Johnson Outdoors Inc (JOUT) 2017 Q1 法說會逐字稿

Hello, everyone, and welcome to the Johnson Outdoors first-quarter 2017 earnings conference call. Helen Johnson-Leipold, Johnson Outdoors' Chairman and Chief Executive Officer, will lead today's call. Also on the call 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.

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

Thank you, Ashley. Good morning and welcome to our discussion of Johnson Outdoors' fiscal 2017 first-quarter results.

If you need a copy of today's news release, it is available on our website at www.JohnsonOutdoors.com under investor relations.

I also need to remind you that this conference may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance. Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors' control. These risks and uncertainties include those listed in our press releases and 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. Thank you for joining us. I'll begin with comments on performance this quarter and share our perspective on our businesses for the year ahead. Dave will review key financials and then we'll take your questions.

During our fiscal first quarter, the warm-weather outdoor recreational industry is in ramp-up mode, preparing for the primary selling season during the second and third quarters. Sales are often low and we historically report an operating loss for the period, (technical difficulty) improve this first quarter. Sales were just shy of $94 million, a 10% increase versus the prior-year period, and we posted operating profit of $0.5 million versus an operating loss of $0.9 million in the last first quarter, and net earnings of $0.40 per diluted share this quarter compared very favorably to the last year's first quarter of $0.05 per diluted share.

Overall, a great start to the fiscal year. Innovation made all the difference. Growing excitement around this year's new product lineup generated very strong preseason orders. Fishing remains our primary growth engine. We told you last quarter that we expected orders for Minn Kota would shift into the first quarter, and that's what happened. Sales increased in every Minn Kota product segment. While the new Ultrex and Ulterra trolling motors are giving us a nice boost, we are also seeing growth in legacy wireless technology innovations, like the i-Pilot and the i-Pilot LINK. Hummingbird is also off to a good start, largely due to the continued popularity of the HELIX series fishfinder.

Late last year, we unveiled a quantum leap in sonar technology with MEGA Down Imaging and MEGA Side Imaging. MEGA is a major advancement in fishfinder display, providing the greatest clarity in underwater imaging ever seen. MEGA will be available in our brand-new ultra big-screen select series, which we announced in January, and also in select second-generation HELIX models. We will continue to make smart, strategic investments to sustain our position as the technology leader in fishing.

Moving on to diving, where our focus is on growing SCUBAPRO brand share in key global dive markets challenged by ongoing external economic and geopolitical factors. Stepping up the pace of innovation in this business is critical to gaining share, and this quarter new products drove higher sales, most notably the HYDROS PRO buoyancy compensator.

BCs, as they are called, enable divers to control depth during a dive, so an essential piece of gear, but they are usually bulky, uncomfortable, and limit arm mobility. HYDROS PRO is a huge step ahead in all areas with its revolutionary design and construction, made with Monprene, a soft gel material that literally molds and grips to the diver's body. It's much more comfortable and easier to move around in. Monprene is also non-absorbent so it dries very quickly, unlike other BCs. It actually folds up small, which makes it easier to pack and more travel friendly.

All this translates into meaningful product plus and the first real innovation in the core life-support BC segment in decades. SCUBAPRO was honored with the coveted red dot award for innovation and product design for the HYDROS PRO this year.

Now, while we are starting to see some benefit from our efforts in diving, more work lies ahead to get where we want to be to ensure sustainable, long-term success in this business.

In watercraft recreation, continued growth in Old Town during the quarter was masked by lower sales, primarily for accessory brands, caused by a shift in pacing of orders. The brand new Old Town Predator pedal drive came out of the gate strong to drive an increase in overall Old Town brand sales for the quarter. The Predator PDL, as we call it, is our first pedal drive craft for the fast-growing pedal drive fishing segment, with a patent pending design and unique engineering that makes it the most comfortable and easiest pedaling and the best maneuvering boat for fishing or just cruising around.

It's all hands on deck going forward to ensure we maximize marketplace success for watercraft rec and sustain the profitable growth trajectory of this business.

Year-over-year comparisons in camping were impacted by overall market softness that left retailers with higher postseason inventory. What the numbers don't show is the strong last half of the current-year quarter, which was not enough to offset the slower-than-normal first half in this business. Now that customer inventory levels are declining, orders are steadily picking up stream.

Jetboil innovation has turned the camp cookware market upside down over the past two years. Jetboil is the number one personal cooking system brand in the world. Outstanding innovation has been the secret ingredient for the brand's success, most recently the dual-burner Genesis, which lets foodies go gourmet when they go to the great outdoors. Genesis was a big hit in this first year and we are moving forward aggressively with programs to build upon this initial success.

At the same time, we are repositioning the Eureka! brand against new emerging camp consumer targets and focusing innovation, customized to meet their unique wants and needs. The goal is to ensure success in the future for Eureka! brand. We've just gone live with Phase 1 of our completely new Eureka website, an important first step in reaching and connecting with this new generation of campers and hikers.

In fact, eurekacamping.com marks the beginning of implementation of our Companywide digital sophistication strategy. Across the board, from websites to social media, to e-commerce and more, we are transforming our outdoor rec consumers' experience with our brands and our Company. You will see more big changes over the next 18 months.

Just a reminder that first-quarter results are not indicative of full-year performance. However, the fact that we are off to such a strong start is certainly a positive sign. Our core brands across fishing, diving, and watercraft recreation brands are heading into the season with strong momentum. We're making good progress against our strategic-plan priorities and remain confident in our plans and ability to deliver accelerated, profitable, long-term growth for Johnson Outdoors. We remain very excited by the future.

Now I'll turn the call over to Dave for financial highlights.

Thank you, Helen. Good morning, everyone.

As Helen mentioned, year-over-year net earnings improved significantly this period. Net income of $4.1 million in the first quarter was favorable to the prior year by $4.6 million.

Net income during the quarter reflected the impact of approximately $4.2 million of foreign tax credits generated by the repatriation of about $22 million in cash from overseas. We determined now was the right time to bring the cash back due to favorable foreign exchange, combined with our ability to utilize these tax credits. Importantly, we anticipate a mid-20%s effective tax rate for the full year as a result of the repatriation. We expect to use the cash to curtail debt and invest in targeted growth strategies and opportunities.

Interest expense was up during the year, increasing about $296,000. This was due to early repayment of term loans totaling about $7.1 million, which triggered a write-off of financing costs and a prepayment penalty.

Working capital declined almost 7% in the quarter, primarily due to lower inventory. We are in good shape heading into the season. Throughout the year, we will be working hard to manage supply and demand efficiently while ensuring best-in-class customer service.

The balance sheet is in really good shape, giving us the financial flexibility to invest in growing our business and continuing to pay a dividend to our shareholders. Obviously, it's too early to predict how the full year will go, but we are very pleased to be off to such a strong start.

Now I'll turn things back over to the operator for the Q&A session. Operator?

(Operator Instructions). George Kelly, Imperial Capital.

A couple of questions for you. First, with the fishing segment. I'm wondering since the quarter, what have you seen with -- it seems like you had a very good sell-in in the December quarter. I'm wondering what you're seeing so far as far as sellthrough.

This is Dave and Helen, but, you know, this is selling and sell-in actually continues through January. So I think we really won't get a read on the consumer takeaway piece of that until more recent current timeframe. So we can't give you a read on that, but I think the fact that our selling is up and the retailers are excited about the new product is a very good sign.

Yes, yes, it is. And can you help at all with -- the quarter was obviously quite a bit better than last year in fishing. It sounds like that's mostly the Minn Kota new stuff. Should this year -- are there big changes in Hummingbird as well? Do you think both those segments will -- how you see it now, should they both be better than last year?

The great thing is we have significant new product launches, which I talked about, which go -- certainly are in Minn Kota and the Hummingbird brand has new innovation as well. And they are both doing well this first quarter, so we are -- just have a positive outlook for the season.

Great, great. And then, just a couple more on the repatriation of cash. You mentioned that there is growth opportunities that fill you delight. Why was it a good time to do that? Can you kind of help at all with what the uses of that cash could be?

It's basically -- we'll continue to invest in our strategy. We've got strategic plans in place. And, you know, we'll continue to look to utilize that cash appropriately. We [did] pay down the term loan in the first quarter. We'll continue to hopefully have the dividend going, and then any other kind of growth opportunities that may be on the horizon.

Okay, okay. I assume -- I mean, continued, there could be acquisitions or -- I'm just -- your business generates a fair amount of cash, so --

Yes, it does, and we recognize the fact that we have that and it's great. It gives us flexibility to pursue all those opportunities. And the nice thing about bringing it back is it gives us even more flexibility.

Okay, okay, and then last question, just on the diving segment. It looks like the quarter showed some more stability there. Do you expect -- can you help at all with kind of full year? Is the new product that you talked about in that segment, is that a big deal? Should that drive growth? Or can you help at all with your expectations there?

The new product launch is -- in the BC segment is significant, and we have seen great excitement about it in the market. And so, you know, new products drive growth across all of our businesses.

I think what we are dealing with is you've got some very challenging markets because of the economic situation. Europe continues to have challenges, but we've got five segments of products. We've got some work to do. I would say this is a great start, but it is one piece of the business. So I would say we are optimistic, but diving at this point in time is a challenging one and we are hoping, obviously, that we can keep this momentum going.

Thank you.

(Operator Instructions). I'm showing no further questions. I would now like to turn the call back to Helen Johnson-Leipold for closing remarks.

Thanks again for joining us and I hope everybody has a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program and you may all disconnect. Everyone, have a great day.