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Article by DailyStocks_admin    (01-20-09 06:24 AM)

Filed with the SEC from Jan 08 to Jan 14:

Johnson Outdoors (JOUT)
Investor Warren B. Kanders reported ownership of 418,341 shares (5.2%), bought on Dec. 31 at $5.60 a share.

BUSINESS OVERVIEW

Johnson Outdoors Inc. (the Company) is a leading global manufacturer and marketer of branded seasonal, outdoor recreation products used primarily for fishing, diving, paddling and camping. The Company’s portfolio of well-known consumer brands have attained leading market positions due to continuous innovation, marketing excellence, product performance and quality and enjoy a premium reputation among outdoor recreation enthusiasts and novices alike. Company values and culture support entrepreneurism in all areas, promoting and leveraging best practices and synergies within and across its subsidiaries to advance the Company’s strategic vision set by executive management and approved by the Board of Directors. The Company is controlled by Helen P. Johnson-Leipold (Chairman and Chief Executive Officer), members of her family and related entities.

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

Marine Electronics
The Company’s marine electronic segment brands are: Minn Kota battery-powered fishing motors for quiet trolling or primary propulsion; Humminbird sonar and GPS equipment for fishfinding and navigation; Cannon downriggers for controlled-depth fishing; and Geonav chartplotters for navigation. Marine electronic brands and related accessories are sold in North America, South America, Europe and the Pacific Basin through large outdoor specialty retailers, such as Bass Pro Shops and Cabelas, large retail store chains, marine distributors, international distributors and original equipment manufacturers, such as Ranger Boats, Skeeter Boats and Stratos Champion.

Market share gains have been achieved by emphasizing innovation, quality products and marketing. Consumer marketing and promotion includes: product placements on fishing-related television shows; print advertising and editorial coverage in outdoor, general interest and sport magazines; professional angler and tournament sponsorships; packaging and point-of-purchase materials and offers to increase consumer appeal and sales; branded websites; and, on-line promotions.

On November 16, 2007, the Company acquired Geonav S.r.l. (Geonav), a marine electronics company in Italy for approximately $5.6 million, including transaction costs. Geonav is a major European brand of chart plotters based in Viareggio, Italy. Also sold under the Geonav brand are marine autopilots, VHF radios and fish finders.

Outdoor Equipment

The Company’s Outdoor Equipment segment brands are: Eureka! tents, sleeping bags and backpacks; Silva field compasses and digital instruments; and Tech 4 0 performance measurement instruments.

Eureka! consumer tents, sleeping bags and backpacks are mid- to high-price range products sold in the U.S. and Canada through independent sales representatives, primarily to sporting goods stores, catalog and mail order houses and camping and backpacking specialty stores. Marketing of the Company’s tents, sleeping bags and backpacks is focused on building the Eureka! brand name and establishing the Company as a leader in tent design and innovation. Although the Company’s camping tents, sleeping bags and backpacks are produced primarily by third-party manufacturing sources, design and innovation are conducted at the Company's Binghamton, New York location. Eureka! camping products are sold under license in Japan, Australia and Europe.

Eureka! commercial tents include party tents, sold primarily to general rental stores, and other commercial tents sold directly to tent erectors. Commercial tents are manufactured by the Company at the Company’s Binghamton, New York location and the Company’s tent products range from 10’x10’ canopies to 120’ wide pole tents and other large scale frame structures.

Eureka! also designs and manufactures large, heavy-duty tents and lightweight backpacking tents for the military at its Binghamton, New York location. Tents produced in the last twelve months include modular general purpose tents, TEMPER tents, a rapid deploy tent system, and various lightweight one to four person tents. Military tent accessories like fabric floors and tent liners are also manufactured.

Silva field compasses are manufactured by third parties and marketed exclusively in North America where the Company owns Silva trademark rights. Tech 4 0 digital instruments are manufactured by third parties and are primarily sold in the North American market.

Watercraft

The Company’s Watercraft brands are: Old Town canoes and kayaks; Ocean Kayak; Necky kayaks; Carlisle and Lendal paddles; and Extrasport personal flotation devices.

The Company manufactures its Watercraft products in two locations in the U.S. and one in New Zealand. The Company also contracts for manufacturing of Watercraft products with third parties in Michigan, Tunisia and the Czech Republic.

In its Old Town, Maine facility, the Company produces high quality Old Town kayaks, canoes and accessories for family recreation, touring and tripping. The Company uses a rotational-molding process for manufacturing polyethylene kayaks and canoes to compete in the high volume, low and mid-priced range of the market. These kayaks and canoes feature stiffer and more durable hulls than higher priced boats. The Company also manufactures canoes from fiberglass, Royalex (ABS) and wood.

Sit-on-top Ocean Kayaks and high-performance Necky sea touring kayaks are manufactured in the Company’s Ferndale, Washington facility.

Watercraft accessory brands, including Extrasport personal flotation devices and wearable paddle gear, as well as Carlisle branded paddles are produced primarily by third-party sources. Lendal paddles are produced in-house at the Old Town Canoe facility.

The Company’s kayaks, canoes and accessories are sold primarily to specialty stores, marine dealers, sporting goods stores and catalog and mail order houses such as L. L. Bean ® in the U.S., Europe and Australasia.

Diving

The Company manufactures and markets underwater diving products for technical and recreational divers, which it sells and distributes under the SCUBAPRO , UWATEC and Seemann brand names.

The Company markets a complete line of underwater diving and snorkeling equipment, including regulators, stabilizing jackets, dive computers and gauges, wetsuits, masks, fins, snorkels and accessories. SCUBAPRO and UWATEC diving equipment are marketed to the premium segment of the market for both diving enthusiasts and more technical, advanced divers. Seemann products are marketed to the recreational diver interested in owning quality equipment at an affordable price. Products are sold via selected distribution to independent specialty dive stores worldwide. These specialty dive stores generally provide a wide range of services to divers, including sales, service and repair, diving education and travel.

The Company focuses on maintaining SCUBAPRO and UWATEC as the market leaders in innovation. The Company maintains research and development functions in the U.S. and Europe and holds a number of patents on proprietary products. The Company’s consumer communication focuses on building the brand and highlighting exclusive product features and consumer benefits of the SCUBAPRO and UWATEC product lines. The Company’s communication and distribution reinforce the SCUBAPRO and UWATEC brands’ position as the industry’s quality and innovation leader. The Company markets its equipment in diving magazines, via websites and through dive specialty stores. Seemann’s full-line of dive equipment and accessories are marketed and sold primarily in Europe. Seemann products compete in the mid-market on the basis of quality at an affordable price.

The Company maintains manufacturing and assembly facilities in Italy and Indonesia and is currently in the process of moving the Swiss manufacturing operation to Batam, Indonesia, as described in Note 2 to the Company’s Consolidated Financial Statements attached to this report. The Company sources stabilizing jackets from a third-party manufacturer in Mexico. The majority of the Company’s rubber, proprietary materials, plastic products and other components are also sourced from third-parties.

Financial Information for Business Segments

As noted above, the Company has four reportable business segments. See Note 12 to the Consolidated Financial Statements included elsewhere in this report for financial information concerning each business segment.

International Operations

See Note 12 to the Consolidated Financial Statements included elsewhere in this report for financial information regarding the Company’s domestic and international operations. See Note 1, subheading “Foreign Operations and Related Derivative Financial Instruments,” to the Consolidated Financial Statements included elsewhere in this report for information regarding risks related to the Company’s foreign operations.

Research and Development

The Company commits significant resources to new product research and development. The Company expenses these costs as incurred except for software development for new fishfinder products which are capitalized once technological feasibility is established and then amortized over the expected life of the software. The amounts expensed by the Company in connection with research and development activities for each of the last three fiscal years are set forth in the Company’s Consolidated Statements of Operations included elsewhere in this report.

Competition

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

Marine Electronics: The main competitor in electric trolling motors is Motor Guide, owned by Brunswick Corporation, which manufactures and sells a full range of trolling motors and accessories. Competition in this business is focused on product quality and durability as well as product benefits and features for fishing. The main competitors in the fishfinder market are Lowrance, Garmin, Navman, and Ray Marine. Competition in this business is primarily focused on the quality of sonar imaging and display as well as the integration of mapping and GPS technology. The main competitors in the downrigger market are Big Jon, Walker and Scotty. Competition in this business primarily focuses on ease of operation, speed and durability.

Outdoor Equipment: The Company’s brands and products compete in the sporting goods and specialty segments of the outdoor equipment market. Competitive brands with a strong position in the sporting goods channel include Coleman and private label brands. The Company also competes with specialty companies such as The North Face and Kelty on the basis of materials and innovative designs for consumers who want performance products priced at a value. Commercial tent market competitors include Anchor Industries and Aztec for tension and frame tents along with canopies based on structure and styling. The Company also competes for military tent contracts under the U.S. Government bidding process; competitors include Base-X, DHS Systems and Alaska Structures, Camel, Outdoor Ventures, and Diamond Brands.

Watercraft: The Company primarily competes in the paddle boat segment of kayaks and canoes. The Company’s main competitors in this segment are Confluence Watersports, Pelican, Wenonah Canoe and Legacy Paddlesports, each of which primarily competes on the basis of their design, performance and quality.

Diving: The main competitors in Diving include Aqualung/U.S. Divers, Oceanic, Mares, Cressi-sub, and Suunto, each of which primarily competes on the basis of product innovation, performance, quality and safety.

Employees

At October 3, 2008, the Company had approximately 1,400 regular, full-time employees. The Company considers its employee relations to be excellent. Temporary employees are utilized primarily to manage peaks in the seasonal manufacturing of products.

Backlog

Unfilled orders for future delivery of products totaled approximately $38.2 million at October 3, 2008 and $36.0 million September 28, 2007. For the majority of its products, the Company’s businesses do not receive significant orders in advance of expected shipment dates, with the exception of the military tent business which has orders outstanding based on contractual agreements.

Patents, Trademarks and Proprietary Rights

The Company owns no single patent that is material to its business as a whole. However, the Company holds various patents, principally for diving products, electric motors and fishfinders and regularly files applications for patents. The Company has numerous trademarks and trade names which it considers important to its business, many of which are noted on the preceding pages. Historically, the Company has vigorously defended its intellectual property rights and the Company expects to continue to do so.

Sources and Availability of Materials

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

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

Seasonality

The Company’s products are outdoor recreation related which results in seasonal variations in sales and profitability. This seasonal variability is due to customers increasing their inventories in the quarters ending March and June, the primary selling season for the Company’s outdoor recreation products. The following table shows, for the past three fiscal years, the total net sales and operating profit or loss of the Company for each quarter, as a percentage of the total year.

Available Information

The Company maintains a website at www.johnsonoutdoors.com. On its website, the Company makes available, free of charge, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as soon as reasonably practical after the reports have been electronically filed or furnished to the Securities and Exchange Commission. In addition, the Company makes available on its website, free of charge, its (a) Code of Business Conduct; (b) Code of Ethics for its Chief Executive Officer and Senior Financial and Accounting Officers; and (c) the charters for the following committees of the Board of Directors: Audit; Compensation; Executive; and Nominating and Corporate Governance. The Company is not including the information contained on or available through its website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K. This report includes all material information about the Company that is included on the Company’s website and is otherwise required to be included in this report.

CEO BACKGROUND

At January 1, 2008, the Johnson Family beneficially owned, 3,722,032 Class A Shares, or approximately 45.6% of the outstanding Class A Shares, and 1,211,196 Class B Shares, or approximately 99.5% of the outstanding Class B Shares.

EXECUTIVE OFFICERS

The following table sets forth the name, age, current position and principal occupation and employment during the past five years of the executive officers of the Company who are not nominees for directors:



Name Age Current Position Other Positions


David W. Johnson
45

Vice President and Chief Financial Officer of the Company since November 2005.


From July 2005 to November 2005, Mr. Johnson served as Interim Chief Financial Officer and Treasurer of the Company. From December 2001 to July 2005, he served as Director of Operations Analysis of the Company. Prior to joining the Company, Mr. Johnson was employed by Procter & Gamble in a series of finance positions with increasing responsibility.

MANAGEMENT DISCUSSION FROM LATEST 10K

Executive Overview

The Company designs, manufactures and markets top-quality recreational products for the outdoor enthusiast. Through a combination of innovative products, strong marketing, a talented and passionate workforce and efficient distribution, the Company sets itself apart from the competition. Its subsidiaries operate as a network that promotes entrepreneurialism and leverages best practices and synergies, following the strategic vision set by executive management and approved by the Company’s Board of Directors.

Recent Developments

The Company’s senior debt agreement in place at October 3, 2008 requires that it meet certain operating requirements and financial ratios in order to avoid a default or event of default under the agreement. The Company was in non-compliance with its net worth covenant at October 3, 2008. On December 31, 2008, the Company entered into a n amended financi ng arrangement with its lenders, effective January 2, 2009 . Changes to the senior debt agreement include shortening the maturity date of the term loan, adjusting financial covenants and interest rates. Additionally, the Company’s revolving credit facility was reduced from $75.0 million to $35.0 million, with an additional reduction of $5.0 million required by January 31, 2009. Due to the fact the Company has entered into this amended agreement, the Company’s debt has been classified as long-term at October 3, 2008, in accordance with the terms of the amended debt agreement. See further information regarding the Company’s indebtedness at Note 4 to the Consolidated Financial Statements included elsewhere in this report.

On December 29, 2008, the Company and JPMorgan Chase (“the Counterparty”) agreed to amend the terms of its $60.0 million LIBOR interest rate swap (“the Swap”) contract to include an automatic termination clause. The Company and the Counterparty are negotiating a modification of the terms of the Swap to accommodate the new debt agreements. If the Company and the Counterparty cannot agree to acceptable modification terms, the Swap will automatically terminate on January 8, 2009. Early termination of the Swap would require the Company and the Counterparty to settle their respective obligations to each other under the Swap contract terms. If such a termination had occurred on December 29, 2008, it would have required the Company to pay the Counterparty approximately $6.5 million, which was the fair value of the Swap on that date. If the Swap were to terminate on January 8, 2009, the amount required to be paid by the Company to settle this contract could be materially different.

As of October 3, 2008, the Company recorded a non-cash charge for impairment of goodwill and other indefinite lived intangible assets of $41.0 million related to all four of the Company’s business segments based on assessments performed in the fourth quarter of fiscal 2008. In accordance with Statement of Financial Accounting Standards No. 142, Accounting for Goodwill and Other Intangible Assets (“SFAS No. 142”), we are required to test goodwill and other indefinite lived intangible assets at least annually for impairment. We determined that as of October 3, 2008, portions of our goodwill and portions of our indefinite lived intangible assets were impaired due to our expectations of lower future profitability and increases in our cost of capital.

During 2008, the Company recorded a valuation allowance of $29.5 million in respect of the net deferred tax assets recorded in our U.S., Germany, Spain, United Kingdom and New Zealand tax jurisdictions. Given the current market conditions of the outdoor recreation equipment market as well as other factors arising during fiscal 2008 which may impact future operating results, the Company considered both positive and negative evidence in evaluating the need for a valuation allowance relating to the deferred tax assets of these tax jurisdictions. The Company determined that it was more likely than not that the deferred tax assets will not be realized and a valuation allowance of $29.2 million, $1.8 million, $0.2 million, $0.4 million and $0.1 million was recorded against the net deferred tax assets in the U.S., Germany, Spain, United Kingdom, and New Zealand tax jurisdictions respectively.

On December 17, 2007, management committed to divest the Company’s Escape business . This decision resulted in the reporting of the Escape business as a discontinued operation in the current year and the reclassification of the results of this business as discontinued operations for comparable reporting periods. Individual lines of boats in this business have either been sold or are in the process of being divested. The Company will continue to explore strategic alternatives for the remaining lines of the Escape business through the first quarter of 2009 at which point we expect to have either sold or otherwise disposed of the remaining assets of the Escape business. We believe we have adequately reserved for any losses that could result from the disposal of the remaining lines.

(1) The results of 2008 contain a deferred tax asset valuation allowance of $29.5 million.
(2) The results of 2008 contain a full year of operating results of the acquired Seemann business and approximately ten months of operating results of the acquired Geonav business.
(3) The results in 2007 contain a full year of operating results of the acquired Lendal Products Ltd. business and six months of operating results of the acquired Seemann business.

See Note 12 in the notes to the Consolidated Financial Statements included elsewhere in this report for the definition of segment net sales and operating profit.

Fiscal 2008 vs Fiscal 2007

Net Sales

Net sales totaled $420.8 million in 2008 compared to $430.6 million in 2007, a decrease of 2.3% or $9.8 million. Sales declined in all but the Company’s Diving business unit. Foreign currency translations favorably impacted 2008 net sales by $9.6 million in comparison to 2007.

Net sales for the Marine Electronics business decreased $11.3 million, or 5.7%, despite incremental sales from the Geonav business, acquired in November, 2007, which added $12.4 million in sales for the year. The decline was primarily the result of general economic conditions and weakness in the domestic boat market which reduced demand for trolling motors and downriggers, and unfavorable volume comparisons due to high levels of new product purchases by customers in the prior year. This weakness was partially offset by higher sales of Humminbird fishfinder/GPS combo units.

Outdoor Equipment net sales declined $7.6 million, or 13.6%, primarily due to the expected $6.6 million decline in military tent sales. Commercial tent sales were also down from the prior year by $1.2 million due to softness in the U.S. economy driving cautious spending by tent rental companies.

Net sales for the Watercraft business decreased $0.7 million, or 0.8%, as a result of a decline in sales to big-box retailers in light of unfavorable weather conditions and economic uncertainty in the retail marketplace. This decline was partially offset by an increase in sales to outdoor specialty stores driven mainly by the timing of orders in the prior year.

The Diving business saw increased sales of $9.5 million, or 10.7%, due mainly to $4 million of incremental sales related to the Seemann business acquired in April, 2007, and $6.7 million of favorable currency translations.

Gross Profit

Gross profit of $159.6 million was 37.9% of net sales on a consolidated basis for the year ended October 3, 2008 compared to $175.5 million or 40.8% of net sales in the prior year.

Gross profit in the Marine Electronics business declined $11.2 million, from 37.5% of net sales in 2007 to 33.8% of net sales in the current year. The incremental Geonav gross profit of $2.8 million was more than offset by the effects of unfavorable overhead expense absorption due to lower production volumes for electric motors and downriggers and an unfavorable product mix. In addition, as a result of the weak consumer demand, reserves for excess and obsolete inventory increased by $1.8 million over the prior year.

Gross profit in the Outdoor Equipment business declined $3.9 million from 34.0% of net sales in 2007 to 31.3% of net sales in the current year due largely to unfavorable product mix and lower production volumes of government and commercial tents.

Gross profit in the Watercraft segment of 34.4% of net sales in 2008 was $3.9 million less than 2007 levels at 38.5% of net sales due primarily to lower volume and related operating inefficiencies, closeout pricing, and $1.2 million of increased material costs. In addition, the Company recorded an additional reserve of $1.0 million for excess and obsolete inventory in 2008 compared to 2007 as a result of lower sales and the Company’s efforts to reduce the number of unique inventory items.

Gross profit for the Diving segment increased by $3.1 million but decreased as a percent of net sales from 53.6% in 2007 to 51.6% in 2008 due largely to currency impacts on purchased product and close out sales on end-of-life products.

Operating Expenses

During fiscal 2008, the Company recorded an impairment charge of $41.0 million related to goodwill and other indefinite lived intangible assets. Excluding the impairment charge, operating expenses in 2008 would have been $156.6 million as compared to $155.5 million in 2007.

Goodwill impairment charges of $7.2 million and $7.4 million of operating expenses generated by the newly acquired Geonav business were recognized in the Marine Electronics segment during 2008. All other operating expenses decreased $3.2 million from the prior year. This decrease was due mainly to the decrease in bonus, profit sharing and other incentive compensation of $2.7 million, partially offset by increased warranty expense.

Outdoor Equipment operating expenses increased by $2.7 million from the prior year due primarily to a goodwill impairment charge of $0.6 million in the current year and the favorable impact in the prior year of $2.9 million of insurance recoveries related to the flood at the Company’s facility in Binghamton, New York in 2006.

The Company recorded a goodwill impairment charge of $6.2 million in 2008 related to the Watercraft business. Other operating expenses in the Watercraft business decreased by $6.0 million due primarily to the impact of a $4.4 million legal settlement recorded in the prior year and the reduction of bonus, profit sharing and other incentive compensation expense in the current year.

An impairment charge of $27.0 million was included in the Diving business operating expenses for 2008. Other Diving operating expenses increased $4.6 million from the prior year due to $2.5 million of restructuring costs incurred related to the relocation of dive computer manufacturing and $3.4 million due to currency impacts, offset by decreased bonus, profit sharing and other incentive compensation expenses.

Operating Results

The Company recognized an operating loss of $38.1 million in 2008 compared to an operating profit of $20 million in fiscal 2007. Primary factors driving the decrease in operating profit margins were the goodwill impairment loss, the underabsorption of overhead expenses due to significantly lower production volumes as well as higher raw material costs, close out pricing and additional inventory reserves on slow moving inventory. Operating expenses totaled $197.6 million, or 47.0% of net sales in fiscal 2008 compared to $155.5 million or 36.1% of net sales in fiscal 2007. Marine Electronics operating profit decreased by $22.5 million, or 98.2%, in fiscal 2008 from the prior year. Outdoor Equipment operating profit decreased $6.5 million, or 76.5%. Watercraft operating loss worsened by $4.1 million from the prior year. Diving operating profit turned into a loss of $21.5 million, a $28.4 million decrease from the prior year amount.

Other Income and Expenses

Interest income remained consistent with the prior year at $0.8 million in fiscal 2008. Interest expense increased $0.5 million from 2007 to $5.7 million in 2008, due largely to higher long term borrowings incurred to fund higher working capital needs. The Company realized currency losses of $1.9 million in fiscal 2008 as compared to $0.6 million in fiscal 2007. The increase was primarily due to significant weakening of the U.S. dollar against the Swiss franc and the euro.

Pretax Income and Income Taxes

The Company recognized a pretax loss of $44.3 million in fiscal 2008, compared to pretax income of $15.8 million in fiscal 2007. The Company recorded income tax expense of $24.2 million in fiscal 2008, an effective rate of (54.6%), compared to $5.2 million in fiscal 2007, an effective rate of 33.2%. The 2008 expense includes a valuation allowance of $29.5 million in respect of deferred tax assets in the U.S. and certain foreign tax jurisdictions. The effective tax rate for 2007 benefited from a German tax law change, an increased tax rate used to record federal deferred tax assets and research and development tax credits .

Loss from Continuing Operations

The loss from continuing operations was $68.5 million for the year compared to income of $10.5 million in the prior year as a result of the fluctuations discussed above.

Loss from Discontinued Operations

On December 17, 2007, the Company’s management committed to a plan to divest the Company’s Escape business and is continuing to explore strategic alternatives for its Escape brand products. In accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144), the results of operations of the Escape business have been reported as discontinued operations in the consolidated statements of operations for the fiscal years ended October 3, 2008, September 28, 2007, and September 29, 2006 and in the consolidated balance sheets as of October 3, 2008 and September 28, 2007. The Company recorded after tax losses related to the discontinued Escape business of $2.6 million and $1.3 million for 2008 and 2007, respectively.

Net Loss

The Company recognized a net loss of $71.0 million in fiscal 2008, or $7.81 per diluted share, compared to net income of $9.2 million in fiscal 2007, or $1.00 per diluted share.

Fiscal 2007 vs Fiscal 2006
Net Sales

Net sales totaled a record $430.6 million in 2007 compared to $394.0 million in 2006, an increase of 9.3% or $36.6 million. Foreign currency translations favorably impacted 2007 net sales by $3.9 million in comparison to 2006. Sales growth in the Company’s Marine Electronics, Watercraft and Diving business units overcame a decline in the Outdoor Equipment business unit.

Net sales for the Marine Electronics business increased $33.5 million, or 20.4% primarily due to the successful launch of new products across the Marine Electronics brands. Net sales for the Company’s Watercraft business increased $3.3 million, or 3.9%, as a result of new product introductions and product offerings in the U.S. and improved volumes in international markets. Net sales for the Diving business increased $10.2 million, or 13.0% primarily due to an increase of $4.6 million from the acquired Seemann Sub business, increased volume in Europe and the far east and a $2.8 million favorable currency translation. Net sales in the Company’s Outdoor Equipment business declined $10.0 million, or 15.2%, primarily due to the expected decline in total military tent sales and a $5.3 million decline in specialty market sales. The declines in military tent sales and specialty market sales were partially offset by strong sales in the Consumer and Commercial businesses.

Operating Results

The Company recognized an operating profit of $20.0 million in fiscal 2007 compared to an operating profit of $23.4 million in fiscal 2006. Company gross profit margins decreased to 40.8% in fiscal 2007 from 42.0% in fiscal 2006. Primary factors driving the decrease in gross profit margins were production inefficiencies in Marine Electronics and Diving supply chain challenges in Europe. Operating expenses totaled $155.5 million, or 36.1% of net sales in fiscal 2007 compared to $141.9 million, or 36.0% of net sales in fiscal 2006.

Marine Electronics operating profit improved by $1.3 million, or 6.2%, in fiscal 2007 from the prior year. The increase was primarily driven by favorable net sales volume on successful launch of new products across the Marine Electronics brands, slightly offset by increased labor due to production inefficiencies incurred in meeting higher new product demand.

Outdoor Equipment operating profit increased $0.2 million, or 2.8%, mainly due to the insurance recoveries related to the 2006 Binghamton, New York flood. The Company recognized gains on the recoveries of $2.9 million compared to losses incurred in the prior year of $1.5 million. No additional costs or recoveries are expected related to this event. Without the insurance recoveries the Outdoor Equipment business operating profit would have declined as a result of lower military tent sales and $5.3 million of specialty market sales occurring in 2006 which did not recur in 2007.

Watercraft operating profit of $0.2 million in 2006 decreased by $4.4 million to an operating loss of $4.2 million for fiscal 2007. However fiscal 2007 operating losses for this segment included a one-time legal settlement of $4.4 million. Nonetheless, Watercraft saw improvements in its core Paddlesports business.

Diving operating profit increased by $1.3 million, or 23.7%, due primarily to operating profit provided by the acquired Seemann Sub business along with improved profitability on increased sales volume in far east markets. Additionally, the Diving business incurred $0.6 million in restructuring costs related to the closure of its Wendelstein, Germany facility.

Other Income and Expenses

Interest income in 2007 increased $0.2 million to $0.7 million in fiscal 2007. Interest expense increased $0.2 million to $5.2 million. Favorability resulting from lower amounts of term debt outstanding for the year was offset by higher short term borrowings incurred to fund working capital needs. The Company realized currency losses of $0.6 million in fiscal 2007 as compared to $0.2 million in fiscal 2006.

Pretax Income and Income Taxes

The Company recognized pretax income of $15.8 million in fiscal 2007, compared to $18.5 million in fiscal 2006. The Company recorded income tax expense of $5.2 million in fiscal 2007, an effective rate of 33.2%, compared to $8.1 million in fiscal 2006, an effective rate of 43.6%. The effective tax rate for 2007 benefited from a German tax law change, an increased tax rate used to record federal deferred tax assets and research and development tax credits .

Loss from Continuing Operations

The income from continuing operations was $10.5 million for the year compared to income of $10.4 million in the prior year as a result of the fluctuations discussed above.

Loss from Discontinued Operations

On December 17, 2007, the Company’s management committed to a plan to divest the Company’s Escape business and is continuing to explore strategic alternatives for its Escape brand products. In accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144), the results of operations of the Escape business have been reported as discontinued operations in the consolidated statements of operations for the fiscal years ended October 3, 2008, September 28, 2007, and September 29, 2006 and in the consolidated balance sheets as of October 3, 2008 and September 28, 2007. The Company recorded after tax losses related to the discontinued Escape business of $1.3 million and $1.7 million for 2007 and 2006, respectively.

Net Income

The Company recognized net income of $9.2 million in fiscal 2007, or $1.00 per diluted share, compared to net income of $8.7 million in fiscal 2006, or $0.95 per diluted share.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) includes comments and analysis relating to the results of operations and financial condition of Johnson Outdoors Inc. and its subsidiaries (the Company) as of and for the nine months ended June 27, 2008 and June 29, 2007. All monetary amounts, other than share and per share amounts, are stated in millions.

Our MD&A is presented in the following sections:



•

Forward Looking Statements


•

Trademarks


•

Overview


•

Results of Operations


•

Financial Condition


•

Obligations and Off Balance Sheet Arrangements


•

Market Risk Management


•

Critical Accounting Policies and Estimates


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New Accounting Pronouncements

Our MD&A should be read in conjunction with the condensed consolidated financial statements and related notes that immediately precede this section, as well as the Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2007 which was filed with the Securities and Exchange Commission on December 12, 2007.

Forward Looking Statements

Certain matters discussed in this Form 10-Q are “forward-looking statements,” and the Company intends these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of those safe harbor provisions. These forward-looking statements can generally be identified as such because the context of the statement includes phrases such as the Company “expects,” “believes” or other words of similar meaning. Similarly, statements that describe the Company’s future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results or outcomes to differ materially from those currently anticipated. Factors that could affect actual results or outcomes include the matters described under the caption "Risk Factors" in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2007 which was filed with the Securities and Exchange Commission on December 12, 2007 and the following: changes in consumer spending patterns; the Company’s success in implementing its strategic plan, including its focus on innovation; actions of companies that compete with the Company; the Company’s success in managing inventory; movements in foreign currencies or interest rates; unanticipated issues related to the Company’s military tent business; the success of suppliers and customers; the ability of the Company to deploy its capital successfully; unanticipated outcomes related to outsourcing certain manufacturing processes; unanticipated outcomes related to outstanding litigation matters and the initiation of new litigation matters; successful integration of acquisitions; and adverse weather conditions. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this filing. The Company assumes no obligation, and disclaims any obligation, to update such forward-looking statements to reflect subsequent events or circumstances.

JOHNSON OUTDOORS INC.

Trademarks

We have registered the following trademarks, which are used in this Form 10-Q: Minn Kota®, Cannon®, Humminbird®, Bottom Line®, Fishin' Buddy®, Silva®, Eureka!®, Geonav®, Old Town®, Ocean Kayak ä , Necky®, Escape®, Lendal®, Extrasport®, Carlisle®, Scubapro®, UWATEC® and Seemann ä .

Overview

Johnson Outdoors designs, manufactures and markets top-quality outdoor recreational products. Through a combination of innovative products and marketing, a talented and passionate workforce, and efficient distribution, the Company seeks to set itself apart from the competition. Its subsidiaries comprise a network that promotes entrepreneurialism and leverages best practices and synergies, following the strategic vision set by executive management and approved by the Company’s Board of Directors.

Highlights

Net sales for the quarter ended June 27, 2008 were $141.2 million, down $8.7 million or 5.8% compared to net sales of $149.9 million for the prior year quarter. Key changes in the quarter included:

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Marine Electronics sales decreased 12.1% from the prior year quarter largely due to a soft domestic boat market, partially offset by incremental sales from the GEONAV business acquired in November, 2007.
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Watercraft sales were down 4.9% versus the prior year quarter due primarily to the effect of economic uncertainty in the retail marketplace.
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Diving sales were up 7.1% due to favorable foreign currency translation.
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Outdoor Equipment sales were essentially flat with the prior year quarter as sales gains in Consumer were virtually offset by lower military and commercial tent sales.

Gross profit margins were 39.5% for the quarter ended June 27, 2008, compared to 42.5% in the prior year quarter, due to lower volume and unfavorable product mix at Marine Electronics; unfavorable product mix and lower production volume in Outdoor Equipment; lower production volume, unfavorable product mix, and higher raw material costs at Watercraft, and currency impacts on purchased product, lower production volumes, and close out sales in Diving.

Operating expenses for the quarter ended June 27, 2008 were down $7.8 million from the prior year quarter driven primarily by the reversal of bonus and incentive compensation expenses in the current year quarter of $3.2 million versus an expense of $1.5 million in the prior year quarter, the negative impact of a $4.4 million legal settlement in the prior year quarter, partially offset by $1.0 million of costs associated with the relocation of dive computer manufacturing.

Seasonality

The Company’s business is seasonal in nature. The third quarter ended June 27, 2008 falls within the Company’s primary selling season. Third quarter sales are historically the highest of the year, reflecting consumer demand during the primary retail selling period for our outdoor recreational products. The table below sets forth a historical view of the Company’s seasonality during the last three completed fiscal years.

JOHNSON OUTDOORS INC.

Net Sales

Net sales on a consolidated basis for the three months ended June 27, 2008 were $141.2 million, a decrease of $8.7 million compared to $149.9 million for the three months ended June 29, 2007.

Net sales for the three months ended June 27, 2008 for the Marine Electronics business were $62.4 million down $8.6 million or 12.1% from $71.0 million in the prior year quarter. This decrease was due to general economic conditions and weakness in the domestic boat market, which reduced demand for trolling motors and downriggers, and unfavorable volume comparisons due to initial stocking of new products in the prior year. This weakness was partially offset by incremental sales from the recently acquired GEONAV business, which added $4.9 million of sales, and higher sales of Humminbird fishfinder / GPS combo units.

Net sales for the Watercraft business were $34.6 million, a decrease of $1.8 million or 4.9%, compared to $36.4 million in the prior year quarter due to weak economic conditions, partially offset by stronger international sales.

Net sales for the Outdoor Equipment business were $17.1 million for the current quarter, a decrease of $0.1 million or 0.6% from the prior year quarter sales of $17.2 million. Military and commercial tent sales were down $0.5 million and $0.4 million respectively, partially offset by an increase in consumer tent and international sales of $0.5 million and $0.3 million , respectively. The decrease in commercial tent sales reflected cautious spending by rental companies in the face of a weakening domestic economy. Consumer tent sales increased due to strength in the overall camping markets .

Net sales for the Diving business were $27.3 million this quarter, versus $25.5 million in the prior year quarter, an increase of $1.8 million or 7.1%. The increase was due to favorable foreign currency exchange translation.

Net sales on a consolidated basis for the nine months ended June 27, 2008 were $339.0 million, a decrease of $4.3 million or 1.3% compared to $343.3 million for the nine months ended June 29, 2007.

Year to date net sales for the Marine Electronics business were $157.2 million down $7.8 million or 4.7% versus $165.0 million in the prior year period. This decrease was due to general economic conditions and weakness in the domestic boat market, which reduced demand for trolling motors and downriggers, and unfavorable volume comparisons due to initial stocking of new products in the prior year. This weakness was partially offset by higher sales of Humminbird fishfinder / GPS combo units, as well as incremental sales from the GEONAV business, acquired in November 2007, which added $10.3 million in sales for the year to date period.

Year to date net sales for the Watercraft business were $71.8 million, an increase of $1.3 million or 1.8%, compared to $70.5 million in the prior year period. The increase in Watercraft net sales was due to growth in watercraft accessories, entry-level kayaks, and growth in international markets.

Year to date net sales for the Outdoor Equipment business were $38.3 million, down $8.1 million or 17.5% from prior year to date net sales of $46.4 million. This change in net sales was driven largely by a decline in military sales of $7.0 million and a decline in commercial tent sales, which was down due to softness in the U.S. economy and a specialty markets sales program in the prior year, partially offset by growth in consumer tent sales in the current year.

The Diving business had year to date net sales of $72.3 million, an increase of $10.4 million or 16.8% from the prior year period net sales of $61.9 million. The primary drivers of this increase were new product launches, favorable foreign currency exchange translation of $5.3 million and incremental sales from the Seemann acquisition. The Seemann business, acquired on April 2, 2007, added $4.0 million in sales for the nine month period ended June 27, 2008.

JOHNSON OUTDOORS INC.

Gross Profit Margin

Gross profit as a percentage of net sales was 39.5% on a consolidated basis for the quarter ended June 27, 2008 compared to 42.5% in the prior year quarter. The decline in gross profit margin was due to lower volume and unfavorable product mix at Marine Electronics; unfavorable product mix and lower production volume in Outdoor Equipment; lower production volume, unfavorable product mix, and higher raw material costs at Watercraft, and lower margins in Diving due to currency impacts on purchased product, lower production volumes, and close out sales.

Gross profit as a percentage of net sales on a consolidated basis was 38.9% for the nine month period ended June 27, 2008 compared to 40.6% in the prior year period. The decline in gross profit margin from the prior year to date period was driven by: lower volume and unfavorable product and geographic mix in Marine Electronics; unfavorable product mix and lower production volume in Outdoor Equipment; lower production volume, unfavorable product mix, and higher raw material costs at Watercraft; and lower margins in Diving due to currency impacts on purchased product, lower production volumes, and close out sales.

Operating Expenses

Operating expenses were $41.2 million for the quarter ended June 27, 2008, a decrease of $7.8 million over the prior year quarter amount of $49.0 million. Primary factors were the reversal of bonus and incentive compensation expenses in the current year quarter of $3.2 million versus an expense of $1.5 million in the prior year quarter, the negative impact of a $4.4 million legal settlement in the prior year quarter, various cost savings actions, partially offset by foreign currency exchange translation of $1.2 million, $1.0 million of costs associated with the relocation of dive computer manufacturing and incremental operating expenses of the recently acquired GEONAV business in the current quarter of $1.8 million.

Operating expenses were $118.2 million for the nine months ended June 27, 2008, a decrease of $4.1 million over the prior year to date amount of $122.3 million, due to bonus and incentive compensation expenses in the current year of $0.4 million compared to $5.7 million in the prior year, the negative impact of a $4.4 million legal settlement in the prior year, various cost savings actions, partially offset by higher restructuring costs of $1.4 million in the current year to date period due to the relocation of dive computer manufacturing, incremental operating expenses of the recently acquired GEONAV business in the current year of $4.1 million, and the effect of nine months of operating expenses of the Seemann businesses in the current year versus three months in the prior year to date period.

Operating Profit

Operating profit on a consolidated basis for the three months ended June 27, 2008 was $14.6 million compared to an operating profit of $14.8 million in the prior year quarter due to the factors impacting gross profit and operating expenses discussed above. Operating profit on a consolidated basis for the nine months ended June 27, 2008 was $13.6 million compared to an operating profit of $17.2 million in the prior year period due to the factors impacting gross profit and operating expenses discussed above.

CONF CALL

Cynthia Georgeson

Good morning and thank you for joining us for our discussion of Johnson Outdoors’ results for the fourth quarter of fiscal year 2008. If you need a copy of the news release we issued this morning it is available on the Johnson Outdoors’ website at www.johnsonoutdoors.com under Investor Relations, Investor Information.

Before I turn the call over to Helen I need to remind you that this conference may contain forward-looking statements intended to qualify for the Safe Harbor for liability established by the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical fact are considered forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond Johnson Outdoors’ control, that could cause actual results to differ materially from those set forth in, or implied by, such forward-looking statements. These risks and uncertainties include those listed in our media release from today and our filing with the Securities and Exchange Commission.

If you have further questions after the call please give either Dave Johnson or me a call at (262) 631-6600.

It is now my pleasure to turn the call over to Helen Johnson-Leipold.

Helen P. Johnson-Leipold

Good morning and thank you for joining us. I hope you have had an opportunity to review our fourth-quarter and year-end earnings announcement. I will start off with comments on 2008, share my perspective on 2009, and provide details on our plans to address future challenges. Dave will cover some key financials, then we will take your questions.

I am not going to rehash the numbers in the press release. Obviously it was a challenging year, however, it didn’t start out that way. In fact, 2008 first quarter projections indicated a year of strong growth ahead. Apart from a weak marine market, orders during the first six months were solid and we built inventory capacity to meet the demand.

Then just as our season began, the economy took a nosedive. Consumer and customer purchases slowed considerably, eroding margins, lowering profits and net income significantly.

Despite the fact that most of our brands were holding or gaining share in key markets and even though we acted immediately to reduce overhead, cut costs, and control spending, results fell short of the prior year.

Overall, outdoor markets declined about 8% but we fared better than the markets and the competition. The marine market was hit the worst by economic downturn with a 25% year-over-year decline, but our marine electronic sales were only down about 12%. The paddle sports market dropped 8% but our canoe and kayak revenues were essentially flat with prior year. Our 2008 new products certainly helped us outperform the market and we have a very strong new product line for 2009.

Strong innovation is key to helping our leading brands gain share in the coming year, which we believe will be at least as challenging as 2008. We also need to protect profitability and enhance our cash position by scaling our cost structure with the current economic environment.

We have comprehensive plans to cut costs and capital by more than $30.0 million across three areas. First, we have specific cost-saving initiatives totaling about $20.0 million. This includes headcount reduction and wage freezes totaling more than $6.0 million. Manufacturing consolidation of die computers along with other raw material and product sourcing initiatives are expected to net almost $9.0 million. The remainder will come from just distribution efficiency programs, reduced discretionary spending in a number of areas, and less use of external consultants.

$20.0 million in cost savings is a very aggressive target for a company of our size. We are committed and are working very hard to capture every penny.

The second area of cost reduction is working capital, where we have set a target of reducing peak working capital by 12%. Restructuring in 2008 has resized operations and functions so that we are leaner and more flexible. To achieve our working capital reduction targets we are being conservative and disciplined in our forecasting models to keep inventories in check, and as of last week our inventories were down 12% compared to the same time last year. The investments we have made in upgrading systems and processes over the past few years have helped us do this.

In addition, we are decreasing safety stock levels and we have an aggressive excess and obsolete movement program. We are also working with our vendors to replace the size and frequency of our orders. Importantly, our bonus program has been revised to align management and operational incentives with our working capital reduction objective.

Our third area of cost savings focuses on capital spending, which we are reducing by 26%. This is the area where we invest in the future. We have and will continue to spend wisely in what I call game-changing innovation.

For instance, side-imaging sonar technology which catapulted the logistic number to Hummingbird fishfinder brand into a neck-and-neck race for the number one market position.

Also the Galileo Sol dive computer which revived the Uwatec brand and set a new higher-bar performance in the category.

And this year Minn-Kota is introducing the next generation fishing motor, the Foretrex. It is revolutionary in styling and performance, the smoothest, quietest trolling motor ever. While anglers may not be in the market for a new boat, the Foretrex can make an old fishing boat feel new again.

These are game changers for the market place and for the company, and that is what we will be focusing resources against.

Importantly, targeted cost savings and spending reductions are highly strategic, intended to scale our cost structure to the current environment while maintaining our competitive position in the coming year and beyond.

In summary, the inherent challenge of doing business amid such economic volatility demands a readiness and commitment to take actions necessary to preserve the long-term sustainability of the enterprise. We believe in the future of Johnson Outdoors and we are doing the right things to ensure we weather the storm, maintain our market leadership, and prepare for growth once the economy and market place rebound.

Now I would like to turn the call over to Dave for the financial highlights.

David W. Johnson

As you say in the press release, the Board voted to suspend quarterly dividends at their meeting yesterday. They felt it was a prudent action at this time. As Helen has just outlined, we are working very hard to ensure the future for Johnson Outdoors and ultimately to enhancing shareholder value for the long term.

I want to talk about the two non-cash items, goodwill impairment charges and deferred tax asset valuation allowance that had such an impact on the quarter and full-year earnings. Let me explain how these occurred.

Consistent with FAS No. 142, we are required to annually test recorded goodwill to determine whether or not there is an impairment. Impairment exists when the carrying amount of goodwill exceeds the fair value. This test is done by a reporting unit. A key element of the fair value calculations is projected future cash flows of each unit, which were impacted by the economic turbulence and declining markets in primarily the fourth quarter.

Projected future cash flows hit their lowest levels concurrent with our annual goodwill assessment, deflating the value of the unit at that point in time, and does not take into consideration the potential for positive future changes in the economic environment. As a result, we were required to write down about $41.0 million of goodwill and other intangible assets in the fourth quarter.

By reporting unit, diving had about $27.0 million in charges, marine electronics roughly $7.0 million, watercraft about $6.0 million, and outdoor gear less than $1.0 million.

Now additionally, there was a $3.5 million inventory write-down across all businesses. Although impairment charges are non-cash items they hit the bottom line and severely impacted earnings, resulting in a significantly higher than normal net loss for the quarter and in turn, the year.

The deferred tax asset valuation allowance was in turn triggered by the net loss, pursuant to FAS 109. This accounting rule deals with whether a valuation allowance should be established against deferred tax assets, based on consideration of all available evidence, positive and negative.

Obviously, the net loss was a big negative and the impact of goodwill impairment was included in the assessment. Ultimately this led to the valuation allowance of $29.5 million in the quarter.

While intangible asset impairment charges and the deferred tax valuation allowance are non-cash accounting charges with no impact on our day-to-day operations, they are reflected on the company’s balance sheet and are used to help calculate various financial performance measures included under our debt agreements. As a result of these non-cash items, the net worth covenant of these agreements has been breached and we are working with our banks to amend those agreements.

In closing, let me reiterate what Helen said. We are working hard and committed to delivering against our plans to protect profits and enhance cash flow during the year. We believe we are doing the right things for today and for the future.

Now I will turn the call back over to the operator for questions.

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