Marine electronics, including trolling motors and fishing gear, powered a 9% gain in sales and rare fourth-quarter profit at Johnson Outdoors, the Racine,  Wis. company reported.  “It’s official,” Johnson Outdoors CEO Helen Johnson-Leipold said of the company’s trolling motor business. “Minn Kota is Johnson Outdoors’ first $100 million brand.”

For the year ended Sept 28, the company reported net sales of $432.0 million, up 9% from 2006.  Net income rose 6% to $9.2 million. Johnson-Leipold, who has been focusing on reducing debt and building up cash to buy companies, said acquisitions drove 30% of the sales growth.  Still, gross margins at the company declined 120 basis points to 40.5% for the year due to a costly legal settlement and higher than expected costs launching its line of Escape watercraft.

The most notable metric was a 39% jump in inventory.  Part of the  increase was due to new product introductions and part was due to dealers delaying orders, said David Johnson, chief financial officer. “That is why we have brought in supply chain optimization experts to work our businesses to identify improvement opportunities,” he said. “Inventory management, SKU reduction, forecasting, and capacity planning are all well within the scope of this work.”

In a bid to sustain the rapid growth, the company announced Nov. 12 that it acquired Geonav, an Italian maker of chart plotters, marine autopilots, VHF radios and fish finders. The acquisition, paid for with stock, put Johnson Outdoors in eight distinct marine electronics segments with global sales of $1 billion.

Johnson-Leipold said Europe is playing a larger than anticipated role in Johnson Outdoors’ growth strategy. “Five years ago, we decided to dip our toe in the water in Europe with our Marine and paddleboat brands,” she said.  “We thought it might be a $10 million opportunity. We were wrong.  After five steady years of double-digit growth, year-over-year, we now know Europe is a much larger opportunity for these businesses, particularly Eastern and Northern Europe.”

To grow those businesses, however, the company will have to change its business model in Europe, Johnson-Leipold said. “That is why Geonav made so much sense. In addition to adding complementary brands to our Marine portfolio, Geonav has local resources and established distribution channels across key countries in Europe that will allow us to grow quickly and smartly.”

Operating profits at Marine Electronics, the company’s largest segment rose 58% to $1.4 million, on a 30.4% rise in net sales to $33 million in the fourth quarter. The growth was driven by strong sales of Hummingbird and Minn Kota. Johnson-Leipold said she expects the company’s new Cannonlink System Module to drive sales going forward. Operating profits as a percentage of net sales rose 72 basis points to 4.2% from the same quarter in 2006.

Net sales of Diving gear grew 15% to $26.8 million thanks to Seemann Sub, the successful launch of the Uwatec Galileo dive computer and favorable exchange rates. Seemann Sub was acquired in April and contributed $2.3 million in sales during the quarter. The appreciation of the euro boosted sales by $700,000 during the quarter. Operating profits as a percentage of net sales rose 139 basis points to 11.8% from the same quarter in 2006.

The Watercraft segment lost $2.2 million during the quarter, on a 2.6% drop in net sales to $18.7 million. That raised losses for the year to $6.3 million, up 154% from 2006.

Johnson-Leipold insisted the company’s Paddling business, which includes the Necky, Old  Town and Ocean Kayak brands, had “turned around” and was “stronger and healthier than ever.” However, she said it could not overcome a $4.4 million legal settlement Johnson Outdoors paid in July to settle an intellectual property dispute with Confluence Watersports.

Slower than expected sales of the company’s electric- and human-powered Escape boats, meanwhile, are also hurting the business. To spur Escape sales, the company invested $2 million in 2007 to develop rental and resort channels for the boats, which range in price from $1,000 to $8,000. She said the company would re-evaluate the business in 2008 to determine how much to invest in it going forward. Without the Confluence settlement and Escape, the watercraft business would have made money in 2007.

As expected, Outdoor revenues fell 25% to $94 million due to declining tent sales to the military and a one-time $3.1 million sale of equipment that inflated third quarter sales in 2006.  David Johnson said military sales fell from $60 million in 2004 to $25.7 million this year. The segment makes Eureka tents and Silva compasses. Operating profits as a percentage of net sales rose 2,056 basis points to 29.7% from the same quarter a year ago.