Johnson Outdoors First Quarter Results Impacted by Marine Electronics Decline…

Johnson Outdoors is attempting to grow into a $500 million company over the next few years, but this most recent fiscal first quarter of 2007 proved to be somewhat of a slow-down from the company’s previous pace.

Though the company’s first quarter is usually a time for its summer-oriented brands to take orders and build inventory for the coming season, the company’s seasonal loss still nearly doubled in spite of non-military sales increasing by $1.5 million. However, management said that across all of its brands, pre-season orders are higher than last year and operational improvements at Watercraft and Outdoor Equipment showed some positive bottom-line trends
Part of the reason for the increase in the company’s net loss was investment in future systems to support this growth goal. Capital spending totaled $2.7 million during the first quarter compared with $1.5 million in the 2006 first fiscal quarter. The company is building a new Marine Electronics distribution center and investing in a new ERP system for the division. In addition, rising commodity costs prompted the company to buy larger amounts of raw materials like resins and metals, so it is carrying higher raw material inventories than last year.

Marine Electronics, which has been a primary growth category for the company in the past, saw sales decline during the quarter due to shipment delays caused by component availability from a key supplier. In addition, the investments in infrastructure caused operating earnings to decline 1.7% to $29.5 million. Management said that shipments are already “back on-track” and their order book is “significantly higher” than at this same time last year.

Watercraft sales were down during the quarter due to a key, large customer shifting their order and delivery schedule. The company said that their order book is up 50% over this same time last year and is optimistic about the division’s year ahead. The investment in systems and infrastructure seem to be paying off in Watercraft. In spite of the decline in sales, the seasonal operating loss was actually less than last year, declining 4.0% to $2.4 million compared to $2.5 million last year.

Outdoor Equipment revenues were down for the quarter due to a 21% decline in military sales. Consumer camping sales were said to be strong during the quarter, while commercial tent sales saw some weakness. In spite of the declines in sales to the military, operating profits in the division remained relatively flat, slipping just 0.3% to $1.6 million.

Diving is beginning to show some positive momentum, to the point that management was concerned about the restructuring in the division hampering growth. Last quarter they decided to slow the restructuring efforts and it appears to have paid off. After several years of decline in the overall diving market, sales at Johnson Outdoors’ diving division increased during the fiscal first quarter, while operating profits jumped nearly ten-fold, from $66,000 to $631,000. The restructuring efforts are now expected to be completed in early 2008.

During a conference call with analysts and the media, Helen Johnson-Leipold, chairman and CEO of Johnson Outdoors, said that the company is still working on identifying key acquisitions to bolster growth in its business. Looking forward, JOUT management said that they are looking to match the sales growth the company realized last year, which was roughly 4%.