Johnson Outdoors Inc (JOUT) 2016 Q3 法說會逐字稿

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

Prior to the question and answer session, all participants will be placed in a listen-only mode. After prepared remarks, the question and answer session will begin. (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.

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

Thank you, Shannon. Good morning, everyone, and thank you for joining us for our discussion of Johnson Outdoors results for the 2016 fiscal third quarter.

If you need a copy of our news release issued this morning, 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. They 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 me.

I would now like to turn the call over to Helen Johnson-Leopold, Chairman and Chief Executive Officer.

Good morning. Thank you for joining us. I will start off with comments on the quarter and year-to-date results and outline key priorities in each business. Dave will review key financials.

The warm weather outdoor recreational season is in full swing during our fiscal third quarter. This is the time of the year we gauge consumer response at retail, the key measure of marketplace performance. Total Company sales were $139.3 million, a slight 1% dip versus the prior year quarter. One-time items in both the current and prior year quarters resulted in unfavorable comparisons and operating profit and earnings. Dave will discuss the details on these in his remarks.

On a year-to-date basis, the strong marketplace performance of new products throughout the year drove a 4% growth in sales year over year. On a constant currency basis, sales are up 5%. Year over year, operating profit and net earnings increased significantly compared with last year. Our core fishing, water craft, recreation, and camp cooking brands are doing exceptionally well.

In our fishing business, new product success drove the 9% increase in revenue year over year. This year's new large-screen Humminbird HELIX fishfinders and Minn Kota saltwater Ulterra trolling motors are exceeding projections. Last year's Minn Kota freshwater fishing Ulterra, which introduced our all new power assist and automatic stow and deploy features is also doing very well in its second year in the market.

Likewise, the Minn Kota i-Pilot and i-Pilot LINK wireless steering and navigation system and the Talon shallow water anchor continue to be growth expectations three plus years out.

Pioneering innovation in our fishing business has strengthened brand equities, improved shares, and enhanced margins. The goal is to continue building on this legacy of success, and our 2017 product lineup promises to do just that. The revolutionary Minn Kota Ultrex trolling motor was named Best of Boating Accessories and the coveted overall Best of Show at last month's ICAST, the world's largest, most prestigious fishing, trade and consumer show. The Ultrex is the first ever electric cable steer motor, providing pedal control, fishing enthusiasts, our breakthrough power steering and navigation features at the tap of a foot.

Humminbird also grabbed its sixth consecutive Best of Electronics Award at ICAST for the ultra bright and and easy to use HELIX 10 with our patented side imaging sonar technology at an unbeatable price value. Fishing is our largest and most profitable business, and there can be no doubt that we will continue to do what is necessary to sustain our technology and market leadership position.

Four years ago, watercraft recreation profitability was challenged by canoe and kayak boat market declines and competitive pressures here and abroad. We refocused our base business and stepped up innovation, targeting the fishing segment with the goal of maximizing our brand's innovation and growth potential. Improved performance by core boat brands, particularly the success with the Old Town Predator series of fishing boats, confirms we did the right thing at the right time and in the right way to turn this business around.

In the last four years, Old Town Predator boats have captured three best boat honors at ICAST, the latest at this year's show for the Predator PDL, our first pedal drive kayak for the fast-growing petal kayak fishing segment. Our efforts have succeeded in both returning watercraft to profitability a year ahead of schedule and growing profits at a faster pace than anticipated. We are not where we want to be yet, but we feel we have turned a big corner and are on the right path toward continued profitable growth in this business. Right now it is pedal to the metal to keep favorable momentum going.

Our camping brands are dealing with two entirely different market dynamics. On the one hand, Jetboil, the number one personal cooking system brand, is winning in a highly competitive expanding market. For perspective, Jetboil is delivering double-digit growth in sales year over year, fueled by successful new cooking systems like the Genesis, Mini Mo and Micro Mo, outpacing the competition and gaining share in a camp cookware market that has doubled in size over the past two years.

On the other hand, the camping tent market is having a tough year, and Eureka is feeling the impact of that downward pressure. We have taken steps to reduce our cost structure near-term, and we are moving forward on our plans to enter long-term success.

Work is well underway to reposition the Eureka brand and invigorate innovation against new emerging camping consumer segments we have uncovered through comprehensive market research. In-depth consumer knowledge and understanding ensures we are focused on the right target consumer with the right products with the greatest potential for success. This is what we have done successfully in our fishing and watercraft recreation brands and feel good about our plans to ensure for future growth for Eureka.

We have often talked of how the diversity of our business portfolio is one of our greatest strengths. This year emphasizes that, with the success of our fishing and watercraft businesses in protecting total company profitability from negative pressures on the global guide market, ongoing strife in the Middle East has led to a significant drop in sales to the region. Economic uncertainty in Europe and unfavorable currency translation have also weighed heavily on the top line.

Given the effect of these influences and no clear end date to them, non-cash goodwill impairment charges in unit were warranted. Our commitment to the future of SCUBAPRO brand is as strong as ever. Diving has been one of our largest and most profitable businesses due to the iconic SCUBAPRO brand and its reputation for quality and technical expertise.

Going forward, our goal is to drive share gains in SCUBAPRO and deliver sustained underwater innovation leadership and improved financial performance long-term. Our acquisition of Seabear last fall was key in expanding our technology horizon and advancing innovation in the fast-growing dive computer segment. Enhanced go-to-market strategies and distribution models are also under development. Progress is expected over time, and outside pressures on that dive market are likely to continue for the foreseeable future.

Our long-term strategic plan is predicated on the firm belief that deeper, richer consumer insights, fuel winning innovation in marketplace success. As consumers evolve, so must our understanding. So keeping our finger on the pulse of the outdoor consumer is our top priority. This enables us to continuously uncover the ad hoc consumer insights and ensure we focus innovation against the biggest and best opportunities. And we are engaging consumers every step along the way from product concept to commercialization to align sales and marketing plans for more consistent, long-term market success.

Importantly, consumer insights are driving a transformative digital sophistication initiative to bring our online look, feel, content and functionality in line with our consumers' use, needs and expectations. We are making solid progress across the board during year one of the plan. We have invested in the future, and every business is moving forward, some at a faster pace. We anticipated moderate growth in year one, and we are on track to deliver that. Right now, our focus is on strong execution in 2016 in a good way.

We are very excited by the future we see for Johnson Outdoors and confident in our plants and ability to make it happen. Now I will turn things over to Dave for comments and a financial overview.

Thank you, Helen. Good morning, everyone. This quarter, Minn Kota and Humminbird brand sales combines to deliver marine electronics, its third record-setting third quarter in as many years. Likewise, Old Town and Jetboil brands generated solid top-line growth, an both our fishing and watercraft recreation businesses reported double-digit increases in operating profit.

Despite the positives, third-quarter earnings were down entirely to higher operating expense quarter over quarter. The increase was driven by one-time items, particularly a $6.2 million non-cash goodwill impairment charge in diving, which was partially offset by improved legal expenses of $4.6 million in the quarter. While we cannot predict an end date to the geopolitical and economic issues facing diving, at this time, we have enough information to better project the impact those issues will likely have on future revenue. This is what triggered the reevaluation of diving's intangible assets and ultimately the non-cash goodwill impairment charge.

Importantly, this charge does not affect the competence confidence we have in the strength and long-term potential of our SCUBAPRO brand. There is no tax benefit associated with the quarter's non-cash goodwill impairment charges, leading to a year-to-date effective tax rate of 44.2% compared to 40.9% last year. We expect to end the year with taxes in the low to mid 40% range.

Year to date cash flow from operations has been strong, up $29 million from prior year, and cash net of debt stands at $68.2 million, a 47% increase versus last year at the same time. Our healthy cash position enabled us to continue to invest in future growth strategies, and platforms are continuing to pay cash dividends to our investors.

As Helen said, our focus is on delivering a strong end to the season moving, forward aggressively against our strategic plan priorities. Now I will turn the call back over to the operator for the Q&A session. Operator?

(Operator Instructions) I am showing no questions at this time. I would like to turn the call back over to Helen Johnson-Leipold for closing remarks.

Thanks, again, everyone for joining us. If you have any questions, please give Dave or Pat a call. Have a good day.

Ladies and gentlemen, this concludes today's conference. Thanks for your participation, and have a wonderful day. You may now disconnect.