Johnson Outdoors Second Quarter Organic Sales Offset Military Loss…

Johnson Outdoors continues to see military sales slip, but growth in the company’s core brands was able to offset all these declines in the fiscal second quarter ended March 31. Military sales actually declined 28%, or $3.7 million during the quarter, but the company’s top-line showed a slight increase due to solid performances from the Marine Electronics and Watercraft businesses. JOUT expects fiscal 2006 military sales to be in the $35 million to $40 million range.

During a conference call with analysts and the media, Helen Johnson-Leipold, chairman and CEO of Johnson Outdoors, said that the company’s core brands outpaced the declines in military sales and that she believes they are also outpacing their peer groups. New product accounted for 47% of sales this quarter. Moving forward, the company will focus on a three point growth strategy – organic sales growth, new category extensions, and acquisitions.

Outdoor Equipment revenues decreased 11% due almost entirely to the 28% decline in military sales from the prior year quarter. Consumer camping benefited significantly this quarter from first-time specialty market sales. With military sales removed from the equation, the division reported healthy organic growth. Operating margins increased 130 basis points to 16% of sales during the quarter due to fewer low-margin military sales.

The Marine Electronics division was described as the “growth engine,” expanding from one brand to three. The Minn Kota brand grew 50% compared to last year while sales to the international market grew 30%. Operating margins for the division fell 320 basis points to 16.3% of sales due to product mix issues that impacted gross margin.

Watercraft is increasing its operating efficiency with sales led by new kayak fishing products and female specific boats. In addition, the company’s new “flip the switch and go” electronic boats are gaining momentum in both the resort rental market and the consumer market. By brand, Old Town and Ocean Kayak were the primary sales drivers. The Watercraft division’s operating loss increased slightly during the quarter to $1.1 million compared to $964,000 last year due to continued weakness in the Northern tier boat market and rising commodity costs, particularly oil-based materials.

Diving revenues declined 11% due in large part to unfavorable currency translation and lower sales in the European region. Excluding the currency impact, Diving revenues would have declined 5.3%. Operating margins in the division declined 180 basis points to 5.7% of sales due to restructuring.

Overall company operating profit was further impacted by increased investment in marketing, sales and R&D initiatives, significant increases in commodity costs, and lower sales in European Diving.

Net sales for fiscal 2006 year-to-date were $179.9 million versus $181.2 million in the same six-month period last year. Excluding the anticipated $8.3 million decline in military sales, total company net sales would have increased by $7.1 million.

Total company operating profit was $7.5 million during the first six months compared to $8.3 million during the prior year-to-date period, which included $2.0 million in costs associated with the terminated buy-out proposal. Net income fell 17.1% to $3.1 million versus $3.7 million last year. Diluted EPS fell to 34 cents compared to 42 cents last year.