Johnson Outdoors Inc (JOUT) 2019 Q4 法說會逐字稿

Hello, everyone, and welcome to the Johnson Outdoors Fourth Quarter 2019 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. (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. Good morning, everyone. Thank you for joining us for a discussion of Johnson Outdoors' results for the 2019 fiscal fourth quarter and full year. If you need a copy of today's news release, it's available on our website at johnsonoutdoors.com under Investor Relations.

I also need to remind you that this conference call 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 release and filings with the Securities and Exchange Commission. If you have additional questions following the call, please contact Dave Johnson or me.

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

Thanks, Pat. Good morning, and thank you for joining us. I'll start off with comments on the quarter and full year results, discuss key performance drivers in each business, and outline priorities going forward. Dave will review the financial highlights, and then we'll take your questions.

In fiscal 2019, revenue grew 3% to $562.4 million. Profits were $63.8 million, and net income was $51.4 million or $5.11 per diluted share, a 26.4% improvement from the prior fiscal year. Strong positive momentum continued into our fiscal fourth quarter, a period when the warm weather outdoor recreation industry is gearing down for the year.

Total company net sales were $104 million, a 14% increase over prior year's fourth quarter, and profits were up significantly as well. Overall, this year's performance reflects the value of our sustained focus and investment in translating deep rich consumer insights into the best outdoor recreation experiences possible, from beginning to end. This ensures we are targeting the right consumer with the right product at the right time in the right way and at the right price, all are critical factors behind our continued success and sustained growth.

Our Fishing business continued on its profitable growth trajectory with the ongoing success of new and legacy technologies. Our successful track record, pioneering innovation was made -- has made Minn Kota and Humminbird the go-to brand for the best possible fishing experiences on the water. Our deep consumer insights, coupled with the advancements in GPS and wireless technologies enable us to constantly reimagine and redefine how to help anglers catch more fish.

Humminbird had a great year, driven primarily by continued demand and excitement for our MEGA imaging, particularly our Helix fishfinders series. Our state-of-the-art mega sonar imaging gives anglers deep and clear underwater views. In addition, the small and midsized Helix series opens the door on this technology to an even larger group of fishing consumers. For some anglers, fishing is an all-weather sport, which bodes well for our Humminbird brand, which is also a leader in ice fishing technology. Our new ICE HELIX with dual spectrum CHIRP sonar allows ice anglers to quickly map the terrain of remote or unmapped lakes and more easily locate productive fishing holes. And the all-new ICE HELIX won the Best of Ice Fishing Award at ICAST earlier in this year.

Also launched at ICAST, our latest innovation, MEGA 360 Imaging, and it's the only sonar option that provides a high-resolution, 360-degree view with unmatched detail and coverage. Before MEGA 360, anglers had to move their boat over a spot to know what was underwater, but with MEGA 360, they can make every cast count by targeting directly in front of the boat.

We're always looking for new ways that our products can seamlessly integrate and communicate. MEGA 360 Imaging, together with Minn Kota Spot-Lock technology, allows anglers to have effortless command of their boats and view under the water. We will continue to invest in building upon our strength, our knowledge of fishing and fishing consumers, coupled with our technical know-how to sustain Minn Kota and Humminbird as key profitable growth engines for Johnson Outdoors.

A deep understanding of what consumers want in camping experience has also been critical to our Camping business. Camping is an all-important gateway marketplace that touches more outdoor recreation consumers than any other. Importantly, participation in camping is strong and growing among the next generation, setting the stage for new innovations tailored to their needs and expectations. Jetboil, the technology leader in portable outdoor cooking systems, continues to grow, giving us a strong position with the new emerging group of tech-savvy outdoor enthusiasts.

Looking ahead, we will continue to invest in consumer insight-driven innovation and enhanced digital marketing and e-commerce to engage even more with our target camping consumer. There's real opportunity for growth in this space long term.

Our Watercraft Rec business continues to face challenging marketplace dynamics. That's why our focus is around investing in innovation and technology to position our brands for success in the future. The fishing kayak segment continues to grow, and we're sustaining -- we're gaining share in this segment with innovation like Old Town Topwater pedal-powered fishing kayak. The Topwater offers the most advanced pedal-powered propulsion ever designed for anglers. Its precise pedal-controlled steering and agility, both forward and in reverse, allows the angler to keep their hands free to reel in the fish. More work and more time are necessary to strengthen innovation and capitalize on opportunities for long-term growth of our watercraft recreation brands.

In Diving, positive momentum continued throughout the fiscal 2019 in our North American business. Gains were driven by our emphasis on digital marketing, resulting in positive trends in retail and e-commerce sales. The European market was flat, and Asia declined, primarily due to political unrest in Hong Kong. Going forward, we will leverage our learnings to support our brand-building efforts and to strengthen our Diving business beyond North America. Our digital efforts, along with sustained innovation and continued simplification of our business model, will ensure SCUBAPRO remains the world's most trusted dive brand. For nearly 50 years, we've taken the long view at Johnson Outdoors, working hard to position our brands and businesses for growth well beyond the next quarter or next year, to be a thriving enterprise with diverse unparalleled portfolio that's built to last.

Looking ahead, we will continue to focus on and invest in our 5 key strategic drivers: Consumer understanding; sustained innovation leadership; new sources and paths of growth in our markets; accelerated digital sophistication; and increasing focus on e-commerce. We will continue to make smart, strategic investments to sustain technology and market leadership positions in an increasingly competitive outdoor recreation industry, and most importantly, to provide the next generation of outdoor consumers with the best outdoor recreation experiences possible.

Now I'll turn the call over to Dave for a review of the financial highlights. Dave?

Thank you, Helen. Good morning, everyone. I wanted to highlight a few things from the quarter and the year. As Helen mentioned, we came into our seasonally slow fourth quarter with a strong tailwind, driven by continued demand in our Fishing and Camping businesses. Operating profit in the fourth quarter compared favorably to the prior year's quarter by $4 million, due largely to the sales growth. Additionally, we recovered $2.3 million of tariffs as a result of exclusions granted in the fourth quarter of fiscal 2019.

For fiscal 2019, sales grew moderately over the prior year, and gross margins remained steady despite $2.9 million full year negative impact from tariffs. The exclusions and other mitigation efforts throughout the year helped reduce the total impact of tariffs on fiscal 2019 profits from original estimates. In fiscal 2020, we expect the proposed increases in tariffs could negatively impact profits in the range of $5 million to $6 million. As was the case in fiscal 2019, we will pursue all possible mitigation efforts in hopes of reducing the impact of tariffs.

Operating expenses were higher for the year, driven largely by higher sales volume-related costs and increased bad debt expense. Additionally, investment in marketing increased over the prior year.

Net income for the year benefited from a lower tax rate, reflecting the reduction in the U.S. federal corporate income tax rate. Fiscal 2019's full year effective tax rate was 22.7% compared to the prior fiscal year's rate of 40.3%. Next year, we expect the effective tax rate to be around the mid-20s.

Looking ahead to next year, we expect continued moderate sales growth. Our balance sheet is strong, and our healthy cash position enables us to continue to invest in growth opportunities.

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

(Operator Instructions) Our first question comes from Anthony Lebiedzinski of Sidoti.

So obviously, a very solid performance here in the quarter. I know you guys talked about -- a little bit about tariffs as well. So Dave, I guess, the reason that you expect the tariff impact to be more negative in fiscal '20 versus fiscal '19, is it because of the new tariffs? Or is it just the timing of the -- of some issues? Maybe if you could just clarify that for us?

Yes, it's both. It's the new tariffs that were rolled in a few months ago, affecting our costs as well as we do have an exclusion that expires in March. So we'll try to re-up for that. But right now, we're not counting on that.

Okay, got it. All right. And then in terms of the Fishing category. So it was certainly very good in the quarter that you just reported. There are a couple of new competitors in the field. So just wondering what you guys -- have you seen anything from your retail partners as far as your ability to maintain your floor space? Have you been able to do that? Or just trying to get a better sense as to how you're looking to tackle this as some of this is new competition.

It's still early, early. But so far, our sell-in is going as planned. So we'll know more at the end of our first quarter.

Got it. Okay. And the balance sheet continues to be very strong. You're building up cash. What are your thoughts as to deploying that cash?

Well, we've been looking at all options, doing a lot of looking, obviously, at opportunities to do acquisitions. We are actively out there. I would say that right now, we are feeling that the opportunities aren't good. It's not good timing from the standpoint of the multiples. And -- but again, we're looking at everything and considering all the options. It's great to have a strong balance sheet at this point.

Absolutely. And last question for me. Could you give us some updated thoughts as to how you're doing with your direct-to-consumer business? I know you significantly improved your websites a couple of years back. So I just wanted to get an update on that?

It's doing well. Our direct-to-consumer, we consider it all e-commerce. And so our e-tailers are very important, and B2C is just a piece of it. But having the new and the revised website has really helped us from a marketing communication standpoint, and it's driving both sales into our bricks-and-mortar as well as through our e-commerce channel. So we're feeling good about it. We still have a lot of work to do, and it will be constantly evolving. But it's great that we've got all businesses actively participating in the omni-channel opportunity.

And ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to Helen Johnson-Leipold for any closing remarks.

I would just thank you all for joining us, and have a great holiday season. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.