Johnson Outdoors Inc. reported second-quarter sales fell 12.5% to $106.6 million compared to $121.8 million in the prior year period. Net income from continuing operations of $2.5 million, or 27 cents a share, marked a threefold-improvement over net income of $0.8 million, or 9 cents, a year ago, thanks to cost-reduction efforts.


 


“We have taken deliberate and decisive action over the past 12 months to minimize the impact of softer markets on operations, cash flow and the bottom line, with a clear focus on strengthening our competitiveness and profitability long-term. We feel good about where we are, and remain vigilant in our efforts to further reduce costs, improve efficiency and enhance shareholder value,'' said Helen Johnson-Leipold, Chairman and Chief Executive Officer.


 


COST REDUCTION UPDATE


 


On December 4, 2008, the company announced comprehensive cost-reduction plans which included an aggressive $20 million cost savings target, lower capital spending and significant reduction in peak working capital. At the end of the second quarter:


 


– Cost savings efforts were progressing on track and in line with expectations. For the quarter, operating expense decreased 21% from the prior year second quarter.


– Working capital was 30% below prior year entering its peak period, with net inventory levels down $40 million versus last year's second quarter.


– Capital spending was down 30% year-over-year.


 


SECOND QUARTER RESULTS


 


Second quarter sales reflect initial shipments to customers in anticipation of the primary retail selling period for the company's seasonal outdoor products. Total net sales declined 12.5% compared to the prior year quarter, due largely to economic conditions in key markets. Unfavorable currency translation had a 3.7% impact on total company revenues in the quarter.


 


– Marine Electronics revenues were 4.6% below last year primarily due to continued weakness in domestic and international boat markets.


– Watercraft sales were 8.7% below the prior year as a result of unfavorable currency translation of 4.3%, scaling back of distribution to non-core channels and weak international markets.


– Diving revenues were down 24.1% due to slowing economies in key markets and the impact of unfavorable currency translation, which comprised 8.3% of the revenue decline.


– Outdoor Equipment sales compared unfavorably to last year due primarily to pacing of military tent orders and slower-than-normal commercial tent sales.


 


Total Company operating profit of $5.8 million for the second fiscal quarter compared favorably to operating profit of $3.6 million in the prior year quarter. Key factors contributing to the favorable comparison were:


 


– Aggressive cost savings initiatives which more than offset the impact of lower sales and unfavorable product mix on margins.


– Improved operating efficiency and strict controls resulting in a 34.5% reduction in net inventory levels.


– Bonus and profit sharing accruals of $1.8 million in the prior year quarter versus no accruals in the current quarter.


 


The company reported net income of $2.5 million, or $0.27 per diluted share, during the second fiscal quarter, compared to net income of $0.5 million, or $0.05 per diluted share, in the same quarter last year. Income during the prior year quarter was negatively impacted by a $1.6 million pre-tax foreign exchange loss related to the accounting treatment of U.S. dollar holdings in Switzerland.


 


In March, the company consolidated leadership of Marine Electronics and Watercraft business units under a single Group Vice President as part of an initiative to significantly reduce cost and complexity, optimize synergies and assets across the two operations, and dramatically improve profitability for the future.


 


YEAR-TO-DATE RESULTS


 


Net sales in the first six months of fiscal 2009 were $176.4 million versus $197.8 million in the same six-month period last year, a decrease of 10.8%. Key drivers in the year-to-date period were:


 


– Lower domestic sales.


– Soft international markets.


– Unfavorable currency translation of 3.5%


 


Total company operating profit was $0.6 million during the first six months of fiscal 2009 compared to an operating loss of $0.9 million during the prior year-to-date period. Net loss from continuing operations for the first six months of the year was $4.5 million, or 49 cents per diluted share, versus a loss from continuing operations of $2.8 million, or 31 cents per diluted share, in the first six months of the prior year. Primary drivers behind the year-to-date comparison were:


 


– Deteriorating economic conditions in domestic and international markets.


– Improved operating efficiency and aggressive cost savings efforts, which helped offset the impact of lower sales and unfavorable product mix on margins during the period.


 


OTHER FINANCIAL INFORMATION


 


The company's debt level was $65.3 million at the end of the second quarter versus $115.0 million at March 28, 2008, and debt, net of cash, was $51.4 million versus $87.3 million in the prior year's quarter. Depreciation and amortization was $5.2 million year-to-date, compared to $4.9 million during the first six months of the prior year. Capital spending totaled $3.7 million during the first six months of fiscal 2009 compared with $5.3 million in same period in 2008.


 


“We believe improved processes and systems will enable us to manage inventory levels down through the remainder of the year. Effective cash management will remain a key focus as we work diligently to ensure cash reserves are at appropriate levels,'' said David W. Johnson, VP and CFO.