Johnson Outdoors Inc. had net sales of $69.8 million for the first quarter ended Jan. 2, 2009, an 8.2% decline compared to net sales of $76.0 million for the prior year quarter. Unfavorable currency translation had a negative 3.1% impact on revenues during the quarter. Loss from continuing operations of $6.9 million, or 76 cents per diluted share for the first quarter of 2009, compared unfavorably to a loss from continuing operations of $3.6 million, or 40 cents in the prior year quarter.
“Disappointing 2008 holiday retail sales, and declines in consumer spending and consumer confidence levels have made retailers even more focused on keeping their inventories down,'' said Helen Johnson-Leipold, chairman and CEO. This has resulted in an adjustment in the timing of customer orders, which we believe will coincide more closely to consumer purchase patterns of our warm-weather seasonal goods. We have taken immediate steps to minimize impact on operations and cash flow, and to ensure our cost structure reflects the rapidly evolving economic climate in which we are doing business.”
COST REDUCTION UPDATE
On Dec. 4, 2008, the company announced comprehensive cost-reduction plans which included an aggressive $20 million cost savings target, lower capital spending and significant reduction in peak working capital. At the end of the first quarter:
* Cost savings efforts were progressing on-track and in-line with
* Inventory levels were 18% below prior year.
* Capital spending was down 18% year-over-year.
FIRST QUARTER RESULTS
Historically, first quarter results are not indicative of the year's overall performance due to the warm-weather seasonality of the company's business. Quarterly sales are typically at their lowest levels during the first fiscal quarter when the company is ramping up for the primary selling period of its outdoor recreation products which occurs during the second and third fiscal quarters. Deteriorating economic conditions in key markets resulted in lower sales across three of the company's four business units during the first quarter:
* Marine Electronics revenues were 3.9% below last year
primarily due to continued declines in the marine market.
* Watercraft sales fell 18% below the prior year primarily due
to softening paddlesports markets and a 5% impact from
unfavorable currency translation.
* Diving revenues were down 28% due largely to slowing
economies in key international markets and the impact of
unfavorable currency translation which comprised 5% of the
* Outdoor Gear sales jumped 41% ahead of last year driven by
double-digit growth in all categories.
Total company operating loss during the seasonally slow first fiscal quarter was $5.2 million compared to an operating loss of $4.6 million in the prior year quarter. Key drivers behind the unfavorable comparison were:
* Deteriorating economic conditions in domestic and international
* Lower sales in Marine Electronics, Watercraft and Diving units.
* A decline in gross profit margin to 36% from 38.6% in
the prior year due to lower volumes and an unfavorable mix of
* These factors were partially offset by a 10.5% reduction in
operating expenses driven by aggressive cost-savings initiatives.
The company reported a net loss of $6.9 million, or 76 cents per diluted share, during the first fiscal quarter, compared to a net loss of $4.7 million, or 52 cents per diluted share, in the same quarter last year.
On Jan. 2, 2009, the company announced completion of an amendment to its existing debt agreements. Among other items, the amendment provides for greater flexibility with respect to financial metric covenants through the end of the company's 2009 fiscal year. Borrowings under the revised facility are now subject to the value of a borrowing base consisting of certain receivables and the company's inventory.
“The on-going success of an enterprise is predicated on its ability to meet the goals and needs of the business and organization today without compromising its ability to do so in the future. Undoubtedly, the current economic environment presents a significant challenge to every company. Ours is no exception. We are acting quickly and prudently to help ensure we weather the economic storm, and emerge stronger and better positioned for growth and profitability when our markets rebound. Amending our credit agreements and our ongoing cost reduction plans were necessary milestones which will help ensure the long-term strength of the company,'' said Johnson-Leipold.
OTHER FINANCIAL INFORMATION
The company's debt to total capitalization stood at 39% at the end of the first quarter versus 29% at Dec. 28, 2007. At Jan. 2, 2009, debt, net of cash, was $41.1 million compared to $44.8 million at the end of the prior year quarter. Depreciation and amortization was $2.4 million year-to-date, compared to $2.2 million during the prior year-to-date period. Capital spending totaled $2.0 million during the first fiscal quarter compared with $2.4 million in the 2008 first fiscal quarter.
“Strict controls enabled significant progress in managing working capital down this quarter, even as sales declined,'' said David W. Johnson, VP and CFO. “Additional steps are being taken to further improve operating efficiency and enhance our ability to manage cash effectively throughout a prolonged economic downturn.”
JOHNSON OUTDOORS INC.
(thousands, except per share amounts)
Operating Results THREE MONTHS ENDED
January 2, December 28,
Net sales $ 69,756 $ 75,967
Cost of sales 44,650 46,678
Gross profit 25,106 29,289
Operating expenses 30,329 33,870
Operating loss (5,223) (4,581)
Interest expense, net 1,494 792
Other expenses, net 1,120 54
Loss before income taxes (7,837) (5,427)
Income tax benefit (896) (1,803)
Net loss from continuing operations (6,941) (3,624)
Net income (loss) from discontinued
operations, net of tax of $0 and $626
respectively 41 (1,066)
Net loss (6,900) $ (4,690)
Net loss basic and diluted per common share:
Continuing operations $ (0.76) $ (0.40)
Discontinued operations — $ (0.12)
Basic and diluted average common shares
outstanding 9,123 9,071
Marine electronics $ 31,977 $ 33,263
Outdoor equipment 11,238 7,985
Watercraft 11,047 13,454
Diving 15,550 21,531
Other/eliminations (56) (266)
Total $ 69,756 $ 75,967
Operating profit (loss):
Marine electronics $ (969) $ 263
Outdoor equipment 925 (382)
Watercraft (1,599) (2,113)
Diving (1,197) 560
Other/eliminations (2,383) (2,909)
Total $ (5,223) $ (4,581)
Balance Sheet Information (End of Period)
Cash and short-term investments $ 32,410 $ 37,181
Accounts receivable, net 61,613 69,127
Inventories, net 87,696 106,850
Net assets of discontinued operations — 359
Total current assets 191,901 235,585
Total assets 258,482 354,351
Short-term debt 13,500 82,002
Total current liabilities 65,616 142,518
Long-term debt 60,001 3
Shareholders' equity 113,320 196,942