Johnson Outdoors 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 has attained leading market positions due to continuous innovation, marketing excellence, product performance and quality. Company values and culture support innovation 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 large, leisure boat navigation technology. In 2011, the Company acquired the LakeMaster brand of high-definition lake charts.
Marine Electronics brands and related accessories are sold across the globe, with approximately 85% of sales coming from North America through large outdoor specialty retailers, such as Bass Pro Shops and Cabela’s; large retail store chains; marine products distributors; international distributors, original equipment manufacturers (OEM) of boat brands such as Tracker, Skeeter and Ranger; and internet retailers and distributors.
Marine Electronics has achieved market share gains by focusing on product innovation, quality products and effective marketing. Such consumer marketing and promotion activities include: 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; social media networks; and online promotions.
Outdoor Equipment
The Company’s Outdoor Equipment segment brands are: Eureka! consumer, commercial and military tents and accessories, sleeping bags, camping furniture and other recreational camping products; Silva field compasses and digital instruments; and Tech40 performance measurement instruments.
Eureka! consumer tents, sleeping bags, camping furniture and other recreational camping products are mid- to high-price range products sold in the U.S. and Canada through independent sales representatives, primarily to camping and backpacking specialty stores, sporting goods stores, catalog and mail order houses and through internet retailers. Marketing of the Company’s tents, sleeping bags and other recreational camping products is focused on building the Eureka! brand name and establishing the Company as a leader in tent design and innovation. The Company’s camping tents and sleeping bags are produced by third party manufacturing sources in Asia. Eureka! camping products are sold under license in Japan, Australia and Europe.
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Eureka! commercial tents include party tents and accessories, sold primarily to general rental stores, and other commercial tents and accessories sold directly to tent erectors. The Company’s tent products range from 10’x10’ canopies to 120’ wide pole tents and other large scale frame structures and are manufactured by the Company at the Company’s Binghamton, New York location.
Commercial tent accessories include lighting systems, interior lining options, and mounting brackets that allow the interior of the tents to be customized to suit the occasion. The Company believes there is a niche market for commercial tents outfitted with common, easy to use accessories.
Eureka! also designs and manufactures large, heavy-duty tents and lightweight backpacking tents for the military at its Binghamton, New York location. Tents produced for military use in the last twelve months include modular general purpose tents, rapid deployment shelters and various lightweight one and two person tents. The Company manufactures military tent accessories like fabric floors and is also a subcontract manufacturer for other providers of military tents.
Silva field compasses are manufactured by the Company and marketed exclusively in North America where the Company owns Silva trademark rights. Tech40 digital instruments and other branded products are manufactured by third parties and are primarily sold in the North American market.
Watercraft
The Company’s Watercraft segment designs and markets Necky high performance sea touring kayaks; sit on top Ocean Kayaks; and Old Town canoes and kayaks for family recreation, touring and tripping. These brands are all manufactured at the Company’s facility in Old Town, Maine.
The Company uses a rotational molding process for manufacturing polyethylene kayaks and canoes to compete in the high volume, low and mid price range of the market. These kayaks and canoes feature stiffer and more durable hulls than higher priced boats. The Company uses a thermo-form molding process in the manufacturing of lower priced models. The Company also markets canoes built from Royalex (ABS) and wood. The Company’s United States warehouse and distribution center for all of its Watercraft brands is also located in Old Town, Maine.
Watercraft accessory brands, including Extrasport personal flotation devices and Carlisle branded paddles, are produced primarily by third-party sources. The Company manufactures its Pacific brand kayaks in New Zealand and contracts for manufacturing of Watercraft products with third parties in New Hampshire and the Czech Republic.
The Company’s kayaks, canoes and accessories are sold through multiple channels in the U.S., Europe and the Pacific Basin with an increasing emphasis on specialty retailers, large outdoor specialty retailers such as Bass Pro Shops and Cabela’s, and large retail sporting goods stores.
The Company’s Watercraft business competes in this segment by introducing product innovations, creating quality products and by focusing on the product-specific needs of each marketing channel. Consumer marketing and promotion activities include: print advertising and editorial coverage in outdoor, general interest and sport magazines; direct marketing; branded websites and social media networks.
Diving
The Company manufactures and markets underwater diving products for technical and recreational divers, which it sells and distributes under the SCUBAPRO, UWATEC and SUBGEAR brand names.
The Company markets a complete line of underwater diving and snorkeling equipment, including regulators, buoyancy compensators, dive computers and gauges, wetsuits, masks, fins, snorkels and accessories. SCUBAPRO and UWATEC diving equipment is marketed to the premium segment of the market for both diving enthusiasts and more technical, advanced divers. SUBGEAR products are marketed to the recreational diver interested in owning quality equipment at an affordable price. Products are sold via select distribution to independent specialty dive stores worldwide. These specialty dive stores sell the Company’s products over the counter as well as through their own websites. In addition, they generally provide a wide range of services to divers, including regular maintenance, product repair, diving education and travel programs. The Company also sells diving gear to dive training centers, aquariums and resorts.
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The Company focuses on maintaining SCUBAPRO and UWATEC as the market leaders in innovation. The Company maintains research and development functions in 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 strategies reinforce the SCUBAPRO and UWATEC brands’ position as the industry’s quality and innovation leaders. The Company markets its equipment in diving magazines, via websites and through information and displays in dive specialty stores. SUBGEAR’S full line of dive equipment and accessories compete in the mid-market on the basis of quality and performance at an affordable price.
The Company manufactures regulators, dive computers, gauges, and instruments at its Italian and Indonesian facilities. The Company sources buoyancy compensators, neoprene goods, plastic products, proprietary materials, and other components from third parties.
Financial Information for Business Segments
As noted above, the Company has four reportable business segments. See Note 13 to the consolidated financial statements included elsewhere in this report for financial information concerning each business segment.
International Operations
See Note 13 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 in each of its business segments. Marine Electronics conducts its product research, design, engineering and software development activities at its locations in Mankato and Little Falls, Minnesota; Alpharetta, Georgia; Eufaula, Alabama; Shanghai, China; and Viareggio, Italy. Diving maintains research and development facilities in Spreitenbach, Switzerland; and Casarza Ligure, Italy. Research and development activities for Watercraft are performed in Bellingham, Washington. Product research, design and innovation for Outdoor Equipment products are conducted at the Company's Binghamton, New York location.
The Company expenses research and development costs as incurred, except for software development for new electronics products and bathymetry data collection and processing. These costs are capitalized once technological feasibility is established and then amortized over the expected useful life of the software or database. The amounts expensed by the Company in connection with research and development activities for each of the last two fiscal years are set forth in the Company’s Consolidated Statements of Operations included elsewhere in this report.
Industry and Competitive Environment
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: Minn Kota’s main competitors in the electric trolling motors business are Motor Guide, owned by Brunswick Corporation, and private label branded motors sourced primarily from manufacturers in Asia. Competition in this business is focused on technological innovation, product quality and durability as well as product benefits and features for fishing.
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Humminbird’s main competitors in the fishfinder market are Lowrance and Garmin. 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.
Cannon’s 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.
Geonav’s main competitors in the marine navigation business are Raymarine, Garmin, Simrad, and Furuno. Competition in this business is primarily focused on innovative designs, quality, easy to use graphical interfaces, resolution of display imaging, leading edge processing power, sales and service capabilities and ease of product integration with related marine electronics devices.
LakeMaster’s main competitors in the lake chart market are Navionics and Jeppesen. Competition in this business focuses primarily on quality of data and quantity of available charts for inland lakes and ocean shoreline.
Outdoor Equipment: The Company’s outdoor equipment 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 Kelty, The North Face and Slumberjack on the basis of materials and innovative designs for consumers who want performance products priced at a value.
The Company’s competitors in the Commercial tent market include Anchor Industries and Aztec for tension, frame and canopy tents. Competition in the commercial tent business is based on price, quality, structure, styling, low cost, ease of installation and technical support.
The Company sells military tents to prime vendors and third party distributors who hold supply contracts from the U.S. Government. Such supply contracts can be for commercial off-the-shelf products in addition to products required to be built to unique specifications. Competitors in the military tent business include HDT, DHS Systems, Alaska Structures, Camel, Outdoor Venture, and Diamond Brand.
Watercraft: The Company primarily competes in the kayak and canoe product categories of the paddlesports market. The Company’s main competitors in this market are Confluence Watersports, Pelican, Wenonah Canoe, Jackson Kayak and Legacy Paddlesports, each of which competes on the basis of their product’s design, performance, quality and price.
Diving: The main competitors in Diving include Aqualung/U.S. Divers, Oceanic, Mares, Cressi-sub, and Suunto.
Competitive advantage in the life support product category of this segment, which consists of regulators, dive computers, and buoyancy compensators, is a function of product innovation, performance, quality and safety.
Competition in the general diving product category of fins, masks, snorkels and wetsuits is characterized by low barriers to entry and numerous competitors who compete on the basis of product innovation, performance, quality and price.
Diving equipment manufacturers are increasingly competing on the basis of financial strength and capital investment. The ability to provide extended credit terms to the specialty dive shop channel offers the opportunity to increase sales in a credit constrained economic environment. Innovation in dive equipment designs drives rapid product cycles, requiring a commitment to investments in research and development in order to maintain market leadership.