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PART I
ITEM 1. BUSINESS
Johnson Outdoors is a leading global manufacturer and marketer of branded seasonal, outdoor recreation products used primarily for fishing from a boat, diving, paddling, hiking and camping. The Company’s portfolio of well-known consumer brands has attained leading market positions due to continuous innovation, marketing excellence, product performance and quality. Company values and culture support innovation in all areas, promoting and leveraging best practices and synergies within and across its subsidiaries to advance the Company’s strategic vision set by executive management and approved by the Board of Directors. The Company is controlled by Helen P. Johnson-Leipold (Chairman and Chief Executive Officer), members of her family and related entities.
The Company was incorporated in Wisconsin in 1987 as successor to various businesses.
Fishing
The Company’s Fishing segment key brands are: Minn Kota electric motors for quiet trolling or primary propulsion, marine battery chargers and shallow water anchors; Humminbird sonar and GPS equipment for fishfinding, navigation and marine cartography; and Cannon downriggers for controlled-depth fishing. Minn Kota trolling motors and shallow water anchors and Cannon downriggers are designed and manufactured primarily at the Company's Mankato, Minnesota facility. Humminbird sonar and GPS equipment are designed and manufactured in Eufaula, Alabama and Alpharetta, Georgia.
Fishing brands and related accessories are sold across the globe, with the majority of sales coming from North America through large outdoor specialty retailers, such as Bass Pro Shops and Cabela’s; large retail store chains; distributors that service independent marine, sporting goods and internet dealers; and original equipment manufacturers (OEM) of boat brands such as Tracker, Skeeter and Ranger. The Company also sells direct to consumers via its Minn Kota, Humminbird and Cannon websites. Markets outside of North America are accessed through a network of international distributors.
Fishing growth has been driven by focusing on innovative technology, quality products and effective marketing. Such consumer marketing and promotion activities include: the Minn Kota, Humminbird and Cannon brand websites; social media networks; product placements on fishing-related television shows; print advertising and editorial coverage in outdoor, general interest and sport magazines; professional angler and tournament sponsorships; and packaging and point-of-purchase materials and offers to increase consumer appeal and sales.
Camping
The Company’s Camping segment key brands are: Eureka! consumer, commercial and military tents and accessories, camping furniture and stoves and other recreational camping products; and Jetboil portable outdoor cooking systems.
Eureka! consumer tents, camping furniture, camping stoves and other recreational camping products are mid- to high-price range products sold in the U.S. and Canada, primarily to camping and backpacking specialty stores, sporting goods stores, internet retailers and direct to consumer via the Eureka! brand website. The Company’s consumer camping products are produced by third party manufacturing sources in Asia. Marketing of brands is focused on building brand awareness and leadership in product features and innovation, primarily through digital marketing and social media.
Eureka! commercial tents include party tents and accessories, sold primarily to general rental stores, and other commercial tents and accessories sold directly to tent erectors. The Company’s commercial tent products range from 10’x10’ canopies to 120’ wide pole tents and other large scale frame structures and are primarily manufactured by the Company at the Company’s Binghamton, New York location.
Eureka! also designs and manufactures large, heavy-duty tents and lightweight backpacking tents primarily for the U.S. military at its Binghamton, New York location. Tents produced for military use in the last twelve months include modular general purpose tents, rapid deployment shelters and various lightweight one and two person tents. The Company manufactures military tent accessories like fabric floors and insulated thermal liners and is also a subcontract manufacturer for other providers of military tents.
Jetboil portable outdoor cooking systems, single burner and two burner stoves, and accessories are sold in the U.S. and Canada through independent sales representatives, primarily to camping and backpacking specialty stores, sporting goods stores, internet retailers, and direct to consumer via the Jetboil brand website. Markets outside of North America are accessed through a network of international distributors. Marketing of Jetboil systems is focused on building brand awareness and leadership in product features and innovation, primarily through digital marketing and social media. Jetboil products are designed at the Company’s operating location in Manchester, New Hampshire and manufactured by third party sources in Asia.
Watercraft Recreation
The Company’s Watercraft Recreation segment designs and markets canoes and kayaks under the Ocean Kayaks and Old Town brand names for family recreation, touring, angling and tripping. These brands are manufactured at the Company’s facility in Old Town, Maine.
The Company uses a rotational molding process for manufacturing mid- to high-end polyethylene kayaks and canoes and uses a thermoform molding process in the manufacturing of lower priced models at its facility in Old Town, Maine. Watercraft Recreation accessory brands, including Carlisle branded paddles, are produced primarily by third party sources located in North America and Asia. The company's personal flotation devices are manufactured by third party sources located in Asia and are sold under the Old Town brand.
The Company’s kayaks, canoes and accessories are sold through multiple channels primarily in the U.S. and Canada with an emphasis on independent specialty dealers and outdoor specialty chain retailers. The Company also sells products direct to consumers via the Old Town and Ocean Kayak websites, and through Amazon and other internet retailer sites. The Company has a network of distributors who sell Company products outside of North America.
The Company’s Watercraft Recreation business competes in the mid- to high-end of the product category by introducing product innovations, creating quality products and by focusing on the product-specific needs of each marketing channel. Marketing of brands is focused on building brand awareness and leadership in product features and innovation, primarily through digital marketing and social media.
Diving
The Company manufactures and markets underwater diving products for recreational divers, which it sells and distributes under the SCUBAPRO brand name.
The Company markets a complete line of underwater diving and snorkeling equipment, including regulators, buoyancy compensators, dive computers and gauges, wetsuits, masks, fins, snorkels and accessories. SCUBAPRO diving equipment is marketed to the premium recreational segment and high-performance technical diving market. Products are sold via select distribution to independent specialty dive stores worldwide. These specialty dive stores generally provide a wide range of services to divers, including regular maintenance, product repair, diving education and travel programs. The Company also sells diving gear direct to consumers via the SCUBAPRO website and to dive training centers, resorts, public safety units and armed forces around the world.
The Company’s consumer communication focuses on building brand awareness and highlighting exclusive product features and consumer benefits of its product lines. The Company’s communication and distribution strategies reinforce the SCUBAPRO brand’s position as the industry’s quality and innovation leader. The Company markets its equipment via websites, through social media, through information and displays in dive specialty stores, and in diving magazines.
The Company manufactures regulators, dive computers, gauges, and instruments at its Italian and Indonesian facilities. The Company sources buoyancy compensators, neoprene goods, diving and snorkeling soft goods, proprietary materials, and other components from third party contract manufacturers.
Financial Information for Business Segments
As noted above, the Company has four reportable business segments. See Note 13 to the consolidated financial statements included elsewhere in this report for financial information concerning each business segment.
International Operations
See Note 13 to the consolidated financial statements included elsewhere in this report for financial information regarding the Company’s domestic and international operations. See Note 1, subheading “Foreign Operations and Related Derivative Financial Instruments,” to the consolidated financial statements included elsewhere in this report, along with the information under “Risk Factors” below, for information regarding risks related to the Company’s foreign operations.
Research and Development
The Company commits significant resources to new product research and development in each of its business segments. Fishing conducts its product research, design, engineering and software development activities at its locations in Mankato and Little Falls, Minnesota; Alpharetta, Georgia; Toronto, Canada; and Eufaula, Alabama. Diving maintains research and development facilities in Zurich, Switzerland and Casarza Ligure, Italy. Research and development activities for Watercraft Recreation are performed in Old Town, Maine. Product research, design and innovation for Camping products are conducted at the Company's Binghamton, New York, Racine, Wisconsin and Manchester, New Hampshire locations.
The Company expenses research and development costs as incurred, except for software development for new electronics products and bathymetry data collection and processing. These software development and bathymetry data collection and processing costs are capitalized once technological feasibility is established and then amortized over the expected useful life of the software or database. The amounts expensed by the Company in connection with research and development activities for each of the last three fiscal years are set forth in the Company’s Consolidated Statements of Operations included elsewhere in this report.
Industry and Competitive Environment
The Company believes its products compete favorably on the basis of product innovation, product performance and marketing support and, to a lesser extent, price.
Fishing: Minn Kota’s competitors in the electric trolling motors business are Motor Guide® and Lowrance™, owned by Brunswick Corporation, and Garmin™ . Competition in this business is focused on technological innovation, product quality and durability as well as product benefits and features for fishing.
Humminbird’s main competitors in the market for on-boat electronics are Garmin™, Lowrance™, Simrad and Raymarine®. Competition in this business is primarily focused on the quality of sonar imaging and display, easy to use graphical interfaces as well as the integration of mapping and GPS technology. Humminbird products contain marine cartography features. Competitors offering marine cartography products include Navionics®, owned by Garmin, and C-Map®, owned by Brunswick Corporation. Competition in this business focuses primarily on quality of data and quantity of available charts for inland lakes and ocean shoreline.
Cannon’s main competitors in the downrigger market are Big Jon Sports®, Walker and Scotty®. Competition in this business primarily focuses on ease of operation, speed and durability.
Camping: The Company’s Camping brands and products compete in the sporting goods and specialty segments of the Camping market. Competitive brands with a strong position in the sporting goods channel include Coleman® and private label brands. The Company also competes with specialty companies such as Kelty®, The North Face®, Marmot® and Big Agnes® on the basis of materials and innovative designs for consumers who want performance products priced at a value.
The Company’s portable outdoor cooking systems compete in the specialty and higher end performance backpacking and camping markets. The primary competitor in portable outdoor cooking systems is MSR®. Competition in this market is based on product size and weight, ease of use, reliability and performance.
The Company’s competitors in the commercial tent market include Anchor Industries® and Aztec Tents for tension, frame and canopy tents. Competition in the commercial tent business is based on price, quality, structure, styling, ease of installation and technical support.
The Company sells military tents via third party distributors who hold supply contracts primarily with the U.S. Government, as well as to international governments. Such supply contracts can be for commercial off-the-shelf products in addition to
products required to be built to unique specifications. Competitors in the military tent business include HDT®, Alaska Structures®, Camel, Outdoor Venture, and Diamond Brand.
Watercraft Recreation: The Company primarily competes in this segment in the kayak and canoe product categories of the paddlesports market. The Company’s main competitors in this market are Confluence Outdoor, Hobie Cat®, Wenonah Canoe, Jackson Kayak and Legacy Paddlesports™, each of which competes on the basis of their product’s design, performance, quality and price.
Diving: The main competitors in the Diving segment include Aqua Lung®, Suunto®, Atomic Aquatics, Oceanic, Cressi and Mares®. Competitive advantage in the life support product category of this segment, which consists of regulators, dive computers, and buoyancy compensators, is a function of product innovation, performance, quality and safety. Competition in the general diving product category of fins, masks, snorkels and wetsuits is characterized by low barriers to entry and numerous competitors who compete on the basis of product innovation, performance, quality and price.
Backlog
Unfilled orders for future delivery of products varies as a result of numerous factors impacting the Company (including those described in the section titled “Risk Factors” below) and because of the non-binding nature of such orders, the Company does not believe that backlog information is material to the understanding of its business.
Employees
At October 1, 2021, the Company had approximately 1,400 regular, full-time employees, of which approximately 1,000 were employed in the United States and approximately 400 were employed outside of the United States. Approximately 55 or 4% were represented by a collective bargaining agreement, all of whom are located at our facilities in Batam, Indonesia. In recent years, we have not experienced any significant work slowdowns, stoppages, or other labor disruptions. The Company considers its employee relations to be excellent. Temporary employees are utilized primarily to manage peaks in the seasonal manufacturing of products.
The Company remains committed to areas of work place safety, product quality and customer satisfaction. Successful execution of our mission is dependent on attracting, developing and retaining key employees and members of our management team, as well as providing competitive pay and benefits.
In response to the COVID-19 pandemic, the Company has generally maintained its headcount as it has accommodated our operations to the virus environment. The Company has taken what it believes to be appropriate measures to ensure the health and safety of its employees and has, in certain cases, permitted remote working.
Patents, Trademarks and Proprietary Rights
The Company holds patents for various of the products it sells and regularly files applications for patents. The Company has numerous trademarks and trade names which it considers important to its business, many of which are noted in this report. Historically, the Company has vigorously defended its intellectual property rights and expects to continue to do so.
Supply Chain and Sourcing of Materials
The Company manufactures some products that use parts or materials that, due to geographical distance, limited supplier capacity or availability or competing demands for such parts or materials, are only available in a cost effective manner from a single vendor or require the Company to place orders several months in advance of required delivery.
Historically, the Company attempted to mitigate product availability and these supply chain risks when possible through the purchase of safety stock, use of forecast-based supply contracts, and, to a lesser extent, with just in time inventory deliveries or supplier-owned inventory located close to the Company’s manufacturing locations. In doing so, the Company strived to balance the businesses’ need to maintain adequate inventory levels with the cost of holding such inventory by manufacturing to forecast for high volume products, utilizing build-to-order strategies wherever possible, and by having contract-manufactured products delivered to customers directly from the supplier. The Company also seeks to manage its inventory through on-going product design and logistical initiatives with its suppliers to reduce lead times.
As most military contracts require utilization of domestic suppliers, the Company is limited to key vendors for materials used in its military tent business.
COVID-19 has caused widely-documented supply chain and logistics disruptions across industries, including those in which the Company operates, which have been exacerbated during the latter portion of fiscal 2021 and into fiscal 2022 due to the recent higher demand for the Company’s outdoor recreation products.
Because the Company expects that these same supply chain disruptions will continue into fiscal 2022, the Company remains focused on evaluating and pursuing additional options (beyond building inventory) to manage its supply chain to meet the continued strong consumer demand for its products. Nonetheless, these supply chain disruptions remain fluid and may impact the cost of goods sold for future sales of product or the Company’s ability to fill such customer demand for its products, especially given the volatility and changing circumstances brought on by the COVID-19 pandemic.
Seasonality
The Company’s products in each of its business segments are primarily warm-weather, outdoor recreation-related, which has historically resulted in seasonal variations in sales and profitability for the Company. This seasonal variability traditionally was due to customers’ increasing their inventories in the quarters ending March and June, which is the typical primary selling season for the Company’s outdoor recreation products, with lower inventory volumes during the quarters ending September and December.
Due to the timing of the COVID-19 outbreak, the Company’s primary-selling season during fiscal 2020 was interrupted resulting in a significant shift in sales volumes during the 2020 fiscal year toward the latter half of that year versus the normal typical primary selling season as noted above which typically occurs during the second and third fiscal quarters. The Company cannot predict at this time whether it will experience more typical seasonality in demand for its products during fiscal 2022 and beyond or whether the recent changes in the Company’s seasonality will continue into fiscal 2022.
Typically and prior to the impact of COVID-19 as noted above, the Company had mitigated the seasonality of its businesses somewhat by encouraging customers to purchase and take delivery of products more evenly through the year. The following table shows, for the past three fiscal years, the total consolidated net sales and operating profit or loss of the Company for each quarter, as a percentage of the total year. See “Coronavirus (COVID-19)” in Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information of the impact of COVID-19 on the Company’s seasonality for fiscal 2020 and 2021.
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Fiscal Year
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2021
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2020
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2019
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Quarter Ended
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Net
Sales
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Operating
Profit
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Net
Sales
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|
Operating
Profit
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Net
Sales
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|
Operating
Profit
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December
|
22
|
%
|
|
22
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%
|
|
22
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%
|
|
10
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%
|
|
19
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%
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9
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%
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March
|
27
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%
|
|
32
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%
|
|
27
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%
|
|
45
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%
|
|
32
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%
|
|
43
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%
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June
|
29
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%
|
|
34
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%
|
|
23
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%
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|
17
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%
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|
31
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%
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43
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%
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September
|
22
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%
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|
12
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%
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|
28
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%
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28
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%
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|
18
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%
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5
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%
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|
|
100
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%
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100
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%
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100
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%
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100
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%
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|
100
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%
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100
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%
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Environment and Climate Change
The Company is subject to various supranational, federal, state and local environmental laws, ordinances, regulations, and other requirements of governmental authorities. We believe we comply with such laws and regulations. Expenditures on environmental compliance have not had, and we believe in the future, are not expected to have, a material adverse effect on the Company’s capital expenditures, earnings or competitive position. We do not believe that any direct or indirect consequences of legislation related to climate change will have a material adverse effect on our operating costs, facilities or products. However, risk of environmental liability and charges associated with maintaining compliance with environmental laws is inherent in the nature of the Company’s business and there is no assurance that material liabilities or charges could not arise.
Available Information
The Company maintains a website at www.johnsonoutdoors.com. On its website, the Company makes available, free of charge, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as soon as reasonably practical after the reports have been electronically filed or furnished to the Securities and Exchange Commission. In addition, the Company makes available on its website, free of charge, its (a) proxy statement for its annual meeting of shareholders; (b) Code of Business Conduct; (c) Code of Ethics for its Chief Executive Officer and Senior Financial and Accounting Officers; (d) the charters for the following committees of the Board of Directors: Audit;
Compensation; Executive; and Nominating and Corporate Governance; and (e) Corporate Governance Guidelines, Insider Trading Policy and Incentive Compensation Recovery Policy. Except as specifically provided herein, the Company is not including the information contained on or available through its website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K. This report includes all material information about the Company that is included on the Company’s website and is otherwise required to be included in this report. Copies of any materials the Company files with the Securities and Exchange Commission (SEC) can also be obtained free of charge through the SEC’s website at www.sec.gov. The SEC’s Public Reference Room can be contacted at 100 F Street, N.E., Washington, D.C. 20549, or by calling 1 (800) 732-0330.
ITEM 1A. RISK FACTORS
The risks described below are not the only risks we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our future business operations. If any of the events or circumstances described in the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline.
Operational Risk Factors
Our net sales and profitability depend on our ability to continue to conceive, design and market products that appeal to our consumers.
Our business depends on our ability to continue to conceive, design, manufacture and market new products and upon continued market acceptance of our product offering. Rapidly changing consumer preferences and trends make it difficult to predict how long consumer demand for our existing products will continue or what new products will be successful. A decline in consumer demand for our products, our failure to develop new products on a timely basis in anticipation of changing consumer preferences or the failure of our new products to achieve and sustain consumer acceptance could reduce our net sales and profitability.
Intellectual property disputes relating to our products could increase our costs.
Our industry is susceptible to litigation regarding patent infringement and infringement of other intellectual property rights. We could be either a plaintiff or a defendant in trademark, patent and/or other intellectual property infringement or misappropriation claims and claims of breach of license from time to time. The prosecution or defense of any intellectual property litigation is both costly and disruptive of the time and resources of our management and product development teams, even if the claim or defense against us is without merit. The scope of any patent or other intellectual property to which we have or may obtain rights also may not prevent others from developing and selling competing products. The validity and breadth of claims covered in patents and other intellectual property involve complex legal and factual questions, and the resolution of such claims may be highly uncertain, lengthy and expensive. In addition, our patents or other intellectual property may be held invalid upon challenge, or others may claim that we have improperly or invalidly sought patent or other intellectual property protection for our technology, thus exposing us to direct or counter claims in any patent or intellectual property proceeding. We could also be required to pay substantial damages or settlement costs to resolve intellectual property litigation. Furthermore, we may rely on trade secret law to protect technologies and proprietary information that we cannot or have chosen not to patent. Trade secrets, however, are difficult to protect. Although we attempt to maintain protection through confidentiality agreements with necessary personnel, contractors and consultants, we cannot guarantee that such contracts will not be breached. In the event of a breach of a confidentiality agreement or the divulgence of proprietary information, we may not have adequate legal remedies to maintain our trade secret protection. Litigation to determine the scope of intellectual property rights, even if ultimately successful, could be costly and could divert management’s attention away from the Company’s business. Any of these negative events could adversely affect our profitability or operating results.
Product recalls and other claims could affect our financial position and results of operations.
As a manufacturer and distributor of consumer products, we could be required to repurchase or recall one or more of our products if they are found to not meet quality or safety standards or be defective. A repurchase or recall of our products could be costly to us and could damage the reputation of our brands. If we were required to remove, or voluntarily remove our products from the market, our reputation could be tarnished and we might have large quantities of finished products that we could not sell. As a result, product recalls could have a material adverse effect on our business, results of operations and financial condition.
We may experience difficulties in integrating strategic acquisitions.
We have, as part of our strategy, historically pursued strategic acquisitions. The pursuit of future growth through acquisitions involves significant risks that could have a material adverse effect on our business. Risks associated with integrating strategic acquisitions include, but are not limited to:
•unanticipated costs relating to the integration of acquired businesses may increase our expenses and reduce our profitability;
•difficulties in achieving planned cost savings and synergies may increase our expenses;
•unanticipated management or operational problems or liabilities may adversely affect our profitability and financial condition; and/or
•breaches of the representations or warranties or other violations of the contractual obligations required by the acquisition agreement of other parties to the acquisition transaction and any contractual remedies related thereto may not adequately protect or compensate us.
We are dependent upon certain key members of management.
Our success will depend to a significant degree on the abilities and efforts of our senior management. Moreover, our success depends on our ability to attract, retain and motivate qualified management, marketing, technical and sales personnel. These people are in high demand and often have competing employment opportunities. The labor market for skilled employees is highly competitive and we may lose key employees or be forced to increase their compensation to retain these people. Employee turnover could significantly increase our recruitment, training and other related employee costs. The loss of key personnel, or the failure to attract qualified personnel, could have a material adverse effect on our business, financial condition or results of operations.
We rely on our credit facilities to provide us with sufficient working capital to operate our business.
Because of the historic seasonal nature of our business, we have from time to time relied upon our credit facilities to provide us with adequate working capital to operate our business. To the extent we again become more dependent upon our credit facilities to fund our operations, if our lenders reduce or terminate our access to amounts under our credit facilities, we may not have sufficient capital to fund our working capital needs and/or we may need to secure additional capital or financing to fund our working capital requirements or to repay outstanding debt under our credit facilities. We can make no assurance that we will be successful in ensuring our availability of amounts under our credit facilities when they are needed or in connection with raising additional capital and that any amount, if raised, will be sufficient to meet our cash flow requirements. In the event we do not have available cash balances on hand for funding future operations, and if we are not able to maintain our borrowing availability under our credit facilities at that time and/or raise additional capital when needed, we may be forced to sharply curtail our efforts to manufacture and promote the sale of our products or to curtail our operations.
Our debt covenants may limit our ability to complete acquisitions, incur debt, make investments, sell assets, merge or complete other significant transactions.
Our credit facilities and certain other of our debt instruments include limitations on a number of our activities in the event of a default, and in some cases regardless of whether a default has occurred, including our ability to:
•incur additional debt;
•create liens on our assets or make guarantees;
•make certain investments or loans; or
•dispose of or sell assets, make acquisitions above certain amounts or enter into a merger or similar transaction.
Although in recent periods we have not had to borrow funds under our credit facilities, we still are required to comply with certain restrictive covenants in our credit facilities, any of which may limit our ability to engage in acts that may be in our best long term interests. Additionally, a breach of any of the restrictive covenants in our credit facilities could result in a default under these facilities. If a default occurs while we have borrowing amounts outstanding, the lenders under our credit facilities may elect to declare all outstanding borrowings, together with accrued interest, to be immediately due and payable, to terminate any commitments they have to provide further borrowings and to exercise any other rights they have under the facilities or applicable law.
We may be subject to disruptions or failures in our information technology systems and network infrastructures that could have a material adverse effect on our business.
We rely on the efficient and uninterrupted operation of complex information technology systems and network infrastructures to operate our business. We also hold data in various company-owned and third party data center facilities upon which our
business depends. A disruption, infiltration, breach or failure of these information technology systems or any of these data centers as a result of software or hardware malfunctions, system implementations or upgrades, computer viruses, third-party security breaches, employee error, theft or misuse, malfeasance, power disruptions, natural disasters or accidents could cause breaches of data security, loss of intellectual property and critical data and the release and misappropriation of sensitive competitive information. Any of these events could result in the loss of key information, impair our production and supply chain processes, harm our competitive position, damage our reputation with customers, cause us to incur significant costs to remedy any damages and ultimately materially and adversely affect our business, results of operations and financial condition. While we have implemented a number of protective measures, such measures may not be adequate or implemented properly to prevent or fully address the adverse effect of such events.
Regulatory Risk Factors
Uncertainty over global tariffs, or the financial impact of tariffs, may negatively affect our results.
Changes in U.S. domestic and global tariff frameworks over the last three years have increased our costs of producing goods and resulted in additional risks to our supply chain. More tariff changes are also possible. We have developed strategies to mitigate, in part, previously implemented and, in some cases, proposed tariff increases, but there is no assurance we will be able to continue to mitigate the impact of tariff increases in substantial part on our financial and operating results. Further, uncertainties about future tariff changes could result in mitigation actions undertaken by us that could prove to be detrimental to our business and our relationships with our customers and suppliers.
U.S. tariffs on Chinese goods and components impacted fiscal 2021 operating profit by approximately $12 million. The scope of the tariffs and the rates at which they are implemented may continue to fluctuate and change in an unpredictable manner that further complicates our ability to implement mitigation actions.
The effective tax rate of the Company may be negatively impacted by future changes to tax laws in global jurisdictions in which we operate.
Changes in tax laws or tax rulings could have a material impact on our effective tax rate. Many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws. Certain proposals could include recommendations that could increase our tax obligations in many countries where we do business. Any changes in the taxation of our activities in such jurisdictions may result in a material increase in our effective tax rate.
We are subject to environmental, safety and human rights regulations.
We are subject to supranational, federal, state, local and foreign laws and other legal requirements related to the generation, storage, transport, treatment and disposal of materials as a result of our manufacturing and assembly operations. These laws include the Resource Conservation and Recovery Act (as amended), the Clean Air Act (as amended) and the Comprehensive Environmental Response, Compensation and Liability Act (as amended), as well as similar laws in foreign jurisdictions. Risk of environmental liability and changes associated with maintaining compliance with environmental laws is inherent in the nature of our business and there is no assurance that material liabilities or changes would not arise.
The Company is also subject to the requirement of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and SEC rules related thereto to conduct due diligence and disclose and report on whether certain minerals and metals, known as “conflict minerals,” are contained in the Company’s products and whether they originate from the Democratic Republic of Congo (“DRC”) and adjoining countries. We may face reputational challenges if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins of all conflict minerals used in our products through the procedures we implement.
Our failure to adequately protect personal information could have a material adverse effect on our business.
A wide variety of local, state, national, and international laws, directives and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data (including with respect to the European Union's General Data Protection Regulation and U.S. state laws such as the California Consumer Privacy Act). These data protection and privacy-related laws and regulations continue to evolve and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions and increased costs of compliance. Our failure to comply with applicable laws and regulations, or to protect such data, could result in enforcement actions against us, including fines, imprisonment of company officials and public censure, claims for damages by end-customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing end-customers and prospective end-customers), any of which could
have a material adverse effect on our operations, financial performance, and business. Changing definitions of personal data and personal information, within the European Union, the United States, and elsewhere may limit or inhibit our ability to operate or expand our business, including limiting strategic partnerships that may involve the sharing of data. The evolving data protection regulatory environment may require significant management attention and financial resources to analyze and modify our information technology infrastructure to meet these changing requirements all of which could reduce our operating margins and impact our operating results and financial condition.
Market and Economic Risk Factors
The COVID-19 pandemic has significantly impacted worldwide economic conditions and could continue to have a material adverse effect on our operations and business.
Our operations are exposed to risks associated with pandemics, epidemics or other public health emergencies, such as the recent outbreak of coronavirus disease (COVID-19). Outbreaks such as these have resulted, and can continue to result, in governments around the world implementing stringent or restrictive measures to help control the spread of the virus, including quarantines, "shelter in place" and "stay at home" orders, travel restrictions, business curtailments, school closures, and other measures. Depending on the timing of these actions, and the scope of the economic activity they impact, we may experience negative impacts on our operations, supply chain, transportation networks, customers and employees and any of such events can impact or adjust the historic seasonality or buying patterns for our products. Further, the COVID-19 pandemic (or any worsening thereof) and resulting public health measures may result in an economic downturn that adversely affects demand for our products, and negatively impacts our business or results of operations through the temporary closure of our operating locations or those of our customers or suppliers. The pandemic (or the continuing worsening of it) may also impact the buying patterns and demand for our products (either positively or negatively) by our customers including by generally limiting or discouraging various leisure and travel activities that may adversely impact consumer use of certain of our products.
As we have previously disclosed in our public filings with the Securities and Exchange Commission, during the latter half of fiscal 2020 and throughout fiscal 2021, we saw favorable impact of COVID-19 on our results due to increased participation in fishing, camping and watercraft recreation and related demand for our products, largely driven by consumer desire to engage in socially distant and safe activities in the great outdoors. It is not certain any previously experienced favorable impacts will continue or will recur in the future, especially as the pandemic alters buying patterns and demand for outdoor recreation products. Additionally, even where demand may be strong, we face the potential for supply chain constraints and disruptions (including as it relates to the timing, sourcing, availability and cost of raw materials and components) given the overall increased stress on global supply chains and the need to operate with appropriate safety measures in operating environments. The extent to which COVID-19 or another similar pandemic may continue to adversely or favorably impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak, the effectiveness of actions globally to contain or mitigate its effects, including government actions to stimulate the economy and prevent further downturns, and the impact of these events on the timing, sourcing, availability and cost of raw materials and components for production of our products. The current level of uncertainty over the economic and operational impacts of COVID-19 means the related financial impact cannot be reasonably estimated at this time.
Competition, consolidation and financial distress in our markets could reduce our net sales, profitability and cash flows.
We operate in highly competitive markets. We compete with several large domestic and foreign companies such as Brunswick, Garmin, Confluence Outdoor and Aqua Lung, with private label products sold by many of our retail customers and with other producers of outdoor recreation products. Some of our competitors have longer operating histories, stronger brand recognition and greater financial, technical, marketing and other resources than us. In addition, due to limited barriers to entry in some of the product industries we engage in, we may face competition from new participants in our markets or from existing participants developing and introducing new products into our market segments. Two of our existing competitors in the on-boat electronics category entered the electric trolling motor category during 2020 competing with products that we sell in that category. Further, we experience price competition for our products, and competition for shelf space at retailers, all of which may increase in the future. Consolidation of our retail markets could result in fewer but larger retail customers, which may further result in lower selling prices or reduced sales volumes of our products or greater competition for shelf space in these retail markets. Further, financial distress or bankruptcies in our retail markets could negatively impact our operating results and cash flows. If we cannot compete in our product markets successfully in the future, our net sales, profitability and cash flows will likely decline.
General economic conditions affect the Company’s results.
Our revenues are affected by economic conditions and consumer confidence worldwide, but especially in the United States and Europe. In times of economic uncertainty, consumers tend to defer expenditures for discretionary items, which affects demand
for our products. Moreover, our businesses are cyclical and seasonal in nature, and their success is impacted by general economic conditions and specific economic conditions affecting the regions and markets we serve, the overall level of consumer confidence in the economy and discretionary income levels. Any substantial deterioration in general economic conditions that diminishes consumer confidence or discretionary income can reduce our sales and adversely affect our financial results. Moreover, declining economic conditions create the potential for future impairments of goodwill and other intangible and long-lived assets that may negatively impact our financial condition and results of operations. Various uncertainties tied to economic conditions, including significant adverse changes in business climate, adverse actions by regulators, unanticipated competition, loss of key customers, a downturn in the economy or in discretionary income levels or changes in consumer preferences could impact the expected cash flows to be generated by an asset or group of assets, and may result in an impairment of those assets. The impact of weak consumer credit markets, corporate restructurings, layoffs, prolonged high unemployment rates, declines in the value of investments and residential real estate, higher fuel prices and increases in federal and state taxation all can negatively affect our operating results.
A limited number of our shareholders can exert significant influence over the Company.
As of October 1, 2021, Helen P. Johnson-Leipold, members of her family and related entities (hereinafter the Johnson Family), held approximately 75% of the voting power of both classes of our common stock taken as a whole. This voting power would permit these shareholders, if they chose to act together, to exert significant influence over the outcome of shareholder votes, including votes concerning the election of directors, by-law amendments, possible mergers, corporate control contests and other significant corporate transactions. Moreover, certain members of the Johnson Family have entered into a voting trust agreement covering approximately 96% of our outstanding class B common shares. This voting trust agreement permits these shareholders, if they continue to choose to act together, to exert significant influence over the outcome of shareholder votes, including votes concerning the election of directors, by-law amendments, possible mergers, corporate control contests and other significant corporate transactions.
Our shares of common stock are thinly traded and our stock price may be volatile.
Because our common stock is thinly traded, its market price may fluctuate significantly more than the stock market in general or the stock prices of similar companies, which are exchanged, listed or quoted on NASDAQ or another stock exchange. We believe there are approximately 5,225,000 shares of our Class A common stock held by non-affiliates as of October 1, 2021. Thus, our common stock will be less liquid than the stock of companies with broader public ownership, and as a result, the trading price for our shares of common stock may be more volatile. Among other things, trading of a relatively small volume of our common stock may have a greater impact on the trading price for our stock than would be the case if our public float were larger.
Our stock price is volatile and our shareholders may not be able to resell shares of Class A Common Stock at or above the price they paid.
The trading price of our Class A Common Stock is highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include:
•announcements relating to our earnings trends or with respect to any cost-cutting actions or other strategic transactions involving Johnson Outdoors;
•announcements relating to, and disruptions in, the sourcing, timing, availability and cost of raw materials and components necessary for the production of our products;
•announcements relating to product development efforts of Johnson Outdoors or competitors;
•announcements relating to the receipt, modification or termination of customer or supplier contracts, including with respect to any government contracts or grants;
•prevailing economic conditions;
•business disruptions caused by weather events, pandemics, or other natural disasters;
•disputes concerning Johnson Outdoors's or its competitors' intellectual property or other proprietary rights;
•sales of our Class A Common Stock by our executive officers and directors or our significant shareholders in the future;
•the lack of an active, liquid, and orderly market in our Class A Common Stock;
•fluctuations in our quarterly operating results; and
•the issuance of new or changed securities analysts' reports or recommendations regarding the shares of our Class A Common Stock
In addition, the stock markets in general, and the markets for equity securities in companies principally operating in the outdoor leisure or recreational product markets, have experienced periods of high volatility that have been often unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our Class A Common Stock.
Sources of and fluctuations in market prices of raw materials can affect our operating results.
The primary raw materials we use in manufacturing our products are metals, resins, electronic components, and packaging materials. These materials are generally available from a number of suppliers, but traditionally we have chosen to concentrate our sourcing with a limited number of vendors for each commodity or purchased component. Under normal circumstances, we believe our sources of raw materials are reliable and adequate for our needs. However, many materials and components are subject to industry-wide shortages and significant commodity pricing fluctuations due to the recent deterioration of the global supply chain as a by-product of the COVID-19 pandemic. The development of future sourcing issues related to the availability of these materials as well as significant fluctuations in the market prices of these materials may have an adverse effect on our financial results.
Our profitability is also affected by significant fluctuations in the prices of the raw materials and components we use in our products, including the effect of fluctuations in foreign currency exchange rates on raw materials and purchased components. We may not be able to pass along any price increases in our raw materials or other component costs to our customers. As a result, an increase in the cost of raw materials, labor or other costs associated with the manufacturing of our products could increase our costs of sales and reduce our gross margins.
Financial distress in supply chain and shortage of raw materials or components of supply.
Deteriorating industry conditions can adversely affect our supply base. Lower production levels at our major suppliers and volatility in certain raw material and energy costs may result in severe financial distress among many companies within our supply base, which may result in issues impacting the sourcing, timing, availability and cost of raw materials and components necessary to manufacture our products. Financial distress within our supply base and/or our suppliers’ inability to obtain credit from lending institutions could lead to commercial disputes and possible supply chain interruptions to our business. In addition, potential adverse industry conditions may require us to provide financial assistance or other measures to ensure uninterrupted production of key components or materials used in the production of our products which could have a material adverse effect on our existing and future revenues and net income. For example, our inventory levels have increased significantly in recent periods as we attempt to build inventory with the goal of mitigating and/or preparing for a continuing disruption of the supply chain as a result of the COVID-19 pandemic.
We are currently experiencing supply shortages and cost increases for certain components and raw materials that are crucial to our manufacturing process. Continued higher levels of consumer demand or growth in demand for our outdoor recreation products may exacerbate these pressures, and, therefore, we expect the supply chain challenges described above and adverse cost impacts on our margins to continue for the foreseeable future. As noted above, we have chosen to take action to increase our inventories and purchase commitments in an attempt to ensure we have adequate inventory levels to meet customer expectations and demand for our products. Nonetheless not all necessary components to build inventory have been readily available at reasonable prices or at all.
Additionally, in the event of catastrophic acts of nature such as fires, tsunamis, hurricanes and earthquakes or a rapid increase in production demands, either we, or our suppliers may experience supply shortages of raw materials or components. This could be caused by a number of factors, including a lack of production line capacity or manpower or working capital constraints. As our industry consolidates its supply base in order to manage the costs of purchased goods and services, there is greater dependence on fewer sources of supply for certain components and materials used in our products, which could increase the possibility of a supply shortage of any particular component. If we or one of our own suppliers experience a supply shortage, we may become unable to produce the affected products if we cannot procure the components from another source. Such production interruptions could impede a ramp-up in production and could have a material adverse effect on our business, results of operations and financial condition.
We consider the production capacities and financial condition of suppliers in our selection process, and expect that they will meet our delivery requirements. However, there can be no assurance that strong demand, capacity limitations, shortages of raw materials, labor disputes, freight capacity or other problems will not result in any shortages or delays in the supply of components to us.
Currency exchange rate fluctuations could adversely affect the Company’s results.
We have significant foreign operations, for which the functional currencies are denominated primarily in euros, Swiss francs, Hong Kong dollars and Canadian dollars. As the values of the currencies of the foreign countries in which we have operations increase or decrease relative to the U.S. dollar, the sales, expenses, profits, losses, assets and liabilities of our foreign operations, as reported in our consolidated financial statements, increase or decrease, accordingly. Approximately 12% of our revenues for the year ended October 1, 2021 were denominated in currencies other than the U.S. dollar. Approximately 4% were denominated in euros and approximately 6% were denominated in Canadian dollars with the remaining 2% denominated in various other foreign currencies. We may mitigate a portion of the impact of fluctuations in certain foreign currencies on our operations through the purchase of foreign currency swaps, forward contracts and options to hedge known commitments denominated in foreign currencies or to reduce the risk of changes in foreign currency exchange rates on foreign currency borrowings.
Because we rely on foreign suppliers and we sell products in foreign markets, we are susceptible to numerous international business risks that could increase our costs or disrupt the supply of our products.
Our international operations subject us to risks, including:
•economic and political instability;
•restrictive actions by foreign governments, including with respect to tariffs or trade policies;
•opportunity costs and reputational damage related to the presence of counterfeit versions of the Company’s products in such foreign markets;
•greater difficulty enforcing intellectual property rights and weaker laws protecting intellectual property rights;
•changes in tariffs, import duties or import or export restrictions;
•timely shipping of product and unloading of product, including the timely rail/truck delivery to our warehouses and/or a customer’s warehouse of our products;
•complications in complying with the laws and policies of the United States affecting the importation of goods, including tariffs, duties, quotas and taxes;
•required compliance with U.S. laws that impact the Company’s operations in foreign jurisdictions that do not impact local operating companies; and
•complications in complying with trade and foreign tax laws.
General Risk Factors
Cyber security vulnerabilities, threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, solutions, services and data.
Increased global cyber security vulnerabilities, threats, computer viruses and more sophisticated and targeted cyber-related attacks, as well as cyber security failures resulting from human error and technological errors, pose a risk to our systems, products and data as well as potentially to our employees’, customers’ and suppliers’ data. We attempt to mitigate these risks by employing a number of measures, including employee training, monitoring and testing, and maintenance of protective systems and contingency plans, but we remain potentially vulnerable to additional known or unknown threats. There is no assurance the impact from such threats will not be material to our financial results or reputation and it could result in security breaches, theft, lost or corrupted data, misappropriation of sensitive, confidential or personal data or information, loss of trade secrets and commercially valuable information, production downtimes and operational disruptions, any of which may adversely affect our profitability or operating results.
Future terror attacks, war, natural disasters or other catastrophic events beyond our control could negatively impact our business.
Terror attacks, war or other civil disturbances, natural disasters and other catastrophic events could lead to economic instability and decreased demand for our products, which could negatively impact our business, financial condition, results of operations and cash flows. In the past, terrorist attacks have caused instability in global financial markets and the industries in which we compete and have negatively affected spending on consumer discretionary products. In addition, our facilities are located throughout the world and could be subject to damage from terrorism incidents or from fires, floods, earthquakes or other natural or man-made disasters. Terrorist incidents could also lead to increased border security which could in turn negatively impact our global supply chain by causing shipping delays or shortages in key materials or components, increasing the cost of such goods or requiring us to keep greater inventories, any of which may adversely impact our business, results of operations, financial condition or cash flows.
Our business is susceptible to adverse weather conditions or events.
Our success is in part affected by adverse weather conditions, including fires, floods, tornadoes, severe cold and other natural disasters. Such events have the tendency to create fluctuations in demand for our products which may increase our expenses and reduce our profitability. Moreover, our profitability is affected by our ability to successfully manage our inventory levels and demand for our products, which, in part depends upon the efficient operation of our production and delivery systems. These systems are vulnerable to damage or interruption from the aforementioned natural disasters. Such natural disasters could adversely impact our ability to meet delivery requirements of our customers, which may result in our need to incur extra costs to expedite production and delivery of product to meet customer demand. Any of these events could negatively impact our profitability.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable
ITEM 2. PROPERTIES
The Company maintains leased and owned manufacturing, warehousing, distribution and office facilities throughout the world. The Company believes that its facilities are well maintained and have capacity adequate to meet its current needs.
See Note 5 to the consolidated financial statements included elsewhere in this report for a discussion of the Company’s lease obligations.
As of October 1, 2021, the Company’s principal manufacturing (identified with an asterisk) and other locations are:
Alpharetta, Georgia (Fishing)
Antibes, France (Diving)
Barcelona, Spain (Diving)
Batam, Indonesia* (Diving)
Binghamton, New York* (Camping)
Brussels, Belgium (Diving)
Burlington, Ontario, Canada (Fishing, Camping, Watercraft Recreation)
Casarza Ligure, Italy* (Diving)
Chai Wan, Hong Kong (Diving)
Chatswood, Australia (Diving)
El Cajon, California (Diving)
Eufaula, Alabama* (Fishing)
Little Falls, Minnesota (Fishing)
Manchester, New Hampshire (Camping)
Mankato, Minnesota* (Fishing)
Mexicali, Mexico* (Fishing)
Old Town, Maine* (Watercraft Recreation)
Toronto, Ontario, Canada (Fishing)
Nuremberg, Germany (Diving)
Zurich, Switzerland (Diving)
The Company’s corporate headquarters is located in a facility in Racine, Wisconsin.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, we may be involved in various legal proceedings from time to time. As of the date of the filing of this Report, we are not involved in any litigation involving amounts deemed to be material to the business or financial condition of the Company.
ITEM 4. MINE SAFETY DISCLOSURES
None.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 1, 2021
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Johnson Outdoors Inc. (the “Company”) is an integrated, global outdoor recreation products company engaged in the design, manufacture and marketing of brand name camping, diving, watercraft and marine electronics products.
Principles of Consolidation
The consolidated financial statements include the accounts of Johnson Outdoors Inc. and all majority owned subsidiaries and are stated in conformity with U.S. generally accepted accounting principles. Intercompany accounts and transactions have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and operating results and the disclosure of commitments and contingent liabilities. Actual results could differ significantly from those estimates.
Fiscal Year
The Company’s fiscal year ends on the Friday nearest September 30. The fiscal year ended October 1, 2021 (hereinafter 2021) comprised 52 weeks. The fiscal year ended October 2, 2020 (hereinafter 2020) comprised 53 weeks. The fiscal year ended September 27, 2019 (hereinafter 2019) comprised 52 weeks.
Coronavirus (COVID-19)
In March 2020, the World Health Organization recognized the current coronavirus (COVID-19) outbreak as a global pandemic. In response to the COVID-19 outbreak, the governments of many countries, states, cities and other geographic regions imposed varying degrees of restrictions on social and commercial activity, including travel restrictions, quarantine guidelines and related actions, to promote social distancing, encourage and promote taking the vaccine and implementing other similar programs all in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy, including manufacturing and retail commerce.
While government mandates allowed us to re-open our manufacturing and distribution centers in the latter half of fiscal 2020, these mandates continued to emphasize social distancing measures to the general public. As such, the Company began to see growing demand and improved sales volumes in the latter part of fiscal 2020 for certain of its outdoor recreation businesses. This demand continued into and throughout fiscal 2021 across all segments. Nonetheless, the full extent to which the COVID-19 pandemic will impact our business, results of operations, and financial condition will depend on future developments, including any potential worsening of the pandemic, the lingering impact of the pandemic in disrupting the global supply chain (including with respect to impacting the sourcing, timing, availability and cost of raw materials and components that are necessary to manufacturing our products), all of which are beyond our control and which remain highly uncertain and cannot be predicted.
Cash, Cash Equivalents and Short-term Investments
The Company considers all short-term investments in interest-bearing bank accounts, and all securities and other instruments with an original maturity of three months or less, to be equivalent to cash. Cash equivalents are stated at cost which approximates market value. Short-term investments consist of certificates of deposit with original maturities greater than three months but less than one year.
The Company maintains cash in bank accounts in excess of insured limits. The Company has not experienced any losses and does not believe that significant credit risk exists as a result of this practice.
As of October 1, 2021, the Company held approximately $61,353 of cash and cash equivalents in bank accounts in foreign jurisdictions.
Accounts Receivable
Accounts receivable are recorded at face value less an allowance for doubtful accounts. The allowance for doubtful accounts is based on a combination of factors. In circumstances where specific collection concerns exist, a reserve is established to reduce the amount recorded to an amount the Company believes will be collected. For all other customers, the Company recognizes allowances for doubtful accounts based on historical experience of bad debts as a percent of outstanding accounts receivable for each business unit. Uncollectible accounts are written off against the allowance for doubtful accounts after collection efforts have been exhausted. The Company typically does not require collateral on its accounts receivable.
Inventories
The Company values inventory at the lower of cost (determined using the first-in first-out method) or net realizable value. Management’s judgment is required to determine the reserve for obsolete or excess inventory. Inventory on hand may exceed future demand either because the product is outdated or because the amount on hand is more than will be used to meet future needs. Inventory reserves are estimated by the individual operating companies using standard quantitative measures based on criteria established by the Company. The Company also considers current forecast plans, as well as market and industry conditions in establishing reserve levels. Though the Company considers these reserve balances to be adequate, changes in economic conditions, customer inventory levels or competitive conditions could have a favorable or unfavorable effect on required reserve balances.
Inventories at the end of the respective fiscal years consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1
2021
|
|
October 2
2020
|
|
Raw materials
|
$
|
110,974
|
|
|
$
|
48,874
|
|
|
Work in process
|
116
|
|
|
39
|
|
|
Finished goods
|
55,525
|
|
|
48,524
|
|
|
|
$
|
166,615
|
|
|
$
|
97,437
|
|
The COVID-19 pandemic has caused widely-documented supply chain and logistics disruptions in the industries in which we operate, resulting in supply shortages across all of our segments for certain materials and components necessary to manufacture our products. As a result of these disruptions, the Company took action to build and procure numerous categories of inventory (in some cases at significantly higher price points than what was historically paid) in an attempt to mitigate against potential shortages during fiscal 2022. These actions have resulted in the Company carrying significantly higher levels of inventory for a number of its materials, components and products at the end of fiscal 2021.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation of property, plant and equipment is determined by straight-line methods over the following estimated useful lives:
|
|
|
|
|
|
|
|
Property improvements
|
5-20 years
|
|
Buildings and improvements
|
20-40 years
|
|
Furniture and fixtures, equipment and computer software
|
3-10 years
|
Upon retirement or disposition of any of the foregoing types of assets, cost and the related accumulated depreciation are removed from the applicable account and any resulting gain or loss is recognized in the statements of operations.
Property, plant and equipment at the end of the respective years consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Property improvements
|
$
|
589
|
|
|
$
|
589
|
|
|
Buildings and improvements
|
26,769
|
|
|
24,416
|
|
|
Furniture and fixtures, equipment and computer software
|
208,043
|
|
|
194,573
|
|
|
|
235,401
|
|
|
219,578
|
|
|
Less accumulated depreciation
|
163,891
|
|
|
156,541
|
|
|
|
$
|
71,510
|
|
|
$
|
63,037
|
|
Goodwill
The Company applies a fair value-based impairment test to the carrying value of goodwill on an annual basis as of the last day of the eleventh month of the Company’s fiscal year and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. The results of the impairment tests performed in 2021, 2020, and 2019 indicated no impairment to the Company’s goodwill.
In conducting its analysis, the Company uses the income approach to compare the reporting unit’s carrying value to its indicated fair value. Fair value is determined primarily by using a discounted cash flow methodology that requires considerable management judgment and long-term assumptions and is considered a Level 3 (unobservable) fair value determination in the fair value hierarchy (see Note 4 below).
The Company’s impairment analysis is based on management’s estimates. Due to the uncertainty of future events, the Company cannot assure that growth rates will not be lower than expected, that discount rates will not increase or that projected cash flows will not decline, all of which factors could impact the carrying value of any remaining goodwill (or portion thereof) in future periods, and accordingly, whether any impairment losses need to be recorded in future periods.
The changes in the carrying amount and the composition of the Company's goodwill for fiscal 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fishing
|
|
Camping
|
|
Watercraft
|
|
Diving
|
|
Total
|
|
Balance at September 27, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
17,415
|
|
|
$
|
7,038
|
|
|
$
|
6,242
|
|
|
$
|
33,078
|
|
|
$
|
63,773
|
|
|
|
Accumulated impairment losses
|
|
(6,229)
|
|
|
(7,038)
|
|
|
(6,242)
|
|
|
(33,078)
|
|
|
(52,587)
|
|
|
|
|
|
11,186
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,186
|
|
|
|
Currency translation
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 2, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
17,413
|
|
|
7,038
|
|
|
6,242
|
|
|
33,078
|
|
|
63,771
|
|
|
|
Accumulated impairment losses
|
|
(6,229)
|
|
|
(7,038)
|
|
|
(6,242)
|
|
|
(33,078)
|
|
|
(52,587)
|
|
|
|
|
|
11,184
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,184
|
|
|
|
Currency translation
|
|
37
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
Balance at October 1, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
17,450
|
|
|
7,038
|
|
|
6,242
|
|
|
33,078
|
|
|
63,808
|
|
|
|
Accumulated impairment losses
|
|
(6,229)
|
|
|
(7,038)
|
|
|
(6,242)
|
|
|
(33,078)
|
|
|
(52,587)
|
|
|
|
|
|
$
|
11,221
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,221
|
|
Other Intangible Assets
Indefinite-lived intangible assets are also tested for impairment annually and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. There were no impairment losses recognized in fiscal 2021, 2020 or 2019.
Intangible assets with definite lives are stated at cost less accumulated amortization. Amortization is computed using the straight-line method over periods ranging from 4 to 15 years. Amortization of patents and other intangible assets with definite lives was $421, $2,334 and $1,031 for 2021, 2020 and 2019, respectively. Amortization of these definite-lived intangible assets is expected to be approximately $264 for each of the next 5 fiscal years.
Intangible assets at the end of the last two years consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
Gross
Intangible
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
Intangible
|
|
Accumulated
Amortization
|
|
Net
|
|
Amortized other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and trademarks
|
$
|
4,207
|
|
|
$
|
(4,203)
|
|
|
$
|
4
|
|
|
$
|
4,174
|
|
|
$
|
(4,169)
|
|
|
$
|
5
|
|
|
Other amortizable intangibles
|
11,234
|
|
|
(9,630)
|
|
|
1,604
|
|
|
11,236
|
|
|
(9,214)
|
|
|
2,022
|
|
|
Non-amortized trademarks
|
7,025
|
|
|
—
|
|
|
7,025
|
|
|
7,025
|
|
|
—
|
|
|
7,025
|
|
|
|
$
|
22,466
|
|
|
$
|
(13,833)
|
|
|
$
|
8,633
|
|
|
$
|
22,435
|
|
|
$
|
(13,383)
|
|
|
$
|
9,052
|
|
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in business circumstances such as unplanned negative cash flow indicate that the carrying amount of these assets may not be fully recoverable. In such an event, the carrying amount of the asset group is compared to the future undiscounted cash flows expected to be generated by the asset group to determine if impairment exists on these assets. If impairment is determined to exist, any related impairment loss is calculated based on the difference between the fair value and the carrying value on these assets. During the fourth quarters of fiscal 2020 and 2019, the Company performed an impairment analysis, in which the carrying value of long-lived assets in its Watercraft segment exceeded the fair value of undiscounted and discounted cash flow analysis. Accordingly, the Company evaluated the fair value of the underlying long-lived assets and determined there was no impairment.
Warranties
The Company provides for warranties of certain products as they are sold. Warranty reserves are estimated using standard quantitative measures based on criteria established by the Company. Estimates of costs to service its warranty obligations are based on historical experience, expectation of future conditions and known product issues. The following table summarizes the warranty activity for the three years in the period ended October 1, 2021.
|
|
|
|
|
|
|
|
Balance at September 28, 2018
|
$
|
8,499
|
|
|
Expense accruals for warranties issued during the period
|
9,581
|
|
|
Less current period warranty claims paid
|
8,890
|
|
|
Balance at September 27, 2019
|
$
|
9,190
|
|
|
Expense accruals for warranties issued during the period
|
11,714
|
|
|
Less current period warranty claims paid
|
10,055
|
|
|
Balance at October 2, 2020
|
$
|
10,849
|
|
|
Expense accruals for warranties issued during the period
|
13,112
|
|
|
Less current period warranty claims paid
|
9,888
|
|
|
Balance at October 1, 2021
|
$
|
14,073
|
|
Accumulated Other Comprehensive Income
The components of Accumulated other comprehensive income ("AOCI") on the accompanying Consolidated Balance Sheets as of the end of fiscal year 2021, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
|
Pre-Tax
Amount
|
|
Tax Effect
|
|
Net of Tax
Effect
|
|
Pre-Tax
Amount
|
|
Tax Effect
|
|
Net of Tax
Effect
|
|
Pre-Tax
Amount
|
|
Tax Effect
|
|
Net of Tax
Effect
|
|
Foreign currency translation adjustment
|
$
|
7,606
|
|
|
$
|
—
|
|
|
$
|
7,606
|
|
|
$
|
7,323
|
|
|
$
|
—
|
|
|
$
|
7,323
|
|
|
$
|
4,790
|
|
|
$
|
—
|
|
|
$
|
4,790
|
|
|
Unamortized loss on pension plans
|
(386)
|
|
|
166
|
|
|
(220)
|
|
|
(3,129)
|
|
|
523
|
|
|
(2,606)
|
|
|
(3,964)
|
|
|
732
|
|
|
(3,232)
|
|
|
Accumulated other comprehensive income
|
$
|
7,220
|
|
|
$
|
166
|
|
|
$
|
7,386
|
|
|
$
|
4,194
|
|
|
$
|
523
|
|
|
$
|
4,717
|
|
|
$
|
826
|
|
|
$
|
732
|
|
|
$
|
1,558
|
|
The reclassifications out of AOCI for the year ended October 1, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
Presentation
|
|
Unamortized loss on defined benefit pension plans
|
|
|
|
|
|
Amortization of loss
|
|
$
|
576
|
|
|
Cost of sales / Operating expense
|
|
Tax effects
|
|
(144)
|
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
$
|
432
|
|
|
|
The reclassifications out of AOCI for the year ended October 2, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
Presentation
|
|
Unamortized loss on defined benefit pension plans:
|
|
|
|
|
|
Amortization of loss
|
|
$
|
537
|
|
|
Cost of sales / Operating expense
|
|
Tax effects
|
|
(134)
|
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
$
|
403
|
|
|
|
The reclassifications out of AOCI for the year ended September 27, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
Presentation
|
|
Unamortized loss on defined benefit pension plans:
|
|
|
|
|
|
Amortization of loss
|
|
$
|
328
|
|
|
Cost of sales / Operating expense
|
|
Tax effects
|
|
(82)
|
|
|
Income tax expense
|
|
Foreign currency translation adjustments:
|
|
|
|
|
|
Write off of currency translation amounts
|
|
(761)
|
|
|
Other income and expense
|
|
Total reclassifications for the period
|
|
$
|
(515)
|
|
|
|
The changes in AOCI by component, net of tax, for the year ended October 1, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
Translation
Adjustment
|
|
Unamortized
Loss on Defined
Benefit Pension
Plans
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Balance at October 2, 2020
|
$
|
7,323
|
|
|
$
|
(2,606)
|
|
|
$
|
4,717
|
|
|
Other comprehensive income before reclassifications
|
283
|
|
|
2,167
|
|
|
2,450
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
576
|
|
|
576
|
|
|
Tax effects
|
—
|
|
|
(357)
|
|
|
(357)
|
|
|
Balance at October 1, 2021
|
$
|
7,606
|
|
|
$
|
(220)
|
|
|
$
|
7,386
|
|
The changes in AOCI by component, net of tax, for the year ended October 2, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
Translation
Adjustment
|
|
Unamortized
Loss on Defined
Benefit Pension
Plans
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Balance at September 27, 2019
|
$
|
4,790
|
|
|
$
|
(3,232)
|
|
|
$
|
1,558
|
|
|
Other comprehensive income before reclassifications
|
2,533
|
|
|
298
|
|
|
2,831
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
537
|
|
|
537
|
|
|
Tax effects
|
—
|
|
|
(209)
|
|
|
(209)
|
|
|
Balance at October 2, 2020
|
$
|
7,323
|
|
|
$
|
(2,606)
|
|
|
$
|
4,717
|
|
Earnings per Share (“EPS”)
Net income or loss per share of Class A common stock and Class B common stock is computed using the two-class method. Grants of restricted stock (whether vested or unvested) which receive non-forfeitable dividends are required to be included as part of the basic weighted average share calculation under the two-class method.
Holders of Class A common stock are entitled to cash dividends equal to 110% of all dividends declared and paid on each share of Class B common stock. The Company grants shares of unvested restricted stock in the form of Class A shares, which carry the same distribution rights as the Class A common stock described above. As such, the undistributed earnings for each period are allocated to each class of common stock based on the proportionate share of the amount of cash dividends that each such class is entitled to receive.
Basic EPS
Basic net income or loss per share is computed by dividing net income or loss allocated to Class A common stock and Class B common stock by the weighted-average number of shares of Class A common stock and Class B common stock outstanding, respectively. In periods with cumulative year to date net income and undistributed income, the undistributed income for each period is allocated to each class of common stock based on the proportionate share of the amount of cash dividends that each such class is entitled to receive. In periods where there is a cumulative year to date net loss or no undistributed income because distributions through dividends exceed net income, Class B shares are treated as anti-dilutive and, therefore, net losses are allocated equally on a per share basis among all participating securities.
For the years ended October 1, 2021, October 2, 2020 and September 27, 2019, basic income per share for Class A and Class B shares has been presented using the two class method as described above.
Diluted EPS
Diluted net income per share is computed by dividing allocated net income by the weighted-average number of common shares outstanding, adjusted for the effect of dilutive stock options, restricted stock units and non-vested restricted stock. Anti-dilutive stock options, restricted stock units and non-vested stock are excluded from the calculation of diluted EPS. The computation of diluted net income per share of Class A common stock assumes that Class B common stock is converted into Class A common stock. Therefore, diluted net income per share is the same for both Class A and Class B common shares. In periods where the Company reports a net loss, the effect of anti-dilutive stock options, restricted stock units and non-vested stock is excluded and diluted loss per share is equal to basic loss per share.
For the years ended October 1, 2021, October 2, 2020 and September 27, 2019, diluted net income per share reflects the effect of dilutive stock options and restricted stock units and assumes the conversion of Class B common stock into Class A common stock.
There were no stock options that could potentially dilute earnings per share in the future which were not included in the fully diluted computation because they would have been anti-dilutive for the years ended October 1, 2021, October 2, 2020 and September 27, 2019. Non-vested stock that could potentially dilute earnings per share in the future which were not included in the fully diluted computation because they would have been anti-dilutive totaled 38,914, 40,094 and 43,963 shares for the years ended October 1, 2021, October 2, 2020 and September 27, 2019, respectively.
The following table sets forth a reconciliation of net income to dilutive earnings used in the diluted earnings per common share calculations and the computation of basic and diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
Net income
|
$
|
83,381
|
|
|
$
|
55,233
|
|
|
$
|
51,413
|
|
|
Less: Undistributed earnings reallocated to non-vested shareholders
|
(320)
|
|
|
(220)
|
|
|
(226)
|
|
|
Dilutive earnings
|
$
|
83,061
|
|
|
$
|
55,013
|
|
|
$
|
51,187
|
|
|
Weighted average common shares – Basic:
|
|
|
|
|
|
|
Class A
|
8,864
|
|
|
8,822
|
|
|
8,782
|
|
|
Class B
|
1,212
|
|
|
1,212
|
|
|
1,212
|
|
|
Dilutive stock options and restricted stock units
|
44
|
|
|
30
|
|
|
27
|
|
|
Weighted average common shares - Dilutive
|
10,120
|
|
|
10,064
|
|
|
10,021
|
|
|
Net income per common share – Basic:
|
|
|
|
|
|
|
Class A
|
$
|
8.34
|
|
|
$
|
5.54
|
|
|
$
|
5.18
|
|
|
Class B
|
$
|
7.57
|
|
|
$
|
5.04
|
|
|
$
|
4.71
|
|
|
Net income per common share – Diluted:
|
|
|
|
|
|
|
Class A
|
$
|
8.21
|
|
|
$
|
5.47
|
|
|
$
|
5.11
|
|
|
Class B
|
$
|
8.21
|
|
|
$
|
5.47
|
|
|
$
|
5.11
|
|
Stock-Based Compensation
Stock-based compensation cost is recorded for all awards of non-vested stock and restricted stock units based on their grant-date fair value. Stock-based compensation expense is recognized on a straight-line basis over the vesting period of each award. See Note 10 of these Notes to Consolidated Financial Statements for information regarding the Company’s stock-based incentive plans, including non-vested stock, restricted stock units and employee stock purchase plans.
Income Taxes
The Company provides for income taxes currently payable and deferred income taxes resulting from temporary differences between financial statement income/loss and taxable income/loss. Accrued interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. Deferred income tax assets and liabilities are determined based on the difference between the amounts reported in the financial statements and the tax basis of assets and liabilities, using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. A valuation allowance is established if it is more likely than not that some portion or all of a deferred income tax asset will not be realized. See Note 6 of these Notes to Consolidated Financial Statements for further discussion.
Employee Benefits
The Company and certain of its subsidiaries have various retirement and profit sharing plans. The Company does not have any significant foreign retirement plans. Pension obligations, which are generally based on compensation and years of service, are funded by payments to pension fund trustees. The Company’s policy is to annually fund the minimum amount required under the Employee Retirement Income Security Act of 1974 for plans subject thereto although the Company may choose to fund more than the minimum amount at its discretion. Other retirement costs are funded at least annually. See Note 7 of these Notes to Consolidated Financial Statements for additional discussion.
Foreign Operations and Related Derivative Financial Instruments
The functional currencies of the Company’s foreign operations are the local currencies. Accordingly, assets and liabilities of foreign operations are translated into U.S. dollars at the rate of exchange existing at the end of the year. Results of operations are translated at monthly average exchange rates. Adjustments resulting from the translation of foreign currency financial statements are classified as “Accumulated other comprehensive income (loss),” a separate component of Shareholders’ equity.
Currency gains and losses are recognized when assets and liabilities of foreign operations, denominated in other than their local currency, are converted into the local currency of the entity. Additionally, currency gains and losses are recognized through the settlement of transactions denominated in other than the local currency. The Company recognized currency losses from transactions of $215, $269 and gains of $645 in 2021, 2020, and 2019, respectively, which were included in Other income, net in the accompanying Consolidated Statements of Operations.
Because the Company operates internationally, it has exposure to market risk from movements in foreign currency exchange rates. Approximately 12% of the Company’s revenues for the year ended October 1, 2021 were denominated in currencies other than the U.S. dollar. Approximately 4% were denominated in euros and approximately 6% were denominated in Canadian dollars, with the remaining 2% denominated in various other foreign currencies. The Company may mitigate the impact on its operating results of a portion of the fluctuations in certain foreign currencies through the purchase of foreign currency swaps, forward contracts and options to hedge known commitments denominated in foreign currencies or borrowings in foreign currencies. The Company did not use foreign currency forward contracts in 2021, 2020 or 2019. The Company does not enter into foreign exchange contracts for trading or speculative purposes.
Revenue Recognition
During fiscal 2019, the Company adopted Accounting Standards Update 2014-09 and all subsequent updates that modified accounting standards Topic 606, Revenue from contracts with customers. See Note 12 of these Notes to Consolidated Financial Statements for further discussion.
Advertising & Promotions
The Company expenses substantially all costs related to the production of advertising the first time the advertising takes place. Cooperative promotional arrangements are accrued as related revenue is earned.
Advertising and promotions expense in 2021, 2020 and 2019 totaled $30,882, $26,727 and $28,397, respectively. These charges are included in “Marketing and selling expenses.” Capitalized advertising costs, included in Other current assets, totaled $429 and $611 at October 1, 2021 and October 2, 2020, respectively, and primarily included catalogs and costs of advertising which have not yet run for the first time.
Shipping and Handling Costs
Shipping and handling fees billed to customers are included in “Net sales.” Shipping and handling costs are included in “Marketing and selling expenses” and totaled $16,093, $12,651 and $12,409 for 2021, 2020 and 2019, respectively.
Research and Development
The Company expenses research and development costs as incurred except for costs of software development for new electronic products and bathymetry data collection and processing, which are capitalized once technological feasibility is established and are included in Furniture, Fixtures and Equipment. The gross amount capitalized related to software development was $50,850, less accumulated amortization of $30,428, at October 1, 2021 and $48,711, less accumulated amortization of $29,579, at October 2, 2020. These costs are amortized over the expected life of the software of three to seven years. Amortization expense related to capitalized software in 2021, 2020 and 2019 was $3,637, $3,829 and $3,962, respectively, and is included in depreciation expense on plant, property and equipment.
Fair Values
The carrying amounts of cash, cash equivalents, short-term investments, accounts receivable, and accounts payable approximated fair value at October 1, 2021 and October 2, 2020 due to the short maturities of these instruments. During 2021, 2020 and 2019, the Company held investments in equity and debt securities that were carried at fair value related to its deferred compensation liability which was also carried at the same fair value. When indicators of impairment are present, the Company may be required to value certain long-lived assets such as property, plant, and equipment, and other intangibles at fair value.
Valuation Techniques
Rabbi Trust Assets
Rabbi trust assets, used to fund amounts the Company owes to certain officers and other employees under the Company’s non-qualified deferred compensation plan, are included in “Other assets,” and are classified as trading securities. These assets are comprised of marketable debt and equity securities that are marked to fair value based on unadjusted quoted prices in active markets.
Goodwill and Other Intangible Assets
In assessing the recoverability of the Company’s goodwill and other intangible assets, the Company estimates the future discounted cash flows of the business segments to which the goodwill relates. When estimated future discounted cash flows are less than the carrying value of the net assets and related goodwill, an impairment charge is recognized based on the excess of
the carrying amount over the fair value. In determining estimated future cash flows, the Company makes assumptions regarding anticipated financial position, future earnings and other factors to determine the fair value of the respective assets.
See Note 4 of these Notes to Consolidated Financial Statements for disclosures regarding fair value measurements.
New Accounting Pronouncements
Recently adopted accounting pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842). In July 2018, the FASB also issued ASU 2018-10 Codification Improvements to Topic 842, Leases and ASU 2018-11 Leases (Topic 842) Targeted Improvements. In February 2019, the FASB also issued ASU 2019-01 Leases (Topic 842): Codification Improvements. This ASU and the updates to this ASU require organizations to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. This guidance was effective for the Company in the first quarter of fiscal year 2020, and may be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with certain practical expedients available. The Company adopted the provisions of these ASU's using the modified retrospective approach at the beginning of the first quarter of fiscal 2020, coinciding with the standard's effective date. The additional disclosures required by the ASU and its updates are included in Note 5 "Leases" of these Notes to the Condensed Consolidated Financial Statements.
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326)” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05 (collectively Topic 326). Topic 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred loss model with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates. This guidance was effective for the Company in the first quarter of fiscal year 2021, and must be adopted by applying a cumulative effect adjustment to retained earnings. The Company adopted the provisions of this ASU at the beginning of the first quarter of fiscal 2021, however the ASU did not have a significant impact on its financial statements, and therefore no adjustment to retained earnings was necessary.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes existing revenue recognition requirements and provides a new comprehensive revenue recognition model. The underlying principle of the new standard requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for those goods or services. The Company adopted the provisions of this ASU in the first quarter of fiscal 2019 for all contracts on a modified retrospective basis, with no cumulative-effect adjustment to retained earnings upon adoption. The additional disclosures required by the ASU are included in Note 12 "Revenues" of these Notes to the Consolidated Financial Statements.
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220), which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. ASU No. 2018-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The ASU allows for early adoption in any interim period after issuance of the update. The Company early adopted the ASU in the second quarter of fiscal 2019, and elected not to make this optional reclassification.
In August 2018, the FASB issued ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans (Topic 715). This ASU will modify the disclosure requirements for employers that sponsor defined pension or postretirement plans. The amendments in this guidance are effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company adopted the provisions of this ASU in fiscal 2021, however, the ASU did not have a significant impact on its disclosures.
Recently issued accounting pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. The Company does not expect adoption of the new guidance to have a significant impact on its financial statements.
2 INDEBTEDNESS
The Company had no outstanding debt at October 1, 2021 or October 2, 2020.
Revolvers
The Company and certain of its subsidiaries have entered into an unsecured revolving credit facility with PNC Bank, National Association and Associated Bank, N.A. ("the Lending Group"). This credit facility consists of a $75 million Revolving Credit Facility among the Company, certain of the Company's subsidiaries, PNC Bank National Association, as lender and as administrative agent, and the other lender named therein (the "Credit Agreement" or "Revolver"). The Revolver provides for borrowing of up to an aggregate principal amount not to exceed $75,000 with a $50,000 accordion feature that gives the Company the option to increase the maximum financing availability (i.e., an aggregate borrowing amount of $125,000) subject to the conditions of the Credit Agreement and subject to the approval of the lenders. On July 15, 2021, the Company entered into a First Amendment to this credit facility that extended its expiration date from November 15, 2022, to July 15, 2026. Other key provisions of the credit facility remained as outlined above and the description herein is qualified in its entirety by the terms and conditions of the original Debt Agreement (a copy of which was filed as Exhibit 99.1 to the current report of Form 8-K dated and filed with the Securities and Exchange Commission on November 20, 2017) and the Amendment (a copy of which was filed as Exhibit 10.1 to the current report on Form 8-K dated and filed with the Securities and Exchange Commission on July 16, 2021).
The interest rate on the Revolver is based on LIBOR plus an applicable margin, which margin resets each quarter. The applicable margin ranges from 1.00% to 1.75% and is dependent on the Company's leverage ratio for the trailing twelve month period. The interest rates on the Revolver were approximately 1.1% at October 1, 2021 and 1.1% at October 2, 2020.
The Credit Agreement restricts the Company's ability to incur additional debt, includes maximum leverage ratio and minimum interest coverage ratio covenants and is unsecured.
Other Borrowings
The Company utilizes letters of credit primarily as security for the payment of future claims under its workers’ compensation insurance which totaled $181 and $181 at October 1, 2021 and October 2, 2020, respectively. The Company had no other unsecured lines of credit as of October 1, 2021 or October 2, 2020.
The weighted average borrowing rate for short-term debt was approximately 1.1%, 1.1% and 3.0% for 2021, 2020 and 2019, respectively.
Under the Company’s Credit Agreement, a change in control of the Company would constitute an event of default. A change in control would be deemed to have occurred if, among other events described in the terms of the Credit Agreement, a person or group other than the Company’s Chief Executive Officer, Helen P. Johnson-Leipold, members of her family and related entities (hereinafter the Johnson Family) became or obtained rights as a beneficial owner (as interpreted under the Securities Exchange Act of 1934) of a certain minimum percentage of the outstanding capital stock of the Company.
3 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The following disclosures describe the Company’s objectives in using derivative instruments, the business purpose or context for using derivative instruments, and how the Company believes the use of derivative instruments helps achieve the stated objectives. In addition, the following disclosures describe the effects of the Company’s use of derivative instruments and hedging activities on its financial statements. See Note 4 of these Notes to Consolidated Financial Statements for disclosures regarding the fair value and effects of changes in the fair value of derivative instruments.
Foreign Exchange Risk
The Company has significant foreign operations, for which the functional currencies are denominated primarily in euros, Swiss francs, Hong Kong dollars and Canadian dollars. As the values of the currencies of the foreign countries in which the Company has operations increase or decrease relative to the U.S. dollar, the sales, expenses, profits, losses, assets and liabilities of the Company’s foreign operations, as reported in the Company’s consolidated financial statements, increase or decrease, accordingly. Approximately 12% of the Company’s revenues for the fiscal year ended October 1, 2021 were denominated in currencies other than the U.S. dollar. Approximately 4% were denominated in euros and approximately 6% were denominated
in Canadian dollars, with the remaining 2% denominated in various other foreign currencies. Changes in foreign currency exchange rates can cause unexpected financial losses or cash flow needs.
The Company may mitigate the impact on its operating results of a portion of the fluctuations in certain foreign currencies through the use of foreign currency forward contracts. Foreign currency forward contracts enable the Company to lock in the foreign currency exchange rate for a fixed amount of currency to be paid or received on a specified date in the future. The Company may use such foreign currency forward contracts to mitigate the risk associated with changes in foreign currency exchange rates on financial instruments and known commitments denominated in foreign currencies. As of October 1, 2021 and October 2, 2020, the Company held no foreign currency forward contracts.
Interest Rate Risk
As of October 1, 2021 and October 2, 2020, the Company held no interest rate swap contracts.
4 FAIR VALUE MEASUREMENTS
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy has been established based on three levels of inputs, of which the first two are considered observable and the last unobservable.
•Level 1 - Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.
•Level 2 - Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments.
•Level 3 - Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.
The following table summarizes the Company’s financial assets measured at fair value as of October 1, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
Rabbi trust assets
|
$
|
27,851
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,851
|
|
The following table summarizes the Company’s financial assets measured at fair value as of October 2, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
Rabbi trust assets
|
$
|
21,550
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,550
|
|
Rabbi trust assets are classified as trading securities and are comprised of marketable debt and equity securities that are marked to fair value based on unadjusted quoted prices in active markets. The rabbi trust assets are owed by the Company to certain officers and other employees under the Company’s non-qualified deferred compensation plan. These assets are included in "Other assets" in the Company's Consolidated Balance Sheets, and the mark-to-market adjustments on the assets are recorded in “Other income, net” in the accompanying Consolidated Statements of Operations. The offsetting deferred compensation liability is also reported at fair value and is included in “Deferred compensation liability” in the Company’s Consolidated Balance Sheets. Changes in the liability are recorded in "Administrative management, finance and information systems" expense in the accompanying Consolidated Statements of Operations.
The effect of changes in the fair value of financial instruments on the Consolidated Statements of Operations for the years ended October 1, 2021, October 2, 2020 and September 27, 2019 was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of income recognized in Statement of
Operations
|
|
2021
|
|
2020
|
|
2019
|
|
Rabbi trust assets
|
Other income, net
|
|
$
|
4,878
|
|
|
$
|
2,140
|
|
|
$
|
572
|
|
Certain assets and liabilities are measured at fair value on a non-recurring basis in periods subsequent to their initial recognition. No assets or liabilities were measured at fair value on a non-recurring basis in 2021, 2020, or 2019.
5 LEASES
Adoption of Topic 842
At the beginning of fiscal 2020, the Company adopted ASU 2016-02 and all subsequent ASUs that modified accounting standards Topic 842 using a modified retrospective adoption method, in which right-of-use ("ROU") assets and lease liabilities are recognized in the condensed consolidated balance sheets. Under the effective date transition method, financial results reported in periods prior to fiscal year 2020 are unchanged. The Company also elected the package of practical expedients permitted under the standard, which does not require reassessment of prior conclusions related to contracts containing a lease, lease classification and initial direct lease costs. As an ongoing accounting policy election, the Company will exclude short-term leases (terms of 12 months or less) from the balance sheet presentation and will account for non-lease and lease components in a contract as a single lease component for most asset classes. All leases in which the Company is the lessee are classified as operating leases, and the Company does not have any finance leases or sublease agreements. Additionally, the Company does not have any leases in which it is the lessor.
The adoption of this new standard had a significant impact on the Company's condensed consolidated balance sheet due to the recognition of approximately $41 million of lease liabilities with corresponding ROU assets for operating leases. The adoption of this new standard did not have a significant impact on the condensed consolidated statements of operations or cash flows, and did not impact our debt covenant compliance under our current credit agreements.
The Company determines if an arrangement is a lease at inception. The Company leases certain facilities and machinery and equipment under long-term, non-cancelable operating leases. As of October 1, 2021, the Company had approximately 200 leases, with remaining terms ranging from less than one year to 15 years. Some of the leases contain variable payment terms, such as payments based on fluctuations in the Consumer Price Index (CPI). Some leases also contain options to extend or terminate the lease. To the extent the Company is reasonably certain to exercise these options, they have been considered in the calculation of the ROU assets and lease liabilities. Under current lease agreements, there are no residual value guarantees or restrictive lease covenants. In calculating the ROU assets and lease liabilities, several assumptions and judgments were made by the Company, including whether a contract is or contains a lease under the new definition, and the determination of the discount rate, which is assumed to be the incremental borrowing rate. The incremental borrowing rate is derived from information available to the Company at the lease commencement date based on lease length and location.
As of October 1, 2021, the components of lease expense recognized in the accompanying Condensed Consolidated Statements of Operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
October 1, 2021
|
|
October 2, 2020
|
|
Lease Cost
|
|
|
|
|
|
Operating lease costs
|
|
$
|
8,323
|
|
|
$
|
7,483
|
|
|
Short-term lease costs
|
|
1,549
|
|
|
1,828
|
|
|
Variable leases costs
|
|
184
|
|
|
173
|
|
|
Total lease cost
|
|
$
|
10,056
|
|
|
$
|
9,484
|
|
Included in the amounts in the table above was rent expense to related parties of $1,043 and $1,028 for the years ended October 1, 2021 and October 2, 2020, respectively.
As of October 1, 2021 and October 2, 2020, the Company did not have any finance leases. While the Company extended or renewed various existing leases during the year, there were no significant new leases entered into during the year ended October 1, 2021. Supplemental balance sheet, cash flow, and other information related to operating leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
|
|
October 1, 2021
|
|
October 2, 2020
|
|
|
|
Operating leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease ROU assets
|
|
$
|
49,032
|
|
|
$
|
40,666
|
|
|
|
|
|
|
|
|
|
|
|
|
Current operating leases liabilities
|
|
5,938
|
|
|
6,587
|
|
|
|
|
Non-current operating lease liabilities
|
|
44,056
|
|
|
34,931
|
|
|
|
|
Total operating lease liabilities
|
|
$
|
49,994
|
|
|
$
|
41,518
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term (in years)
|
|
12.20
|
|
10.05
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average discount rate
|
|
3.08
|
%
|
|
2.85
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
$
|
7,608
|
|
|
$
|
6,716
|
|
|
|
Future minimum rental commitments under non-cancelable operating leases with an initial lease term in excess of one year at October 1, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
Related parties included
in total
|
|
Total
|
|
2022
|
$
|
1,123
|
|
|
$
|
7,791
|
|
|
2023
|
1,143
|
|
|
6,735
|
|
|
2024
|
1,178
|
|
|
6,474
|
|
|
2025
|
1,213
|
|
|
5,275
|
|
|
2026
|
1,250
|
|
|
4,573
|
|
|
Thereafter
|
209
|
|
|
29,653
|
|
|
Total undiscounted lease payments
|
6,116
|
|
|
60,501
|
|
|
Less: Imputed interest
|
(245)
|
|
|
(10,507)
|
|
|
Total net lease liability
|
$
|
5,871
|
|
|
$
|
49,994
|
|
|
|
|
|
|
During the second fiscal quarter of fiscal 2021, the Company amended its agreement with the landlord on an existing leased facility. Payments under the amended agreement are expected to begin in fiscal year 2022 and go through June 2039, and total estimated rental payments, not included in the amounts above, will be approximately $14 million over the course of the lease as amended. As of October 1, 2021, the Company did not have any other additional significant operating lease commitments that have not yet commenced.
6 INCOME TAXES
The U.S. and foreign income before income taxes for the respective years consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
United States
|
$
|
99,774
|
|
|
$
|
72,602
|
|
|
$
|
59,261
|
|
|
Foreign
|
13,148
|
|
|
1,100
|
|
|
7,246
|
|
|
|
$
|
112,922
|
|
|
$
|
73,702
|
|
|
$
|
66,507
|
|
Income tax expense for the respective years consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
Current:
|
|
|
|
|
|
|
Federal
|
$
|
22,860
|
|
|
$
|
13,735
|
|
|
$
|
11,074
|
|
|
State
|
6,392
|
|
|
3,348
|
|
|
2,752
|
|
|
Foreign
|
3,236
|
|
|
1,109
|
|
|
1,422
|
|
|
Deferred
|
(2,947)
|
|
|
277
|
|
|
(154)
|
|
|
|
$
|
29,541
|
|
|
$
|
18,469
|
|
|
$
|
15,094
|
|
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at the end of the respective years are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Deferred tax assets:
|
|
|
|
|
Inventories
|
$
|
1,355
|
|
|
$
|
1,346
|
|
|
Compensation
|
8,771
|
|
|
7,726
|
|
|
Tax credit carryforwards
|
2,817
|
|
|
3,235
|
|
|
Net operating loss carryforwards
|
3,996
|
|
|
4,427
|
|
|
Other
|
8,756
|
|
|
7,154
|
|
|
Total gross deferred tax assets
|
25,695
|
|
|
23,888
|
|
|
Less valuation allowance
|
6,372
|
|
|
6,524
|
|
|
Deferred tax assets
|
19,323
|
|
|
17,364
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Goodwill and other intangibles
|
1,717
|
|
|
2,080
|
|
|
Depreciation and amortization
|
5,714
|
|
|
5,735
|
|
|
Foreign statutory reserves
|
362
|
|
|
288
|
|
|
Net deferred tax assets
|
$
|
11,530
|
|
|
$
|
9,261
|
|
The net deferred tax assets recorded in the accompanying Consolidated Balance Sheets as of the years ended October 1, 2021 and October 2, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Non-current assets
|
$
|
13,129
|
|
|
$
|
10,679
|
|
|
Non-current liabilities
|
1,599
|
|
|
1,418
|
|
|
Net deferred tax assets
|
$
|
11,530
|
|
|
$
|
9,261
|
|
The significant differences between the statutory federal tax rate and the effective income tax rates for the Company for the respective years shown below were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
|
Statutory U.S. federal income tax rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
*
|
|
State income tax, net of federal benefit
|
4.4
|
%
|
|
4.6
|
%
|
|
4.3
|
%
|
|
|
Uncertain tax positions, net of settlements
|
0.1
|
%
|
|
(0.1)
|
%
|
|
(0.5)
|
%
|
|
|
Foreign-derived intangible income ("FDII") deduction
|
(1.1)
|
%
|
|
(1.1)
|
%
|
|
(0.9)
|
%
|
|
|
|
|
|
|
|
|
|
|
Net tax cost of foreign income
|
0.7
|
%
|
|
—
|
%
|
|
0.5
|
%
|
|
|
Compensation
|
0.8
|
%
|
|
0.7
|
%
|
|
(0.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
Other
|
0.3
|
%
|
|
—
|
%
|
|
(1.0)
|
%
|
|
|
|
26.2
|
%
|
|
25.1
|
%
|
|
22.7
|
%
|
|
The Tax Cuts and Jobs Act of 2017 included a new provision designed to tax global intangible low taxed income (“GILTI”) starting in fiscal 2019. The Company elected to record the tax effects of the GILTI provision as a period expense in the applicable tax year.
The Company’s net operating loss carryforwards and their expirations as of October 1, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State
|
|
Foreign
|
|
Total
|
|
Year of expiration
|
|
|
|
|
|
|
2022-2026
|
$
|
653
|
|
|
$
|
6,403
|
|
|
$
|
7,056
|
|
|
2027-2031
|
2,928
|
|
|
4,689
|
|
|
7,617
|
|
|
2032-2036
|
6,857
|
|
|
—
|
|
|
6,857
|
|
|
2037-2041
|
648
|
|
|
—
|
|
|
648
|
|
|
Indefinite
|
—
|
|
|
3,372
|
|
|
3,372
|
|
|
Total
|
$
|
11,086
|
|
|
$
|
14,464
|
|
|
$
|
25,550
|
|
The Company has tax credit carryforwards as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State
|
|
Federal
|
|
Total
|
|
Year of expiration
|
|
|
|
|
|
|
2022-2026
|
$
|
1,554
|
|
|
$
|
—
|
|
|
$
|
1,554
|
|
|
2027-2031
|
904
|
|
|
—
|
|
|
904
|
|
|
2032-2036
|
359
|
|
|
—
|
|
|
359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
2,817
|
|
|
$
|
—
|
|
|
$
|
2,817
|
|
A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Beginning balance
|
$
|
7,372
|
|
|
$
|
7,931
|
|
|
Gross increases - tax positions in prior period
|
—
|
|
|
82
|
|
|
|
|
|
|
|
Gross increases - tax positions in current period
|
1,288
|
|
|
909
|
|
|
Settlements
|
—
|
|
|
—
|
|
Lapse of statute of limitations
|
(1,903)
|
|
|
(1,550)
|
|
|
Ending balance
|
$
|
6,757
|
|
|
$
|
7,372
|
|
The total accrued interest and penalties with respect to income taxes was approximately $1,884 and $1,947 for the years ended October 1, 2021 and October 2, 2020, respectively. The Company’s liability for unrecognized tax benefits as of October 1, 2021 was $6,757, and if recognized, $5,474 of such amount would have an effective tax rate impact.
In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Interest and penalties of $(63), $5 and $79 were recorded as a component of income tax expense in the accompanying Consolidated Statements of Operations during fiscal years 2021, 2020 and 2019, respectively.
The Company’s policy is to remit earnings from foreign subsidiaries only to the extent the remittance does not result in an incremental U.S. tax liability. The Company does not currently provide for the additional U.S. and foreign income taxes which would become payable upon remission of undistributed earnings of foreign subsidiaries. If all undistributed earnings were remitted, an additional income tax provision of approximately $1.9 million would have been necessary as of October 1, 2021.
The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign taxing jurisdictions. The amount of unrecognized tax benefits recognized within the next twelve months may decrease due to expiration of the statute of limitations for certain years in various jurisdictions. However, it is possible that a jurisdiction may open an audit prior to the statute expiring that may result in adjustments to the Company’s tax filings. At this time, an estimate of the range of the reasonably possible change cannot be made.
The following tax years remain subject to examination by the Company's respective major tax jurisdictions:
|
|
|
|
|
|
|
|
Jurisdiction
|
Fiscal Years
|
|
United States
|
2018-2021
|
|
Canada
|
2017-2021
|
|
France
|
2018-2021
|
|
Germany
|
2019-2021
|
|
Italy
|
2019-2021
|
|
Switzerland
|
2011-2021
|
7 EMPLOYEE BENEFITS
The Company has non-contributory defined benefit pension plans covering certain U.S. employees. Retirement benefits are generally provided based on the employees’ years of service and average earnings. Normal retirement age is 65, with provisions for earlier retirement. The Company elected to freeze its U.S. defined benefit pension plans as of September 30, 2009 and, as a result, there are no benefit accruals related to service performed after that date.
During the fourth quarter of 2021, the Company terminated its Johnson Outdoors Inc. Mankato Operations Pension Plan and Old Town Canoe Company Pension Plan (collectively, "the Terminated Plans"), both of which were frozen defined benefit pension plans at the time of termination. In connection with the plan terminations, the Company settled all future obligations under the Terminated Plans through a combination of lump-sum payments to eligible participants who elected to receive them, and the transfer of any remaining benefit obligations under the Terminated Plans to a third-party insurance company under a group annuity contract. As a result of these actions, the Company recognized a non-cash pre-tax pension termination charge of $2,526 in our Consolidated Statements of Operations as Other Expense (Income), Net. The remaining over-funded plan assets will be utilized by the Company to fund remaining expenses related to the Terminated Plans, as well as obligations associated with other qualified retirement programs.
The Company still maintains the Johnson Outdoors Inc. Supplemental Executive Retirement Plan ("SERP"), and all future benefit payments to participants under this plan are made from the Company's general assets.
The Company has elected the practical expedient pursuant to ASU 2015-04, Compensation-retirement benefits (Topic 715) and has selected the measurement date of September 30, the calendar month end closest to the Company's fiscal year end. The financial position of the Company’s non-contributory defined benefit plans as of fiscal year end 2021 and 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Projected benefit obligation:
|
|
|
|
|
Projected benefit obligation, beginning of year
|
$
|
32,631
|
|
|
$
|
30,248
|
|
|
Service cost
|
—
|
|
|
—
|
|
|
Interest cost
|
838
|
|
|
931
|
|
|
Actuarial (gain) loss
|
(610)
|
|
|
2,588
|
|
|
Settlements
|
(31,062)
|
|
|
—
|
|
|
Benefits paid
|
(1,126)
|
|
|
(1,136)
|
|
|
Projected benefit obligation, end of year
|
671
|
|
|
32,631
|
|
|
Fair value of plan assets:
|
|
|
|
|
Fair value of plan assets, beginning of year
|
32,923
|
|
|
30,356
|
|
|
Actual (loss) gain on plan assets
|
(172)
|
|
|
3,526
|
|
|
Company contributions
|
172
|
|
|
177
|
|
|
Settlements
|
(31,424)
|
|
|
—
|
|
|
|
|
|
|
|
Benefits paid
|
(1,126)
|
|
|
(1,136)
|
|
|
Fair value of plan assets, end of year
|
373
|
|
|
32,923
|
|
|
Funded status of the plans
|
(298)
|
|
|
292
|
|
|
Amounts recognized in the Consolidated Balance Sheets consist of:
|
|
|
|
|
Current pension liabilities
|
96
|
|
|
171
|
|
|
Non-current pension liabilities
|
575
|
|
|
—
|
|
|
Non-current pension assets
|
373
|
|
|
462
|
|
|
Accumulated other comprehensive loss
|
(385)
|
|
|
(3,129)
|
|
|
Components of accumulated other comprehensive loss:
|
|
|
|
|
Net actuarial loss
|
(385)
|
|
|
(3,129)
|
|
|
Accumulated other comprehensive loss
|
$
|
(385)
|
|
|
$
|
(3,129)
|
|
Net periodic benefit cost for the non-contributory defined benefit pension plans for the respective years included the following pre-tax amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
Interest cost
|
$
|
838
|
|
|
$
|
931
|
|
|
$
|
1,103
|
|
|
Expected return on plan assets
|
(436)
|
|
|
(641)
|
|
|
(855)
|
|
|
Amortization of unrecognized net actuarial loss
|
576
|
|
|
537
|
|
|
328
|
|
|
Pension termination charge
|
2,526
|
|
|
—
|
|
|
—
|
|
|
Net periodic pension cost
|
3,504
|
|
|
827
|
|
|
576
|
|
|
Other changes in benefit obligations recognized in other comprehensive income ("OCI"):
|
|
|
|
|
|
|
Pension termination charge
|
(2,288)
|
|
|
—
|
|
|
—
|
|
|
Net actuarial gain
|
(455)
|
|
|
(835)
|
|
|
(1,365)
|
|
|
Total recognized in net periodic pension cost and OCI
|
$
|
761
|
|
|
$
|
(8)
|
|
|
$
|
(789)
|
|
The Company expects to recognize $45 of unrecognized loss amortization as a component of net periodic benefit cost in 2022. This amount is included in accumulated other comprehensive income as of October 1, 2021.
At October 1, 2021, the aggregate accumulated benefit obligation and aggregate fair value of plan assets for plans with plan assets in excess of benefit obligations was $0 and $373, respectively, and the aggregate accumulated benefit obligation and aggregate fair value of plan assets for plans with benefit obligations in excess of plan assets was $671 and $0, respectively. At October 2, 2020, the aggregate accumulated benefit obligation and aggregate fair value of plan assets for plans with plan assets in excess of benefit obligations was $31,446 and $32,923, respectively, and the aggregate accumulated benefit obligation and aggregate fair value of plan assets for plans with benefit obligations in excess of plan assets was $1,185 and $0, respectively.
The Company anticipates making contributions to the defined benefit pension plans of $96 through fiscal year 2022.
Estimated benefit payments from the Company’s defined benefit plans to participants for each of the next five years and the five years thereafter are as follows:
|
|
|
|
|
|
|
|
2022
|
$
|
96
|
|
|
2023
|
89
|
|
|
2024
|
82
|
|
|
2025
|
75
|
|
|
2026
|
67
|
|
|
Five years thereafter
|
230
|
|
Actuarial assumptions used to determine the projected benefit obligation and net periodic pension cost as of the following fiscal years were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected Benefit Obligation
|
|
Net Periodic Pension Cost
|
|
|
2021
|
|
2020
|
|
2019
|
|
2021
|
|
2020
|
|
2019
|
|
Discount rate
|
2.80
|
%
|
|
2.60
|
%
|
|
3.13
|
%
|
|
2.60
|
%
|
|
3.13
|
%
|
|
4.22
|
%
|
|
Long-term rate of return
|
N/A
|
|
N/A
|
|
N/A
|
|
1.70
|
%
|
|
2.50
|
%
|
|
3.45
|
%
|
|
Average salary increase rate
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
To determine the discount rate assumption used in the Company’s pension valuation, the Company identified a benefit payout stream based on the demographics of the pension plans and constructed a hypothetical bond portfolio using high-quality corporate bonds with cash flows that matched that benefit payout stream. A yield curve was calculated based on this hypothetical portfolio which was used for the discount rate determination.
The Company determines the long-term rate of return assumption for plan assets by using the historical asset returns for various investment asset classes and adjusting them to reflect future expectations. The expected asset class returns are weighted by the targeted asset allocations, resulting in a weighted average return which is rounded to the nearest quarter percent.
The Company uses measurement dates of October 1 to determine pension expenses for each year and September 30 to determine the fair value of the pension assets.
The Company’s pension plans’ weighted average asset allocations at October 1, 2021 and October 2, 2020, by asset category were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Equity securities
|
—
|
%
|
|
5
|
%
|
|
Fixed income securities
|
—
|
%
|
|
92
|
%
|
|
Other securities
|
100
|
%
|
|
3
|
%
|
|
|
100
|
%
|
|
100
|
%
|
The following table summarizes the Company’s pension plan assets measured at fair value as of October 1, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Description:
|
|
|
|
|
|
|
|
|
Money market funds
|
$
|
—
|
|
|
$
|
373
|
|
|
$
|
—
|
|
|
$
|
373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
—
|
|
|
$
|
373
|
|
|
$
|
—
|
|
|
$
|
373
|
|
The following table summarizes the Company’s pension plan assets measured at fair value as of October 2, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Description:
|
|
|
|
|
|
|
|
|
Fixed income
|
$
|
5,657
|
|
|
$
|
24,734
|
|
|
$
|
—
|
|
|
$
|
30,391
|
|
|
Mutual funds
|
1,468
|
|
|
—
|
|
|
—
|
|
|
1,468
|
|
|
Money market funds
|
—
|
|
|
1,056
|
|
|
—
|
|
|
1,056
|
|
|
Group annuity contract
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
|
Total
|
$
|
7,125
|
|
|
$
|
25,790
|
|
|
$
|
8
|
|
|
$
|
32,923
|
|
The tables below set forth a summary of changes in fair value of the Company’s Level 3 pension plan assets for the years ended October 1, 2021 and October 2, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Level 3 assets, beginning of year
|
$
|
8
|
|
|
$
|
31
|
|
|
|
|
|
|
|
Gain/(loss)
|
12
|
|
|
(1)
|
|
|
Sales
|
(20)
|
|
|
(22)
|
|
|
Level 3 assets, end of year
|
$
|
—
|
|
|
$
|
8
|
|
The fair values of the treasury fixed income and mutual fund assets were derived from quoted market prices as substantially all of these instruments have active markets. The fair values of agency and corporate bond fixed income and money market assets are derived from other observable market inputs or independent pricing services. The fair value of the group annuity contract was derived using a discounted cash flow model with inputs based on current yields of similar instruments with comparable durations. The annuity contract consisted of high quality bonds.
The Company also has a non-qualified deferred compensation plan that provides certain officers and employees the ability to defer a portion of their compensation until a later date. The deferred amounts and earnings thereon are payable to participants, or designated beneficiaries, at specified future dates upon retirement, death or termination of employment from the Company. The deferred compensation liability, which is reported at fair value equal to the related rabbi trust assets, and is classified as “Deferred compensation liability” on our accompanying Consolidated Balance Sheets, was approximately $27,885 and $21,585 as of October 1, 2021 and October 2, 2020, respectively. See “Note 4 Fair Value” for additional information.
A majority of the Company’s full-time employees are covered by defined contribution programs. Expenses attributable to the defined contribution programs were approximately $1,680, $1,592 and $1,422 for 2021, 2020 and 2019, respectively.
8 PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of preferred stock in various classes and series, of which there are none currently issued and none outstanding.
9 COMMON STOCK
The number of authorized and outstanding shares of each class of the Company’s common stock at the end of the respective years was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
Class A, $0.05 par value:
|
|
|
|
|
Authorized
|
20,000,000
|
|
|
20,000,000
|
|
|
Outstanding
|
8,915,636
|
|
|
8,873,235
|
|
|
Class B, $0.05 par value:
|
|
|
|
|
Authorized
|
3,000,000
|
|
|
3,000,000
|
|
|
Outstanding
|
1,211,564
|
|
|
1,211,564
|
|
Holders of Class A common stock are entitled to elect 25%, or the next highest whole number, of the members of the Company’s Board of Directors and holders of Class B common stock are entitled to elect the remaining directors. With respect to matters other than the election of directors or any matters for which class voting is required by law, holders of Class A
common stock are entitled to one vote per share while holders of Class B common stock are entitled to ten votes per share. If any dividends (other than dividends paid in shares of the Company’s stock) are paid by the Company on its common stock, a dividend would be paid on each share of Class A common stock equal to 110% of the amount paid on each share of Class B common stock. Each share of Class B common stock is convertible at any time into one share of Class A common stock. During 2021 and 2020 there were 0 and 38 shares of Class B common stock converted into Class A common stock, respectively.
10 STOCK-BASED COMPENSATION AND STOCK OWNERSHIP PLANS
The Company’s current stock ownership plans provide for issuance of options to acquire shares of Class A common stock by key executives and non-employee directors. Current plans also allow for issuance of shares of restricted stock, restricted stock units or stock appreciation rights in lieu of options.
Under the Company’s 2012 Non-Employee Director Stock Ownership Plan and the 2020 Long-Term Incentive Plan (the only plans where shares currently remain available for future equity incentive awards) there were a total of 501,314 shares of the Company’s Class A common stock available for grant to key executives and non-employee directors at October 1, 2021. Share awards previously made under the Company's 2010 Long-Term Stock Incentive Plan, which no longer allows for additional share grants, also remain outstanding.
The Company recognized additional tax benefits from the vesting of restricted stock and restricted stock units of $581, $238 and $646 for 2021, 2020 and 2019, respectively. In 2021 and 2020, these amounts were recorded as a component of income tax expense. In 2019, the amount was recorded as an increase in additional paid-in capital on the consolidated balance sheets and as cash from financing activities on the consolidated statements of cash flows. The Company recognizes forfeitures of equity awards as incurred.
Non-Vested Stock
All shares of non-vested stock awarded by the Company have been granted at their fair market value on the date of grant and vest within five years after the grant date. The fair value at date of grant is based on the number of shares granted and the average of the Company’s high and low Class A common stock price on the date of grant or, if the Company’s shares did not trade on the date of grant, the average of the Company’s high and low Class A common stock price on the last preceding date on which the Company’s shares traded.
A summary of non-vested stock activity for the two year period ended October 1, 2021 related to the Company’s stock ownership plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average
Grant Price
|
|
Non-vested stock at September 27, 2019
|
41,608
|
|
|
$
|
51.78
|
|
|
Non-vested stock grants
|
19,105
|
|
|
63.33
|
|
|
|
|
|
|
|
Restricted stock vested
|
(20,221)
|
|
|
41.93
|
|
|
Non-vested stock at October 2, 2020
|
40,492
|
|
|
62.15
|
|
|
Non-vested stock grants
|
14,954
|
|
|
101.97
|
|
|
Non-vested stock forfeited
|
(621)
|
|
|
120.77
|
|
|
Restricted stock vested
|
(17,234)
|
|
|
53.79
|
|
|
Non-vested stock October 1, 2021
|
37,591
|
|
|
80.86
|
|
Non-vested stock grantees may elect to reimburse the Company for withholding taxes due as a result of the vesting of shares by tendering a portion of the vested shares back to the Company. Shares tendered back to the Company were 2,341 and 4,054 during 2021 and 2020, respectively. The fair value of restricted stock vested during 2021, 2020 and 2019 was approximately $1,950, $1,288 and $1,237, respectively.
Stock compensation expense, net of forfeitures, related to non-vested stock was $1,179, $1,032 and $667 during 2021, 2020 and 2019, respectively. The tax benefit recognized during 2021, 2020 and 2019 related to stock based compensation was $287, $252 and $163, respectively. Unrecognized compensation cost related to non-vested stock as of October 1, 2021 was $1,447, which amount will be amortized to expense through September 2023 or adjusted for changes in future estimated or actual forfeitures.
Restricted Stock Units
All restricted stock units awarded by the Company during fiscal 2021 and in prior years have been granted at their fair market value on the date of grant. The fair value at date of grant is based on the number of units granted and the average of the Company’s high and low Class A common stock trading price on the date of grant or, if the Company’s shares did not trade on the date of grant, the average of the Company’s high and low Class A common stock trading price on the last preceding date on which the Company’s shares traded. The vesting period for RSUs is generally one year from the date of grant for RSUs granted to directors and three years from the date of the grant for RSUs granted to employees.
A summary of RSU activity follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of RSUs
|
|
Weighted Average
Grant Price
|
|
RSUs at September 27, 2019
|
58,708
|
|
|
$
|
62.13
|
|
|
RSUs granted
|
27,517
|
|
|
64.51
|
|
|
|
|
|
|
|
RSUs vested
|
(18,404)
|
|
|
42.80
|
|
|
RSUs at October 2, 2020
|
67,821
|
|
|
68.34
|
|
|
RSUs granted
|
20,059
|
|
|
88.49
|
|
|
|
|
|
|
|
RSUs vested
|
(18,112)
|
|
|
70.39
|
|
|
RSUs at October 1, 2021
|
69,768
|
|
|
73.60
|
|
RSU grantees may elect to reimburse the Company for withholding taxes due as a result of the vesting of units and issuance of unrestricted shares of Class A common stock by tendering a portion of such unrestricted shares back to the Company. Shares tendered back to the Company were 3,320 and 3,075 during 2021 and 2020, respectively. The fair value of restricted stock recognized as a tax deduction during 2021, 2020 and 2019 was approximately $3,353, $1,600 and $2,945, respectively.
Stock compensation expense, net of forfeitures, related to restricted stock units was $2,895, $1,611 and $1,652 for the years ended October 1, 2021, October 2, 2020 and September 27, 2019, respectively. The tax benefit recognized during 2021, 2020 and 2019 related to restricted stock unit based compensation was $534, $166 and $405, respectively. Unrecognized compensation cost related to non-vested restricted stock units as of October 1, 2021 was $2,885, which amount will be amortized to expense through September 2022 or adjusted for changes in future estimated or actual forfeitures.
Compensation expense related to units earned by certain employees is based upon the attainment of certain financial goals related to cumulative net sales and cumulative operating profit over a three-year performance period. Awards are only paid if at least 80% of the target levels are met and maximum payouts are made if 120% of more of target levels are achieved. The payouts for achievement at the minimum threshold levels of performance are equal to 50% of the target award amount. The payouts for achievement at maximum levels of performance are equal to 150% of the target award amount. To the extent earned, awards are issued in shares of Company common stock after the end of the three year performance period.
Employee Stock Purchase Plan
The 2009 Employees’ Stock Purchase Plan (the “Purchase Plan”) provides for the issuance of shares of Class A common stock at a purchase price of not less than 85% of the fair market value of such shares on the date of grant or at the end of the offering period, whichever is lower.
The Company issued 0, 2,190 and 1,594 shares of Class A common stock under the Purchase Plan during the years 2021, 2020 and 2019, respectively, and recognized expense of $86, $43 and $27 in 2021, 2020 and 2019, respectively.
11 RELATED PARTY TRANSACTIONS
The Company conducts transactions with certain related parties including organizations controlled by the Johnson Family. These transactions include product purchases, aviation services, office rental, and facility fees. Total costs of these transactions were $1,243, $1,099 and $1,261 for 2021, 2020 and 2019, respectively. Amounts due to/from related parties were immaterial at October 1, 2021 and October 2, 2020.
12 REVENUES
Revenue recognition
Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our goods at a point in time based on shipping terms and transfer of title. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. The amount of consideration received can vary, primarily because of customer incentive or rebate arrangements. The Company estimates variable consideration based on the expected value of total consideration to which customers are likely to be entitled based on historical experience and projected market expectations. Included in the estimate is an assessment as to whether any variable consideration is constrained. Revenue estimates are adjusted at the earlier of a change in the expected value of consideration or when the consideration becomes fixed. For all contracts with customers, the Company has not adjusted the promised amount of consideration for the effects of a significant financing component as the period between the transfer of the promised goods and the customer's payment is expected to be one year or less. Sales are made on normal and customary short-term credit terms, generally ranging from 30 to 90 days, or upon delivery of point of sale transactions. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.
The Company enters into contractual arrangements with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms. The Company does not have contracts which are satisfied over time. Due to the nature of these contracts, no significant judgment exists in relation to the identification of the customer contract, satisfaction of the performance obligation, or transaction price. The Company expenses incremental costs of obtaining a contract due to the short-term nature of the contracts.
Estimated costs of returns, allowances and discounts, based on historic experience, are accrued as a reduction to sales when revenue is recognized. The Company provides customers the right to return eligible products under certain circumstances. At October 1, 2021, the right to returns asset was $769 and the accrued returns liability was $2,061. At October 2, 2020, the right to returns asset was $1,091 and the accrued returns liability was $2,990. The Company also offers assurance-type warranties relating to its products sold to end customers that continue to be accounted for under ASC 460 Guarantees.
The Company generally accounts for shipping and handling activities as a fulfillment activity, consistent with the timing of revenue recognition; that is, when a customer takes control of the transferred goods. In the event that a customer were to take control of a product upon or after shipment, the Company has made an accounting policy election to treat such shipping and handling activities as a fulfillment cost. Shipping and handling fees billed to customers are included in "Net Sales," and shipping and handling costs are recognized within "Marketing and selling expenses" in the same period the related revenue is recognized.
The Company has a wide variety of seasonal, outdoor recreation products used primarily for fishing from a boat, diving, paddling, hiking and camping, that are sold to a variety of customers in multiple end markets. While there are multiple products sold, the nature of products are similar in terms of the nature of the revenue recognition policies.
See Note 13 of these Notes to Consolidated Financial Statements for required disclosures of disaggregated revenue.
13 SEGMENTS OF BUSINESS
The Company conducts its worldwide operations through separate business segments, each of which represent major product lines. Operations are conducted in the U.S. and various foreign countries, primarily in Europe, Canada and the Pacific Basin. During the years ended October 1, 2021, October 2, 2020, and September 27, 2019, combined sales to one customer of the Company's Fishing, Camping and Watercraft Recreation segments represented approximately $114,008, $93,478, and $93,056 respectively, of the Company's consolidated revenues.
Net sales and operating profit include both sales to customers, as reported in the Company’s accompanying Consolidated Statements of Operations, and inter-unit transfers, which are priced to recover costs plus an appropriate profit margin. Total assets represent assets that are used in the Company’s operations in each business segment at the end of the years presented.
A summary of the Company’s operations by business segment is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
Net sales:
|
|
|
|
|
|
|
Fishing:
|
|
|
|
|
|
|
Unaffiliated customers
|
$
|
552,073
|
|
|
$
|
449,186
|
|
|
$
|
411,566
|
|
|
Interunit transfers
|
927
|
|
|
692
|
|
|
555
|
|
|
Camping:
|
|
|
|
|
|
|
Unaffiliated customers
|
62,879
|
|
|
41,554
|
|
|
40,339
|
|
|
Interunit transfers
|
42
|
|
|
38
|
|
|
40
|
|
|
Watercraft Recreation:
|
|
|
|
|
|
|
Unaffiliated customers
|
66,396
|
|
|
41,786
|
|
|
33,405
|
|
|
Interunit transfers
|
207
|
|
|
71
|
|
|
93
|
|
|
Diving
|
|
|
|
|
|
|
Unaffiliated customers
|
69,433
|
|
|
60,853
|
|
|
76,279
|
|
|
Interunit transfers
|
14
|
|
|
20
|
|
|
27
|
|
|
Other / Corporate
|
870
|
|
|
830
|
|
|
830
|
|
|
Eliminations
|
(1,190)
|
|
|
(821)
|
|
|
(715)
|
|
|
Total
|
$
|
751,651
|
|
|
$
|
594,209
|
|
|
$
|
562,419
|
|
|
Operating profit (loss):
|
|
|
|
|
|
|
Fishing
|
$
|
122,490
|
|
|
$
|
95,884
|
|
|
$
|
84,092
|
|
|
Camping
|
14,025
|
|
|
4,406
|
|
|
2,896
|
|
|
Watercraft Recreation
|
9,173
|
|
|
(329)
|
|
|
(2,822)
|
|
|
Diving
|
1,530
|
|
|
(2,576)
|
|
|
3,043
|
|
|
Other / Corporate
|
(35,935)
|
|
|
(26,315)
|
|
|
(23,435)
|
|
|
|
$
|
111,283
|
|
|
$
|
71,070
|
|
|
$
|
63,774
|
|
|
Depreciation and amortization expense:
|
|
|
|
|
|
|
Fishing
|
$
|
8,770
|
|
|
$
|
8,654
|
|
|
$
|
8,730
|
|
|
Camping
|
644
|
|
|
639
|
|
|
705
|
|
|
Watercraft Recreation
|
707
|
|
|
899
|
|
|
1,051
|
|
|
Diving
|
765
|
|
|
1,761
|
|
|
1,005
|
|
|
Other / Corporate
|
2,515
|
|
|
2,973
|
|
|
2,473
|
|
|
|
$
|
13,401
|
|
|
$
|
14,926
|
|
|
$
|
13,964
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
Fishing
|
$
|
18,570
|
|
|
$
|
12,847
|
|
|
$
|
13,712
|
|
|
Camping
|
399
|
|
|
206
|
|
|
210
|
|
|
Watercraft Recreation
|
681
|
|
|
685
|
|
|
727
|
|
|
Diving
|
742
|
|
|
947
|
|
|
955
|
|
|
Other / Corporate
|
1,017
|
|
|
915
|
|
|
1,182
|
|
|
|
$
|
21,409
|
|
|
$
|
15,600
|
|
|
$
|
16,786
|
|
|
Goodwill, net:
|
|
|
|
|
|
|
Fishing
|
$
|
11,221
|
|
|
$
|
11,184
|
|
|
|
|
Camping
|
—
|
|
|
—
|
|
|
|
|
Watercraft Recreation
|
—
|
|
|
—
|
|
|
|
|
Diving
|
—
|
|
|
—
|
|
|
|
|
|
$
|
11,221
|
|
|
$
|
11,184
|
|
|
|
|
Total assets (end of period):
|
|
|
|
|
|
|
Fishing
|
$
|
285,321
|
|
|
$
|
206,244
|
|
|
|
|
Camping
|
54,276
|
|
|
37,514
|
|
|
|
|
Watercraft Recreation
|
27,530
|
|
|
21,038
|
|
|
|
|
Diving
|
67,069
|
|
|
67,393
|
|
|
|
|
Other / Corporate
|
240,091
|
|
|
213,837
|
|
|
|
|
|
$
|
674,287
|
|
|
$
|
546,026
|
|
|
|
A summary of the Company’s operations by geographic area is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
Net sales:
|
|
|
|
|
|
|
United States:
|
|
|
|
|
|
|
Unaffiliated customers
|
$
|
659,330
|
|
|
$
|
525,204
|
|
|
$
|
482,326
|
|
|
Interunit transfers
|
30,593
|
|
|
17,503
|
|
|
20,991
|
|
|
Europe:
|
|
|
|
|
|
|
Unaffiliated customers
|
30,509
|
|
|
28,880
|
|
|
35,114
|
|
|
Interunit transfers
|
9,974
|
|
|
8,561
|
|
|
9,792
|
|
|
Canada:
|
|
|
|
|
|
|
Unaffiliated customers
|
48,867
|
|
|
29,512
|
|
|
30,039
|
|
|
Interunit transfers
|
12
|
|
|
35
|
|
|
—
|
|
|
Other:
|
|
|
|
|
|
|
Unaffiliated customers
|
12,945
|
|
|
10,613
|
|
|
14,940
|
|
|
Interunit transfers
|
106
|
|
|
10
|
|
|
29
|
|
|
Eliminations
|
(40,685)
|
|
|
(26,109)
|
|
|
(30,812)
|
|
|
|
$
|
751,651
|
|
|
$
|
594,209
|
|
|
$
|
562,419
|
|
|
Total assets:
|
|
|
|
|
|
|
United States
|
$
|
574,916
|
|
|
$
|
456,188
|
|
|
|
|
Europe
|
45,916
|
|
|
45,429
|
|
|
|
|
Canada and other
|
53,455
|
|
|
44,409
|
|
|
|
|
|
$
|
674,287
|
|
|
$
|
546,026
|
|
|
|
|
Long-term assets (1):
|
|
|
|
|
|
|
United States
|
$
|
158,868
|
|
|
$
|
134,932
|
|
|
|
|
Europe
|
8,038
|
|
|
7,889
|
|
|
|
|
Canada and other
|
2,988
|
|
|
3,988
|
|
|
|
|
|
$
|
169,894
|
|
|
$
|
146,809
|
|
|
|
(1)Long term assets consist of net property, plant and equipment, right of use assets, net intangible assets, goodwill and other assets excluding deferred income taxes.
14 CONTINGENCIES
The Company is subject to various legal actions and proceedings in the normal course of business, including those related to commercial disputes, product liability, intellectual property and environmental matters. The Company is insured against loss for certain of these matters. Although litigation is subject to many uncertainties and the ultimate exposure with respect to these matters cannot be ascertained, management does not believe the final outcome of any pending litigation will have a material adverse effect on the financial condition, results of operations, liquidity or cash flows of the Company.
15 VALUATION AND QUALIFYING ACCOUNTS
The following summarizes changes to valuation and qualifying accounts for 2021, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
Beginning of Year
|
|
Additions Charged
to Costs and
Expenses
|
|
Less Deductions
|
|
Balance at End of
Year
|
|
Year Ended October 1, 2021
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
$
|
2,697
|
|
|
$
|
308
|
|
|
$
|
511
|
|
|
$
|
2,494
|
|
|
Reserves for inventory valuation
|
5,385
|
|
|
518
|
|
|
355
|
|
|
5,548
|
|
|
Valuation of deferred tax assets
|
6,524
|
|
|
1,352
|
|
|
1,504
|
|
|
6,372
|
|
|
Reserves for sales returns
|
3,043
|
|
|
1,705
|
|
|
2,653
|
|
|
2,095
|
|
|
Year ended October 2, 2020
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
$
|
2,550
|
|
|
$
|
2,095
|
|
|
$
|
1,948
|
|
|
$
|
2,697
|
|
|
Reserves for inventory valuation
|
5,223
|
|
|
878
|
|
|
716
|
|
|
5,385
|
|
|
Valuation of deferred tax assets
|
5,964
|
|
|
875
|
|
|
315
|
|
|
6,524
|
|
|
Reserves for sales returns
|
4,880
|
|
|
1,532
|
|
|
3,369
|
|
|
3,043
|
|
|
Year ended September 27, 2019
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
$
|
1,637
|
|
|
$
|
2,003
|
|
|
$
|
1,090
|
|
|
$
|
2,550
|
|
|
Reserves for inventory valuation
|
5,124
|
|
|
1,009
|
|
|
910
|
|
|
5,223
|
|
|
Valuation of deferred tax assets
|
6,402
|
|
|
430
|
|
|
868
|
|
|
5,964
|
|
|
Reserves for sales returns
|
1,532
|
|
|
7,040
|
|
|
3,692
|
|
|
4,880
|
|
16 QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
The following summarizes quarterly operating results for the years presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
(thousands, except per share data)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net sales
|
$
|
165,667
|
|
|
$
|
128,054
|
|
|
$
|
206,156
|
|
|
$
|
163,084
|
|
|
$
|
213,568
|
|
|
$
|
138,390
|
|
|
$
|
166,260
|
|
|
$
|
164,681
|
|
|
Gross profit
|
75,030
|
|
|
53,612
|
|
|
93,254
|
|
|
75,132
|
|
|
97,511
|
|
|
62,562
|
|
|
68,330
|
|
|
73,687
|
|
|
Operating profit
|
23,557
|
|
|
6,801
|
|
|
36,036
|
|
|
31,794
|
|
|
38,099
|
|
|
12,929
|
|
|
13,591
|
|
|
19,546
|
|
|
Income before income taxes
|
26,011
|
|
|
8,589
|
|
|
37,310
|
|
|
28,377
|
|
|
39,074
|
|
|
15,557
|
|
|
10,527
|
|
|
21,179
|
|
|
Income tax expense
|
6,164
|
|
|
2,159
|
|
|
9,476
|
|
|
7,990
|
|
|
10,300
|
|
|
2,688
|
|
|
3,601
|
|
|
5,632
|
|
|
Net income
|
$
|
19,847
|
|
|
$
|
6,430
|
|
|
$
|
27,834
|
|
|
$
|
20,387
|
|
|
$
|
28,774
|
|
|
$
|
12,869
|
|
|
$
|
6,926
|
|
|
$
|
15,547
|
|
|
Net income per common share - Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
$
|
1.99
|
|
|
$
|
0.65
|
|
|
$
|
2.78
|
|
|
$
|
2.05
|
|
|
$
|
2.87
|
|
|
$
|
1.29
|
|
|
$
|
0.70
|
|
|
$
|
1.56
|
|
|
Class B
|
$
|
1.81
|
|
|
$
|
0.59
|
|
|
$
|
2.53
|
|
|
$
|
1.86
|
|
|
$
|
2.61
|
|
|
$
|
1.17
|
|
|
$
|
0.62
|
|
|
$
|
1.42
|
|
|
Net income per common share - Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
$
|
1.96
|
|
|
$
|
0.64
|
|
|
$
|
2.74
|
|
|
$
|
2.02
|
|
|
$
|
2.83
|
|
|
$
|
1.27
|
|
|
$
|
0.68
|
|
|
$
|
1.53
|
|
|
Class B
|
$
|
1.96
|
|
|
$
|
0.64
|
|
|
$
|
2.74
|
|
|
$
|
2.02
|
|
|
$
|
2.83
|
|
|
$
|
1.27
|
|
|
$
|
0.68
|
|
|
$
|
1.53
|
|
Due to changes in stock prices during the year and the timing of issuance of shares, the cumulative total of quarterly net income per share amounts may not equal the net income per share for the entire year.