Johnson Outdoors Inc. Q3 net sales were $150.6 million, an increase of 11% compared with $135.5 million in the prior year quarter. Net earnings were $8.3 million or 89 cents per diluted share compared to $6.6 million or 72 cents per diluted share in the prior year quarter.
Third quarter sales are historically the highest of the year, reflecting consumer demand during the key retail selling period of the Company's seasonal outdoor recreational products. Significant gains in the Marine Electronics, Diving and Watercraft divisions more than offset an anticipated slow down in military sales. Excluding military sales in both the current and the prior year third quarter, total Company net sales would have increased $16.7 million, or 13%. Key changes included:
- Marine Electronics sales grew 23% driven by strong response to new products in the Minn Kota® and Humminbird® brands.
- Diving sales jumped 14% ahead of last year's third quarter due to improved performance by the SCUBAPRO® brand in Europe; the successful European launch of a new UWATEC® dive computer; and, the acquisition of the Seemann Sub(TM) brand, announced on April 2, 2007, which added $2.3 million in sales this quarter.
- Watercraft's revenues grew 5% behind favorable marketplace response to new products in the Company's paddle sport brands and growth in key international markets.
- Outdoor Equipment revenues were 16% behind last year. A 22% reduction in military sales and one-time specialty sales during the prior year quarter drove the unfavorable year-over-year comparison.
Total Company operating profit in the current quarter increased 6% to $14.7 million compared with $13.9 million in the prior year quarter. Operating profit during the period was impacted by the following factors:
- Significant growth in Marine Electronics and Diving sales due to successful new product introductions.
- Increased sales in Watercraft, which could not offset a one-time charge of $4.4 million, announced on July 10, 2007, that resolved a long-standing intellectual property dispute. As reported in the Company's Form-10K report, the Company is subject to various legal actions and proceedings, and is insured against loss for certain of these matters. The Company has made a claim for this matter, and at this time does not expect resolution in Fiscal 2007.
- Lower expenses in Outdoor Equipment versus the prior year quarter which included $1.2 million in flood-related charges.
- Decreased corporate expense due to a decline in spending.
Net income of $8.3 million, or $0.89 per diluted share, in the current quarter compared favorably to net income of $6.6 million, or $0.72 per diluted share, in the prior year quarter.
“Market-winning innovation and strategic acquisitions continue to drive revenue growth that outpaces the industry. Investments to grow our brands and strengthen operations are dropping to the bottom line, with supply chain optimization and enhanced resource planning initiatives underway to help further improve efficiency and profitability. Unfavorable year-to-date comparisons are due largely to one-time charges and costs this year which will not negatively impact earnings going forward,” observed Helen Johnson-Leipold, Chairman and Chief Executive Officer, Johnson Outdoors Inc. “We are excited and confident in the future of Johnson Outdoors, and committed to sustainable profitable growth to enhance long-term value for our shareholders. For the first time, we are in a position to return a portion of earnings to shareholders in the form of a dividend without compromising our ability to pursue acquisitions and organic growth opportunities consistent with our strategic plan. Our performance this year demonstrates we have the capability and capacity to expand our leadership in the outdoor recreational marketplace and achieve our target of half a billion dollars in sales over the next few years.”
Total Company net sales for the first nine months of fiscal 2007 were $344.4 million, a 9% increase over $315.5 million during the same period last year. Excluding military sales in the current and prior nine-month period, total Company net sales would have increased 12%. Key drivers in the nine-month period were:
- Successful new product introductions for Minn Kota®, Humminbird® and Cannon® brands.
- Strong demand behind new product launches and international market expansion in the Company's paddle sport brands.
- Improved performance in European Diving operations due to growth in SCUBAPRO® and the acquisition of the Seemann Sub(TM) brand.
- The anticipated slow down in military sales.
Total Company operating profit was $16.1 million during the current nine-month period compared to $21.4 million during the prior year-to-date period. Key factors impacting the year-to-date unfavorable comparison were:
- The expected decline in military sales, primarily accounting for lower Outdoor Equipment profits versus the same period last year.
- Sales growth in Marine Electronics which was partially offset by lower margins due to increased labor costs to meet continued high demand for new products.
- A one-time $4.4 million settlement payment in Watercraft, partly offset by increased paddle sport brand sales.
- Corporate investments of $1.8 million in strategic future growth initiatives during the second quarter.
Net income year-to-date was $7.7 million, or $0.84 per diluted share, versus net income of $9.6 million, or $1.05 per diluted share, in the prior year nine-month period.
OTHER FINANCIAL INFORMATION
The Company's debt to total capitalization stood at 27% at the end of the fiscal third quarter versus 26% at June 30, 2006 as a result of short-term borrowings to meet higher working capital needs. Debt, net of cash and short-term investments, increased to $36.4 million at the end of this quarter versus $20.2 million at the end of the prior year quarter. Depreciation and amortization was $7.1 million in the current nine-months versus $6.6 million in the previous year-to-date period. Capital spending totaled $8.3 million year-to-date, compared with $6.4 million in the prior year first nine months. Gross margin percentage year-to-date was 40.5%, compared to 41.6% in the prior year period.
“Short-term debt is decreased versus the March quarter, but is higher than last year's quarter, as we funded working capital growth in our Marine Electronics and Watercraft businesses. We expect working capital levels to drop next quarter, yet remain higher than normal through the end of the year,” said David Johnson, Vice President and Chief Financial Officer.
Johnson Outdoors delivers meaningful innovation to the outdoor recreation marketplace driven by unique consumer insights, with new products representing more than a third of total Company year-to-date net sales. Strong new product growth continues to bolster the Company's already robust existing brands, and differentiate the Company in the industry. Included among the new product innovations from Watercraft for 2008 are:
- The OCEAN KAYAK(TM) PROWLER(TM) TRIDENT(TM) is the Company's newest entry into the rapidly growing fishing kayak segment which has doubled in size each of the past five years. Designed expressly for the serious kayak angler, the new Prowler(TM) Trident(TM) includes unique features such as: the couch-like Comfort Plus(TM) seat back; the unique Sonar Shield(TM) to reduce glare on fishfinder screens; and, an extra-large capacity bow hatch outfitted with the easy-to-open Cross Lock(TM) strap system.
- The NECKY® MANITOU(TM) 13 & 14 ULTRALITES(TM) combine the stability and comfort of recreational boats with the feel and glide of performance touring kayaks. Weighing in at less than 40 pounds, the new Ultralites(TM) are as easy to handle off the water as they are on, and boast a composite seat pan with comfortable foam cover, supportive back band and adjustable foot pedals.
- The NECKY® ELIZA(TM) ULTRALITE(TM), designed by women for women to bring performance, style and grace to the touring kayak category for the female paddler. The ergonomically designed ELIZA(TM) cockpit is wider to account for a woman's center of gravity and shorter in length, with a shallow V-shaped hull that is reactive and edgy, while providing an excellent balance between tracking and maneuverability on the water. A unique, continuous cored construction allows for a stiffer, lighter hull which translates into enhanced durability and superior efficiency and responsiveness on the water.