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Item 2. Management’s Discussion and Analysis

2025-05-02 compared with 2025-02-03 · 100 added, 68 removed, 98 unchanged (63% 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 month periods ended December 27, 2024 and December 29, 2023.

and its subsidiaries (collectively, the “Company”) as of and for the three and six month periods ended March 28, 2025 and March 29, 2024.

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

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

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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,

JOHNSON OUTDOORS INC.

objectives or goals are also forward-looking statements.

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.

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

JOHNSON OUTDOORS INC.

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 $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.

Recent Developments

As disclosed in Part I, Item 1A:

Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended September 27 2024, the Company’s business is subject to risks related to, among other factors, tariffs put in the place by the United States or other countries.

During the second fiscal quarter of 2025, the United States government announced additional tariffs on goods imported into the U.S.

from numerous countries.

These tariffs may result in an increase in product or component costs, which may ultimately negatively impact demand for our products and/or reduce the Company's overall profitability.

The Company continues to analyze the potential impacts of the tariffs and actions that can be taken to mitigate their effects, including, among other options, adjusting our supply chain strategy, evaluating potential operational changes to improve efficiencies, and considering potential adjustments to our pricing strategy.

Net sales of $168,349 for the second quarter of fiscal 2025 decreased $7,507, or 4%, from the same period in the prior year.

The decrease between quarterly periods was mainly driven by persistent market challenges across several of the Company's product categories, as well as a cautious approach from the retail and trade environment.

These factors led to reduced demand and revenue in all segments of the Company's outdoor recreation products.

Gross margin remained relatively flat as compared to the prior year quarter, at approximately 35%.

Lower direct expenses driven by the decrease in sales volumes between periods, as well as lower promotions expense and a $3,370 decrease in expense related to the Company's deferred compensation plan contributed to a $5,154 improvement in operating profit in the current year quarter versus the prior year quarter.

As of December 27, 2024, and as referenced in “Note 16 – Segments of Business” of the notes to the accompanying Condensed Consolidated Financial Statements, 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 completed an acquisition of a scuba equipment manufacturer for $12,197, which is expected to provide new innovative products, unlock synergies and enhance operating efficiencies for this segment.

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 first fiscal quarter traditionally falls prior to the Company’s primary selling season for its warm-weather outdoor recreation products.

The second fiscal quarter traditionally 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.

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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

December 27, 2024 December 29, 2023

JOHNSON OUTDOORS INC.

Three Months Ended Six Months Ended

March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024

Fishing $ 134,891 $ 138,608 $ 217,363 $ 249,100

Camping & Watercraft Recreation

17,852 20,248 27,303 30,974

Diving 15,820 16,924 31,504 34,402

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Total $ 168,349 $ 175,856 $ 275,998 $ 314,500

Operating (loss) profit:

Operating profit (loss):

Fishing $ 9,469 $ 7,427 $ 1,208 $ 18,956

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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 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.

JOHNSON OUTDOORS INC.

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.

Net Sales - Second Fiscal Quarter

Consolidated net sales for the three months ended March 28, 2025 were $168,349, a decrease of $7,507, or 4%, compared to $175,856 for the three months ended March 29, 2024.

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

Net sales for the three months ended March 28, 2025 for the Fishing business were $134,891, a decrease of $3,717, or 3%, from $138,608 during the second fiscal quarter of the prior year.

The sales decline between quarters was due to continued challenging consumer and trade dynamics in this market.

Net sales for the Camping & Watercraft Recreation business were $17,852 for the second quarter of the current fiscal year, a decrease of $2,396, or 12%, from the prior year net sales during the same period of $20,248.

As previously announced, the Company exited the Eureka!

brand in this segment and completed all sales of Eureka!

inventory in the first fiscal quarter of 2025.

There were no Eureka!

sales in the current year second quarter, compared to approximately $2,950 of Eureka!

sales in the prior year quarter.

Excluding the impact of Eureka!

sales in the prior year quarter, sales in this segment increased slightly over the prior year quarter due to success of new Jetboil products introduced into the market by the Company.

Net sales for Diving for the second quarter of fiscal 2025 were $15,820, which declined $1,104, or 7%, compared to net sales of $16,924 for the three months ended March 29, 2024.

The sales decline compared to the prior year quarter was mainly due to continuing soft market demand for our Diving segment products across all geographic regions, driven by global economic uncertainty.

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

Net Sales - Year-To-Date

Consolidated net sales for the six months ended March 28, 2025 were $275,998, a decrease of $38,502, or 12%, compared to $314,500 for the six months ended March 29, 2024.

Foreign currency translation had a negligible impact on net sales of the current year to date period compared to the prior year to date period.

Net sales for the six months ended March 28, 2025 for the Fishing business were $217,363, a decrease of $31,737, or 13%, from $249,100 during the prior year to date period.

In addition to a continued challenging market as noted above for the second quarter, a strong sell-in of new products in the prior year year-to-date period also contributed to the sales decline between periods.

Net sales for the Camping & Watercraft Recreation business were $27,303 for the six months ended March 28, 2025, a decrease of $3,671, or 12%, from the prior year net sales during the same period of $30,974.

As discussed above, the decrease over the

JOHNSON OUTDOORS INC.

prior year to date period is mainly attributable to Eureka!

sales in the prior year to date period that were not repeated in the current fiscal year due to the exit of the brand.

Diving net sales for the six months ended March 28, 2025 were $31,504, which declined $2,898, or 8%, compared to net sales of $34,402 for the six months ended March 29, 2024, due to continued soft market demand for our Diving segment products across all geographic regions.

Foreign currency translation had an unfavorable impact of less than 2% on sales in this segment versus the prior year to date period.

Cost of Sales

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.

Cost of sales for the three months ended March 28, 2025 of $109,483 decreased $4,942 compared to $114,425 for the three months ended March 29, 2024, mainly due to a decrease in sales volumes over the prior year quarter.

Cost of sales for the six months ended March 28, 2025 of $184,949 decreased $15,266 compared to $200,215 for the six months ended March 29, 2024, mainly due to the decrease in sales volumes, partially offset by a shift in mix to higher cost products between year to date periods.

Gross Profit Margin

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.

For the three months ended March 28, 2025, gross profit as a percentage of net sales remained flat at 35.0% compared to 34.9% in the three month period ended March 29, 2024.

For the six months ended March 28, 2025, gross profit as a percentage of net sales was 33.0% compared to 36.3% in the six month period ended March 29, 2024.

The decline in gross profit percentage over the prior year-to-date period was primarily due to promotional pricing on end-of-life products and changes in product mix toward lower margin products between year-to-date periods.

Operating Expenses

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 expenses were $53,965 for the three months ended March 28, 2025, compared to $61,684 for the three months ended March 29, 2024, for a decrease of $7,719 between quarters.

The main drivers of the decrease were lower sales volume-driven expenses compared to the prior year quarter, as well as a decrease in promotions expense and a $3,370 decrease in expense related to the Company's deferred compensation plan between periods.

Operating expenses were $106,387 for the six months ended March 28, 2025, compared to $114,492 for the six months ended March 29, 2024, for a decrease of $8,105 between year-to-date periods.

Decreased sales volume-driven expenses and a $5,961 decrease in expense related to the Company's deferred compensation plan contributed to the decrease compared to the prior year to date period.

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.

Operating profit on a consolidated basis for the three month period ended March 28, 2025 was $4,901, compared to operating loss of $253 in the second quarter of the prior fiscal year.

As discussed above, the increase in operating profit between quarters was driven by a reduction in operating expenses that more than offset the decrease in gross profit caused by lower sales volumes between periods.

Operating loss on a consolidated basis for the six month period ended March 28, 2025 was $15,338, compared to $207 in the prior year to date period.

As discussed above, the increase in operating loss between periods was driven primarily by lower sales volumes, promotional pricing and changes in product mix toward lower margin products between year-to-date periods.

Interest expense was $68 and $40 for the three months ended March 28, 2025 and March 29, 2024, respectively, and $115 and $78 for the six months ended March 28, 2025 and March 29, 2024, respectively.

Interest income was $625 and $857 for the three months ended March 28, 2025 and March 29, 2024, respectively, and $1,658 and $2,055 for the six months ended March 28, 2025 and March 29, 2024, respectively.

Other Expense (Income), net

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.

JOHNSON OUTDOORS INC.

Other expense was $1,300 for the three months ended March 28, 2025 compared to other income of $2,448 in the prior year period.

The main driver of the $3,748 decrease over the prior year quarter was a $3,370 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, entirely offset as a reduction to operating expense as noted above.

For the three months ended March 28, 2025, foreign currency exchange losses were $20 compared to gains of $46 for the three months ended March 29, 2024.

For the six months ended March 28, 2025, other expense was $974, compared to other income of $7,141 in the six months ended March 29, 2024.

The $8,115 decrease was mostly attributable to a $5,961 decrease in net investment gains and earnings on the assets related to the Company’s non-qualified deferred compensation plan in the current year to date period over the prior year to date period, entirely offset as a reduction to operating expense as noted above.

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

For the six months ended March 28, 2025, foreign currency exchange gains were $183 compared to losses of $145 for the six months ended March 29, 2024.

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 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.

The effective tax rates for the three and six month periods ended March 28, 2025 were an expense of 44.6% and a benefit of 12.1%, respectively, compared to expense of 28.4% and 31.4% in the corresponding periods of the prior year.

Net Income/Loss

Net income for the three months ended March 28, 2025 was $2,304, or $0.22 per diluted common class A and B share, compared to $2,156, or $0.21 per diluted common class A and B share, for the second quarter of the prior fiscal year.

Net loss for the six months ended March 28, 2025 was $12,986, or $1.26 per diluted common class A and B share, compared to net income of $6,111, or $0.59 per diluted common class A and B share, for the second quarter of the prior fiscal year.

Liquidity and Financial Condition

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.

Cash and cash equivalents and short term investments totaled $93,951 as of March 28, 2025, compared to $84,270 as of March 29, 2024.

The Company’s debt to total capitalization ratio was 0% as of March 28, 2025 and March 29, 2024.

The Company’s total debt balance was $0 as of each of March 28, 2025 and March 29, 2024.

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

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.

Accounts receivable, net of allowance for credit losses, were $116,776 as of March 28, 2025, a decrease of $12,569 compared to $129,345 as of March 29, 2024.

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

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

Inventories were $180,057 as of March 28, 2025, a decrease of $69,144, compared to $249,201 as of March 29, 2024.

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.

Accounts payable were $44,323 at March 28, 2025 compared to $50,374 as of March 29, 2024.

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:

Three months ended

(thousands) December 27,

2024 December 29,

Six months ended

(thousands) March 28,

2025 March 29,

Cash (used for) provided by:

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Operating Activities

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.

JOHNSON OUTDOORS INC.

Cash used for operations totaled $38,566 for the six months ended March 28, 2025 compared to $51,764 during the corresponding period of the prior fiscal year.

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

Depreciation and amortization charges were $10,041 for the six month period ended March 28, 2025 compared to $9,949 for the corresponding period of the prior year.

Investing Activities

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.

Cash used for investing activities totaled $7,749 for the six months ended March 28, 2025 compared to cash provided by investing activities of $7,031 for the corresponding period of the prior fiscal year.

Current year cash used for investing activities reflects $12,197 paid to acquire a business, partially offset by the maturity of investments of $11,826.

The prior year period included proceeds from maturity of investments of $15,000, as well as proceeds from the sale of a building of $2,234.

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.

Capital expenditures were $7,378 in the six months ended March 28, 2025, compared to $10,203 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 $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.

Cash used for financing activities totaled $6,879 for the six months ended March 28, 2025 compared to $6,945 for the six month period ended March 29, 2024 and, for both periods, represents the payment of dividends and purchase of treasury stock.

The Company had no debt during either six month period ended March 28, 2025 and March 29, 2024.

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

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.

As of March 28, 2025 the Company held approximately $56,367 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 December 27, 2024.

There have been no changes outside of the ordinary course of business in the specified contractual obligations during the quarter ended March 28, 2025.

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 $67 as of December 27, 2024 and December 29, 2023, respectively.

Letters of credit outstanding were approximately $67 and $67 as of March 28, 2025 and March 29, 2024, 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 three months ended December 27, 2024.

There were no significant changes to the Company’s critical accounting policies and estimates during the six months ended March 28, 2025.

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