Johnson Outdoors Inc. reported a 4% increase in net sales for the fiscal fourth quarter to $80.3 million from $77.1 million in the year-ago quarter. Net income for the quarter improved to a net loss of $0.9 million (10 cents per diluted share) from a net loss of $3.4 million (39 cents per diluted share) for the prior year quarter. For the full year, net sales also grew 4% to $395.8 million from $380.7 million for fiscal 2005. Net income for the year was $8.7 million (95 cents per diluted share), a 23% increase versus prior year.
FOURTH QUARTER RESULTS
Fourth quarter results historically reflect a loss due to the slowing of sales and production of the company's seasonal outdoor recreation products. Sales growth in the company's core consumer brands more than offset anticipated lower military revenues for the quarter. Key changes included:
- Watercraft positive momentum continued as double-digit growth in international paddle sport revenues drove sales 4% ahead of last year's strong fourth quarter results.
Marine Electronics realized a 13% uptick in quarterly net sales due to growth in mass and sporting good channels for Minn Kota® and the acquisition of Cannon® and Bottom Line® brands, completed on October 3, 2005, which added a combined $2.1 million in net sales to the unit during the quarter. - Diving revenues were 11% ahead of last year driven by solid growth in North America and improved performance in key international markets.
- Outdoor Equipment revenues decreased 16% due entirely to a 57% decline in military tent sales. Consumer camping continued to benefit significantly from specialty market sales this quarter. Commercial tent sales dipped slightly below last year due to low inventories resulting from the temporary halt of production in the 2006 fiscal third quarter caused by flooding in the company's tent manufacturing facility in Binghamton, New York.
Total company operating loss of $0.7 million in the fourth quarter compared favorably to an operating loss of $4.6 million in the same period last year. Operating loss improvement was due primarily to a growth in gross margins driven by strong new product introductions, coupled with effective cost-saving programs and pricing strategies, which more than off-set higher commodity costs and freight charges.
The company reported a net loss during the seasonally slow fourth quarter of $0.9 million, or 10 cents per diluted share, a significant improvement over the net loss of $3.4 million, or 39 cents per diluted share, in the prior year quarter.
FULL YEAR RESULTS
Total company net sales were $395.8 million, a 4% increase over $380.7 million in the prior year. Sales growth in the company's core consumer brands more than offset anticipated lower military revenues for the year. Key factors impacting the year-over-year sales results included:
- The successful integration of Cannon® and Bottom Line® brands into the company's Marine Electronics division, which added $9.8 million to the division's net sales, along with double-digit growth in the Humminbird® brand and increased international sales drove the 13% increase in Marine Electronics revenues year-over-year.
- The Watercraft division grew 8% year-over-year as a result of a strong line-up of new canoes and kayaks which drove double-digit growth in key international markets and among the division's top 30 domestic customers for the second year in a row. The Old Town® Dirigo(TM) kayak, the Ocean Kayak(TM) Prowler series of fishing kayaks and the Necky® Manitou series of kayaks were major contributors to this year's revenue growth.
- Diving sales were down slightly with strong performances in North American and Asia markets almost offsetting unfavorable currency translations and weakness in European markets.
- Outdoor Equipment reported a year-over-year decline of 12.5% due to a 33.5% reduction in military sales versus the prior year which was partially offset by increased revenues in both Consumer and Commercial segments.
Operating profit for the year was $20.6 million compared to $15.5 million in 2005 which reflected $2.7 million in charges related to a terminated buy-out proposal. Other key factors driving the year-over-year changes in operating profit included:
- Significant growth in Marine Electronics and Watercraft sales due to successful new product introductions.
- Reduced restructuring and severance costs.
- Reduced overhead costs at corporate and operational levels.
- Charges totaling $1.5 million related to the temporary closure of the company's Outdoor Equipment operations due to flooding caused by heavy rains in the Northeast.
- The conclusion of contracts for higher margin military tents and the overall decrease in military sales.
Net income was $8.7 million, or $0.95 per diluted share, versus net income of $7.1 million, or $0.81 per diluted share, in the prior year.
“Our focus on innovation and strategic acquisitions delivered industry-leading growth in our consumer segments which outpaced our competition and more than offset the slowdown in military sales we expected. Excluding military sales in both this and the prior year, our core brands grew nearly 10% and operating margins rose a full 3 points. Improved operating efficiency and targeted cost-savings efforts further strengthened our competitiveness and profitability. It was a very good year,” said Helen Johnson-Leipold, Chairman and Chief Executive Officer, Johnson Outdoors Inc. “Our goal is to sustain the positive momentum we have built, and continue to deliver profitable growth to enhance shareholder value. We will seek to do that by expanding our markets, our great brand equities and our leading technology portfolio as we set our sights on becoming a half billion dollar company in the next few years.”
Further commenting, Ms. Johnson-Leipold said: “Clearly, European restructuring efforts had an impact on Diving results this year, and will continue to do so to a lesser degree through early 2008 when new systems should be fully implemented. Investments in building awareness and distribution for our award-winning electric boat line, which masked the strong performance of our paddle sports brands this year, will also continue at a lower rate next year. We have worked hard to strengthen operations and reduce the impact of one-time items on total Company results, and next year we look for sales growth equal to this year while maintaining our focus on enhancing core brand operating margins. Our balance sheet is strong and we are well positioned to capitalize on growth opportunities for the future.”
OTHER FINANCIAL INFORMATION
The company's debt to total capitalization stood at 17% at the end of the year versus 23% at October 1, 2005. Cash, net of debt, decreased $7.4 million to $13.9 million by year end. Depreciation and amortization was $9.2 million year-to-date compared with $9.4 million in the prior year. Capital spending totaled $8.9 million in 2006 compared with last year's $6.8 million.
“Significant growth in Humminbird® and the acquisition of Cannon® and Bottom Line® brands resulted in unfavorable comparisons in inventory and working capital this year. Going forward, we remain focused on managing working capital efficiently and expect to leverage our working capital base as we grow sales in the future. Our strong cash position and lower debt level should give us the ability and flexibility we need to successfully execute our strategic growth plans,” said David Johnson, Vice-President and Chief Financial Officer.
MILITARY OUTLOOK
The quarterly and year-over-year decline in military tent sales is consistent with the company's stated projections throughout the year. During the fourth quarter of the current year, the company reported it was one of seven vendors awarded a multi-product military contract. No orders have been received against this new contract. The Company plans to bid on other future contracts, and at this time, expects fiscal 2007 military sales to be in the $25-30 million range.
INNOVATION UPDATE
Johnson Outdoors saw new products represent one-third of total company net sales in 2006.
FINANCIAL TABLES FOLLOW JOHNSON OUTDOORS INC. AND SUBSIDIARIES (thousands, except per share amounts) Operating Results THREE MONTHS ENDED(a) TWELVE MONTHS ENDED(a) ---------------------------------------------------------------------- Sept 29 Sept 30 Sept 29 Sept 30 2006 2005 2006 2005 ---------------------------------------------------------------------- Net sales $80,314 $77,095 $395,790 $380,690 Cost of sales 46,274 48,505 230,574 224,336 ---------------------------------------------------------------------- Gross profit 34,040 28,590 165,216 156,354 Operating expenses 34,784 33,201 144,591 140,823 ---------------------------------------------------------------------- Operating profit (loss) (744) (4,611) 20,625 15,531 Interest expense, net 910 1,111 4,485 4,225 Other expenses (income), net (85) 116 376 (796) ---------------------------------------------------------------------- Income (loss) before income taxes (1,569) (5,838) 15,764 12,102 Income tax expense (benefit) (645) (2,439) 7,049 5,001 ---------------------------------------------------------------------- Net income (loss) $(924) $(3,399) $8,715 $7,101 ---------------------------------------------------------------------- Basic earnings (loss) per common share: $(0.10) $(0.39) $0.97 $0.82 ---------------------------------------------------------------------- Diluted earnings (loss) per common share: $(0.10) $(0.39) $0.95 $0.81 ---------------------------------------------------------------------- Diluted average common shares outstanding 9,001 8,629 9,161 8,795 ---------------------------------------------------------------------- Segment Results Net sales: Marine electronics $25,341 $22,481 $164,472 $145,231 Outdoor equipment 12,481 14,906 65,948 75,340 Watercraft 19,241 18,485 87,302 80,849 Diving 23,270 21,054 78,473 79,404 Other/eliminations (19) 169 (405) (134) ---------------------------------------------------------------------- Total $80,314 $77,095 $395,790 $380,690 ---------------------------------------------------------------------- Operating profit (loss): Marine electronics $870 $756 $21,583 $21,572 Outdoor equipment 1,142 1,740 8,236 11,208 Watercraft (1,989) (2,323) (2,573) (4,353) Diving 2,426 (203) 5,604 4,901 Other/eliminations (3,193) (4,581) (12,225) (17,797) ---------------------------------------------------------------------- Total $(744) $(4,611) $20,625 $15,531 ---------------------------------------------------------------------- Balance Sheet Information (End of Period) Cash and short-term investments $51,689 $72,111 Accounts receivable, net 52,844 48,274 Inventories, net 63,828 51,885 Total current assets 184,897 186,035 Total assets 284,226 283,318 Short-term debt 17,000 13,000 Total current liabilities 74,650 69,196 Long-term debt 20,807 37,800 Shareholders' equity 180,881 166,434 ---------------------------------------------------------------------- (a) Unaudited