Johnson Outdoors Shows Mixed Results in Fiscal Q2; Watercraft Improves…

The predicted slowdown in military tent sales became a reality at Johnson Outdoors during their fiscal second quarter ended April 1, but the softness in the category was offset by sales growth in the Marine Electronics division, driven by the acquisition of Humminbird in May of last year. Total Company net sales in the second quarter rose 11.1% over the comparable 2004 period due solely to the addition of the Humminbird brand.

The Watercraft division posted an improved quarter, but the segment is still running in the red for the year. During a conference call with analysts and the media, President and COO, Jerry Perkins said that Watercraft sales to their top ten retail customers were up in the double digits and the company set an “all-time sales record” at two recent east coast consumer kayak shows. The decline in sales in the Watercraft division is due to the discontinuation of certain “low-margin specialty kayaks.” Increased efficiency in manufacturing drove a $1.1 million improvement in Watercraft operating losses.

The Outdoor equipment division still would have seen sales decline roughly $350,000 excluding the military tent business impact. The military tent business accounted for about three quarters of the total shortfall. Johnson Outdoors has been quite active lobbying congress concerning their issues with the military business. Operating margins in the outdoor division declined 380 basis points to 14.8% compared to 18.6% last year.

Diving sales showed a $600,000 benefit from favorable currency translation, but it was offset by soft markets worldwide.

The most profitable segment was the Marine Electronics division, which actually saw its operating margins decrease 400 basis points from 23.5% to 19.5% due to lower margins at the acquired Humminbird division.

Johnson Outdoors 
Fiscal Second Quarter Results
(in $ millions)  2005 2004 Change 
Net Sales $106.2  $95.6  +11.1%
Outdoor $20.9  $24.2  -13.7%
Watercraft $19.0  $19.7  -3.5%
Diving $19.2  $20.0  -4.0%
Marine Electronics $47.2  $31.9  +48.0%
Gross Margins 43.1% 44.2% -110 bps 
Net Income  $4.7  $4.8  -1.2%
Diluted EPS  54¢ 55¢ -1.8%
Inventory $69.4  $67.7  +2.5%

About The Author

Teresa Hartford

Teresa Hartford Editorial & Creative Director | SGB Media teresa@sgbonline.com | 704.651.5741

Johnson Outdoors Shows Mixed Results in Fiscal Q2; Watercraft Improves…

The predicted slow-down in military tent sales became a reality at Johnson Outdoors during their fiscal second quarter, but this was offset by sales growth in the Marine Electronics division, driven by the acquisition of Humminbird in May of last year. Total company net sales in the second quarter rose 11.1% over the comparable 2004 period due solely to the addition of the Humminbird brand.

The Watercraft division posted an improved quarter, but the segment is still running in the red for the year. During a conference call with analysts and the media, president and COO, Jerry Perkins said that Watercraft sales to their top ten retail customers were up in the double digits and the company set an “all-time sales record” at two recent east coast consumer kayak shows. The decline in sales in the Watercraft division is due to the discontinuation of certain “low-margin specialty kayaks.” Increased efficiency in manufacturing drove the $1.1 million improvement in Watercraft operating losses.

The division appears to be driven primarily by sales of fishing kayaks. The category has seen sales double over the last year and JOUT management says that they are leveraging their knowledge of the fishing world to sell more boats. Recently, Humminbird ‘Fish Finders’ and Ocean Kayaks ‘Prowler Fish Kayak’ launched a joint marketing and sales project. The company is starting similar projects between their canoe and outdoor division with a joint program planned between Old Town Canoe and Eureka.

The Outdoor equipment division posted a sales shortfall of $1.4 million but even after backing out the military tent business, the division experienced a decline in sales of roughly $350,000. The military tent business accounted for approximately ¾ of the total shortfall.

JOUT has been quite active in lobbying congress concerning their issues with the military business. Perkins stated that there is currently a substantial backlog for orders of military tents at the DOD, but no funds allotted to complete these orders. Even with this unfulfilled backlog, JOUT management expects their military business to be down 40% by year-end. Operating margins in the outdoor division declined 380 basis points to 14.8% compared to 18.6% last year.

Diving sales showed a $600,000 benefit from favorable currency translation, but it was offset by soft markets worldwide. The lower sales and lower margins impacted profits. The company is waiting for “investments in innovation and restructuring efforts” to take effect.

Johnson Outdoors’ most profitable segment for the quarter was its Marine Electronics division, which actually saw its operating margins decrease 400 basis points from 23.5% to 19.5% due to lower margins at the acquired Humminbird division.

“Improved working capital management during the customary seasonal build has led to enhanced liquidity of the operations. Rising commodity costs have affected margins in all businesses, but were mitigated in large part by cost reduction efforts. Cash balances will grow as account receivables come due in the second half of the year. Our balance sheet is strong and healthy,” said Paul Lehmann, VP and chief financial officer.

The company did not provide any guidance for the year, rather management simply cautioned investors to avoid reliance on financial projections for 2005 and 2006 included in its shareholder proxy dated February 15, 2005 due to current developments in the Military and Diving markets. The company did not comment on any of the recent actions by Dolphin Partners to acquire a greater share of the company (See BOSS_0516).

Johnson Outdoors 
Fiscal Second Quarter Results
(in $ millions)  2005 2004 Change 
Net Sales $106.2 $95.6 11.1%
Outdoor $20.9 $24.2 -13.7%
Watercraft $19.0 $19.7 -3.5%
Diving $19.2 $20.0 -4.0%
Marine Electronics $47.2 $31.9 48.0%
Gross Margins 43.1% 44.2% -110 bps 
Net Income  $4.7  $4.8  -1.2%
Diluted EPS  54¢ 55¢ -1.8%
Inven. @ qtr-end $69.4  $67.7  +2.5%

About The Author

Teresa Hartford

Teresa Hartford Editorial & Creative Director | SGB Media teresa@sgbonline.com | 704.651.5741

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