Johnson Outdoors Sees Mixed Q3; Eyes $500 Million…

Johnson Outdoors is seeing strong results in its Marine Electronics and Watercraft divisions, while Outdoor Equipment and Diving are experiencing difficulties relating to market conditions and “uncontrollable outside events.” The positives and negatives added up to a double-digit top line increase and a slight decline in earnings for the fiscal third quarter. Margins for the year-to-date period were also negatively impacted to the tune of 1.5 full percentage points due to increased raw material costs and freight fuel charges.

The primary impact on Outdoor Equipment has been declining military sales, but during the company’s most recent quarter, flooding also shut down its primary military tent factory, further impacting this already slow segment. Without the impact of the flood, Johnson Outdoors would have reported a 14.7% increase in net income, or $7.8 million.

Management said that they are working around the clock to rectify this situation in New York, but the company has yet to see the full financial impact of the flooding.

Management said that JOUT may report a loss in the 2006 fiscal year due to the $1.2 million write-down and any future expenses caused by the natural disaster, but it will be recouped in fiscal 2007. Because of the flooding, JOUT now expects to see $30 million to $35 million in annual military revenue, versus the previous expectations of roughly $40 million. This is a 50% decline from JOUT’s peak military sales in 2004, and a 30% decline from last year.

Outdoor Equipment revenues were behind last year due entirely to a 25% decline in military sales. Consumer camping continued to benefit significantly this quarter from specialty market sales, which added $3.6 million to the division’s revenue for the quarter.

During a conference call with analysts, Helen Johnson-Leipold, chairman and CEO of Johnson Outdoors, said that there is now a better balance between consumer, commercial, and military sales in the Outdoor Equipment division, “but we’re not where we need to be.” Outdoor Equipment operating profits declined 7.5% to $2.5 million versus $3.0 million last year. This is a 240 basis point decline in operating margin to 12.1% of sales.

Diving revenues declined 2% due primarily to weakness in European and U.S. markets and unfavorable currency exchange rates. In addition, the turmoil in the Middle East is impacting sales even further, especially in Europe. Diving operating profits declined 44.7% to $2.1 million compared to $3.8 million last year. This equals an operating margin decline of seven full percentage points to 9.6%.

Marine Electronics sales increased 21% driven by organic growth in the Humminbird brand and the acquisition of the Cannon and Bottomline brands in October of 2005, which added $3.3 million to sales during the quarter. Operating profits for the division increased 13.0% to $9.9 million while operating margins declined 110 basis points to 17.1%.

Watercraft sales increased 14% due to strong double-digit growth in the Old Town and Ocean Kayak brands. Watercraft has clearly turned a corner in terms of profitability with a 73.8% increase in operating profits and a three percentage point increase in operating margins to $3.0 million and 8.6% of sales respectively.

Helen Johnson-Leipold said that Johnson Outdoors is well on track to becoming a half a billion dollar company in the “next few years.” She also said that the company is actively looking for acquisitions and there is a lot of activity for the company to consider, but no specifics were available.

The $500 million goal for the year was said to be attainable without acquisitions, on an organic basis.