Johnson Outdoor Inc. reported strong sales of new fishing gear and camping stoves offset declining military and diving sales to increased sales and profits in the fiscal third quarter ended July 3, resulting in a favorable sales comparison in the year-to-date fiscal nine-month period.
“A solid new product line-up is fueling positive marketplace momentum as we head into the final months of the warm-weather outdoor recreational season,” said the Racine-WI-based company's Chairman and Chief Executive Officer, Helen Johnson-Leipold. “The revolutionary Ulterra fishing motor and the Talon 12' shallow water anchor are powering growth for Minn Kota, our $100+ million flagship fishing brand. In Watercraft, the Old Town Predator series is also enhancing our position in the all-important outdoor specialty channel. And, the new MiniMo from Jetboil, the leader in outdoor cooking systems, has ignited growth in our consumer camping portfolio. Work is underway to strengthen new product development and competitiveness in Diving where weak economies in European markets have impacted results.
Third quarter results
Fiscal third quarter results historically reflect in-season replenishment orders for the company's warm-weather outdoor recreation products. Total company net sales were $140.9 million during the quarter, a 3 percent gain versus net sales of $137.1 million in the prior year third quarter. Foreign currency translation had a 3 percent unfavorable impact on sales versus the prior year quarter. Key factors behind the year-over-year comparison in each business unit were:
- Strong growth in Minn Kota, powered by exceptional new product response, drove an 8 percent increase in Marine Electronics revenue and a record-high $86.2 million in third quarter sales.
- Significantly higher Eureka! and Jetboil consumer camping sales could not offset declines in commercial and military segments resulting in a 1 percent dip in Outdoor Gear revenue.
- Watercraft revenue held steady with the prior year quarter as Old Town continued to gain share in the key fishing kayak segment.
Unfavorable currency translation had an 11 percent unfavorable impact on Diving sales accounting for the 9 percent drop in revenue for the quarter.
Total company operating profit during the quarter was $16.4 million compared to $9.3 million in the prior fiscal year third quarter. Non-cash impairment charges of $8.5 million in Outdoor Gear and a $1.6 million cash recovery from the Jetboil indemnity escrow in the previous year quarter, partially offset by $1.4 million of legal expense in the current year quarter related to litigation brought by the company asserting infringement of its patented side scan sonar technology by Garmin, were primary factors in the favorable year-over-year comparison.
Excluding the net effect of these one-time items in both years, operating profit would have been $1.6 million ahead of the prior year. Third quarter net income was $10.0 million, or $1.00 per diluted share, compared to net income of $4.7 million, or $0.47 per diluted share, in the previous third quarter.
Year-to-date results
Strong marketplace momentum around new products across the company's consumer fishing, camping and water recreation brands during the fiscal third quarter brought year-to-date sales for the nine-month period 1 percent ahead of the same prior year period. Unfavorable currency translation had a 2 percent unfavorable impact on year-to-date revenue.
Total company operating profit was $16.7 million versus operating profit of $18.0 million in the same nine-month period last year. The net charges of $6.9 million taken in the prior year were almost entirely offset by patent litigation expense of $6.8 million taken in the current year. The remaining decrease in profit was driven by various factors including higher warranty costs and increased promotional spending.
Net income was $9.4 million, or $0.95 per diluted share, in the current nine-month period compared to $9.9 million, or $0.98 per diluted share, in the same period last year. The company's effective tax rate during the nine-month period was 40.9 percent versus 46.1 percent for the previous year-to-date period.
In connection with the patent litigation, on July 13, 2015, an Administrative Law Judge at the International Trade Commission (ITC) determined that Garmin International, Inc. violated section 337 of the Tariff Act of 1930 by importing and selling SideVu sonars, which the judge found infringed a Johnson Outdoors Inc. side scan sonar patent used in certain Humminbird fishfinders. The ruling is subject to review by the ITC. Upon final adoption of this ruling by the ITC, Garmin's infringing SideVu sonars, which are manufactured overseas, would be excluded from import into the United States, and a cease and desist order would be issued prohibiting Garmin from selling any infringing product from its inventory.
Other financial information
The company reported cash, net of debt, of $46.4 million as of July 3, 2015, versus cash, net of debt, of $44.2 million as of June 27, 2014. Depreciation and amortization was $8.8 million year-to-date, compared to $7.9 million during the first nine months of the prior year. Capital spending totaled $6.6 million during the first nine months of fiscal 2015 compared with $9.8 million in the same period in 2014.
“Improved margins helped reduce the impact on profitability of higher operating expenses year-to-date. We remain focused on delivering a strong end to our season,” said David W. Johnson, Vice President and Chief Financial Officer. “The balance sheet is in great shape, as we continue to pay down debt and maintain a healthy cash position that enables us to invest in expanding and growing the business.”
Product news
On July 22, the Humminbird HELIX 7 was named Best in Show — Electronics at ICAST, the world's largest and most prestigious fishing products exposition. The HELIX 7 series is the first compact-format fishfinder that lets anglers choose the technology that fits with how they like to fish, from a basic sonar-only unit up to a full complement of functions and technologies, including patented Side Imaging side scan sonar, and compatibility with Humminbird LakeMaster cartography products.
On Aug. 6, the Jetboil Genesis captured the coveted Outside Magazine Gear of the Show award at the 2015 Outdoor Retailer Show. Jetboil Genesis is the first complete base camp cooking solution in an easy carry travel bag, a system that includes a 10″ ceramic-coated fry pan, 5 liter cooking pot and a compact folding two-burner stove with patented Flux Ring technology.
Johnson Outdoors designs, manufactures and markets a portfolio of winning, consumer-preferred brands across four categories: Watercraft, Marine Electronics, Diving and Outdoor Gear. Johnson Outdoors' familiar brands include, among others: Old Town canoes and kayaks; Ocean Kayak and Necky kayaks; Carlislepaddles; Extrasport personal flotation devices; Minn Kota motors; Cannon downriggers; Humminbird marine electronics; LakeMaster electronic charts; SCUBAPro and Subgear dive equipment; Silva compasses; Jetboil outdoor cooking systems; and Eureka! camping and hiking equipment.
| JOHNSON OUTDOORS INC. | ||||
| (thousands, except per share amounts) | ||||
| THREE MONTHS ENDED |
NINE MONTHS ENDED |
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| July 3 | June 27 | July 3 | June 27 | |
| Operating Results | 2015 | 2014 | 2015 | 2014 |
| Net sales | $ 140,883 | $ 137,133 | $ 344,816 | $ 340,506 |
| Cost of sales | 82,131 | 81,314 | 206,794 | 205,912 |
| Gross profit | 58,752 | 55,819 | 138,022 | 134,594 |
| Operating expenses | 42,331 | 46,487 | 121,309 | 116,624 |
| Operating profit: | 16,421 | 9,332 | 16,713 | 17,970 |
| Interest expense, net | 205 | 179 | 678 | 658 |
| Other expense (income), net | 115 | (952) | 38 | (1,087) |
| Income before income taxes | 16,101 | 10,105 | 15,997 | 18,399 |
| Income tax expense | 6,104 | 5,407 | 6,548 | 8,490 |
| Net income | $ 9,997 | $ 4,698 | $ 9,449 | $ 9,909 |
| Weighted average common shares outstanding – Dilutive | 9,736 | |||
