Johnson Outdoors Inc.

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Johnson Outdoors Inc.


555 Main Street
Racine, Wisconsin 53403-1035
U.S.A.
Telephone: (262) 631-6600
Fax: (262) 631-6602
Web site: http://www.johnsonoutdoors.com

Public Company
Incorporated: 1985
Employees: 1,300
Sales: $395.8 million (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: JOUT
NAIC: 339920 Sporting and Athletic Goods Manufacturing; 314912 Canvas and Related Product Mills; 315999 Other Apparel Accessories and Other Apparel Manufacturing; 314991 Rope, Cordage, and Twine Mills; 335312 Motor and Generator Manufacturing; 334514 Totalizing Fluid Meter and Counting Device Manufacturing; 421910 Sporting and Recreational Goods and Supplies Wholesalers

Johnson Outdoors Inc. manufactures, markets, and distributes a wide range of its own, market-leading, brand-name recreational products, including Minn Kota battery-powered boat motors; Eureka! tents; Silva compasses; Old Town, Ocean Kayak, and Necky paddle-craft; Carlisle and Lendal paddles and oars; Extrasport personal floatation devices; and Scubapro underwater diving gear and UWATEC dive computers and instruments. Although the company headquarters is located in Wisconsin, the firm counts manufacturing facilities and distribution centers in 23 locations around the world. Johnson Outdoors is the only publicly traded company in the Johnson empire, although the family has tried to take it private again.

EARLY HISTORY

During the late 1960s and early 1970s, Johnson Wax (S.C. Johnson & Son, Inc.) initiated a diversification strategy similar though not identical to the diversification programs being carried out by many Fortune 500 companies. The plan was to acquire a group of small to medium-sized firms that were manufacturing recreational products with recognizable brand names, and form them into a recreational products division. Based largely on the fact that Samuel C. Johnson, the owner of the $2 billion Johnson Wax empire, was known as a sports enthusiast, the company initially purchased a small electric motor boat and fishing reel manufacturer located in Minnesota. Yet, even though the new recreational products division grew due to the help provided by the marketing network and management ability of Johnson Wax, as the division prospered it came into competition with consumer and institutional products groups for a larger share of the parent company's resources.

Confident that the recreational products division could stand on its own, company management and the Johnson family decided in the mid-1980s that it was time for the division to function as an independent company. The newly named Johnson Worldwide Associates was spun off from parent company Johnson Wax by means of a leveraged buyout to Samuel C. Johnson and the Johnson family. The buyout amounted to just over $66 million, with the Johnson family maintaining a 42 percent investment interest, but a 72 percent majority voting interest. Within two years, the company had firmly established itself in the fishing equipment and camping equipment markets, and the Johnson family thought an initial public offering (IPO) was the next step in the firm's growth. Thus in 1987, just a short time after its spinoff from Johnson Wax, the small but growing Johnson Worldwide Associates went public in order to have access to the capital market and to establish a market value for the company's stock.

Having received an enthusiastic welcome from the traders and investors on Wall Street, Johnson Worldwide stock was initially offered to the public at $15.50 per share. Almost overnight, the company raised $25 million, which was used quite wisely to pare down its debt. Unfortunately, the stock market crash of October 19, 1987, occurred one week after the company's IPO and sent its share price spiraling downward out of control. The company lost 50 percent of its share value within a few days. Yet management decided to make another offering of common stock available a short ten months later and, with its solid product line in fishing gear and camping equipment, Johnson Worldwide Associates soon recovered.

GROWTH AND EXPANSION

By the end of the 1980s, the company was making its brand-name Johnson fishing reels, Minn Kota electric fishing motors, Old Town canoes, Eureka! Tents, and Camp Trail backpacking gear. The company was so successful that its Minn Kota electric fishing motors had captured a 70 percent share of the entire market within the industry, with sales of approximately $80 million for 1989. In addition, the firm's diving equipment, sold under the brand name Scubapro, had achieved record sales and, as a result, management at Johnson Worldwide Associates decided to invest heavily in the manufacture, distribution, and sale of diving gear and marine equipment throughout Europe. From the company's spinoff in 1985 to 1990, operating profits increased at an annual rate of 35 percent. With $232 million in sales for 1989, Johnson Worldwide Associates was named one of the best small companies in the United States by Forbes magazine.

During this time, the company made one of its first overseas acquisitions, a fishing reel manufacturer in Cluses, France, named Mitchell Sports S.A. Mitchell Sports was one of the most revered manufacturers in the sporting goods industry, mostly due to the regard with which serious fishermen held the company's Mitchell 300 fishing reel. First introduced in the early 1950s, the reel had never fully taken advantage of its popularity among fishermen in the United States, but Johnson Worldwide immediately developed new brochures, television commercials, and displays to market an updated version of the Mitchell 300 fishing reel. Not surprisingly, the product became one of the best-selling items in the company's history.

By 1992, the company's net sales had increased to $334 million, with 43 percent of the total resulting from sales outside the United States. The purchase of Jack Wolfskin one year earlier, a German firm that manufactured backpacks, camping tents, and outdoor clothing, was a large part of the company's rising fortunes in Europe. New models of its camping tents, fishing reels, and canoes were soon warehoused at a new Wolfskin facility in Germany, and sales began to increase at a dramatic rate. Old Town Canoes, one of the firm's most successful product lines throughout North America, was just as popular in Europe. The diving and marine businesses of Johnson Worldwide Associates produced over 70 percent of their sales outside the United States, and new models for diving masks and rubber goods sold particularly well throughout Europe's Scandinavian countries.

COMPANY PERSPECTIVES


We're a worldwide company that's creative and market driven with some of the most recognizable brand names in the recreational industry: Scubapro, Uwatec, SnorkelPro, Eureka, Silva, Tech 4o, Old Town, Ocean Kayak, Carlisle, Escape, Extrasport, Necky, Hummingbird, Cannon, Bottomline, and Minn Kota. Whether you are on water or on land, an active diver, camper, hiker, paddler, or fisherman we have the recreational gear you need to make your experience more enjoyable.

Augmenting the company's recreational products line was its development of a marking products business, which included such items as hand stamps, ink rolls, ink jets, and other office equipment. In 1989, management had made a significant investment in developing technology for bar coding systems, equipment for check processing, highspeed addressing, and postal coding. By the early 1990s, this strategic investment began to pay dividends, with sales increasing at a rate of 10 percent annually, and marking products totaling approximately 20 percent of the company's overall sales. Once again, European operations played a major role. The largest hand stamp facility of the company was located in Sweden, with the majority of sales in that and neighboring countries.

RESTRUCTURING

Unfortunately, the company's strategy for growth was flawed, and resulted in major financial repercussions during the mid-1990s. Seeking to expand its operations and revenues quickly through a series of acquisitions, management had overextended itself. Earnings dropped precipitously, and management was forced to make drastic decisions. Many of the companies purchased during this time were sold. In addition, the company made a strategic decision to streamline its operations, thus requiring the sale of its entire marking products business.

Since Samuel C. Johnson, the owner of Johnson Wax, was involved in establishing the company and running it, he had incorrectly assumed that it could be developed in much the same fashion as his first entrepreneurial effort. What this meant was that a core business would provide a steady flow of cash and additional investment and expansion capital, while other businesses could be added or sold depending on their profitability. However, the corporate sector had changed enormously since Samuel Johnson had established Johnson Wax, and the same strategies for growth and expansion were no longer applicable. After going through a number of different CEOs and presidents, the old warrior was still smart enough to recognize his mistakes and change course.

What this meant was that Johnson Worldwide Associates required a comprehensive restructuring from a holding company with numerous but unrelated businesses working mostly independently of one another to an efficiently run operating company whose core business was the manufacture and marketing of a complete line of recreational sports products and clothing. By 1995 earnings had rebounded, and company management was focusing on the development of new products, such as electronic diving equipment and camping gear. A new president and chief executive officer, Ronald Whitaker, was hired to guide the company's product development, and to implement a long-term, but more cautious, acquisitions program that would enhance its position in many of the recreational products markets.

By the end of 1997, the company's focus had been narrowed to five core product markets, including fishing rods, reels, and lures; electric boat motors, speedometers, marine and automotive compasses, and weather instruments; diving equipment and accessories such as regulators, masks, fins, wet and dry suits, gloves, dive belts, dive computers, snorkels, and buoyancy compensators; outdoor equipment such as camping tents, backpacks, commercial tents, bicycling gear, sleeping bags, field compasses, and outdoor clothing; and watercraft, including canoes, kayaks, paddles, and oars. Although sales were holding steady, amounting to just over $300 million at the end of fiscal 1997, management was optimistic that a few well-chosen, strategic acquisitions would increase that figure. To this end, in July 1997 management purchased Plastiques L.P.A. Limitée, a privately owned firm located in Canada that was widely regarded as one of the premier makers of high-quality kayaks in the country; Uwatec AG, a German-based manufacturer of diving computers and other electronic equipment; and Ocean Kayak, Inc., another Canadian-based producer of kayaks which had been identified as one of the fastest-growing recreational products firms throughout North America.

Johnson Worldwide Associates regarded itself as a well-integrated, global outdoor recreational products company; nonetheless, management was still searching for just the right product mix to ensure its continued growth. Johnson did, however, think it had found the right leadership in the person of Helen Johnson-Leipold, who came on board as chair and CEO in March 1999. Johnson-Leipold, who was Samuel Johnson's daughter, had served as vice-president for worldwide consumer marketing under S.C. Johnson & Son.

KEY DATES


1985:
Recreational products division is spun off from Johnson Wax (S.C. Johnson & Son, Inc.) as Johnson Worldwide Associates.
1987:
Johnson Worldwide goes public.
1991:
Germany's Jack Wolfskin tent and backpack manufacturer is acquired.
1997:
Sales are more than $300 million as company narrows its focus to five core markets.
1998:
Necky kayaks acquired.
2000:
Fishing business, including Mitchell and Johnson reels, sold to Berkley Inc.; Pacific Kayak acquired.
2002:
Jack Wolfskin is sold.
2005:
An attempt by Johnson family to take company private fails.
2006:
Lendal paddles, Cannon downriggers, and Bottomline fishfinders are acquired.

Johnson Worldwide Associates was soon renamed Johnson Outdoors. Though revenues were up to $347 million in 2000, the company posted a $17 million net loss due to a write-down related to the sale of its fishing division. Share price plummeted, prompting some investors to call for a sale of the company. However, the Johnson family retained most voting rights.

In the meantime, Johnson Outdoors had made some international acquisitions. It bought Auckland, New Zealand's Pacific Kayak in April 2000, and a year later added another Fibrekraft Manufacturers Ltd., a Kiwi producer of paddles and watercraft accessories. Pacific Kayak had been formed in 1993.

While buying new plants overseas, Johnson Outdoors was consolidating manufacturing operations in North America in a never-ending pursuit of economies of scale. The Lake Electric division of Racine, Wisconsin was moved into Minn Kota's Mankato, Minnesota electric boat motor plant in 2000. British Columbia's Necky brand of kayaks, acquired in late 1998, was folded into the Ocean Kayak facility in Ferndale, Washington, three years later. Kayak production at a Quebec facility was transferred to the operation in Old Town, Maine in 2004. Johnson Outdoors also turned over rotational molding operations in Michigan to a contractor.

There were also divestments. In 2000 Berkley Inc., which traded as Pure Fishing, bought the Fishing division, which included Mitchell reels and Johnson lures, for $34.5 million. The Jack Wolfskin unit was sold to Bain Capital in 2002 for $63 million EUR 64 million).

Sales began a downward slide in 2001, reaching $345.6 million. Consumer products sales suffered in a slack economy; growth for the paddlesports segment was starting to slow after growing at a 30 percent annual rate in the late 1990s. By 2003, sales were down to $315.9 million.

Johnson's military tent sales were taking off, however, with an initial cold-weather tent contract in 2001 potentially worth $10 million over five years. This was just the beginning as the military geared up to support deployments in Afghanistan and Iraq. In 2004, the company won a $43 million emergency supply contract for more than 6,000 modular tent systems. The tents were made at the Eureka plant in Conklin, New York, which employed 250 people. Unfortunately, this facility suffered a flood in 2006, costing the company more than $1 million.

SQUEEZE-OUT ATTEMPT

Chairman Helen Johnson-Leipold had aimed to raise revenues to $500 million by 2004 by adding more products to appeal to a broader customer base. When the company failed to make these numbers (2004 sales were $355 million), the Johnson family attempted to take the company private again in a deal worth $177 million. However, they were not able to win the super-majority of votes required by Wisconsin law. Family patriarch Samuel Johnson died in May 2004 as the deal was being debated.

Some shuffles in the executive suite followed. The company's chief financial officer left in July 2005 and its president and chief operating officer stepped down a year later. At the same time, a minority shareholder was suing the company seeking greater access to its financial records.

Revenues continued to climb slowly, reaching $381 million in 2005 and approaching $400 million in the fiscal year ended September 29, 2006. Johnson Outdoors was profitable, with net income rising from $7.1 million to $8.7 million in 2006. A drop off in military tent sales was offset by increased business in consumer-oriented lines and the addition of a couple of new brands to Marine Electronics, which was the company's largest division. The popularity of fishing kayaks helped lift the Watercraft division, while Outdoor Equipment and Diving both saw sales drop. Earlier in the fiscal year, Johnson acquired the Cannon downrigger and Bottomline fishfinder brands from Armstrong International subsidiary Computrol. The company continued to bank on paddle sports, buying Scotland's Lendal paddles in October 2006. Lendal dated back to 1964.

Thomas Derdak

Updated, Frederick C. Ingram

PRINCIPAL SUBSIDIARIES

Johnson Outdoors Canada Inc.; Old Town Canoe Company; Techsonic Industries, Inc.; Under Sea Industries, Inc.; Johnson Outdoors Watercraft Ltd. (New Zealand).

PRINCIPAL DIVISIONS

Watercraft; Marine Electronics; Diving; Outdoor Equipment.

PRINCIPAL COMPETITORS

American Recreation Products, Inc.; Brunswick Corporation; The Coleman Company, Inc.; Confluence Holdings Corp.; Lowrance Electronics, Inc.

FURTHER READING

Balin, Kim Thuy, "Eschler's Fashionable Performance," Sporting Goods Business, April 16, 1999, p. 22.

Byrne, Harlan S., "Johnson Worldwide," Barron's, March 2, 1992, p. 37.

, "Johnson Worldwide Associates, Inc.," Barron's, July 10, 1989, p. 35.

Carpenter, Kristin, "Backwoods Showdown," Sporting Goods Business, January 6, 1998, p. 44.

Cecil, Mark, "Founding Family Won't Try Taking Johnson Outdoors Private Again Anytime Soon," Mergers & Acquisitions Report, April 18, 2005.

, "Investors Greet Johnson Offer with a Groan," Mergers & Acquisitions Report, March 1, 2004.

, "Johnson Outdoors: Likely a Done Deal," Mergers & Acquisitions Report, November 15, 2004.

, "Johnson Shareholders Receive No News on Squeeze-Out Offer," Mergers & Acquisitions Report, August 9, 2004.

Content, Thomas, "Investors Reject Proposal; No Change to Johnson Outdoors Board," Milwaukee Journal Sentinel, July 27, 2005, p. D2.

, "Proxy Advisors Switch View on Johnson Outdoors; Firms Back Greater Role for Minority Investors," Milwaukee Journal Sentinel, July 20, 2005, p. D3.

, "Shareholders to Vote on Outdoors; Johnson Family Wants to Take Its Only Publicly Traded Company Private," Milwaukee Journal Sentinel, Bus. Sec., March 21, 2005, p. 1.

DeRosa, Angie, "Johnson Outdoors Still Public," Plastics News, March 28, 2005, p. 8.

, "Members of the Johnson Family Taking Kayak Rotomolder Private," Plastics News, November 8, 2004, p. 12.

Gallun, Alby, "Outside Job," Business Journal-Milwaukee, April 16, 1999, p. 3.

Hajewski, Doris, "Analysts, Stockholders Disagree on Health of Wisconsin-Based Johnson Outdoors," Milwaukee Business Journal, January 15, 2001.

, "Investors File Suit; Johnson Outdoors Financial Records Are Target of Action," Milwaukee Journal Sentinel, July 9, 2005, p. D1.

Homer, Eric, "Johnson Outdoors Hunts for $40 Million," Private Placement Letter, November 19, 2001.

"Johnson COO Resigns," Sporting Goods Business, April 25, 2006.

"Johnson Outdoors Finance Chief to Leave," Associated Press Newswires, June 8, 2005.

"Johnson Worldwide Names Helen Johnson-Leipold Chairman and CEO," PR Newswire, March 9, 1999.

Koselka, Rita, "More Fun Than Selling Floor Wax," Forbes, November 12, 1990, p. 222.

McClellan, Matt, "Kayak Maker Closing 2 Plants," Plastics News, August 2, 2004, p. 19.

McEvoy, Christopher, "Acquiring Mind," Sporting Goods Business, August 1995, p. 44.

, "Despite Slow Start, Retailers Still Bullish on Outdoor Boom," Sporting Goods Business, August 1995, p. 22.

Mozinski, Eileen, "Military Orders $15.9 Million in Tents from Johnson Outdoors," Milwaukee Journal Sentinel, Bus. Sec., May 28, 2005, p. 1.

"Outdoor Equipment Group to Refocus Three Key Brands," Sporting Goods Business, August 4, 2000, p. 20.

Spohr, George, "Tougher Times Await Johnson Outdoors," Business Journal, December 24, 2004, p. 1.

Stein, Jason, "It's All About Being a Johnson; The First Woman to Run Any of the Johnson Family Enterprises Cites Her Father's Advice," Capital Times & Wisconsin State Journal, September 25, 2005, p. C1.

Tulabut, Erlina, "Outdoor Segment Softens Sales Downturn for Johnson Outdoors," Outdoor Retailer, January 2002, p. 87.

Young, Kevin, "Standard Operation," Sporting Goods Business, August 1995, p. 48.

NEARBY TERMS

Johnson Outdoors Inc.