Johnson Outdoors Inc. reported a slight dip in fiscal second quarter net sales to $121.8 million from $122.0 million for the prior year second quarter. Earnings from continuing operations dropped 61.9% to $0.8 million, or 9 cents per diluted share, from earnings from continuing operations of $2.1 million, or 23 cents per diluted share, in the prior year quarter.


Second quarter sales reflect initial shipments to customers in anticipation of the primary retail selling period for the company’s seasonal outdoor products. Total company net sales in the quarter were flat with the prior year period, benefiting from higher exports in Marine Electronics, growth in Watercraft and Diving, foreign currency translation increase of 2.2% and acquisitions. The expected slowing of military sales accounted largely for the unfavorable year-over-year comparison in Outdoor Equipment. Key changes included:

Marine Electronics revenues were 4.6% behind last year due to a soft domestic boat market. GEONAV, acquired in November 2007, added $4.5 million of revenue in the quarter.


Watercraft sales increased 5.1 percent over the prior year quarter due primarily to growth in paddle sport accessories.


Diving revenues rose 20.3 percent above last year’s second quarter due to growth in key international markets. Seemann®, acquired in April 2007, added $2.1 million to quarterly sales and favorable currency translation added $1.7 million.


Outdoor Equipment revenues compared unfavorably to last year’s second quarter due to the expected slowdown of military sales. In addition, revenue gains in Consumer were unable to offset lower Commercial sales.


Total company operating profit for the second quarter was $3.6 million compared to an operating profit of $4.6 million in the prior year quarter. Key drivers behind the unfavorable comparison were:

Lower margins in Marine Electronics driven by lower domestic sales, unfavorable product and geographic mix and integration costs associated with the GEONAV acquisition.


Lower military sales.

Strategic charges of $0.6 million related to Global Diving restructuring.
The company reported income from continuing operations of $0.8 million, or $0.09 per diluted share, compared to income from continuing operations of $2.1 million, or $0.23 per diluted share, in the same quarter last year.

 

Income was negatively impacted by a $1.6 million pre-tax foreign exchange loss related to GAAP treatment of U.S. dollar holdings in Switzerland where the Swiss franc strengthened significantly during the quarter. Loss from discontinued operations of $0.3 million, or ($0.04) per diluted share, was consistent with the prior year quarter. Net income for the quarter was $0.5 million, or $0.05 per diluted share, compared to net income of $1.7 million, or $0.19 per diluted share in the prior year.

“Economic uncertainty in the U.S. is starting to have an effect on outdoor retailers, which are keeping inventory levels below last year until they can gauge consumer demand at shelf in the next few months. On the other hand, international sales continue to grow and orders among U.S. specialty retailers are solid,” said Helen Johnson-Leipold, Chairman and Chief Executive Officer. “In addition to ongoing cost-savings initiatives, we have instituted strict company-wide cost-control measures and are working hard to manage inventory levels down in the face of a soft marketplace. At the same time, we will continue to protect the future by investing wisely and appropriately in innovation.”


Year-to-date results


Net sales in the first six months of fiscal 2008 were $197.8 million versus $193.4 million in the same six-month period last year, an increase of 2.3 percent. Excluding the anticipated $6.5 million decline in military sales, total Company net sales would have increased 5.8 percent. Key drivers in the year-to-date period were:


  • Successful new product launches in Watercraft and Diving.
    Growth in key international markets in Marine Electronics and Diving;
  • Lower military sales;
  • Lower domestic sales in Marine Electronics due to a soft boat market.

Total company operating loss was $0.9 million during the first six months of fiscal 2008 compared to an operating profit of $2.4 million during the prior year-to-date period. Loss from continuing operations for the first six months of the year was $2.8 million, or ($0.31) per diluted share, versus income from continuing operations of $0.8 million, or $0.08 per diluted share, in the first six months of the prior year. Primary drivers behind the year-to-date comparison were:



  • Reduced margins in Marine Electronics due to product and geographic mix and integration costs.
  • The significant drop in military sales versus the prior year six-month period.
  • Global Diving restructuring.
  • Negative impact of foreign currency holdings.

Other financial information


The company’s debt to total capitalization stood at 36 percent at the end of the current quarter versus 33 percent at this time last year. Debt, net of cash, was $87.3 million compared to $56.1 million at the end of the prior year quarter. Depreciation and amortization was $4.9 million year-to-date compared with $4.6 million in the prior year period. Capital spending totaled $5.3 million year to date compared with $5.7 million in the same period last year. The company entered into a new $60 million credit facility during the quarter. Additional information on the new loan agreement can be found in the Company’s Form 8-K filing with the Securities and Exchange Commission dated February 19, 2008.


“Performance in Europe and other key international markets is strong, and our brands appear to be gaining market share against the competition everywhere, including the U.S.,” said David W. Johnson, VP and CFO. “We have tightened our belts, revised production schedules and are working with vendors to help minimize the impact of a slowing domestic economy.”