Johnson Outdoors Inc (JOUT) 2016 Q2 法說會逐字稿

Hello, everyone, and welcome to the Johnson Outdoors second-quarter 2016 earnings conference call. Today's call will be held by Helen Johnson-Leipold, Johnson Outdoors' Chairman and Chief Executive Officer. Also on the call today is David Johnson, Vice President and Chief Financial Officer.

(Operator Instructions) This call is being recorded. Your participation implies consent to our recording this call. If you do not agree to these terms, simply drop off the line at this time.

I would now like to turn the call over to Patricia Penman from Johnson Outdoors. Please go ahead, Ms. Penman.

Thank you, Andrew. Good morning, everyone. Thank you for joining us for our discussion of Johnson Outdoors' results for the 2016 fiscal second quarter. If you need a copy of our earnings release, it is available on the Johnson Outdoors website at www.johnsonoutdoors.com, under Investor Relations.

Before I turn the call over to Helen, I need to remind you that this conference call may contain forward-looking statements. These statements are made on the basis of our views and assumptions at this time, and are not guarantees of future performance. Actual events may differ materially from those statements due to a number of factors, many of which are beyond Johnson Outdoors' control.

These risks and uncertainties include those listed in today's press release and our filings with the Securities and Exchange Commission. If you have additional questions following the call, please contact either Dave Johnson or me.

It is now my pleasure to turn the call over to Helen Johnson-Leipold.

Good morning. I'll begin with an overview of results for the second quarter and first six months, then discuss new product performance this year and close with comments on the future. Dave will review key financials and then we'll take your questions.

During the first six months of the year, we are ramping up and in the initial selling period for the primary retail selling season for our warm weather outdoor recreation products.

We had a great first quarter behind double-digit growth in sales and, as anticipated, sales evened out a bit in the March quarter, with net sales ending about 1% ahead of last year's quarter. On a year-to-date basis, net sales were up 7.6% year over year at $219.5 million. So top-line performance is quite good.

Bottom-line performance is even better, with operating profit up 98% compared with last year's second quarter. And year-to-date operating profit increased even more significantly. Higher gross margins and reduced operating expense drove the profit improvement.

Last-year operating expenses reflect higher nonrecurring legal costs, primarily related to our side-scan sonar patent infringement lawsuits against Garmin. Last November the International Trade Commission, the ITC, affirmed that some Garmin sonar products infringe one of our patents and issued an order barring import, sale, or distribution of those.

Late yesterday it was announced that a settlement agreement has been reached resolving the litigation, which includes the licensing of three side-scan sonar patents to Garmin. This agreement will bring closure to related legal matters pending before the ITC and in the US Federal Circuit Court and District Court. As noted in the joint announcement, terms of the agreement are confidential.

Our intellectual property is an invaluable asset, providing us critical advantage in an increasingly competitive and rapidly changing marketplace. Innovation is our lifeblood and is what Johnson Outdoors has delivered consistently for nearly 50 years. It is the driving force behind our legacy of continuous growth and success. This is why we invest heavily in development and protection of our proprietary innovations and vigorously defend them against unauthorized use.

Today's announcement, settlement, and licensing agreements are the latest acknowledgements of the validity of our side-scan sonar patents by our competitors as affirmed consistently by the courts. We are pleased with the resolution of this matter.

We are also pleased by the strong rebound in earnings this year. Net income improved 150% to $9.3 million, or $0.93 per diluted share, for the quarter. And a year-to-date basis net income grew significantly to $8.8 million, or $0.88 per diluted share.

Overall, we head into the consumer retail season with our family of brands well positioned for continued growth and success behind award-winning innovation that is generating excitement and demand in our markets.

New product innovation like the Minn Kota Ulterra, the first automatic stow-and-deploy fishing motor, which we introduced last year for freshwater fishing. This year we've launched the Riptide Ulterra for saltwater anglers. Both are exceeding expectations.

Time-tested innovation is doing just as well, [such] as the Minn Kota Talon, our ultra-quiet, pushbutton-deployed, shallow-water anchor, and the Minn Kota i-Pilot Link for hands-free steering and navigation while trolling.

The feature-rich Humminbird Helix series is perhaps the biggest news in fishing this year, offering our patented side-scan sonar technology with the most advanced cartography design and display for a wider angling audience, with screen sizes from 5 to 12 inches. We are working hard to keep up with demand that continues to be strong.

Minn Kota and Humminbird are pioneers in fishing electronics and our ability to continue to deliver new products that enhance the fishing experience is critical. This was a key factor behind our acquisition of Northport Systems, announced last month. Northport brings us new cartography capabilities and partnerships which can broaden our innovation horizon, accelerate speed to market, and further enhance potential for bigger new product success and sustained growth in fishing.

Jetboil's patented FluxRing technology is making base camp and family camp cooking a breeze -- reliable, simple, and fast. It's innovation that truly enhances the outdoor experience, expands consumer appeal and reach of our camping and hiking products, and drives growth.

This year's new Jetboil Genesis dual-burning cooking system has been named Gear of the Year by National Geographic Adventure, Outside magazine, and Gear Junkie publications, just to name a few, and has fueled double-digit growth for the brand this year.

Four years ago we streamlined our watercraft recreation business to reinvigorate innovation and align resources against fast-growing segments in core trade channels. Our efforts are paying off as demonstrated by the ongoing positive momentum behind the Old Town Predator series of kayaks over the past two years. And, as a result, our watercraft unit is on a solid, profitable growth trajectory.

And in our diving business we are moving forward on plans to spur more innovation in underwater electronics and computers, the key focus behind our acquisition of Seabear Technology last November. Seabear's unique technical expertise, combined with our deep knowledge of the dive consumer and the dive marketplace, is a win/win formula for the future of Scubapro, the world's most trusted and respected dive gear brand.

Innovation is what consumers demand, what consumers expect, and what we have to continue to deliver. That's why we're stepping up our game on the innovation front, raising the bar across the board to achieve even bigger, even better new product launch.

Our market research efforts are giving us a deeper understanding of our target consumers, who they are, what they need, what makes them tick, and how our family of brands can uniquely deliver for them. These insights are innovation guideposts for what we now see to be an expanding playing field of growth opportunities across brands and businesses.

These insights are also shaping our voice and interface with the consumer everywhere. In advertising in-store and online we're making big changes to take a big step toward a bigger, better future, a future we are very excited about and committed to making happen.

Right now the number one focus is on effective and efficient execution of our plans to maximize potential for marketplace success this year. Now, here in the US we're seeing positive indicators with respect to consumer discretionary spending and retailers are stocked for the season accordingly. Overseas the economic picture is less certain, but we are working hard to implement plans to achieve share gain.

Ultimately it is too soon to predict full-year performance. As pleased as we are with bottom-line results to date, we are still not satisfied and continue to work hard to achieve a better balance of profit contributions across our units with a goal of delivering accelerated, sustained profitable growth.

Now I'd like to turn the call over to Dave for comments and a financial overview.

Thank you, Helen, and good morning, everyone.

As Helen mentioned, we're pleased with the growth in operating profit and earnings, both for the quarter and the first half of the year. Increased volume, gross margin expansion, and lower expense all contributed to that improvement. Helen spoke to the primary reason for this year's reduced operating expenses, and I'll cover the factors behind this year's improved margins.

Specifically, gross margin for the quarter was 41%, a 2 point increase over last year's quarter. On a year-to-date basis, gross margin was 40.2%, which was a 1.4 point increase over the first six months of last year. Importantly, margin gains were reported in every unit during the second quarter.

On a year-to-date basis sales are up more than 7%, so we've had a strong sell-in with a very favorable trade response to new products, which resulted in a better product mix and improved absorption on the higher volume this year.

Gross margins also benefited from improved commodity costs and price increases, which helped offset the negative impact of foreign currency in Canada and Europe.

Let me also mention that inventories increased. Given how early we are in the season and the great responses we've had to new products, we're expecting those levels to moderate throughout the remainder of the year and bring working capital at par with prior year.

The balance sheet is strong and we have a healthy, growing cash position that enables us to continue to invest in opportunities to expand and grow our fishing, camping, hiking, diving and watercraft recreation businesses.

We remain confident in our ability and plans to create long-term value and consistently pay dividends to our shareholders.

Now I'll turn the call back over to the Operator for the Q&A period. Operator?

(Operator Instructions) And I'm not seeing any questions on the phone lines at this time, so I'd like to turn the call back over to Management for closing remarks.

Thank you again for joining us. We look forward to speaking with you again soon. Have a great day.

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program and you may all disconnect your telephone lines at this time. Everyone have a great day.