What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-03 compared with 2024-08-05 · 71 added, 97 removed, 95 unchanged (64% of the section changed)

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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, 2024 and June 30, 2023.

and its subsidiaries (collectively, the “Company”) as of and for the three month periods ended December 27, 2024 and December 29, 2023.

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

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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 27, 2024 which was filed with the Securities and Exchange Commission on December 11, 2024.

JOHNSON OUTDOORS INC.

Forward Looking Statements

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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.

Similarly, statements that describe the Company’s future plans,

JOHNSON OUTDOORS INC.

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.

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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®.

Minn Kota®, Cannon®, Humminbird®, Jetboil®, Old Town®, Ocean Kayak®, Carlisle®, and SCUBAPRO®.

The Company is a leading global manufacturer and marketer of branded seasonal outdoor recreation products used primarily for fishing, diving, paddling and camping.

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Johnson-Leipold, the Company’s Chairman and Chief Executive Officer, members of her family and related entities.

Net sales of $172,472 for the third quarter of fiscal 2024 decreased $14,575, or 8%, from the same period in the prior year.

The decrease between quarterly periods was primarily due to ongoing market challenges in many of the Company's product categories, as well as increasing competitive pressure, which resulted in weaker demand and revenue across all segments of the Company's outdoor recreation products.

Unfavorable overhead absorption due to the lower sales volumes and product mix also contributed to a 5.7 point decline in gross margin in the current year quarter versus the prior year quarter.

Additionally, a 4%

Net sales of $107,649 for the first quarter of fiscal 2025 decreased $30,995, or 22%, from the same period in the prior year.

The decrease between quarterly periods was primarily due to ongoing market challenges in many of the Company's product categories, a cautious retail and trade environment, as well as increasing competitive pressure, which resulted in weaker demand and revenue across all segments of the Company's outdoor recreation products.

Unfavorable overhead absorption due to the lower sales volumes and unfavorable product mix more than offset the Company's cost saving initiatives and contributed to an 8.2 point decline in gross margin, as well as a $20,285 decrease in operating profit in the current year quarter versus the prior year quarter.

As of December 27, 2024, the Company has combined the previously reported "Camping" and "Watercraft Recreation" segments into one segment, referred to as "Camping & Watercraft Recreation".

During the first quarter of fiscal 2025, the Company's Diving segment acquired a scuba equipment manufacturer for $12,180, which is expected to provide new innovative products, unlock synergies and enhance operating efficiencies for this segment.

JOHNSON OUTDOORS INC.

increase in operating expenses, which was mainly due to increased advertising and promotional spending between quarterly periods, contributed to a $17,949 decrease in operating profit from the prior year quarter.

See “Note 18 – Acquisitions” of the notes to the accompanying Condensed Consolidated Financial Statements for additional information.

The Company’s business is seasonal in nature.

The third fiscal quarter traditionally falls within the Company’s primary selling season for its warm-weather outdoor recreation products.

The first fiscal quarter traditionally falls prior to 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.

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Sales Operating

Profit (Loss) Net

Sales Operating

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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, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Three Months Ended

December 27, 2024 December 29, 2023

Fishing $ 82,472 $ 110,492

Camping 10,927 11,658 27,360 36,996

Watercraft Recreation 11,070 15,726 25,611 38,274

Camping & Watercraft Recreation

Diving 15,684 17,478

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Total $ 107,649 $ 138,644

Operating profit (loss):

Operating (loss) profit:

Fishing $ (8,261) $ 11,529

Camping 1,474 2,039 3,541 4,863

Watercraft Recreation 557 1,483 (2,007) 1,637

Camping & Watercraft Recreation

(646) (1,720)

Diving (908) (578)

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See “Note 16 – Segments of Business” of the notes to the accompanying Condensed Consolidated Financial Statements for the definition of segment net sales and operating profit.

Consolidated net sales for the three months ended June 28, 2024 were $172,472, a decrease of $14,575, or 8%, compared to $187,047 for the three months ended June 30, 2023.

Foreign currency translation had a negligible impact on current year third quarter net sales compared to the prior year's third quarter net sales.

Net sales for the three months ended June 28, 2024 for the Fishing business were $130,537, a decrease of $6,923, or 5%, from $137,460 during the third fiscal quarter of the prior year.

Softer consumer demand in the market for outdoor recreation products in the current year quarter combined with increased competitive pressure in the Fishing market has contributed to the sales decline between quarters.

Consolidated net sales for the three months ended December 27, 2024 were $107,649, a decrease of $30,995, or 22%, compared to $138,644 for the three months ended December 29, 2023.

Foreign currency translation had a negligible impact on current year first quarter net sales compared to the prior year's first quarter net sales.

Net sales for the three months ended December 27, 2024 for the Fishing business were $82,472, a decrease of $28,020, or 25%, from $110,492 during the first fiscal quarter of the prior year.

Challenging consumer and trade dynamics, increased competitive pressure, and strong sell-in of new products in last year's quarter all contributed to the sales decline between quarters.

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Net sales for the Camping business were $10,927 for the third quarter of the current fiscal year, a decrease of $731, or 6%, from the prior year net sales during the same period of $11,658.

The decrease is mainly attributable to declines in overal consumer demand for products in this market.

Net sales for the third quarter of fiscal 2024 for the Watercraft Recreation business were $11,070, a decrease of $4,656, or 30%, compared to $15,726 in the prior year same period.

Sales in this segment were negatively affected by continuing decreased demand in the overall watercraft market compared to the prior year quarter.

Net sales for Diving for the third quarter of fiscal 2024 were $19,861, which declined $2,366, or 11%, compared to net sales of $22,227 for the three months ended June 30, 2023.

The decline in sales over the prior year quarter was driven primarily by softening market demand across all geographic regions.

Foreign currency translation had an unfavorable impact of less than 1% on sales in this segment versus the prior year quarter.

For the nine months ended June 28, 2024, consolidated net sales of $486,972 decreased $80,527, or 14%, compared to $567,499 for the nine months ended June 30, 2023.

Foreign currency translation had an insignificant impact on net sales of the current year to date period versus the prior year to date period.

Net sales for the nine months ended June 28, 2024 for the Fishing business were $379,637, a decrease of $51,205, or 12%, from $430,842 during the same period of the prior year.

As noted above for the quarter, a continued challenging market and competitive pressures resulted in lower sales compared to the prior year to date period.

Net sales for the Camping business were $27,360 for the nine months ended June 28, 2024, a decrease of $9,636, or 26%, from the prior year net sales during the same period of $36,996.

Approximately $4,500 of the decrease from the prior year quarter was related to the previously reported divestiture of the Military and Commercial Tents product lines of its Camping business during the second quarter of fiscal 2023, with the remainder due primarily to general declines in the market for camping products.

Net sales for the nine months ended June 28, 2024 for the Watercraft Recreation business were $25,611, a decrease of $12,663, or 33%, compared to $38,274 in the prior year same period.

The company was impacted by reductions in demand in the overall watercraft market, resulting in decreased sales over the prior year.

Diving net sales were $54,263 for the nine months ended June 28, 2024, versus $61,594 for the same period of the prior year, a decrease of $7,331 or 12% due to soft market demand across all geographic regions.

Foreign currency translation had a favorable impact of less than 1% on sales in this segment versus the prior year.

Net sales for the Camping & Watercraft Recreation business were $9,451 for the first quarter of the current fiscal year, a decrease of $1,275, or 12%, from the prior year net sales during the same period of $10,726.

The decrease is mainly attributable to declines in overall consumer demand for products in this market, primarily in the overall kayak industry.

Net sales for Diving for the first quarter of fiscal 2025 were $15,684, which declined $1,794, or 10%, compared to net sales of $17,478 for the three months ended December 29, 2023.

The decline in sales over the prior year quarter was driven primarily by continued soft market demand across all geographic regions.

Foreign currency translation had a favorable impact of less than 1% on sales in this segment versus the prior year quarter.

Cost of Sales

Cost of sales for the three months ended June 28, 2024 of $110,650 increased $1,190 compared to $109,460 for the three months ended June 30, 2023.

Despite a decrease in sales volumes between quarters, the mix of products sold led to increases in certain material costs, resulting in increased cost of sales between quarters.

For the nine months ended June 28, 2024, cost of sales was $310,865 compared to $351,798 in the same period of the prior year.

The decrease year over year was driven primarily by decreased sales volumes between periods.

Cost of sales for the three months ended December 27, 2024 of $75,466 decreased $10,324 compared to $85,790 for the three months ended December 29, 2023, mainly due to the decrease in sales volumes, and the unfavorable mix of higher cost product between quarters.

Gross Profit Margin

For the three months ended June 28, 2024, gross profit as a percentage of net sales was 35.8% compared to 41.5% in the three month period ended June 30, 2023.

The decline in gross profit percentage over the prior year quarter was primarily due to unfavorable overhead absorption as a result of lower sales volumes and changes in product mix toward lower margin products between quarters.

For the nine months ended June 28, 2024, gross profit as a percentage of sales was 36.2% compared to 38.0% in the prior nine month period.

Unfavorable overhead absorption on lower sales volumes and changes in product mix were the primary drivers of the decrease in gross profit percentage between year to date periods.

For the three months ended December 27, 2024, gross profit as a percentage of net sales was 29.9% compared to 38.1% in the three month period ended December 29, 2023.

The decline in gross profit percentage over the prior year quarter was primarily due to unfavorable overhead absorption as a result of lower sales volumes, promotional pricing on end-of-life products and changes in product mix toward lower margin products between quarters.

Operating Expenses

Operating expenses were $62,328 for the three months ended June 28, 2024, compared to $60,144 for the three months ended June 30, 2023.

The increase of $2,184 was primarily due to increased advertising and promotional spending between quarters, partially offset by the impact of lower sales volumes.

JOHNSON OUTDOORS INC.

Operating expenses were $176,820 for the nine months ended June 28, 2024, compared to $181,396 for the nine months ended June 30, 2023.

The decrease of $4,576 was primarily due to lower sales volumes between quarters, as well as lower incentive compensation and professional services expense, partially offset by increased advertising and promotional spending.

Operating Profit

Operating loss on a consolidated basis for the three month period ended June 28, 2024 was $506, compared to operating profit of $17,443 in the third quarter of the prior fiscal year.

As discussed above, the decrease in operating profit between quarters is driven by lower sales volumes and increased promotional spending over the prior year quarter.

Operating loss on a consolidated basis for the nine month period ended June 28, 2024 was $713, compared to operating profit of $34,305 in the prior year to date period.

Lower sales volumes in the current year quarter was the primary driver of the decrease in operating profit between year to date periods.

Interest expense was $37 and $39 for the three months ended June 28, 2024 and June 30, 2023, respectively.

Interest expense was $115 and $114 for the nine months ended June 28, 2024 and June 30, 2023, respectively.

Interest income was $1,123 and $1,244 for the three months ended June 28, 2024 and June 30, 2023, respectively.

Interest income was $3,178 and $2,806 for the nine months ended June 28, 2024 and June 30, 2023, respectively.

Operating expenses were $52,422 for the three months ended December 27, 2024, compared to $52,808 for the three months ended December 29, 2023, for a decrease of $386 between quarters.

Decreased sales volumes and a $2,590 decrease in expense related to the Company's deferred compensation plan were nearly offset by increased professional services and warranty expenses between periods.

Operating Loss/Profit

Operating loss on a consolidated basis for the three month period ended December 27, 2024 was $20,239, compared to operating profit of $46 in the first quarter of the prior fiscal year.

As discussed above, the decrease in operating profit between quarters is driven by lower sales volumes.

Interest expense was $47 and $38 for the three months ended December 27, 2024 and December 29, 2023, respectively.

Interest income was $1,033 and $1,198 for the three months ended December 27, 2024 and December 29, 2023, respectively.

Other Expense (Income), net

Other income was $327 for the three months ended June 28, 2024 compared to $1,174 in the prior year period.

The main driver of the $847 decrease over the prior year quarter was a $888 decrease in net investment gains and earnings on the assets related to the Company’s non-qualified deferred compensation plan in the current quarter over the prior year quarter.

For the three months ended June 28, 2024, foreign currency exchange losses were $28 compared to $76 for the three months ended June 30, 2023.

For the nine months ended June 28, 2024, other income was $7,468 compared to $10,939 in the nine months ended June 30, 2023.

The main drivers of the $3,471 decrease over the prior year period were the gain on the sale of the Military and Commercial Tents product lines of approximately $6,640 recorded in the prior year period, partially offset by a gain on the sale of a building of approximately $1,900 in the current period.

Additionally, net investment gains and earnings on the assets related to the Company's non-qualified deferred compensation plan in the nine months ended June 28, 2024 were $5,463, compared to $4,159 in the prior year to date period.

Foreign currency exchange losses were $173 compared to gains of $155 for the nine months ended June 28, 2024 and June 30, 2023, respectively.

Other income was $326 for the three months ended December 27, 2024 compared to $4,693 in the prior year period.

The main driver of the $4,367 decrease over the prior year quarter was a $2,590 decrease in net investment gains and earnings on the assets related to the Company’s non-qualified deferred compensation plan in the current year quarter over the prior year quarter.

Additionally, the prior year included a gain on the sale of building of approximately $1,900.

For the three months ended December 27, 2024, foreign currency exchange gains were $203 compared to losses of $191 for the three months ended December 29, 2023.

Income Tax Expense

The Company’s provision for income taxes is based upon estimated annual effective tax rates in the tax jurisdictions in which the Company operates.

The effective tax rate for the three month period ended June 28, 2024 was a benefit of 78.8%, due to the decline in profit before taxes and geographic mix of profits and losses.

For the nine month period ended June 28, 2024 the effective tax rate was 21.2%.

The effective tax rates were 25.3% and 25.9% in the corresponding periods of the prior year.

Net income for the three months ended June 28, 2024 was $1,622, or $0.16 per diluted common class A and B share, compared to net income of $14,801, or $1.44 per diluted common class A and B share, for the third quarter of the prior fiscal year.

Net income for the nine months ended June 28, 2024 was $7,733, or $0.75 per diluted common class A and B share, compared to net income of $35,541, or $3.47 per diluted common class A and B share for the nine months ended June 30, 2023.

The effective tax rate for the three month period ended June 28, 2024 was a tax benefit of 19.2%, due to the decline in profit before taxes, as well as geographic mix of profits and losses.

Net Loss/Income

JOHNSON OUTDOORS INC.

Net loss for the three months ended December 27, 2024 was $15,290, or $1.49 per diluted common class A and B share, compared to net income of $3,955, or $0.38 per diluted common class A and B share, for the first quarter of the prior fiscal year.

Liquidity and Financial Condition

Cash and cash equivalents and short term investments totaled $148,369 as of June 28, 2024, compared to $149,247 as of June 30, 2023.

The Company’s debt to total capitalization ratio was 0% as of June 28, 2024 and June 30, 2023.

The Company’s total debt balance was $0 as of each of June 28, 2024 and June 30, 2023.

Cash and cash equivalents and short term investments totaled $101,617 as of December 27, 2024, compared to $109,555 as of December 29, 2023.

The Company’s debt to total capitalization ratio was 0% as of December 27, 2024 and December 29, 2023.

The Company’s total debt balance was $0 as of each of December 27, 2024 and December 29, 2023.

See “Note 11 – Indebtedness” in the notes to the Company’s accompanying condensed consolidated financial statements for further discussion.

JOHNSON OUTDOORS INC.

Accounts receivable, net of allowance for credit losses, were $79,593 as of June 28, 2024, a decrease of $15,051 compared to $94,644 as of June 30, 2023.

Accounts receivable, net of allowance for credit losses, were $68,297 as of December 27, 2024, a decrease of $14,746 compared to $83,043 as of December 29, 2023.

The decrease is consistent with the decreased sales volumes year over year.

Inventories were $223,160 as of June 28, 2024, a decrease of $11,909, compared to $235,069 as of June 30, 2023.

Accounts payable were $43,153 at June 28, 2024 compared to $45,728 as of June 30, 2023.

Inventories were $201,606 as of December 27, 2024, a decrease of $65,715, compared to $267,321 as of December 29, 2023.

The decrease is consistent with the Company's ongoing efforts to reduce inventory balances.

Accounts payable were $33,491 at December 27, 2024 compared to $43,403 as of December 29, 2023.

The Company’s cash flows from operating, investing and financing activities, as presented in the Company’s accompanying Condensed Consolidated Statements of Cash Flows, are summarized in the following table:

Nine months ended

(thousands) June 28,

2024 June 30,

Three months ended

(thousands) December 27,

2024 December 29,

Cash (used for) provided by:

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Effect of foreign currency rate changes on cash (3,369) 1,197

Increase (decrease) in cash and cash equivalents $ 14,969 $ (7,207)

Decrease in cash and cash equivalents $ (50,228) $ (31,393)

Operating Activities

Cash provided by operations totaled $21,899 for the nine months ended June 28, 2024 compared to $45,210 during the corresponding period of the prior fiscal year.

The decrease in cash provided by operations over the prior year nine month period was due primarily to lower income on decreased sales volumes between quarters.

Depreciation and amortization charges were $14,799 for the nine month period ended June 28, 2024 compared to $11,815 for the corresponding period of the prior year.

Cash used for operations totaled $36,909 for the three months ended December 27, 2024 compared to $33,687 during the corresponding period of the prior fiscal year.

The decrease in cash provided by operations over the prior year three month period was due primarily to lower income on decreased sales volumes between quarters, offset in part by cash provided by working capital reductions between quarters.

Depreciation and amortization charges were $4,803 for the three month period ended December 27, 2024 compared to $5,027 for the corresponding period of the prior year.

Investing Activities

Cash provided by investing activities totaled $3,225 for the nine months ended June 28, 2024 compared to cash used for investing activities of $45,133 for the corresponding period of the prior fiscal year.

Current year cash provided by investing activities reflects maturity of investments of $19,650, as well as proceeds of $2,244 related to the sale of fixed assets, which predominantly consisted of the sale of a building, as discussed above, partially offset by purchases of investments of $2,220.

The prior year period included purchases of investments of $40,696, offset in part by proceeds of $14,990 related to the divestiture of the Military and Commercial Tents product lines, previously discussed.

Capital expenditures were $16,449 in the nine months ended June 28, 2024, compared to $19,427 in the prior year to date period which included investments in expansion of Fishing facilities to accommodate additional production.

Cash used for investing activities totaled $6,500 for the three months ended December 27, 2024 compared to cash provided by investing activities of $4,685 for the corresponding period of the prior fiscal year.

Current year cash used for investing activities reflects $12,180 paid to acquire a business, partially offset by maturity of investments of $9,764.

The prior year period included proceeds from maturity of investments of $7,500, as well as proceeds from the sale of a building of $2,189.

Capital expenditures were $4,084 in the three months ended December 27, 2024, compared to $5,004 in the prior year to date period which included investments in expansion of Fishing facilities to accommodate additional production.

Any additional capital expenditures in fiscal 2025 are expected to be funded by working capital.

Financing Activities

Cash used for financing activities totaled $10,136 for the nine months ended June 28, 2024 compared to $9,591 for the nine month period ended June 30, 2023 and represents the payment of dividends and purchase of treasury stock.

The Company had no debt during either nine month period ended June 28, 2024 and June 30, 2023.

Cash used for financing activities totaled $3,450 for the three months ended December 27, 2024 compared to $3,588 for the three month period ended December 29, 2023 and, for both periods, represents the payment of dividends and purchase of treasury stock.

The Company had no debt during either three month period ended December 27, 2024 and December 29, 2023.

See Note 11 "Indebtedness" to the accompanying Condensed Consolidated Financial Statements for additional information on our credit facilities.

As of June 28, 2024 the Company held approximately $54,960 of cash, cash equivalents and short-term investments in bank accounts in foreign taxing jurisdictions.

JOHNSON OUTDOORS INC.

As of December 27, 2024 the Company held approximately $58,043 of cash, cash equivalents and short-term investments in bank accounts in foreign taxing jurisdictions.

Contractual Obligations and Off Balance Sheet Arrangements

The Company has contractual obligations and commitments to make future payments including under operating leases and open purchase orders.

There have been no changes outside of the ordinary course of business in the specified contractual obligations during the quarter ended June 28, 2024.

There have been no changes outside of the ordinary course of business in the specified contractual obligations during the quarter ended December 27, 2024.

The Company utilizes letters of credit primarily as security for the payment of future claims under its workers compensation insurance.

Letters of credit outstanding were approximately $67 and $78 as of June 28, 2024 and June 30, 2023, respectively.

JOHNSON OUTDOORS INC.

Letters of credit outstanding were approximately $67 and $67 as of December 27, 2024 and December 29, 2023, respectively.

The Company has no other off-balance sheet arrangements.

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The Company’s critical accounting policies and estimates are identified in the Company’s Annual Report on Form 10-K for the fiscal year ending September 27, 2024 in Management’s Discussion and Analysis of Financial Condition and Results of Operations under the heading “Critical Accounting Estimates”, which was filed with the Securities and Exchange Commission on December 11, 2024.

There were no significant changes to the Company’s critical accounting policies and estimates during the nine months ended June 28, 2024.

There were no significant changes to the Company’s critical accounting policies and estimates during the three months ended December 27, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis