 
BALANCE AT SEPTEMBER 28, 2018
   
9,999,046
   
$
503
   
$
75,025
   
$
202,828
   
$
(2,646
)
 
$
3,487
 
Net income
   
     
     
     
3,521
     
     
 
Dividends declared
   
     
     
     
(1,384
)
   
     
 
Award of non-vested shares
   
48,236
     
     
(1,593
)
   
     
1,593
     
 
Stock-based compensation
   
     
     
536
     
     
     
 
Currency translation adjustment
   
     
     
     
     
     
(1,700
)
Change in pension plans, net of tax of $33
   
     
     
     
     
     
105
 
Purchase of treasury stock at cost
   
(9,890
)
   
     
     
     
(708
)
   
 
BALANCE AT DECEMBER 28, 2018
   
10,037,392
     
503
     
73,968
     
204,965
     
(1,761
)
   
1,892
 
Net income
   
     
     
     
21,923
     
     
 
Dividends declared
   
     
     
     
(1,397
)
   
     
 
Issuance of stock under employee stock purchase plan
   
1,594
     
     
79
     
     
     
 
Award of non-vested shares
   
11,075
     
     
     
     
     
 
Stock-based compensation
   
     
     
572
     
     
     
 
Currency translation adjustment
   
     
     
     
     
     
(148
)
Change in pension plans, net of tax of $33
   
     
     
     
     
     
105
 
BALANCE AT MARCH 29, 2019
   
10,050,061
     
503
     
74,619
     
225,491
     
(1,761
)
   
1,849
 
Net income
   
     
     
     
22,066
     
     
 
Dividends declared
   
     
     
     
(1,393
)
   
     
 
Award of non-vested shares
   
     
1
     
(1
)
   
     
     
 
Stock-based compensation
   
     
     
574
     
     
     
 
Currency translation adjustment
   
     
     
     
     
     
1,047
 
Change in pension plans, net of tax of ($7)
   
     
     
     
     
     
(23
)
BALANCE AT JUNE 28, 2019
   
10,050,061
   
$
504
   
$
75,192
   
$
246,164
   
$
(1,761
)
 
$
2,873
 
 
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)
 
June 28,
2019
   
June 29,
2018
 
CASH PROVIDED BY OPERATING ACTIVITIES
           
Net income
 
$
47,510
   
$
45,625
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
   
9,602
     
8,901
 
Amortization of intangible assets
   
775
     
716
 
Amortization of deferred financing costs
   
20
     
51
 
Write off of currency translation adjustment gain
   
     
(2,290
)
Stock based compensation
   
1,682
     
1,587
 
Gain on disposal of productive assets
   
(34
)
   
(1,262
)
Pension contributions
   
(134
)
   
(5,140
)
Deferred income taxes
   
519
     
9,780
 
Change in operating assets and liabilities:
               
Accounts receivable, net
   
(42,145
)
   
(34,798
)
Inventories, net
   
(7,249
)
   
1,218
 
Accounts payable and accrued liabilities
   
4,495
     
8,685
 
Other current assets
   
(147
)
   
3,526
 
Other non-current assets
   
198
     
 
Other long-term liabilities
   
501
     
463
 
Other, net
   
27
     
(36
)
     
15,620
     
37,026
 
CASH PROVIDED BY INVESTING ACTIVITIES
               
Purchase of short-term investments
   
(7,124
)
   
(25,000
)
Proceeds from sale of short-term investments
   
35,838
     
46,607
 
Proceeds from sale of productive assets
   
60
     
1,306
 
Capital expenditures
   
(12,031
)
   
(14,653
)
     
16,743
     
8,260
 
CASH USED FOR FINANCING ACTIVITIES
               
Common stock transactions
   
79
     
68
 
Debt issuance costs paid
   
     
(61
)
Dividends paid
   
(4,165
)
   
(3,164
)
Purchases of treasury stock
   
(708
)
   
(675
)
     
(4,794
)
   
(3,832
)
Effect of foreign currency rate changes on cash
   
(478
)
   
(987
)
Increase in cash and cash equivalents
   
27,091
     
40,467
 
CASH AND CASH EQUIVALENTS
               
Beginning of period
   
121,877
     
63,810
 
End of period
 
$
148,968
   
$
104,277
 
                 
Supplemental Disclosure:
               
Cash paid for taxes
 
$
10,185
   
$
8,049
 
Cash paid for interest
   
118
     
117
 
 
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 June 28, 2019 and June 29, 2018, 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 September 28, 2018 which was filed with the Securities and Exchange Commission on December 7, 2018.

Due to seasonal variations and other factors, the results of operations for the three and nine months ended June 28, 2019 are not necessarily indicative of the results to be expected for the Company’s full 2019 fiscal year.  See “Seasonality” 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.  Short-term investments consist of certificates of deposit with original maturities greater than three months but less than one year.

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

2
ACCOUNTS RECEIVABLE

Accounts receivable are stated net of allowances for doubtful accounts of $1,969, $1,637 and $1,446 as of June 28, 2019, September 28, 2018 and June 29, 2018, respectively. The increase in net accounts receivable to $82,860 as of June 28, 2019 from $40,866 as of September 28, 2018 is attributable to the seasonal nature of the Company’s business and the resulting increases in sales volumes between periods. 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 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.

- 7 -

JOHNSON OUTDOORS INC.

For the three and nine month periods ended June 28, 2019 and June 29, 2018, 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 June 28, 2019 and June 29, 2018, 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.

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 45,898 and 46,776 for the three months ended June 28, 2019 and June 29, 2018, respectively, and 43,772 and 57,624 for the nine months ended June 28, 2019 and June 29, 2018, 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 28,673 and 38,392 for the three month periods ended June 28, 2019 and June 29, 2018, respectively, and 31,178 and 39,605 for the nine months ended June 28, 2019 and June 29, 2018, respectively.

There were no anti-dilutive stock options outstanding in either the three or nine month periods ended June 28, 2019 and June 29, 2018.

Dividends per share

Dividends per share for the three and nine month periods ended June 28, 2019 and June 29, 2018 were as follows:

 
Three Months Ended
 
Nine months ended
 
 
June 28,
2019
 
June 29,
2018
 
June 28,
2019
 
June 29,
2018
 
Dividends declared per common share:
               
Class A
 
$
0.14
   
$
0.12
   
$
0.42
   
$
0.32
 
Class B
 
$
0.13
   
$
0.11
   
$
0.38
   
$
0.29
 
 
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 2010 Long-Term Stock Incentive Plan and the 2012 Non-Employee Director Stock Ownership Plan (the only two plans where shares remain available for future equity incentive awards) there were a total of 532,367 shares of the Company’s Class A common stock available for future grant to key executives and non-employee directors at June 28, 2019.

- 8 -

JOHNSON OUTDOORS INC.

Non-vested Stock

All shares of non-vested 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 June 28, 2019 related to the Company’s stock ownership plans is as follows:
 

 
Shares
   
Weighted Average
Grant Price
 
Non-vested stock at September 28, 2018
   
46,776
   
$
36.37
 
Non-vested stock grants
   
16,366
     
69.36
 
Restricted stock vested
   
(17,244
)
   
30.05
 
Non-vested stock at June 28, 2019
   
45,898
     
50.51
 
 
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 3,381 and 9,377 during the nine month periods ended June 28, 2019 and June 29, 2018, respectively.

Stock compensation expense, net of forfeitures, related to non-vested stock was $240 and $106 for the three month periods ended June 28, 2019 and June 29, 2018, respectively, and $518 and $394 for the nine month periods ended June 28, 2019 and June 29, 2018, respectively.  Unrecognized compensation cost related to non-vested stock as of June 28, 2019 was $1,309, which amount will be amortized to expense through November 2022 or adjusted for changes in future estimated or actual forfeitures.

The fair value of restricted stock vested during the nine month periods ended June 28, 2019 and June 29, 2018 was $1,237 and $3,948, respectively.

Restricted Stock Units

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 June 28, 2019 follows:
 
   
Number of RSUs
   
Weighted Average
Grant Price
 
RSUs at September 28, 2018
   
79,579
   
$
44.06
 
RSUs granted
   
22,192
     
71.42
 
RSUs vested
   
(40,011
)
   
31.59
 
RSUs at June 28, 2019
   
61,760
     
61.97
 
 
Stock compensation expense, net of forfeitures, related to RSUs was $330 and $450 for the three months ended June 28, 2019 and June 29, 2018, respectively, and $1,144 and $1,149 for the nine months ended June 28, 2019 and June 29, 2018, respectively.  Unrecognized compensation cost related to non-vested RSUs as of June 28, 2019 was $1,893, which amount will be amortized to expense through September 2021 or adjusted for changes in future estimated or actual forfeitures.

- 9 -

JOHNSON OUTDOORS INC.

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 were 6,509 and 0 during the nine month periods ended June 28, 2019 and June 29, 2018, respectively.

The fair value of RSUs vested during the nine month periods ended June 28, 2019 and June 29, 2018 was $3,333 and $549, 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 three month period ended June 28, 2019, the Company issued 0 shares of Class A common stock and recognized $4 of expense in connection with the Employees’ Stock Purchase Plan.  During the nine month period ended June 28, 2019, the Company issued 1,594 shares of Class A common stock and recognized $20 of expense in connection with the Plan.  During the three month period ended June 29, 2018, the Company issued 0 shares of Class A common stock and recognized $17 of expense in connection with the Plan.  During the nine month period ended June 29, 2018, the Company issued 1,740 shares of Class A common stock and recognized $44 of expense in connection with the Plan.

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.

The Company made contributions of $44 and $47 to its pension plans for the three months ended June 28, 2019 and June 29, 2018, respectively, and contributions of $134 and $5,140 for the nine month periods ended June 28, 2019 and June 29, 2018, respectively.

The components of net periodic benefit cost related to Company sponsored defined benefit plans for the three and nine month periods ended June 28, 2019 and June 29, 2018 were as follows:
 
   
Three Months Ended
   
Nine Months Ended
 
   
June 28, 2019
   
June 29, 2018
   
June 28, 2019
   
June 29, 2018
 
Components of net periodic benefit cost:
                       
Service cost
 
$
   
$
   
$
   
$
 
Interest on projected benefit obligation
   
298
     
272
     
827
     
794
 
Less estimated return on plan assets
   
259
     
(25
)
   
641
     
572
 
Amortization of unrecognized losses
   
(31
)
   
50
     
246
     
415
 
Net periodic benefit cost
 
$
8
   
$
347
   
$
432
   
$
637
 
 
- 10 -

JOHNSON OUTDOORS INC.

6
INCOME TAXES

For the three and nine months ended June 28, 2019 and June 29, 2018, the Company’s earnings before income taxes, income tax expense and effective income tax rate were as follows:

   
Three Months Ended
   
Nine Months Ended
 
(thousands, except tax rate data)
 
June 28, 2019
   
June 29, 2018
   
June 28, 2019
   
June 29, 2018
 
Profit before income taxes
 
$
28,892
   
$
31,779
   
$
63,243
   
$
69,548
 
Income tax expense
   
6,826
     
8,009
     
15,733
     
23,923
 
Effective income tax rate
   
23.6
%
   
25.2
%
   
24.9
%
   
34.4
%
 
The effective tax rate for the three months ended June 28, 2019 and the prior year period were consistent with no primary factors impacting the rate.  The most significant factors impacting changes in the effective tax rate for the nine months ended June 28, 2019 as compared with the prior year period is from the impact of the $6,763 provisional tax expense generated by the enactment of comprehensive tax legislation generally referred to as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) in the first quarter of fiscal 2018.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act.  The Tax Act created a new requirement that certain income (commonly referred to as “GILTI”) earned by controlled foreign corporations (CFC’s) must be included currently in the gross income of the CFC’s U.S. shareholder. The Company elected to record the tax effects of the GILTI provision as a period expense in the applicable tax year when incurred.

Prior to the Tax Act, the Company’s practice and intention was to reinvest the earnings in our non-U.S. subsidiaries, and no U.S. deferred income taxes or foreign withholding taxes were recorded. The Company has not changed its practices or intentions with respect to these earnings.

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 tax jurisdictions that have a valuation allowance for the periods ended June 28, 2019 and June 29, 2018 were:

June 28, 2019
June 29, 2018
Australia
Australia
 
Austria
France
France
Indonesia
Indonesia
Netherlands
Netherlands
New Zealand
New Zealand
Spain
Spain
Switzerland
 
 
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 2019 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 27, 2019.

The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign taxing jurisdictions.   The Company is currently undergoing income tax examinations in Germany and Italy.  As of the date of this report, the following tax years remain open to examination by the respective tax jurisdictions:

- 11 -

JOHNSON OUTDOORS INC.

Jurisdiction
Fiscal Years
United States
2016-2018
Canada
2014-2018
France
2015-2018
Germany
2014-2018
Italy
2013-2018
Switzerland
2008-2018
 
7
INVENTORIES

Inventories at the end of the respective periods consisted of the following:

   
June 28,
2019
   
September 28,
2018
   
June 29,
2018
 
Raw materials
 
$
42,702
   
$
40,375
   
$
32,141
 
Work in process
   
232
     
39
     
77
 
Finished goods
   
52,899
     
48,450
     
45,081
 
   
$
95,833
   
$
88,864
   
$
77,299
 
 
8
GOODWILL

The changes in goodwill during the nine months ended June 28, 2019 and June 29, 2018 were as follows:

   
June 28, 2019
   
June 29, 2018
 
Balance at beginning of period
 
$
11,199
   
$
11,238
 
Amount attributable to movements in foreign currency rates
   
(4
)
   
(54
)
Balance at end of period
 
$
11,195
   
$
11,184
 
 
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 June 28, 2019 and June 29, 2018.
 
   
June 28, 2019
   
June 29, 2018
 
Balance at beginning of period
 
$
8,499
   
$
6,393
 
Expense accruals for warranties issued during the period
   
6,830
     
7,485
 
Less current period warranty claims paid
   
5,741
     
4,981
 
Balance at end of period
 
$
9,588
   
$
8,897
 
 
- 12 -

JOHNSON OUTDOORS INC.

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 June 28, 2019, September 28, 2018, or June 29, 2018.

Revolvers
During the three months ended December 29, 2017, the Company and certain of its subsidiaries entered into a new unsecured credit facility with PNC Bank National Association and Associated Bank, N.A. (“the Lending Group”).  This credit facility replaced the Company’s previous revolving credit agreement dated September 16, 2013 and consists of an Amended and Restated Credit Agreement dated November 15, 2017 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 (the “Credit Agreement” or “Revolver”).  The Revolver has an expiration date of November 15, 2022 and 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.

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 June 28, 2019 and June 29, 2018 were approximately 3.4% and 3.1%, 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
The Company had no unsecured revolving credit facilities at its foreign subsidiaries as of June 28, 2019 or June 29, 2018.  The Company utilizes letters of credit primarily as security for the payment of future claims under its workers’ compensation insurance, which totaled approximately $279 at each of June 28, 2019 and June 29, 2018.

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 June 28, 2019 were denominated in currencies other than the U.S. dollar. Approximately 5% were denominated in euros, approximately 5% were denominated in Canadian dollars and approximately 2% were denominated in Hong Kong dollars, with the remaining revenues denominated in various other foreign currencies. Changes in foreign currency exchange rates can cause the Company to experience unexpected financial losses or cash flow needs.

During the nine months ended June 29, 2018, the Company recognized a currency translation gain of $2,290 related to the liquidation of the Company’s subsidiary in Japan. This gain is reported as a component of “Other (income) expense, net” in the accompanying Condensed Consolidated Statements of Operations.

- 13 -

JOHNSON OUTDOORS INC.

The Company may mitigate a portion of the fluctuations in certain foreign currencies through the use of foreign currency forward contracts.  Foreign currency forward contracts enable the Company to lock in the foreign currency exchange rate to be paid or received for a fixed amount of currency at a specified date in the future. The Company may use such foreign currency forward contracts to mitigate the risk associated with changes in foreign currency exchange rates on financial instruments and known commitments, including commitments for inventory purchases, denominated in foreign currencies. As of June 28, 2019 and June 29, 2018, the Company held no foreign currency forward contracts.

13
FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy has been established based on three levels of inputs, of which the first two are considered observable and the last unobservable.


Level 1 - Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets or liabilities.


Level 2 - Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments.


Level 3 - Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

The carrying amounts of cash, cash equivalents, short term investments, accounts receivable, and accounts payable approximated their fair values at June 28, 2019, September 28, 2018 and June 29, 2018 due to the short term maturities of these instruments. When indicators of impairment are present, the Company may be required to value certain long-lived assets such as property, plant, and equipment, and other intangibles at their fair value.

Valuation Techniques

Rabbi Trust Assets
Rabbi trust assets are classified as trading securities and are comprised of marketable debt and equity securities that are marked to fair value based on unadjusted quoted prices in active markets.  The rabbi trust assets are used to fund amounts the Company owes to certain officers and other employees under the Company’s non-qualified deferred compensation plan.  These assets are included in “Other assets” in the Company’s Condensed Consolidated Balance Sheets, and the mark to market adjustments on the assets are recorded in “Other expense (income), net” in the accompanying Condensed Consolidated Statements of Operations.  The offsetting deferred compensation liability is also reported at fair value and is included in “Other liabilities” in the Company’s Condensed Consolidated Balance Sheets. Changes in the liability are recorded in “Administrative management, finance and information systems” expense in the accompanying Condensed Consolidated Statements of Operations.

The following table summarizes the Company’s financial assets measured at fair value as of June 28, 2019:
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Assets:
               
Rabbi trust assets
 
$
18,981
   
$
   
$
   
$
18,981
 
 
- 14 -

JOHNSON OUTDOORS INC.
 
The following table summarizes the Company’s financial assets measured at fair value as of September 28, 2018:


Level 1
 
Level 2
 
Level 3
 
Total
 
Assets:
               
Rabbi trust assets
 
$
17,477
   
$
   
$
   
$
17,477
 

The following table summarizes the Company’s financial assets measured at fair value as of June 29, 2018:

 
Level 1
 
Level 2
 
Level 3
 
Total
 
Assets:
               
Rabbi trust assets
 
$
16,659
   
$
   
$
   
$
16,659
 
 
The effect of changes in the fair value of financial instruments on the accompanying Condensed Consolidated Statements of Operations for the three and nine month periods ended June 28, 2019 and June 29, 2018 was:

    
Three Months Ended
 
Nine months ended
 

Location of (income) loss
recognized in Statement of
Operations
June 28,
2019
 
June 29,
2018
 
June 28,
2019
 
June 29,
2018
 
Rabbi trust assets
Other (income) expense, net
 
$
(649
)
 
$
(283
)
 
$
(355
)
 
$
(854
)
 
There were no assets or liabilities measured at fair value on a non-recurring basis in periods subsequent to their initial recognition for either of the three or nine month periods ended June 28, 2019 or June 29, 2018.

14
NEW ACCOUNTING PRONOUNCEMENTS

Recently adopted accounting pronouncements
 
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes existing revenue recognition requirements and provides a new comprehensive revenue recognition model.  The underlying principle of the new standard requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for those goods or services.  The Company adopted the provisions of this ASU on September 29, 2018 for all contracts on a modified retrospective basis, with no cumulative-effect adjustment to retained earnings upon adoption.  The comparative information has not been restated and continues to be reported under the accounting standards that were in effect for those periods. The additional disclosures required by the ASU are include in Note 15 “Revenues” of these Notes to Condensed Consolidated Financial Statements.
 
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220), which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. ASU No. 2018-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The ASU allows for early adoption in any interim period after issuance of the update.  The Company early adopted the ASU in the second quarter of fiscal 2019, and elected not to make this optional reclassification.
 
Recently issued accounting pronouncements
 
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). In July 2018, the FASB also issued ASU 2018-10 Codification Improvements to Topic 842, Leases and ASU 2018-11 Leases (Topic 842) Targeted Improvements.  In February 2019, the FASB also issued ASU 2019-01 Leases (Topic 842): Codification Improvements.  The amendments in this update will increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This guidance is effective for the Company in the first quarter of fiscal year 2020, and may be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with certain practical expedients available.  An entity may apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company is currently evaluating the effect of this standard on its consolidated financial statements.
 
- 15 -

JOHNSON OUTDOORS INC.

In August 2018, the FASB issued ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans (Topic 715), which modifies the disclosure requirements for employers that sponsor defined pension or postretirement plans. The amendments in this guidance are effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on its disclosures.
 
15
REVENUES

Adoption of Topic 606

On September 29, 2018, the Company adopted ASU 2014-09 and all subsequent ASUs that modified Topic 606.  The adoption of the new revenue standard did not have a material impact on the Company’s consolidated financial statements, and the timing and amount of its revenue recognition remained substantially unchanged under this new guidance.

Revenue recognition

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our goods at a point in time based on shipping terms and transfer of title.  Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods.  For all contracts with customers, the Company has not adjusted the promised amount of consideration for the effects of a
significant financing component as the period between the transfer of the promised goods and the customer’s payment is expected to be one year or less.  Sales are made on normal and customary short-term credit terms or upon delivery of point of sale transactions.  Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

The Company enters into contractual arrangements with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms. The Company does not have long-term contracts which are satisfied over time. Due to the nature of these contracts, no significant judgment exists in relation to the identification of the customer contract, satisfaction of the performance obligation, or transaction price. The Company expenses incremental costs of obtaining a contract due to the short-term nature of the contracts.

Estimated costs of returns, allowances and discounts, based on historic experience, are accrued as a reduction to sales when revenue is recognized.  Additionally, the Company records an other current asset for inventory which it expects to be returned with a corresponding reduction of cost of goods sold.  The Company also offers assurance-type warranties relating to its products sold to end customers that continue to be accounted for under ASC 460 Guarantees.

The Company generally accounts for shipping and handling activities as a fulfillment activity, consistent with the timing of revenue recognition; that is, when a customer takes control of the transferred goods. In the event that a customer were to take control of a product prior to shipment, the Company made an accounting policy election to treat such shipping and handling activities as a fulfillment cost.  Shipping and handling fees billed to customers are included in “Net Sales,” and shipping and handling costs are recognized within “Marketing and selling expenses” in the same period the related revenue is recognized.

The Company has a wide variety of seasonal, outdoor recreation products used primarily for fishing from a boat, diving, paddling, hiking and camping, that are sold to a variety of customers in multiple end markets. While there are multiple products sold, the nature of products are similar in terms of the nature of the revenue recognition policies.

16
SEGMENTS OF BUSINESS

The Company conducts its worldwide operations through separate business segments, each of which represents major product lines. Operations are conducted in the United States and various foreign countries, primarily in Europe, Canada and the Pacific Basin.  During the three and nine month periods ended June 28, 2019, combined net sales to one customer of the Company’s Fishing, Camping and Watercraft Recreation segments represented approximately $24,260 and $78,010, respectively, of the Company’s consolidated revenues.  During the three and nine month periods ended June 29, 2018, combined net sales to one customer of the Company’s Fishing, Camping and Watercraft Recreation segments represented approximately $26,755 and $76,035, respectively, of the Company’s consolidated revenues.

- 16 -

JOHNSON OUTDOORS INC.

Net sales and operating profit include both sales to customers, as reported in the Company’s accompanying Condensed Consolidated Statements of Operations, and interunit transfers, which are priced to recover cost plus an appropriate profit margin. Total assets represent assets that are used in the Company’s operations in each business segment at the end of the periods presented.

A summary of the Company’s operations by business segment is presented below:

   
Three Months Ended
   
Nine Months Ended
       
   
June 28,
2019
   
June 29,
2018
   
June 28,
2019
   
June 29,
2018
   
September 28,
2018
 
Net sales:
                             
Fishing:
                             
Unaffiliated customers
 
$
127,968
   
$
121,765
   
$
344,746
   
$
335,965
   
   
Interunit transfers
   
228
     
155
     
476
     
368
         
Camping:
                                       
Unaffiliated customers
   
14,708
     
13,898
     
30,044
     
29,810
         
Interunit transfers
   
20
     
17
     
33
     
33
         
Watercraft Recreation:
                                       
Unaffiliated customers
   
12,965
     
14,000
     
27,118
     
29,138
         
Interunit transfers
   
45
     
115
     
68
     
142
         
Diving
                                       
Unaffiliated customers
   
20,237
     
20,766
     
55,845
     
57,565
         
Interunit transfers
   
6
     
8
     
21
     
17
         
Other / Corporate
   
375
     
350
     
647
     
658
         
Eliminations
   
(299
)
   
(295
)
   
(598
)
   
(560
)
       
Total
 
$
176,253
   
$
170,779
   
$
458,400
   
$
453,136
         
Operating profit (loss):
                                       
Fishing
 
$
29,672
   
$
33,044
   
$
75,684
   
$
77,871
         
Camping
   
2,315
     
2,154
     
2,048
     
1,732
         
Watercraft Recreation
   
380
     
661
     
(1,628
)
   
(653
)
       
Diving
   
1,440
     
1,503
     
2,156
     
1,132
         
Other / Corporate
   
(5,778
)
   
(5,407
)
   
(16,409
)
   
(15,088
)
       
   
$
28,029
   
$
31,955
   
$
61,851
   
$
64,994
         
Total assets (end of period):
                                       
Fishing
                 
$
173,076
   
$
147,479
   
$
135,808
 
Camping
                   
33,401
     
34,368
     
32,728
 
Watercraft Recreation
                   
22,227
     
23,259
     
16,994
 
Diving
                   
60,431
     
58,763
     
56,498
 
Other / Corporate
                   
156,423
     
133,682
     
153,908
 
                   
$
445,558
   
$
397,551
   
$
395,936
 
 
- 17 -

JOHNSON OUTDOORS INC.

17
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in Accumulated Other Comprehensive Income (“AOCI”) by component, net of tax, for the three months ended June 28, 2019 were as follows:

   
Foreign
Currency
Translation
Adjustment
   
Unamortized
Loss on Defined
Benefit Pension
Plans
   
Accumulated
Other
Comprehensive
Income (Loss)
 
Balance at March 29, 2019
 
$
5,948
   
$
(4,099
)
 
$
1,849
 
Other comprehensive income before reclassifications
   
1,047
     
     
1,047
 
Amounts reclassified from accumulated other comprehensive income
   
     
(30
)
   
(30
)
Tax effects
   
     
7
     
7
 
Balance at June 28, 2019
 
$
6,995
   
$
(4,122
)
 
$
2,873
 
 
The changes in AOCI by component, net of tax, for the three months ended June 29, 2018 were as follows:
 
   
Foreign
Currency
Translation
Adjustment
   
Unamortized
Loss on Defined
Benefit Pension
Plans
   
Accumulated
Other
Comprehensive
Income (Loss)
 
Balance at March 30, 2018
 
$
9,057
   
$
(5,909
)
 
$
3,148
 
Other comprehensive loss before reclassifications
   
(2,442
)
   
     
(2,442
)
Amounts reclassified from accumulated other comprehensive income
   
61
     
50
     
111
 
Tax effects
   
     
(12
)
   
(12
)
Balance at June 29, 2018
 
$
6,676
   
$
(5,871
)
 
$
805
 
 
The changes in AOCI by component, net of tax, for the nine months ended June 28, 2019 were as follows:
 
   
Foreign
Currency
Translation
Adjustment
   
Unamortized
Loss on Defined
Benefit Pension
Plans
   
Accumulated
Other
Comprehensive
Income (Loss)
 
Balance at September 28, 2018
 
$
7,796
   
$
(4,309
)
 
$
3,487
 
Other comprehensive loss before reclassifications
   
(801
)
   
     
(801
)
Amounts reclassified from accumulated other comprehensive income
   
     
246
     
246
 
Tax effects
   
     
(59
)
   
(59
)
Balance at June 28, 2019
 
$
6,995
   
$
(4,122
)
 
$
2,873
 

The changes in AOCI by component, net of tax, for the nine months ended June 29, 2018 were as follows:
 
   
Foreign
Currency
Translation
Adjustment
   
Unamortized
Loss on Defined
Benefit Pension
Plans
   
Accumulated
Other
Comprehensive
Income (Loss)
 
Balance at September 29, 2017
 
$
11,179
   
$
(6,186
)
 
$
4,993
 
Other comprehensive loss before reclassifications
   
(2,213
)
   
     
(2,213
)
Amounts reclassified from accumulated other comprehensive income
   
(2,290
)
   
415
     
(1,875
)
Tax effects
   
     
(100
)
   
(100
)
Balance at June 29, 2018
 
$
6,676
   
$
(5,871
)
 
$
805
 

- 18 -

JOHNSON OUTDOORS INC.
 
The reclassifications out of AOCI for the three months ended June 28, 2019 were as follows:

       
Statement of Operations
Presentation
Unamortized loss on defined benefit pension plans:
        
Amortization of loss
 
$
(30
)
Other income and expense
Tax effects
   
7
 
Income tax expense
Total reclassifications for the period
 
$
(23
)
 
 
The reclassifications out of AOCI for the three months ended June 29, 2018 were as follows:
 
       
Statement of Operations
Presentation
Unamortized loss on defined benefit pension plans:
        
Amortization of loss
 
$
50
 
Other income and expense
Tax effects
   
(12
)
Income tax expense
Foreign currency translation adjustments:
          
Write off of currency translation adjustment gain
   
61
 
Other income and expense
Total reclassifications for the period
 
$
99
   
 
The reclassifications out of AOCI for the nine months ended June 28, 2019 were as follows:
 
       
Statement of Operations
Presentation
Unamortized loss on defined benefit pension plans:
        
Amortization of loss
 
$
246
 
Other income and expense
Tax effects
   
(59
)
Income tax expense
Total reclassifications for the period
 
$
187
   
 
The reclassifications out of AOCI for the nine months ended June 29, 2018 were as follows:
 
       
Statement of Operations
Presentation
Unamortized loss on defined benefit pension plans:
        
Amortization of loss
 
$
415
 
Other income and expense
Tax effects
   
(100
)
Income tax expense
Foreign currency translation adjustments:
          
Write off of currency translation adjustment gain
   
(2,290
)
Other income and expense
Total reclassifications for the period
 
$
(1,975
)
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) includes comments and analysis relating to the results of operations and financial condition of Johnson Outdoors Inc. and its subsidiaries (collectively, the “Company”) as of and for the three and nine month periods ended June 28, 2019 and June 29, 2018.  All monetary amounts, other than share and per share amounts, are stated in thousands.

Our MD&A is presented in the following sections:

 
Forward Looking Statements

Trademarks

Overview

- 19 -

JOHNSON OUTDOORS INC.


Results of Operations

Liquidity and Financial Condition

Contractual Obligations and Off Balance Sheet Arrangements

Critical Accounting Policies and Estimates

This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and related notes that immediately precede this section, as well as the Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2018 which was filed with the Securities and Exchange Commission on December 7, 2018.

Forward Looking Statements

Certain matters discussed in this Form 10-Q are “forward-looking statements,” and the Company intends these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of those safe harbor provisions. These forward-looking statements can generally be identified as such because they include phrases such as the Company “expects,” “believes,” “anticipates,” “intends,” use of words such as “confident,” “could,” “may,” “planned,” “potential,” “should,” “will,” “would” or the negative of such words 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 the matters described under the caption “Risk Factors” in Item 1A of the Company’s Form 10-K which was filed with the Securities and Exchange Commission on December 7, 2018 and the following:  changes in economic conditions, consumer confidence levels and discretionary spending patterns in key markets; uncertainties stemming from changes in U.S. trade policies, tariffs, and the reaction of other countries to such changes; the Company’s success in implementing its strategic plan, including its targeted sales growth platforms, innovation focus and its increasing digital presence; litigation costs related to actions of and disputes with third parties, including competitors; the Company’s continued success in its working capital management and cost-structure reductions; the Company’s success in integrating strategic acquisitions; the risk of future writedowns of goodwill or other long-lived assets; the ability of the Company’s customers to meet payment obligations; the impact of actions of the Company’s competitors with respect to product development or enhancement or the introduction of new products into the Company’s markets; movements in foreign currencies, interest rates or commodity costs; fluctuations in the prices of raw materials or the availability of raw materials used by the Company; any disruptions in the Company’s supply chain as a result of material fluctuations in the Company’s order volumes and requirements for raw materials and other components necessary to manufacture and produce the Company’s products;  the success of the Company’s suppliers and customers and the impact of any consolidation in the industries of the Company’s suppliers and customers; the ability of the Company to deploy its capital successfully; unanticipated outcomes related to outsourcing certain manufacturing processes; unanticipated outcomes related to litigation matters; 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 filing. The Company assumes no obligation, and disclaims any obligation, to update such forward-looking statements to reflect subsequent events or circumstances.

Trademarks

We have registered the following trademarks, among others, which may be used in this report: Minn Kota®, Cannon®, Humminbird®, Eureka!®, Jetboil®, Old Town®, Ocean Kayak®, Carlisle®, and SCUBAPRO®.

Overview

The Company is a leading global manufacturer and marketer of branded seasonal outdoor recreation products used primarily for fishing, diving, paddling and camping.  The Company’s portfolio of well-known consumer brands has attained leading market positions due to continuous innovation, marketing excellence, product performance and quality.  The Company’s values and culture support innovation in all areas, promoting and leveraging best practices and synergies within and across its subsidiaries to advance the Company’s strategic vision set by executive management and approved by the Company’s Board of Directors.  The Company is controlled by Helen P. Johnson-Leipold, the Company’s Chairman and Chief Executive Officer, members of her family and related entities.

- 20 -

JOHNSON OUTDOORS INC.

Highlights

Net sales of $176,253 for the third quarter of fiscal 2019 increased $5,474, or 3%, from the same period in the prior year, reflecting increased sales volumes in the Fishing business.  A decrease of $3,926 in operating profit over the prior year quarter was primarily the result of the impact of tariffs implemented during the current fiscal year on the import of certain components and other supplies from China, as well as increased marketing spend and increased bad debt expense year over year.

Seasonality

The Company’s business is seasonal in nature. The third fiscal quarter falls within the Company’s primary selling season for its warm-weather outdoor recreation products.  The table below sets forth a historical view of the Company’s seasonality during the last three fiscal years.
 
   
Fiscal Year
 
   
2018
   
2017
   
2016
 
Quarter Ended
 
Net
Sales
   
Operating
Profit
   
Net
Sales
   
Operating
Profit
   
Net
Sales
   
Operating
Profit
 
December
   
21
%
   
11
%
   
19
%
   
1
%
   
20
%
   
-4
%
March
   
31
%
   
41
%
   
30
%
   
45
%
   
31
%
   
66
%
June
   
31
%
   
51
%
   
32
%
   
54
%
   
32
%
   
59
%
September
   
17
%
   
-3
%
   
19
%
   
%
   
17
%
   
-21
%
     
100
%
   
100
%
   
100
%
   
100
%
   
100
%
   
100
%
 
Results of Operations

The Company’s net sales and operating profit (loss) by business segment for the periods shown below were as follows:
 
   
Three Months Ended
   
Nine Months Ended
 
   
June 28, 2019
   
June 29, 2018
   
June 28, 2019
   
June 29, 2018
 
Net sales:
                       
Fishing
 
$
128,196
   
$
121,920
   
$
345,222
   
$
336,333
 
Camping
   
14,728
     
13,915
     
30,077
     
29,843
 
Watercraft Recreation
   
13,010
     
14,115
     
27,186
     
29,280
 
Diving
   
20,243
     
20,774
     
55,866
     
57,582
 
Other / Eliminations
   
76
     
55
     
49
     
98
 
Total
 
$
176,253
   
$
170,779
   
$
458,400
   
$
453,136
 
Operating profit (loss):