Johnson Outdoors Finishes 2009 Poised for the “New Normal”…

While restructuring costs of $7.5 million in the watercraft and diving operations accounted for more than half of the reported operating loss in the fourth quarter, cost-savings helped offset the impact of declining sales on quarterly profits.  The company said that it exceeded its $20 million cost savings target for the year, including $12 million in reductions it expects to continue moving forward. It reduced working capital by 25%, in part by cutting its inventory by 29% from a year earlier through SKU rationalization. The company reduced its capital spending by a third — to $8.1 million from $12.4 million — and closed on a new financing package Sept. 30 that will reduce its borrowing costs by more than 40% next year.

Fiscal fourth quarter sales declined 20.2% for the period to $65.3 million from $81.8 million in the prior-year period, a decline management attributed to retailers maintaining minimum inventory levels.  For the full year ended Oct. 2, management attributed 3% of the 15.3% revenue decline to unfavorable currency translation.

Marine Electronics revenues were down 25.2% to $22.1 million from $29.5 million in the prior-year quarter due to “continued weakness in boat markets and a change in the shipping dates of pre-season orders.”  Watercraft sales decreased 31.1% to $11.2 million in the fiscal fourth quarter, compared to $16.3 million in the prior-year quarter, a decline the company attributed to “lower end-of-season demand and scaled-back distribution in non-core channels.”  Diving revenues were down 10.4% to $23.3 million due to the “weak economies in key markets and unfavorable currency translation of 1.3%.” 

 

Outdoor Equipment sales declined 11.5% to $8.8 million from $10.0 million in the previous year fourth quarter, with growth in consumer camping unable to offset continued declines in the military and commercial segments.

The total company operating loss was $10.9 million for the fiscal  fourth quarter, a marked improvement from an operating loss of $51.7 million in the prior year quarter.  The prior-year quarter loss included $44.5 million in non-cash goodwill and asset impairment charges, while the most recent quarter included charges of $5.7 million associated with restructuring and consolidation in Watercraft and Diving operations. 

 
The operating loss in the Marine Electronics group narrowed nearly 72% to a loss of $3.7 million and the Watercraft division saw its fiscal fourth quarter loss improve more than 38% to a loss of $5.9 million. 

 

Meanwhile, the Outdoor Equipment division posted a slight operating profit of $101,000 for the period versus an operating loss of $802,000 in the prior-year period and the Diving division posted a $96,000 operating profit in the quarter compared to a $25.1 million operating loss in the prior-year quarter.

The company reported a loss from continuing operations of $14.2 million, or $1.55 per diluted share, during the fiscal fourth quarter, compared to a loss from continuing operations of $73.5 million, or $8.07 per diluted share, in the same quarter last year.

JOUT Chairman and CEO Helen Johnson-Leipold said she expects the company’s Watercraft division to return to profitability next year after a major restructuring this year that included consolidating boat making at a factory in Maine (See BOSS_0946 for the full story). While that project cut slightly into boat sales, it lowered annual costs by $5 million, or about $1 million more than anticipated earlier this year.

 “We expect the outdoor rec. marketplace to begin a slow recovery in 2010,” she said. “However, we believe the future of the outdoor rec. industry will be defined by what we are calling a ‘new normal’ that will affect manufacturers, retailers and customers in the marketplace as a whole. In this ‘new normal,’ customers and vendors will keep inventories as low as possible. Retailers will limit in-store offerings to the most popular and most profitable products. Consumers will even be more discerning in making purchase decisions against a higher bar of price value expectations. Competition will fight for growth through share gains in constricted markets.”