Johnson Outdoors Annual Report 2004

Plain-text annual report

T H E S P I R I T O F A D V E N T U R E Old Town® | Canoes, touring and recreational kayaks Necky™ | Touring, recreational and whitewater kayaks Escape® | Recreational electric watercraft Ocean Kayak™ | Sit-on-top kayaks Carlisle® | Paddles and oars Extrasport™ | Personal flotation devices and wearable paddle gear Our market-leading brands are known worldwide for outstanding quality and performance. Minn Kota® | Electric trolling motors, batteries, chargers and marine accessories Humminbird® | Sonar and GPS marine electronics SCUBAPRO® | Underwater breathing regulators, BCs, masks, fins, snorkels and suits UWATEC™ | Underwater dive computers and gauges Cover photograph by Samuel C. Johnson Eureka!® | Camping tents, camping gear, Silva® | Compasses and gauges specialty commercial and military tents T F A R C R E T A W S C I N O R T C E L E E N I R A M G N I V I D T N E M P I U Q E R O O D T U O C H A I R M A N ’ S L E T T E R Throughout the excitement and challenges of 2004, Johnson Outdoors held steady on our ultimate resolve: We are committed to ensuring sustainable growth and proﬁ tability through continuous, meaningful innovation. In 2004, we achieved double-digit improvements in net income, earnings and sales, while strength- ening our business through a sig- nificant acquisition and continued focus on creating a lean, flexible organization. Our acquisition of Humminbird brand fishfinders and consumer electronics gave us an important growth platform for leading-edge technology, and a model to follow in the future. Our alliance with sports rack manufacturer Thule Inc. high- lights our creativity in stimulat- ing our markets — creativity all our businesses demonstrated in delivering market-winning new products that drove a third of sales this year. Our emphasis on enhanced systems points up the power of our innovative business model, enabling us to create a more efficient, productive organization. At the same time, we demon- strate our long-term commitment by investing more resources than ever to enhance our unique insight into the consumer, and to stay on the cutting edge of research and development in our industry. A L O O K B A C K Watercraft. We restructured to remove cost and complexity and increase flexibility in this busi- ness, treating people right when our decisions meant a change in their lives. Watercraft is now the right size, with the right systems and processes and the right team. Our investments have resulted in a change for the better, as this business will be stronger and more competitive going forward. We are on the upswing. We continue to invest in new products, which drove about 30 percent of Watercraft sales this year. We’ve created a totally new market segment with our breakthrough Escape® brand “flip the switch and go” small electric boats. Excitement also surrounds the Old Town® Dirigo kayak, with enhanced comfort and control features; the Ocean™ Kayak SideKick, a seat-and-a-half kayak for an adult and a child or a large pet; and our new Extrasport™ accessories and “comfort-fit” seating. Diving. We took a hard look at this global business and began taking action to rejuvenate our market, capitalizing on Diving’s synergies and strengths. Breakthrough prod- ucts and marketing programs are key to growing sales and gaining market share. We are working to reinvigorate our dealers’ business and consumer base with new prod- ucts like the Scubapro® Xtender wrist computer and UWATEC™ Smart TEC and Aladin™ TEC computers. Marine Electronics. Our integration of Humminbird®, a leading global fishfinder brand, finished ahead of schedule, while the Maxxum™ from Minn Kota® generated record sales. Now our disciplined team is driving forward to capture new growth opportunities as we build on Minn Kota® strengths and Humminbird® potential. The Marine Electronics group saw nine months of exceptional wholesale and retail sales. While fourth quarter sales softened due to retail uncertainty regarding the economy, happily, early season orders for fiscal 2005 are strong. Outdoor Equipment. Military tent sales drove excellent perfor- mance; however, with contracts and emergency orders slowing, we do not expect the same results in 2005. Our focus is creating better balance across all Outdoor Equipment segments, and this will take time. Commercial tent sales were up, albeit from a small base. Consumer camping—tents, sleeping bags, compasses and other accessories—was flat, suggesting declines here may have leveled and it’s time to grow. Again, our ability to innovate and reinvigorate our markets is crucial. We are combining new designs and new technology with exciting new alliances and cutting-edge market research to ensure new product success. A L O O K A H E A D Johnson Outdoors seeks long-term, sustainable growth and profit- ability through continuous inno- vation—in our products, in our marketing, in our business model. That also means continuous investment in understanding our markets and consumers, building on superior insight to create suc- cessful product “firsts” like those shown elsewhere in this report. While the proposed merger between Johnson Outdoors Inc. and JO Acquisition Corporation was not approved, the go-private analysis gave us valuable financial planning and strategic business insights on which we will build as we continue as a publicly traded company. Looking ahead, there may never be a perfect year when all the trends are in our favor. We live by the principle that the economy should not be an excuse for why business is bad, nor should it be the reason for why business is good. We can’t let trends dictate our future. We can take charge of our destiny by out-innovating our competition. At Johnson Outdoors, we choose to innovate—and succeed. Our people and our brands are second to none. Our ability to turn ideas into winning products has never been greater, and our commit- ment to our deeply-held values has never been stronger. Our possibilities and potential are endless. The future is ours for the making. Helen P. Johnson-Leipold Chairman and Chief Executive Officer The lifeblood of our business The lifeblood of our business For Johnson Outdoors, the key to growth and proﬁ tability is —continuous innovation that is meaningful to our consumers. That keeps us a clear step ahead of the competition. That Plastic boats An Old Town® Canoe ﬁ rst, created by Sam Johnson in the 1970s, that is now a half-a-billion-dollar market Underwater breathing regulator SCUBAPRO® innovation, still considered revolutionary decades after its introduction Electric trolling motors Minn Kota® has become the ﬁ shing enthusiast’s best friend and the market leader Small electric- powered boats Escape® “ﬂ ip the switch and go” boats bring a completely new experience and add comfort, convenience and ease to water recreation empowers us to take charge of our future. And our greatest Wireless ﬁ shﬁ nder Humminbird® breakthrough technology has captured the attention of ﬁ shing enthusiasts around the world source of innovation is our people, whose passion and creativity have led to many important product “firsts.” The Freedom tent A ﬁ rst for people with disabilities, developed by Eureka!® using universal design concepts to make the outdoor experience more accessible to more people Extrasport™ life preserver Extrasport™ innovation that brings “the most comfort in the water” to kayakers and other paddlers while earning U.S. Coast Guard safety approval Modern-day dive computer UWATEC™ Air X Nitrox took underwater computer technology to new heights in the 1990s Easy-to-use sailboats The Escape® patented rigging system opened sailing to a broader market Wireless remote steering CoPilot from Minn Kota® introduced hands-free steering from the ﬁ shing rod, wrist or belt M A N Y M O R E T O C O M E www.j ohnsonout do ors .com Certain matters discussed in the Chairman’s Letter 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. Please see “Forward Looking Statements” in the 2004 Form 10-K for a discussion of uncertainties and risks associated with these statements. 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 A T R I B U T E T O O U R F O U N D E R Where the Adventure Began WHEN SAM JOHNSON JOINED JOHNSON WAX in 1954, all the company’s products were wax-based. With a passion for innovation and a willingness to take calculated risks, Sam expanded the family business to new products in new markets, turning a small wax company into a multi-billion-dollar family of international companies. As part of that growth, Sam established Johnson Outdoors in 1970—and soon created the plastic boat industry through Old Town Canoe®. Though the world economy was in disarray, Sam knew there were always consumers looking for higher price value. He knew more affordable, more convenient plastic boats would be just what they wanted. Today plastic boats are a half-billion-dollar market, and Johnson Outdoors is the number one seller. In the 35 years since our founding, Johnson Outdoors has grown into a lead- ing provider of innovative, top-quality recreation products that make it easy for people to have fun in the great outdoors. We continue to employ the quintessential new product development model Sam created. We take to heart his innovation- driven business strategy: “New products, new geographies, and every few years, an acquisition.” We pursue his commitment to serving employees, customers, the environment and the communities where we do business. “I believe that making a better place goes beyond providing jobs,” Sam once said. “It means being a worthy neighbor who cares about the neighborhood. It means adding an unspoken dimension of decency and consideration to the community.” Though Sam’s consideration may have been unspoken, it did not go unrecognized. Fortune called him “corporate America’s leading environmentalist” when he was inducted into the U.S. National Business Hall of Fame. He held seven honorary doctoral degrees and received numerous international awards recognizing his busi- ness, environmental and philanthropic contributions, including the Charles A. Lindbergh Award for balancing techno- logical advancement and environmental preservation; the Experimental Aircraft Association’s Freedom of Flight Award for his contributions to aviation; and the Lifetime Environmental Award from the United Nations Environment Programme. Sam was a founding member of the World Business Council for Sustainable Development, and was named in 1993 to the U.S. President’s Council on Sustainable Development. From 1990 to 2000, he served on the Board of Governors for The Nature Conservancy, acting the last two years as Chairman of the Board of Governors. Most recently, he was a director of the World Resources Institute. In his book The Essence of a Family Enterprise, Sam wrote, “A good leader builds an organization infused with sound principles and values, indelibly locked into the intellect and soul of all.” His focus on innovation continues to guide Johnson Outdoors toward leadership in the global outdoor recreation industry. His strategic vision continues to fuel our drive toward sustainable, long-term growth and proﬁ t- ability. And his overriding principle— “Do the right thing”—is indelibly locked into the soul of our enterprise. SAMUEL C. JOHNSON 1928–2004 SAMUEL C. JOHNSON SAMUEL C believed business should serve a higher purpose and be managed for the next generation. The man known by all as simply “Sam” leaves a legacy of visionary leadership, remark- able success and great humanitarianism. T F A R C R E T A W Carlisle ® Black Magic Paddle Extrasport™ Eagle PFD Ocean Kayak™ Prowler 15 Necky ™ OrbitFish Old Town® Dirigo Old Town ® Charles River Necky ™ Manitou Sport O u r B r a n d s Extrasport™ Drytop Ocean Kayak™ SideKick Escape ® Chai se Lounger W A T E R C R A F T Johnson Outdoors has a vision: to own the water within a quarter mile of shore. And we have the passion to realize that vision. Our watercraft brands reﬂect a rich tradition of innovation, from the ﬁ rst elegant wooden canoes to sleek space-age- composite kayaks to fun-time peddle and patio boats to light- weight, durable accessories. This year’s new Escape electric- powered boats are the ﬁ rst real innovation in the marine industry in years. Using a clean and quiet patented Minn Kota® electric propulsion system, this line of recreational watercraft brings new ease on the water to a whole new market for Johnson Outdoors. AN ADVENTURE IN PADDLING - OCEAN KAYAK, NECKY AND OLD TOWN G N I V I D MK17/R390 MK25 X650 Cobalt and Hi-Viz TM Yellow Twin Jet Fins Aladin Computer Console Knighthawk Smart TEC Wrist Aladin TEC Wrist Classic Sport BC O u r B r a n d s Ventana Mask Phoenix Snorkel EverFlex Wetsuit D I V I N G Some dive to get away from the world, others to get closer to it. Whatever the reason, divers are underwater adventurers exploring the amazing hidden realm beneath the waves. Deep down they want and need the best. Johnson Outdoors sees they get it. Our SCUBAPRO® UWATEC brands are global leaders in innovative recreational diving equipment. Our products are designed for comfort and safety to provide a lifetime of reliable performance for the recreational and pro- fessional technical diver alike. Our elite global dealer network has unparalleled expertise, ensuring SCUBAPRO® UWATEC consumers of outstanding products and world-class service. SCUBAPRO® UWATEC - DEEP DOWN ONLY THE BEST WILL DO. T N E M P I U Q E R O O D T U O K2 Digi tal Compass Wild Basi n Twister Solar Shade Extreme Coldweather Military Tent O u r B r a n d s Freedom Evolution Commercial Tent O U T D O O R E Q U I P M E N T When the great outdoors beckons, Eureka!® brand tents can meet every challenge. Specialty commercial and military tents, camping gear and Silva® com- passes round out Outdoor Equip- ment Group’s product portfolio at Johnson Outdoors. Field & Stream named the lightweight, durable Zeus 4EXO “2004 Best of the Best” for camping. The Freedom received kudos as the ﬁ rst-ever camping tent especially for people with disabilities. The K-2 XT pro- tected world-famous adventurer Pasquale Scaturro from Africa’s extreme heat, rain and insects as he ﬁ lmed and solved “The Mystery of the Nile” — the new IMAX hit. New this year: solar shade day-shelters to add com- fort and cool from the backyard to the beach. EUREKA!® - TURNING THE OUTDOORS INTO A WELCOME ADVENTURE S C I N O R T C E L E E N I R A M Vantage Vector MK-330 Charger Riptide Autopi lot SmartCast RF35 Matri x 97 Maxxum Pro O u r B r a n d s 987c M A R I N E E L E C T R O N I C S In 2004, Johnson Outdoors added Humminbird® to the Marine Electronics Group, estab- lishing it alongside the ever- popular Minn Kota® ﬂ agship. The addition of this well-known ﬁ shing and marine electronics brand gives us even stronger top-of-mind presence among serious anglers. Minn Kota® enjoys the mantle of leadership in trolling and specialty electric motors, delivering “Anywhere. Anytime.” performance. Work has begun in earnest to lever- age the strength of Minn Kota® and Humminbird® to create a formidable presence in the marine electronics marketplace. Two iconic brands. One focused vision. A future of boundless opportunity. MINN KOTA® - ANYWHERE. ANYTIME. HUMMINBIRD® - SIMPLY. CLEARLY. BETTER. M A N A G E M E N T P E R S P E C T I V E In ﬁ scal 2004 Johnson Outdoors achieved double-digit growth in net sales, income and earnings. The Humminbird ® acquisition, strong military tent sales and record growth in Motors offset declines in Watercraft and Diving. Investment in innovation contributed to a growth in margins, as system integration and restructuring efforts helped to improve operating efficiency. This year’s emphasis on expense control, inventory management and accounts receivable reflects our continued focus on cash management. We ended the year with cash reserves of nearly $70 million. We remain committed to strengthening the competitiveness of our businesses long-term. Maintaining a healthy balance sheet, with sub- stantial liquidity, provides us the ﬂ exibility to pursue that objective. Jervis B. Perkins Paul A. Lehmann President and Chief Operating Ofﬁ cer Vice President and Chief Financial Ofﬁ cer (thousands, except per share data) 2004 Operating Results Net sales 2002 2003 2004 $342,532 $315,892 $355,274 Gross proﬁ t Operating proﬁ t Diluted earnings per common share Diluted average common shares outstanding Capitalization Total debt 141,054 127,989 147,618 19,751 11,613 19,128 $ 3.59(1) $ 0.63 $ 0.99 8,430 8,600 8,774 $ 88,253 $ 77,473 $ 67,019 Shareholders’ equity 124,145 144,194 160,644 Total debt to total capital 41.6% 35.0% 29.4% (1)Includes a gain on sale of subsidiary of $2.65 per diluted share. n o i t a m r o f n I l a i c n a n i F y r a m m u S B O A R D O F D I R E C T O R S HELEN P. JOHNSON-LEIPOLD, 47 Chairman and Chief Executive Officer. Director since 1994. Also Chairman of Johnson Financial Group, Director of S.C. Johnson & Son, Inc. and JohnsonDiversey, Inc., THOMAS F. PYLE, JR., 63 Vice Chairman of the Board. Director since 1987. Chairman, The Pyle Group. Also Director of Sub Zero Corporation. JOHN M. FAHEY, JR., 52 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. GREGORY E. LAWTON, 53 Director since 1997. President and Chief Executive Officer and Director of JohnsonDiversey, Inc. Also Director of General Cable Corporation and Superior Metal Products, Inc. TERRY E. LONDON, 55 Director since 1999. President of London Partners LLC. Also Director of Pier 1 Imports, Inc. On behalf of the Company’s people and each of us individually, we, the Directors of Johnson Outdoors, express our deepest and most humble appreciation of Samuel Curtis Johnson for the enduring contribu- tions he made to this Company and its reputation throughout the world; for the inspiring and visionary example he set for each of us; for showing us the joy to be found by simply being alive; and for the gift of having known such an honest and compassionate man. From a resolution passed on December 8, 2004 by the Board of Directors of Johnson Outdoors. SAMUEL C. JOHNSON Director since 1970. Chairman of Johnson Financial Group and Chairman Emeritus of S.C. Johnson & Son, Inc. SAMUEL C. JOHNSON 1928–2004

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