Transformation
Our aggressive transformation of Johnson Outdoors over the past two years produced powerful results in 2010, the initial year of our three-year strategic plan to enhance competitiveness and profitability.

Exceeding our targets
During fiscal 2010, we continued our focus on cost-structure reductions, enhanced product value, targeted revenue gains and disciplined balance sheet management. As a result, when outdoor recreation markets slowly began to recover, we grew sales, gained share and significantly improved operating efficiency.

Key financial targets were met or exceeded in 2010:
- Net income advanced to $6.5 million or $0.68 per diluted share, compared to a net loss of $9.7 million or ($1.06) per diluted share in 2009.
- Revenues improved by more than 7% from 2009.
- Profits grew faster than sales. Total company operating profit grew to $14.6 million, versus $0.3 million in 2009.
- Debt fell to a record low, and our balance sheet showed a $19 million dollar improvement in cash flow year-over-year.

Outpacing our competitors
The economic recession presented unprecedented challenges to every company in our industry. While others faltered or failed, we prevailed, doing what was necessary to weather the crisis in the near-term, while at the same time helping ensure sustained profitability in the years ahead.

This year’s revenue growth outpaced that of our markets. We outperformed the competition in EBIT margin trends. And we gained share even as we maintained market leadership: in core categories, Johnson Outdoors’ brands strengthened their #1 and #2 positions.

You’ll find details on individual business performance throughout this report. I’d like to offer a broader view of the environment in which we have been operating, and in which we have excelled.

Success in the face of challenge
Our three-year strategic plan is the key to Johnson Outdoors leading the market, enhancing shareholder value and delivering long-term, profitable growth. It gives us the structure to make the right choices in the face of challenges such as the following:

Economic uncertainty Demand for our products is affected by economic conditions and consumer confidence worldwide, and especially in the United States and Europe. Like others in our industry, we saw the global economy deteriorating—and we took early, decisive action before most.

In December 2008 we announced aggressive cost-reduction plans. Throughout 2009, we restructured, reduced our operational footprint for competitiveness, and tightened our product line and marketing focus. In 2010 we continued to streamline operations, simplify processes and control working capital while investing strategically in innovative products and programs. We pursued strategies specifically designed to grow share and optimize profitability in depressed economic conditions.

For example, Eureka!®, one of the ten best-known outdoor recreation brands among consumers, revamped product lines and programs to pursue success in the specialty channel. Minn Kota® stayed ahead of low-cost competitors through innovative sales and Point-of-Purchase programs. Targeted email campaigns and in-store programs in all businesses helped increase online and retail purchases, while social media programs helped build relationships with influential enthusiasts.

Outdoor recreation markets have begun to stabilize, yet remain below pre-recession levels. We will continue to emphasize working capital management and supply chain optimization as well as tightly focused product development and marketing to ensure the flexibility needed to adapt to the ebb and flow of economic conditions.

Evolving price/value expectations
While the outdoor recreation industry is on the road to recovery, the economic recession has had a lasting impact on the marketplace. Understandably, customers are more demanding and consumers more discerning with increasingly higher price/value expectations.

In developing new products, our focus is on meaningful innovation that delivers functionality and performance at optimum price points across the value chain. For example, in 2010 we introduced SUBGEAR®, our new high-quality mid-price scuba gear brand. The Minn Kota® i-Pilot, a wireless steering accessory in its second year on the market, and the new feature-rich Humminbird® side-imaging/GPS combo models deliver the performance, features and value consumers demand. As a result, these and other new product offerings exceeded marketplace expectations.

We will continue to provide value relevant to price, along with targeted innovation, and to enhance our competitive position with outstanding customer service.

Advancing technology
Technology change is a given in product development and in business management. The key is to invest in technology strategically for maximum return.

Johnson Outdoors has long been a technology pioneer in our industry, creating categories and advancing participation with the gear we develop. Innovation is who we are. Our plan calls for us to focus on technological advances that are meaningful to consumers, developing new products that bring excitement and growth to the mid-price segment and enhance our brand portfolios.

In 2010 we did just that, increasing net sales 7 percent with successful new products. In fact, this was the sixth straight year new products represented a third or more of total company sales.

We also use technology to improve operational efficiency and maximize value to our customers. For example, a new application tracks Marine Electronics and Watercraft product movement across retail locations enabling us to manage customer inventory to prevent costly out-of-stock or overstock situations on a store-by-store basis. This application currently supports trade partners representing about half of Johnson Outdoors revenues and in 2011 will expand to more customers and include Outdoor Equipment brands.

Sustainability
We are pleased with the results we delivered in Year 1 of our strategic plan. We worked hard, made sacrifices and put every dollar of profit toward our ultimate goal: sustained competitiveness and profitability. Now it’s time for Year 2…and beyond.

Continued focus
Our fiscal 2011 budgets reflect a pragmatic assessment of leading economic indicators and their implications for outdoor markets. Realistically, we anticipate the pace of recovery in our markets to mirror that of the U.S. economy: sluggish and slower than in 2010.

Focused, disciplined execution of our strategic plan is essential to sustain profitable growth in what will be another challenging year. We will continue to carefully manage inventories, keeping working capital in check while supporting our ability to meet marketplace demand, and directing our resources toward maintaining market leadership.

A talented, passionate workforce
Our three-year plan can succeed only with employee engagement. Together, we at Johnson Outdoors are all accountable for the plan’s success. And the efforts of our talented workforce directly enhance shareholder value.

Passion for what we do drives our market success. Passion to do the right thing, as embodied in our new, updated Code of Conduct, ensures we remain the kind of company we strive to be: a company people trust.

A heritage of success
2010 marked the 40th anniversary of Johnson Outdoors. We have grown from a collection of independent businesses, each doing their own thing, to a global family that promotes entrepreneurism while leveraging best practices and synergies.

Back in 1970, some of our categories did not exist and others were in their infancy. Today, we are recognized as pioneers in marine electronics, scuba equipment, plastic canoes and kayaks and camping, commercial and military tents.

Our strategic plan builds on this heritage of innovation and achievement. Now, more than ever, we are forging ahead with a renewed sense of urgency and clarity of purpose. Through transformation in action, and with sustainability in focus, I am confident we will succeed.