Johnson Outdoors (JOUT) - 2021 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements The unaudited financial statements show significant growth in sales and profit, driven by heightened demand for outdoor recreation products Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations Highlights | Metric (in thousands) | Three Months Ended April 2, 2021 | Three Months Ended March 27, 2020 | Six Months Ended April 2, 2021 | Six Months Ended March 27, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $206,156 | $163,084 | $371,823 | $291,138 | | Gross profit | $93,254 | $75,132 | $168,284 | $128,744 | | Operating profit | $36,036 | $31,794 | $59,593 | $38,595 | | Net income | $27,834 | $20,387 | $47,681 | $26,817 | | Diluted EPS (Class A) | $2.74 | $2.02 | $4.70 | $2.66 | Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights | Metric (in thousands) | April 2, 2021 | October 2, 2020 | March 27, 2020 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $186,921 | $212,437 | $131,256 | | Total current assets | $450,769 | $388,538 | $353,342 | | Total assets | $618,980 | $546,026 | $504,304 | | Total current liabilities | $123,503 | $105,607 | $102,623 | | Total liabilities | $195,244 | $167,926 | $157,202 | | Total shareholders' equity | $423,736 | $378,100 | $347,102 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended) | Metric (in thousands) | April 2, 2021 | March 27, 2020 | | :--- | :--- | :--- | | Net cash used for operating activities | $(11,955) | $(28,991) | | Net cash used for investing activities | $(9,822) | $(7,762) | | Net cash used for financing activities | $(4,690) | $(3,842) | | Decrease in cash and cash equivalents | $(25,516) | $(41,126) | Notes to Condensed Consolidated Financial Statements - The COVID-19 pandemic led to increased participation in outdoor recreation, driving higher demand for the company's products in late fiscal 2020 and the first half of fiscal 2021[28] - The company initiated actions to terminate its two defined benefit pension plans, estimating an unfavorable net income impact of approximately $4 to $5 million[60] - The company had no debt outstanding as of April 2, 2021, and maintains a $75 million revolving credit facility for liquidity[75][76] Net Sales by Business Segment (Unaffiliated Customers) | Segment (in thousands) | Three Months Ended April 2, 2021 | Three Months Ended March 27, 2020 | Six Months Ended April 2, 2021 | Six Months Ended March 27, 2020 | | :--- | :--- | :--- | :--- | :--- | | Fishing | $159,770 | $133,710 | $286,629 | $232,903 | | Camping | $14,231 | $8,841 | $26,416 | $16,346 | | Watercraft Recreation | $17,768 | $6,063 | $30,165 | $10,866 | | Diving | $14,205 | $14,253 | $28,295 | $30,711 | Operating Profit (Loss) by Business Segment | Segment (in thousands) | Three Months Ended April 2, 2021 | Three Months Ended March 27, 2020 | Six Months Ended April 2, 2021 | Six Months Ended March 27, 2020 | | :--- | :--- | :--- | :--- | :--- | | Fishing | $40,400 | $32,917 | $68,163 | $47,935 | | Camping | $2,962 | $709 | $5,770 | $775 | | Watercraft Recreation | $2,814 | $(1,639) | $3,883 | $(3,202) | | Diving | $(1,253) | $(812) | $(1,594) | $(607) | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes strong financial performance to increased consumer demand for outdoor recreation, while managing supply chain challenges and rising costs Overview - The company is a leading global manufacturer of branded seasonal outdoor recreation products for fishing, diving, paddling, and camping[129] - The COVID-19 pandemic spurred a surge in demand for Fishing, Camping, and Watercraft Recreation products continuing into fiscal 2021[131] - Key challenges include managing supply chains and ensuring component availability to meet continued strong demand[131] Results of Operations - Gross profit margin for Q2 FY2021 was 45.2%, a slight decrease from 46.1% in the prior year due to higher tariff and freight costs[149] - The company anticipates a full-year negative impact of approximately $9 million from Section 301 tariffs in fiscal 2021[151] - Operating expenses increased by $13.9 million in Q2 FY2021, driven by higher sales volume and compensation expenses[153] Net Sales Growth (Q2 FY2021 vs Q2 FY2020) | Segment | Net Sales (Q2 2021, in thousands) | Growth vs Q2 2020 | | :--- | :--- | :--- | | Consolidated | $206,156 | 26% | | Fishing | $160,016 | 19% | | Camping | $14,244 | 61% | | Watercraft Recreation | $17,778 | 193% | | Diving | $14,208 | Flat | Net Income and EPS Comparison | Metric | Three Months Ended April 2, 2021 | Three Months Ended March 27, 2020 | Six Months Ended April 2, 2021 | Six Months Ended March 27, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $27,834 | $20,387 | $47,681 | $26,817 | | Diluted EPS | $2.74 | $2.02 | $4.70 | $2.66 | Liquidity and Financial Condition - Cash and cash equivalents totaled $186.9 million as of April 2, 2021, an increase from $131.3 million a year prior[165] - The company maintained a debt-to-total capitalization ratio of 0% with no debt outstanding[165] - Inventories increased by $16.9 million year-over-year to $124.5 million to support increased product demand[166] - Cash used for operations for the six-month period decreased to $12.0 million from $29.0 million in the prior year[168] Quantitative and Qualitative Disclosures about Market Risk The company identifies primary market risks from commodity prices, interest rates, foreign currency, and supply chain disruptions due to high demand - The company's primary market risks include raw material commodity prices, interest rate fluctuations, and foreign currency exchange rate risk[178] - The COVID-19 pandemic continues to pose a risk with potential adverse impacts on the supply chain and operations[179] - Approximately 11% of revenues for the six-month period were denominated in foreign currencies, exposing the company to foreign exchange risk[182] - Higher than normal demand levels may strain the supply chain, potentially causing component shortages and higher costs[187] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[188] - No material changes occurred in the company's internal control over financial reporting during the last fiscal quarter[191] PART II OTHER INFORMATION Legal Proceedings The company is not involved in any legal proceedings expected to have a material adverse effect on its financial condition - The company states that it is not currently involved in any legal proceedings expected to have a material adverse effect on its financial condition[192] Risk Factors A new risk factor was added concerning the potential for high volatility in the company's Class A Common Stock price - A new risk factor was added regarding the high volatility of the company's Class A Common Stock trading price[193][194] - Factors contributing to stock price volatility include earnings announcements, competitor actions, economic conditions, and general market fluctuations[195][197] Exhibits This section indexes exhibits filed with the report, including CEO/CFO certifications and XBRL-formatted financial statements - The report includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[202] - Financial statements and notes are provided in XBRL format as required[202]