Johnson Outdoors net sales in the third quarter were $122.4 million, the highest reported since 1999, and 1.1% above the comparable 2004 period. Humminbird®, acquired in May 2004, reported three months' sales in the third quarter this year compared with two months in the prior year quarter. As a result, Humminbird® sales are up $6.6 million over the previous third quarter, and are reflected in total Marine Electronics' results. Watercraft posted a strong gain in revenue (7.8%) resulting in its highest sales quarter in two years. Diving sales benefited from favorable currency translation ($0.5 million), and double-digit growth in North American markets. As announced on May 27, 2005, the Company was awarded a new $15.9 million urgent need order for military tents, however, third quarter revenues in Outdoor Equipment do not reflect delivery against this order. The Company continues to expect military sales to decline up to 25% in 2005 versus fiscal 2004, as sales in this segment declined 32.5% versus the prior year quarter, and accounted for the majority of the revenue decline in Outdoor Equipment.
Total Company operating profit declined $1.9 million in the third quarter versus the same period last year. Humminbird® added $1.6 million to operating profit for the three-month quarter versus $0.5 million in the prior year period which reflected only two months of activity. Growth in revenues and improved manufacturing efficiency contributed to the significant increase ($1.1 million) in operating profit in Watercraft. In Diving, profits lagged behind the prior year period by $1.1 million when the business unit benefited from a $2.0 million litigation settlement with a former employee. Declines in military tent sales accounted for the majority of the profit decline in Outdoor Equipment. The Company incurred $0.5 million in costs related to the terminated buy-out transaction compared to $1.1 million during the third quarter last year. Net income for the quarter of $6.8 million ($0.77 per diluted share) compared to $7.5 million ($0.85 per diluted share) in the prior year period.
“Humminbird® is exceeding our expectations with our flagship Marine Electronics business continuing to deliver outstanding results. As anticipated, the benefits of our strategic investments to revitalize innovation, enhance systems and improve efficiency throughout Watercraft are now beginning to materialize at the bottom line,” said Helen Johnson-Leipold, Chairman and Chief Executive Officer, Johnson Outdoors Inc. “In Diving, transformation efforts are well underway in Europe, and we continue to work towards rebalancing the Outdoor Equipment portfolio. We believe we are taking the appropriate actions to ensure sustainable, profitable growth of our businesses, and enhanced shareholder value long-term.”
Year-to-date net sales increased 8.5% versus the same period in 2004. Humminbird® sales, which included nine months of reported results in 2005 compared with only two months during the same period last year, more than offset reductions in military tent sales. The year-on-year increase in operating expense (12.4%) was also due primarily to the addition of Humminbird®. Operating profit fell $3.6 million below the comparable 2004 period primarily driven by weak performance in Diving during the first six months of the year. Operating losses improved by $2.9 million in the Company's Watercraft business unit year-to-date. Net income for the nine-month period was $10.5 million, or $1.20 per diluted share, down from $12.4 million or $1.42 per diluted share in the year ago period.
“The future of our company rests in our ability to continuously deliver meaningful innovation that will enable us to further expand our markets, our great brand equities and our technology horizons,” observed Ms. Johnson-Leipold. “We will do this by leveraging the collective strength of our portfolio of brands and expertise, like we did this year with Escape® electric boats, and through targeted acquisitions, such as Humminbird®, which are designed to complement our businesses without adding complexity.”
Favorable currency gains of $0.6 million were recorded year-to-date and interest costs were reduced by $0.4 million on lower debt outstanding. Pre-tax income year-to-date was $17.9 million, $2.3 million below the corresponding prior year period.
The Company's debt to total capitalization stood at 23% at the end of the quarter versus 29% at July 2, 2004. Debt, net of cash, decreased $15.6 million to $11.2 million at July 1, 2005. Depreciation and amortization was $7.1 million year-to-date, greater than last year's $6.3 million due to the impact from the acquisition of Humminbird®. Capital spending totaled $5.2 million year-to-date compared with last year's $4.9 million.
“Our continued focus on inventory management and cost-control measures led to lowered working capital and improved operating cash flow,” said David Johnson, Interim Chief Financial Officer. “Our balance sheet is healthy and our operations continue to generate the cash we need to invest in the company's innovation and future growth opportunities.”
JOHNSON OUTDOORS INC. AND SUBSIDIARIES
(thousands, except per share amounts)
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Operating Results THREE MONTHS ENDED NINE MONTHS ENDED
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July 1 July 2 July 1 July 2
2005 2004 2005 2004
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Net sales $122,445 $121,166 $303,595 $279,702
Cost of sales 70,727 70,964 175,830 160,251
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Gross profit 51,718 50,202 127,765 119,451
Operating expenses 39,898 36,515 107,620 95,734
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Operating profit 11,820 13,687 20,145 23,717
Interest expense, net 996 1,237 3,114 3,421
Other (income) expense, net (189) 149 (909) 93
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Income before income taxes 11,013 12,301 17,940 20,203
Income tax expense 4,219 4,810 7,440 7,755
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Net income $6,794 $7,491 $10,500 $12,448
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Basic earnings per common share $0.79 $0.87 $1.22 $1.46
Diluted earnings per common share $0.77 $0.85 $1.20 $1.42
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Diluted average common shares
outstanding 8,781 8,795 8,779 8,766
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Segment Results
Net sales:
Marine Electronics $47,759 $43,112 $122,750 $93,003
Outdoor Equipment 20,715 27,202 60,434 67,174
Watercraft 31,287 29,029 62,364 61,162
Diving 22,783 22,227 58,350 59,217
Other/eliminations (99) (404) (303) (854)
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Total $122,445 $121,166 $303,595 $279,702
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Operating profit:
Marine Electronics $8,715 $8,445 $20,816 $19,001
Outdoor Equipment 3,001 4,760 9,469 11,692
Watercraft 1,753 639 (2,030) (4,934)
Diving 3,790 4,936 5,104 9,686
Other/eliminations (5,439) (5,093) (13,214) (11,728)
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Total $11,820 $13,687 $20,145 $23,717
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