Johnson Outdoors (JOUT) - 2021 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements for the three months ended January 1, 2021, reflect significant growth in net sales and net income, driven by increased consumer demand for outdoor recreation products, maintaining a strong, debt-free balance sheet Condensed Consolidated Statements of Operations Net sales for the three months ended January 1, 2021, increased by 29.4% to $165.7 million, driving a surge in operating profit and net income Consolidated Statements of Operations Highlights (unaudited) | (In thousands, except per share data) | Three Months Ended Jan 1, 2021 | Three Months Ended Dec 27, 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $165,667 | $128,054 | 29.4% | | Gross profit | $75,030 | $53,612 | 40.0% | | Operating profit | $23,557 | $6,801 | 246.4% | | Net income | $19,847 | $6,430 | 208.7% | | Diluted EPS (Class A) | $1.96 | $0.64 | 206.3% | Condensed Consolidated Balance Sheets As of January 1, 2021, the balance sheet shows strong liquidity with $195.9 million in cash and increased total assets and shareholders' equity Key Balance Sheet Items (unaudited) | (In thousands) | Jan 1, 2021 | Oct 2, 2020 | Dec 27, 2019 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $195,923 | $212,437 | $138,257 | | Accounts receivable, net | $97,386 | $67,292 | $78,249 | | Inventories | $114,849 | $97,437 | $103,885 | | Total current assets | $417,256 | $388,538 | $330,126 | | Total assets | $577,181 | $546,026 | $486,123 | | Total current liabilities | $113,288 | $105,607 | $95,261 | | Total liabilities | $178,569 | $167,926 | $155,884 | | Total shareholders' equity | $398,612 | $378,100 | $330,239 | Condensed Consolidated Statements of Cash Flows Cash used for operating activities significantly improved to $11.2 million in Q1 fiscal 2021, contributing to an ending cash balance of $195.9 million Consolidated Cash Flow Summary (unaudited) | (In thousands) | Three Months Ended Jan 1, 2021 | Three Months Ended Dec 27, 2019 | | :--- | :--- | :--- | | Net cash used for operating activities | $(11,238) | $(29,088) | | Net cash used for investing activities | $(4,388) | $(3,307) | | Net cash used for financing activities | $(2,589) | $(2,149) | | Effect of foreign currency on cash | $1,701 | $419 | | Decrease in cash and cash equivalents | $(16,514) | $(34,125) | | Cash and cash equivalents, end of period | $195,923 | $138,257 | Notes to Condensed Consolidated Financial Statements Notes detail financial statement basis, accounting policies, and the COVID-19 pandemic's impact on demand, segment performance, pension plans, and debt status - The COVID-19 pandemic led to increased participation in outdoor activities like fishing, camping, and watercraft recreation, driving higher demand for the company's products starting in the latter half of fiscal 2020 and continuing into Q1 fiscal 2021[27] - Management has initiated actions to terminate its two defined benefit pension plans, estimated to result in an unfavorable impact on net income of approximately $4 to $5 million when payouts occur[57] - The company had no debt outstanding as of January 1, 2021, October 2, 2020, or December 27, 2019, maintaining an unused $75 million revolving credit facility[69][70] Segment Net Sales and Operating Profit (Three Months Ended Jan 1, 2021 vs Dec 27, 2019) (In thousands) | Segment | Net Sales (Q1'21) | Net Sales (Q1'20) | % Change | Operating Profit (Q1'21) | Operating Profit (Q1'20) | | :--- | :--- | :--- | :--- | :--- | :--- | | Fishing | $126,859 | $99,193 | 27.9% | $27,763 | $15,018 | | Camping | $12,185 | $7,505 | 62.4% | $2,808 | $66 | | Watercraft Rec. | $12,397 | $4,803 | 158.1% | $1,069 | $(1,563) | | Diving | $14,090 | $16,458 | -14.4% | $(341) | $205 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q1 fiscal 2021 performance to increased outdoor recreation demand, driving 29% net sales growth and improved gross margin, while maintaining a strong, debt-free balance sheet Results of Operations Q1 2021 net sales increased 29% to $165.7 million, driven by strong growth in outdoor recreation segments, improving gross profit margin to 45.3% - The increase in sales is mainly attributable to increased participation in outdoor recreation activities as a result of social distancing and other indoor activity restrictions related to the COVID-19 pandemic[123] Net Sales by Segment (Three Months Ended) (In thousands) | Segment | Jan 1, 2021 | Dec 27, 2019 | % Change | | :--- | :--- | :--- | :--- | | Fishing | $126,999 | $99,278 | +28% | | Camping | $12,194 | $7,514 | +62% | | Watercraft Recreation | $12,443 | $4,809 | +159% | | Diving | $14,093 | $16,459 | -14% | | Total | $165,667 | $128,054 | +29% | - Gross profit margin improved to 45.3% in Q1 2021 from 41.9% in Q1 2020, primarily due to product mix and increased efficiencies, which offset $700 thousand of higher tariff costs[138] - The company anticipates a full-year negative impact of approximately $7 million from Section 301 tariffs in fiscal 2021, up from $3.5 million in fiscal 2020, due to expired exclusions and new tariffs[139] Liquidity and Financial Condition The company maintains a robust financial condition with $195.9 million in cash and no debt, significantly improving cash flow from operations - The company's debt to total capitalization ratio was 0% as of January 1, 2021, with a total debt balance of $0[148] - Accounts receivable increased by $19.1 million and inventories increased by $11.0 million compared to the prior year, consistent with higher sales volumes and efforts to meet increased demand[149] Summary of Cash Flows (Three months ended) | (In thousands) | Jan 1, 2021 | Dec 27, 2019 | | :--- | :--- | :--- | | Cash used for operating activities | $(11,238) | $(29,088) | | Cash used for investing activities | $(4,388) | $(3,307) | | Cash used for financing activities | $(2,589) | $(2,149) | Quantitative and Qualitative Disclosures about Market Risk The company faces market risks from commodity prices, interest rates, and foreign currency, with COVID-19 and supply chain strains posing significant uncertainties - The COVID-19 pandemic continues to pose a risk, with potential adverse impacts on the supply chain, manufacturing capabilities, and future consumer demand, although it has so far driven heightened demand for outdoor products[163] - Approximately 10% of revenues for the quarter were denominated in foreign currencies, primarily euros and Canadian dollars; the company may use forward contracts to mitigate currency risk but held none at the end of the period[166][77] - Higher than normal demand levels may strain the supply chain, potentially causing limited availability and increased costs for key raw materials and components[171] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective with no material changes to internal control - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of January 1, 2021[172] - No changes occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[175] PART II: OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its financial statements - In the normal course of business, the Company may be involved in various legal proceedings, but none are currently expected to have a material adverse effect on its financial statements[176] Risk Factors A new risk factor highlights the high volatility of Class A Common Stock price, with no other material changes to previously disclosed risks - A new risk factor was added highlighting that the trading price of the Class A Common Stock is highly volatile and shareholders may not be able to resell shares at or above the price they paid[177][178] - No other material changes were made to the risk factors previously disclosed in the annual report on Form 10-K[180] Exhibits This section references the Exhibit Index, including CEO and CFO certifications and financial data in XBRL format - The report includes CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[187] - Financial statements and notes are provided in XBRL format as required[187]