Johnson Outdoors Inc. saw a double-digit fiscal Q3 net sales increase due to strong demand in its Marine Electronics, Diving and Watercraft divisions. This demand also helped bolster the bottom line, which saw very strong double-digit growth. Profitability could have been even stronger, but management said that supply chain inefficiencies coupled with high demand impacted their ability to deliver goods in the Marine Electronics, Watercraft and Diving divisions. The company has hired an “expert” to work with each division to fine tune forecasting, planning and supply chain management processes.


Management also said that three things impacted year-to-date financials – working capital, financial investments, and the one-time $4.4 million settlement cost paid to Confluence. Excluding this one-time charge, Watercraft would have returned to profitability for the fiscal 2007 year. The settlement concerned a five-year-old lawsuit between Johnson Outdoors and Confluence concerning various patents held by Confluence. JOUT is insured against this type of loss and the company has made a claim for this matter, but does not expect resolution in fiscal 2007.


Watercraft sales during the quarter were driven primarily by growth in all paddle sport brands and growth in key international markets.  Excluding the one-time settlement charge, the Watercraft division would have reported a 5% increase in operating profits to $3.2 million, on par with the division’s sales increase.  This profit would put operating margins at 8.6%, flat to last year.  Including the settlement, Watercraft reported an operating loss of $1.2 million.


Outdoor Equipment revenues were 16% behind last year, entirely due to a 22% reduction in military sales and a one-time specialty sale last year that made for difficult year-over-year comparisons. Operating profit in the division increased 13.3% to $2.8 million in spite of the sales decline. Operating margins increased 410 basis points to 16.2%.


Marine Electronics sales were driven primarily by sales of Minn Kota and Humminbird. Operating profit in the division was up 27.4% to $12.6 million, while operating margins increased 60 basis points to 17.7%.


Diving sales increased due to the SCUBAPRO brand in Europe; the successful European launch of a new UWATEC dive computer; and, the acquisition of the Seemann Sub brand, announced on April 2, 2007, which added $2.3 million in sales this quarter. Diving operating profits increased 40.6% to $3.0 million with operating margins climbing 120 basis points to 11.8%.


Total company operating profit in the current quarter increased 6% to $14.7 million compared with $13.9 million in the prior year quarter due to Marine Electronics and Diving sales.


During a conference call with analysts, management said that future growth will come equally from organic growth, new product extensions and targeted acquisitions. Johnson is actively looking for smaller tuck-in acquisitions or larger acquisitions that could “significantly expand our footprint” in the outdoor industry. Humminbird was called out as a model for acquisition integration in the company and other recent acquisitions, like Lendahl Paddles, were said to be following a similar path with earnings and top-line growth along the way.


Finally, Johnson Outdoor decided to issue a dividend to stockholders for the first time in company history.