SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Oct. 02, 2020

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Johnson Outdoors Inc. (the “Company”) is an integrated, global outdoor recreation products company engaged in the design, manufacture and marketing of brand name camping, diving, watercraft and marine electronics products.

Principles of Consolidation

The consolidated financial statements include the accounts of Johnson Outdoors Inc. and all majority owned subsidiaries and are stated in conformity with U.S. generally accepted accounting principles. Intercompany accounts and transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and operating results and the disclosure of commitments and contingent liabilities. Actual results could differ significantly from those estimates.

Fiscal Year

The Company’s fiscal year ends on the Friday nearest September 30. The fiscal year ended October 2, 2020 (hereinafter 2020) comprised 53 weeks. The fiscal years ended September 27, 2019 (hereinafter 2019) and September 28, 2018 (hereinafter 2018) each comprised 52 weeks.

Coronavirus (COVID-19)

In March 2020, the World Health Organization recognized the current coronavirus (COVID-19) outbreak as a global pandemic. In response to the COVID-19 outbreak, the governments of many countries, states, cities and other geographic regions imposed varying degrees of restrictions on social and commercial activity, including travel restrictions, quarantine guidelines and related actions, to promote social distancing and other similar programs all in an effort to slow the spread of the illness. These measures have had a significant adverse impact upon many sectors of the economy, including manufacturing and retail commerce. In response to these measures and for the protection of our employees, we temporarily closed our manufacturing locations and warehouses for a portion of our fiscal year, some of which fell during our primary selling season. As of the end of fiscal 2020, we have resumed nearly all production and shipping activities under appropriate safety protocols, however, the period of suspended operations had an impact on the pacing of sales and operating profits between fiscal quarters.

While government mandates allowed us to re-open our manufacturing and distribution centers in the latter half of the fiscal year, these mandates continued to emphasize social distancing measures to the general public. As such, the Company began to see growing demand and improved sales volumes in the latter part of the year for certain of its outdoor recreation businesses. Nonetheless, the full extent to which the COVID-19 pandemic will impact our business, results of operations, and financial condition will depend on future developments, including any potential worsening of the pandemic, which are beyond our control and which remain highly uncertain and cannot be predicted. This includes, but is not limited to, the duration, spread, severity and impact of the COVID-19 pandemic, or future waves, increasing outbreaks or hot spots of the pandemic in our areas of operations or in key markets, the effects of the pandemic on our customers, consumers, suppliers and vendors and the remedial actions and stimulus measures adopted by federal, state and local governments in reaction to the pandemic. As the COVID-19 pandemic continues to impact various key regions of the world, even after it subsides, we may continue to experience adverse impacts to our business as a result of any economic recession that has occurred or may occur in the future. As a result, the Company cannot reasonably estimate the full impact of the COVID-19 pandemic on Company operations and profitability at this time as the situation is dynamic and constantly changing. We continue to monitor evolving economic and general business conditions stemming from the COVID-19 pandemic and the actual and potential impacts on our financial position, results of operations and cash flows.

Cash, Cash Equivalents and Short-term Investments

The Company considers all short-term investments in interest-bearing bank accounts, and all securities and other instruments with an original maturity of three months or less, to be equivalent to cash.  Cash equivalents are stated at cost which approximates market value. Short-term investments consist of certificates of deposit with original maturities greater than three months but less than one year.

The Company maintains cash in bank accounts in excess of insured limits. The Company has not experienced any losses and does not believe that significant credit risk exists as a result of this practice.

As of October 2, 2020, the Company held approximately $47,886 of cash and cash equivalents in bank accounts in foreign jurisdictions.

Accounts Receivable

Accounts receivable are recorded at face value less an allowance for doubtful accounts. The allowance for doubtful accounts is based on a combination of factors. In circumstances where specific collection concerns exist (including as a result of the impact of COVID-19), a reserve is established to reduce the amount recorded to an amount the Company believes will be collected. For all other customers, the Company recognizes allowances for doubtful accounts based on historical experience of bad debts as a percent of outstanding accounts receivable for each business unit. Uncollectible accounts are written off against the allowance for doubtful accounts after collection efforts have been exhausted. The Company typically does not require collateral on its accounts receivable.

Inventories

The Company values inventory at the lower of cost (determined using the first-in first-out method) or net realizable value. Management’s judgment is required to determine the reserve for obsolete or excess inventory. Inventory on hand may exceed future demand either because the product is outdated or because the amount on hand is more than will be used to meet future needs. Inventory reserves are estimated by the individual operating companies using standard quantitative measures based on criteria established by the Company. The Company also considers current forecast plans, as well as market and industry conditions in establishing reserve levels. Though the Company considers these reserve balances to be adequate, changes in economic conditions, customer inventory levels or competitive conditions could have a favorable or unfavorable effect on required reserve balances.

Inventories at the end of the respective fiscal years consisted of the following:

	October 2 2020		September 27 2019
Raw materials	$	48,874	$	45,168
Work in process	39		152
Finished goods	48,524		48,978
	$	97,437	$	94,298

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation of property, plant and equipment is determined by straight-line methods over the following estimated useful lives:

Property improvements	5-20 years
Buildings and improvements	20-40 years
Furniture and fixtures, equipment and computer software	3-10 years

Upon retirement or disposition of any of the foregoing types of assets, cost and the related accumulated depreciation are removed from the applicable account and any resulting gain or loss is recognized in the statements of operations.

Property, plant and equipment at the end of the respective years consisted of the following:

	2020		2019
Property improvements	$	589	$	588
Buildings and improvements	24,416		23,231
Furniture and fixtures, equipment and computer software	194,573		178,708
	219,578		202,527
Less accumulated depreciation	156,541		143,028
	$	63,037	$	59,499

Goodwill

The Company applies a fair value-based impairment test to the carrying value of goodwill on an annual basis as of the last day of the eleventh month of the Company’s fiscal year and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. The results of the impairment tests performed in 2020, 2019, and 2018 indicated no impairment to the Company’s goodwill.

In conducting its analysis, the Company uses the income approach to compare the reporting unit’s carrying value to its indicated fair value.  Fair value is determined primarily by using a discounted cash flow methodology that requires considerable management judgment and long-term assumptions and is considered a Level 3 (unobservable) fair value determination in the fair value hierarchy (see Note 4 below).

The Company’s impairment analysis is based on management’s estimates.  Due to the uncertainty of future events, the Company cannot assure that growth rates will not be lower than expected, that discount rates will not increase or that projected cash flows will not decline, all of which factors could impact the carrying value of any remaining goodwill (or portion thereof) in future periods, and accordingly, whether any impairment losses need to be recorded in future periods.

The changes in the carrying amount and the composition of the Company's goodwill for fiscal 2020 and 2019 were as follows:

		Fishing		Camping		Watercraft		Diving		Total
Balance at September 28, 2018
	Goodwill	$	17,428	$	7,038	$	6,242	$	33,078	$	63,786
	Accumulated impairment losses	(6,229)		(7,038)		(6,242)		(33,078)		(52,587)
		11,199		—		—		—		11,199
	Currency translation	(13)		—		—		—		(13)
Balance at September 27, 2019
	Goodwill	17,415		7,038		6,242		33,078		63,773
	Accumulated impairment losses	(6,229)		(7,038)		(6,242)		(33,078)		(52,587)
		11,186		—		—		—		11,186
	Currency translation	(2)		—		—		—		(2)
Balance at October 2, 2020
	Goodwill	17,413		7,038		6,242		33,078		63,771
	Accumulated impairment losses	(6,229)		(7,038)		(6,242)		(33,078)		(52,587)
		$	11,184	$	—	$	—	$	—	$	11,184

Other Intangible Assets

Indefinite-lived intangible assets are also tested for impairment annually and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis.  There were no impairment losses recognized in fiscal 2020, 2019 or 2018.

Intangible assets with definite lives are stated at cost less accumulated amortization. Amortization is computed using the straight-line method over periods ranging from 4 to 15 years.  Amortization of patents and other intangible assets with definite lives was $2,334, $1,031 and $1,111 for 2020, 2019 and 2018, respectively. Amortization of these definite-lived intangible assets is expected to be approximately $419, $264, $264, $264 and $264 for fiscal years 2021, 2022, 2023, 2024, and 2025 respectively.

Intangible assets at the end of the last two years consisted of the following:

	2020						2019
	Gross Intangible		Accumulated Amortization		Net		Gross Intangible		Accumulated Amortization		Net
Amortized other intangible assets:
Patents and trademarks	$	4,174	$	(4,169)	$	5	$	4,088	$	(4,081)	$	7
Other amortizable intangibles	11,236		(9,214)		2,022		11,098		(6,756)		4,342
Non-amortized trademarks	7,025		—		7,025		7,025		—		7,025
	$	22,435	$	(13,383)	$	9,052	$	22,211	$	(10,837)	$	11,374

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in business circumstances such as unplanned negative cash flow indicate that the carrying amount of these assets may not be fully recoverable.  In such an event, the carrying amount of the asset group is compared to the future undiscounted cash flows expected to be generated by the asset group to determine if impairment exists on these assets.  If impairment is determined to exist, any related impairment loss is calculated based on the difference between the fair value and the carrying value on these assets. During the fourth quarter of fiscal 2019, the Company performed an impairment analysis, in which the carrying value of long-lived assets in its Watercraft segment exceeded the fair value of undiscounted and discounted cash flow analysis. Accordingly, the Company evaluated the fair value of the underlying long-lived assets and determined there was no impairment. During fiscal 2018, the Company performed an impairment analysis, which included a discounted cash flow analysis, on the long-lived assets in its Watercraft segment during the fourth quarter.  No impairment was indicated.

Warranties

The Company provides for warranties of certain products as they are sold. Warranty reserves are estimated using standard quantitative measures based on criteria established by the Company. Estimates of costs to service its warranty obligations are based on historical experience, expectation of future conditions and known product issues.  The following table summarizes the warranty activity for the three years in the period ended October 2, 2020.

Balance at September 29, 2017	$	6,393
Expense accruals for warranties issued during the period	9,389
Less current period warranty claims paid	7,283
Balance at September 28, 2018	$	8,499
Expense accruals for warranties issued during the period	9,581
Less current period warranty claims paid	8,890
Balance at September 27, 2019	$	9,190
Expense accruals for warranties issued during the period	11,714
Less current period warranty claims paid	10,055
Balance at October 2, 2020	$	10,849

Accumulated Other Comprehensive Income

The components of Accumulated other comprehensive income ("AOCI") on the accompanying Consolidated Balance Sheets as of the end of fiscal year 2020, 2019 and 2018 were as follows:

	2020						2019						2018
	Pre-Tax Amount		Tax Effect		Net of Tax Effect		Pre-Tax Amount		Tax Effect		Net of Tax Effect		Pre-Tax Amount		Tax Effect		Net of Tax Effect
Foreign currency translation adjustment	$	7,323	$	—	$	7,323	$	4,790	$	—	$	4,790	$	7,796	$	—	$	7,796
Unamortized loss on pension plans	(3,129)		523		(2,606)		(3,964)		732		(3,232)		(5,329)		1,020		(4,309)
Accumulated other comprehensive income	$	4,194	$	523	$	4,717	$	826	$	732	$	1,558	$	2,467	$	1,020	$	3,487

The reclassifications out of AOCI for the year ended October 2, 2020 were as follows:

			Statement of Operations Presentation
Unamortized loss on defined benefit pension plans
Amortization of loss	$	537	Cost of sales / Operating expense
Tax effects	(134)		Income tax expense
Total reclassifications for the period	$	403

The reclassifications out of AOCI for the year ended September 27, 2019 were as follows:

			Statement of Operations Presentation
Unamortized loss on defined benefit pension plans:
Amortization of loss	$	328	Cost of sales / Operating expense
Tax effects	(82)		Income tax expense
Foreign currency translation adjustments:
Write off of currency translation amounts	(761)		Other income and expense
Total reclassifications for the period	$	(515)

The reclassifications out of AOCI for the year ended September 28, 2018 were as follows:

			Statement of Operations Presentation
Unamortized loss on defined benefit pension plans:
Amortization of loss	$	553	Cost of sales / Operating expense
Tax effects	(133)		Income tax expense
Foreign currency translation adjustments
Write off of currency translation amounts	(2,378)		Other income and expense
Total reclassifications for the period	$	(1,958)

The changes in AOCI by component, net of tax, for the year ended October 2, 2020 were as follows:

	Foreign Currency Translation Adjustment		Unamortized Loss on Defined Benefit Pension Plans		Accumulated Other Comprehensive Income (Loss)
Balance at September 27, 2019	$	4,790	$	(3,232)	$	1,558
Other comprehensive income before reclassifications	2,533		298		2,831
Amounts reclassified from accumulated other comprehensive income	—		537		537
Tax effects	—		(209)		(209)
Balance at October 2, 2020	$	7,323	$	(2,606)	$	4,717

The changes in AOCI by component, net of tax, for the year ended September 27, 2019 were as follows:

	Foreign Currency Translation Adjustment		Unamortized Loss on Defined Benefit Pension Plans		Accumulated Other Comprehensive Income (Loss)
Balance at September 28, 2018	$	7,796	$	(4,309)	$	3,487
Other comprehensive income (loss) before reclassifications	(2,245)		1,037		(1,208)
Amounts reclassified from accumulated other comprehensive income	(761)		328		(433)
Tax effects	—		(288)		(288)
Balance at September 27, 2019	$	4,790	$	(3,232)	$	1,558

Earnings per Share (“EPS”)

Net income or loss per share of Class A common stock and Class B common stock is computed using the two-class method.  Grants of restricted stock (whether vested or unvested) which receive non-forfeitable dividends are required to be included as part of the basic weighted average share calculation under the two-class method.

Holders of Class A common stock are entitled to cash dividends equal to 110% of all dividends declared and paid on each share of Class B common stock. The Company grants shares of unvested restricted stock in the form of Class A shares, which carry the same distribution rights as the Class A common stock described above.  As such, the undistributed earnings for each period are allocated to each class of common stock based on the proportionate share of the amount of cash dividends that each such class is entitled to receive.

Basic EPS

Basic net income or loss per share is computed by dividing net income or loss allocated to Class A common stock and Class B common stock by the weighted-average number of shares of Class A common stock and Class B common stock outstanding, respectively.  In periods with cumulative year to date net income and undistributed income, the undistributed income for each period is allocated to each class of common stock based on the proportionate share of the amount of cash dividends that each such class is entitled to receive.  In periods where there is a cumulative year to date net loss or no undistributed income because distributions through dividends exceed net income, Class B shares are treated as anti-dilutive and, therefore, net losses are allocated equally on a per share basis among all participating securities.

For the years ended October 2, 2020, September 27, 2019 and September 28, 2018, basic income per share for Class A and Class B shares has been presented using the two class method as described above.

Diluted EPS

Diluted net income per share is computed by dividing allocated net income by the weighted-average number of common shares outstanding, adjusted for the effect of dilutive stock options, restricted stock units and non-vested restricted stock. Anti-dilutive stock options, restricted stock units and non-vested stock are excluded from the calculation of diluted EPS.  The computation of diluted net income per share of Class A common stock assumes that Class B common stock is converted into Class A common stock.  Therefore, diluted net income per share is the same for both Class A and Class B common shares.  In periods where the

Company reports a net loss, the effect of anti-dilutive stock options, restricted stock units and non-vested stock is excluded and diluted loss per share is equal to basic loss per share.

For the years ended October 2, 2020, September 27, 2019 and September 28, 2018, diluted net income per share reflects the effect of dilutive stock options and restricted stock units and assumes the conversion of Class B common stock into Class A common stock.

There were no stock options that could potentially dilute earnings per share in the future which were not included in the fully diluted computation because they would have been anti-dilutive for the years ended October 2, 2020, September 27, 2019 and September 28, 2018.  Non-vested stock that could potentially dilute earnings per share in the future which were not included in the fully diluted computation because they would have been anti-dilutive totaled 40,094, 43,963 and 46,776 shares for the years ended October 2, 2020, September 27, 2019 and September 28, 2018, respectively.

The following table sets forth a reconciliation of net income to dilutive earnings used in the diluted earnings per common share calculations and the computation of basic and diluted earnings per common share:

	2020		2019		2018
Net income	$	55,233	$	51,413	$	40,669
Less: Undistributed earnings reallocated to non-vested shareholders	(220)		(226)		(224)
Dilutive earnings	$	55,013	$	51,187	$	40,445
Weighted average common shares – Basic:
Class A	8,822		8,782		8,730
Class B	1,212		1,212		1,212
Dilutive stock options and restricted stock units	30		27		54
Weighted average common shares - Dilutive	10,064		10,021		9,996
Net income per common share – Basic:
Class A	$	5.54	$	5.18	$	4.12
Class B	$	5.04	$	4.71	$	3.74
Net income per common share – Diluted:
Class A	$	5.47	$	5.11	$	4.05
Class B	$	5.47	$	5.11	$	4.05

Stock-Based Compensation

Stock-based compensation cost is recorded for all awards of non-vested stock and restricted stock units based on their grant-date fair value.  Stock-based compensation expense is recognized on a straight-line basis over the vesting period of each award. See Note 10 of these Notes to Consolidated Financial Statements for information regarding the Company’s stock-based incentive plans, including non-vested stock, restricted stock units and employee stock purchase plans.

Income Taxes

The Company provides for income taxes currently payable and deferred income taxes resulting from temporary differences between financial statement income/loss and taxable income/loss.  Accrued interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.  Deferred income tax assets and liabilities are determined based on the difference between the amounts reported in the financial statements and the tax basis of assets and liabilities, using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.  A valuation allowance is established if it is more likely than not that some portion or all of a deferred income tax asset will not be realized. See Note 6 of these Notes to Consolidated Financial Statements for further discussion.

Employee Benefits

The Company and certain of its subsidiaries have various retirement and profit sharing plans.  The Company does not have any significant foreign retirement plans. Pension obligations, which are generally based on compensation and years of service, are funded by payments to pension fund trustees. The Company’s policy is to annually fund the minimum amount required under the Employee Retirement Income Security Act of 1974 for plans subject thereto although the Company may choose to fund

more than the minimum amount at its discretion.  Other retirement costs are funded at least annually.  See Note 7 of these Notes to Consolidated Financial Statements for additional discussion.

Foreign Operations and Related Derivative Financial Instruments

The functional currencies of the Company’s foreign operations are the local currencies. Accordingly, assets and liabilities of foreign operations are translated into U.S. dollars at the rate of exchange existing at the end of the year. Results of operations are translated at monthly average exchange rates. Adjustments resulting from the translation of foreign currency financial statements are classified as “Accumulated other comprehensive income (loss),” a separate component of Shareholders’ equity.

Currency gains and losses are recognized when assets and liabilities of foreign operations, denominated in other than their local currency, are converted into the local currency of the entity. Additionally, currency gains and losses are recognized through the settlement of transactions denominated in other than the local currency.  The Company recognized currency losses from transactions of $269, and currency gains of $645 and $1,985 in 2020, 2019, and 2018, respectively, which were included in Other income, net in the accompanying Consolidated Statements of Operations.

Because the Company operates internationally, it has exposure to market risk from movements in foreign currency exchange rates.  Approximately 12% of the Company’s revenues for the year ended October 2, 2020 were denominated in currencies other than the U.S. dollar. Approximately 5% were denominated in euros and approximately 5% were denominated in Canadian dollars, with the remaining 2% denominated in various other foreign currencies.  The Company may mitigate the impact on its operating results of a portion of the fluctuations in certain foreign currencies through the purchase of foreign currency swaps, forward contracts and options to hedge known commitments denominated in foreign currencies or borrowings in foreign currencies.  The Company did not use foreign currency forward contracts in 2020, 2019 or 2018.  The Company does not enter into foreign exchange contracts for trading or speculative purposes.

Revenue Recognition

On September 29, 2018, the Company adopted Accounting Standards Update 2014-09 and all subsequent updates that modified accounting standards Topic 606, Revenue from contracts with customers. See Note 12 of these Notes to Consolidated Financial Statements for further discussion.

Prior to adoption of Topic 606, during 2018, the Company followed Topic 605, Revenue Recognition. Under Topic 605, the Company recognized revenue when all of the following criteria had been met:

•Persuasive evidence of an arrangement existed.  Contracts, internet commerce agreements, and customer purchase orders were generally used to determine the existence of an arrangement.

•All substantial risk of ownership transferred to the customer.  Shipping documents and customer acceptance, when applicable, were used to verify delivery.

•The fee was fixed or determinable.  This was assessed based on the payment terms associated with the transaction and whether the sales price was subject to refund or adjustment.

•Collectability was reasonably assured.  Collectability was assessed based on the creditworthiness of the customer as determined by credit checks and analysis, as well as by the customer’s payment history.

Estimated costs of returns and allowances and discounts were accrued as a reduction to sales when revenue was recognized.

Advertising & Promotions

The Company expenses substantially all costs related to the production of advertising the first time the advertising takes place. Cooperative promotional arrangements are accrued as related revenue is earned.

Advertising and promotions expense in 2020, 2019 and 2018 totaled $26,727, $28,397 and $26,319, respectively. These charges are included in “Marketing and selling expenses.”  Capitalized advertising costs, included in Other current assets, totaled $611 and $466 at October 2, 2020 and September 27, 2019, respectively, and primarily included catalogs and costs of advertising which have not yet run for the first time.

Shipping and Handling Costs

Shipping and handling fees billed to customers are included in “Net sales.” Shipping and handling costs are included in “Marketing and selling expenses” and totaled $12,651, $12,409 and $11,846 for 2020, 2019 and 2018, respectively.

Research and Development

The Company expenses research and development costs as incurred except for costs of software development for new electronic products and bathymetry data collection and processing, which are capitalized once technological feasibility is established and are included in Furniture, Fixtures and Equipment. The gross amount capitalized related to software development was $48,711, less accumulated amortization of $29,579, at October 2, 2020 and $43,304, less accumulated amortization of $25,750, at September 27, 2019.  These costs are amortized over the expected life of the software of three to seven years.  Amortization expense related to capitalized software in 2020, 2019 and 2018 was $3,829, $3,962 and $3,747, respectively, and is included in depreciation expense on plant, property and equipment.

Fair Values

The carrying amounts of cash, cash equivalents, short-term investments, accounts receivable, and accounts payable approximated fair value at October 2, 2020 and September 27, 2019 due to the short maturities of these instruments. During 2020, 2019 and 2018, the Company held investments in equity and debt securities that were carried at fair value related to its deferred compensation liability which was also carried at the same fair value.  When indicators of impairment are present, the Company may be required to value certain long-lived assets such as property, plant, and equipment, and other intangibles at fair value.

Valuation Techniques

Rabbi Trust Assets

Rabbi trust assets, used to fund amounts the Company owes to certain officers and other employees under the Company’s non-qualified deferred compensation plan, are included in “Other assets,” and are classified as trading securities.  These assets are comprised of marketable debt and equity securities that are marked to fair value based on unadjusted quoted prices in active markets.

Goodwill and Other Intangible Assets

In assessing the recoverability of the Company’s goodwill and other intangible assets, the Company estimates the future discounted cash flows of the business segments to which the goodwill relates.  When estimated future discounted cash flows are less than the carrying value of the net assets and related goodwill, an impairment charge is recognized based on the excess of the carrying amount over the fair value.  In determining estimated future cash flows, the Company makes assumptions regarding anticipated financial position, future earnings and other factors to determine the fair value of the respective assets.

See Note 4 of these Notes to Consolidated Financial Statements for disclosures regarding fair value measurements.

New Accounting Pronouncements

Recently adopted accounting pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842). In July 2018, the FASB also issued ASU 2018-10 Codification Improvements to Topic 842, Leases and ASU 2018-11 Leases (Topic 842) Targeted Improvements. In February 2019, the FASB also issued ASU 2019-01 Leases (Topic 842): Codification Improvements. This ASU and the updates to this ASU require organizations to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. This guidance was effective for the Company in the first quarter of fiscal year 2020, and may be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with certain practical expedients available. The Company adopted the provisions of these ASU's using the modified retrospective approach at the beginning of the first quarter of fiscal 2020, coinciding with the standard's effective date. The additional disclosures required by the ASU and its updates are included in Note 5 "Leases" of these Notes to the Condensed Consolidated Financial Statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220), which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. ASU No. 2018-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The ASU allows for early adoption in any interim period after issuance of the update. The Company early adopted the ASU in the second quarter of fiscal 2019, and elected not to make this optional reclassification.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes existing revenue recognition requirements and provides a new comprehensive revenue recognition model.  The underlying principle of

the new standard requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for those goods or services. The Company adopted the provisions of this ASU in the first quarter of fiscal 2019 for all contracts on a modified retrospective basis, with no cumulative-effect adjustment to retained earnings upon adoption. The comparative information has not been restated and continues to be reported under the accounting standards that were in effect for those periods. The additional disclosures required by the ASU are included in Note 12 "Revenues" of these Notes to the Consolidated Financial Statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. The ASU includes provisions intended to simplify the measurement of inventory and to more clearly articulate the requirements for the measurement and disclosure of inventory. Under such provisions, an entity should measure inventory within the scope of this amendment at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company adopted this standard at the beginning of the first quarter of fiscal 2018. The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The ASU includes, among other provisions, one that will require presentation of the service cost component of net benefit cost in the same line item(s) as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of a subtotal of income from operations. This amendment is effective for annual periods beginning after December 15, 2017 and the interim periods within those annual periods. The Company elected to adopt this accounting standard at the beginning of the first quarter of fiscal 2018. The adoption of this standard resulted in a reduction of an annual operating expense of $848 and an increase in other expense of $848. The adoption of this standard did not have an effect on the Company's consolidated balance sheets or consolidated statements of cash flows.

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326)” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05 (collectively Topic 326). Topic 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred loss model with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates. The amendments in this guidance are effective for fiscal years beginning after December 15, 2019, with early adoption permitted for certain amendments. Topic 326 must be adopted by applying a cumulative effect adjustment to retained earnings. The Company does not expect adoption of the new guidance to have a significant impact on its financial statements.

In August 2018, the FASB issued ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans (Topic 715). This ASU will modify the disclosure requirements for employers that sponsor defined pension or postretirement plans. The amendments in this guidance are effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on its disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with early adoption permitted. The Company does not expect adoption of the new guidance to have a significant impact on its financial statements.