Johnson Outdoors Inc. reported sales dropped 5.8% in the third quarter ended June 27, to $141.2 million from $149.9 million a year ago. The sales decline was blamed on a weak U.S. economy and the effects of a soft domestic boat market on the company’s Marine segment. Earnings from continuing operations slid 4.8% of $7.9 million, or 85 cents a share, from $8.3 million, or 90 cents, in the prior year quarter.

Marine Electronics revenues were 12.1% behind last year due to a soft domestic boat market. Growth in Humminbird and the addition of $4.9 million in revenue from GEONAV, which was acquired in November 2007, could not offset declines in Minn Kota and Cannon.

Diving revenues were 7.1% above last year’s third quarter due to favorable currency translation which added $2.6 million.

Watercraft sales dipped 4.9% below the prior year quarter due to the effect of economic uncertainty on the retail marketplace.

Outdoor Equipment revenues were essentially flat with the prior year quarter, as revenue gains in consumer almost entirely offset lower commercial and military sales.

Total company operating profit for the third quarter was $14.6 million compared to an operating profit of $14.8 million in the prior year quarter which was negatively impacted by a one-time $4.4 million legal settlement. Due to business performance, the company reversed accruals of $3.2 million related to its discretionary bonus and compensation plans this quarter. Other key factors impacting the current quarter were:



  • Lower margins in Marine Electronics driven by lower domestic sales, unfavorable product and geographic mix, and start-up investments in GEONAV.
  • Restructuring charges of $1.0 million in Outdoor Equipment and Diving.
  • Lower military and commercial tent sales.
The company reported income from continuing operations of $7.9 million, or 85 cents per diluted share, compared to income from continuing operations of $8.3 million, or 90 cents, in the same quarter last year. Loss from discontinued operations of $100,000, or 1 cent per diluted share, was consistent with the prior year quarter. Net income for the quarter was $7.8 million, or 84 cents per diluted share, compared to net income of $8.3 million, or 89 cents per diluted share, in the prior year.

“Growing economic uncertainty in the U.S. hit a peak just as the warm-weather season for our businesses was getting underway, and it has now impacted distribution channels in every business this quarter, with retailers being cautious and keeping their inventories to a minimum. As a result, we have ramped down production, restructured operations and moved aggressively on all identified cost-reduction initiatives. On the positive side, despite a soft summer retail market, retail reports indicate that, in general, our brands are outperforming the competition as meaningful new-product innovation accounted for more than a third of year-to-date revenues, said Helen Johnson-Leipold, chairman and CEO.
 

“Looking ahead, we will continue to invest in growth and innovation to help ensure we maintain our market-leadership positions when the economy rebounds. At the same time, we are moving forward on supply chain optimization initiatives in every business to drive improved efficiency across operations. Our strong commitment to the future for Johnson Outdoors and to enhanced shareholder value remains constant and unchanged regardless of the economic climate.

Year-to-date Results

Net sales in the first nine months of fiscal 2008 were $339.0 million versus $343.3 million in the same nine-month period last year. Key factors in the year-to-date period were:



  • Lower domestic sales in Marine Electronics due to a soft boat market.
  • Successful new products, international growth and favorable currency translation in Diving.
  • Growth in Watercraft accessories.
  • A $7.0 million year-over-year decline in military sales.

Total company operating profit was $13.6 million during the first nine months of fiscal 2008 compared to an operating profit of $17.2 million during the prior year-to-date period. Income from continuing operations for the first nine months of the year was $5.0 million, or 55 cents per diluted share, versus income from continuing operations of $9.0 million, or 97 cents per diluted share, in the first nine months of the prior year. Primary factors behind the year-to-date comparison were:



  • Reduced margins in Marine Electronics due to lower sales, product and geographic mix, and start-up investments in GEONAV
  • Restructuring charges in Outdoor Equipment and Global Diving.
  • Significant decline in military sales.
  • Reversal of accruals related to the Company’s discretionary bonus and compensation plans. 
  • Negative impact of foreign currency holdings during the second fiscal quarter.
  • Favorable year-over-year comparison in Watercraft due to a one-time $4.4 million legal settlement in the third quarter of the prior year.

Other Financial Information

The company’s debt to total capitalization stood at 25% at the end of the current quarter versus 27% at this time last year. Debt, net of cash, was $46.7 million compared to $36.4 million at the end of the prior year quarter due to higher working capital and acquisitions.
 

Depreciation and amortization was $7.4 million year-to-date compared with $7.1 million in the prior year nine-month period. Capital spending totaled $8.4 million year to date compared with $8.3 million in the same period last year.

 

“Working capital continues to be a challenge, and we have shortened work weeks, eliminated production shifts, reduced our labor force, developed SKU reduction plans and close-out programs to help bring finished goods inventory levels down over the next three months, said David W. Johnson, vice president and CFO. “In addition, we are closely monitoring global markets for signs of further softness or improvement in anticipation of 2009 planning. We have a strong line-up of new products in every business and we will be fact-based in our forecasts and production plans.

Johnson Outdoors brands include Old Town canoes and kayaks; Ocean Kayak and Necky kayaks; Lendal paddles; Carlisle and Extrasport paddling accessories; Minn Kota motors; Cannon downriggers; Humminbird fishfinders; GEONAV marine electronics; SCUBAPRO UWATEC and Seemann dive equipment; Silva compasses; Tech4O digital instruments; and Eureka! tents.
 (thousands, except per share amounts)
 ———————————————————————
 Segment Results        THREE MONTHS ENDED        NINE MONTHS ENDED
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                        June 27     June 29      June 27      June 29
                         2008         2007         2008         2007
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 Net sales:
  Marine electronics  $  62,379    $  71,006    $ 157,186    $ 165,010
  Outdoor equipment      17,115       17,220       38,343       46,494
  Watercraft             34,649       36,444       71,833       70,489
  Diving                 27,246       25,461       72,268       61,910
  Other/eliminations       (146)        (263)        (607)        (636)
 ———————————————————————
 Total                $ 141,243    $ 149,868    $ 339,023    $ 343,267
 ———————————————————————
 Operating profit:
  Marine electronics  $   7,696    $  12,551    $  13,442    $  21,559
  Outdoor equipment       2,412        2,806        2,784        5,681
  Watercraft              3,583       (1,094)       1,240       (3,043)
  Diving                  2,443        3,014        3,579        3,769
  Other/eliminations     (1,565)      (2,494)      (7,410)     (10,807)
 ———————————————————————
 Total                $  14,569    $  14,783    $  13,635    $  17,159
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 Balance Sheet
  Information (End of
  Period)
 Cash and short-term
  investments                                   $  23,292    $  35,426
 Accounts receivable,
  net                                             103,780      107,248
 Inventories, net                                  96,964       84,203
 Total current assets                             244,758      246,524
 Total assets                                     368,499      356,746
 Short-term debt                                   10,001       61,843
 Total current
  liabilities                                      80,766      143,339
 Long-term debt                                    60,003       10,006
 Shareholders equity                             214,026      194,320
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