Johnson Outdoors Reports Finishes FY 2014 Strong

Johnson Outdoors Inc. reported sales increased 10 percent to $84.9 million in the fiscal fourth quarter ended Oct. 3 due to double-digit growth in both Marine Electronics and Outdoor Gear units. Operating loss declined sharply year-over-year due largely to the increase in sales volume, but not enough to prevent the company from resetting its three-year 2015 financial targets

Sales increased 10 percent to $84.9 million compared with $77.3 million in the fiscal fourth quarter of 2013, while operating loss declined year-over-year to $1.3 million this quarter compared to $4.7 million in the prior year fourth quarter due largely to the increase in sales volume.

Net loss in the fourth quarter improved to $0.8 million, or $0.08 per diluted share, compared to a net loss of $3.5 million, or $0.35 per diluted share, in the prior year fourth quarter.

The results marked another quarter of  strong market momentum of new products throughout the second fiscal six-month period that nearly offset declines due to extreme weather conditions during the first fiscal six-months. Still, lower volume in the first half of the year and non-cash one-time charges in the second half contributed to an unfavorable comparison in operating profit. A significantly higher year-over-year effective tax rate further curtailed earnings.

“Three-year 2015 financial targets have been reset to 2-3 percent compound annual growth in sales and 5-6 percent operating margin to reflect the impact of this year’s unforeseeable weather-related conditions,” said Dave Johnson, Vice President and Chief Financial Officer.

Johnson Outdoors ended the fiscal year with:
   

• Record sales by its flagship Minn Kota brand
• A return to profits at its Watercraft business unit
• Top industry innovation awards for 2015 model year products
• Historic low debt with $70.8 million in cash at year-end

“Despite a challenging start to the year, we once again benefitted from the power of our market-leading brands and dedication to delivering innovation to our outdoor recreation enthusiasts,” said Helen Johnson-Leipold, Chairman and Chief Executive Officer. “Bottom-line results mask the progress made to help ensure a better balance of profitability across our portfolio in the future, notably in Outdoor Gear and Watercraft. Our Marine Electronics business remains a formidable engine of profitable growth, while our work to strengthen performance in Diving continues Looking forward, our commitment to long-term value creation and sustained consumer loyalty demands added focus and investment to further expand and grow our brand equities and market positions, and consistently strive for improved operational performance. In doing so, we will continue to be an ever smarter, stronger and better company overall.”

Fiscal year results

Total company net sales were $425.4 million versus $426.5 million in the previous fiscal year, driven by 7 percent growth during the second six-month period, virtually offsetting declines during the first-six months caused by prolonged harsh winter conditions. Growth in Marine Electronics and Outdoor Gear countered declines in other business units. For the tenth consecutive year, new products generated a third or more of total company sales, spurring a 3 percent growth in domestic sales. Key contributing factors in the year-over-year comparison were:

•  Strong new product performance across key channels drove record sales in Minn Kota and a 1 percent uptick in Marine Electronics revenue overall.  
• A full year of Jetboil, acquired in November 2012, and higher-than anticipated government orders propelled a 7 percent upswing in Outdoor Gear sales.
• Double-digit growth in Old Town sales could not offset the effect of last year’s exit from non-profitable international markets, resulting in a 3 percent year-over-year decline in Watercraft revenue.
• New product delays, and weak economic conditions in key markets dragged Diving sales 6 percent below last year.

Operating profit was $16.7 million versus $25.6 million in the prior fiscal year, a period during which the company reported a twenty-plus year high in operating profit. Non-cash goodwill and other intangible asset impairment charges of $8.5 million recognized in the third fiscal quarter were largely responsible for the unfavorable year-over-year comparison. The Watercraft business posted modest operating profit of $0.2 million, marking the unit’s return to profitability a year ahead of schedule.

Net income for the fiscal year was $9.1 million, or $0.90 per diluted share, versus $19.3 million, or $1.95 per diluted share in fiscal 2013. The company’s effective tax rate more than doubled year-over-year due primarily to tax treatment of goodwill impairment charges and contributed to the unfavorable comparison in net income for the year.

The company reported cash of $70.8 million at fiscal year-end, and paid quarterly cash dividends of $0.075 and $0.0675 for Class A and Class B shareholders, respectively, throughout fiscal 2014.

The company’s debt to total capitalization stood at 4 percent at the end of both the current and prior year. Cash, net of debt, was $63 million at year-end versus cash, net of debt, of $47.4 million on Sept. 27, 2013. Depreciation and amortization was $10.9 million year-to-date compared with $10.1 million in the prior year. Capital spending totaled $13.3 million
in fiscal 2014 compared with last year’s $16.3 million. The company has
experienced consistent declines in interest expense for twenty
consecutive fiscal quarters.