RACINE, Wis. - Net sales were up but net income was down during the second fiscal quarter, ended April 1, for Johnson Outdoors Inc., the company said in a press release this morning.
Total company net sales in the second quarter rose 11.1 percent over the comparable 2004 period, due solely to the addition of the Humminbird brand, which was acquired in May 2004 and added $15.8 million to marine electronics' sales during the quarter, Johnson Outdoors said.
Net income for the quarter was $4.7 million ($0.54 diluted earnings per share) compared to $4.8 million ($0.55 diluted earnings per share) in the comparable 2004 period.
Operating profit declined $0.3 million in the second quarter versus the same period last year. Humminbird added $2.0 million to operating profit for the quarter, and increased efficiency in manufacturing drove a $1.1 million improvement in watercraft operating losses.
The company's planned discontinuance of low-margin specialty boats resulted in the unfavorable comparison year-on-year in watercraft revenues, Johnson Outdoors said.
"Marine Electronics continues to drive growth and, after two years of hard work, watercraft is stronger, less complex and more competitive,” said Helen Johnson-Leipold, chairman and CEO, Johnson Outdoors Inc. “With the arrival of warmer weather, we shift focus from customer sell-in to consumer sell-thru. This is the time when weather and economy can have the biggest impacts - positive or negative - on our businesses.
"We have stepped up investment in innovation over the past two years to better provide a strong pipeline of new products that are designed to represent the best price/value option in the marketplace. Those investments are paying off as new product sales reflect about a third of total revenue."
Increased net sales (14.3 percent) over the same six-month period last year were due almost solely to the addition of Humminbird, which added $24.8 million to sales and offset shortfalls in all other business units. Operating profit fell $1.7 million below the comparable 2004 period due to a sharp drop in diving profits driven by a combination of lower sales and gross margins, new product development spending and initial restructuring costs in Europe. Operating losses improved by $1.8 million in the company's watercraft business unit year-to-date. Net income for the first half was $3.7 million, or $0.42 per diluted share, down from $5.0 million or $0.57 per diluted share in the year ago first half.
The company said it cautions investors not to rely on financial projections for 2005 and 2006 included in its shareholder proxy dated Feb. 15, due to current developments in the military and diving markets.
Reduced interest costs and favorable currency gains year-to-date helped reduce the operating profit shortfall from the prior year by $0.7 million, resulting in pretax profit of $6.9 million, $1.0 million below a year ago. The effective tax rate stands at 46.5 percent year-to-date, subject to a final determination regarding the deductibility of costs incurred related to the recently terminated privatization initiative.
The company's debt to total capitalization stands at 23 percent at the end of the quarter versus 30 percent at April 2, 2004. Debt, net of cash, increased due to the $28 million acquisition of Humminbird in May of 2004 and stands at $40.0 million versus $30.9 million at April 2, 2004. Depreciation and amortization in the quarter was $2.4 million and year-to-date was $5.0 million. Both are greater than last year's $2.1 million and $3.9 million respectively due to the impact from the acquisition of Humminbird. Capital spending totaled $1.8 million for the quarter and $3.5 million year-to-date compared with last year's $2.0 million and $3.4 million respectively.
"Improved working capital management during the customary seasonal build has led to enhanced liquidity of the operations,” said Paul Lehmann, vice president and chief financial officer. “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."
Johnson Outdoors has now scheduled its annual shareholder meeting on July 26, in Racine, Wis., beginning at 10:00 a.m. Central Time. The record date for the annual meeting is June 3, 2005. Details and items to be considered at the meeting will be in the company's forthcoming proxy.
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