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Sportsman's WarehouseJohnson Outdoors Building Value Annual Report | 2011 Footprint l a b o G l $407.4 Million FY 2011 Revenue Products sold in 81 countries 1,300 employees 17 facilities in 10 countries Mission To be the innovation leader and bring excitement and growth to our markets. Vision To own the outdoor adventure with innovation and passion! 2011 Sales by Division Marine Electronics 54% Trolling Motors Downriggers Fishfinders Navigation Devices Regulators Buoyancy Compensators Dive Computers Masks/Fins/Snorkels Wetsuits Diving 22% Watercraft 14% Canoes Kayaks Paddles Accessories Personal Flotation Devices Consumer Tents Commercial Tents Military Tents Compasses Accessories Outdoor Gear 10% Johnson Outdoors | Annual Report 2011 | 1 Snapshot l a i c n a n i F new pro d u c t s a l e s In 2011, new products generated more than 40% of total sales. More than a third of annual revenue has come from new, innovative products for seven consecutive years. Operating Results* 2009 2010 2011 Net sales Gross profit Operating profit Net (loss) income Diluted earnings per common share $(1.06) Diluted average common shares outstanding 9,165 Capitalization* Total debt Shareholders’ equity Total debt to total capital 2009 $31,563 115,825 21.4% 2 | Johnson Outdoors | Annual Report 2011 *($ Thousands, except per share amount) $356,523 $382,432 $407,422 132,782 153,523 272 (9,671) 14,554 6,539 $0.68 9,267 2010 $23,810 126,369 15.8% 163,135 17,670 32,644 $3.36 9,287 2011 $14,972 163,525 8.4% Profitability continues to climb Debt is at an 11-year low Our brands command the top positions in their markets. Minn Kota® | Motors Humminbird® | Fishfinders Old Town® | Canoes Necky® | Kayaks Ocean Kayak™ | Kayaks Cannon® | Downriggers SCUBAPRO® | Diving Gear Eureka!® | Family Tents Silva® | Field Compasses Johnson Outdoors | Annual Report 2011 | 3 Contents About Johnson Outdoors 1 Message from the Chairman 4 Growing Our Brands 8 Sustaining Performance 18 Letter from the CEO and CFO 20 Financial Summary 28 Enhancing Value 30 Leadership 34 Message from the Chairman 4 | Johnson Outdoors | Annual Report 2011 Message from the Chairman 2011 M e s s a g e f r o m t h e C h a i r m a n Committed to building value A 2011 survey by the acclaimed Boston Consulting Group found that in today’s post-recession environment, investor objectives have shifted from short-term return to longer-term value creation. Investors said they assess prospects using three main value-based criteria: strong management teams, solid competitive advantages and good growth prospects. Johnson Outdoors has always been committed to enhancing long- term value for all stakeholders—employees, customers, consumers and shareholders. Over the years, we have maximized and leveraged our iconic brand equities to establish an unmatched breadth of distribution that enables us to expand into new segments and new markets with speed and agility. And our steadily improving performance in the face of a start-stop recovery demonstrates the depth of our team’s ability to deliver on our commitment in good Helen P. Johnson-Leipold Chairman of the Board times and bad. Looking back Building value is the driving force behind our three-year strategic plan. The aggressive transformation we launched in 2009 laid the groundwork, creating a stronger, more competitive company that delivered powerful results in 2010. We met or exceeded every financial target, outperforming our markets and the competition. Johnson Outdoors | Annual Report 2011 | 5 2011 n a m r i a h C e h t m o r f e g a s s e M In the first half of fiscal 2011, our financial previous fiscal year, due in part to a segments and technologies to accelerate results were the best in the last ten years. $21.9 million reversal of our deferred tax profitable growth in our Marine Electronics In the second half of the year, economic asset valuation allowance. Excluding the and Diving businesses in the future; we uncertainty slowed industry-wide recovery of benefit of this non-cash item, adjusted net are constantly evaluating acquisition outdoor recreational products. However, our income was $10.8 million, or $1.12 on an opportunities; and we are staying focused quick response to market fluctuation, coupled adjusted earnings per diluted share basis— on the balance sheet. Above all, Johnson with the strength of our diverse portfolio, a 66 percent improvement over the Outdoors is building on the strengths you’ll enabled us to achieve year-over-year growth prior year. read more about in this report: in revenue, profit and earnings. Looking ahead Innovation keeps our brands strong and Our strategic plan gives us the structure growing. In 2011, new products generated to make the right choices in the face of • Market-leading brands • Meaningful innovation more than 40 percent of total company sales, challenges, enabling us to continue to lead • The right price/value balance helping propel Minn Kota® and Humminbird® our markets, deliver long-term, profitable into elite $100,000,000 brands. In fact, growth and enhance value for shareholders. for seven years running, more than a third The strength of recovery of outdoor of total company revenue has come from recreation markets will set the pace for • Powerful distribution channels • Top-quality customer service market-winning new products. growth in 2012, the final year of our three- • A performance-based culture Net income advanced to $32.7 million or year plan. $3.37 per diluted share versus net income of However, our horizon looks beyond a single $6.5 million or $0.68 per diluted share in the year. So, we are investing in new categories, These are the keys to sustainable growth that create shareholder value. That long-term focus underlies every aspect of our strategy. 6 | Johnson Outdoors | Annual Report 2011 Looking behind the scenes So how do we create value? This report Our transformation is nearly complete. While more work lies ahead, we are clearly takes you “behind the scenes,” presenting stronger, more competitive and better the foundations of our transformation. positioned than ever to deliver sustained It explains what we are doing to grow our profitable growth and enhanced shareholder brands, to sustain our performance and to value, now and in the future. build value for all stakeholders. You will find details on our strategy and tactics and better understand our plan and our priorities. Our story is generating excitement We are hard at work on our next multi-year plan, determining the strategy that will help us not only withstand challenges, but build even greater value. I look forward to sharing among investors, particularly those who the details of that plan with you in the embrace a company with a proven record months ahead. of sustained, profitable growth. While the outdoor recreation industry overall was negatively affected by the recession, outdoor enthusiasts—the anglers, divers, paddlers and campers who demand the latest and greatest—have been drawn more and more to Johnson Outdoors’ innovation-rich brands. Helen Johnson-Leipold Chairman & Chief Executive Officer 2011 M e s s a g e f r o m t h e C h a i r m a n Johnson Outdoors | Annual Report 2011 | 7 Growing Our Brands 8 | Johnson Outdoors | Annual Report 2011 Powerful brands fuel success Market-leading brands are the key to continued Johnson Outdoors grows and strengthens our growth for Johnson Outdoors. Maintaining the brands through the strategies described in the Number 1 or Number 2 positions in our markets next few pages: innovation, focused marketing, is a top priority. targeted distribution and product excellence. Why does brand matter? In the outdoor recreation industry, people value and reward innovation, quality and experience. And they link those qualities to the name on the product. Great brands let us compete on factors other than price. Our powerful brands… • Differentiate us from competitors, delivering instant credibility. • Attract and influence customers, speeding the sales cycle. • Reinforce relationships with business partners as well as consumers, opening markets and increasing sales. In short, our brands are business assets that add significantly to our bottom line. Leveraging brand equity The Minn Kota® Talon, a push-button deployable shallow-water anchor, has energized a once-sleepy market segment. It’s easier to mount than the competition, deploys faster, holds stronger and won’t damage vegetation or the bottom. With the durability and performance customers expect from the brand, the Talon is Minn Kota’s top-selling new product for 2011. Johnson Outdoors | Annual Report 2011 | 9 Innovation s d n a r B r u O g n w o r G i Delivering a must-have Strong core brand innovation fuels Johnson Meaningful innovation helps us hit the right These enthusiasts are early adopters, Outdoors’ competitiveness and organic sales price/value balance, delighting consumers trendsetters always searching for new ways growth. For seven years straight, more than while improving margins. It’s especially to make their experience more enjoyable a third of our revenue has come from new critical in our Diving and Marine Electronics regardless of the economic climate. In the products—a clear indicator of innovation’s segments, where avid enthusiasts eagerly Marine Electronics market, for example, a ability to drive marketplace demand even seek the next “must-have” gear or equipment. Southwick Associates survey found purchases when the battle for consumer discretionary dollars is fierce. of fishing equipment remained steady in 2011 versus the previous year. A technology exclusive Our strategic acquisition of LakeMaster®, the gold standard in regional electronic charts and fishing and boating maps, adds to our portfolio of proprietary technologies. We’re already expanding geographic coverage, developing innovative new chart features and integrating this exclusive technology with our other marine electronic offerings to maximize LakeMaster’s growth potential. LakeMaster® Digital Charting Technology 10 | Johnson Outdoors | Annual Report 2011 Our innovation strategy in Marine Electronics is to maximize technology to help the angler catch more fish. That means staying on top of constant electronic and digital advancements. We’re looking for new technologies and new ways to apply existing technology to reach our goals. The result is a strong, healthy innovation pipeline. New products like the Minn Kota® Talon, an award-winning shallow water anchor, Humminbird® 1158c DI and Humminbird® Down Imaging™ sonar technology bring excitement and growth to professional. And users of their categories. And the Minn Kota® i-Pilot®, Cannon’s® new introduced last year, has revolutionized Digi-Troll electric steering and positioning with its wireless downriggers can preset intervals and depths approach. Year I sales exceeded expectations, for up to six bait lines with a backlit keypad—or and Year II has been even bigger. through their Humminbird fishfinder, via the We also work to maximize the market unique CannonLink® system. potential for product innovation, making Innovative products capture media attention technology accessible to the broadest and, year after year, win awards for Johnson audience. Humminbird® Side Imaging® and Outdoors. The true “must-have” of innovation, new Down Imaging™ sonar technologies, for however, is consumer appeal, proven by sales example, are now available in fishfinders at and share gains that confirm our brands just every price point, for anglers from amateur to keep growing and growing. Innovation Highlight Marine Electronics Humminbird® 1158cDI expands picture and appeal This year Humminbird pointed its pioneering technology in a new direction. The 1158c DI, an ICAST 2011 Best in Show winner, uses Down Imaging™ technology to deliver detailed views of what’s below the boat: timber, brush, bridge pilings, rocks and other structure where fish might linger. It emits high-frequency sound waves in razor-thin slices, using sonar returns from the waves to create an instant “snapshot.” With Humminbird Side Imaging®, showing structure out to 240 feet on each side of the boat, and 2D Sonar, for targeting fish, Down Imaging rounds out a full range of fishfinding technologies for anglers—and keeps Johnson Outdoors clearly in front of the competition. Johnson Outdoors | Annual Report 2011 | 11 Focused Marketing s d n a r B r u O g n w o r G i Expanding market opportunity The outdoor recreation industry is fragmented, In Outdoor Gear, Eureka!® Is expanding Targeted, innovative marketing also creates with many brands serving many categories. That its presence to include backpacks in 2012. demand for our products. In Marine Electronics, makes focused marketing a valuable key to brand This focused collection is targeted at family for instance, Humminbird® has a significant social growth. Johnson Outdoors is adept at leveraging campers, backpackers, hunters and anglers, media presence among all those linked-in anglers. brand equity to expand existing markets, enter with features such as padded hip belts, We’re front and center in their conversations about new geographies or consumer segments and safety whistles, built-in rain covers and a catching great screen shots as well as big fish. jump-start entire categories. padded hydration sleeve that doubles as In Diving, for example, we recognized that the largest, fastest-growing market segment is the mid-price segment—made up of new and recreational divers who don’t yet need the sophisticated technical capabilities of SCUBAPRO®, the world’s Number 1 dive equipment brand. So we built on the power of the SCUBAPRO name to introduce SUBGEAR®, a new brand of mid-price, lifestyle-oriented dive gear. SUBGEAR complements SCUBAPRO, offering a commitment to quality and service on which dealers and divers can rely. Over the past 18 months, we’ve significantly expanded global distribution of SUBGEAR while at the same time growing SCUBAPRO sales. The plan: Inspire today’s SUBGEAR recreational diver to become the SCUBAPRO diving enthusiast of tomorrow. 12 | Johnson Outdoors | Annual Report 2011 a laptop compartment. Customers and consumers alike know they can expect the comfort and performance common to all Eureka! products. Offering more to existing consumers and connecting with more and more consumers in a fragmented market—our marketing strategy brings it all together to keep our brands growing. Marketing Highlight Outdoor Gear Building on big names Named after peaks in the Adirondacks, the new Eureka!® backpacks are designed for comfort and accessibility on day trips, weekend travels and longer treks. And the Eureka! brand name carries a heritage of quality. Serving customers with technology Here are just a few ways Johnson Outdoors uses technology to enhance value for our retail partners. Trading Partner Intelligence (TPI) captures weekly point-of-sale data from key partners. Metrics include units sold, sales dollars, on-hand levels and more, sorted by item, retailer and location. TPI lets us give our top retailers detailed product recommendations by brand and region, so they can meet consumer demands without costly overstock. The result: we grew sales with these partners in 2011 while reducing inventories. BOATS is a secure e-commerce site for Watercraft’s specialty dealer channel. Dealers can browse products, check availability, and order and pay online. In 2011, nearly 600 users accessed BOATS. Shopatron lets our Cannon® brand reach consumers directly while still supporting our trade partners. Consumers place an order online, and, behind the scenes, retailers bid to fulfill it, sharing in online marketing proceeds. Sales through Shopatron rose 50 percent from 2010 to 2011. It’s a win all around: Consumers enjoy online convenience, retailers get new business, we strengthen partnerships—and Cannon sales and brand awareness grow. Discover GPS Watch Marketing Great features, great value We’re building momentum in Outdoor Gear with products like the Discover GPS Watch from Tech4O®. This powerful watch delivers speed, distance, navigation and heart rate data, with route mapping and PC link and analysis software that interfaces with Google Earth. Sawtooth 45L Backpack Johnson Outdoors | Annual Report 2011 | 13 Market fact: Prior to the 2008 holiday season, active Americans expected to spend 11% of their sports, recreation and fitness gift dollars at independent specialty stores. That number has increased each of the past three years, reaching 18% this year, showing that specialty stores have capitalized on their unique advantages to add value to the shopping experience. 14 | Johnson Outdoors | Annual Report 2011 Targeted Distribution i G r o w n g O u r B r a n d s Succeeding with channel partners One of Johnson Outdoors’ greatest assets can maximize the growth opportunity for and models. In 2012 we’ll build on that momentum is the unmatched breadth of our portfolio, both businesses. and ensure continuity for dealers as we look for ways to make the most of channel synergies. From there we’ll work to be an easier, more profitable partner for specialty vendors—creating growth for their businesses and for ours. which translates into unparalleled depth of distribution. We build on strong partnerships with distributors to penetrate our markets and grow our brands in more than 80 countries. Specialty channels are composed of small business owners—the experts to whom enthusiasts look for advice and premier brands. These dealers need sales programs This year we identified a major opportunity for and terms that reflect their size; marketing Watercraft and Outdoor Gear. Research shows and product support to compete with larger that paddle specialty and outdoor specialty retailers; and simple, cost-effective business channels together represent about half of the processes to improve profitability. Our goal is $1.5 billion market for our camping and paddling to meet these unique needs and become the products, and an even higher percentage of our partner of choice for these local and regional price/value target consumers. By combining retailers, creating a distinct, sustainable Watercraft and Outdoor Gear and focusing our competitive advantage. resources on the specialty class of trade, we Our Watercraft and Outdoor Gear brands were once exclusively sold through the specialty channel and have established strong momentum lately with specialty-only brands An edge for paddlers—and dealers The Necky® Vector 14™ sit-on-top kayak, sold through authorized Necky specialty dealers, is geared for more advanced paddlers. With a hull designed to deliver the performance of a high-end sea kayak, the Vector 14 draws in consumers eager to push the speed and distance envelope. Necky® Vector 14™ Kayak, “Storm” Johnson Outdoors | Annual Report 2011 | 15 Honors and awards Every year, Johnson Outdoors‘ products achieve new levels of innovation, performance and quality, earning recognition from industry trade groups, publications and the all-important consumer. Here are winners from 2011. Eureka!® Mansard 8 Tent Camping Life 2011 Editors‘ Choice The Eureka! Mansard tent brings luxurious convenience to the base camp tent market. Its proprietary hubs and box frame construction create near-vertical walls, with well over six feet of headroom. Two large doors, a removable divider curtain that can create two internal rooms, and large front and rear vestibules help the Mansard comfortably house the entire family. 16 | Johnson Outdoors | Annual Report 2011 2011 Humminbird ® 1158c DI Winner, ICAST 2011 Best in Show, Electronics This huge 10.4” LED backlit color display delivers incredibly detailed views of the bottom and structure below the boat, thanks to new Down Imaging™ technology and DualBeam PLUS™ sonar. With GPS chart plotting and options like Ethernet networking and Satellite Weather, the 1158c DI makes for the best possible fishing experience. SCUBAPRO® Everdry4 Drysuit SCUBALAB 2011 Testers‘ Choice The Everdry4 combines a wetsuit’s soft, supple comfort with the watertight warmth of a dry suit. It weighs half as much as traditional dry suits, yet offers better protection and buoyancy stability at depth than traditional wetsuits. All in all, the Everdry4 provides a comfortable dive from start to finish. Product Excellence i G r o w n g O u r B r a n d s Necky® Eliza™ Kayak 2011 Sea Kayaker Readers Choice Award—Best Women’s Kayak Available in a number of models, including a new ruddered composite version, the Necky Eliza is ergonomically designed around a woman’s hip and leg physiology and overall body proportions. Its low profile and cockpit dimensions allow flexibility for rolling, bracing, surfing and spirited paddling. Necky® Vector 13™ Kayak 2011 National Geographic Gear of the Year Selection The Vector 13 is the rare sit-on-top that paddles like a sit-inside touring craft, combining stability and style—the best of both water worlds. As National Geographic Adventure wrote when naming this kayak as must-have gear, “The Vector 13 will make you rethink just how cool the category can be.” SCUBAPRO® MK 11/C200 Regulator Sport Diver Magazine 2011 Gear Guide SCUBAPRO® MK 25/A700 Black Tech Regulator Sport Diver Magazine 2011 Editor’s Pick These regulators reflect SCUBAPRO’s continued commitment to great breathing performance for recreational and technical divers. The MK 11/C200 combines a lightweight first stage with a compact, uncomplicated second stage, for the value consumers demand. The MK 25/A700 combo delivers high performance with a stealthy new look: a Titanium Nitride PVD coating that boosts surface hardness and durability. Johnson Outdoors | Annual Report 2011 | 17 Sustaining Performance 18 | Johnson Outdoors | Annual Report 2011 Transformation produces measurable results For Johnson Outdoors, building value requires The business results in the next few pages maximizing marketplace performance and show we’re addressing the elements that strengthening operational results. we can control. When we’re challenged by In 2009, we launched an aggressive transformation of our organization—a three-year plan focused on achieving sustainable results: elements beyond our control, such as bad weather and economic downturns, our strategy positions us to sustain performance and capture opportunities for continued growth. • Reduce our cost structure, lowering our breakeven point. • Enhance price/value, meeting tougher marketplace criteria. • Achieve targeted revenue gains, growing profits faster than sales. • Better manage the balance sheet, improving net income while reducing working capital and debt. We delivered dramatic results in 2010, meeting or exceeding every fiscal target. When the economic recovery slowed midway through 2011, we had the strength and flexibility to adapt quickly. And we continue to surpass competitors in return on equity. Known for its innovative rotational-molding process for forming polyethylene kayaks and canoes, Old Town® also shapes paddlers’ expectations for comfort, ease and affordability. That’s key in meeting the market’s increasingly stringent price/value criteria. Johnson Outdoors | Annual Report 2011 | 19 Letter from the CEO and CFO 20 | Johnson Outdoors | Annual Report 2011 Letter from the CEO and CFO i i S u s t a n n g P e r f o r m a n c e Strategy promotes success in a challenging environment After outstanding results in the first six We’re seeing results from our commitment Looking ahead, due to the need for added months of 2011, industry recovery slowed to a strong balance sheet. Average working investment in innovation and the ongoing in the face of economic, political and capital was 30.8 percent of net sales unpredictability surrounding external factors weather-related challenges. Even so, our versus 29.8 percent last year on a trailing which could impact recovery of outdoor rec strong brands and diverse portfolio enabled twelve-month basis. Factors behind this markets, 2012 will be a challenging year. Johnson Outdoors to grow total company modest increase include higher volume That said, we end fiscal 2011 with a revenue 7 percent year-over-year, with and continued demand in MEG. In addition, strong, healthy balance sheet, a threefold innovative new products accounting for the tsunami in Japan and flooding in the improvement in net cash year-over-year and 40 percent of revenues. northeast U.S. tied up inventory in Diving confidence in our ability to withstand the and Outdoor Gear respectively. At year-end, economic tides. Operating expense in 2011 was lower as a percentage of sales, although $6 million higher than in 2010 due to higher volume and R&D spending, as well as higher legal costs driven in part by efforts to enforce total working capital dollars were below prior year, so overall we feel good about our ability to keep working capital in check despite market volatility. our patented Humminbird side imaging Cash from operating activities increased technology. Reported earnings were up over 50 percent over the prior year, and Helen Johnson-Leipold Chairman & Chief Executive Officer significantly over 2010 due in part to a all units contributed to positive cash reversal of our tax asset valuation allowance. generation. Importantly, excluding the Still, excluding this non-cash item, adjusted non-cash tax asset reversal, adjusted net earnings increased nearly 70 percent. earnings per diluted share nearly doubled, reemphasizing our commitment to David W. Johnson sustained profitable growth and enhanced Vice President & Chief Financial Officer shareholder value. Johnson Outdoors | Annual Report 2011 | 21 e c n a m r o f r e P g n n a t s u S i i Business Recap: Marine Electronics Net Sales: $222.1 Million Largest business thrives with innovation, teamwork Continuing its 2010 success, the Marine Electronics group, which accounts for nearly half ago, fishing electronics has grown Electronics group delivered a stellar 2011 of Johnson Outdoors‘ sales. from niche products to a sophisticated performance, creating huge demand with unique new products and targeted marketing— and keeping pace with that demand through efficient manufacturing. Net sales for the group jumped $36.6 million, or 19.7 percent, in 2011, and operating profit increased by $7.1 million—more than 50 percent —with higher-margin products such as the Two brands surpassed $100 million in sales: Minn Kota® Talon™, Minn Kota® i-Pilot®, Minn Kota®, the world’s #1 brand of electric and Humminbird® Down Imaging™ and fishing motors, and, for the first time, Side Imaging® fishfinders. market serving millions of enthusiasts. And just as we’ve built Humminbird into a sonar powerhouse since we acquired it seven years ago, we expect to establish Geonav and LakeMaster as leaders—creating growth opportunities for all our Marine Electronics brands. Humminbird®, the world’s leading fishfinder brand. Cannon® downriggers, Geonav® marine navigation technology and LakeMaster® digital charting technology and products complete the Marine Marine Electronics will continue to be our growth engine, fueled by deep market penetration and broad distribution. Since we acquired Minn Kota 40 years Geonav® GIS 12 Multi-Function Display with BlueLogic™ User Interface I had a pretty good tournament season this year and couldn’t have done it without my Humminbird ®or my Terrova. I absolutely love i-Pilot®. Thank you for making my days on the water more productive, and keep up the good work. —Ron Levine, pro fishing champion 22 | Johnson Outdoors | Annual Report 2011 The electronics enthusiasts love Minn Kota’s® i-Pilot® wireless trolling system uses GPS technology to steer and position a boat. Anglers can press a button on the wireless remote to stay on a fishing spot, retrace trolling paths or take full control of speed and steering. After a fantastic 2010 launch, i-Pilot sales in 2011 again exceeded expectations. i-Pilot® Wireless GPS Trolling System i-Pilot® Remote Control Johnson Outdoors | Annual Report 2011 | 23 Compact design, big performance This year SCUBAPRO® introduced the C300 second stage regulator, which incorporates new Optimized Flow Design technology for uncompromised breathing performance. Divers enjoy a compact, midrange system with all the adjustment options of a high-end regulator. 24 | Johnson Outdoors | Annual Report 2011 SCUBAPRO ® C300 Regulator Business Recap: Diving Net Sales: $89.5 Million Adding value for consumers yields growth amid challenges Despite the tsunami in We are moving ahead carefully to ensure operations Japan, political upheaval in the remain stable through the year-long transition. Meanwhile, superior innovation, quality, value and service will keep SCUBAPRO and SUBGEAR on top of the market. SUBGEAR ® XP-10 3-Gauge Dive Computer Understanding the diving lifestyle Most divers must travel to enjoy their sport—and they can go anywhere with the SCUBAPRO® Go Travel BCD. Lightweight and extremely comfortable, it includes original features such as an integrated weight system. The entire BC easily folds for storage in its own travel sack. i i S u s t a n n g P e r f o r m a n c e Middle East and economic turmoil in Europe, Diving turned in modest topline growth in 2011. Net sales increased $4.4 million, or 5.2 percent, and operating profit rose by $0.8 million, or 19 percent, over 2010. Our priorities in this global business are clear: grow share and improve margins. SUBGEAR®, our new mid-priced line of dive equipment, delivered double-digit growth in 2011, while our flagship SCUBAPRO® brand grew share in the premium-price dive segment. SUBGEAR’s price points appeal to the largest, fastest-growing dive gear segment, and its global rollout exceeded expectations. In 2012 we’ll expand distribution beyond our elite SCUBAPRO dealer network. Supply chain optimization is essential in our efforts to improve margins. This year we began implementing a common ERP platform in Europe, an important step in reducing costs. SCUBAPRO ® Go Travel BCD Johnson Outdoors | Annual Report 2011 | 25 e c n a m r o f r e P g n n a t s u S i i Business Recap: Watercraft & Outdoor Gear Net Sales: $96.6 Million (combined) Resources combined to target specialty channels, enthusiasts Cold, rainy weather delayed the start of this Watercraft, which dramatically improved Yet we see steady growth for both businesses year’s paddling and camping season, and profitability in 2010, saw 2011 sales drop with specialty retailers, which make up nearly late summer rains cut it short, making 2011 a 9.8 percent, or $6.3 million, with an operating half of the combined market for camping and difficult year for Watercraft and Outdoor Gear. loss of $1.4 million. Brands include Old Town® paddling. It makes sense to focus consolidated But with plans to combine resources and canoes and kayaks, Ocean Kayak™, Necky® Watercraft and Outdoor Gear marketing and target long-term growth in the specialty trade, kayaks, Carlisle® paddles, and Extrasport® sales resources on these channels, leveraging these businesses are entering 2012 with fresh personal flotation devices. synergies to become these retailers’ partner of enthusiasm and strong momentum. Outdoor Gear, comprising Eureka!® tents, Silva® choice. Family camping made even easier In 2012 Eureka!© expands its Copper Canyon™ recreational tent line with the Copper Canyon 4, a six-pole cabin-style, four-person tent. With a center height of seven feet and near-vertical walls, it’s spacious and inviting. Easy assembly, interior pocketing and hanging gear loft organizers add convenience, while a full mesh roof and side windows for increased ventilation enhance comfort. field compasses and Tech4O® performance It’s a big opportunity, and we’re taking the measurement instruments, was hit hard by time to do it right. Our 2012 priority is to reduced U.S. government spending on military maintain momentum in the specialty channel tents. Net sales dropped 20 percent, to $38.9 while developing programs for 2013. We’ll also million, and operating profit was $3 million. evaluate operational synergies to ensure we continue to meet customer expectations for innovation, price/value, quality and service. 26 | Johnson Outdoors | Annual Report 2011 Old Town® Saranac™ 160 XT Canoe Carlisle Expedition Kayak Paddle New canoe design promotes fun Building off last year’s successful Saranac™ 146 launch, Old Town® expanded the family in 2011 with the Saranac 160. Saranac canoes feature a modified design with slightly lowered seats, paddling better than most other recreational canoes. The Saranac 160 includes comforts like contoured bow and stern seats, a center bench with storage compartment, and molded-in rod and cup holders. Available in base, XT and angler versions, the Saranac continues Old Town’s tradition of innovation and quality for affordable family fun. Johnson Outdoors | Annual Report 2011 | 27 Strategy 2011 Focusing on the pursuit of value How do you sustain performance in the face of • A lean infrastructure. Johnson Outdoors maintains earthquakes and floods, rioting and revolutions, a strong, streamlined center providing direction currency fluctuations and economic uncertainties? and resources for each of our businesses. For Johnson Outdoors, it comes down to two words: strategy and discipline. • Cross-business synergies. We look for ways our businesses can complement each other, We’re committed to our three-year strategy, creating greater value in R&D, sales and marketing, emphasizing balance sheet management. And and distribution. we’re disciplined in our follow-through, making the most of our organizational strengths: • A results-driven focus. Our organization is fully aligned and committed to continuously improved performance. Improving Sales and Profitability Reducing Debt to Historic Low Maintaining Strong Cash Flow ) s n o i l l i M $ ( s e l a S t e N 400 300 200 100 0 25 20 15 10 5 O p e r a t i n g P r o fi t ( $ M i l l i o n s ) 8 . 0 2 4 4 . 7 0 4 18.0 5 . 6 5 3 4 . 2 8 3 14.6 8.6 8.7 FY 2008 FY 2009 FY 2010 FY 2011 Net Sales Compared to Operating Profit *Excluding unusual items 28 | Johnson Outdoors | Annual Report 2011 s n o i l l i M $ 20 15 10 5 0 -5 -10 -15 -20 -25 -30 8 1 4 0 1 - 0 3 - FY 2008 FY 2009 FY 2010 FY 2011 Debt, Net of Cash *Excluding unusual items s n o i l l i M $ 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 FY 2008 FY 2009 FY 2010 FY 2011 Operating Cash Flow s e e y o l p m E f o r e b m u N 1,800 1,600 1,400 1,200 1,000 800 600 JOUT PEER 20 15 20 10 5 0 -5 -10 -15 -20 -25 -30 $ T h o u s a n d s O p e r a t i n g P r o fi t p e r E m p l o y e e 180 160 140 120 100 80 60 40 20 FY 2008 FY 2009 FY 2010 FY 2011 Profit per Employee Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Sep-11 Shareholder Value Performance (As Reported) 400 400 8 8 . . 0 0 2 2 4 4 25 25 4 4 . . 7 7 0 0 4 4 20 20 18.0 18.0 4 4 . . 2 2 8 8 3 3 5 5 . . 6 6 5 5 3 3 14.6 14.6 ) ) s s n n o o i i l l l l i i M M $ $ ( ( s s e e l l a a S S t t e e N N 300 300 200 200 100 100 O O p p e e r r a a t t i i n n g g P P r r o o fi fi t t ( ( $ $ M M i i l l l l i i o o n n s s ) ) 15 15 10 10 5 5 8.6 8.6 8.7 8.7 0 0 FY FY FY FY FY FY FY FY 2008 2008 2009 2009 2010 2010 2011 2011 Net Sales Net Sales Compared to Operating Profit Compared to Operating Profit *Excluding unusual items *Excluding unusual items 8 8 1 1 4 4 0 0 1 1 - - 20 20 15 15 10 10 5 5 0 -5 s s n n 0 o o i i l l l l i i -5 M M $ -10 $ -10 -15 -15 -20 -20 -25 -25 -30 -30 0 0 3 3 - - FY FY FY FY FY FY FY FY 2008 2008 2009 2009 2010 2010 2011 2011 Debt, Net of Cash Debt, Net of Cash *Excluding unusual items *Excluding unusual items s s n n o o i i l l l l i i M M $ $ 35,000 35,000 30,000 30,000 25,000 25,000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 0 FY FY FY FY FY FY FY FY 2008 2008 2009 2009 2010 2010 2011 2011 Operating Cash Flow Operating Cash Flow Financial Summary Increasing Productivity, Efficiency Outperforming Our Peers 1,800 1,800 1,600 1,600 1,400 1,400 1,200 1,200 1,000 1,000 l s e e y o p m E f o r e b m u N l s e e y o p m E f o r e b m u N 20 20 15 15 20 20 10 10 5 0 -5 -10 $ 5 T h 0 o u s a -5 n d s -10 O p e r a t i n g $ P T r h o o fi u t s p a e n r d E s m p o y e e l O p e r a t i n g P r o fi t p e r E m p o y e e l JOUT JOUT PEER PEER 180 180 160 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 Oct-08 Oct-08 Apr-09 Apr-09 Oct-09 Oct-09 Apr-10 Apr-10 Oct-10 Oct-10 Apr-11 Apr-11 Sep-11 Sep-11 Shareholder Value Performance (As Reported) Shareholder Value Performance (As Reported) Peer Group Includes: Arctic Cat Inc. (ACAT) Black Diamond (BDE) Brunswick Corporation (BC) Cybex International Inc. (CYBI) Callaway Golf Co. (ELY) Escalade Inc. (ESCA) Jarden Corp (JAH) Marine Products Corp. (MPX) Nautilus, Inc. (NLS) Quicksilver Inc. (ZQK) -15 -15 -20 -20 -25 -25 -30 -30 800 800 600 600 FY 2008 FY 2008 FY 2009 FY 2009 FY 2010 FY 2010 FY 2011 FY 2011 Profit per Employee Profit per Employee i i S u s t a n n g P e r f o r m a n c e Discipline 2011 Discipline also means continually seeking intensive, but in place, ERP zeroes in on waste operational improvements and cost reductions. and increases efficiency. Forecasting, inventory In Marine Electronics and Diving, for example, management and back-office effectiveness all we source goods and materials strategically. In improve—and profitability increases. Outdoor Gear, we’re pursuing value-engineering to decrease the cost of sales. And ERP for our Diving business in Europe will complete the company’s implementation, giving us essential visibility into operations and inventory. The process is resource- Sustaining performance can be a challenge in any environment. With a focused strategy and a commitment to discipline, Johnson Outdoors is positioned to meet that challenge. Johnson Outdoors | Annual Report 2011 | 29 Enhancing Value 30 | Johnson Outdoors | Annual Report 2011 Executing a strategy to help all stakeholders win The ultimate result of growing our brands While share prices and market moves are and sustaining performance is to create unpredictable, our shareholders can rely measurable value for all Johnson Outdoors‘ on our commitment to flawless execution stakeholders, particularly our shareholders. of our strategic plan in pursuit of enhanced competitiveness and profitability. As a publicly traded, closely held business, ours is a compelling, unique story among small- and micro-cap companies. Studies show that owner-managed and -controlled companies create more value over time compared with those where management is less invested in the business’ long-term performance. Simply put, our objectives are aligned with those of our shareholders—to achieve long-term, profitable growth. Entering the final third of our current three- year plan, our transformation is nearly complete and sustainability is in focus. We continue to simplify our business model. Strengthen our balance sheet. Gain share. And outperform the market—thereby building value in our brands and businesses that translates into value for our shareholders. We enhance value for all stakeholders through strategies designed to grow share and optimize profitability even in challenging times. For example, Eureka!®, one of the ten best-known outdoor recreation brands, is pursuing success in the specialty channel with revamped product lines and programs. Johnson Outdoors | Annual Report 2011 | 31 Strategic Plan e u l a V g n i c n a h n E Building on a solid core Johnson Outdoors’ strategic plan starts with Four Cs are key to success We call the strategies we’re pursuing to enhance value “the four Cs.” two overarching objectives: • Grow share by leveraging our market 1. Cost control 2. Customer focus leadership • Grow profits faster than sales To achieve those objectives, our current and upcoming three-year plans build on: • Meaningful innovation, growing our customers’ business and our own. • Superior service, meeting dealer and consumer needs like no other company. We’ve removed $18 million from our business To be the partner of choice among retailers, cost structure and cut the cost of debt. especially specialty dealers, we offer value- Streamlining also focuses on: added customer service: • Cost of sales • Supply chain • Design engineering • Global systems/ERP Targets: • Operating expense at 34% of net sales • Products with attractive price/value margins • Accurate, on-time order delivery • Superior business support to create a true partnership • Quality, striking the right price/value balance • Borrowing costs 15% below 2010 levels while outshining the competition. Proven staying power Outdoor recreation (fishing, paddling, camping and diving) presents distinct advantages for our business and our shareholders. Positive demographics include high-spending, avid participants. Price premiums reward innovation, retail experience and technical expertise. Fragmented categories create opportunities for many brands. The outdoor recreation industry has proven staying power. And with our leading brands, superior innovation and performance-driven culture, Johnson Outdoors is uniquely positioned to deliver long-term, profitable growth. 32 | Johnson Outdoors | Annual Report 2011 3. Competitiveness Strategic acquisitions. We make smart A culture of accountability Our continued outperformance draws on acquisitions that meet strict criteria: growing To drive growth, Johnson Outdoors depends on the Johnson Outdoors’ strengths: market, leading brand, compatible culture, fair four Cs, as well as a fifth C—culture. Our company has the family feel and sensibilities of a small business, with the sophisticated capabilities of a large multinational enterprise. Our people-focused values go hand-in-hand with our performance-based culture, encouraging and rewarding improving business results. Our culture is an asset that no competitor can duplicate. Innovation. We are the innovation leader in our markets. For seven consecutive years, more than 33% of our revenue has come driven by acquisitions. 4. Cash price. More than half our 2011 revenue was from new products. Market development. We uncover and also create profitable market segments. Our most recent success, SUBGEAR® mid-price diving gear, delivered double- digit growth in 2011. In 2012, we expect our Geonav® brand to capture significant opportunity in big boat navigation. We’re balancing investment in growth with cost controls, and managing inventories to contain working capital while meeting market demand. Target: • Working capital days at 2010 level Measuring progress In the first two years of our plan, we met or Industry recovery is key to reaching these exceeded our targets and achieved business- targets. But whatever the economy, we specific goals such as restructuring Watercraft are committed to executing our strategic and reducing Diving costs. Company-wide plan…measuring success through enhanced performance targets for 2012 include: shareholder value. • Net sales 5% CAGR • Operating margin of 6% Johnson Outdoors | Annual Report 2011 | 33 34 | Johnson Outdoors | Annual Report 2011 34 | Johnson Outdoors | Annual Report 2011 Front row , seated (L-R): Mr. Pyle, Ms. Johnson-Leipold, Mr. London Back row, standing (L-R): Mr. McCollum, Mr. Fahey, Mr. Lang Company Leadership Board of Directors Helen P. Johnson-Leipold Chairman of the Board since 1994. Chairman and CEO, Johnson Outdoors; Chairman and Director, Johnson Financial Group, Inc.; Director, S.C. Johnson & Son, Inc.; Chairman, The Johnson Foundation. W. Lee McCollum Director since 2005. Vice Chairman and Director, Johnson Financial Group, Inc.; Chairman of the Board and Director, Le Groupe Fruits & Passion; Director, Sigma Aldrich Corporation; Director, Coastal South Bancshares, Inc. E n h a n c i n g V a u e l Thomas F. Pyle, Jr. Vice Chairman of the Board and Director since 1997. Chairman, The Pyle Group; Director, Sub-Zero Corporation; Non-Executive Chairman of Uniek, Inc.; Trustee, Wisconsin Alumni Research Foundation; Member, Kennedy Center National Advisory Board. John M. Fahey, Jr. Director since 2001. Chairman and CEO, National Geographic Society; Director, Exclusive Resorts; Member of the Board, Smithsonian National Museum of Natural History. Edward F. Lang Director since 2006. Senior Vice President and Chief Financial Officer of the New Orleans Hornets; past President of Business Operations and Alternate Governor, Nashville Predators; Director and past Chairman, Nashville’s Adventure Science Center. Terry E. London Director since 1999. President and CEO, London Broadcasting Company, Inc.; past President, London Partners, LLC; past President and CEO, Gaylord Entertainment Company; Director, Pier 1 Imports. Management Team Front row (L-R): Dave Johnson, Bill Kelly, Alisa Swire, Kelly Grindle, Helen Johnson-Leipold Back row (L-R): Joe Stella, John Moon, Sara Vidian, Cynthia Georgeson Johnson Outdoors | Annual Report 2011 | 35 Front row , seated (L-R): Mr. Pyle, Ms. Johnson-Leipold, Mr. London Back row, standing (L-R): Mr. McCollum, Mr. Fahey, Mr. Lang Company Information e u l a V g n i c n a h n E Corporate Secretary Johnson Outdoors Inc. 555 Main Street Racine, WI USA 53403-1015 For more information, contact: Johnson Outdoors Inc. Cynthia Georgeson, Vice President-Worldwide Communication 262-631-6600 cgeorges@johnsonoutdoors.com To contact the Board of Directors directly, visit: http://investor.johnsonoutdoors.com/contactBoard.cfm Certain matters discussed in this 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. Please see “Forward Looking Statements” in the 2011 Form 10-K for a discussion of uncertainties and risks associated with these statements. www.johnsonoutdoors.com © 2012 Johnson Outdoors Inc. Publisher: Cynthia Georgeson, Vice President-Worldwide Communication, Johnson Outdoors Inc. Design: Lynne and Gil Leigh, Modern Media Editor: Mary Jo Thome Production Coordinator: Amy Helvick Our Shared Values Our values drive our commitment to abide by a Code of Conduct and the A Superior Organization policies which support it. Each Johnson Outdoors employee, officer and We are committed to being highly innovative, delighting the consumer; director, and every agent, consultant and contract worker engaged by to being a company of choice for our customers; and to being socially us, shares that commitment. responsible. Our People, Our Greatest Strength A Winning Business Philosophy We employ and retain the best people, provide an enjoyable work We demonstrate superior leadership, passion for winning, high ethical environment and ensure fair and consistent treatment of employees. standards and long-term thinking. 36 | Johnson Outdoors | Annual Report 2011 Lew Gilman: Innovator, artist, colleague The Johnson Outdoors production floor in Old Town, Maine has been renamed the Lew Gilman Center of Inspiration, in memory of the man who invented the revolutionary roto-molding process for plastic boats. Lew found inspiration in the outdoors and painted a mural of northern Maine ’s Brandy Pond on the wall of his office at the old factory. We recovered and restored the mural, placing it at the entrance of the manufacturing hub to remind everyone of Lew’s pioneering spirit—and to encourage continuing innovation. johnsonoutdoors.com
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