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 three and nine months ended July 3, 2009 and June 27, 2008. 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 ? Liquidity and Financial Condition ? Obligations and Off Balance Sheet Arrangements ? Market Risk Management ? Critical Accounting Policies and Estimates ? New Accounting Pronouncements

This discussion 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 October 3, 2008 which was filed with the Securities and Exchange Commission on January 2, 2009.

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 October 3, 2008 which was filed with the Securities and Exchange Commission on January 2, 2009 and the following: changes in consumer spending patterns; the Company's success in implementing its strategic plan, including its focus on innovation; actions of and disputes with companies that compete with the Company; the Company's success in managing inventory; the risk that the Company's lenders may be unwilling to provide a waiver or amendment if the Company is in violation of its financial covenants and the cost to the Company of obtaining any waiver or amendment that the lenders would be willing to provide; the risk of future writedowns of goodwill or other intangible assets; movements in foreign currencies or interest rates; the Company's success in restructuring certain of its operations; the success of suppliers and customers; the ability of the Company to deploy its capital successfully; adverse weather conditions; and other risks and uncertainties provided in the Company's filings with the Securities and Exchange Commission. 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.

Trademarks

We have registered the following trademarks, which may be used in this report: Minn Kota®, Cannon®, Humminbird®, Bottom Line®, Fishin' Buddy®, Silva®, Eureka!®, Tech 4O™, Geonav®, Old Town®, Ocean Kayak™, Necky®, Escape®, Lendal®, Extrasport®, Carlisle®, Scubapro®, UWATEC® and Seemann™.

Overview

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 has attained leading market positions due to continuous innovation, marketing excellence, product performance and quality. The Company's management believes its brands 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.

Highlights

The Company experienced a 18.7% decrease in net sales for the quarter ended July 3, 2009 over the same period in the prior year and a 27.3% decrease in operating profit. The decrease in net sales from the prior year resulted primarily from weak economic conditions and declines in consumer spending.

Key changes in the quarter included:

? Marine Electronics sales decreased 15.7% from the prior year quarter due to continued weakness in domestic and international boat markets. Outdoor Equipment sales were down 24.6% from the prior year quarter due ? primarily to a decrease in military tent orders and commercial tent market weakness.
? Watercraft sales were 26.3% below the prior year quarter due to lower customer reorders, unfavorable currency translation of 3.4%, and continued scaling back of distribution to non-core channels and weak international markets.
? Diving sales were down 11.4% due to weak economies in key markets and unfavorable currency translation of 6.7%.

Gross profit margins were 40.1% for the quarter ended July 3, 2009, compared to 39.5% in the prior year quarter. The increase in the gross profit margin was due primarily to improved operating efficiency and aggressive cost savings.

Operating expenses for the quarter ended July 3, 2009 were down $5.7 million from the prior year quarter despite the prior year quarter including a $3.2 million reversal of bonus and profit sharing expense related to the first six months of the year. The decrease was driven primarily by headcount reductions, curtailed spending in administrative costs, and the impact of currency translation, offset by $1.4 million associated with the consolidation of Watercraft operations.

Seasonality

The Company's business is seasonal in nature. The third quarter 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 fiscal years.

                             JOHNSON OUTDOORS INC.

                                                                    Year Ended
                                       October 3, 2008                  September 28, 2007                  September 29, 2006
                                 Net         Operating             Net           Operating             Net           Operating
Quarter Ended                  Sales     Profit (Loss)           Sales       Profit (Loss)           Sales       Profit (Loss)
December                        18 %            (12 )%           17 %               (11 )%           19 %                (1 )%
March                           29 %             10 %            28 %                23 %            27 %                38 %
June                            34 %             38 %            35 %                74 %            34 %                62 %
September                       19 %           (136 )%           20 %                14 %            20 %                 1 %
                               100 %           (100 )%          100 %               100 %           100 %               100 %

Results of Operations
The Company's net sales and operating profit (loss) by segment are summarized as
follows:

(millions)                       Three Months Ended           Nine Months ended
                               July 3       June 27         July 3      June 27
                                 2009          2008           2009         2008
Net sales:
Marine Electronics         $     52.6      $   62.4     $    143.3     $  157.2
Outdoor Equipment                12.9          17.1           32.6         38.3
Watercraft                       25.5          34.6           58.2         71.8
Diving                           24.2          27.3           57.6         72.3
Other/eliminations               (0.4 )        (0.2 )         (0.5 )       (0.6 )
Total                      $    114.8      $  141.2     $    291.2     $  339.0
Operating profit (loss):
Marine Electronics         $      6.7      $    7.7     $     12.9     $   13.4
Outdoor Equipment                 2.0           2.4            3.3          2.8
Watercraft                        1.5           3.5           (0.3 )        1.2
Diving                            2.4           2.5            1.5          3.6
Other/eliminations               (2.0 )        (1.5 )         (6.2 )       (7.4 )
Total                      $     10.6      $   14.6     $     11.2     $   13.6

See Note 21 of the notes to the condensed consolidated financial statements for the definition of segment net sales and operating profit.

Net Sales

Net sales on a consolidated basis for the three months ended July 3, 2009 were $114.8 million, a decrease of $26.4 million compared to $141.2 million for the three months ended June 27, 2008. Unfavorable currency translation had a negative $4.5 million impact on consolidated net sales during the current quarter.

Net sales for the three months ended July 3, 2009 for the Marine Electronics business were $52.6 million, down $9.8 million or 15.7% from $62.4 million in the prior year quarter. This decrease was largely due to continued weakness in the domestic and international boat markets.

Net sales for the Outdoor Equipment business were $12.9 million for the current quarter, a decrease of $4.2 million or 24.6% from the prior year quarter sales of $17.1 million due primarily to a decrease in military tent orders and a weaker commercial tent market.

Net sales for the Watercraft business were $25.5 million, a decrease of $9.1 million or 26.3%, compared to $34.6 million in the prior year quarter, which was primarily due to lower customer reorders and scaling back distribution in non-core channels. Unfavorable currency translation had a $1.2 million negative impact on net sales in the current quarter.

Net sales for the Diving business were $24.2 million this quarter versus $27.3 million in the prior year quarter, a decrease of $3.1 million or 11.4%. The decrease was due largely to weak economies in key markets and unfavorable currency translation which had a $1.8 million negative impact on net sales in the current quarter.

Net sales on a consolidated basis for the nine months ended July 3, 2009 were $291.2 million, a decrease of $47.8 million, or 14.1%, compared to $339.0 million for the nine months ended June 27, 2008.

Net sales for the Marine Electronics business for the nine months ended July 3, 2009 were $143.3 million, a decrease of 8.8% from prior year sales of $157.2 million. This decrease was primarily due to general economic conditions and weakness in the domestic and international boat markets. Unfavorable currency translation had a 2% negative impact on net sales in the current year period.

Net sales for the Outdoor Equipment business were $32.6 million for the nine months ended July 3, 2009 which represented a 14.9% decline from net sales of $38.3 in the same period last year due largely to a decrease in military tent sales and a weaker commercial tent market.

Net sales for the Watercraft business declined by 18.9% during the nine months ended July 3, 2009 to $58.2 million from $71.8 million during the nine months ended June 27, 2008. This decrease was primarily due to scaling back of distribution in non-core channels and weaker boat markets. Unfavorable currency translation had a 4.1% negative impact on net sales in the current year period.

Net sales for the Diving business declined by 20.3% to $57.6 million for the nine months ended July 3, 2009 compared to $72.3 million in the same period last year primarily due to slowing economies in key international markets. Unfavorable currency translation had a 6.7% negative impact on revenues.

Gross Profit Margin

Gross profit as a percentage of net sales was 40.1% on a consolidated basis for the quarter ended July 3, 2009 compared to 39.4% in the prior year quarter. The increase in gross profit margin was primarily due to improved operating efficiencies and aggressive cost savings efforts undertaken in the current year.

Gross profit as a percentage of net sales was 38.2% on a consolidated basis for the nine month period ended July 3, 2009 compared to 38.9% in the prior year period. The decrease was primarily due to lower volumes.

Operating Expenses

Operating expenses were $35.5 million for the quarter ended July 3, 2009, a decrease of $5.7 million over the prior year quarter amount of $41.2 million.
Primary factors driving the reduced level of operating expenses were volume, headcount reductions, curtailed spending in administrative costs, and favorable foreign currency exchange translation of $1.4 million in the current year quarter, partially offset by restructuring and related charges of $1.4 million associated with the consolidation of Watercraft operations, and the effect of the reversal in the prior year quarter of $3.2 million of bonus and profit sharing expense related to the first six months of the year. Operating expenses were $100.0 for the nine months ended July 3, 2009, a decrease of $18.2 million over the prior year period amount of $118.2 million.

Operating Profit/Loss

Operating profit on a consolidated basis for the three months ended July 3, 2009 was $10.6 million compared to $14.6 million in the prior year quarter, a decrease of 27.4%. The decrease in the Company's operating profit in the current period from the prior year period was due to the factors impacting gross profit and operating expenses discussed above.

Operating profit on a consolidated basis for the nine months ended July 3, 2009 was $11.2 million compared to $13.6 million in the prior year period due to the factors impacting gross profit and operating expenses discussed above.

Other Income and Expense

Interest expense totaled $2.6 million for the three months ended July 3, 2009, compared to $1.7 million in the corresponding period of the prior year, which increase was due primarily to amortization of the Company's interest rate swap. Interest expense for the nine months ended July 3, 2009 was $7.4 million, compared to $4.2 million in the corresponding period of the prior year. The increase was due to amortization of the Company's interest rate swap and the increase in interest rate on the Company's term debt. See "Note 13 - Derivative Instruments and Hedging Activities" to the Company's condensed consolidated financial statements for further discussion.

Interest income was less than $0.1 million and $0.2 million, respectively, for the three and nine months ended July 3, 2009 compared to $0.1 million and $0.6 million, respectively, for the three and nine months ended July 27, 2008.

Other expense included a net $0.3 million foreign currency exchange gain for the three month period ended July 3, 2009. Foreign currency exchange gains were $0.2 million for the three month period ended June 27, 2008. For the nine months ended July 3, 2009, net foreign currency exchange losses were $0.4 million compared to losses of $1.5 million for the nine months ended June 27, 2008. See "Note 13 - Derivative Instruments and Hedging Activities" to the Company's condensed consolidated financial statements for further discussion.

Income Tax Expense

The Company's provision for income taxes is based upon estimated annual effective tax rates in the tax jurisdictions in which the Company operates. The Company's effective tax rate for the three and nine month periods ended July 3, 2009 was (7.3)% and (21.7)% respectively, compared to 40.9% and 43.8%, in the corresponding periods of the prior year. Significant items contributing to changes in the effective rate versus the prior year quarter primarily relate to the impact of the Company recording a valuation allowance benefit of $2.2 million against the net deferred tax assets in the jurisdictions of the United States, Japan, Spain, and the United Kingdom with corresponding deferred tax asset resulting in no tax expense and a State income tax credit benefit of $1.4 million in the current year period related to the receipt of credits during the current quarter. For the year to date period, in addition to the State income tax credit above, key changes in the valuation allowance during the first quarter of fiscal 2009 included the reversal of the valuation allowance for the Company's Germany operations which resulted in $1.8 million benefit and establishing a valuation allowance for the Company's Japan operations which resulted in $1.2 million of additional tax expense.

Discontinued Operations

On December 17, 2007, the Company committed to a plan to divest the Company's Escape business. In accordance with the provisions of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the operations of the Escape business were reported as discontinued operations in the consolidated financial statements for the fiscal years ended October 3, 2008, September 28, 2007, and September 29, 2006. The Company recorded after tax losses related to the discontinued Escape business of $0.1 million and $1.5 million during the three and nine month periods ended June 27, 2008, respectively, and a slight gain, less than $0.1 million, in the nine month period ended July 3, 2009.

Net Income/Loss

Net income for the three months ended July 3, 2009 was $9.0 million, or $0.98 per diluted common class A and B share, compared to net income of $7.8 million, or $0.84 per diluted common class A and B share, for the corresponding period of the prior year due to the factors discussed above.

Net income for the nine months ended July 3, 2009 was $4.6 million, or $0.49 per diluted common class A and B share, compared to a net income of $3.6 million or $0.38 per diluted common class A and B share, for the corresponding period of the prior year due to the factors discussed above.

Liquidity and Financial Condition

The financial position of the Company remains strong, as evidenced by the July 3, 2009 balance sheet. Debt, net of cash balances was $26.9 million as of July 3, 2009 compared to $47.7 million as of June 27, 2008. This decrease in net debt was largely due to the Company's focus on reducing working capital and operating costs resulting in a higher cash balance at July 3, 2009.

The Company's debt-to-total capitalization ratio has increased to 32% as of July 3, 2009 from 25% as of June 27, 2008. The Company's debt balance was $60.8 million as of July 3, 2009 compared to $70.0 million as of June 27, 2008. The increase in debt-to-total capitalization was primarily attributable a decrease in shareholders' equity of $86.0 million year over year, which was a result of the asset impairments and deferred tax asset valuation allowances recognized in the last quarter of fiscal 2008. The Company believes it has adequate financial resources and liquidity to meet anticipated business needs and to fund future growth opportunities.

Accounts receivable net of allowance for doubtful accounts were $82.4 million as of July 3, 2009, a decrease of $21.4 million compared to $103.8 million as of June 27, 2008. The decrease year over year was due to lower sales in the current year and the effect of foreign currency translation of $4.1 million.

Inventories net of inventory reserves were $62.2 million as of July 3, 2009, a decrease of $34.8 million compared to $97.0 million as of June 27, 2008. The decrease year over year was due to a concerted effort to reduce working capital levels through strict controls and improved processes and the effect of foreign currency translation of $3.8 million.

Accounts payable were $20.0 million compared to $28.8 million as of June 27, 2008. The decrease year over year was due to lower sales volumes and the related purchasing activity in the current year and the effect of foreign currency translation of $1.0 million.

The Company's cash flow from operating, investing and financing activities, as reflected in the condensed consolidated statements of cash flows, is summarized in the following table:

(millions)                                    Nine Months Ended
                                            July 3      June 27
                                              2009         2008
Cash provided by (used for):
Operating activities                    $      7.3     $  (32.5 )
Investing activities                         (12.8 )      (14.1 )
Financing activities                          (1.8 )       26.2
Effect of exchange rate changes               (0.5 )        3.5
Decrease in cash and cash equivalents   $     (7.8 )   $  (16.9 )

Operating Activities

Cash flows provided by operations totaled $7.3 million for the nine months ended July 3, 2009 compared with $32.5 million used for operations during the corresponding period of the prior fiscal year.

Accounts receivable increased $29.3 million for the nine months ended July 3, 2009, down from a $40.8 million increase in the prior fiscal year period. Inventories decreased by $24.2 million for the nine months ended July 3, 2009 compared to an increase of $0.9 million in the prior year period. The year to date change in inventory year over year was due to concerted efforts to enhance controls and processes to bring down working capital levels and the effect of reduced production activity in the current year period. Accounts payable and accrued liabilities decreased $2.5 million for the nine months ended July 3, 2009 versus a decrease of $1.1 million for the corresponding period of the prior year period. The year to date change in accounts payable year over year reflects reduced production activity in the current year.

Including the amortization of deferred financing costs, depreciation and amortization charges were $8.0 million for the nine month period ended July 3, 2009 compared to $7.4 million for the corresponding period of the prior year.

Investing Activities

Cash used for investing activities totaled $12.8 million for the nine months ended July 3, 2009 and $14.1 million for the corresponding period of the prior year. Capital expenditures totaled $5.2 million for the nine months ended July 3, 2009 compared to $8.4 million for the corresponding period of the prior year. The Company's recurring investments are made primarily for tooling for new products and enhancements on existing products. Any additional expenditures in fiscal 2009 are expected to be funded by working capital or existing credit facilities.

On February 6, 2009, the Company acquired 100% of the common stock of Navicontrol S.r.l. ("Navicontrol"), a marine autopilot manufacturing company for $0.9 million. The acquisition was funded with existing cash.

On November 16, 2007, the Company acquired 100% of the outstanding common stock of Geonav S.r.l. (Geonav), a marine electronics company located in Viareggio, Italy, for approximately $5.6 million (cash of $5.2 million and transaction costs of $0.4 million). The acquisition was funded with existing cash and borrowings under our credit facilities.

Cash used for investing activities included $6.7 million in payments under interest rate swap contracts. See "Note 13 - Derivative Instruments and Hedging Activities" in the Company's condensed consolidated financial statements for an explanation of these contracts.

Financing Activities

Cash flows used by financing activities totaled $1.8 million for the nine months ended July 3, 2009 compared to $26.2 million provided in the corresponding period of the prior year. The Company made principal payments on senior notes and other long-term debt of $0.0 million and $10.8 million during the nine month periods ended July 3, 2009 and June 27, 2008, respectively.

The Company had no outstanding borrowings on revolving credit facilities or current maturities of long term debt as of July 3, 2009 versus $10.0 million of current maturities of long term debt as of June 27, 2008.

The net increase in borrowings from long term debt for the nine months ended July 3, 2009 was due to the acquisition of approximately $0.8 million of telecommunications equipment under a capital lease. The term of the lease is 60 months. See "Note 18 - Capital Leases" in the Company's condensed consolidated financial statements for additional information.

On February 12, 2008, the Company entered into a term loan agreement with JPMorgan Chase Bank N.A., as lender and agent for the other lenders named therein (the "lending group"). This term loan agreement consisted of a $60.0 million term loan maturing on February 12, 2013, bearing interest at a three-month LIBOR rate plus an applicable margin. The applicable margin was based on the Company's ratio of consolidated debt to earnings before interest, taxes, depreciation and amortization (EBITDA) and varied between 1.25% and 2.00%. At October 3, 2008, the margin in effect was 2.00% for LIBOR loans. Also on February 12, 2008, the Company entered into an amended and restated revolving credit agreement with the lending group. This amendment updated the Company's October 7, 2005 revolving credit facility to allow for the term loan and to amend the financial covenants in the revolving credit facility.

On October 13, 2008, the Company entered into an Omnibus Amendment of its term loan agreement and revolving credit facility effective as of October 3, 2008 with the lending group. On the same date, the Company also entered into a Security Agreement with the lending group. The Omnibus Amendment temporarily modified certain provisions of the Company's term loan agreement and revolving credit facility. The Security Agreement was granted in favor of the lending group and covers certain inventory and accounts receivable.

The Omnibus Amendment reset the applicable margin on the LIBOR based debt at . . .