Johnson Outdoors (JOUT) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements This section presents Johnson Outdoors Inc.'s unaudited condensed consolidated financial statements for the three and six months ended March 28, 2025, and March 29, 2024, including statements of operations, comprehensive income (loss), balance sheets, shareholders' equity, and cash flows, along with detailed notes explaining accounting policies and significant financial events Condensed Consolidated Statements of Operations | (thousands, except per share data) | Three Months Ended March 28, 2025 | Three Months Ended March 29, 2024 | Six Months Ended March 28, 2025 | Six Months Ended March 29, 2024 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $ 168,349 | $ 175,856 | $ 275,998 | $ 314,500 | | Gross profit | 58,866 | 61,431 | 91,049 | 114,285 | | Operating profit (loss) | 4,901 | (253) | (15,338) | (207) | | Profit (loss) before income taxes | 4,158 | 3,012 | (14,769) | 8,911 | | Net income (loss) | $ 2,304 | $ 2,156 | $ (12,986) | $ 6,111 | | Net income (loss) per common share - Diluted: Class A | $ 0.22 | $ 0.21 | $ (1.26) | $ 0.59 | Condensed Consolidated Statements of Comprehensive Income (Loss) | (thousands) | Three Months Ended March 28, 2025 | Three Months Ended March 29, 2024 | Six Months Ended March 28, 2025 | Six Months Ended March 29, 2024 | | :------------------------------ | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $ 2,304 | $ 2,156 | $ (12,986) | $ 6,111 | | Other comprehensive income (loss): | | | | | | Foreign currency translation | 1,133 | 2,379 | (3,782) | 680 | | Unrealized (loss) gain on available-for-sale securities, net of tax | (4) | (18) | (5) | 84 | | Change in pension plans, net of tax | 7 | 8 | 16 | 15 | | Total other comprehensive income (loss) | 1,136 | 2,369 | (3,771) | 779 | | Total comprehensive income (loss) | $ 3,440 | $ 4,525 | $ (16,757) | $ 6,890 | Condensed Consolidated Balance Sheets | (thousands, except share data) | March 28, 2025 | September 27, 2024 | March 29, 2024 | | :----------------------------- | :------------- | :----------------- | :------------- | | ASSETS | | | | | Total current assets | $ 407,079 | $ 428,728 | $ 477,329 | | Total assets | $ 624,474 | $ 635,212 | $ 691,678 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | Total current liabilities | $ 104,833 | $ 90,444 | $ 108,532 | | Total liabilities | $ 183,372 | $ 171,788 | $ 191,589 | | Total shareholders' equity | $ 441,102 | $ 463,424 | $ 500,089 | | Total liabilities and shareholders' equity | $ 624,474 | $ 635,212 | $ 691,678 | Condensed Consolidated Statements of Shareholders' Equity | (thousands except for shares) | Balance at September 27, 2024 | Net loss | Dividends declared | Stock-based compensation | Currency translation adjustment | Balance at March 28, 2025 | | :---------------------------- | :---------------------------- | :------- | :----------------- | :----------------------- | :------------------------------ | :------------------------ | | Common Stock | $ 517 | — | — | 1 | — | $ 521 | | Capital in Excess of Par Value | $ 90,146 | — | — | 1,256 | — | $ 91,599 | | Retained Earnings | $ 369,592 | (12,986) | (6,734) | — | — | $ 349,872 | | Accumulated Other Comprehensive Income (Loss) | $ 5,964 | — | — | — | (3,782) | $ 2,193 | | Treasury Stock | $ (2,795) | — | — | (288) | — | $ (3,083) | Condensed Consolidated Statements of Cash Flows | (thousands) | Six Months Ended March 28, 2025 | Six Months Ended March 29, 2024 | | :-------------------------------------------- | :------------------------------ | :------------------------------ | | CASH USED FOR OPERATING ACTIVITIES | $ (38,566) | $ (51,764) | | CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES | $ (7,749) | $ 7,031 | | CASH USED FOR FINANCING ACTIVITIES | $ (6,879) | $ (6,945) | | Effect of foreign currency rate changes on cash | $ (2,668) | $ 180 | | Decrease in cash and cash equivalents | $ (55,862) | $ (51,498) | | CASH AND CASH EQUIVALENTS End of period | $ 89,636 | $ 60,356 | Notes to Condensed Consolidated Financial Statements These notes provide detailed disclosures on the Company's accounting policies, financial statement components, and significant transactions, including earnings per share calculations, stock-based compensation, lease obligations, income taxes, inventory valuation, goodwill, warranties, indebtedness, fair value measurements, marketable securities, new accounting pronouncements, revenue recognition, segment reporting, accumulated other comprehensive income, and recent acquisitions 1 BASIS OF PRESENTATION The condensed consolidated financial statements are unaudited and include all normal recurring adjustments necessary for fair presentation. They should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended September 27, 2024 - The financial statements are unaudited and include only normal recurring adjustments, consistent with prior filings[24] 2 ACCOUNTS RECEIVABLE Accounts receivable are reported net of allowances for credit losses, which are determined based on specific collection concerns and historical bad debt experience. The Company typically does not require collateral | Allowance for Credit Losses (thousands) | March 28, 2025 | September 27, 2024 | March 29, 2024 | | :-------------------------------------- | :------------- | :----------------- | :------------- | | Allowance for credit losses | $ 692 | $ 3,543 | $ 749 | 3 EARNINGS PER SHARE ("EPS") EPS is computed using the two-class method, with Class A shares receiving 110% of Class B dividends. Basic and diluted EPS were the same for both classes due to no cumulative undistributed earnings or net losses being allocated equally among participating securities - Basic and diluted EPS for Class A and Class B shares were identical for the three and six months ended March 28, 2025, and March 29, 2024, due to the absence of cumulative undistributed earnings[30][32] | Dividends declared per common share | Three Months Ended March 28, 2025 | Three Months Ended March 29, 2024 | Six months ended March 28, 2025 | Six months ended March 29, 2024 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Class A | $ 0.33 | $ 0.33 | $ 0.66 | $ 0.66 | | Class B | $ 0.30 | $ 0.30 | $ 0.60 | $ 0.60 | 4 STOCK-BASED COMPENSATION AND STOCK OWNERSHIP PLANS The Company operates stock ownership plans for executives and directors, issuing non-vested restricted stock and restricted stock units (RSUs). Compensation expense is recognized over the vesting period, with RSUs tied to financial performance goals. The Company also has an Employees' Stock Purchase Plan | Non-vested stock activity (six months ended March 28, 2025) | Shares | Weighted Average Grant Price | | :------------------------------------------ | :------- | :--------------------------- | | Non-vested stock at September 27, 2024 | 56,389 | $ 59.69 | | Non-vested stock grants | 67,312 | $ 30.20 | | Restricted stock vested | (24,357) | $ 54.60 | | Forfeitures | (3,690) | $ 54.20 | | Non-vested stock at March 28, 2025 | 95,654 | $ 40.44 | | RSU activity (six months ended March 28, 2025) | Number of RSUs | Weighted Average Grant Price | | :--------------------------------------------- | :------------- | :--------------------------- | | RSUs at September 27, 2024 | 84,192 | $ 64.58 | | RSUs granted | 57,792 | $ 33.14 | | RSUs vested and canceled due to performance targets not being met | (17,041) | $ 101.22 | | RSU's forfeited | (3,690) | $ 54.20 | | RSUs at March 28, 2025 | 121,253 | $ 44.76 | - Stock compensation expense for non-vested stock was $462 thousand (3 months) and $816 thousand (6 months) for March 28, 2025, compared to $322 thousand and $750 thousand for March 29, 2024. RSU compensation expense was $160 thousand (3 months) and $276 thousand (6 months) for March 28, 2025, while the prior year periods recognized income due to unmet performance conditions[41][44] 5 LEASES The Company leases facilities and equipment under non-cancelable operating leases, with terms up to 14 years. Lease costs include operating, short-term, and variable components. As of March 28, 2025, the Company had no finance leases or significant new leases | Lease Cost (thousands) | Three months ended March 28, 2025 | Three months ended March 29, 2024 | Six months ended March 28, 2025 | Six months ended March 29, 2024 | | :--------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Operating lease costs | $ 2,647 | $ 2,476 | $ 5,271 | $ 4,941 | | Short-term lease costs | 561 | 599 | 1,128 | 1,226 | | Variable lease costs | 50 | 43 | 99 | 86 | | Total lease cost | $ 3,118 | $ 3,258 | $ 6,498 | $ 6,253 | | Operating Leases (thousands) | March 28, 2025 | March 29, 2024 | | :--------------------------- | :------------- | :------------- | | Operating lease ROU assets | $ 46,978 | $ 50,880 | | Total operating lease liabilities | $ 48,825 | $ 52,597 | | Weighted average remaining lease term (in years) | 10.59 | 11.28 | | Weighted average discount rate | 3.4 % | 3.2 % | 6 INCOME TAXES The Company's effective income tax rate fluctuates due to changes in the geographic mix of profits/losses and the recording of unrecognized tax benefits. Valuation allowances are maintained for certain foreign tax jurisdictions (Indonesia, Switzerland) where realization of deferred tax assets is uncertain | (thousands, except tax rate data) | Three Months Ended March 28, 2025 | Three Months Ended March 29, 2024 | Six Months Ended March 28, 2025 | Six Months Ended March 29, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Profit (loss) before income taxes | $ 4,158 | $ 3,012 | $ (14,769) | $ 8,911 | | Income tax (benefit) expense | 1,854 | 856 | (1,783) | 2,800 | | Effective income tax rate | 44.6 % | 28.4 % | 12.1 % | 31.4 % | - The effective tax rate for the three months ended March 28, 2025, increased to 44.6% from 28.4% in the prior year, primarily due to an unrecognized tax benefit and changes in the geographic mix of profits/losses. For the six months, it shifted from a 31.4% expense to a 12.1% benefit[57] 7 INVENTORIES Inventories are valued at the lower of cost (FIFO method) or net realizable value, consisting of raw materials and finished goods | Inventories (thousands) | March 28, 2025 | September 27, 2024 | March 29, 2024 | | :---------------------- | :------------- | :----------------- | :------------- | | Raw materials | $ 96,172 | $ 103,780 | $ 119,981 | | Finished goods | 83,885 | 106,008 | 129,220 | | Total | $ 180,057 | $ 209,788 | $ 249,201 | 8 GOODWILL Goodwill is evaluated annually for impairment using the income approach. The Fishing reporting unit's goodwill was impaired in Q4 fiscal 2024, reducing its balance to zero. New goodwill of $10,231 thousand was recognized from the acquisition of Endless Summer Technologies Proprietary, Ltd. in the current period | Goodwill (thousands) | March 28, 2025 | March 29, 2024 | | :------------------------------- | :------------- | :------------- | | Balance at beginning of period | $ — | $ 11,172 | | Acquisitions | 10,231 | — | | Amount attributable to movements in foreign currency rates | (341) | (5) | | Balance at end of period | $ 9,890 | $ 11,167 | - A goodwill impairment charge was recognized in Q4 fiscal 2024 for the Fishing reporting unit, reducing its carrying value to $0 as of September 27, 2024, due to reduced cash flow projections[67] 9 WARRANTIES The Company provides warranties on its products, with expense accruals and claims paid impacting the warranty liability | Warranty Activity (thousands) | March 28, 2025 | March 29, 2024 | | :---------------------------- | :------------- | :------------- | | Balance at beginning of period | $ 10,211 | $ 11,741 | | Expense accruals for warranties issued during the period | 5,793 | 3,431 | | Less current period warranty claims paid | (3,938) | (4,187) | | Balance at end of period | $ 12,066 | $ 10,985 | 10 CONTINGENCIES The Company is involved in various legal actions in the normal course of business but does not anticipate any material adverse effect on its financial condition or results of operations from pending litigation - Management believes the final outcome of any pending litigation will not have a material adverse effect on the Company's financial condition, results of operations, liquidity, or cash flows[71] 11 INDEBTEDNESS The Company had no debt outstanding as of March 28, 2025, September 27, 2024, or March 29, 2024. Its unsecured credit facility (Revolver) was reduced to $50 million in January 2025, with modified terms during the Second Amendment Period, including a $50 million minimum cash balance requirement - The Company had no debt outstanding at March 28, 2025, September 27, 2024, or March 29, 2024[72] - On January 29, 2025, the Company's Revolving Credit Facility was reduced from $75 million to $50 million, while maintaining a $50 million accordion feature[73] - During the Second Amendment Period, the Company must maintain a $50 million minimum cash balance, and the interest rate on borrowings is SOFR plus a 1.75% applicable margin[75][77] 12 FAIR VALUE MEASUREMENTS Fair value is measured using a three-level hierarchy. Rabbi trust assets (Level 1) and marketable securities (Level 2) are measured at fair value. Changes in fair value of Rabbi trust assets resulted in a $2,765 thousand expense for the six months ended March 28, 2025, compared to a $4,772 thousand income in the prior year | Financial Assets Measured at Fair Value (thousands) | March 28, 2025 | September 27, 2024 | March 29, 2024 | | :-------------------------------------------------- | :------------- | :----------------- | :------------- | | Rabbi trust assets (Level 1) | $ 27,396 | $ 29,059 | $ 27,139 | | Marketable securities (Level 2) | 4,315 | 16,541 | 26,071 | | Total | $ 31,711 | $ 45,600 | $ 53,210 | | Effect of changes in fair value (thousands) | Three Months Ended March 28, 2025 | Three Months Ended March 29, 2024 | Six months ended March 28, 2025 | Six months ended March 29, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Rabbi trust assets (Other (expense) income, net) | $ (1,277) | $ 2,100 | $ (2,765) | $ 4,772 | 13 CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES Cash equivalents are short-term investments with original maturities of three months or less. Marketable securities are classified as available-for-sale, reported at fair value with unrealized gains/losses in OCI. As of March 28, 2025, all marketable securities were fixed-rate Canadian Government Bonds maturing within one year | Marketable Securities (thousands) | March 28, 2025 | September 27, 2024 | March 29, 2024 | | :-------------------------------- | :------------- | :----------------- | :------------- | | Fixed rate Canadian Government Bonds | $ 4,315 | $ 9,045 | $ 11,150 | | Fixed rate US Government Bonds | $ — | $ 7,496 | $ 14,921 | | Total Fair Value | $ 4,315 | $ 16,541 | $ 26,071 | - Proceeds from maturities of available-for-sale securities were $11,826 thousand for the six months ended March 28, 2025, down from $15,000 thousand in the prior year period[89] 14 NEW ACCOUNTING PRONOUNCEMENTS The Company is evaluating the potential impact of recently issued accounting pronouncements, including ASU 2024-03 (Expense Disaggregation Disclosures), SEC Final Rulemaking Release No. 33-11275 (Climate-Related Disclosures), ASU 2023-09 (Income Tax Disclosures), and ASU 2023-07 (Segment Reporting) - The Company is evaluating ASU 2024-03 (Expense Disaggregation Disclosures), effective fiscal 2028, and SEC Final Rulemaking Release No. 33-11275 (Climate-Related Disclosures), effective fiscal 2027[91][92][94] - ASU 2023-09 (Income Tax Disclosures) is effective for the Company in fiscal 2026, and ASU 2023-07 (Segment Reporting) is effective in fiscal 2025, both with early adoption permitted[95][96] 15 REVENUES Revenue is recognized when control of goods transfers to the customer, typically at shipment. Variable consideration, such as customer incentives and returns, is estimated and adjusted. The Company expenses incremental costs of obtaining contracts due to their short-term nature and accounts for shipping and handling as fulfillment costs - Revenue is recognized at a point in time when control of goods transfers, based on shipping terms and transfer of title[97] - Estimated costs of returns, allowances, and discounts are accrued as a reduction to sales when revenue is recognized[99] | Returns and Accrued Liabilities (thousands) | March 28, 2025 | March 29, 2024 | | :------------------------------------------ | :------------- | :------------- | | Right to returns asset | $ 1,615 | $ 1,266 | | Accrued returns liability | $ 4,283 | $ 3,362 | 16 SEGMENTS OF BUSINESS The Company combined its 'Camping' and 'Watercraft Recreation' segments into 'Camping & Watercraft Recreation' as of December 27, 2024, to align with how the CODM assesses performance. Segment net sales and operating profit include both external sales and interunit transfers - The Company combined its 'Camping' and 'Watercraft Recreation' segments into a single 'Camping & Watercraft Recreation' segment as of December 27, 2024, for financial reporting purposes[104] | Net Sales by Segment (thousands) | Three Months Ended March 28, 2025 | Three Months Ended March 29, 2024 | Six Months Ended March 28, 2025 | Six Months Ended March 29, 2024 | | :------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Fishing | $ 134,462 | $ 138,466 | $ 216,895 | $ 248,827 | | Camping & Watercraft Recreation | 17,826 | 20,232 | 27,269 | 30,915 | | Diving | 15,814 | 16,918 | 31,494 | 34,392 | | Total Unaffiliated Customers | $ 168,102 | $ 175,616 | $ 275,658 | $ 314,134 | | Operating Profit (Loss) by Segment (thousands) | Three Months Ended March 28, 2025 | Three Months Ended March 29, 2024 | Six Months Ended March 28, 2025 | Six Months Ended March 29, 2024 | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Fishing | $ 9,469 | $ 7,427 | $ 1,208 | $ 18,956 | | Camping & Watercraft Recreation | 1,246 | 1,223 | 600 | (497) | | Diving | (413) | (298) | (1,321) | (876) | | Other / Corporate | (5,401) | (8,605) | (15,825) | (17,790) | | Total | $ 4,901 | $ (253) | $ (15,338) | $ (207) | 17 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated Other Comprehensive Income (AOCI) includes foreign currency translation adjustments, unrealized gains/losses on available-for-sale securities, and changes in pension plans. For the six months ended March 28, 2025, AOCI decreased from $5,964 thousand to $2,193 thousand, primarily due to foreign currency translation losses | AOCI Components (thousands) | Balance at September 27, 2024 | Other comprehensive loss before reclassifications | Amounts reclassified from AOCI | Tax effects | Balance at March 28, 2025 | | :-------------------------- | :---------------------------- | :------------------------------------------------ | :----------------------------- | :---------- | :------------------------ | | Foreign Currency Translation Adjustment | $ 6,056 | (4,915) | — | — | $ 2,274 | | Unrealized gain (loss) on available for sale securities | 17 | (1) | — | — | 12 | | Unamortized Loss on Defined Benefit Pension Plans | (109) | — | 21 | (5) | (93) | | Total | $ 5,964 | (4,916) | 21 | (5) | $ 2,193 | 18 ACQUISITIONS On October 25, 2024, the Company acquired Endless Summer Technologies Proprietary, Ltd. (EST) for approximately $12,197 thousand, funded by existing cash. This acquisition, included in the Diving segment, is expected to bring innovative products and enhance operating efficiencies. Provisional fair values of acquired assets and liabilities have been determined - The Company acquired Endless Summer Technologies Proprietary, Ltd. (EST) on October 25, 2024, for approximately $12,197 thousand, funded with existing cash[112][113] - The EST acquisition is included in the Diving segment and is expected to provide new innovative products, unlock synergies, and enhance operating efficiencies[112] | Recognized amounts of identifiable assets acquired and liabilities assumed (thousands) | Amount | | :--------------------------------------------------------------------------------- | :----- | | Accounts receivable | $ 245 | | Inventories | 2,261 | | Identifiable intangible assets | 1,439 | | Total identifiable net assets | 1,966 | | Goodwill | 10,231 | | Net assets acquired | $ 12,197 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance and condition for the three and six months ended March 28, 2025, highlighting a decrease in net sales due to market challenges, an improvement in quarterly operating profit driven by reduced expenses, and a year-to-date operating loss. It also discusses liquidity, cash flows, and recent developments like new tariffs and an acquisition Overview Johnson Outdoors Inc. is a global manufacturer and marketer of branded seasonal outdoor recreation products, known for innovation and quality across its Fishing, Diving, Paddling, and Camping segments. The Company is controlled by Helen P. Johnson-Leipold and her family - Johnson Outdoors Inc. is a leading global manufacturer and marketer of branded seasonal outdoor recreation products for fishing, diving, paddling, and camping[124] Recent Developments The U.S. government announced additional tariffs on imported goods, which may increase product costs and negatively impact demand or profitability. The Company is analyzing these impacts and considering mitigation strategies. Additionally, the Company combined its Camping and Watercraft Recreation segments and completed an acquisition in its Diving segment - The U.S. government announced additional tariffs on imported goods, which may increase product/component costs and negatively impact demand or profitability[125] - The Company combined its 'Camping' and 'Watercraft Recreation' segments and completed a $12,197 thousand acquisition of a scuba equipment manufacturer for its Diving segment[127] Highlights Net sales for Q2 fiscal 2025 decreased by 4% due to persistent market challenges and cautious retail environments. Gross margin remained flat at 35%. Operating profit improved by $5,154 thousand, driven by lower direct expenses, reduced promotions, and a decrease in deferred compensation plan expenses - Net sales for the second quarter of fiscal 2025 decreased by $7,507 thousand (4%) to $168,349 thousand, primarily due to persistent market challenges and cautious retail/trade environments[126] - Gross margin remained relatively flat at approximately 35% compared to the prior year quarter[126] - Operating profit improved by $5,154 thousand in the current quarter, driven by lower direct expenses, reduced promotions, and a $3,370 thousand decrease in deferred compensation plan expense[126] Seasonality The Company's business is seasonal, with the second fiscal quarter typically representing the primary selling season for warm-weather outdoor recreation products | Quarter Ended | 2024 Net Sales | 2024 Operating Loss | 2023 Net Sales | 2023 Operating Profit (Loss) | 2022 Net Sales | 2022 Operating Profit | | :------------ | :------------- | :------------------ | :------------- | :--------------------------- | :------------- | :-------------------- | | December | 23 % | — % | 27 % | 47 % | 21 % | 21 % | | March | 30 % | 1 % | 30 % | 97 % | 26 % | 23 % | | June | 29 % | 1 % | 28 % | 149 % | 27 % | 36 % | | September | 18 % | 98 % | 15 % | (193)% | 26 % | 20 % | | Total | 100 % | 100 % | 100 % | 100 % | 100 % | 100 % | Results of Operations This section details the Company's financial performance, including net sales, cost of sales, gross profit margin, operating expenses, operating profit/loss, interest, other expense/income, income tax expense, and net income/loss for the three and six months ended March 28, 2025, compared to the prior year periods | (thousands) | Three Months Ended March 28, 2025 | Three Months Ended March 29, 2024 | Six Months Ended March 28, 2025 | Six Months Ended March 29, 2024 | | :------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Net sales | $ 168,349 | $ 175,856 | $ 275,998 | $ 314,500 | | Operating profit (loss) | $ 4,901 | $ (253) | $ (15,338) | $ (207) | | Net income (loss) | $ 2,304 | $ 2,156 | $ (12,986) | $ 6,111 | Net Sales - Second Fiscal Quarter Consolidated net sales for Q2 fiscal 2025 decreased by 4% to $168,349 thousand. Fishing sales declined 3% due to challenging market dynamics. Camping & Watercraft Recreation sales decreased 12%, primarily due to the exit of the Eureka! brand, though new Jetboil products showed slight growth. Diving sales fell 7% due to soft market demand globally - Consolidated net sales for the three months ended March 28, 2025, decreased by $7,507 thousand (4%) to $168,349 thousand, with negligible foreign currency impact[131] - Fishing net sales decreased by 3% to $134,891 thousand due to challenging consumer and trade dynamics[132] - Camping & Watercraft Recreation net sales decreased by 12% to $17,852 thousand, mainly due to the exit of the Eureka! brand (prior year sales of $2,950 thousand), partially offset by new Jetboil product success[133] - Diving net sales declined by 7% to $15,820 thousand, attributed to continuing soft market demand across all geographic regions[134] Net Sales - Year-To-Date Consolidated net sales for the six months ended March 28, 2025, decreased by 12% to $275,998 thousand. Fishing sales dropped 13% due to market challenges and strong prior-year new product sell-in. Camping & Watercraft Recreation sales decreased 12% primarily due to the Eureka! brand exit. Diving sales declined 8% due to continued soft market demand - Consolidated net sales for the six months ended March 28, 2025, decreased by $38,502 thousand (12%) to $275,998 thousand, with negligible foreign currency impact[135] - Fishing net sales decreased by 13% to $217,363 thousand, impacted by challenging market conditions and a strong new product sell-in in the prior year[136] - Camping & Watercraft Recreation net sales decreased by 12% to $27,303 thousand, mainly due to the exit of the Eureka! brand[137][139] - Diving net sales declined by 8% to $31,504 thousand, driven by continued soft market demand across all geographic regions[140] Cost of Sales Cost of sales decreased for both the three and six-month periods ended March 28, 2025, primarily due to lower sales volumes. For the six-month period, this was partially offset by a shift to higher-cost products - Cost of sales decreased by $4,942 thousand for the three months and $15,266 thousand for the six months ended March 28, 2025, mainly due to lower sales volumes[141] Gross Profit Margin Gross profit margin remained flat at 35.0% for the three months ended March 28, 2025. However, for the six-month period, it declined to 33.0% from 36.3% in the prior year, primarily due to promotional pricing on end-of-life products and a shift towards lower-margin products - Gross profit as a percentage of net sales was 35.0% for the three months ended March 28, 2025, remaining flat compared to 34.9% in the prior year[142] - For the six months ended March 28, 2025, gross profit margin declined to 33.0% from 36.3% in the prior year, mainly due to promotional pricing on end-of-life products and a shift to lower-margin products[143] Operating Expenses Operating expenses decreased by $7,719 thousand for the three months and $8,105 thousand for the six months ended March 28, 2025. This reduction was driven by lower sales volume-driven expenses, decreased promotions, and a significant reduction in deferred compensation plan expenses - Operating expenses decreased by $7,719 thousand for the three months and $8,105 thousand for the six months ended March 28, 2025[144][145] - Key drivers for the decrease include lower sales volume-driven expenses, reduced promotions, and a $3,370 thousand (three months) and $5,961 thousand (six months) decrease in deferred compensation plan expense[144][145] Operating Loss/Profit The Company reported an operating profit of $4,901 thousand for the three months ended March 28, 2025, a significant improvement from an operating loss of $253 thousand in the prior year, primarily due to reduced operating expenses. However, the six-month period saw an increased operating loss of $15,338 thousand, driven by lower sales, promotional pricing, and product mix shifts - Operating profit for the three months ended March 28, 2025, was $4,901 thousand, an improvement from an operating loss of $253 thousand in the prior year, driven by reduced operating expenses[146] - Operating loss for the six months ended March 28, 2025, increased to $15,338 thousand from $207 thousand in the prior year, primarily due to lower sales volumes, promotional pricing, and shifts to lower-margin products[147] Interest Interest expense slightly increased for both periods, while interest income decreased, reflecting changes in market rates and investment balances | (thousands) | Three Months Ended March 28, 2025 | Three Months Ended March 29, 2024 | Six Months Ended March 28, 2025 | Six Months Ended March 29, 2024 | | :------------ | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Interest expense | $ 68 | $ 40 | $ 115 | $ 78 | | Interest income | $ (625) | $ (857) | $ (1,658) | $ (2,055) | Other Expense (Income), net Other expense, net, was $1,300 thousand for the three months and $974 thousand for the six months ended March 28, 2025, a significant decrease from prior year income. This was mainly due to lower net investment gains on deferred compensation plan assets and, for the six-month period, the absence of a prior-year gain on the sale of a building - Other expense, net, was $1,300 thousand for the three months ended March 28, 2025, compared to income of $2,448 thousand in the prior year, primarily due to a $3,370 thousand decrease in net investment gains on deferred compensation plan assets[151] - For the six months ended March 28, 2025, other expense, net, was $974 thousand, compared to income of $7,141 thousand in the prior year, mainly due to a $5,961 thousand decrease in net investment gains and the absence of a $1,900 thousand gain on building sale from the prior year[152] Income Tax Expense The effective tax rate for the three months ended March 28, 2025, was an expense of 44.6%, while for the six months, it was a benefit of 12.1%. This compares to expenses of 28.4% and 31.4% for the corresponding prior year periods, reflecting changes in estimated annual effective tax rates - The effective tax rate for the three months ended March 28, 2025, was an expense of 44.6%, compared to 28.4% in the prior year[153] - For the six months ended March 28, 2025, the effective tax rate was a benefit of 12.1%, compared to an expense of 31.4% in the prior year[153] Net Income/Loss Net income for the three months ended March 28, 2025, increased slightly to $2,304 thousand ($0.22 diluted EPS). However, the Company reported a net loss of $12,986 thousand ($1.26 diluted EPS) for the six months, compared to a net income of $6,111 thousand ($0.59 diluted EPS) in the prior year | (thousands, except per share data) | Three Months Ended March 28, 2025 | Three Months Ended March 29, 2024 | Six Months Ended March 28, 2025 | Six Months Ended March 29, 2024 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) | $ 2,304 | $ 2,156 | $ (12,986) | $ 6,111 | | Diluted EPS (Class A and B) | $ 0.22 | $ 0.21 | $ (1.26) | $ 0.59 | Liquidity and Financial Condition The Company's cash and short-term investments increased to $93,951 thousand as of March 28, 2025, from $84,270 thousand in the prior year. It maintained a 0% debt to total capitalization ratio with no outstanding debt. Accounts receivable and inventories decreased, reflecting lower sales and inventory reduction efforts - Cash and cash equivalents and short-term investments totaled $93,951 thousand as of March 28, 2025, an increase from $84,270 thousand as of March 29, 2024[155] - The Company maintained a 0% debt to total capitalization ratio and had no debt outstanding as of March 28, 2025, and March 29, 2024[155] - Inventories decreased by $69,144 thousand to $180,057 thousand as of March 28, 2025, reflecting ongoing efforts to reduce inventory balances[156] | Cash Flows (thousands) | Six months ended March 28, 2025 | Six months ended March 29, 2024 | | :-------------------------------------- | :------------------------------ | :------------------------------ | | Cash (used for) provided by: Operating activities | $ (38,566) | $ (51,764) | | Investing activities | $ (7,749) | $ 7,031 | | Financing activities | $ (6,879) | $ (6,945) | | Decrease in cash and cash equivalents | $ (55,862) | $ (51,498) | Operating Activities Cash used for operations decreased to $38,566 thousand for the six months ended March 28, 2025, from $51,764 thousand in the prior year, primarily due to cash provided by working capital reductions, partially offset by lower income from decreased sales - Cash used for operations decreased to $38,566 thousand for the six months ended March 28, 2025, from $51,764 thousand in the prior year, driven by working capital reductions[160] Investing Activities Cash used for investing activities totaled $7,749 thousand for the six months ended March 28, 2025, a shift from cash provided in the prior year. This was primarily due to $12,197 thousand paid for a business acquisition, partially offset by investment maturities. Capital expenditures also decreased - Cash used for investing activities was $7,749 thousand for the six months ended March 28, 2025, compared to cash provided of $7,031 thousand in the prior year[161] - Current year investing activities include $12,197 thousand for a business acquisition, partially offset by $11,826 thousand from investment maturities[161] - Capital expenditures decreased to $7,378 thousand from $10,203 thousand in the prior year[161] Financing Activities Cash used for financing activities remained consistent at approximately $6,879 thousand for the six months ended March 28, 2025, primarily representing dividend payments and treasury stock purchases. The Company had no debt during either period - Cash used for financing activities totaled $6,879 thousand for the six months ended March 28, 2025, consistent with $6,945 thousand in the prior year, mainly for dividends and treasury stock purchases[162] Contractual Obligations and Off Balance Sheet Arrangements The Company has contractual obligations for operating leases and open purchase orders, with no significant changes outside the ordinary course of business. It utilizes letters of credit for workers' compensation insurance, totaling approximately $67 thousand, and has no other off-balance sheet arrangements - The Company has contractual obligations for operating leases and open purchase orders, with no significant changes during the quarter[164] - Letters of credit outstanding for workers' compensation insurance totaled approximately $67 thousand as of March 28, 2025, and March 29, 2024[165] Critical Accounting Policies and Estimates There were no significant changes to the Company's critical accounting policies and estimates during the six months ended March 28, 2025, as detailed in its Annual Report on Form 10-K for the fiscal year ending September 27, 2024 - No significant changes occurred in the Company's critical accounting policies and estimates during the six months ended March 28, 2025[167] Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company is exposed to market risks related to foreign currency exchange rates, interest rates, commodity prices, and inflation. No significant changes to these market risks occurred during the six months ended March 28, 2025 - The Company is exposed to market risks in foreign currency exchange rates, interest rates, commodity prices, and inflation[168] - There have been no significant changes to the Company's market risk during the six months ended March 28, 2025[168] Item 4. Controls and Procedures The Company's management, including the CEO and CFO, evaluated the effectiveness of its disclosure controls and procedures as of March 28, 2025, concluding they were effective at a reasonable assurance level. There were no material changes to internal control over financial reporting during the last fiscal quarter - The Company's disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of March 28, 2025[171] - No material changes occurred in the Company's internal control over financial reporting during the last fiscal quarter[172] PART II OTHER INFORMATION Item 1. Legal Proceedings The Company is involved in various legal proceedings in the normal course of business but does not believe any current claim or action will have a material adverse effect on its financial statements - The Company does not believe any current legal claim or action will have a material adverse effect on its financial statements[173] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's Form 10-K for the fiscal year ending September 27, 2024 - No material changes to the risk factors disclosed in the Company's Form 10-K for the fiscal year ending September 27, 2024[174] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended March 28, 2025, nor did the Company adopt or terminate any such arrangement - No director, officer, or the Company adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended March 28, 2025[175] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q report, including articles of incorporation, bylaws, credit agreement amendments, certifications by the CEO and CFO, and XBRL formatted financial statements - The exhibit index includes corporate governance documents, credit facility amendments, CEO/CFO certifications, and XBRL formatted financial statements[182]