Johnson Outdoors Inc. Annual Report 2003

FY2003 Annual Report · Johnson Outdoors Inc.

Loading PDF…

Own the experience with

innovation and passion

annual report

Our Vision...
Own the Experience with Innovation and Passion

Our Mission...
In the Outdoor Recreational Industry,
our stakeholders will recognize us as:
The Innovation Leader
Bringing Excitement and Growth to our Markets
A Strong, Talented Team with Exceptional Passion

This will translate into:
(cid:127) Strong brand equities and leading market shares
(cid:127) Increased sales and proﬁ ts
(cid:127) Steady shareholder returns

J o h n s o n O u t d o o r s I n c . 2 0 0 3 A n n u a l R e p o r t

Johnson Outdoors Inc. designs,

Operating Results

Summary Financial Information

(thousands, except per share data)

2001

2002

2003

manufactures and markets

outdoor recreation products in four

businesses: Watercraft, Motors,

Diving, and Outdoor Equipment.

More than 1,300 employees work

in twenty-four locations worldwide.

All of the brand names appearing

throughout this report are trademarks

of Johnson Outdoors Inc.

Table of Contents

1 Summary Financial Information

2 Letter to Shareholders

4 Business Profile

6 Watercraft

8 Motors

10 Diving

12 Outdoor Equipment

14 Product Gallery

16 CFO Commentary

(cid:127) Form 10-K

Inside Back Cover

Directors and Officers

Shareholders’ Information

Net sales

Gross profit

$345,637

$342,532

$315,892

138,781

141,054

127,989

Operating profit

15,718

19,751

11,613

Diluted earnings
per common share

Diluted average common
shares outstanding

Capitalization

Total debt

$0.44

$3.59(1)

$0.63

8,170

8,430

8,600

$97,535

$88,253

$77,473

Shareholders’ equity

105,779

124,145

144,194

Total debt to total capital

48.0%

41.6%

35.0%

(1)Includes a gain on sale of subsidiary of $2.65 per diluted share.

Certain matters discussed in this 2003 Annual Report are “forward-looking statements” intended to be covered
by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995, including certain matters discussed in the Chairman’s Letter to Shareholders and the CFO
Commentary. Please see “Forward Looking Statements” in the 2003 Form 10-K for a discussion of uncertainties
and risks associated with these statements.

At Johnson Outdoors, we are deﬁ ned by our

innovation and distinctive in our passion. Our

market-leading brands are known worldwide for

outstanding quality and performance, backed by

excellent customer service. We are recognized for

bringing excitement and growth to our markets.

In 2003 we grew net sales
from our continuing busi-
nesses, despite a weak econ-
omy, and outperformed
competition while investing
in the future with new sys-
tems, processes and talent.
Profits and earnings were
lowered due to these invest-
ments and the operational
issues we addressed.

Our focus and drive against
our business success model
resulted in solid progress
toward our vision this year as
we worked to create sustain-
able, long-term growth and
enhance shareholder value.

Helen P. Johnson-Leipold

Chairman and Chief Executive Of f icer

Innovation
Our business success model
is built upon innovation. It
is the lifeblood of our busi-
ness, affecting everything we
do. Our customers expect
it, our consumers demand
it and Johnson Outdoors
can deliver because no one
knows the outdoor recre-
ational consumer better,
or invests more in turning
that insight into successful
product innovation. Today’s
consumer wants to experi-
ence the outdoors, and
our job is to make that
experience as easy, fun and
accessible as possible.

Our investment in high-
tech, low-cost rapid-proto-
typing technology ensures
consistent consumer feed-
back from concept to com-
mercialization, enabling us
to bring products to market
faster, better and more
efficiently, supported by
breakthrough sales and
marketing programs. We
draw on the best talent
available —in-house or
external —and empower

them with the resources
they need and an environ-
ment where creativity is
encouraged and valued,
and productivity is bal-
anced with personal needs.

Effective Portfolio
Management
Our diverse portfolio is
a strategic asset in an
industry that can experi-
ence significant market
variability. For instance,
while the war in Iraq unfa-
vorably affected some of
our businesses this year, it
drove record military sales
and profit in our Outdoor
Equipment business. Our
strong cash and financial
profile allows us to con-
sider various acquisition
targets, all of which
must prove to enhance
shareholder value and
contribute to our long-
term sustainability. We
assess these targets against
our core business criteria:
#1 or #2 in the market,
in a category that rewards
innovation with strong
growth potential.

Business Success Model

Portfolio
Management

Expanding
Markets

Network
Model

I N N O V A T I O N

Long-term
Profitable
Growth

Expanding Markets
New products and devel-
oping new trade channels
and customers are key
drivers behind market
expansion. Nearly a third
of 2003 total net sales for
Johnson Outdoors came
from new products, which
included, among others:
a new composite material
that reduced kayak weight
by over 30%; the first
kayak specially designed for
women—the Ocean Kayak
Venus; a full line of battery
chargers and the first wire-
less remote steering acces-
sory for fisherman from
Minn Kota; the new Twin
Speed Fin and Crystal Vu
Mask from SCUBAPRO;

the Eureka! Dry Doc
backpack; the Silva Digital
Compass. Our targeted
National Accounts initia-
tive reported 2003 revenue
in excess of $50 million,
growing to nearly 20% of
total net sales in less than
two years. Five years ago
we had never made a mili-
tary tent, and today we are
a leading provider of the
modular general purpose
tent system (MGPTS)
used by U.S. armed forces
overseas.

Network
Operation Model
Johnson Outdoors is
building a strong network
of empowered businesses,

guided by a core vision and
strategy, and supported
with centralized expertise
and resources. We work
to leverage synergies, real-
ize efficiencies and share
best practices. This year in
Watercraft we aggressively
addressed redundancies and
underutilized facilities, and
moved to a centers-of-excel-
lence management structure
to simplify and streamline
these operations. Improved
business processes and
financial systems are also
helping to drive stability,
growth and profitability in
this business. The network
further benefited from an
independent assessment of
Global Diving operations,

supporting best practices
in designing and manu-
facturing dive equipment.
Our global sourcing initia-
tive continues to harness
and optimize the collective
buying power of our four
businesses.

The Future
Continuous innovation will
drive our success in 2004
and bring even more excite-
ment and growth to our
markets in the years ahead.
Every day we become
a stronger, more vibrant
company, true to our entre-
preneurial heritage, yet
better poised and ready to
capitalize on new oppor-
tunities and maximize
our growth potential and
profitability. We are more
excited than ever about the
future of our business.

Helen P. Johnson-Leipold
Chairman and
Chief Executive Officer

W A T E R C R A F T

M O T O R S

Old Town | Canoes and kayaks

Necky | Kayaks

WaterQuest | Canoes, small boats

and kayaks

Ocean Kayak | Sit-on-top kayaks

Escape | Pedal boats, sail boats
and deck boats

Carlisle | Paddles and oars

Extrasport | Personal flotation devices

Dimension | Kayaks

25% of Net Sales

M A R K E T P O S I T I O N
With $79 million in sales, we hold
the #1 share of the market in small
paddle craft and pedal boats.

2 0 0 3 H I G H L I G H T S
Transition to new systems, pro-
cesses and talent, and resource
realignment increase flexibility,
strengthen operations and maxi-
mize efficiency. Strategic sales
partnerships open new channels
of distribution for more brands,
reduce customers’ cost of doing
business and ensure faster,
better service.

L O O K I N G F O R W A R D
We’re working to fill the pipeline
with exciting, innovative products
and accessories, reaching out to an
even broader consumer base. At the
same time, we’re focused on driving
continuous improvement in opera-
tional performance and increasing
profitability.

27% of Net Sales

Minn Kota | Electric boat motors,
battery chargers and
accessories

M A R K E T P O S I T I O N
Minn Kota continues to lead the
trolling motor category with $86
million in sales.

2 0 0 3 H I G H L I G H T S
Motors turned in an outstanding
performance this year, delivering
record sales and proﬁ ts through an
emphasis on innovative products,
like the Minn Kota CoPilot, and
higher-end products, like the Maxxum
bow-mounted trolling motor.

L O O K I N G F O R W A R D
Our onboard battery charger line is
now complete, and we consider it a
promising growth area. We’re also
looking to grow the category with
our ﬁ rst electric primary propulsion
motors. New products will feature
creative use of technology as we
continue to drive growth through
innovation.

D I V I N G

O U T D O O R E Q U I P M E N T

SCUBAPRO | Regulators, buoyancy
compensators, masks,
fins, wet and dry suits,
gloves, dive lights and
other accessories

UWATEC | Dive computers and other

electronic instruments

25% of Net Sales

M A R K E T P O S I T I O N
SCUBAPRO and UWATEC sales of
$78 million this year ensure our
leading global position in the
dive equipment market.

2 0 0 3 H I G H L I G H T S
We increased market share in regu-
lators, masks and ﬁ ns, moving into
the lead sales position in all three
categories. Increased emphasis on
global marketing and sales strate-
gies and programs enhanced brand
image and strengthened customer
relationships worldwide.

L O O K I N G F O R W A R D
Our SCUBAPRO product develop-
ment plan emphasizes innovation,
with increased R&D across all cat-
egories. UWATEC will reach out to
new consumers while maintaining
leadership in premium dive com-
puters. As the economy improves
and travel rebounds, we expect to
see more growth in this business.

Eureka! | Camping tents, accessories
and military and
commercial tents

CampTrails | Backpacks

and accessories

Silva | Field compasses

23% of Net Sales

M A R K E T P O S I T I O N
We’re the leader in niche markets in
this highly fragmented category, with
$73 million in sales and a continued
strong presence in military tents.

2 0 0 3 H I G H L I G H T S
Military tent sales drove OEG’s out-
standing results, as we continued to
develop this important partnership.
Exciting innovation helped Consumer
tents gain share and new distri-
bution. Operating profit for both
Consumer and Commercial tents grew
significantly due to tight expense
controls and improved products.

L O O K I N G F O R WA R D
We’re working for greater balance
in this business portfolio, “think-
ing big and acting fast” to grow all
segments. Innovative new prod-
ucts and programs are expected to
expand markets for both Commercial
and Consumer tents, as we work to
broaden our military customer base.

(cid:127) Old Town Casco
(cid:127) Necky Chatham
(cid:127) Ocean Kayak Prowler

Watercra

Old Town Discovery Sport

STRATEGIC MOVES BUILD MOMENTUM
We’re investing in the systems to drive Watercraft forward and

setting our products apart with unique features and materials.

In 2003 Necky, Ocean Kayak and Old Town introduced more new

products than anyone else at the Outdoor Retailer show, while

our revamped sales force marketed the entire line. Innovation

abounds: the Escape Jazz pedal boat with water cannon, Ocean

Kayak’s ﬁ rst ﬁ shing kayak, Necky’s show-stopping carbon surf

kayak…all creating new standards and new growth.

Kayaking has been the fastest growing outdoor activity over the past ﬁ ve years.

2002 SGMA SUPER STUDY

“The right kayak

makes me more

effective in the

water. It turns easily

and sharply, and I

don’t have to exert

too much energy

when I stroke.”

L e a h N e m e t z

Fishing is the number one outdoor recreational activity in the US.

2002 SGMA SUPER STUDY

Motors

“I value my free time,

and I don’t want to

have to think about

equipment. I’ve used

Minn Kota motors for

15 years, and they’ve

never let me down.”

A l e x G i n t n e r

Minn Kota CoPilot

FAVORABLE MIX FUELS PROFITS

Motors grew sales and market share with inno-

vative products like Minn Kota’s CoPilot wireless

remote steering accessory, named Best of Show

at the 2002 ICAST trade show. New E-Drive

electric primary propulsion motors tap a grow-

ing market, as does our now-complete line of

onboard battery chargers. And Riptide saltwater

motors, backed by the industry’s ﬁ rst three-year

warranty, emphasize our continuing quality.

Minn Kota E-Drive

Minn Kota MK220 Onboard Charger

UWATEC Smart PRO Wrist

INNOVATION TRUMPS ECONOMY

Diving signiﬁ cantly increased market

share in 2003 despite internal challenges

and a slow travel industry. We led the

competition in regulator sales and also

moved into the #1 sales position with

both our Crystal Vu mask and Twin Jet

fin. With new products accounting for

more than a third of sales, SCUBAPRO is

increasing R&D across all categories.

UWATEC will emphasize premium com-

puter lines while also reaching out to

more recreational divers.

SCUBAPRO Glide Star BC

SCUBAPRO MK25SA/X650 Regulator

Females are the fastest growing segment in scuba diving and account for 40% of all divers.

2003 JOHNSON OUTDOORS RESERVOIR STUDY

Diving

“I’m lead diver for

the county sheriff ’s

search and rescue

team. I also do a lot

of technical diving—

ice diving, cave

systems, ship wrecks.

SCUBAPRO is what

I prefer to use.”

B r a d l e y F r i e n d

Camping is the most popular outdoor family activity in the US.

2002 SGMA SUPER STUDY

Outdoor Equ

“An easy-to-set-up

tent can make all the

difference between

a good camping

experience and a

frustrating one–

especially when you’re

camping with kids.”

K i m P o l z i n

ipme

LEADER SHIP DRIVES SALES

This year Outdoor Equipment Group products

made news with innovation and reliability. The

New York Times called the Eureka! Condo tent

“cushy new gear,” while Silva’s classic Ranger

CL Compass earned Backpacker magazine’s

prestigious Editor’s Choice Gold Award. We’re

extending our leadership to new channels.

Since 1999, we’ve provided some 90,000 spe-

cial order tents for U.S. troops. And we’re #2 in

commercial tents.

Eureka! Commercial Tent

Eureka! Combat Tent

Silva Digital Compass

Product

Extrasport
Cienna and Tricky Arrow

Carlisle
Black Magic

Minn Kota
E-Drive

Minn Kota
Riptide 3X

Minn Kota
Maxxum

Minn Kota
Vector 3X

Ocean Kayak
Malibu Two XL

Old Town
Ojibway

Ocean Kayak
Manitou

Minn Kota
Deckhand 40

Minn Kota
CoPilot

Minn Kota
MK11OP
Portable Charger

OT Sport Jolt

Minn Kota
MK220 Onboard
Charger

Escape
Jazz

Escape
12

I N N O V A T I O N

SCUBAPRO
Twin Speed Fin

SCUBAPRO
Glide Star BC

SCUBAPRO
Crystal Vu

Eureka!
Backcountry
Outfitter

Eureka!
Titan

Eureka!
Kahuna

Silva
Digital
Compass

Eureka!
Dry Doc
Shield Pack

SCUBAPRO
MK25SA/5600

SCUBAPRO
Dive-n-Roll Gear Bag

SCUBAPRO
EverFlex

Eureka!
Northern Breeze Screen house

F O

C O M M E N T A R

This year’s results for Johnson Outdoors reﬂ ect our investment in systems, structures and processes
to drive sustainable growth. As we eliminated obstacles to growth, we incurred expenses that
affected proﬁ ts and earnings. But it was the right time to take these steps and move toward the
opportunities we see ahead.

We continue to focus on maintaining a healthy balance sheet with substantial liquidity, for the
ﬂ exibility we need to pursue our objectives. At the corporate level, we are more disciplined in our
management of debt and interest rates. Tighter currency transaction management added $3 million
to pre-tax proﬁ ts. Average receivables increased during the year, according to plan. And we have
never been more focused on expense control.

Throughout our network we continue to improve manufacturing capabilities, speed inventory turns
and seek the most productive use of assets. The impact of these actions is woven through the
ﬁ nancial statements. For example, in closing underused facilities, we eliminate overhead and vastly
improve margins, but we also face severance and inventory rationalization costs.

Meanwhile, the diversity of our businesses is an important buffer against the recreation market’s
variability. Motors gives us a stellar model of consistent margin improvement and bottom-line
growth. The Outdoor Equipment Group this year realized beneﬁ ts from outstanding customer service,
quickly turning around orders for the U.S. military. We see a continuing strong partnership here
and, as with any other customer, will work to do what is right for their business and ours. Diving
held performance steady, while auditing processes to ensure best practices are in place. Our ﬂ awless
execution of the Smart Com dive computer recall strengthened brand image by delivering new
product in half the promised time. Watercraft, though a greater challenge than we foresaw, now has
the right people and the right focus; we expect meaningful progress in the coming season.

This is the last year results include numbers from Jack Wolfskin, the outdoor clothing business we
sold in September 2002. That will make future reporting and comparisons clearer and easier.

We are conﬁ dent our actions throughout 2003 will beneﬁ t Johnson Outdoors. We own our perfor-
mance. And we are committed to improving that performance, enhancing long-term proﬁ tability
and shareholder value.

Paul A. Lehmann
Vice President and Chief Financial Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 3, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number 0-16255

JOHNSON OUTDOORS INC.
(Exact name of registrant as specified in its charter)

Wisconsin
(State or other jurisdiction of
incorporation or organization)

39-1536083
(I.R.S. Employer Identification No.)

555 Main Street, Racine, Wisconsin 53403
(Address of principal executive offices, including zip code)

(262) 631-6600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act:

Class A common stock, $.05 par value
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. [ ]

As of November 1, 2003, 7,385,661 shares of Class A and 1,222,297 shares of Class B common stock of the
registrant were outstanding. The aggregate market value of voting stock of the registrant held by nonaffiliates of
the registrant was approximately $34,070,330 on March 28, 2003. For purposes of this calculation only, shares of
voting stock are deemed to have a market value of $8.90 per share, the closing price of the Class A common stock
as reported on The NASDAQ Stock Market, Inc. on March 28, 2003.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes [ ] No [ X ]

DOCUMENTS I NC ORP ORATE D BY REF ER ENCE

Document

Johnson Outdoors Inc. Notice of
Annual Meeting of Shareholders
and Proxy Statement for the
Annual Meeting of Shareholders
to be held February 25, 2004.

Part and Item Number of Form 10-K
into which Incorporated

Part III, Items 10, 11, 12, 13 and 14

TABL E OF CONTE NT S

Business

Properties

Legal Proceedings

Submission of Matters to a Vote of Security Holders

Market for Registrant’s Common Equity and Related Stockholder Matters

Selected Financial Data

Management’s Discussion and Analysis of Financial Condition
and Results of Operations

Quantitative and Qualitative Disclosures about Market Risk

Financial Statements and Supplementary Data

Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

Controls and Procedures

Directors and Executive Officers of the Registrant

Executive Compensation

Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters

Certain Relationships and Related Transactions

Principal Accountant Fees and Services

Exhibits, Financial Statement Schedules and Reports on Form 8-K

Signatures

Exhibit Index

Consolidated Financial Statements

Page

F-1

FORWARD LOOKING STATEMENTS
Certain matters discussed in this Form 10-K and in the accompanying 2003 Annual
Report are “forward-looking statements,” and the Company intends these forward-
looking statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995 and
is including this statement for purposes of those safe harbor provisions. These for-
ward-looking statements can generally be identified as such because the context of
the statement includes phrases such as the Company “expects,” “believes” or other
words of similar meaning. Similarly, statements that describe the Company’s future
plans, objectives or goals are also forward-looking statements. Such forward-looking
statements are subject to certain risks and uncertainties which could cause actual
results or outcomes to differ materially from those currently anticipated. Factors
that could affect actual results or outcomes include changes in consumer spend-
ing patterns; the Company’s success in implementing its strategic plan, including
its focus on innovation; actions of companies that compete with the Company;
the Company’s success in managing inventory; movements in foreign currencies or
interest rates; unanticipated issues related to the Company’s military tent business;
the success of suppliers and customers; the ability of the Company to deploy its
capital successfully; unanticipated outcomes related to outstanding litigation mat-
ters and a European Commission investigation; and adverse weather conditions.
Shareholders, potential investors and other readers are urged to consider these fac-
tors in evaluating the forward-looking statements and are cautioned not to place un-
due reliance on such forward-looking statements. The forward-looking statements
included herein are only made as of the date of this Form 10-K and Annual Report
and the Company undertakes no obligation to publicly update such forward-look-
ing statements to reflect subsequent events or circumstances.

PART I

ITEM 1. BUSINESS
Johnson Outdoors Inc. and its subsidiaries (the “Company”) design, manufacture
and market outdoor recreation products in four businesses: Diving, Watercraft,
Outdoor Equipment and Motors. The Company’s primary focus is innovation
— meeting consumer needs with breakthrough products that stand apart from the
competition and advance the Company’s strong brand names. Its subsidiaries are
organized in a network that is intended to promote entrepreneurialism and leverage
best practices and synergies, following the strategic vision set by senior managers
and approved by the Company’s Board of Directors. The Company is controlled by
Samuel C. Johnson, members of his family and related entities.

The Company was incorporated in Wisconsin in 1987 as successor to various
businesses.

Diving
The Company manufactures and distributes technical underwater diving products,
which it sells under the SCUBAPRO and Snorkel Pro names. The Company mar-
kets a full line of underwater diving and snorkeling equipment, including regulators,
stabilizing jackets, tanks, depth gauges, masks, fins, snorkels, diving electronics and
other accessories. The Company is also a leading manufacturer of dive computers
and other electronics sold under the Aladin and UWATEC brands. SCUBAPRO,
Aladin and UWATEC products are marketed to the high quality, premium priced
segment of the market via limited distribution to independent specialty dive stores
worldwide. These specialty dive stores generally provide a wide range of services to
divers, including sales, instruction, travel and repair service.

The Company focuses on maintaining SCUBAPRO, Aladin and UWATEC as the
market leaders in innovation and new products. The Company maintains research
and development functions both in the United States and Europe and holds hun-
dreds of patents on proprietary products. Consumer advertising focuses on building
the brand and communicating exclusive features and benefits of the SCUBAPRO
UWATEC product lines. The Company’s advertising and dealer network reinforce
the SCUBAPRO UWATEC brands’ position as the industry’s high quality and
innovation leader. The Company advertises its equipment in diving magazines, via
website and through dive specialty stores.

The Company also manufactures and markets diving buoyancy compensators under
the SCUBAPRO brand.

The Company maintains manufacturing and assembly facilities in Switzerland,
Mexico, Italy and Indonesia and procures a majority of its proprietary rubber and
plastic products and components from third-party manufacturers.

Watercraft
The Company manufactures and markets canoes, kayaks, paddles, oars, recre-
ational sailboats, personal flotation devices and small thermoformed recreational
boats under the brand names Old Town, Carlisle Paddles, Ocean Kayak, Pacific
Kayak, Canoe Sports, Necky, Escape, Extrasport, Leisure Life and Dimension.

The Company’s Old Town Canoe subsidiary produces high quality canoes, kay-
aks and accessories for family recreation, touring and tripping. The Company uses
a patented rotational-molding process for manufacturing polyethylene kayaks and
canoes to compete in the high volume, low and mid-priced range of the market.
These kayaks and canoes feature stiffer and more durable hulls than higher priced
boats. The Company also manufactures canoes from fiberglass, Royalex (ABS) and
wood. Carlisle Paddles, a manufacturer of canoe and kayak paddles and rafting
oars, supplies paddles and oars to the Company’s other watercraft businesses and
also distributes directly through the accessories channels mentioned below under
the Carlisle brand.

The Company is a leading manufacturer of sit-on-top kayaks under the Ocean
Kayak and Pacific Kayak brands. In addition, the Company manufactures and
markets high quality Necky sea touring and whitewater kayaks; Escape recreational
sailboats; Extrasport and Swiftwater personal flotation devices; small thermo-
formed recreational boats, including canoes, pedal boats, deck boats and tenders,
under the Leisure Life brand; the Dimension brand of kayaks; and other paddle
and watercraft accessory brands.

The Company’s kayaks, canoes and accessories are sold primarily to specialty stores
and marine dealers, sporting goods stores and catalog and mail order houses such
as L. L. Bean®, in the United States and Europe. Leisure Life products are sold
through marine dealers and large retail chains under several brand identities.

The Company manufactures its Watercraft products in four locations in the United
States, one location in Canada and in New Zealand. The Company is also active in
Europe with most of the brands noted above.

The North American market for both canoes and kayaks has slowed over the past
year along with the economy. The Company believes, based on industry and other

data, that it has grown market share and continues to be a leading manufacturer of
canoes and kayaks in the United States in both unit and dollar sales.

Outdoor Equipment
The Company’s Outdoor Equipment Group’s product includes Eureka! military,
commercial and consumer tents and backpacks and Silva field compasses.

Eureka! consumer tents and packs compete primarily in the mid- to high-price range
and are sold in the United States and Canada through independent sales representa-
tives, primarily to sporting goods stores, catalog and mail order houses and camping
and backpacking specialty stores. The Company entered the mass market segment of
the category in 2003 with specifically designed tents sold through Wal-Mart stores.
Marketing of the Company’s tents and backpacks is focused on building the Eureka!
brand name and establishing the Company as a leader in tent design and innovation.
Although the Company’s camping tents and backpacks are produced primarily by
third-party manufacturing sources, design and innovation is conducted at the Bing-
hamton, NY business location. Eureka! camping products are sold under license in
Japan and Australia as well as by distribution agreement in Europe.

Eureka! commercial tents include party tents, sold primarily to general rental stores,
and other commercial tents sold directly to tent erectors. Commercial tents are man-
ufactured by the Company in the United States. Products range from 10x10 cano-
pies to 120’ wide pole tents and other large scale frame structures.

Eureka! also designs and manufactures large, heavy-duty tents and lightweight
backpacking tents for the military. The Company was awarded a one-year contract
with four option years for the Extreme Cold Weather Tent on September 28, 2001.
The Company is in the second option year and currently expects the third option
year to be exercised in April 2004. The Company is operating under three additional
one-year contracts from the U.S. Armed forces. Current tents in production are a
lightweight, two-man combat tent for the Marine Corps; a lightweight one-person
tent for the Army; and a modular, general purpose tent for the Army. During 2003,
sales to the United States military accounted for 13.4% of total Company net sales.
The Company was recently notified that it was not awarded a new multi-year con-
tract for the modular general purpose tent. The Company has a significant backlog
of orders under existing military contracts. In December 2003, the Company was
awarded a $42.9 million urgent need military tent order. The order is for 6,500
modular general purpose tent systems to be delivered over the next 15 months. Addi-
tionally, there is potential for volume from other contracts on which the Company
is currently bidding.

Silva field compasses, which are manufactured by third parties, are marketed exclusively
in North America, the area for which the Company owns Silva trademark rights.

heading “Foreign Operations,” to the Consolidated Financial Statements for infor-
mation respecting risks attendant to the Company’s foreign operations.

In September 2002, the Company sold its Jack Wolfskin business (a marketer of
high quality technical outdoor clothing, footwear, camping tents, backpacks, travel
gear and accessories). The Company’s North American Jack Wolfskin operations
were not included in the sale. The Company exited this business over the last year.

Motors
The Company manufactures, under its Minn Kota name, battery powered motors
used on fishing boats and other boats for quiet trolling power or primary propul-
sion. The Company’s Minn Kota motors and related accessories are sold in the
United States, Canada, Europe and the Pacific Basin through large retail store
chains such as Wal-Mart, catalogs such as Bass Pro Shops and Cabelas, sporting
goods specialty stores, marine distributors, and original equipment manufacturers
(OEM) including Ranger® Boats, Skeeter Boats, Triton, Lowe, and Stratos/Javilin.
Consumer advertising and promotion include advertising on regional television and
in outdoor, general interest and sports magazines. Packaging and point-of-purchase
materials are used to increase consumer appeal and sales.

The Company has the leading market share of the U.S. electric fishing motor mar-
ket. While the overall motors market has generally been flat over a number of years,
the Company has been able to gain share by emphasizing marketing, product inno-
vation and original equipment manufacturer sales.

In 2002, the Company rebranded its compass line of products to Minn Kota and
discontinued use of the Airguide product line. In 2003 the Company discontinued
its Minn Kota compass line altogether. In 2001, the Company exited the weather
and automotive instrument categories. In 2003, the Company began a concerted
effort to grow in the marine charger market with several new products branded as
Minn Kota. These products complement and are sold through the same channels
as the Company’s Motors business.

Financial Information for Business Segments
See Note 14 to the Consolidated Financial Statements for financial information
comparing each business segment.

International Operations
See Note 14 to the Consolidated Financial Statements for financial information
comparing the Company’s domestic and international operations. See Note 1, sub-

Research and Development
The Company commits significant resources to research and new product devel-
opment. The Company expenses research and development costs as incurred. The
amounts expended by the Company in connection with research and development
activities for each of the last three fiscal years are set forth in the Consolidated State-
ments of Operations.

Competition
The Company believes its products compete favorably on the basis of product inno-
vation, product performance and marketing support and, to a lesser extent, price.

Diving: The main competitors in Diving include Oceanic, Aqualung and Suunto,
each of which competes on the basis of product innovation, performance, quality
and safety.

Watercraft: The Company primarily competes in the paddle sport segment of
canoes and kayaks. Main competitors are Watermark and Confluence, both of
which also make a full range of boats. These companies compete on the basis of
their design, performance and quality.

Outdoor Equipment: The Company’s brands and products compete in the sport-
ing goods and specialty segments of the outdoor equipment market. Competitive
brands with a strong position in the sporting goods channel include Coleman, Jans-
port and private label brands. The Company also competes with the specialty com-
panies such as North Face and Kelty on the basis of materials and innovative designs
for consumers who want performance products priced at a value.

Motors: The main competitor in electric trolling motors is Motor Guide from
Brunswick, which manufactures and sells a full range of trolling motors and acces-
sories. Competition in this segment is focused on product quality/durability as well
as product benefits and features for fishing. The main competitors in the charger
market are Dual Pro from Charging Systems International, Guest from Marinco
and ProMariner from Professional Mariner. Competition in this segment is focused
on charging time, safety, performance and durability.

Employees
At October 3, 2003, the Company had approximately 1,300 employees. The Com-
pany considers its employee relations to be excellent. Temporary employees are uti-

lized to manage peaks in the seasonal manufacturing of products.

Backlog
Unfilled orders for future delivery of products of continuing operations totaled
approximately $68.3 million at October 3, 2003 and $34.8 million at September
27, 2002. For the majority of products, the Company’s businesses do not receive
significant orders in advance of expected shipment dates, with the exception of the
military business which contributed to the 2003 increase.

Patents, Trademarks and Proprietary Rights
The Company owns no single patent that is material to its business as a whole. How-
ever, the Company holds various patents, principally for diving products, rotational-
molded canoes and electric motors, 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 discussed on the preceding pages. The Company
vigorously defends its intellectual property rights.

Sources and Availability of Materials
The Company’s products are made using materials that are generally in adequate
supply and are available from a variety of third-party suppliers.

The Company has an exclusive supply contract with a single vendor for materials
used in its military business. Interruption or loss in the availability of this material
could have an impact on sales and operating results of the Outdoor Equipment
business.

Executive Officers
The following list sets forth certain information, as of December 1, 2003, regarding
the executive officers of the Company.

Helen P. Johnson-Leipold, age 46, became Chairman and Chief Executive Officer of
the Company in March 1999. Prior to joining the Company, Ms. Johnson-Leipold
was employed by S.C. Johnson & Son, Inc. (SCJ) for twelve years. From September
1998 until March 1999, Ms. Johnson-Leipold was Vice President, Worldwide Con-
sumer Products-Marketing of SCJ.

Jervis B. Perkins, age 48, became Chief Operating Officer of the Company in Janu-
ary 2003. Prior to joining the Company, Mr. Perkins was employed by Brunswick
Corporation for seven years, most recently as Group General Manager of the Bowl-
ing Products business beginning in February 2000. He was Executive Vice Presi-
dent, Sales and Marketing at Brunswick’s Mercury Marine Division from January
1998 to February 2000.

Paul A. Lehmann, age 50, became Vice President and Chief Financial Officer of the
Company in May 2001. Prior to joining the Company, Mr. Lehmann was employed
by Steelcase North America, Inc. (SCNA) for seven years. From October 1999 to
May 2001, Mr. Lehmann was Vice President, Finance and Strategic Planning of
SCNA. From June 1997 to October 1999, Mr. Lehmann was Vice President, Opera-
tions Finance of SCNA.

There are no family relationships between the above executive officers.

Seasonality
The Company’s business is seasonal. The following table shows, for the past three
fiscal years, total net sales and operating profit or loss related to continuing opera-
tions of the Company for each quarter, as a percentage of the total year.

ITEM 2. PROPERTIES
The Company maintains both leased and owned manufacturing, warehousing, dis-
tribution and office facilities throughout the world. The Company believes that its
facilities are well maintained and have capacity adequate to meet its current needs.

Quarter Ended
December
March
June
September

Operating
Profit (Loss)

October 3, 2003
Net
Sales
17%
27
34
22
100%

53
77
(31)
100%

See Note 7 to the Consolidated Financial Statements for a discussion of lease
obligations.

September 27, 2002
Net
Operating
Profit (Loss)
Sales
5%
17%
42
29
66
34
(13)
20
100%
100%

Year Ended

September 28, 2001
Operating
Net
Profit (Loss)
Sales
(23)%
17%
42
29
83
33
(2)
21
100%
100%

The Company’s principal manufacturing (identified with an asterisk) and other
locations are:

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Certain information with respect to this item is included in Notes 10 and 11 to
the Consolidated Financial Statements. The Company’s Class A common stock is
traded on The NASDAQ Stock Market, Inc. under the symbol: JOUT. There is
no public market for the Company’s Class B common stock. However, the Class
B common stock is convertible at all times at the option of the holder into shares
of Class A common stock on a share for share basis. As of November 1, 2003, the
Company had 712 holders of record of its Class A common stock and 58 holders of
record of its Class B common stock. The Company has never paid, and has no cur-
rent intention to pay, a dividend on its common stock.

A summary of the high and low prices for the Company’s Class A common stock
during each quarter of the years ended October 3, 2003 and September 27, 2002 is
as follows:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

2003

2002

2003

2002

2003

2002

2003

2002

Stock prices:
High
Low
Last

$13.67 $9.04 $12.12 $10.49 $14.00 $20.20 $15.75 $17.32
12.55
9.83
13.50 10.90

9.90
13.15 16.83

6.90 6.21
10.28 7.95

8.40
8.90

7.47
9.85

8.76

ITEM 6. SELECTED FINANCIAL DATA
A summary of the Company’s operating results and key balance sheet data for
each of the years in the five-year period ended October 3, 2003 is presented below.
All periods have been restated to reflect the discontinuation of the Company’s
Fishing business.

Albany, New Zealand (Watercraft)
Antibes, France (Diving)
Bad Säkingen, Germany (Diving)
Barcelona, Spain (Diving)
Basingstoke, Hampshire, England (Diving)
Batam, Indonesia* (Diving)
Binghamton, New York* (Outdoor Equipment)
Burlington, Ontario, Canada (Motors, Outdoor Equipment)
Chatswood, Australia (Diving)
Chi Wan, Hong Kong (Diving)
El Cajon, California (Diving)
Ferndale, Washington* (Watercraft)
Genoa, Italy* (Diving)
Grand Rapids, Michigan* (Watercraft)
Grayling, Michigan* (Watercraft)
Greenville, South Carolina (Watercraft)
Hallwil, Switzerland* (Diving)
Henggart, Switzerland (Diving)
Mankato, Minnesota* (Motors)
Mansonville, Quebec, Canada* (Watercraft)
Napier, New Zealand (Watercraft)
Old Town, Maine* (Watercraft)
Tijuana, Mexico* (Motors, Diving)
Tokyo (Kawasaki), Japan (Diving)

The Company’s corporate headquarters is located in Racine, Wisconsin.

ITEM 3. LEGAL PROCEEDINGS
See Note 16 to the Consolidated Financial Statements for a discussion of legal
proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the last quarter
of the year ended October 3, 2003.

(thousands, except per share data)

Operating Results(1)
Net sales
Gross profit
Operating expenses
Operating profit
Interest expense
Other expense (income), net(2)
Income from continuing operations before income taxes and
before cumulative effect of change in accounting principle
Income tax expense
Income from continuing operations before cumulative
effect of change in accounting principle
Income (loss) from discontinued operations
Income (loss) on disposal of discontinued operations
Income (loss) from change in accounting principle
Net income (loss)
Basic earnings (loss) per common share:

Continuing operations

Discontinued operations

Effect of change in accounting principle

Net income (loss)
Diluted earnings (loss) per common share:

Continuing operations

Discontinued operations

Effect of change in accounting principle

Net income (loss)
Diluted average common shares outstanding

Balance Sheet Data
Current assets(3)
Total assets
Current liabilities(4)
Long-term debt, less current maturities
Total debt
Shareholders’ equity

October 3
2003

September 27
2002

September 28
2001

September 29
2000

$ 315,892
127,989
116,376
11,613
5,165
(3,254)

9,702
4,281

5,421
—
—
—
$ 5,421

0.64
—
—
0.64

0.63
—
—
0.63
8,600

$ 195,135
277,657
50,032
67,886
77,473
144,194

$ 342,532
141,054
121,303
19,751
6,630
(27,372)

40,493
10,185

30,308
—
495
(22,876)
$ 7,927

3.69
0.06
(2.79)
0.96

3.59
0.06
(2.71)
0.94
$
8,430

$ 192,137
271,285
53,589
80,195
88,253
124,145

$ 345,637
138,781
123,063
15,718
9,085
543

6,090
2,480

3,610
—
—
1,755
5,365

0.44
—
0.22
0.66

0.44
—
0.22
0.66
8,170

$ 133,180
244,913
36,568
84,550
97,535
105,779

$ 354,889
144,574
119,855
24,719
9,799

(160)

15,080
6,705

8,375
(940)
(24,418)
—
$ (16,983)

1.03
(3.12)
—
(2.09)

1.03
(3.12)
—
(2.09)
$
8,130

$ 144,194
257,971
46,941
45,857
105,319
100,832

Year Ended
October 1
1999

$ 310,198
125,774
106,261
19,513
9,565
(71)

10,019
4,158

5,861
1,161
—
—
$ 7,022

0.72
0.15
—
0.87

0.72
0.15
—
0.87
8,108

$ 185,733
299,025
45,072
72,744
122,071
127,178

(1) The year ended October 3, 2003 includes 53 weeks. All other years include 52 weeks. The Company sold its European Jack Wolfskin business during 2002; 2002 includes ten months of results from this business.
(2) Includes gain on sale of the European Jack Wolfskin business of $27,251 in 2002.
(3) Includes cash of $88,910 and $100,830 in 2003 and 2002, respectively, and net assets of discontinued operations of $56,114 in 1999.
(4) Excluding short-term debt and current maturities of long-term debt.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion includes comments and analysis relating to the Company’s
results of operations and financial condition for the three years ended October 3,
2003. This discussion should be read in conjunction with the Consolidated Finan-
cial Statements and related notes thereto.

Results of Operations
Summary consolidated financial results from continuing operations are as follows:

(m illions, exc ept per share data)
Operating Results(1)
Net sales
Gross profit
Operating expenses
Operating profit
Interest expense
Gain of sale of subsidiary
Income from continuing operations
before cumulative effect of
change in accounting principle
Diluted earnings per common share
from continuing operations before
cumulative effect of change in
accounting principle(2)

2003

2002

2001

$315.9
128.0
116.4
11.6
5.2
—

$342.5
141.1
121.3
19.8
6.6
27.3

$345.6
138.8
123.1
15.7
9.1
—

5.4

30.3

3.6

$ 0.63

$ 3.59

$ 0.44

(2) In 2002, the after tax gain on sale of subsidiary was $2.65 per diluted share.

2003 vs 2002

Net Sales
Net sales totaled $315.9 million in 2003 compared to $342.5 million in 2002, a
decrease of 7.8% or $26.6 million. Excluding the results of the Company’s Jack
Wolfskin subsidiary, which was sold in the forth quarter of 2002, sales of the Com-
pany’s continuing businesses increased 6.7% or $19.8 million over the prior year. A
reconciliation of the Company’s sales excluding Jack Wolfskin to sales as reported
in the Statement of Operations is set forth below. Foreign currency translations
favorably impacted year-to-date sales by $8.3 million in comparison to 2002. Three
of the Company’s continuing business units experienced sales growth over the prior
year. The markets in which the Company’s business units participate were relatively

flat versus 2002, however, the Company was able to maintain or increase its share in
those markets. The Outdoor Equipment business as a whole incurred a sales decline
of $33.6 million, or 31.6%. This decline is directly attributable to the disposition
of the Company’s Jack Wolfskin subsidiary. Sales for the continuing portion of the
Company’s Outdoor Equipment business increased $12.9 million, or 21.6%, as a
result of strength in military sales. The consumer tent business continued to experi-
ence competition from the low-price mass market and private label segment of the
category. The Company entered the mass market segment of the category in 2003
with specifically designed tents sold through Wal-Mart stores. The same tents will
be in place for fiscal 2004. The Motors business sales increased $5.1 million, or
6.4%, to $85.7 million as a result of strength in new products as well as continued
market share strength. The Diving business sales increased $5.4 million, or 7.5%,
to $78.0 million as a result of new product sales as well as currency impacts aided
by the strengthening of the Euro against the U.S. Dollar. The Watercraft business
saw sales decline $3.9 million, or 4.7%, to $79.0 million primarily related to market
softness compounded by integration and operational difficulties.

Operating Results
The Company recognized an operating profit of $11.6 million in 2003 compared
to an operating profit of $19.8 million in 2002. The Jack Wolfskin operation con-
tributed $5.0 million to operating profit in 2002. Improvements in the Motors and
Outdoor Equipment businesses were offset by declines in the Diving and Water-
craft businesses. Gross profit margins declined to 40.5% in 2003 from 41.2% in
2002. The Motors and Outdoor Equipment businesses improved gross margin by
3.1 and 1.6 percentage points, respectively. The Diving business had a slight gross
margin improvement despite recording $1.8 million in charges related to the vol-
untary recall of the UWATEC Smart Pro and Smart Com diving computers. The
Watercraft business drove the overall decline in gross margin due to operational
inefficiencies; inventory, tooling and equipment write-offs; and operating company
integration issues.

Operating expenses totaled $116.4 million, or 36.8% of sales, in 2003 com-
pared to $121.3 million, or 35.4% of sales, in 2002. Operating expenses in 2002
included $13.4 million of expenses from the Jack Wolfskin operations. Factors
that contributed to operating expense increases in 2003 included charges related
to a product recall in the Diving business totaling $1.0 million, a discontinued
acquisition totaling $0.8 million, reorganization in the Watercraft and Outdoor
Equipment businesses of $0.7 million, and the closing of the Company’s Extra-
sport facility of $0.1 million.

The Outdoor Equipment business operating profit increased by $0.3 million, or
2.1%, to $12.1 million in 2003. The Company’s Jack Wolfskin subsidiary contrib-
uted $0.1 million and $4.9 million of operating profit to the Outdoor Equipment
business in 2003 and 2002, respectively. The continuing Outdoor Equipment busi-
ness benefited from strength in military and commercial tents, partially offset by
softness in the consumer tent business. The Diving business saw operating profit
decline by $1.9 million in 2003, resulting in an operating profit margin of 11.0% of
sales in 2003 compared to 14.5% of sales in 2002. Improved gross profit was more
than offset by charges taken during the year related to product recalls as well as
other increases in operating expenses. The Motors business had operating profit of
$12.0 million in 2003 compared to $8.2 million in 2002. The increase was driven
by improved gross profit related to production efficiencies from higher volume, cost
savings and improved pricing yield resulting from favorable changes in product mix
and the impact of new products.

The Watercraft business incurred an operating loss of $9.0 million in 2003 com-
pared to operating profits of $1.2 million in 2002. The operating loss in 2003 was
primarily related to declines in gross profit due to operational inefficiencies, as well
as charges related to inventory, tooling and equipment write downs of $1.7 million
and costs related to the closing of the Extrasport facility of $0.8 million.

Other Income and Expenses
Interest expense decreased $1.5 million in 2003, reflecting a decline in interest rates
from prior year levels primarily related to favorable positions on interest rate swap
agreements the Company had in place during 2003. The Company realized cur-
rency gains of $2.8 million in 2003. In 2002, the Company recorded a pretax gain
from the sale of the Jack Wolfskin business of $27.3 million.

Results from Continuing Operations
The Company recognized income from continuing operations before cumula-
tive effect of change in accounting principle of $5.4 million in 2003, or $0.63
per diluted share, compared to $30.3 million in 2002 or $3.59 per diluted share.
Included in 2002 income from continuing operations before cumulative effect of
change in accounting principle was a gain on the sale of the Jack Wolfskin busi-
ness of $22.4 million, after tax, or $2.65 per diluted share. The Company recorded
income tax expense of $4.3 million in 2003, an effective rate of 44.1%, compared
to income tax expense of $10.2 million in 2002, an effective tax rate of 25.2%. The
effective tax rate in 2003 was negatively impacted by a $0.5 million provision made
to account for an ongoing income tax audit in Germany. The favorable effective
tax rate in 2002 was mainly due to favorable tax treatment on the sale of the Jack
Wolfskin business.

At October 3, 2003, the Company had U.S. federal operating loss carryforwards of
$34.7 million, which begin to expire in 2012, as well as various state net operating
loss carryforwards. The U.S. federal operating loss carryforwards are available to
offset future taxable income over the next 9 to 20 years. The Company believes it
will realize the deferred tax assets through the generation of future taxable income,
tax planning strategies and reversals of deferred tax liabilities.

Change in Accounting Principles
Effective September 29, 2001, the Company adopted Statement of Financial
Accounting Standards (“SFAS”) No. 142. In accordance with the adoption of this
new standard, the Company ceased the amortization of goodwill.

As required under SFAS No. 142, the Company performed an assessment of the car-
rying value of goodwill using a number of criteria, including the value of the overall
enterprise as of September 29, 2001. This assessment resulted in a write off of good-
will during the quarter ended December 28, 2001 totaling $22.9 million, net of tax
($2.76 per diluted share) and was reflected as a change in accounting principle. The
write off was associated with the Watercraft ($12.9 million) and Diving ($10.0 mil-
lion) business units. Future impairment charges from existing operations or other
acquisitions, if any, will be reflected as an operating expense in the consolidated
statement of operations.

Net Income
The Company recognized net income of $5.4 million in 2003, or $0.63 per diluted
share, compared to net income of $7.9 million in 2002, or $0.94 per diluted share.

2002 vs 2001

Net Sales
Net sales totaled $342.5 million in 2002 compared to $345.6 million in 2001, a
decrease of 0.9%. Sales as measured in United States (U.S.) dollars were positively
impacted by the effects of foreign currencies relative to the U.S. dollar in comparison
to 2001. Excluding the effects of foreign currency movements, sales decreased 1.5%
when compared with 2001. Sales were also impacted by the sale of the Jack Wolfskin
business. In 2002, Jack Wolfskin sales were $46.8 million compared to $49.7 million
in 2001. With the continued soft economy both in the U.S. and abroad, the Com-
pany saw marginal growth or even contraction in most of its markets. The Company,
however, was able to maintain or increase its share in those markets. Sales were posi-
tively impacted in the Motors business from growth in this category, strong sales from
new products and a recovery in the OEM market, while in the Diving business the
market continued to be negatively impacted by a sluggish travel industry.

Outdoor Equipment business sales decreased 7.4% from 2001 levels. The Com-
pany’s Jack Wolfskin subsidiary contributed $46.8 million and $49.7 million in
sales to the Outdoor Equipment business in 2002 and 2001, respectively. The Out-
door Equipment business benefited from sales in its military tent business, which
increased 2.1% over 2001, while the commercial and consumer businesses had dou-
ble digit declines. The consumer tent business is experiencing competition from the
low-price mass market and private label segment of the category. Diving sales were
down 9.8% from 2001, primarily related to declines in the travel industry. Declines
were broad-based as all Diving operating companies in the U.S. and Europe were
down versus prior year. The Motors business was very strong, with a sales increase
of $16.4 million (25.0%) versus the prior year primarily due to market share gains
related to strong new product sales and recovery in the OEM markets. The Water-
craft business experienced continued soft markets with sales down 3% from a year
ago. Sales were also impacted by transition issues related to the integration of the
Necky/Ocean Kayak operations.

Operating Results
The Company recognized an operating profit of $19.8 million in 2002 compared
to an operating profit of $15.7 million in 2001. Gross profit margins increased to
41.2% in 2002 from 40.2% in 2001, as improvements in the Motors and Outdoor
Equipment businesses were partially offset by declines in the Watercraft and Diving
businesses. Lower sales volume for 2002 negatively impacted gross margins in Diving
and Watercraft due to unfavorable manufacturing labor and overhead variances.

Operating expenses totaled $121.3 million, or 35.4% of sales, in 2002 compared to
$123.1 million, or 35.6% of sales, in 2001. Amortization of acquisition costs were
$0.4 million in 2002, compared to $5.3 million in 2001. This decline is the result
of the adoption of Financial Accounting Standard Board No. 142, Goodwill and
Other Intangibles (SFAS No. 142), during 2002 and a writedown of goodwill of
$2.5 million related to the Company’s Airguide brand during 2001. The adoption
of SFAS No. 142 ceased the amortization of goodwill, which resulted in a decrease
in operating expenses of approximately $2.4 million in 2002.

The Outdoor Equipment business operating profit decreased by $0.1 million, or
1.1%, to $11.9 million in 2002 compared to $12.0 million in 2001. The Company’s
Jack Wolfskin subsidiary contributed $4.9 million and $5.1 million of operating
profit to the Outdoor Equipment business in 2002 and 2001, respectively. The
Outdoor Equipment business benefited from strength in military tents, offset by
softness in the consumer and commercial tent businesses. The Diving business saw
operating profit decline by $1.1 million in 2002, in line with the sales decline.

Declines in gross profit due to lower sales volume were partially offset by reductions
in operating expenses resulting in an operating profit margin equal to 2001 at 14.5%
of sales. The Motors business had operating profit of $8.2 million in 2002 compared
to $0.2 million in 2001. The increase was driven by improved gross profit related to
production efficiencies from higher volume, cost savings and improved pricing yield
resulting from favorable changes in product mix and the impact of new products.
In addition, 2001 contained a $2.5 million write-down of goodwill related to the
Company’s Airguide brand.

The Watercraft business had a decline in operating profit in 2002 to $1.2 million
from operating profits of $1.3 million in 2001. Declines in gross profit related
to lower volume and operating company integration issues were nearly offset by
reductions in operating expenses. Operating profit levels remain significantly lower
than 2000 as the Company continues to work on the trailing affects of significant
growth, over-capacity and the impacts of too much complexity in this segment of
our business.

Other Income and Expenses
Interest expense decreased $2.5 million in 2002, reflecting a decline in interest rates
from prior year levels and a reduction in working capital needs versus 2001 levels.
Interest income increased $0.4 million to $1.0 million in 2002 from $0.5 million
in 2001 due to improved cash flow and proceeds from the sale of the Jack Wolfskin
business. In 2002, the Company recorded a pretax gain from the sale of the Jack
Wolfskin business of $27.3 million.

Results from Continuing Operations
The Company recognized income from continuing operations before cumulative
effect of change in accounting principle of $30.3 million in 2002 or $3.59 per
diluted share, compared to $3.6 million in 2001 or $0.44 per diluted share. Included
in 2002 income from continuing operations before cumulative effect of change in
accounting principle was a gain on the sale of the Jack Wolfskin business of $22.4
million, after tax, or $2.65 per diluted share. The Company recorded income tax
expense of $10.2 million in 2002, an effective tax rate of 25.2%. The decline in the
effective tax rate (from 40.7% in 2001) is mainly due to favorable tax treatment on
the sale of the Jack Wolfskin business. Excluding the impact on the effective tax rate
from the sale transaction, the Company’s effective tax rate declined approximately
1.4% due to changes in the mix of earnings from jurisdictions with higher tax rates
to those with lower tax rates.

Discontinued Operations
In March 2002, the Company recognized a gain from the disposal of discontinued
operations of $0.5 million, net of tax, related to the final accounting on the sale of
the Fishing business, which was sold in March of 2000.

Reconciliation of Results Adjusted for Sale of Subsidiary
The following tables show the adjusted results of the Company’s continuing busi-
nesses excluding the gain on the sale, the North America exit costs and the operating
results of the Jack Wolfskin subsidiaries.

Change in Accounting Principles
Effective September 29, 2001, the Company adopted SFAS No. 142. In accordance
with the adoption of this new standard, the Company ceased the amortization of
goodwill. If SFAS No. 142 had been in effect for the prior periods presented, the
Company’s income from continuing operations before cumulative effect of change
in accounting principle would have been $6.0 million or $0.73 per diluted share for
the year ended September 28, 2001.

As required under SFAS No. 142, the Company performed an assessment of the
carrying value of goodwill using a number of criteria, including the value of the
overall enterprise as of September 29, 2001. This assessment resulted in a write off
of goodwill totaling $22.9 million, net of tax ($2.71 per diluted share) and has
been reflected as a change in accounting principle. The write off is associated with
the Watercraft ($12.9 million) and Diving ($10.0 million) business units. Future
impairment charges from existing operations or other acquisitions, if any, will be
reflected as an operating expense in the statement of operations.

Effective September 30, 2000, the Company adopted SFAS No. 133, which estab-
lishes accounting and reporting standards for derivative instruments, including cer-
tain derivative instruments embedded in other contracts and for hedging activities.
All derivatives, whether designated in hedging relationships or not, are required to
be recorded on the balance sheet at fair value. If the derivative is designated as a
fair value hedge, the changes in fair value of the derivative and the hedged item are
recognized in earnings. If the derivative is designated as a cash flow hedge, changes
in the fair value of the derivative are recorded in other comprehensive income and
are recognized in earnings when the hedged item affects earnings.

The adoption of SFAS No. 133 resulted in a cumulative effect of change in account-
ing principle after tax gain of $1.8 million in 2001.

Net Income
The Company recognized net income of $7.9 million in 2002, or $0.94 per diluted
share, compared to net income of $5.4 million in 2001, or $0.66 per diluted share.

The Company reports its financial results of operations in accordance with gener-
ally accepted accounting principles (“GAAP”). The Company has also provided in
this Form 10-K certain non-GAAP financial measures to complement its financial
information presented in accordance with GAAP. These non-GAAP financial mea-
sures relate to the Company’s results excluding the Jack Wolfskin business, which
was sold in the fourth quarter of fiscal 2002. The Company believes the non-GAAP
financial information is useful to the readers of this Form 10-K because it (a) pro-
vides comparable year over year financial information based on the Company’s con-
tinuing businesses and (b) better enables the reader to evaluate the performance of
these businesses.

The presentation of the non-GAAP financial information should not be considered
in isolation or in lieu of the results prepared in accordance with GAAP, but should
be considered in conjunction with the results prepared in accordance with GAAP.

Adjusted Results of Continuing Businesses:

(thousands, except per share data )
Net sales
Gross profit
Operating profit
Income from continuing operations
before cumulative effect of
change in accounting principle
Diluted EPS–Continuing business

2003
$315,546
127,982
11,675

2002
$295,718
122,687
14,822

2001
$295,987
118,416
10,621

5,461
$ 0.64

5,563
$ 0.66

798
$ 0.10

Reconciliation of Adjusted Results to Reported Results for 2003:

Reconciliation of Adjusted Earnings per Diluted Share:

(t housand s, except per share data)
Net sales
Gross profit
Operating profit
Income from continuing operations
before cumulative effect of change

in accounting principle

Diluted EPS

As Reported
Results
$315,892
127,989
11,613

Jack
Wolfskin
$ 346
7
62

Continuing
Results
$315,546
127,982
11,675

Income from continuing operations

(according to GAAP)

Add back (subtract):
Gain on sale of Jack Wolfskin
Closing cost for North American

2003

2002

2001

$0.63

$3.59

$ 0.44

—

(2.65)

—

5,421
$ 0.63

(40)
$(0.01)

5,461
$ 0.64

—
Jack Wolfskin operations
Jack Wolfskin operating results
0.01
Adjusted income from continuing businesses $0.64

0.05
(0.33)
$0.66

—
(0.34)
$ 0.10

Reconciliation of Adjusted Results to Reported Results for 2002:

(t housand s, except per share data)
Net sales
Gross profit
Operating profit
Income from continuing operations
before cumulative effect of change

in accounting principle

Diluted EPS

As Reported
Results
$342,532
141,054
19,751

Jack
Wolfskin
$46,814
18,367
4,929

Continuing
Results
$295,718
122,687
14,822

30,308
$ 3.59

24,745
$ 2.93

5,563
$ 0.66

Reconciliation of Adjusted Results to Reported Results for 2001:

(t housand s, except per share data)
Net sales
Gross profit
Operating profit
Income from continuing operations
before cumulative effect of change

in accounting principle

Diluted EPS

As Reported
Results
$345,637
138,781
15,718

Jack
Wolfskin
$49,650
20,365
5,097

Continuing
Results
$295,987
118,416
10,621

3,610
$ 0.44

2,812
$ 0.34

798
$ 0.10

Financial Condition
The following discusses changes in the Company’s liquidity and capital resources.

Operations
The following table sets forth the Company’s working capital position related to
continuing operations at the end of each of the past three years:

(millions)
Current assets (1)
Current liabilities (2)
Working capital (2)
Current ratio (2)

2003
$195.1
50.0
$145.1
3.9:1

2002
$192.1
53.6
$138.5
3.6:1

2001
$133.2
36.6
$ 96.6
3.6:1

(1)2003 and 2002 include cash of $88.9 and $100.8 million, respectively.
(2)Excludes short-term debt and current maturities of long-term debt.

Cash flows provided by (used for) operations totaled ($3.5) million in 2003, $33.8
million in 2002 and $15.5 million in 2001. Declines in accounts payable and other
accrued liabilities of $8.1 million and increases in inventory of $9.0 million and
accounts receivable of $1.9 million contributed to the overall cash flows used for
operations in 2003. The Company’s improved profitability and working capital
management, contributed to the positive cash flows in 2002. Increases in accounts
payable and other accrued liabilities of $15.2 million and declines in inventory of
$4.8 million contributed to the overall positive cash flows provided by operations
in 2002. The changes in 2002 are exclusive of changes resulting from the disposal
of the Jack Wolfskin business. Profitability and decreases in accounts receivable of
$6.8 million, contributed to the positive cash flows in 2001. Decreases in accounts
payable and other accrued liabilities of $11.4 million reduced the overall positive
cash flows provided by operations in 2001.

Depreciation and amortization charges were $8.2 million in 2003, $9.1 million
in 2002 and $13.5 million in 2001. The adoption of SFAS No. 142, which ceased
the amortization of goodwill, as well as reduced capital spending accounted for the
decrease in 2002 from 2001. The Company recorded a charge for impairment of
goodwill of $2.5 million in 2001.

Investing Activities
Cash flows provided by (used for) investing activities were ($9.6) million, $56.8
million and ($9.6) million in 2003, 2002 and 2001, respectively. In 2002, proceeds
from the sale of the Jack Wolfskin business contributed $59.3 million to the Com-
pany’s investing activities, while proceeds from the sale of the Company’s former
headquarters facility contributed $5.0 million. Expenditures for property, plant and
equipment were ($9.8) million in 2003, ($7.7) million in 2002 and ($9.8) million
in 2001. The Company’s recurring investments are primarily related to tooling for
new products, facilities and information systems improvements. In 2004, capital
expenditures are anticipated to be consistent with 2003 levels. These expenditures
are expected to be funded by working capital or existing credit facilities.

The Company paid, net of cash acquired, $0.6 million for two small businesses
acquired in 2001.

Financing Activities
The following table sets forth the Company’s debt and capital structure at the end
of the past three years:

(m illions)
Current debt
Long-term debt
Total debt
Shareholders’ equity
Total capitalization
Total debt to total capitalization

2003
$ 9.6
67.9
77.5
144.2
$221.7
35.0%

2002
$ 8.1
80.2
88.3
124.1
$212.4
41.6%

2001
$ 13.0
84.5
97.5
105.8
$203.3
48.0%

Cash flows used for financing activities totaled $6.1 million in 2003, $8.4 million
in 2002 and $7.9 million in 2001. In December 2001 the Company consummated
a private placement of long-term debt totaling $50.0 million. Cash provided by the
private placement debt was used to pay down short-term debt of $48.4 million in
2002. Payments on long-term debt were $8.0 million, $11.6 million and $6.8 mil-
lion in 2003, 2002 and 2001, respectively.

At October 3, 2003, the Company had available unused credit facilities in excess
of $76.7 million, which is believed to be adequate for its needs for the fore-
seeable future.

Obligations and Off Balance Sheet Arrangements
The Company has obligations and commitments to make future payments under
debt and operating leases. The following schedule details these obligations at
October 3, 2003.

Payment Due by Period

After
(millions)
2-3 years
5 years
$76,592 $ 9,587 $29,205 $27,800 $10,000
Long-term debt (1)
Operating lease obligations
4,584
Total contractual obligations $97,648 $14,674 $36,462 $31,928 $14,584

Less than
1 year

21,056

5,087

4,128

4-5 years

7,257

Total

(1) Excludes fair value adjustment of hedged debt.

The Company also utilizes letters of credit for trade financing purposes. Letters of
credit outstanding at October 3, 2003 total $2.5 million.

The Company has no off-balance sheet arrangements.

Market Risk Management
The Company is exposed to market risk stemming from changes in foreign exchange
rates, interest rates and, to a lesser extent, commodity prices. Changes in these fac-
tors could cause fluctuations in earnings and cash flows. The Company may reduce
exposure to certain of these market risks by entering into hedging transactions
authorized under Company policies that place controls on these activities. Hedging
transactions involve the use of a variety of derivative financial instruments. Deriva-
tives are used only where there is an underlying exposure, not for trading or specula-
tive purposes.

Foreign Operations
The Company has significant foreign operations, for which the functional currencies
are denominated primarily in Euros, Swiss francs, Japanese yen and Canadian dol-
lars. 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, assets and liabilities of the Company’s foreign operations, as reported in the
Company’s Consolidated Financial Statements, increase or decrease, accordingly.

The Company has mitigated a portion of the fluctuations in certain foreign curren-
cies through the purchase of foreign currency swaps, forward contracts and options
to hedge known commitments, primarily for purchases of inventory and other assets
denominated in foreign currencies, however, no such transactions were entered into
during 2003.

Interest Rates
The Company’s debt structure and interest rate risk are managed through the use
of fixed and floating rate debt. The Company’s primary exposure is to U.S. interest
rates. The Company also periodically enters into interest rate swaps, caps or collars
to hedge its exposure and lower financing costs.

Commodities
Certain components used in the Company’s products are exposed to commodity
price changes. The Company manages this risk through instruments such as pur-
chase orders and non-cancelable supply contracts. Primary commodity price expo-
sures are metals and packaging materials.

Sensitivity to Changes in Value
The estimates that follow are intended to measure the maximum potential fair value
or earnings the Company could lose in one year from adverse changes in market
interest rates under normal market conditions. The calculations are not intended to
represent actual losses in fair value or earnings that the Company expects to incur.
The estimates do not consider favorable changes in market rates. The table below
presents the estimated maximum potential one year loss in fair value and earnings
before income taxes from a 100 basis point movement in interest rates on the senior
notes outstanding at October 3, 2003:

(m illions)
Interest rate instruments

Estimated Impact on

Fair Value
$1.4

Earnings Before
Income Taxes
$0.8

The Company has outstanding $76.5 million in unsecured senior notes as of Octo-
ber 3, 2003. The senior notes have interest rates that range from 6.98% to 7.82%
and principal payments through December 2008. The fair market value of the
Company’s fixed rate debt was $86.9 million as of October 3, 2003.

In January 2002, the Company entered into interest rate swap agreements relating
to a portion of the senior notes. As of October 3, 2003, the notional amount of the

swaps was $38.7 million. The swap agreements effectively reduced interest rates to
a range of 3.46% to 4.49% on the notional amounts. The swap agreements expire
in fiscal years 2005 and 2006. The fair market value of the Company’s swap agree-
ments was $0.9 million as of October 3, 2003.

Other Factors
The Company has not been significantly impacted by inflationary pressures over
the last several years. The Company anticipates that changing costs of basic raw
materials may impact future operating costs and, accordingly, the prices of its prod-
ucts. The Company is involved in continuing programs to mitigate the impact of
cost increases through changes in product design and identification of sourcing and
manufacturing efficiencies. Price increases and, in certain situations, price decreases
are implemented for individual products, when appropriate.

Critical Accounting Policies and Estimates
The Company’s management discussion and analysis of its financial condition and
results of operations are based upon the Company’s consolidated financial state-
ments, which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements requires
the Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related footnote disclosures. On an on-
going basis, the Company evaluates its estimates, including those related to customer
programs and incentives, product returns, bad debts, inventories, intangible assets,
income taxes, warranty obligations, pensions and other post-retirement benefits, and
litigation. The Company bases its estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more sig-
nificant judgments and estimates used in the preparation of its consolidated finan-
cial statements. Management has discussed these policies with the Audit Committee
of the Company’s Board of Directors.

Allowance for Doubtful Accounts
The Company recognizes revenue when title and risk of ownership have passed to
the buyer. Allowances for doubtful accounts are estimated at the individual operat-
ing companies based on estimates of losses related to customer receivable balances.

Estimates are developed by using standard quantitative measures based on histori-
cal losses, adjusting for current economic conditions and, in some cases, evaluating
specific customer accounts for risk of loss. The establishment of reserves requires
the use of judgment and assumptions regarding the potential for losses on receiv-
able balances. Though the Company considers these balances adequate and proper,
changes in economic conditions in specific markets in which the Company operates
could have a favorable or unfavorable effect on reserve balances required.

to record impairment charges for these assets not previously recorded. On Septem-
ber 29, 2001 the Company adopted Statement of Financial Accounting Standards
No. 142, “Goodwill and Other Intangible Assets,” and was required to analyze its
goodwill for impairment issues during the first six months of fiscal 2002, and then
on a periodic basis thereafter. As a result of this analysis, the Company recorded a
goodwill impairment charge of $22.9 million, net of tax, in the second quarter of
fiscal 2002.

Inventories
The Company values inventory at the lower of cost (determined using the first-
in first-out method) or market. 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 can be used to meet future needs. Inventory reserves are estimated at
the individual operating companies using standard quantitative measures based on
criteria established by the Company. The Company also considers current fore-
cast plans, as well as, market and industry conditions in establishing reserve levels.
Though the Company considers these balances to be adequate, changes in eco-
nomic conditions, customer inventory levels or competitive conditions could have a
favorable or unfavorable effect on reserve balances required.

Deferred Taxes
The Company records a valuation allowance to reduce its deferred tax assets to the
amount that is more likely than not to be realized. While the Company has consid-
ered future taxable income and ongoing prudent and feasible tax planning strategies
in assessing the need for the valuation allowance, in the event the Company were to
determine that it would not be able to realize all or part of its net deferred tax asset
in the future, an adjustment to the deferred tax asset would be charged to income in
the period such determination was made. Likewise, should the Company determine
that it would be able to realize its deferred tax assets in the future in excess of its net
recorded amount, an adjustment to the deferred tax asset would increase income in
the period such determination was made.

Goodwill and Intangible Impairment
In assessing the recoverability of the Company’s goodwill and other intangibles,
the Company must make assumptions regarding estimated future cash flows and
other factors to determine the fair value of the respective assets. If these estimates
or their related assumptions change in the future, the Company may be required

Warranties
The Company accrues a warranty reserve for estimated costs to provide warranty
services. The Company’s estimate of costs to service its warranty obligations is
based on historical experience, expectation of future conditions and known product
issues. To the extent the Company experiences increased warranty claim activity
or increased costs associated with servicing those claims, revisions to the estimated
warranty reserve would be required. The Company engages in product quality pro-
grams and processes, including monitoring and evaluating the quality of its suppli-
ers, to help minimize warranty obligations.

New Accounting Pronouncements
In December 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure.
SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In addition,
SFAS No. 148 requires expanded and more prominent disclosure in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method on reported results.

The Company has not adopted a method under SFAS No. 148 to expense stock
options but rather continues to apply the recognition and measurement provisions
of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations in accounting for those plans. No stock-
based employee compensation expense is reflected in net income for the fiscal years
presented as all options granted under those plans had an exercise price equal to the
market value of the underlying common stock at the date of grant. A pro forma effect
table is presented in the notes to the Company’s consolidated financial statements on
net income and earnings per share assuming the fair value recognition provisions of
SFAS No. 123 would have been adopted for options granted since fiscal 1995.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest
Entities, which requires the consolidation of variable interest entities (VIEs). VIEs
are entities for which control is achieved through means other than voting rights.
The consolidation requirements of FIN No. 46 were applicable immediately to all
VIEs in which an interest was acquired after January 31, 2003. For VIEs in which
an interest was acquired before February 1, 2003, the consolidation requirements of
FIN No. 46 are generally effective at the end of our fiscal year 2004. FIN No. 46
has not had, and is not expected to have, a significant impact on our consolidated
financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Information with respect to this item is included in Management’s Discussion and
Analysis of Financial Condition and Results of Operations under the heading “Mar-
ket Risk Management.”

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this item is included on pages F-1 to F-21.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

ITEM 9A. CONTROLS AND PROCEDURES
(a) As of the end of the period covered by this Form 10-K, the Company carried out
an evaluation, under the supervision and with the participation of its management,
including the Company’s principal executive officer and principal financial officer,
of the effectiveness of the design and operation of the Company’s disclosure con-
trols and procedures (as defined in Exchange Act Rule 13a-15(e)). Based upon that
evaluation, the Company’s principal executive officer and principal financial officer
concluded that the Company’s disclosure controls and procedures were effective as
of the end of the fiscal year ended October 3, 2003 to ensure that material infor-
mation relating to the Company (including consolidated subsidiaries) was made
known to them by others within those entities, particularly during the period in
which this Form 10-K was being prepared.

(b) There were no changes in internal control over financial reporting that occurred
during the quarter ended October 3, 2003 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information with respect to this item, except for certain information on
executive officers (which appears at the end of Part I of this Form 10-K) is included
in the Company’s Proxy Statement for its February 25, 2004 Annual Meeting of
Shareholders, which, upon filing with the Securities and Exchange Commission,
will be included in the Company’s Proxy Statement for its February 25, 2004 Annual
Meeting of Shareholders, which, upon filing with the Securities and Exchange Com-
mission, will be incorporated herein by reference, under the headings “Election of
Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance,” pro-
vided, however, that the subsection entitled “Election of Directors – Audit Commit-
tee Report” shall not be deemed to be incorporated herein by reference.

Employee Code of Conduct and Code of Ethics and Procedures for
Reporting of Accounting Concerns

The Company adopted an Employee Code of Conduct (the “Code of Conduct”).
The Company requires all directors, officers and employees to adhere to the Code
of Conduct in addressing legal and ethical issues encountered in conducting their
work. The Code of Conduct requires the Company’s employees to avoid conflicts of
interest, comply with all laws and other legal requirements, conduct business in an
honest and ethical manner and otherwise act with integrity and in the Company’s
best interest.

The Company also adopted a Code of Ethics for its Chief Executive Officer, its
Chief Financial Officer, its Controller and all other financial officers and execu-
tives (the “Code of Ethics”). The Code of Ethics supplements the Code of Conduct
and is intended to deter wrongdoing and to promote honest and ethical conduct,
including the ethical handling of conflicts of interest; full, fair, accurate, timely and
understandable disclosure in the Company’s public documents; compliance with
applicable laws and regulations; the prompt reporting of violations of the Code of
Ethics; and accountability for adherence to the Code of Ethics. The Company has
posted a copy of the Code of Ethics on the Company’s website at www.johnsonout-
doors.com. The Company intends to satisfy the disclosure requirements under Item
10 of Form 8-K regarding amendments to, or waivers from, the Code of Ethics by
posting such information on its website at www.johnsonoutdoors.com.

Further, the Company has established “whistle-blower procedures” which provide a
process for the confidential and anonymous submission, receipt, retention and treat-

ment of complaints regarding accounting, internal accounting controls or auditing
matters. These procedures provide substantial protections to employees who report
Company misconduct.

ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is included in the Company’s Proxy Statement
for its February 25, 2004 Annual Meeting of Shareholders, which, upon filing with
the Securities and Exchange Commission, will be incorporated herein by reference,
under the headings “Election of Directors - Compensation of Directors” and “Exec-
utive Compensation;” provided, however, that the subsection entitled “Executive
Compensation - Compensation Committee Report on Executive Compensation”
shall not be deemed to be incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information with respect to this item is included in the Company’s Proxy Statement
for its February 25, 2004 Annual Meeting of Shareholders, which, upon filing with
the Securities and Exchange Commission, will be incorporated herein by reference,
under the heading “Stock Ownership of Management and Others” and under the
heading “Equity Compensation Plan Information.”

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item is included in the Company’s Proxy Statement
for its February 25, 2004 Annual Meeting of Shareholders, which, upon filing with
the Securities and Exchange Commission, will be incorporated herein by reference,
under the heading “Certain Transactions.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to this item is included in the Company’s Proxy Statement
for its February 25, 2004 Annual Meeting of Shareholders, which, upon filing with
the Securities and Exchange Commission, will be incorporated herein by reference,
under the heading “Independent Auditors’ Fees.”

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
The following documents are filed as a part of this Form 10-K:

Financial Statements
Included in Item 8 of Part II of this Form 10-K are the following :

Report of Management

Reports of Independent Auditors

Consolidated Balance Sheets - October 3, 2003 and September 27, 2002

Consolidated Statements of Operations - Years ended October 3, 2003,
September 27, 2002 and September 28, 2001

Consolidated Statements of Shareholders’ Equity - Years ended October 3, 2003,
September 27, 2002 and September 28, 2001

Consolidated Statements of Cash Flows - Years ended October 3, 2003,
September 27, 2002 and September 28, 2001

Notes to Consolidated Financial Statements

Financial Statement Schedules
All schedules are omitted because they are not applicable, are not required or equiv-
alent information has been included in the Consolidated Financial Statements or
notes thereto.

Exhibits
See Exhibit Index.

Reports on Form 8-K
On July 18, 2003, the Company filed a Current Report on Form 8-K dated July 18,
2003 furnishing under Item 12 the Company’s preliminary financial results press
release for the reporting period ended June 27, 2003.

On July 24, 2003, the Company filed a Current Report on Form 8-K dated July 24,
2003 furnishing under Item 12 the Company’s earnings press release for the report-
ing period ended June 27, 2003.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Racine and State of Wiscon-
sin, on the 22nd day of December 2003.

JOHNSON OUTDOORS INC.
(Registrant)
By /s/ Helen P. Johnson-Leipold

Helen P. Johnson-Leipold
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has
been signed by the following persons on behalf of the registrant and in the capacities
indicated on the 22nd day of December 2003.

/s/ Helen P. Johnson-Leipold
(Helen P. Johnson-Leipold)

/s/ Thomas F. Pyle, Jr.
(Thomas F. Pyle, Jr.)

/s/ Samuel C. Johnson
(Samuel C. Johnson)

/s/ Gregory E. Lawton
(Gregory E. Lawton)

/s/ Terry E. London
(Terry E. London)

/s/ John M. Fahey, Jr.
(John M. Fahey, Jr.)

/s/ Paul A. Lehmann
(Paul A. Lehmann)

Chairman and Chief Executive
Officer and Director
(Principal Executive Officer)

Vice Chairman of the Board
and Director

Director

Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)

EXHIBIT INDEX

Exhibit

3.1

Title

Articles of Incorporation of the Company as amended through
February 17, 2000. (Filed as Exhibit 3.1(a) to the Company’s
Form 10-Q for the quarter ended March 31, 2000 and incorporated
herein by reference.)

3.2(a) Bylaws of the Company as amended through December 4, 2003

3.2(b) Amendment to Bylaws of the Company dated as of December 4, 2003

4.1

4.2

4.3

4.4

4.5

4.6

4.7

Note Agreement dated October 1, 1995. (Filed as Exhibit 4.1 to the
Company’s Form 10-Q for the quarter ended December 29, 1995
and incorporated herein by reference.)

First Amendment dated October 31, 1996 to Note Agreement dated
October 1, 1995. (Filed as Exhibit 4.3 to the Company’s Form 10-Q
for the quarter ended December 27, 1996 and incorporated herein
by reference.)

Second Amendment dated September 30, 1997 to Note Agreement dated
October 1, 1995. (Filed as Exhibit 4.8 to the Company’s Form 10-K for
the year ended October 3, 1997 and incorporated herein by reference.)

Third Amendment dated October 3, 1997 to Note Agreement dated
October 1, 1995. (Filed as Exhibit 4.9 to the Company’s Form 10-K for
the year ended October 3, 1997 and incorporated herein by reference.)

Fourth Amendment dated January 10, 2000 to Note Agreement dated
October 1, 1995. (Filed as Exhibit 4.9 to the Company’s Form 10-Q
for the quarter ended March 31, 2000 and incorporated herein by
reference.)

Fifth Amendment dated December 13, 2001 to Note Agreement dated
October 1, 1995. (Filed as Exhibit 4.6 to the Company’s Form 10-K for the
year ended September 27, 2002 and incorporated herein by reference.)

Consent and Amendment dated of September 6, 2002 to Note
Agreement dated October 1, 1995. (Filed as Exhibit 4.7 to the Company’s
Form 10-K for the year ended September 27, 2002 and incorporated
herein by reference.

Exhibit

4.8

4.9

4.10

4.11

4.12

4.13

4.14

4.15

Title

Note Agreement dated as of September 15, 1997. (Filed as Exhibit 4.15
to the Company’s Form 10-K for the year ended October 3, 1997 and
incorporated herein by reference.)

First Amendment dated January 10, 2000 to Note Agreement dated
September 15, 1997. (Filed as Exhibit 4.10 to the Company’s Form
10-Q for the quarter ended March 31, 2000 and incorporated herein
by reference.)

Second Amendment dated December 13, 2001 to Note Agreement
dated September 15, 1997. (Filed as Exhibit 4.9 to the Company’s Form
10-K for the year ended September 27, 2002 and incorporated herein
by reference.)

Consent and Amendment dated as of September 6, 2002 to Note
Agreement dated September 15, 1997. (Filed as Exhibit 4.11 to the
Company’s Form 10-K for the year ended September 27, 2002 and
incorporated herein by reference.)

3-Year Revolving Credit Agreement dated as of August 31, 2001. (Filed
as Exhibit 4.10 to the Company’s Form 10-K for the year ended
September 27, 2002 and incorporated herein by reference.)

Amendment No. 1 to 3-Year Revolving Credit Agreement dated as
of December 18, 2001. (Filed as Exhibit 4.11 to the Company’s Form
10-K for the year ended September 27, 2002 and incorporated herein
by reference.)

Note Agreement dated as of December 13, 2001. (Filed as Exhibit 4.12
to the Company’s Form 10-K for the year ended September 27, 2002
and incorporated herein by reference.)

Consent and Amendment dated of September 6, 2002 to Note Agreement
dated as of December 13, 2001. (Filed as Exhibit 4.15 to the Company’s
Form 10-K for the year ended September 27, 2002 and incorporated
herein by reference.)

Johnson Outdoors Inc. Class B common stock Voting Trust Agreement,
dated December 30, 1993 (Filed as Exhibit 9 to the Company’s Form
10-Q for the quarter ended December 31, 1993 and incorporated herein
by reference.)

Exhibit

10.1

10.2

10.3+

10.4

10.5

10.6+

10.7+

10.8+

10.9+

Title

Stock Purchase Agreement, dated as of January 12, 2000, by and
between Johnson Outdoors Inc. and Berkley Inc. (Filed as Exhibit 2.1
to the Company’s Form 8-K dated March 31, 2000 and incorporated
herein by reference.)

Amendment to Stock Purchase Agreement, dated as of February 28,
2000, by and between Johnson Outdoors Inc. and Berkley Inc. (Filed
as Exhibit 2.2 to the Company’s Form 8-K dated March 31, 2000 and
incorporated herein by reference.)

Johnson Outdoors Inc. Amended and Restated 1986 Stock Option Plan.
(Filed as Exhibit 10 to the Company’s Form 10-Q for the quarter ended
July 2, 1993 and incorporated herein by reference.)

Registration Rights Agreement regarding Johnson Outdoors Inc.
common stock issued to the Johnson family prior to the acquisition
of Johnson Diversified, Inc. (Filed as Exhibit 10.6 to the Company’s
Form S-1 Registration Statement No. 33-16998 and incorporated herein
by reference.)

Registration Rights Agreement regarding Johnson Outdoors Inc. Class A
common stock held by Mr. Samuel C. Johnson. (Filed as Exhibit 28 to
the Company’s Form 10-Q for the quarter ended March 29, 1991 and
incorporated herein by reference.)

Form of Restricted Stock Agreement. (Filed as Exhibit 10.8 to the
Company’s Form S-1 Registration Statement No. 33-23299 and
incorporated herein by reference.)

Form of Supplemental Retirement Agreement of Johnson Diversified,
Inc. (Filed as Exhibit 10.9 to the Company’s Form S-1 Registration
Statement No. 33-16998 and incorporated herein by reference.)

Johnson Outdoors Retirement and Savings Plan. (Filed as Exhibit 10.9
to the Company’s Form 10-K for the year ended September 29, 1989
and incorporated herein by reference.)

Form of Agreement of Indemnity and Exoneration with Directors and
Officers. (Filed as Exhibit 10.11 to the Company’s Form S-1 Registration
Statement No. 33-16998 and incorporated herein by reference.)

Exhibit

10.10

10.11+

10.12+

10.13+

10.14+

10.15+

10.16+

10.17+

Title

Exhibit

Title

Consulting and administrative agreements with S. C. Johnson & Son,
Inc. (Filed as Exhibit 10.12 to the Company’s Form S-1 Registration
Statement No. 33-16998 and incorporated herein by reference.)

Johnson Outdoors Inc. 1994 Long-Term Stock Incentive Plan. (Filed
as Exhibit 4 to the Company’s Form S-8 Registration Statement
No. 333-88091 and incorporated herein by reference.)

Johnson Outdoors Inc. 1994 Non-Employee Director Stock Ownership
Plan. (Filed as Exhibit 4 to the Company’s Form S-8 Registration
Statement No. 333-88089 and incorporated herein by reference.)

Johnson Outdoors Economic Value Added Bonus Plan (Filed as Exhibit
10.15 to the Company’s Form 10-K for the year ended October 3, 1997
and incorporated herein by reference.)

Johnson Outdoors Inc. 2000 Long-Term Stock Incentive Plan. (Filed
as Exhibit 10.16 to the Company’s Form 10-Q for the quarter ended
March 31, 2000 and incorporated herein by reference.)

Share Purchase and Transfer Agreement, dated as of August 28, 2002,
by and between, among others, Johnson Outdoors Inc. and an affiliate of
Bain Capital Fund VII-E (UK), Limited Partnership. (Filed as Exhibit 2.1
to the Company’s Form 8-K dated September 9, 2002 and incorporated
herein by reference.)

Johnson Outdoors Inc. Worldwide Key Executive Phantom Share Long-
Term Incentive Plan (Filed as Exhibit 10.1 to the Company’s Form 10-Q
dated March 28, 2003 and incorporated herein by reference.)

Johnson Outdoors Inc. Worldwide Key Executives’ Discretionary Bonus
Plan. (Filed as Exhibit 10.2 to the Company’s Form 10-Q dated March
28, 2003 and incorporated herein by reference.)

23.2

Note Regarding Consent of Arthur Andersen LLP.

31.1

31.2

32.1

32.2

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
or 15d-14(a).

Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
or 15d-14(a).

Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350.

Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350.

Definitive Proxy Statement for the 2004 Annual Meeting of Share-
holders. Except to the extent specifically incorporated herein by
reference, the Proxy Statement for the 2004 Annual Meeting of
Shareholders shall not be deemed to be filed with the Securities and
Exchange Commission as part of this Form 10-K. The Proxy Statement
for the 2004 Annual Meeting of Shareholders will be filed with the
Securities and Exchange Commission under regulation 14A within
120 days after the end of the Company’s fiscal year.

+ A management contract or compensatory plan or arrangement.

Statement regarding computation of per share earnings. (Note 15 to the
Consolidated Financial Statements of the Company’s 2001 Form 10-K
is incorporated herein by reference.)

Subsidiaries of the Company as of October 3, 2003.

23.1

Consent of Ernst & Young LLP.

CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF MANAGEMENT

Table of Contents

Page

Report of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Consolidated Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . F-6

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-8

The management of Johnson Outdoors Inc. is responsible for the preparation and
integrity of all financial statements and other information contained in this Form
10-K. We rely on a system of internal financial controls to meet the responsibility
of providing accurate financial statements. The system provides reasonable assur-
ances that assets are safeguarded, that transactions are executed in accordance with
management’s authorization and that the financial statements are prepared on a
worldwide basis in accordance with accounting principles generally accepted in the
United States of America.

The financial statements for each of the years covered in this Form 10-K have been
audited by independent auditors, who have provided an independent assessment
as to the fairness of the financial statements, after obtaining an understanding of
the Company’s systems and procedures and performing such other tests as deemed
necessary.

The Audit Committee of the Board of Directors, which is composed solely of direc-
tors who are not officers of the Company, meets with management and the inde-
pendent auditors to review the results of their work and to satisfy itself that their
respective responsibilities are being properly discharged. The independent auditors
have full and free access to the Audit Committee and have regular discussions with
the Committee regarding appropriate auditing and financial reporting matters.

Helen P. Johnson-Leipold
Chairman and Chief Executive Officer

Paul A. Lehmann
Vice President and Chief Financial Officer

F-1

goodwill, as a result of initially applying Statement No. 142 to the Company’s un-
derlying records obtained from management, and (b) testing the mathematical ac-
curacy of the reconciliation of adjusted net income to reported net income, and the
related earnings-per-share amounts. In our opinion, the disclosures for 2001 in Note
1 are appropriate. However, we were not engaged to audit, review, or apply any pro-
cedures to the 2001 financial statements of the Company other than with respect to
such disclosures and, accordingly, we do not express an opinion or any other form of
assurance on the 2001 financial statements taken as a whole.

As explained in Note 1 to the consolidated financial statements, effective September
29, 2001, the Company changed its method of accounting for goodwill and other
intangible assets.

Ernst & Young LLP
Milwaukee, Wisconsin
November 14, 2003, except for Note 16,
as to which the date is December 22, 2003.

REPORT OF INDEPENDENT AUDITORS

Shareholders and Board of Directors
Johnson Outdoors Inc.:

We have audited the accompanying consolidated balance sheets of Johnson Outdoors
Inc. and subsidiaries as of October 3, 2003 and September 27, 2002 and the related
consolidated statements of operations, shareholders’ equity, and cash flows for the
years then ended. These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The financial statements of
Johnson Outdoors Inc. as of September 28, 2001, and for the year then ended were
audited by other auditors who have ceased operations. Those auditors expressed an
unqualified opinion on those financial statements in their report dated November 8,
2001, except for Notes 5 and 17 as to which the date is December 21, 2001.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes as-
sessing the accounting principles used and significant estimates made by manage-
ment, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all mate-
rial respects, the consolidated financial position of Johnson Outdoors Inc. and sub-
sidiaries as of October 3, 2003 and September 27, 2002 and the consolidated results
of their operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.

As discussed above, the financial statements of Johnson Outdoors Inc. as of Sep-
tember 28, 2001, and for the year then ended were audited by other auditors who
have ceased operations. As described in Note 1, these financial statements have been
revised to include the transitional disclosures required by Statement of Financial
Accounting Standards (Statement) No. 142, Goodwill and Other Intangible Assets,
which was adopted by the Company as of September 29, 2001. Our audit pro-
cedures with respect to the disclosures in Note 1 with respect to 2001 included
(a) agreeing the previously reported net income to the previously issued financial
statements and the adjustments to reported net income representing amortization
expense (including any related tax effects) recognized in those periods related to

F-2

The following report is a copy of a report previously issued by Arthur Andersen LLP
in connection with the Company’s Annual Report on Form 10-K for the year ended
September 28, 2001. This opinion has not been reissued by Arthur Andersen LLP.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Shareholders and Board of Directors
Johnson Outdoors Inc.:

We have audited the consolidated balance sheet of Johnson Outdoors Inc. and sub-
sidiaries as of September 28, 2001 and the related consolidated statements of opera-
tions, shareholders’ equity, and cash flows for the year then ended. These consolidat-
ed financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements
based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Johnson Outdoors Inc. and sub-
sidiaries as of September 28, 2001 and the results of their operations and their cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

As explained in Note 1 to the consolidated financial statements, effective
September 30, 2000, the Company changed its method of accounting for deriva-
tive instruments.

Arthur Andersen LLP
Milwaukee, Wisconsin
November 8, 2001, except for Notes 5 and 17,
as to which the date is December 21, 2001.

F-3

CONSOLIDATED BALANCE SHEETS

(thousands, except share data)
Assets
Current assets:
Cash and temporary cash investments
Accounts receivable less allowance for doubtful accounts of $4,214 and $4,028, respectively

Inventories

Deferred income taxes
Other current assets
Total current assets
Property, plant and equipment, net
Deferred income taxes
Intangible assets, net
Other assets
Total assets

Liabilities and Shareholders’ Equity
Current liabilities:
Short-term debt and current maturities of long-term debt
Accounts payable
Accrued liabilities:

Salaries and wages

Income taxes

Other

Total current liabilities
Long-term debt, less current maturities
Other liabilities
Total liabilities
Shareholders’ equity:
Preferred stock: none issued
Common stock:

Class A shares issued:

October 3, 2003, 7,382,979; September 27, 2002, 7,112,155

Class B shares issued (convertible into Class A shares):

October 3, 2003, 1,222,647; September 27, 2002, 1,222,729

Capital in excess of par value
Retained earnings
Deferred compensation
Accumulated other comprehensive income (loss)
Total shareholders’ equity
Total liabilities and shareholders’ equity

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-4

October 3
2003

September 27
2002

$ 88,910
43,104
50,594
6,392
6,135
195,135
31,023
18,637
29,573
3,289
$277,657

$100,830
39,972
42,231
5,083
4,021
192,137
29,611
19,588
27,139
2,810
$271,285

$ 9,587
15,627

$ 8,058
13,589

8,899
499
25,006
59,618
67,886
5,959
133,463

—

369

61
50,093
93,510
(20)
181
144,194
$277,657

9,428
6,567
24,005
61,647
80,195
5,298
147,140

—

355

61
47,583
88,089
(22)
(11,921)
124,145
$271,285

CONSOLIDATED STATEMENTS OF OPERATIONS

(thousands, except per share data)

Net sales
Cost of sales
Gross profit
Operating expenses:
Marketing and selling
Administrative management, finance and information systems
Research and development
Amortization of acquisition costs
Profit sharing
Strategic charges
Total operating expenses
Operating profit
Interest income
Interest expense
Gain on sale of subsidiary
Other (income) expense, net
Income from continuing operations before income taxes and cumulative effect of change in accounting principle
Income tax expense
Income from continuing operations before cumulative effect of change in accounting principle
Income from disposal of discontinued operations, net of income tax expense of $255
Income (loss) from effect of change in accounting principle, net of income tax expense (benefit) of $(2,200) and
$845 for 2002 and 2001, respectively
Net income
Basic earnings per common share:
Continuing operations
Discontinued operations

Income (loss) from net effect of change in accounting principle

Net income
Diluted earnings per common share:
Continuing operations
Discontinued operations

Income (loss) from net effect of change in accounting principle

Net income

The accompanying notes are an integral part of the Consolidated Financial Statements.

October 3
2003

$315,892
187,903
127,989

74,555
33,438
6,682
304
1,397
—
116,376
11,613
(798)
5,165
—
(2,456)
9,702
4,281
5,421
—

—
$ 5,421

$ 0.64
—
—
$ 0.64

$ 0.63
—
—
$ 0.63

September 27
2002

$342,532
201,478
141,054

78,224
31,929
6,729
374
2,340
1,707
121,303
19,751
(968)
6,630
(27,251)
847
40,493
10,185
30,308
495

(22,876)
$ 7,927

$ 3.69
0.06
(2.79)
$ 0.96

$ 3.59
0.06
(2.71)
$ 0.94

Year Ended

September 28
2001

$345,637
206,856
138,781

78,192
29,138
7,565
5,288
1,432
1,448
123,063
15,718
(548)
9,085
—
1,091
6,090
2,480
3,610
—

1,755
$ 5,365

$ 0.44
—
0.22
$ 0.66

F-5

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(t housand s)

Balance at September 29, 2000
Net income
Issuance of restricted stock
Issuance of stock under employee stock purchase plan
Amortization of deferred compensation
Translation adjustment
Translation adjustment recognized in the cumulative

effect of change in accounting principle

Balance at September 28, 2001
Net income
Issuance of restricted stock
Exercise of stock options
Issuance of stock under employee stock purchase plan
Amortization of deferred compensation
Translation adjustment
Translation adjustment recognized in the gain on sale

of Jack Wolfskin subsidiary
Additional minimum pension liability
Building gain

Balance at September 27, 2002
Net income
Issuance of restricted stock
Exercise of stock options
Issuance of stock under employee stock purchase plan
Amortization of deferred compensation
Translation adjustment
Additional minimum pension liability

Common
Stock

$407
—
—
1
—
—

—

408
—
—
7
1
—
—

—
—
—

416
—
—
13
1
—
—
—

Capital in
Excess of
Par Value

$44,291
—
50
70
—
—

—

44,411
—
60
1,735
75
—
—

—
—
1,302

47,583
—
50
2,378
82
—
—
—

Retained
Earnings

Deferred
Compensation

$74,797
5,365
—
—
—
—

—

80,162
7,927
—
—
—
—
—

—
—
—

88,089
5,421
—
—
—
—
—
—

$(77)
—
(50)
—
83
—

—

(44)
—
(60)
—
—
82
—

—
—
—

(22)
—
(50)
—
—
52
—
—

Accumulated Other
Comprehensive Income (loss)

Cumulative
Translation
Adjustment

$(18,586)
—
—
—
—
2,402

(2,974)

(19,158)
—
—
—
—
—
4,378

3,057
—
—

(11,723)
—
—
—
—
—
12,174
—

Minimum
Pension
Liability

Comprehensive
Income (Loss)

$ —
—
—
—
—
—

—

—
—
—
—
—
—
—

—
(198)
—

(198)
—
—
—
—
—
—
(72)

$ 5,365
—
—
—
2,402

—

$ 7,767
$ 7,927
—
—
—
—
4,378

—
(198)
—

$12,107
$ 5,421
—
—
—
—
12,174
(72)

BALANCE AT OCTOBER 3, 2003
The accompanying notes are an integral part of the Consolidated Financial Statements.

$430

$50,093

$93,510

$(20)

$ 451

$(270)

$17,523

F-6

CONSOLIDATED STATEMENTS OF CASH FLOWS

(t housand s)

Cash Provided By (Used For) Operations
Net income
Less income from discontinued operations
Less income (loss) from cumulative effect of change in accounting principle
Income from continuing operations before cumulative effect of change in accounting principle
Adjustments to reconcile income from continuing operations before cumulative effect of change in accounting
principle to net cash provided by (used for) operating activities of continuing operations:

Depreciation and amortization
Provision for doubtful accounts receivable
Provision for inventory reserves
Deferred income taxes
Gain on sale of subsidiary
Impairment of goodwill

Change in assets and liabilities, net of effect of businesses acquired or sold:

Accounts receivable

Inventories

Accounts payable and accrued liabilities
Other, net

Cash Provided By (Used For) Investing Activities
Proceeds from sale of business, net of cash
Payments for purchase of businesses, net of cash acquired
Net additions to property, plant and equipment
Proceeds from sale of property, plant and equipment

Cash Used For Financing Activities
Proceeds from issuance of senior notes
Principal payments on senior notes and other long-term debt
Net change in short-term debt
Common stock transactions

Effect of foreign currency fluctuations on cash
Increase (decrease) in cash and temporary cash investments
Cash and Temporary Cash Investments
Beginning of year
End of year

The accompanying notes are an integral part of the Consolidated Financial Statements.

October 3
2003

September 27
2002

$ 5,421
—
—
5,421

$ 7,927
495
(22,876)
30,308

Year Ended

September 28
2001

$ 5,365
—
1,755
3,610

8,198
1,216
3,296
(358)
—
—

(1,878)
(8,983)
(8,142)
(2,253)
(3,483)

—
—
(9,767)
187
(9,580)

—
(8,044)
—
1,994
(6,050)
7,193
(11,920)

9,096
1,937
1,798
4,026
(27,251)
—

(4,488)
4,821
15,218
(1,661)
33,804

59,295
—
(7,697)
5,182
56,780

50,000
(11,604)
(48,364)
1,536
(8,432)
2,609
84,761

13,516
2,460
1,529
(2,922)
—
2,526

6,780
124
(11,391)
(760)
15,472

—
(573)
(9,765)
730
(9,608)

—
(6,784)
(1,143)
71
(7,856)
698
(1,294)

100,830
$ 88,910

16,069
$100,830

17,363
$16,069

F-7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Johnson Outdoors Inc. is an integrated, global outdoor recreation products com-
pany engaged in the design, manufacture and marketing of brand name outdoor
equipment, diving, watercraft and motors products.

All monetary amounts, other than share and per share amounts, are stated in thou-
sands and are from continuing operations.

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
The Consolidated Financial Statements include the accounts of Johnson Outdoors
Inc. and all majority owned subsidiaries (the Company) and are stated in confor-
mity with accounting principles generally accepted in the United States. Significant
intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements requires management to make estimates
and assumptions that impact the reported amounts of assets, liabilities and operat-
ing results and the disclosure of commitments and contingent liabilities. Actual
results could differ significantly from those estimates. For the Company, significant
estimates include the allowance for doubtful accounts receivable, reserves for inven-
tory valuation, recoverability of goodwill, reserves for sales returns, reserves for war-
ranty service and the valuation allowance for deferred tax assets.

The Company’s fiscal year ends on the Friday nearest September 30. The fiscal year
ended October 3, 2003 (hereinafter 2003) comprises 53 weeks. The fiscal years
ended September 27, 2002 (hereinafter 2002) and September 28, 2001 (hereinafter
2001) each comprise 52 weeks.

Accounts receivable
Accounts receivable are stated net of allowance for doubtful accounts. The valua-
tion of the allowance for doubtful accounts is based on a combination of factors. In
circumstances where specific identification exists, a reserve is established to value
the account receivable to what is believed will be collected. For all other customers,
the Company recognizes allowances for bad debts based on historical experience of
bad debts as a percent of 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
Inventories are stated at the lower of cost (determined using the first-in, first-out
method) or market.

Inventories attributable to continuing operations at the end of the respective years
consist of the following:

Raw materials
Work in process
Finished goods

Less reserves

2003

$19,009
2,065
33,362
54,436
3,842
$50,594

2002

$17,709
1,072
25,633
44,414
2,183
$42,231

Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation of plant and equipment is determined by straight-line and accelerated
methods over estimated useful lives, with the following ranges:

Cash and Temporary Cash Investments
The Company considers all short-term investments in interest-bearing bank
accounts, securities and other instruments with an original maturity of three months
or less to be equivalent to cash.

Property improvements
Buildings and improvements
Furniture, fixtures and equipment

5-20 years
20-40 years
3-10 years

The Company maintains cash in bank accounts in excess of insured limits. The
Company has not experienced any losses as a result of this practice and does not
believe that significant credit risk exists.

Upon retirement or disposition, cost and the related accumulated depreciation are
removed from the accounts and any resulting gain or loss is recognized in operating
results.

F-8

Property, plant and equipment at the end of the respective years consist of the
following:

Property and improvements
Buildings and improvements
Furniture, fixtures and equipment

Less accumulated depreciation

2003

$ 1,115
20,623
83,715
105,453
74,430
$ 31,023

2002

$ 1,103
18,920
80,315
100,338
70,727
$ 29,611

Impairment of Property, Plant and Equipment
The Company annually assesses, if indicators of impairment are identified, the
recoverability of property, plant and equipment, primarily by determining whether
the depreciation of the balance over the remaining life of the underlying assets can
be recovered through projected undiscounted future operating cash flows of the
related businesses. The amount of impairment, if any, is measured primarily based
on the deficiency of projected discounted future operating cash flows relative to the
value of the assets, using a discount rate reflecting the Company’s cost of capital,
which currently approximates 10%. There was no impairment of property, plant
and equipment during 2003 or 2002.

Intangible Assets
Intangible assets are stated at cost less accumulated amortization. Amortization is
computed using the straight-line method with periods ranging from 3 to 16 years
for patents, trademarks and other intangible assets. Intangible assets at the end of
the respective years consist of the following:

Goodwill
Patents, trademarks and other

Less accumulated amortization

2003

$42,042
4,965
47,007
17,434
$29,573

2002

$38,541
4,840
43,381
16,242
$27,139

Amortization of patents, trademarks and other intangible assets was $302, $374,
and $422 for 2003, 2002 and 2001, respectively. Amortization of these intangible
assets is expected to continue at consistent levels for each of the next five years.

Impairment of Goodwill and Other Intangibles
Effective September 29, 2001, the Company adopted SFAS No. 142. In accordance
with the adoption of this new standard, the Company ceased the amortization of
goodwill. If SFAS No. 142 had been in effect for the year ended September 28,
2001, the Company’s income from continuing operations before cumulative effect of
change in accounting principle would have been $5,950 or $0.73 per diluted share.

As required under SFAS No. 142, the Company performed an assessment of the
carrying value of goodwill using a number of criteria, including the value of the
overall enterprise as of September 29, 2001. This assessment resulted in a write off
of goodwill totaling $22,876, net of tax ($2.71 per diluted share) and has been
reflected as a change in accounting principle. The write off is associated with the
Watercraft ($12,900) and Diving ($10,000) business units. Future impairment
charges from existing operations or other acquisitions, if any, will be reflected as an
operating expense in the statement of operations.

In 2001, under the guidance prior to the adoption of SFAS No. 142, the Com-
pany recognized in operating expenses a $2,526 write-down for impaired goodwill
related to the Airguide brand in the Motors business.

Warranties
The Company has recorded product warranty accruals of $3,270 as of October 3,
2003. The Company provides for warranties of certain products as they are sold
in accordance with SFAS No. 5, Accounting for Contingencies. The following table
summarizes the warranty activity for the year ended October 3, 2003 in accordance
with Financial Accounting Standards Board Interpretation No. 45, Guarantor’s
Accounting and Disclosures Requirements for Guarantees, Including Indirect Guaran-
tees of Indebtedness with Others.

Balance at September 27, 2002
Expense accruals for warranties issued during the year
Less current year warranty claims paid
Balance at October 3, 2003

$1,846
3,855
2,431
$3,270

F-9

Earnings per Share
Basic earnings per share is computed by dividing net earnings by the weighted-aver-
age number of common shares outstanding. Diluted earnings per share is computed
by dividing net earnings by the weighted-average number of common shares out-
standing, adjusted for the net effect of dilutive stock options.

The following table sets forth the computation of basic and diluted earnings per
common share from continuing operations before cumulative effect of change in
accounting principle:

2003

2002

2001

Income from continuing operations before
cumulative effect of change in accounting
principle for basic and diluted earnings
per share
Weighted average shares outstanding
Less nonvested restricted stock
Basic average common shares
Dilutive stock options and restricted stock
Diluted average common shares
Basic earnings per common share from
continuing operations before cumulative
effect of change in accounting principle
Diluted earnings per common share from
continuing operations before cumulative
effect of change in accounting principle

5,367

$5,421

$30,308

$3,610
8,411,713 8,224,655 8,161,624
15,162
8,406,346 8,214,461 8,146,462
23,277
8,600,162 8,429,769 8,169,739

193,816

215,308

10,194

$0.64

$3.69

$0.44

The Company accounts for its stock-based compensation plans under Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees.
The pro forma information below was determined using the fair value method
based on provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as
amended by SFAS No. 148, Accounting for Stock-Based Compensation—Transition
and Disclosure, issued in December 2002.

Income from continuing operations
before cumulative effect of change in
accounting principle
Total stock-based employee compensation
expense determined under fair value
method for all awards net of tax
Pro forma income from continuing
operations before cumulative effect of
change in accounting principle
Basic earnings per common share from
continuing operations before cumulative
effect of change in accounting principle

As reported
Pro forma

Diluted earnings per common share from
continuing operations before cumulative
effect of change in accounting principle

2003

2002

2001

$5,421

$30,308

$3,610

(273)

(459)

(498)

$5,148

$29,849

$3,112

$ 0.64
$ 0.61

$3.69
$3.66

$0.44
$0.38

$0.63

$3.59

$0.44

As reported
Pro forma

$ 0.63
$ 0.60

$3.59
$3.55

$0.44
$0.38

Stock options that could potentially dilute basic earnings per share in the future that
were not included in the fully diluted computation for 2003 and 2002 because they
would have been antidilutive were 87,500 and 186,222, respectively.

Stock-Based Compensation
The Company accounts for stock options using the intrinsic value based method.
Accordingly, compensation cost is generally recognized only for stock options
granted with an exercise price lower than the market price on the date of grant.
The Company’s practice is to grant options with an exercise price equal to the fair
market value on the date of the grant. The fair value of restricted shares awarded
in excess of the amount paid for such shares is recognized as compensation and is
amortized over 1 to 3 years from the date of award, the period after which all restric-
tions generally lapse.

For purposes of calculating pro forma operating results, the fair value of each option
grant was estimated using the Black-Scholes option pricing model with an expected
volatility of approximately 35-50%, a risk free rate equivalent to five year U.S. Trea-
sury securities, an expected life of five years and no dividends. The pro forma operat-
ing results reflect only options granted after 1995. Based on these assumptions, the
weighted average fair market value of options granted during the year was $5.30 in
2003, $2.90 in 2002 and $2.18 in 2001.

The Company’s employee stock purchase plan provides for the issuance of Class A
common stock at a purchase price of not less than 85% of the fair market value at the
date of grant. During 2003, 2002 and 2001, 9,585, 10,378, 13,382 shares, respec-
tively, were issued under this plan. Shares available for purchase by employees under
this plan were 56,829 at October 3, 2003.

F-10

Income Taxes
The Company provides for income taxes currently payable and deferred income
taxes resulting from temporary differences between financial statement and tax-
able income.

In assessing the realizability of deferred tax assets, the Company considers whether
it is more likely than not that some portion, or all of the deferred tax assets, will
not be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the years in which those temporary
differences become deductible. The Company considers the scheduled reversal of
deferred tax liabilities, projected future taxable income and tax planning strategies
in making this assessment.

Federal and state income taxes are provided on foreign subsidiary income distrib-
uted to, or taxable in, the U.S. during the year. At October 3, 2003, net undistrib-
uted earnings of foreign subsidiaries total approximately $106,638. The Company
considers these unremitted earnings to be permanently invested abroad and no pro-
vision for federal or state taxes have been made on these amounts. In the future, if
foreign earnings are returned to the U.S., provision for income taxes will be made.

The Company’s U.S. entities file a consolidated federal income tax return.

Employee Benefits
The Company and certain of its subsidiaries have various retirement and profit
sharing 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 generally to fund the minimum amount required under the Employee
Retirement Income Security Act of 1974 for plans subject thereto. Profit sharing
and other retirement costs are funded at least annually.

Foreign Operations and Related Derivative Financial Instruments
The functional currencies of the Company’s foreign operations are the local curren-
cies. 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. Gains and losses 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 realized as assets and liabilities of foreign opera-
tions, denominated in other than the local currency, are first adjusted based on
the denominated currency. Additionally, currency gains and losses are realized
through the settlement of transactions denominated in other than local currency.
The Company realized currency gains (losses) from transactions of $2,791, ($622)
and ($555) for 2003, 2002 and 2001, respectively.

The Company operates internationally, which gives rise to exposure to market risk
from movements in foreign currency exchange rates. To minimize the effect of
fluctuating foreign currencies on its income, the Company periodically enters into
foreign currency forward contracts. The Company primarily hedges assets, inven-
tory purchases and loans denominated in foreign currencies. The Company does
not enter into foreign exchange contracts for trading purposes. Gains and losses on
unhedged exposures are recorded in operating results.

The contracts are used to hedge known foreign currency transactions on a
continuing basis for periods consistent with the Company’s exposures. Beginning
September 30, 2000 upon the adoption of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities—Deferral of the Effective Date of SFAS
Statement No. 133 and SFAS No. 138, Accounting for Certain Derivative Instruments
and Certain Hedging Activities, the effective portion of the gain or loss on the for-
eign currency forward contract is reported as a component of other comprehensive
income and reclassified into earnings in the same period during which the hedged
transaction affects earnings. The remaining gain or loss on the futures contract, if
any, is recognized in current earnings during the period of changes. Adoption of
these new accounting standards resulted in a cumulative after-tax gain of approxi-
mately $1.8 million and an accumulated other comprehensive loss of approximately
$3.0 million in the first quarter of fiscal 2001.

At October 3, 2003 and September 27, 2002, the Company had no foreign cur-
rency contracts.

Revenue Recognition
Revenue from sales is recognized when all substantial risk of ownership transfers
to the customer, which is generally upon shipment of products. Estimated costs of
returns and allowances are accrued when revenue is recognized.

F-11

Reclassifications
Certain reclassifications have been made to prior years’ amounts to conform with
the current year presentation.

2 STRATEGIC CHARGES
In 2002 and 2001, the Company recorded strategic charges totaling $1,707 and
$1,448, respectively.

In 2002 strategic charges included moving and other exit costs related to the reloca-
tion of manufacturing facilities in the Watercraft business and severance and clo-
sure costs increased reserves for doubtful accounts receivable and excess inventory
related to the North American Jack Wolfskin closure. Severance costs included in
the strategic charges totaled $150 and approximately three employees were impacted
by these actions. There are no unexpended funds related to this action as of the end
of 2003.

In 2001 strategic charges included severance, moving and other exit costs related
primarily to the closure and relocation of manufacturing facilities in the Watercraft
business. Severance costs included in the strategic charges totaled $660 and approx-
imately 88 employees were impacted by these actions. There are no unexpended
funds related to this action as of the end of 2003.

Advertising
The Company expenses substantially all costs related to production of advertising
the first time the advertising takes place. Cooperative promotional arrangements
are accrued in relation to sales.

Advertising expense attributable to continuing operations in 2003, 2002 and 2001
totaled $14,909, $16,340 and $18,282, respectively. Capitalized costs at October 3,
2003 and September 27, 2002 totaled $772 and $726, respectively, and primarily
include catalogs and costs of advertising which has not yet run for the first time.

Shipping and Handling Costs
Shipping and handling expense attributable to continuing operations included in
marketing and selling expense was $11,723, $12,208 and $12,821 for 2003, 2002
and 2001, respectively.

Research and Development
Research and development costs are expensed as incurred.

The Company has not adopted a method under SFAS No. 148 to expense stock
options but rather continues to apply the recognition and measurement provisions
of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations in accounting for those plans. No stock-
based employee compensation expense for options is reflected in net income for the
fiscal years presented as all options granted under those plans had an exercise price
equal to the market value of the underlying common stock at the date of grant.
A pro forma effect table is presented in the Stock-Based Compensation section of
Note 1, which assumes the fair value recognition provisions of SFAS No. 123 would
have been adopted for all options granted since fiscal 1995.

F-12

3 ACQUISITIONS
During 2001, the Company completed the acquisition of two small businesses
which manufacture paddles and marine accessories. The initial purchase price,
including direct expenses, for the acquisitions was approximately $600, of which
approximately $420 was recorded as intangible assets.

All acquisitions were accounted for using the purchase method and, accordingly,
the Consolidated Financial Statements include the results of operations since the
respective dates of acquisition.

4 SALE OF JACK WOLFSKIN BUSINESS
In September 2002, the Company sold its Jack Wolfskin business. The sale price
totaled 60,320 Euros ($59,295 U.S. dollars) after an adjustment based on net work-
ing capital of the business as finally determined. The Company recorded a gain
on the sale of $22,351, after tax. In connection with the sale, the Company exited
its North American Jack Wolfskin operations in 2003. The Company recorded
charges amounting to $450 related to exiting these operations in fiscal year 2002.

5 SALE OF FISHING BUSINESS
In March 2002, the Company recognized a gain from discontinued operations of
$495, net of tax, related to the final accounting for the sale of the Fishing business.
The sale of the Fishing business occurred in March 2000.

INDEBTEDNESS

6
Short-term credit facilities provide for borrowings with interest rates set periodi-
cally by reference to market rates. Commercial paper rates are set by competi-
tive bidding. The Company’s primary facility is a $70,000 unsecured revolving
credit agreement expiring in August 2004, which includes a maximum amount of
$15,000 in support of commercial paper issuance. At October 3, 2003, the Com-
pany’s interest rate on this credit agreement was LIBOR plus 100 basis points. Per
the agreement, the LIBOR rate is determined based on the term of the borrowing.
At October 3, 2003, the Company had no outstanding borrowings on this credit
agreement. The Company has lines of credit, both foreign and domestic, totaling
$81,310, of which $76,667 is available at October 3, 2003. The Company also
utilizes letters of credit for trade financing purposes. Letters of credit outstanding
at October 3, 2003 total $2,505.

Long-term debt at the end of the respective years consists of the following:

2001 senior notes
1998 senior notes
1996 senior notes
Other long-term notes

Fair value adjustment of hedged debt

Less current maturities

2003

$ 50,000
14,800
11,700
92
76,592
881
77,473
9,587
$ 67,886

2002

$ 50,000
16,800
17,700
1,988
86,488
1,765
88,253
8,058
$ 80,195

In December 2001, the Company issued unsecured senior notes totaling $50,000
with an interest rate of 7.82%. The senior notes have annual principal payments of
$10,000 beginning December 2004 with a final payment due December 2008.

In 1998, the Company issued unsecured senior notes totaling $25,000 with an
interest rate of 7.15%. The 1998 senior notes have remaining annual principal pay-
ments of $800 to $7,000 with a final payment due October 2007.

In 1996, the Company issued unsecured senior notes totaling $30,000 with an
interest rate of 7.77% and $15,000 with an interest rate of 6.98%. The 1996 senior
notes have remaining annual principal payments of $500 to $5,000 with a final
payment due October 2005.

The Company’s policy is to manage interest cost using a mix of fixed and variable-
rate debt. To manage this risk in a cost efficient manner, the Company enters into
interest rate swaps in which the Company agrees to exchange, at specified intervals,
the difference between fixed and variable interest amounts calculated by reference
to an agreed upon notional principal amount. The Company formally documents
all relationships between hedging instruments and hedged items, as well as its risk-
management objectives and strategies for understanding hedge transactions.

Interest rate swaps that met specific conditions under SFAS No. 133 are accounted
for as fair value hedges. Accordingly, the changes in the fair value of these instru-
ments are immediately recorded in earnings. The mark-to-market values of both
the fair value hedging instruments and the underlying debt obligations are recorded

F-13

as equal and offsetting gains and losses in the interest expense component of the
statement of operations. The fair value of the Company’s interest rate swap agree-
ments was approximately $881 at October 3, 2003 and included in other assets on
the consolidated balance sheet. All existing fair value hedges are 100% effective. As
a result, there is no impact to earnings due to hedge ineffectiveness.

Based on the borrowing rates currently available to the Company for debt with
similar terms and average maturities, the fair value of the Company’s long-term
debt as of October 3, 2003 and September 27, 2002 was approximately $86,900
and $89,900, respectively. The carrying value of all other financial instruments
approximates the fair value.

In January 2002, the Company entered into the interest rate swap agreements
described below, which effectively convert some of the fixed rate senior notes to
variable rate debt.

Hedged Debt

2001 senior notes - 7.82%
1998 senior notes - 7.15%
1996 senior notes - 7.77%
1996 senior notes - 6.98%

Notional Amount
of Swap

Effective
Interest Rate(1)

Fiscal Year
Expiration

Swap
Fair Value

$20,000
7,000
8.300
3,400

3.80%
3.84%
4.49%
3.46%

2006
2006
2006
2005

$584
189
85
23
$881

(1) Effective rate for the year ended October 3, 2003 of notional amount of senior notes based on interest

rate swaps entered into in January 2002

On November 6, 2003, the Company terminated the swap instruments relating
to the 1998 and 2001 debt instruments. The Company realized gains on the 1998
and 2001 instruments of $161 and $744, respectively. The gains will be amortized
as a reduction in interest expense over the remaining life of the underlying debt
instruments.

Aggregate scheduled maturities of long-term debt in each of the next five years end-
ing September 2008 and thereafter are as follows:

Year
2004
2005
2006
2007
2008
Thereafter

$ 9,587
15,705
13,500
17,000
10,800
10,000

Interest paid was $4,762, $6,214 and $9,178 for 2003, 2002 and 2001, respectively.

F-14

Certain of the Company’s loan agreements require that Samuel C. Johnson, mem-
bers of his family and related entities (hereinafter the Johnson Family) continue
to own stock having votes sufficient to elect a 51% majority of the directors. At
October 3, 2003, the Johnson Family held approximately 3,385,000 shares or 46%
of the Class A common stock, approximately 1,168,000 shares or 96% of the Class
B common stock and approximately 77% of the voting power of both classes of
common stock taken as a whole. The agreements also contain restrictive covenants
regarding the Company’s net worth, indebtedness, fixed charge coverage and distri-
bution of earnings. The Company is in compliance with the restrictive covenants of
such agreements, as amended from time to time.

7 LEASES AND OTHER COMMITMENTS
The Company leases certain operating facilities and machinery and equipment
under long-term, noncancelable operating leases. Future minimum rental commit-
ments under noncancelable operating leases attributable to having an initial term in
excess of one year at October 3, 2003 are as follows:

Year
2004
2005
2006
2007
2008
Thereafter

$5,087
4,046
3,211
2,140
1,988
4,584

Future minimum rental commitments to related parties are $652 and $490 for
2004 and 2005, respectively. Rental expense attributable to continuing operations
under all leases was approximately $6,926, $6,830 and $6,739 for 2003, 2002 and
2001, respectively.

The Company makes commitments in a broad variety of areas, including capital
expenditures, contracts for services, sponsorship of broadcast media and supply of fin-
ished products and components, all of which are in the ordinary course of business.

INCOME TAXES

8
Income tax expense (benefit) attributable to continuing operations for the respective
years consists of the following:

The tax effects of temporary differences that give rise to significant portions of
deferred tax assets and deferred tax liabilities attributable to continuing operations
at the end of the respective years are presented below:

Current:
Federal
State
Foreign
Deferred

2003

2002

2001

$ 23
71
4,545
(358)
$4,281

$ 204
74
9,732
175
$10,185

$ —
101
5,301
(2,922)
$2,480

The significant components of deferred tax expense (benefit) attributable to continu-
ing operations are as follows:

Deferred tax benefit (exclusive of effects of
other components listed below)
Increase in beginning of the year balance of the
valuation allowance for deferred tax assets

2003

2002

2001

$(358)

$(177) $(3,185)

—
$(358)

352
$ 175

263
$(2,922)

Deferred tax assets:
Inventories
Compensation
Foreign tax credit carryforwards
Goodwill and other intangibles
Net operating loss carryforwards
Other
Total gross deferred tax assets
Less valuation allowance

Deferred tax liabilities:
Foreign statutory reserves
Net deferred tax asset

2003

2002

$ 2,309
4,355
506
1,391
18,755
4,821
32,137
6,527
25,610

$ 1,838
4,800
2,240
1,579
19,758
2,869
33,084
8,398
24,686

581
$25,029

15
$24,671

The net deferred tax asset is recorded as $6,392 in current and $18,637 in non-
current assets for 2003 and $5,083 in current and $19,588 in non-current assets
for 2002.

Following is the income (loss) from continuing operations before income taxes
and cumulative effect of change in accounting principle for domestic and foreign
operations:

United States
Foreign

2003

2002

2001

$ 110
9,592
$9,702

$ (1,477)
41,970
$40,493

$(5,719)
11,809
$ 6,090

F-15

The significant differences between the statutory federal tax rate and the effective
income tax rates for income from continuing operations are as follows:

Statutory U.S. federal income tax rate
State income taxes, net of federal income

2003

2002

2001

34.0%

tax benefit

—
Foreign rate differential
11.0
Change in beginning of year valuation allowance —
0.1
Foreign operating losses
(1.0)
Other
44.1%

—
(8.8)
0.1
0.1
(0.2)
25.2%

0.9
1.3
4.3
—
0.2
40.7%

The foreign rate differential of 11.0 and (8.8) for 2003 and 2002, respectively, is
comprised of several foreign tax related items; most notably an ongoing German
income tax audit in 2003 and the favorable tax treatment on the sale of the Jack
Wolfskin business in 2002.

At October 3, 2003, the Company has $506 of foreign tax credit carryforwards
available to be offset against future U.S. tax liabilities. The credits expire in 2004
through 2008 if not utilized. These carryforwards have been fully reserved for in
the valuation allowance. The balance of the valuation allowance relates to state and
foreign net operating loss carryforwards and other tax credits.

At October 3, 2003, the Company has a U.S. federal operating loss carryforward
of $34,705 which begin to expire in 2012, and various state net operating loss car-
ryforwards. During 2003, 2002 and 2001, foreign net operating loss carryforwards
were utilized, resulting in a reduction in income tax expense of $384, $27 and $32,
respectively. In addition, certain of the Company’s foreign subsidiaries have net
operating loss carryforwards totaling $2,240. These amounts are available to offset
future taxable income over the next 9 to 20 years and are anticipated to be utilized
during this period.

Taxes paid attributable to continuing operations were $10,708, $4,663 and $4,337
for 2003, 2002 and 2001, respectively.

9 EMPLOYEE BENEFITS
Net periodic pension cost for noncontributory defined benefit pension plans
includes the following components.

Service cost
Interest on projected benefit obligation
Less estimated return on plan assets
Amortization of unrecognized:
Net loss
Prior service cost
Transition asset
Net amount recognized

2003

$464
878
676

11
26
(71)
$632

2002

$471
841
652

28
26
(80)
$634

2001

$343
792
631

1
26
(80)
$451

The following provides a reconciliation of the changes in the plans benefit obliga-
tion and fair value of assets for 2003 and 2002 and a statement of the funded status
at the end of each year:

Benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost

Actuarial gain (loss)
Benefits paid
Benefit obligation at end of year
Fair value of plan assets:
Fair value of plan assets at beginning of year
Actual return (loss) on plan assets
Company contributions
Benefits paid
Fair value of plan assets at end of year
Funded status:
Funded status of the plan
Unrecognized net loss
Unrecognized prior service cost
Unrecognized transition asset
Net liability recognized

2003

2002

$12,581
464
878
(80)
(690)
$13,153

$11,929
471
841
21
(681)
$12,581

$ 7,037
901
1,211
(690)
$ 8,459

$ 7,684
(298)
332
(681)
$ 7,037

$(4,694) $(5,544)
2,702
97
(130)
$(1,963) $(2,875)

2,709
71
(49)

F-16

The following summarizes the components of the net liability recognized in the
consolidated balance sheets at the end of the respective years:

10 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 or outstanding.

Prepaid benefit cost
Accrued benefit liability
Intangible asset
Accumulated other comprehensive income
Net liability recognized

2003

2002

$ — $ —
(3,269)
(2,439)
90
66
304
410
$(1,963) $(2,875)

Plan assets are invested primarily in stock and bond mutual funds and insurance
contracts.

Actuarial assumptions used to determine the projected benefit obligation are as
follows:

Discount rate
Long-term rate of return
Average salary increase rate

2003

2002

2001

7.25%
8
5

A majority of the Company’s full-time employees are covered by profit sharing
and defined contribution programs. Participating entities determine profit shar-
ing distributions under various performance and service based formulas. Expense
attributable to continuing operations under the defined contribution programs was
approximately $2,500, $2,300 and $2,200 for 2003, 2002 and 2001, respectively.

11 COMMON STOCK
Common stock at the end of the respective years was as follows:

Class A, $.05 par value:
Authorized
Outstanding
Class B, $.05 par value:
Authorized
Outstanding

2003

2002

20,000,000 20,000,000
7,112,155

7,382,979

3,000,000
1,222,647

3,000,000
1,222,729

Holders of Class A common stock are entitled to elect 25% of the members of the
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) 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 2003, 82
shares of Class B common stock were converted into Class A common stock. Dur-
ing 2002 and 2001, no shares of Class B common stock were converted into Class
A common stock.

F-17

12 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 direc-
tors. All stock options have been granted at a price not less than fair market value
at the date of grant and become exercisable over periods of one to four years from
the date of grant. Stock options generally have a term of 10 years. Current plans
also allow for issuance of restricted stock or stock appreciation rights in lieu of
options. Grants of restricted shares are not significant in any year presented. No
stock appreciation rights have been granted. In December 2002, the Company
adopted a phantom share plan to provide an alternative vehicle for the granting of
long-term incentives. In 2003, awards were made under the phantom share plan but
were not significant.

A summary of stock option activity related to the Company’s plans is as follows:

Outstanding at September 29, 2000
Granted
Cancelled
Outstanding at September 28, 2001
Granted
Exercised
Cancelled
Outstanding at September 27, 2002
Granted
Exercised
Cancelled
Outstanding at October 3, 2003

Shares
952,230
235,000
(100,435)
1,086,795
277,755
(148,952)
(151,579)
1,064,019
20,750
(256,327)
(137,557)
690,885

Weighted Average
Exercise Price
$12.08
5.50
17.00
10.20
7.64
10.15
13.54
9.06
10.36
7.26
13.79
$ 8.80

Shares available for grant to key executives and non-employee directors are 142,691
at October 3, 2003.

The range of options outstanding at October 3, 2003 is as follows:

13 RELATED PARTY TRANSACTIONS
Various transactions are conducted between the Company and other organizations
controlled by the Johnson Family. These include consulting services, aviation ser-
vices, office rental, royalties and certain administrative activities. Total net costs of
these transactions are $1,825, $1,219 and $546 for 2003, 2002 and 2001, respec-
tively. The majority of the increase in 2002 resulted from a new three year lease
agreement with a Johnson Family controlled entity for the Company’s new head-
quarters facility.

On November 30, 2001, the Company entered into a sale/leaseback transaction for
its prior headquarters facility with a related party. The Company sold the facility for
$4,982 in cash and related furniture and fixtures for $200 in cash and entered into
a month-to-month lease agreement with the related party, which terminated May
31, 2002. The Company and the related party engaged an independent appraiser
to determine the sale price of the facility. The gain of $1,302, net of income tax of
$675, was recorded as an additional contribution to equity. The gain on the sale
could not be recognized in the statement of operations due to the related party
nature of the transaction.

14 SEGMENTS OF BUSINESS
The Company conducts its worldwide operations through separate global busi-
ness units, 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.

Net sales and operating profit include both sales to customers, as reported in the
Company’s consolidated statements of operations, and interunit transfers, which
are priced to recover cost plus an appropriate profit margin. Total assets represent
assets that are used in the Company’s operations in each business unit at the end of
the years presented.

Number of Options

605,885/414,769

Weighted Average
Exercise Price
Outstanding/Exercisable Outstanding/Exercisable
$ 7.35/$ 7.41
16.51/ 16.57
23.06/ 23.06
$ 8.80/$ 9.38

51,000/49,000
34,000/34,000
690,885/497,769

Weighted Average
Remaining Contractual
Life (in years)
6.4
3.8
0.7
5.9

Price Range
per Share
$ 5.31–11.50
12.94–17.50
18.63–24.38

F-18

A summary of the Company’s continuing operations by business segment is pre-
sented below:

A summary of the Company’s continuing operations by geographic area is presented
below:

2003

2002

2001

2003

2002

2001

Net sales:
Outdoor equipment:

Unaffiliated customers
Interunit transfers

Watercraft:

Unaffiliated customers
Interunit transfers

Diving:

Unaffiliated customers
Interunit transfers

Motors:

Unaffiliated customers
Interunit transfers

Other
Eliminations

Operating profit (loss):
Outdoor equipment
Watercraft
Diving
Motors
Other

Total assets:
Outdoor equipment
Watercraft
Diving
Motors
Other

$ 72,704 $106,318 $114,875
89

141

78,971
946

82,865
534

85,841
343

77,974
38

72,565
25

80,426
62

85,703
867
540
(1,933)

64,446
539
49
(1,033)
$315,892 $342,532 $345,637

80,577
761
207
(1,461)

$ 12,136 $ 11,882 $ 12,015
1,293
11,638
231
(9,459)
$ 11,613 $ 19,751 $ 15,718

(8,983)
8,579
11,993
(12,112)

1,162
10,502
8,248
(12,043)

$ 25,535 $ 23,114
54,480
78,403
21,423
93,865
$277,657 $271,285

58,013
92,254
23,682
78,173

Net sales:
United States:

Unaffiliated customers
Interarea transfers

Europe:

Unaffiliated customers
Interarea transfers

Other

Interarea transfers

Eliminations

Total assets:
United States
Europe
Other

Long-term assets(1):
United States
Europe
Other

$242,100 $232,383 $228,491
5,828

6,760

5,947

46,792
10,593
27,000
3,170
(20,523)

89,995
7,267
27,151
7,170
(20,265)
$315,892 $342,532 $345,637

83,696
7,993
26,453
4,032
(17,972)

$164,336 $114,198
136,007
21,080
$277,657 $271,285

89,541
23,780

$ 33,121 $ 32,680
23,241
1,873
$ 62,454 $ 57,794

26,816
2,517

(1) Long-term assets consist of net property, plant and equipment, net intangible assets and other assets

excluding financial instruments.

The Company’s Outdoor Equipment business recognized sales to the United States
military totaling $42,444 in 2003. No customer accounted for more than 10% of
sales in 2002 or 2001.

F-19

16 LITIGATION
The Company is subject to various legal actions and proceedings in the normal
course of business, including those related to 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.

On February 21, 2003, the competition department of the European Commission
initiated formal proceedings in a case concerning certain provisions in the former
distribution arrangements of the Company’s European SCUBAPRO UWATEC
subsidiaries. The Company responded to the Commission’s views at a hearing on
July 1, 2003. The Company has been and will aggressively pursue its position.
At this preliminary stage in the procedure, the Commission has indicated that it
is considering imposing an unspecified fine on the Company and its European
SCUBAPRO UWATEC subsidiaries. The Company cannot currently predict the
outcome of the investigation.

On December 22, 2003, the Company entered into a confidential settlement agree-
ment with a former employee. Under the terms of the agreement the Company is
entitled to receive up to $2.0 million. Any consideration received pursuant to the
settlement agreement will be recorded in the quarter in which it occurs.

15 VALUATION AND QUALIFYING ACCOUNTS
The following summarizes changes to valuation and qualifying accounts:

Additions Reserves of
Businesses
Acquired

Balance at Charged to
Costs and
Beginning
Expenses
of Year

Less
or Sold Deductions

Balance
at End
of Year

Year ended
October 3, 2003:
Allowance for

doubtful accounts

$4,028

$1,216

$ —

$1,030 $4,214

Reserves for

inventory valuation

2,183

3,296

—

1,637 3,842

Year ended
September 27, 2002:
Allowance for

doubtful accounts

3,739

1,937

(438)

1,210

4,028

Reserves for

inventory valuation

3,404

1,798

(848)

2,171

2,183

Year ended
September 28, 2001:
Allowance for

doubtful accounts

3,895

2,460

Reserves for

inventory valuation

2,949

1,529

—

2,616

3,739

1,074

3,404

Deductions include the net impact of foreign currency fluctuations on the respective
accounts.

F-20

17 QUARTERLY FINANCIAL SUMMARY (unaudited)
The following summarizes quarterly operating results:

Net sales
Gross profit
Operating profit (loss)
Income (loss) from continuing operations
before cumulative effect of change in
accounting principle
Gain on disposal of discontinued
operations, net of tax
Loss from cumulative effect of change in
accounting principle, net of tax
Net income (loss)
Basic earnings (loss) per common share:
Continuing operations
Discontinued operations
Cumulative effect of change in

accounting principle, net of tax

Net income (loss)
Diluted earnings (loss) per common share:
Continuing operations
Discontinued operations
Cumulative effect of change in

accounting principle, net of tax

Net income (loss)

2003
$54,895
23,683
166

First Quarter

2002
$ 59,738
25,290
991

Second Quarter

2003
$83,265
36,193
6,124

2002
$97,718
40,741
8,258

2003
$108,546
43,508
8,919

Third Quarter

2002
$116,699
49,382
12,974

Fourth Quarter

2003
$69,186
24,605
(3,596)

2002
$68,377
25,641
(2,472)

(280)

(396)

4,297

3,889

5,060

6,433

(3,656)

20,382

—

495

—

—
$ (280)

(22,876)
$(23,272)

—
$ 4,297

—
$ 4,384

—
$ 5,060

—
$ 6,433

—
$ (3,656)

—
$20,382

$ (0.03)
—

$ (0.05)
—

$ 0.51
—

$ 0.48
0.06

$ 0.60
—

$ 0.78
—

$ (0.43)
—

$ 2.45
—

—
$ (0.03)

(2.80)
$ (2.85)

—
$ 0.51

—
$ 0.54

—
$ 0.60

—
$ 0.78

—
$ (0.43)

—
$ 2.45

$ (0.03) $ (0.05)
—

—

$ 0.50
—

$ 0.46
0.06

$ 0.59
—

$ 0.75
—

$ (0.43)
—

$ 2.38
—

—
$ (0.03)

(2.80)
$ (2.85)

—
$ 0.50

—
$ 0.52

—
$ 0.59

—
$ 0.75

—
$ (0.43)

—
$ 2.38

During the fourth quarter of 2003, the Company incurred approximately $4.0 million in charges stemming from operational changes to improve long-term efficiency and
rationalize the Company’s manufacturing capacity and inventory investments.

Due to changes in stock prices during the year and timing of issuance of shares, the cumulative total of quarterly net income (loss) per share amounts may not equal the net
income per share for the year.

F-21

B o a r d o f D i r e c t o r s

SAMUEL C. JOHNSON, 75
Director since 1970.
Chairman Emeritus of
S.C. Johnson & Son, Inc.
Chairman, Johnson Financial Group

HELEN P. JOHNSON-LEIPOLD, 46
Chairman and Chief Executive Officer.
Director since 1994.
Also Director of S.C. Johnson & Son, Inc.
and JohnsonDiversey, Inc.

TERRY E. LONDON, 54
Director since 1999.
President of London Partners LLC.
Also Director of Pier 1 Imports, Inc.

THOMAS F. PYLE, JR., 62
Vice Chairman of the Board.
Director since 1987.
Chairman, The Pyle Group.
Also Director of Sub Zero Corporation.

GREGORY E. LAWTON, 52
Director since 1997.
President and Chief Executive Officer
and Director of JohnsonDiversey, Inc.
Also Director of General Cable Corporation
and Superior Metal Products, Inc.

JOHN M. FAHEY, JR., 51
Director since 2001.
President and Chief Executive Officer
and Chairman of the Executive Committee
of the Board of Trustees of the National
Geographic Society. Also Director of Jason
Foundation for Education.

S h a re h o l d e rs ’ I n fo r m a t i o n

CORPORATE HEADQUARTERS
Johnson Outdoors Inc.
555 Main Street
Racine, Wisconsin 53403 USA
Phone: (262) 631-6600
Fax: (262) 631-6601

INTERNET ADDRESSES (www.)
JohnsonOutdoors.com
camptrails.com (CampTrails)
carlislepaddles.com (Carlisle Paddles)
dimensionkayak.com (Dimension)
escapesail.com (Escape Sailboats)
eurekatent.com (main Eureka! page)
extrasport.com (Extrasport)
llboats.com (Leisure Life)
minnkotamotors.com (Minn Kota Motors)
necky.com (Necky kayaks)
oceankayak.com (Ocean Kayak)
oldtowncanoe.com (Old Town)
otsport.com (OT Sport)
scubapro-uwatec.com (SCUBAPRO and UWATEC)
silvacompass.com (Silva)
waterquestboats.com (Waterquest)

COMMON STOCK
Johnson Outdoors Inc. Class A Common Stock
is traded on The NASDAQ Stock Market® under
the symbol: JOUT.

ANNUAL MEETING
The Annual Meeting of Shareholders will convene
at 10:00 a.m. (CST) on February 25, 2004, at
the Company’s Headquarters.

TRANSFER AGENT AND REGISTRAR
LaSalle Bank
135 South LaSalle Street
Chicago, Illinois 60603
Phone: (312) 904-2450
Fax: (312) 904-2236

SHAREHOLDER INQUIRIES
Communication concerning the transfer
of shares, lost certificates or changes
of address should be directed to the
Transfer Agent.

Executive Officers

HELEN P. JOHNSON-LEIPOLD, 46
Chairman and Chief Executive Officer

JERVIS B. PERKINS, 48
Chief Operating Officer

PAUL A. LEHMANN, 50
Vice President and Chief Financial Officer

ww w.john son out door s.com

J o h n s o n O u t d o o r s I n c .

5 5 5 M a i n S t r e e t

R a c i n e , W i s c o n s i n

5 3 4 0 3 -1015 U S A

( 2 6 2 ) 6 31 - 6 6 0 0