Johnson Outdoors Sees Sales and Earnings Declines in Fiscal Third Quarter

Johnson Outdoors Inc. saw lower sales and earnings for the fiscal third quarter ended July 1, declines the company attributed to a slow-down in outdoor recreational market recovery during the period.  Johnson Outdoors said significant growth during the first six months of the fiscal year more than offset sluggish third quarter results as year-to-date sales increased 7 percent and net earnings grew 24 percent compared to the same nine-month period in the prior year.

“Economic and weather conditions impacted the pace of recovery in outdoor recreational markets during the third quarter. The late onset of the paddlesports and camping season coincided with a downtick in consumer spending as economic anxieties flared. Continued strong performance by our flagship Marine Electronics and Diving brands more than offset declines in these markets during the quarter; however, U.S. federal budget gridlock led to significant declines in military sales which drove total revenue and profits below last year's quarter,” said Helen Johnson-Leipold, chairman and CEO. “Despite challenges during the quarter, year-to-date performance confirms our transformed business model enables us to adjust quickly to marketplace fluctuations, maintain a strong balance sheet and protect the bottom-line against the backdrop of a start-stop recovery in outdoor recreational markets. As a result, we remain focused and disciplined on moving forward with our 2012 strategic plan to grow profits faster than sales.”

THIRD QUARTER RESULTS
Third fiscal quarter results reflect in-season replenishment orders for the company's warm-weather outdoor recreation products. Economic anxiety in the U.S. and Europe slowed recovery of outdoor recreational markets during the quarter. Total Company net revenue during the third fiscal quarter was $122.5 million, a 1 percent dip compared to net sales of $124.0 million in the prior year quarter.

Key drivers in the quarter were:

• Successful new products in Marine Electronics across all channels, all markets.
• Global expansion of the SUBGEAR(R) brand and favorable currency translation which added 11 percent to Diving revenue.
• Combined impact of a weather-delayed season and unfavorable shift in consumer discretionary spending contributed largely to an 11 percent decline in Watercraft revenue.
• Outdoor Equipment revenue declined 27 percent due to a 68 percent, or $3.4 million, reduction in military sales.

Total company operating profit during the quarter was $11.8 million versus $13.4 million in the prior year quarter. The unfavorable comparison was due to lower sales volume, particularly declines in military sales, and increased supplier costs. Net income was $8.1 million, or 83 cents per diluted share, during the third fiscal quarter, compared to $10.4 million, or $1.09 per diluted share, in the prior-year quarter. Reduced interest expense totaling $0.4 million had a positive impact on net income during the quarter.

YEAR-TO-DATE RESULTS
Total company year-to-date revenue for the fiscal nine-month period was $330.0 million, a 7 percent increase over the prior year period. Growth in Marine Electronics and Diving more than offset sales declines in Outdoor Equipment and Watercraft.

Primary drivers behind the results were:

• Marine Electronics revenue advanced 18 percent due to successful new product introductions in Minn Kota(R), Humminbird(R) and Cannon(R) brands, and double digit growth in all channels and all markets.
• Diving sales grew 8 percent due largely to continued global expansion of the SUBGEAR(R) brand, growth in the U.S. and favorable currency translation which added 3.6 percent during the period.
• Watercraft revenue declined 10 percent attributable to lackluster recovery in domestic and international paddlesports markets and channels.
• Outdoor Equipment sales fell 16 percent driven primarily by a 37 percent decline in military sales caused by continued U.S. federal budget gridlock.
• The company anticipates military sales will fall below historical levels to between $10 – $13 million at the end of Fiscal 2011.

Total company operating profit was $21.9 million in the nine-month period, a 22 percent increase compared to the same prior year period.

Key factors contributing to the favorable comparison were:

• Higher revenue in the year-to-date period.
• Total company gross margin improved to 40.6 percent from 40.1 due to favorable product mix.
• Higher gross margin was partially offset by higher operating expense which was $6.9 million above prior year period due to higher sales-related costs, increased R&D spending and litigation costs.

The company realized a 24 percent increase in net earnings to $15.4 million, or $1.58 per diluted share, during the year-to-date period compared to net earnings of $12.4 million, or $1.30 per diluted share, during the prior year period. A 30 percent reduction year-over-year in interest expense totaling $1.2 million resulted largely from lower debt levels, lower swap amortization expense and lower borrowing costs.

OTHER FINANCIAL INFORMATION
The company's debt level was $22.7 million at the end of the third quarter versus $31.9 million at the end of the prior year quarter, and cash, net of debt, was $7.7 million as of July 1, 2011 compared to debt, net of cash of $6.4 million as of July 2, 2010. Depreciation and amortization was $7.7 million year-to-date, compared to $7.4 million during the first nine months of the prior year. Capital spending totaled $6.0 million during the first nine months of fiscal 2011 compared with $5.7 million in same period in 2010.

“Innovation has driven marketplace demand and led to stronger margins this year. We have continued to pay down debt which is now at a record low level. Maintaining a strong balance sheet and low infrastructure costs remain top priorities,” said David W. Johnson, VP and CFO.