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Johnson OutdoorsAnnual Report 2015 We are Johnson Outdoors We are on the Water $262.5 million FY2015 NET SALES Fishing Fishing motors Fishfinders Downriggers Shallow water anchors Digital charts & maps J O U T - N A S D A Q 1 We are in the Moment Diving $72.1 million FY2015 NET SALES Regulators Buoyancy compensators Dive computers Masks/fins/snorkels Dive wear J O U T - N A S D A Q 2 | 3 We are at the Forefront We are at the Forefront $47.6 million FY2015 NET SALES Camping & Hiking Tents Sleeping bags & pads Personal & family cooking systems Compasses Camp furniture & accessories J O U T - N A S D A Q 4 | 5 We are on the Move Watercraft Recreation $49.0 million FY2015 NET SALES Kayaks & canoes Fishing craft Personal flotation devices Paddles & accessories J O U T - N A S D A Q 6 | 7 We are Inspired Johnson Outdoors is the leader in innovative equipment and solutions that help more people enjoy more adventures in the great outdoors. We make every experience better. We are Inspired Outdoor recreation equipment sold in 80 countries A family of core brands 16 product categories 20 facilities worldwide 1,200 employees Market cap ~$213M (as of 10/2/15) J O U T - N A S D A Q 8 | 9 Leading the Market Power brands shape our vibrant portfolio MARINE ELECTRONICS drove momentum for Johnson Outdoors in 2015 with record sales from our flagship Minn Kota® brand and a 5 percent uptick in revenue overall. DIVING, our most global business, continued to deal with geopolitical tensions affecting popular dive destinations. In a resilient market, our goal is to stand out with innovation. • Minn Kota powered to more than $1 billion in • Seabear® diving technology acquisition sales in 10 years • The Humminbird® HELIX™ series lit up the adds expertise in emerging technologies for underwater instrumentation market with its first side scan sonar fishfinders in compact screen sizes • SCUBAPRO® continued as the best-known, most respected dive brand in the world Fishing Diving OUTSTANDING BRANDS Minn Kota® | Motors Eureka!® | Family Tents Jetboil® | Personal Cooking Systems Minn Kota® | Shallow Water Anchors Old Town® | Canoes Humminbird® | Fishfinders Humminbird® | Digital Maps Ocean Kayak® | Kayaks SCUBAPRO® | Diving Gear OUTDOOR GEAR moved forward on its profitable growth trajectory as we expanded the line of Jetboil® personal cooking systems to reach a larger outdoor consumer base. WATERCRAFT beat profit expectations as we reaped the rewards of sustained operational improvement. Innovation reenergized growth in our brands. • Jetboil innovation excited the market and ignited sales • Eureka!® continued as a trusted outfitter for the family campsite • Old Town® Predator™ series drove growth and strengthens our position in the fast-growing fishing kayak segment • Old Town NEXT™ engages new, younger consumers, a critical segment for our future Camping & Hiking Watercraft Recreation J O U T - N A S D A Q 1 0 | 1 1 INNOVATION IS AT THE CORE OF WHO We push technology boundaries and seek WE ARE—a strength we’ve cultivated for nearly innovations in design and function, enhancing half a century. Johnson Outdoors focuses on familiar products like trolling motors and inspiring consumers with equipment that meets entering new categories such as shallow-water their high expectations and delivers value that’s anchors. Above all, we’re working to involve worth the price. From the most advanced trolling consumers in every phase of innovation— motors to breakthrough outdoor cooking systems for higher-impact, longer-lasting results, the to revolutionary side scan sonar fishfinders, our ultimate standard for innovation success. offerings improve the outdoor experience. Winning with Innovation With revolutionary valve technology and a new cooking-cup size, the Jetboil® MiniMo™ has won consumer awards and the approval of backpacking gourmets. The Humminbird® HELIX™ 7 SI, voted ICAST 2015 “Best of Electronics,” offers a bigger, ultra-bright, nearly glare-free screen and leading side scan sonar at incomparable price value. J O U T - N A S D A Q 1 2 | 1 3 The Minn Kota® Ulterra™ bow-mount trolling motor makes boat control amazingly easy with fully automated stow and deploy, push-button power trim and wireless or foot-pedal control. The Minn Kota Talon™ shallow water anchor enters new territory with easy adjustment for depths up to 12 feet, plus auto-drive, soft bottom, and rough water anchor modes. The Old Town® NEXT™ combines a canoe’s stability and storage with a kayak’s profile and easy paddling, exciting a new generation of paddlers. Designed by anglers, for anglers, the Old Town Predator™ XL, powered by Minn Kota, combines our unmatched fishing expertise with the world’s #1 trolling motor. J O U T - N A S D A Q 1 4 | 1 5 Continuing Success In Fiscal 2015 we achieved double-digit net income growth on slightly higher sales. Winning innovation spurred momentum in our fishing, camping and watercraft businesses. THIS YEAR’S PERFORMANCE reflects our businesses more than offset the currency impact and continued progress in strengthening capabilities emphasized the value of ongoing investments in for sustained, long-term, profitable growth. Total innovation. New product sales drove strong growth net sales increased 1 percent over Fiscal 2014 in Marine Electronics and positive momentum in to $430.5 million, despite the impact of $10.8 Outdoor Gear and Watercraft, where we are working million (2.5 percent) in unfavorable currency to keep these units on a profitable growth trajectory. translation. While a stronger U.S. dollar particularly Higher inventory levels at year-end signify the need affected Diving, our most global business, higher to gear up earlier to meet continued strong demand volume and improved margins in our other heading into the new year. FY2015 Financial Highlights Operating Results* Net sales Gross profit Operating profit Net income Diluted earnings per common share Diluted average common shares outstanding Capitalization Total debt Shareholders’ equity Total debt to total capital * $ Thousands, except per-share amount 2013 $426,461 171,049 25,591 19,327 $1.95 9,523 2013 $8,333 197,668 4% 2014 $425,410 168,613 16,691 9,123 $0.90 9,635 2014 $7,791 198,458 4% 2015 $430,489 171,733 17,853 10,616 $1.06 9,727 2015 $7,431 197,968 4% Management Perspective Operations rose to the challenge of heightened three years, we expect steady incremental sales market demand to keep working capital in check. and profit growth as we implement our strategic Operating expense this year included $7.3 million in priorities. litigation costs to protect our side scan sonar patents. The International Trade Commission issued a favorable final determination, and we expect related costs to decline in 2016. Net income improved 16 percent, benefiting from the lower year-over-year effective Helen P. Johnson-Leipold tax rate of 33 percent that came with the release of Chairman & Chief Executive Officer deferred tax allowances in foreign jurisdictions. With debt at a historic low and $69.2 million in cash at year-end, the balance sheet is in great shape. We increased the quarterly dividend while also investing David W. Johnson in growing our business and brands. Over the next Vice President & Chief Financial Officer • Minn Kota® achieves record sales and profits • Watercraft continues profitable growth trajectory • New products generate a third of sales • Strong balance sheet and net cash position maintained • Effective tax rate reduced • Quarterly dividend increased J O U T - N A S D A Q 1 6 | 1 7 Message from the Chairman Looking Forward With an intensified focus on consumer intimacy, lasting innovation and digital sophistication, we are confidently positioning our businesses to reveal awe on the horizon. JOHNSON OUTDOORS offers an unmatched array we are in fishing, camping, hiking, diving and water of trusted brands and products that inspire more recreation—able to make the experience better people to spend more time in the great outdoors. Yet from heading out to coming home. As such, we see we are so much more than equipment; we are about expansion opportunity well beyond narrow product the experience, about helping people enjoy the awe categories and markets. This fresh perspective drives in outdoor adventure. This reality fuels our strategy to our plans for the future. position each of our businesses for an even stronger, better future. We have already identified new growth platforms across our major recreational activities where we can We’re looking at that future in a whole new way. further leverage our know-how and strong brand Specifically, we’re examining every product, every equities to gain a clear competitive advantage. Just process, every approach through the eyes of our as we have successfully moved the Minn Kota® brand consumers—what they want, expect and need to beyond electric fishing motors into shallow water have the best possible outdoor experience. anchors and other adjacent fishing categories, we are working to expand our other power brands. As Envisioning Johnson Outdoors from a consumer we broaden the market footprint and innovation perspective significantly increases our marketplace horizon for each of our businesses, we will achieve a potential. Consumers view our brands through the better balance of profitability across our portfolio and lens of the outdoor recreational activities in which enhance capacity for long-term growth. they use our products. They see us as the experts that J O U T - N A S D A Q 1 8 | 1 9 Comprehensive research is essential to produce deeper, richer understanding of our consumers. Consumer insight is an area where Johnson Outdoors has long excelled. But consumers evolve and so must our understanding; ongoing diligence is critical. We must do more than keep our fingers on the outdoor consumer’s pulse. We must learn what’s in our consumer’s mind and heart. New initiatives are underway to take us from insight to intimacy, using sophisticated resources and techniques. Through qualitative segmentation, we’re ensuring that we direct our resources toward the right priorities, the innovations that connect with our targeted consumers. This relentless, continual focus leads us to the “aha” moments, the invaluable revelations that we use to train our sights on the biggest and best opportunities, align our go-to-market strategies, and achieve more consistent, longer-term At every step we’re making sure that our consumer insights are spot-on and that we’re moving forward with the right ideas, amplifying our potential for long-term return on our efforts. marketplace success. A revamped innovation process is designed to deliver even greater marketplace success. Innovation remains the lifeblood of our business, empowering us to strengthen and grow brand equity and, equally important, compete and win on price/value. We’re revamping our innovation process and setting the bar higher—working toward even Message from the Chairman bigger, more successful new products with even Developing an enterprise-wide plan will minimize greater staying power, grounded in a deeper, richer upfront costs, while a phased-in rollout will spread understanding of our consumers. further spending over time. Ultimately we will offer consumers a cohesive experience that strengthens Inspired by this enhanced consumer intimacy, we’re relationships across all our brands. filling the innovation funnel in every business with ideas that target high-growth-potential segments. Our strategic plan lays the foundation for consistent, This is the first step in an ongoing, iterative feedback accelerated, sustainable growth and profitability. loop that involves consumers from concept to Our capabilities will only increase as we progress on commercialization and beyond. At every step we’re our three priorities: enhanced consumer intimacy, making sure that our consumer insights are spot-on greater innovation success and digital sophistication. and that we’re moving forward with the right ideas, Investments in these strategic areas will translate into amplifying our potential for long-term marketplace even stronger brand equities and help ensure a better success. future for Johnson Outdoors. In the end, Johnson Outdoors will be a wholly consumer-centric enterprise committed to providing the best overall outdoor experience at every step – from planning the outdoor adventure, to shopping and buying equipment, to having fun fishing, camping, diving and recreating on the water. We welcome your support and hope you share our excitement for the future. Digital sophistication is at the core of continued competitiveness, supporting holistic marketing. Enhanced consumer intimacy is also behind a new, more sophisticated approach to our digital presence. The Internet offers a compelling tool to support marketing and engagement; it may well be where most consumers begin their experience with us. We’re working with industry experts to ensure our online look, feel, content and utilization are in line with consumer habits, needs and expectations. Our overarching strategy will touch everything from Johnson Outdoors company and brand websites to social media platforms to interactive marketing. This is Helen P. Johnson-Leipold a major undertaking that requires time and resources. Chairman & Chief Executive Officer J O U T - N A S D A Q 2 0 | 2 1 Guiding with Insight Edward F. Lang Director since 2006 Kathy Button Bell Director since 2014 W. Lee McCollum Director since 2005 Richard “Casey” Sheahan Director since 2014 Board of Directors John M. Fahey, Jr. Director since 2001 Helen P. Johnson-Leipold Chairman of the Board Director since 1999 Thomas F. Pyle, Jr. Vice Chairman of the Board Director since 1997 Terry E. London Director since 1999 J O U T - N A S D A Q 2 2 | 2 3 Our board of directors helps guide Johnson Outdoors with vital business acumen and a broad range of experience. Helen P. Johnson-Leipold, Johnson Outdoors chairman and CEO, leads with skills in strategic planning, global operations, strategic marketing and branding, drawing on deep knowledge of the company and its industry. She served as a marketing executive with SC Johnson and Foote, Cone & Belding. Ms. Johnson-Leipold is chairman and director of Johnson Bank and Financial Services.; director of SC Johnson; and chairman, The Johnson Foundation at Wingspread. Thomas F. Pyle, Jr., Johnson Outdoors vice chairman, brings extensive managerial, transactional, operational and financial expertise to the role. Currently chairman, The Pyle Group, and non-executive chairman of Uniek, Inc., Mr. Pyle is former owner, chairman and CEO of Rayovac Corporation. He serves as director of Sub-Zero Wolf, Inc.; advisor to the University of Wisconsin Chancellor; and trustee of Wisconsin Alumni Research Foundation and other leading research institutions. Kathy Button Bell is vice president and chief marketing officer of Emerson Electric Co., a $25 billion manufacturing conglomerate. A renowned branding strategist with expertise in global marketing, digital strategy and market research, she has served in lead marketing roles with recreational giants Converse, Inc. and Wilson Sporting Goods. Ms. Button Bell is a director of Sally Beauty Holdings and the American Marketing Association, and past chairwoman, Business Marketing Association. John M. Fahey, Jr., chairman of the National Geographic Society, is knowledgeable in key Johnson Outdoors markets and outdoor leisure, travel and recreational industries. He brings skills in leadership, strategic planning, international business and enterprise risk management. Mr. Fahey is also lead director of Time Inc., a director of Lindblad Expeditions Holdings and a regent of the Smithsonian Institution. Edward F. Lang, senior vice president and CFO of the NFL’s New Orleans Saints and the NBA’s New Orleans Pelicans, provides insight in leisure industries and consumer products as well as broad experience in corporate finance, operations and enterprise risk management. He previously served with the NHL’s Nashville Predators for 13 years, most recently as president of business operations and alternate governor. Terry E. London, former chairman of London Broadcasting Company LP and LBK Entertainment Holdings, provides insight on a broad range of corporate management and financial matters, drawing on his experience as chief executive of major corporations. Mr. London has been involved with the outdoor industry for more than 20 years and is also chairman of the Pier 1 Imports, Inc. board of directors. W. Lee McCollum, director of Johnson Bank and Financial Services, brings a broad range of international and consumer product marketing and operational experience as well as financial expertise, having served as executive vice president and CFO of SC Johnson. He is a director of Coastal South Bancshares, Inc. and a former director of Sigma Aldrich Corporation. Richard “Casey” Sheahan, former president and CEO of Patagonia, Inc., brings proven knowledge, expertise and leadership in management, marketing and sustainable business practices in the outdoors industry. Prior to taking the reins at Patagonia, he held key executive positions at Kelty, Inc., Wolverine Worldwide, Inc., Merrell Outdoor Division and Nike, Inc. A lifelong outdoor enthusiast, Mr. Sheahan serves on the board of the Outdoor Industry Association and as senior advisor to Backbone Media. Board of Directors J O U T - N A S D A Q 2 4 | 2 5 Leading with Experience Karen James Vice President, Global Operations Joe Stella Group Vice President, Global Diving Judy Douglas Group Vice President, Marine Electronics John Moon Vice President and Chief Information Officer Helen P. Johnson-Leipold Chairman and CEO Executive team and board of directors photos by John Sibilski Photography Leading with Experience Executive Team Sara Vidian Vice President, Human Resources Alisa Swire Corporate Secretary, Vice President and General Counsel David W. Johnson Vice President and CFO Bill Kelly Group Vice President, Outdoor Gear and Watercraft Patricia Penman Vice President, Marketing Services and Global Communication J O U T - N A S D A Q 2 6 | 2 7 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 2015 Form 10-K for a discussion of uncertainties and risks associated with these statements. www.JohnsonOutdoors.com © 2015 Johnson Outdoors Inc. Publisher: Patricia Penman Vice President, Marketing Services & Global Communication Johnson Outdoors Inc. Design: Lynne and Gil Leigh, Modern Media www.modernmediausa.com Editor: Mary Jo Thome Production Coordinator: Amy Helvick Corporate Secretary Johnson Outdoors Inc. • 555 Main Street Racine, WI USA • 53403-1015 For more information, contact: Johnson Outdoors Inc. Patricia Penman Vice President, Marketing Services & Global Communication 262-631-6600 • patricia.penman@johnsonoutdoors.com To contact the Board of Directors directly, visit: http://investor.johnsonoutdoors.com/contactBoard.cfm JohnsonOutdoors.com
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