Johnson Outdoors Inc. reported lower sales for the fiscal 2014 second quarter, due primarily to prolonged harsh winter weather during the period. Record-high revenue during the prior year second quarter also contributed to unfavorable year-over-year comparisons. Lower operating expenses were unable to offset the volume-related impact on operating profit.
“Unpredictable weather conditions are always challenging for the highly seasonal outdoor recreational industry, and this year's unusually long and frigid winter has shifted the pacing of customer orders to more closely align with the retail-selling period of our products during the spring and summer months. On a positive note, we ended this quarter with strong marketplace demand for our new products. However, given the very late start to the season, it is difficult to forecast full-year performance at this time,” said Helen Johnson-Leipold, Chairman & CEO.
Sales during the second fiscal quarter historically reflect initial shipments to customers in advance of the primary retail selling period for the outdoor recreation industry's warm-weather products season. Net sales were $124.3 million in the second fiscal quarter, a 6 percent decline compared with record-high net sales of $132.1 million in the prior year quarter. Revenue declines in Marine Electronics, Watercraft and Diving eclipsed the modest growth in Outdoor Gear sales. Key drivers behind the year-over-year comparison in each business unit were:
- Marine Electronics revenue declined 7 percent due to delayed orders in key channels.
- Outdoor Gear revenue increased 9 percent due primarily to higher military tent orders.
- Watercraft sales compared unfavorably to the same period last year due to lower international sales related to the planned exit of European and Pacific Rim markets.
- Diving sales were 11 percent behind the prior year due to weak economies in key diving markets, coupled with delayed shipments of new products.
Total company operating margin for the fiscal second quarter was 9 percent versus operating margin of 10 percent in the prior year second quarter. Operating profit of $11.5 million in the current quarter reflected a $1.1 million decline year-over-year. Operating expenses declined $4.1 million year-over-year due largely to lower sales volume related costs, as well as reduced discretionary compensation, warranty and restructuring costs. Net income in the fiscal second quarter of $7.4 million, or $0.67 per diluted share, compared unfavorably to record-high second-quarter net income of $8.9 million, or $0.90 per diluted share, reported in the previous year second quarter.
Year-to-date results
Fiscal 2014 year-to-date net sales were $203.4 million compared with record-high net sales of $219.4 million in the same year-to-date period last year. Total company operating profit was $8.6 million, which compared unfavorably to operating profit of $14.2 million during the first six months of the prior fiscal year-to-date period. Key factors contributing to the revenue and profit declines during the first six months are the same as those stated above for the current quarter. Net income for the first six months of the year of $5.2 million, or $0.30 per diluted share, compared unfavorably to record-high net income of $9.2 million, or $0.93 per diluted share, reported in the prior year same six-month period. Net interest expense for the first six months declined nearly 50 percent compared with the same period last year. The company's effective tax rate during the fiscal first six months was 37 percent compared to an effective tax rate of 33 percent in the prior year-to-date period.
Balance sheet
At March 28, 2014, debt, net of cash was $1.5 million, a 92 percent decrease compared with debt, net of cash of $20.2 million at the end of the prior year quarter. Depreciation and amortization was $5.1 million year-to-date, compared to $5.1 million during the prior year-to-date period. Capital spending totaled $6.7 million during the first six-month period compared with $6.1 million in the previous year-to-date period.
At March 28, 2014, debt, net of cash was $1.5 million, a 92 percent decrease compared with debt, net of cash of $20.2 million at the end of the prior year quarter. Depreciation and amortization was $5.1 million year-to-date, compared to $5.1 million during the prior year-to-date period. Capital spending totaled $6.7 million during the first six-month period compared with $6.1 million in the previous year-to-date period.
“The next six months demands a keen focus on disciplined working capital management and enhanced operational flexibility, in addition to controlled spending to ensure continued progress toward our 2015 financial targets,” said David W. Johnson, vice president and CFO. “Importantly, despite this year's weather-delayed season, the balance sheet is solid and our cash position remains strong enabling us to make key strategic investments in the future, while also paying a dividend to shareholders.”
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; Carlisle paddles; 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 equipment.
JOHNSON OUTDOORS INC. | ||||
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(thousands, except per share amounts) | ||||
| THREE MONTHS | SIX MONTHS | |||
| ENDED | ENDED | |||
| March 28 | March 29 | March 28 | March 29 | |
| Operating Results | 2014 | 2013 | 2014 | 2013 |
| Net sales | $ 124,273 | $ 132,100 | $ 203,373 | $ 219,374 |
| Cost of sales | 75,427 | 78,016 | 124,598 | 131,476 |
| Gross profit | 48,846 | 54,084 | 78,775 | 87,898 |
| Operating expenses | 37,300 | 41,446 | 70,137 | 73,734 |
| Operating profit: | 11,546 | 12,638 | 8,638 | 14,164 |
| Interest expense, net | 308 | 453 | 479 | 871 |
| Other expense (income), net | 24 | (878) | (135) | (380) |
| Income before income taxes | 11,214 | 13,063 | 8,294 | 13,673 |
| Income tax expense | 3,810 | 4,126 | 3,083 | 4,489 |
| Net income | $ 7,404 | $ 8,937 | $ 5,211 | $ 9,184 |
| Weighted average common shares outstanding – Dilutive | 9,649 | 9,546 | 9,611 | 9,491 |
| Net income per common share – Diluted | $ 0.67 | $ 0.90 | $ 0.30 | $ 0.93 |
| Segment Results | ||||
| Net sales: | ||||
| Marine electronics | $ 81,870 | $ 87,778 | $ 130,055 | $ 141,429 |
| Outdoor equipment | 10,974 | 10,096 | 19,357 | 18,536 |
| Watercraft | 13,228 | 13,754 | 18,677 | 20,568 |
| Diving | 18,441 | 20,815 | 35,765 | 39,298 |
| Other/eliminations | (240) | (343) | (481) | (457) |
| Total | $ 124,273 | $ 132,100 | $ 203,373 | $ 219,374 |
| Operating profit (loss): | ||||
| Marine electronics | $ 13,748 | $ 15,594 | $ 16,080 | $ 20,340 |
| Outdoor equipment | 573 | (268) | 385 | (44) |
| Watercraft | (395) | (542) | (2,031) | (2,224) |
| Diving | 605 | 1,379 | 754 | 2,081 |
| Other/eliminations | (2,985) | (3,525) | (6,550) | (5,989) |
| Total | $ 11,546 | $ 12,638 | $ 8,638 | $ 14,164 |
| Balance Sheet Information (End of Period) | ||||
| Cash and cash equivalents | $ 48,653 | $ 40,392 | ||
| Accounts receivable, net | 98,484 | 109,176 | ||
| Inventories, net | 85,089 | 85,192 | ||
| Total current assets | 247,408 | 248,024 | ||
| Total assets | 348,529 | 348,505 | ||
| Short-term debt | 568 | 52,542 | ||
| Total current liabilities | 76,735 | 132,533 | ||
| Long-term debt | 49,627 | 8,057 | ||
| Shareholders' equity | 201,374 | 180,365 | ||
