Johnson Outdoor Q1 Loss Rises on Lower Sales, Higher Litigation Costs

Johnson Outdoors Inc. reported that a 10.5 percent drop in sales and patent enforcement costs tripled its loss in the  seasonally slow first fiscal quarter ended Jan. 2, 2015 versus the prior year first quarter.

“First quarter results, which historically are not predictive of full year performance, mask the growing demand for new products across our brand portfolio, particularly in Marine Electronics, Watercraft and Outdoor Gear. More work is needed to strengthen competitiveness and enhance profitability for Diving long term,” said Helen Johnson-Leipold, Chairman and Chief Executive Officer. “While the highly seasonal outdoor recreational industry can be influenced by a number of uncertainties, at this time, we remain optimistic in our ability to deliver against our 2015 financial goal of growing profits faster than sales.”

Sales during the first fiscal quarter are typically the lowest of the year as the company ramps up for the key selling period of warm-weather outdoor recreation products during the second and third fiscal quarters. Net sales were $70.8 million in the first fiscal quarter compared with net sales of $79.1 million in the prior year quarter. Foreign currency translation had an unfavorable impact of 1.6 percent versus the prior year period. Analysts' consensus estimate Other key contributing factors were:

• Marine Electronics revenue declined as continued growth in Minn Kota  could not offset declines in Humminbird  resulting from non-repeating Black Friday promotions in the prior year first quarter, as well as competitive pricing actions and changes in terms on international orders in the current year quarter.
• Outdoor Gear sales were behind the previous year quarter due to a shift in pacing of international orders and changes to sales programs in consumer camping.
• Watercraft sales were flat year-over-year as double-digit growth in the U.S. offset anticipated declines due to last year's planned closure of New Zealand operations designed to improve the long-term profitability profile of the business.
• Diving sales declined due continued weakness in European markets and unfavorable currency translation.

Total company operating loss during the seasonally slow first fiscal quarter was ($7.3) million compared to an operating loss of ($2.9) million in the prior year period. Primary drivers behind the quarter-to-quarter comparison were lower volume and increased legal expense of $2.5 million related to litigation brought by the company asserting infringement of its patented Side Imaging sonar technology by a competitor.

The company reported a net loss of ($4.2) million, or ($0.42) per diluted share, during the first fiscal quarter compared with a net loss of ($2.2) million, or ($0.22) per diluted share, in the same quarter last year. The company's effective tax rate for the quarter was 39.4 percent compared to 24.9 percent in the previous year first quarter.

Other financial information

At  Jan. 2, 2015, cash, net of debt was $25.1 million compared to cash, net of debt of $7.5, million at the end of the prior year quarter. Depreciation and amortization was $2.8 million year-to-date, compared to $2.4 million during the prior year-to-date period. Capital spending totaled $1.8 million during the first fiscal quarter compared with $3.4 million in the 2014 first fiscal quarter. In December 2014, the company's board of directors approved a quarterly cash dividend to shareholders of record as of  Jan. 15, 2015 which was payable on  Jan. 29, 2015.

“Continuous innovation has translated into sustained healthy margins and our diligence and hard work have brought working capital as a percentage of sales down to its lowest level in a decade. We enter the primary production and key selling period for our products with the balance sheet in great shape and the capacity to invest in opportunities focused on our long-term goal of sustained profitable growth,” said David W. Johnson, Vice President and Chief Financial Officer.