JOHNSON OUTDOORS INC 10-Q

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 month periods ended January 2, 2026 and December 27, 2024. All monetary amounts, other than share and per share amounts, are stated in thousands. 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 October 3, 2025 which was filed with the Securities and Exchange Commission on December 12, 2025. 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 for the fiscal year ended October 3, 2025 which was filed with the Securities and Exchange Commission on December 12, 2025 and the following: changes in economic conditions, consumer confidence levels and discretionary spending patterns in key markets; uncertainties stemming from political instability or changes in government policy and actions (and its impact on the economies in jurisdictions where the Company has operations); uncertainties - 20 - Index JOHNSON OUTDOORS INC. stemming from changes in U.S. trade policies, tariffs, and the reaction of other countries to such changes; the global outbreaks of disease which may affect market and economic conditions and may have wide-ranging impacts on employees, customers and various aspects of our operations; 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 or components 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, or the demand for those same raw materials and components by third parties, necessary to manufacture and produce the Company's products including related to shortages in procuring necessary raw materials and components to manufacture and produce such 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 and other factors impacting climate change legislation. 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®, Jetboil®, Old Town®, 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. Highlights Net sales of $140,935 for the first quarter of fiscal 2026 increased $33,286, or 31%, from the same period in the prior year. The increase between quarterly periods was mainly driven by new product innovation and market stabilization between periods. Gross margin increased to 36.6% compared to 29.9% in the prior year quarter. Taking into account the seasonal nature of the Company's business, as described below, the increase in net sales and the significant increase in margin contributed to a $17,327 improvement in operating loss in the current year quarter versus the prior year quarter. Seasonality 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 table below sets forth a historical view of the Company’s seasonality during the last three fiscal years. - 21 - Index JOHNSON OUTDOORS INC. Fiscal Year 2025 2024 2023 Quarter Ended Net Sales Operating (Profit) Loss Net Sales Operating Profit (Loss) Net Sales Operating Profit (Loss) December 18 % 125 % 23 % — % 27 % 47 % March 28 % (30) % 30 % 1 % 30 % 97 % June 31 % (45) % 29 % 1 % 28 % 149 % September 23 % 50 % 18 % 98 % 15 % (193) % 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 January 2, 2026 December 27, 2024 Net sales: Fishing $ 112,370 $ 82,472 Camping & Watercraft Recreation 10,601 9,451 Diving 17,974 15,684 Other / Corporate / Eliminations (10) 42 Total $ 140,935 $ 107,649 Operating profit (loss): Fishing $ 7,520 $ (8,261) Camping & Watercraft Recreation (1,118) (646) Diving (336) (908) Other / Corporate / Eliminations (8,978) (10,424) Total $ (2,912) $ (20,239) 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. Net Sales - First Fiscal Quarter Consolidated net sales for the three months ended January 2, 2026 were $140,935, an increase of $33,286, or 31%, compared to $107,649 for the three months ended December 27, 2024. Foreign currency translation had a negligible impact on current year first quarter consolidated net sales compared to the prior year's first quarter net sales. Net sales for the three months ended January 2, 2026 for the Fishing business were $112,370, an increase of $29,898, or 36%, from $82,472 during the first fiscal quarter of the prior year. The increase in sales in this segment between quarters was mainly due to improved trade inventory levels and sales generated by the launch of new products. Net sales for the Camping & Watercraft Recreation business were $10,601 for the first quarter of the current fiscal year, an increase of $1,150, or 12%, from the prior year net sales during the same period of $9,451. Growth in e-commerce channels overcame the unfavorable impact of a continuing weak end market for watercraft recreation. Net sales for Diving for the first quarter of fiscal 2026 were $17,974, which increased $2,290, or 15%, compared to net sales of $15,684 for the three months ended December 27, 2024. The sales increase over the prior year first quarter was primarily driven by the success of new products, particularly in the U.S. market. Additionally, foreign currency translation had a favorable impact of approximately 4% on sales in this segment versus the prior year first quarter. Cost of Sales - 22 - Index JOHNSON OUTDOORS INC. Cost of sales for the three months ended January 2, 2026 of $89,325 increased $13,859 compared to $75,466 for the three months ended December 27, 2024, due primarily to the increase in sales volumes over the prior year quarter as well as higher costs from tariffs on purchased raw materials and components. Higher material costs were offset in part by lower labor costs driven by efficiencies from cost cutting initiatives. Gross Profit Margin For the three months ended January 2, 2026, gross profit as a percentage of net sales increased to 36.6% compared to 29.9% in the three month period ended December 27, 2024, mainly as a result of improved overhead absorption driven by higher sales volumes between periods as well as a favorable mix of products sold. Pricing actions taken by the Company helped to offset the impact of incremental tariffs in the current year quarter. Operating Expenses Operating expenses were $54,522 for the three months ended January 2, 2026, compared to $52,422 for the three months ended December 27, 2024. The main drivers of the $2,100 increase between quarters were higher sales-volume related costs offset in part by lower warranty expenses. Operating Profit/Loss Operating loss on a consolidated basis for the three month period ended January 2, 2026 was $2,912, compared to operating loss of $20,239 in the first quarter of the prior fiscal year. As discussed above, the improvement in operating loss between quarters was driven primarily by an increase in sales and gross margin improvements between periods. Interest Interest expense was $57 and $47 for the three months ended January 2, 2026 and December 27, 2024, respectively. Interest income was $1,320 and $1,033 for the three months ended January 2, 2026 and December 27, 2024, respectively. Other Expense (Income), net Other income was $394 for the three months ended January 2, 2026 compared to $326 in the prior year period. For the three months ended January 2, 2026, foreign currency exchange losses were $69 compared to foreign currency exchange gains of $203 for the three months ended December 27, 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 Company recorded income tax expense of $2,045 in the three month period ended January 2, 2026 which equated to an effective tax rate of (162.9)% which was impacted by an adjustment related to its U.S. valuation allowance on deferred tax assets. The Company recorded a benefit of $3,637 in the corresponding period of the prior year which equated to an effective tax rate of 19.2%. Net Income/Loss Net loss for the three months ended January 2, 2026 was $3,300, or $0.33 per diluted common class A and B share, compared to $15,290, or $1.49 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 $130,731 as of January 2, 2026, compared to $101,617 as of December 27, 2024. The Company’s debt to total capitalization ratio was 0% as of January 2, 2026 and December 27, 2024. The Company’s total debt balance was $0 as of each of January 2, 2026 and December 27, 2024. See “Note 11 – Indebtedness” in the notes to the Company’s accompanying condensed consolidated financial statements for further discussion of our credit facilities. Accounts receivable, net of allowance for credit losses, were $85,108 as of January 2, 2026, an increase of $16,811 compared to $68,297 as of December 27, 2024. The increase is consistent with the increased sales volumes over the prior year quarter. Inventories were $183,940 as of January 2, 2026, a decrease of $17,666, compared to $201,606 as of December 27, 2024. The - 23 - Index JOHNSON OUTDOORS INC. decrease is consistent with the Company's ongoing efforts to reduce inventory balances. Accounts payable were $48,135 at January 2, 2026 compared to $33,491 as of December 27, 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) January 2, 2026 December 27, 2024 Cash provided by (used for): Operating activities $ (38,415) $ (36,909) Investing activities (4,293) (6,500) Financing activities (3,479) (3,450) Effect of foreign currency rate changes on cash 519 (3,369) Decrease in cash and cash equivalents $ (45,668) $ (50,228) Operating Activities Cash used for operations totaled $38,415 for the three months ended January 2, 2026 compared to $36,909 during the corresponding period of the prior fiscal year. The increase in cash used for operations over the prior year three month period was due primarily to working capital changes between quarters. Depreciation and amortization charges were $5,099 for the three month period ended January 2, 2026 compared to $4,803 for the corresponding period of the prior year. Investing Activities Cash used for investing activities totaled $4,293 for the three months ended January 2, 2026 compared to $6,500 for the corresponding period of the prior fiscal year. The prior year period reflects $12,180 paid to acquire a business, partially offset by proceeds from maturity of investments of $9,764. Capital expenditures were $4,293 in the three months ended January 2, 2026, compared to $4,084 in the prior year to date period. Any additional capital expenditures in fiscal 2026 are expected to be funded by working capital. Financing Activities Cash used for financing activities totaled $3,479 for the three months ended January 2, 2026 compared to $3,450 for the three month period ended December 27, 2024 and represents the payment of dividends and purchase of treasury stock for both periods. The Company had no debt during either three month period ended January 2, 2026 and December 27, 2024. See Note 11 "Indebtedness" to the accompanying Condensed Consolidated Financial Statements for additional information on our credit facilities. As of January 2, 2026 the Company held approximately $66,152 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 January 2, 2026. 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 January 2, 2026 and December 27, 2024, respectively. The Company has no other off-balance sheet arrangements. Critical Accounting Policies and Estimates - 24 - Index JOHNSON OUTDOORS INC. 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 October 3, 2025 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 12, 2025. There were no significant changes to the Company’s critical accounting policies and estimates during the three months ended January 2, 2026.