Johnson Outdoors (JOUT) - 2025 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of Johnson Outdoors Inc. for the three and nine months ended June 27, 2025, and June 28, 2024, including statements of operations, comprehensive income (loss), balance sheets, shareholders' equity, and cash flows, along with detailed notes explaining the accounting policies and significant financial events Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations show a significant improvement in net income for the three months ended June 27, 2025, compared to the prior year, driven by increased net sales and gross profit, while the nine-month period reflects a net loss Condensed Consolidated Statements of Operations (thousands, except per share data) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net sales | $180,655 | $172,472 | $456,653 | $486,972 | | Gross profit | $67,927 | $61,822 | $158,976 | $176,107 | | Operating profit (loss) | $7,330 | $(506) | $(8,008) | $(713) | | Profit (loss) before income taxes | $10,500 | $907 | $(4,269) | $9,818 | | Net income (loss) | $7,742 | $1,622 | $(5,244) | $7,733 | | Net income (loss) per Class A share - Diluted | $0.75 | $0.16 | $(0.52) | $0.75 | Condensed Consolidated Statements of Comprehensive Income (Loss) The Condensed Consolidated Statements of Comprehensive Income (Loss) show a positive total comprehensive income for the three months ended June 27, 2025, primarily due to net income and favorable foreign currency translation, contrasting with a comprehensive loss for the nine-month period Condensed Consolidated Statements of Comprehensive Income (Loss) (thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) | $7,742 | $1,622 | $(5,244) | $7,733 | | Foreign currency translation | $5,192 | $(439) | $1,410 | $241 | | Total other comprehensive income (loss) | $5,193 | $(419) | $1,422 | $360 | | Total comprehensive income (loss) | $12,935 | $1,203 | $(3,822) | $8,093 | Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets indicate a slight decrease in total assets and shareholders' equity as of June 27, 2025, compared to September 27, 2024, with a notable reduction in inventories and an increase in cash and cash equivalents Condensed Consolidated Balance Sheets (thousands) | Metric | June 27, 2025 | September 27, 2024 | June 28, 2024 | | :-------------------------- | :------------ | :----------------- | :------------ | | Cash and cash equivalents | $158,691 | $145,498 | $126,823 | | Short term investments | $2,331 | $16,541 | $21,546 | | Accounts receivable, net | $81,993 | $40,649 | $79,593 | | Inventories | $163,732 | $209,788 | $223,160 | | Total current assets | $420,073 | $428,728 | $461,005 | | Total assets | $634,473 | $635,212 | $679,825 | | Accounts payable | $43,478 | $36,077 | $43,153 | | Total current liabilities | $105,562 | $90,444 | $99,293 | | Total liabilities | $184,009 | $171,788 | $181,156 | | Total shareholders' equity | $450,464 | $463,424 | $498,669 | Condensed Consolidated Statements of Shareholders' Equity The Condensed Consolidated Statements of Shareholders' Equity show a decrease in retained earnings for the nine months ended June 27, 2025, primarily due to net loss and dividends declared, partially offset by an increase in accumulated other comprehensive income Changes in Shareholders' Equity (thousands, except for shares) | Metric | Balance at Sep 27, 2024 | Net Loss/Income | Dividends Declared | Currency Translation Adjustment | Balance at Jun 27, 2025 | | :-------------------------------- | :---------------------- | :-------------- | :----------------- | :------------------------------ | :---------------------- | | Shares (total) | 10,301,738 | — | — | — | 10,372,263 | | Common Stock | $517 | — | — | — | $521 | | Capital in Excess of Par Value | $90,146 | — | — | — | $91,422 | | Retained Earnings | $369,592 | $(15,290) | $(3,362) | — | $354,205 | | Accumulated Other Comprehensive Income (Loss) | $5,964 | — | — | $7,466 | $7,386 | | Treasury Stock | $(2,795) | — | — | — | $(3,070) | Condensed Consolidated Statements of Cash Flows The Condensed Consolidated Statements of Cash Flows indicate an increase in cash provided by operating activities for the nine months ended June 27, 2025, compared to the prior year, while investing activities shifted from providing cash to using cash, primarily due to a business acquisition Condensed Consolidated Statements of Cash Flows (thousands) | Activity | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Cash provided by operating activities | $32,810 | $21,899 | | Cash (used for) provided by investing activities | $(10,002) | $3,225 | | Cash used for financing activities | $(10,142) | $(10,136) | | Effect of foreign currency rate changes on cash | $527 | $(19) | | Increase in cash and cash equivalents | $13,193 | $14,969 | | Cash and cash equivalents, End of period | $158,691 | $126,823 | Notes to Condensed Consolidated Financial Statements These notes provide detailed information on the Company's accounting policies, significant financial statement line items, and recent events, including earnings per share calculations, stock-based compensation, lease obligations, income taxes, goodwill, warranties, indebtedness, fair value measurements, new accounting pronouncements, revenue recognition, segment reporting, accumulated other comprehensive income, and business acquisitions Note 1. Basis of Presentation This note clarifies that the condensed consolidated financial statements are unaudited, include normal recurring adjustments, and should be read in conjunction with the Company's latest Annual Report on Form 10-K - The financial statements are unaudited and include only normal recurring adjustments, consistent with prior filings[23] - All monetary amounts, except for share and per share data, are presented in thousands[24] Note 2. Accounts Receivable This note details the Company's policy for accounts receivable, which are stated net of allowances for credit losses, determined by specific collection concerns and historical bad debt experience Allowances for Credit Losses (thousands) | Date | Allowance for Credit Losses | | :---------------- | :-------------------------- | | June 27, 2025 | $670 | | September 27, 2024| $3,543 | | June 28, 2024 | $649 | - The Company determines allowances for credit losses based on specific collection concerns and historical bad debt experience for each business segment[25] Note 3. Earnings Per Share (EPS) This note explains the computation of basic and diluted earnings per share using the two-class method, considering the different dividend rights of Class A and Class B common stock and the impact of participating securities and anti-dilutive instruments - EPS is computed using the two-class method, with Class A common stock holders entitled to 110% of dividends declared on Class B common stock[26][27] - For the three months ended June 27, 2025, diluted net income per share reflects the effect of dilutive stock units and assumes conversion of Class B to Class A common stock[33] Dividends Declared Per Common Share | Class | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :---- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Class A | $0.33 | $0.33 | $0.99 | $0.99 | | Class B | $0.30 | $0.30 | $0.90 | $0.90 | Note 4. Stock-Based Compensation and Stock Ownership Plans This note details the Company's stock ownership plans, including non-vested stock and restricted stock units (RSUs), outlining their activity, compensation expense, and the termination of the Employees' Stock Purchase Plan Non-vested Stock Activity (Nine Months Ended June 27, 2025) | Metric | Shares | Weighted Average Grant Price | | :-------------------------- | :----- | :--------------------------- | | Balance 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 | | Balance at June 27, 2025 | 95,654 | $40.44 | Stock Compensation Expense (thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Non-vested stock expense | $462 | $398 | $1,278 | $1,148 | | RSU income (expense) | $660 | $201 | $384 | $(239) | | ESPP income (expense) | $86 | $(25) | $79 | $(83) | - The Employees' Stock Purchase Plan was terminated effective May 9, 2025[48] Note 5. Leases This note outlines the Company's operating lease arrangements, including lease costs, right-of-use (ROU) assets, lease liabilities, and future minimum rental commitments, noting no significant new leases or finance leases Total Lease Cost (thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Operating lease costs | $2,680 | $2,470 | $7,951 | $7,411 | | Short-term lease costs | $559 | $602 | $1,687 | $1,828 | | Variable lease costs | $53 | $43 | $152 | $129 | | Total lease cost | $3,292 | $3,115 | $9,790 | $9,368 | Operating Lease Information (thousands, except years and rate) | Metric | June 27, 2025 | June 28, 2024 | | :------------------------------------------ | :------------ | :------------ | | Operating lease ROU assets | $45,038 | $49,017 | | Total operating lease liabilities | $46,930 | $50,772 | | Weighted average remaining lease term (years) | 10.58 | 11.21 | | Weighted average discount rate | 3.41 % | 3.22 % | | Cash paid for amounts in lease liabilities | $7,565 | $6,884 | Future Minimum Rental Commitments (thousands) | Year | Total Undiscounted Lease Payments | | :---------------- | :-------------------------------- | | Remainder of 2025 | $2,580 | | 2026 | $9,308 | | 2027 | $7,473 | | 2028 | $4,882 | | 2029 | $3,534 | | Thereafter | $29,768 | | Total | $57,545 | Note 6. Income Taxes This note details the Company's income tax expense and effective tax rates, highlighting the impact of geographic mix of profits/losses and valuation allowances, and mentions the assessment of the recently signed OBBB Act Income Tax Expense and Effective Tax Rate (thousands, except tax rate data) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Profit (loss) before income taxes | $10,500 | $907 | $(4,269) | $9,818 | | Income tax expense (benefit) | $2,758 | $(715) | $975 | $2,085 | | Effective income tax rate | 26.3 % | (78.8)% | (22.8)% | 21.2 % | - The change in effective tax rate is primarily due to the geographic mix of profits or losses and the recording of an unrecognized tax benefit in the current year[57][58] - The Company recorded an $858 thousand unrecognized tax benefit, including interest and penalties, during the nine months ended June 27, 2025[61] - The Company is currently assessing the potential impact of the One Big Beautiful Bill (OBBB) Act, signed into law on July 4, 2025, on its estimated annual effective tax rate[62] Note 7. Inventories This note provides a breakdown of the Company's inventory, valued at the lower of cost (FIFO method) or net realizable value, showing a decrease in both raw materials and finished goods compared to prior periods Inventories (thousands) | Category | June 27, 2025 | September 27, 2024 | June 28, 2024 | | :--------------- | :------------ | :----------------- | :------------ | | Raw materials | $85,956 | $103,780 | $107,384 | | Finished goods | $77,776 | $106,008 | $115,776 | | Total Inventories| $163,732 | $209,788 | $223,160 | Note 8. Goodwill This note details the changes in goodwill, including the addition from a recent acquisition and the prior year's impairment charge related to the Fishing reporting unit Changes in Goodwill (thousands) | Metric | June 27, 2025 | June 28, 2024 | | :------------------------------------ | :------------ | :------------ | | Balance at beginning of period | $0 | $11,172 | | Acquisitions | $10,231 | — | | Amount attributable to foreign currency rates | $(69) | $(12) | | Balance at end of period | $10,162 | $11,160 | - Goodwill at June 27, 2025, relates to the acquisition of Endless Summer Technologies Proprietary, Ltd. (EST)[64] - A goodwill impairment charge was recognized in the fourth quarter of fiscal 2024, reducing the Fishing reporting unit's goodwill to $0, due to reduced cash flow projections from market challenges and competitive pressure[66] Note 9. Warranties This note summarizes the Company's warranty activity, showing an increase in the warranty liability for the nine months ended June 27, 2025, due to higher expense accruals Warranty Activity (thousands) | Metric | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Balance at beginning of period | $10,211 | $11,741 | | Expense accruals for warranties issued | $8,969 | $6,359 | | Less current period warranty claims paid | $(6,737) | $(7,168) | | Balance at end of period | $12,443 | $10,932 | Note 10. Contingencies This note states that the Company is involved in various legal actions in the normal course of business but management does not believe the final outcome will have a material adverse effect on its financial condition - The Company is subject to various legal actions and proceedings, including commercial disputes, product liability, intellectual property, and regulatory matters[69] - 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[69] Note 11. Indebtedness This note confirms the Company had no debt outstanding and details the terms of its unsecured revolving credit facility, which was reduced to $50 million with modified conditions during the Second Amendment Period - The Company had no debt outstanding as of June 27, 2025, September 27, 2024, or June 28, 2024[70] - The Revolving Credit Facility was reduced from $75 million to $50 million on January 29, 2025, while maintaining a $50 million accordion feature[71] - 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[71][73] Note 12. Fair Value Measurements This note defines fair value and outlines the hierarchy of inputs used for fair value measurements, specifically for Rabbi trust assets (Level 1) and marketable securities (Level 2) - Fair value is defined as the exchange price in an orderly transaction between market participants[76] Financial Assets Measured at Fair Value (thousands) as of June 27, 2025 | Asset | Level 1 | Level 2 | Level 3 | Total | | :---------------- | :------ | :------ | :------ | :---- | | Rabbi trust assets| $28,617 | — | — | $28,617 | | Marketable securities | — | $2,331 | — | $2,331 | | Total | $28,617 | $2,331 | — | $30,948 | - Rabbi trust assets are classified as Level 1 (quoted prices in active markets), and marketable securities are classified as Level 2 (significant other observable inputs)[79][82][83] Note 13. Cash, Cash Equivalents, and Marketable Securities This note defines cash equivalents and details the classification and fair value of marketable securities, which are held as available-for-sale and primarily consist of fixed-rate government bonds - Cash equivalents include short-term investments in interest-bearing accounts and securities with original maturities of three months or less, stated at cost approximating market value[84] - All marketable securities are classified as available-for-sale, reported at estimated fair value with unrealized gains/losses in accumulated other comprehensive income[85] Marketable Securities at Fair Value (thousands) as of June 27, 2025 | Security | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | | :-------------------------- | :------------- | :--------- | :--------------------- | :---------------------- | | Fixed rate Canadian Government Bonds | $2,326 | $2,331 | $5 | — | | Total | $2,326 | $2,331 | $5 | — | Note 14. New Accounting Pronouncements This note outlines recently issued accounting pronouncements, including ASUs related to expense disaggregation, income tax disclosures, segment reporting, and SEC rules on climate-related disclosures, with the Company currently assessing their potential impact - ASU 2024-03 (Expense Disaggregation Disclosures) is effective in fiscal 2028, aiming to improve disclosures on expenses like inventory purchases, employee compensation, and depreciation[91] - SEC Final Rulemaking Release No. 33-11275 (Climate-Related Disclosures) is effective for the Company beginning in fiscal 2027, enhancing consistency and transparency of climate risks[92] - ASU 2023-07 (Segment Reporting) is effective in fiscal 2025, improving disclosures about reportable segments' expenses, but the Company does not expect a material effect[94] Note 15. Revenues This note describes the Company's revenue recognition policy, which occurs when control of goods is transferred, and details how variable consideration, shipping and handling, and estimated returns are accounted for - Revenue is recognized when obligations are satisfied, typically upon transfer of control of goods at the point of shipping, with consideration adjusted for customer incentives or rebates[95] - Estimated costs of returns, allowances, and discounts are accrued as a reduction to sales when revenue is recognized[97] Returns Asset and Accrued Returns Liability (thousands) | Metric | June 27, 2025 | June 28, 2024 | | :-------------------------- | :------------ | :------------ | | Right to returns asset | $1,447 | $1,195 | | Accrued returns liability | $3,783 | $2,981 | Note 16. Segments of Business This note provides disaggregated financial information by business segment, highlighting the combination of 'Camping' and 'Watercraft Recreation' into a single segment and detailing net sales, operating profit (loss), and total assets for each segment - As of December 27, 2024, the Company combined its 'Camping' and 'Watercraft Recreation' segments into 'Camping & Watercraft Recreation' for financial reporting purposes[102] Net Sales by Business Segment (thousands) | Segment | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Fishing | $140,243 | $130,415 | $357,138 | $379,242 | | Camping & Watercraft Recreation | $18,884 | $21,946 | $46,153 | $52,861 | | Diving | $21,197 | $19,856 | $52,691 | $54,248 | | Total | $180,655 | $172,472 | $456,653 | $486,972 | Operating Profit (Loss) by Business Segment (thousands) | Segment | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Fishing | $14,553 | $5,258 | $15,761 | $24,214 | | Camping & Watercraft Recreation | $1,588 | $2,031 | $2,188 | $1,534 | | Diving | $1,576 | $898 | $255 | $22 | | Other / Corporate | $(10,387) | $(8,693) | $(26,212) | $(26,483) | | Total | $7,330 | $(506) | $(8,008) | $(713) | Note 17. Accumulated Other Comprehensive Income (Loss) This note details the changes in Accumulated Other Comprehensive Income (AOCI) by component, including foreign currency translation adjustments, unrealized gains/losses on available-for-sale securities, and changes in pension plans, net of tax Changes in AOCI by Component (thousands) for Nine Months Ended June 27, 2025 | Component | Balance at Sep 27, 2024 | Other Comprehensive Income (Loss) before Reclassifications | Amounts Reclassified from AOCI | Tax Effects | Balance at Jun 27, 2025 | | :------------------------------------ | :---------------------- | :--------------------------------------------------------- | :----------------------------- | :---------- | :---------------------- | | Foreign Currency Translation Adjustment | $6,056 | $1,410 | — | — | $7,466 | | Unrealized gain (loss) on available-for-sale securities | $17 | $(13) | — | — | $4 | | Unamortized Loss on Defined Benefit Pension Plans | $(109) | $25 | $32 | $(7) | $(84) | | Total AOCI | $5,964 | $1,422 | $25 | $(7) | $7,386 | Reclassifications out of AOCI (thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Amortization of loss (pension plans) | $11 | $10 | $32 | $29 | | Tax effects | $(2) | $(2) | $(7) | $(8) | | Total reclassifications | $9 | $8 | $25 | $21 | Note 18. Acquisitions This note details the Company's acquisition of Endless Summer Technologies Proprietary, Ltd. (EST) in October 2024, a scuba equipment manufacturer, for approximately $12.2 million, aiming to enhance the Diving segment's product innovation and operating efficiencies - On October 25, 2024, the Company acquired Endless Summer Technologies Proprietary, Ltd. (EST), a scuba equipment manufacturer based in Durban, South Africa[113] - The acquisition cost was approximately $12.197 million, funded with existing cash, and is expected to provide new innovative products, unlock synergies, and enhance operating efficiencies for the Diving segment[113][114] Provisional Fair Values of Assets Acquired and Liabilities Assumed (thousands) | Category | Amount | | :------------------------------------ | :----- | | Accounts receivable | $245 | | Inventories | $2,261 | | Property, plant and equipment | $502 | | Identifiable intangible assets | $1,439 | | Deferred tax asset | $237 | | Less, accounts payable and accruals | $(1,044)| | Less, other current liabilities | $(636) | | Less, long term liabilities | $(1,110)| | 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 nine months ended June 27, 2025, discussing key drivers of net sales, gross profit, operating expenses, and liquidity, alongside recent developments and forward-looking statements Overview Johnson Outdoors Inc. is a global manufacturer and marketer of branded seasonal outdoor recreation products, known for innovation and strong market positions, with strategic vision set by executive management and controlled by the Johnson-Leipold family - The Company is a leading global manufacturer and marketer of branded seasonal outdoor recreation products for fishing, diving, paddling, and camping[126] - The Company's brands have achieved leading market positions through continuous innovation, marketing excellence, product performance, and quality[126] Recent Developments Recent developments include the assessment of potential impacts from new U.S. tariffs on imported goods and the newly signed One Big Beautiful Bill (OBBB) Act on the Company's effective tax rate - The Company is analyzing the potential negative impacts of additional U.S. tariffs on imported goods, which may increase costs and reduce profitability[127] - The Company is assessing the potential impact of the One Big Beautiful Bill (OBBB) Act, signed on July 4, 2025, on its estimated annual effective tax rate[128] Highlights Key highlights for the third quarter of fiscal 2025 include a 5% increase in net sales, an improved gross margin of 37.6%, and a significant increase in operating profit, alongside the combination of the Camping and Watercraft Recreation segments and the acquisition of a scuba equipment manufacturer - Net sales for Q3 FY25 increased by $8.183 million, or 5%, to $180.655 million, driven by innovation and new product success[129] - Gross margin improved to 37.6% in Q3 FY25 from 35.8% in the prior year quarter, contributing to a $7.836 million improvement in operating profit[129] - The Company combined its 'Camping' and 'Watercraft Recreation' segments into 'Camping & Watercraft Recreation' as of December 27, 2024[130] - The Diving segment completed a $12.197 million acquisition of a scuba equipment manufacturer in Q1 FY25, expected to provide new innovative products and enhance operating efficiencies[130] Seasonality The Company's business is seasonal, with the third fiscal quarter traditionally representing the primary selling season for its warm-weather outdoor recreation products - The Company's business is seasonal, with the third fiscal quarter typically being the primary selling season for warm-weather outdoor recreation products[131] Historical Seasonality (Net Sales % and Operating Profit % by Quarter) | 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 analyzes the Company's financial performance, detailing changes in net sales, cost of sales, gross profit margin, operating expenses, interest, other income/expense, income tax, and net income/loss for the three and nine months ended June 27, 2025, compared to the prior year Net Sales - Third Fiscal Quarter Consolidated net sales for the third fiscal quarter increased by 5% year-over-year, primarily driven by new product introductions in the Fishing segment and success of new Jetboil products, despite the exit of the Eureka! brand - Consolidated net sales for the three months ended June 27, 2025, increased by $8.183 million (5%) to $180.655 million[137] - Fishing segment sales increased by $10.142 million (8%) to $140.679 million, mainly due to new product introductions[138] - Camping & Watercraft Recreation sales decreased by $3.089 million (14%) to $18.908 million, primarily due to the exit of the Eureka! brand (prior year Q3 included $3.573 million in Eureka! sales)[139] - Diving net sales increased by $1.340 million (7%) to $21.201 million, driven by modest market improvements and a 2% favorable foreign currency translation impact[140] Net Sales - Year-To-Date Consolidated net sales for the nine-month period decreased by 6% year-over-year, primarily due to challenging market conditions in the Fishing segment and the discontinuation of the Eureka! brand in Camping & Watercraft Recreation, partially offset by modest improvements in Diving - Consolidated net sales for the nine months ended June 27, 2025, decreased by $30.319 million (6%) to $456.653 million[141] - Fishing segment sales decreased by $21.595 million (6%) to $358.042 million, as declines in the first two quarters offset third-quarter new product growth[142] - Camping & Watercraft Recreation sales decreased by $6.760 million (13%) to $46.211 million, mainly due to $7.577 million in Eureka! sales in the prior year that were not repeated[144] - Diving net sales declined by $1.558 million (3%) to $52.705 million, due to soft market demand in the first two fiscal quarters[145] Cost of Sales Cost of sales increased for the three-month period due to higher sales volumes but decreased for the nine-month period, reflecting lower sales volumes partially offset by a shift to higher-cost products - Cost of sales for the three months ended June 27, 2025, increased by $2.078 million to $112.728 million, primarily due to increased sales volumes[146] - Cost of sales for the nine months ended June 27, 2025, decreased by $13.188 million to $297.677 million, mainly due to decreased sales volumes, partially offset by a shift to higher-cost products[147] Gross Profit Margin Gross profit margin improved for the three-month period due to better overhead absorption from higher sales volumes but decreased for the nine-month period due to promotional pricing and a shift to lower-margin products - Gross profit as a percentage of net sales increased to 37.6% for the three months ended June 27, 2025, from 35.8% in the prior year, due to improved overhead absorption from higher sales volumes[148] - Gross profit as a percentage of net sales decreased to 34.8% for the nine months ended June 27, 2025, from 36.2% in the prior year, primarily due to promotional pricing on end-of-life products and a shift to higher-cost products[149] Operating Expenses Operating expenses decreased for both the three-month and nine-month periods, driven by lower commission rates, reduced promotional expenses, and decreased professional services, partially offset by changes in deferred compensation plan expenses - Operating expenses decreased by $1.731 million to $60.597 million for the three months ended June 27, 2025, mainly due to lower commission rates, reduced promotional expenses, and lower professional services, partially offset by a $2.012 million increase in deferred compensation expense[150] - Operating expenses decreased by $9.836 million to $166.984 million for the nine months ended June 27, 2025, due to decreased sales volume-driven expenses and a $3.948 million decrease in deferred compensation expense[151] Operating Profit/Loss The Company reported an operating profit for the three-month period, a significant improvement from a loss in the prior year, driven by increased sales, gross margin improvements, and reduced operating expenses. However, the nine-month period saw an increased operating loss due to lower sales volumes and product mix shifts - Operating profit for the three months ended June 27, 2025, was $7.330 million, a significant improvement from an operating loss of $506 thousand in the prior year quarter[152] - Operating loss for the nine months ended June 27, 2025, was $8.008 million, compared to an operating loss of $713 thousand in the prior year, primarily due to lower sales volumes, promotional pricing, and a shift to lower-margin products[153] Interest Interest expense saw a slight increase, while interest income decreased for both the three-month and nine-month periods compared to the prior year Interest Expense and Income (thousands) | Metric | Three Months Ended June 27, 2025 | Three Months Ended June 28, 2024 | Nine Months Ended June 27, 2025 | Nine Months Ended June 28, 2024 | | :------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Interest expense | $49 | $37 | $164 | $115 | | Interest income | $927 | $1,123 | $2,585 | $3,178 | Other Expense (Income), net Other income significantly increased for the three-month period due to higher net investment gains from the deferred compensation plan, but decreased for the nine-month period, primarily due to lower investment gains and the absence of a prior-year gain on asset sale - Other income for the three months ended June 27, 2025, was $2.292 million, an increase of $1.965 million from the prior year, mainly due to a $2.012 million increase in net investment gains on deferred compensation plan assets[156] - Other income for the nine months ended June 27, 2025, was $1.318 million, a decrease of $6.150 million from the prior year, primarily due to a $3.948 million decrease in net investment gains and a $1.900 million gain on the sale of a building in the prior year[157] Income Tax Expense The Company's effective tax rate for the three months ended June 27, 2025, was an expense of 26.3%, while for the nine-month period, it was a benefit of 22.8%, reflecting significant changes from the prior year's corresponding periods Effective Income Tax Rates | Period | June 27, 2025 | June 28, 2024 | | :---------------- | :------------ | :------------ | | Three Months Ended| 26.3 % | (78.8)% | | Nine Months Ended | (22.8)% | 21.2 % | Net Income/Loss Net income for the three months ended June 27, 2025, significantly increased, while the nine-month period resulted in a net loss, contrasting with a net income in the prior year's nine-month period - Net income for the three months ended June 27, 2025, was $7.742 million, or $0.75 per diluted common share (Class A and B), up from $1.622 million, or $0.16 per diluted share, in the prior year[159] - Net loss for the nine months ended June 27, 2025, was $5.244 million, or $0.52 per diluted common share (Class A and B), compared to net income of $7.733 million, or $0.75 per diluted share, in the prior year[159] Liquidity and Financial Condition The Company's liquidity remains strong with no outstanding debt, an increase in cash and cash equivalents, and a significant reduction in inventories, while cash flows from operations improved, and investing activities shifted to a net use of cash due to an acquisition Overview of Liquidity The Company maintains a strong liquidity position with no outstanding debt, an increase in cash and short-term investments, and a notable reduction in inventories - Cash and cash equivalents and short-term investments totaled $161.022 million as of June 27, 2025, up from $148.369 million as of June 28, 2024[160] - The Company had no debt outstanding and a debt to total capitalization ratio of 0% as of June 27, 2025, and June 28, 2024[160] - Inventories decreased by $59.428 million to $163.732 million as of June 27, 2025, reflecting ongoing efforts to reduce balances[161] Operating Activities Cash provided by operating activities increased for the nine-month period, primarily due to working capital reductions, partially offset by lower income from decreased sales volumes - Cash provided by operations totaled $32.810 million for the nine months ended June 27, 2025, an increase from $21.899 million in the prior year period[164] - The increase in cash from operations was primarily due to cash provided by working capital reductions, partially offset by lower income on decreased sales volumes[164] Investing Activities Investing activities shifted from providing cash to using cash for the nine-month period, mainly due to a business acquisition, partially offset by investment maturities, with capital expenditures decreasing - Cash used for investing activities totaled $10.002 million for the nine months ended June 27, 2025, compared to cash provided of $3.225 million in the prior year[165] - Current year investing activities reflect $12.197 million paid for a business acquisition, partially offset by $14.021 million from investment maturities[165] - Capital expenditures decreased to $11.826 million for the nine months ended June 27, 2025, from $16.449 million in the prior year[165] Financing Activities Cash used for financing activities remained consistent year-over-year, primarily reflecting dividend payments and treasury stock purchases, with no outstanding debt - Cash used for financing activities totaled $10.142 million for the nine months ended June 27, 2025, consistent with $10.136 million in the prior year, mainly for dividends and treasury stock purchases[166] - The Company held approximately $66.152 million of cash, cash equivalents, and short-term investments in foreign taxing jurisdictions as of June 27, 2025[167] Contractual Obligations and Off Balance Sheet Arrangements The Company's contractual obligations include operating leases and purchase orders, with no significant changes outside the ordinary course of business, and it utilizes letters of credit for workers' compensation insurance - The Company has contractual obligations and commitments under operating leases and open purchase orders, with no significant changes during the quarter[168] - Letters of credit outstanding for workers' compensation insurance totaled approximately $67 thousand as of June 27, 2025, and June 28, 2024[169] - The Company has no other off-balance sheet arrangements[170] Critical Accounting Policies and Estimates There were no significant changes to the Company's critical accounting policies and estimates during the nine months ended June 27, 2025 - No significant changes occurred in the Company's critical accounting policies and estimates during the nine months ended June 27, 2025[171] 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, with no significant changes in these exposures during the nine months ended June 27, 2025 - The Company is exposed to market risks in foreign currency exchange rates, interest rates, commodity prices, and inflation[172] - There have been no significant changes to the Company's market risk during the nine months ended June 27, 2025[172] Item 4. Controls and Procedures The Company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective at a reasonable assurance level as of June 27, 2025, with 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 June 27, 2025[175] - No changes in the Company's internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[176] 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 anticipate any material adverse effect on its financial statements from their ultimate disposition - The Company is involved in various legal proceedings in the normal course of business[177] - Management does not believe the final outcome of any pending litigation will have a material adverse effect on the Company's financial statements[177] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended 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[178] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement, nor did the Company adopt or terminate any such arrangement during the three-month period ended June 27, 2025 - No director or officer, nor the Company, adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 27, 2025[179] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, amendments to credit agreements, certifications, and XBRL formatted financial data - Exhibits include Articles of Incorporation, Bylaws, Second Amendment to Amended and Restated Credit Agreement, Certifications by CEO and CFO, and XBRL formatted financial statements[186]