Johnson Outdoors announced increased net sales, operating profit and earnings for the fiscal quarter ended July 2, 2004. Improved results reflected the continued strong performances by the Company's Marine Electronics (formerly Motors) and Outdoor Equipment business units. Diving benefited top-line from favorable currency translation, and on the bottom-line from one-time items discussed below. As previously announced this week, the Company continues to take action to improve the efficiency and profitability of its Watercraft business.
Increases in total Company net sales (+11.6%) and operating profit (+53.5%) this quarter were driven by the Marine Electronics and Outdoor Equipment business units. Growth in Minn Kota(R) and military sales was slower than reported in the previous two quarters. Marine Electronics sales and profits were bolstered by the Company's acquisition of the Humminbird(R) brand, announced on May 6, 2004. Humminbird(R) added $7.8 million in net sales, $0.5 million in operating profit, and $0.04 in earnings per diluted share this quarter.
“The Humminbird(R) brand is the perfect complement to our fishing motors business, providing us yet another technology base for future expansion and growth. This was the right acquisition at the right time for a business clearly on the upswing,” said Helen Johnson-Leipold, Chairman and Chief Executive Officer, Johnson Outdoors.
Improvements in Outdoor Equipment over the prior year were due to military tent sales which are expected to return to lower historical levels in 2005. Net sales in Diving benefited once again from favorable currency translation this quarter. Operating profit in Diving for the quarter reflected proceeds of $2.0 million from the settlement of a lawsuit with a former employee and final accounting resolution of costs related to a dive computer recall.
Net income for the third quarter was $7.5 million or $0.85 per diluted share, which reflected a 48.0 % improvement in net income over $5.1 million or $0.59 per diluted share earned in the comparable quarter last year. A number of items unrelated to the Company's operations had a net favorable impact of $0.09 on earnings per diluted share in the 2004 third quarter. These items included: settlement of litigation with a former employee (+$0.14); final accounting resolution of costs related to a dive computer recall (+$0.05); charges associated with the on-going review of a proposal to take the Company private (-$0.07); and, obsolete product warranty and discontinued acquisition costs (-$0.03.)
“While we are benefiting from the diversity of our portfolio, we need a better balance of performance within it,” observed Ms. Johnson-Leipold. “We must continue to drive innovation to minimize the impact of soft consumer markets. We must reduce cost and complexity, while investing appropriately to strengthen operations. We are seeing progress in Watercraft, but we are not there yet, and our work in Diving is just beginning. We continue to manage our businesses for the long-term, and to do what's right to ensure sustainable, profitable growth.”
Year-to-Date
Increased net sales (+13.4%) over the same period last year were due to exceptional growth in Minn Kota(R) brand (+18.0%) and military tent (+38.0%) net sales. Although both product lines have produced strong sales growth year-to-date, the Company does not believe this growth rate is sustainable in the future. In total, Marine Electronics sales grew 28.9% over the prior year due to above average growth in Minn Kota(R) and the addition of the Humminbird(R) brand. Diving sales increased 4.7% over the same period last year due to favorable currency translation. Increased operating profit over the same period last year (+55.9%) was attributed to significant improvement in Marine Electronics and Outdoor Equipment which offset sizeable losses in the Company's Watercraft business. Charges related to a dive computer recall in the prior year third quarter and favorable one-time items in the current year third quarter account for the year-on-year favorable comparison in operating profit for Diving. Earnings of $12.4 million year-to-date or $1.42 per diluted share increased 37.1% from $9.1 million or $1.06 earnings per diluted share for the prior year period.
Financial Highlights
Changes in cash, accounts receivable and inventory balances largely reflect the impact of higher net sales for the quarter, the acquisition of Humminbird(R) during the quarter and the impact of foreign currency appreciation. Within inventories, the largest increase was in raw material stocks which are up approximately $8.6 million from the prior year. As in previous years, cash balances should rise during the fourth quarter corresponding with the seasonal decline in the Company's receivable and inventory positions. At the end of the third quarter, the Company's reported debt-to-total-capital was reduced to 29.1%, down from 35.0% in June of 2003.
“We have absorbed the acquisition of Humminbird(R) and finished the quarter with a solid balance sheet,” commented Paul Lehmann, Vice President and Chief Financial Officer. “With the expected reduction of working capital balances during the fourth quarter, this acquisition should provide us positive cash flows during the period from acquisition until the end of our fiscal year.”
JOHNSON OUTDOORS INC. AND SUBSIDIARIES
(thousands, except per share amounts)
Operating Results
THREE MONTHS ENDED NINE MONTHS ENDED
July 2 June 27 July 2 June 27
2004 2003 2004 2003
Net sales $121,166 $108,546 $279,702 $246,706
Cost of sales 70,964 65,038 160,251 143,322
Gross profit 50,202 43,508 119,451 103,384
Operating expenses 36,515 34,589 95,733 88,175
Operating profit 13,687 8,919 23,718 15,209
Interest expense, net 1,237 1,191 3,421 3,323
Other (income) expense, net 149 (644) 94 (3,115)
Income before income taxes 12,301 8,372 20,203 15,001
Income tax expense 4,810 3,312 7,755 5,924
Net income $7,491 $5,060 $12,448 $9,077
Basic earnings per
common share $0.87 $0.60 $1.46 $1.08
Diluted earnings per
common share $0.85 $0.59 $1.42 $1.06
Diluted average common
shares outstanding 8,795 8,579 8,766 8,545
Segment Results
Net sales:
Marine electronics $43,112 $29,821 $93,003 $72,158
Outdoor equipment 27,202 25,148 67,174 55,859
Watercraft 29,029 31,557 61,162 63,415
Diving 22,227 22,425 59,217 56,585
Other/eliminations (404) (405) (854) (1,311)
Total $121,166 $108,546 $279,702 $246,706
Operating profit (loss):
Marine electronics $8,445 $5,454 $19,001 $11,327
Outdoor equipment 4,760 4,416 11,692 8,855
Watercraft 639 1,759 (4,934) (1,281)
Diving 4,936 1,123 9,686 6,306
Other/eliminations (5,093) (3,833) (11,727) (9,998)
Total $13,687 $8,919 $23,718 $15,209
Balance Sheet Information (End of Period)
Cash and short-term investments $40,258 $62,696
Accounts receivable, net 82,630 75,888
Inventories, net 62,373 51,606
Total current assets 197,273 200,589
Total assets 297,660 283,006
Short-term debt 15,755 9,591
Total current liabilities 76,047 64,290
Long-term debt 51,318 68,444
Shareholders' equity 163,687 144,621
