Johnson Outdoors Inc. reported double-digit growth in operating profit and net income as successful new products delivered solid revenue gains in the company's 2012 fiscal third quarter ending June 29. Total revenue during the third fiscal quarter was $128.6 million, a 5 percent increase over net sales of $122.5 million in the prior fiscal year quarter.
“Three years ago we set a goal to grow profits faster than sales amid a gradual recovery of outdoor recreation markets. While markets remain below pre-recession levels, impressive third quarter results demonstrate the significant progress we've made in leveraging our strengths to maximize market opportunities and address challenges with heightened energy and discipline,” said Helen Johnson-Leipold, Chairman and Chief Executive Officer. “Going forward, we expect meaningful innovation to continue to drive growth in technology-driven Marine Electronics and Diving segments, and play a central role in efforts to recapture leadership positions in specialty camping and paddling channels where our targeted outdoor enthusiasts shop. Future investments will reflect our commitment to delivering enhanced value for our brands, our customers and shareholders long-term.”
Third quarter results
Third fiscal quarter results reflect in-season replenishment orders for the Company's warm-weather outdoor recreation products. Strong performance in North America and Asia markets more than offset declines in Southern Europe. Total company revenue during the third fiscal quarter was $128.6 million, a 5 percent increase over net sales of $122.5 million in the prior fiscal year quarter, with new products generating more than 40 percent of total Company net sales. Currency translation had a negative 2 percent, or $2.5 million, impact on sales. Key highlights in the quarter were:
- Double-digit growth in Minn Kota(R) and Cannon(R) brands propelled a 9 percent increase in Marine Electronics revenue.
- Growth in the Old Town(R) brand led to a 1 percent uptick in Watercraft revenue.
- A sharp rise in military sales due to pacing of orders accounted for an 8 percent upswing in Outdoor Gear revenue.
- Diving revenue declined 5 percent due to unfavorable currency translation which had a negative 7 percent, or $1.7 million, impact on sales.
- Total company operating profit during the quarter was $14.2 million, a 20 percent increase over the prior fiscal year quarter, due to higher volume, strong margins and improved efficiency. On July 11, 2012, the Company announced the restructuring of Watercraft U.S. and European operations to realize estimated annual savings of $2 million by the end of fiscal 2014. Restructuring and other costs related to the action were $1.2 million in the current quarter. The Company expects additional charges between $0.8 and $1.3 million over the next twelve months. Third quarter net income of $9.0 million, or $0.91 per diluted share, marked an 11 percent increase over the prior year.
Total company year-to-date revenue for the fiscal nine-month period was $337.5 million, a 2 percent increase over the prior year. Growth in Marine Electronics' brands more than offset declines in the Company's Outdoor Gear and Diving segments. Successful new products across all units delivered nearly half of total Company net sales in the current nine-month period. Key factors impacting year-to-date revenue comparisons were:
- Growth in Minn Kota(R), Humminbird(R) and Cannon(R) brands in all channels.
- Old Town(R) and Carlisle(R) sales drove a modest 1 percent increase in Watercraft revenue.
- A 27 percent decline in military sales year-over-year drove a 13 percent decline in Outdoor Gear revenue.
- Solid growth in North America and Asia markets could not offset the impact of unfavorable currency translation and depressed Southern European markets in Diving.
- Total company operating profit was $24.5 million in the nine-month period, a 12 percent increase compared to the same prior year period. A favorable settlement in the second quarter of a long-standing insurance coverage dispute added $3.5 million to operating profit during the year-to-date period. While net income benefitted from a 29 percent reduction in interest expense year-over-year, net earnings declined 13 percent during the period due primarily to accounting for applicable domestic and international taxes. As previously reported, the Company's recent history of income generation and future profit expectations led to a reversal of its U.S. tax valuation allowance in the 2011 fiscal fourth quarter. In the current year-to-date period, valuation allowances in those countries where losses occurred preclude the Company from realizing any tax benefit on the loss. The combination of these two factors resulted in a significant year-over-year increase in the Company's effective tax rate which reduced year-to-date net income by $8.3 million.
The company's debt level was $12.5 million at the end of the fiscal third quarter versus $22.7 million at the end of the prior year quarter. Cash, net of debt, was $26.3 million as of June 29, 2012 compared to $7.7 million as of July 1, 2011. Depreciation and amortization was $9.2 million year-to-date, compared to $7.7 million during the first nine months of the prior year. Capital spending totaled $8.9 million during the first nine months of fiscal 2012 compared with $6.0 million in same period in 2011 due to increased investment in Marine Electronics. The company has experienced continuing declines in interest expense for eleven straight quarters for a favorable impact on net income each fiscal period.
“Margins held firm as demand in Marine Electronics and Diving brands and innovation outpaced price discounting by competitors,” said David W. Johnson, VP &CFO. ” Rigorous balance sheet management remains a top priority. Working capital declined $12 million and every business was in a cash generating position for the quarter.”
