Johnson Outdoors Inc. — Q1 Fiscal 2024 Form 10-Q
Reporting period: Three months ended December 29, 2023, compared with the three months ended December 30, 2022. Amounts are in thousands of dollars, except per-share data. The company manufactures and markets outdoor recreation products, including fishing, camping, watercraft recreation and diving products. Results for this seasonally quieter quarter are not necessarily indicative of full-year performance.
Financial performance
| Metric | Q1 FY2024 | Q1 FY2023 | Change |
|---|---|---|---|
| Net sales | $138.6 million | $178.3 million | Down 22% |
| Gross profit / margin | $52.9 million / 38.1% | $62.8 million / 35.2% | Margin up 2.9 percentage points |
| Operating expenses | $52.8 million | $57.3 million | Down $4.5 million |
| Operating profit | $46,000 | $5.5 million | Down $5.4 million |
| Net income | $4.0 million | $5.9 million | Down 33% |
| Diluted EPS | $0.38 | $0.57 | Down $0.19 |
| Operating cash flow | -$33.7 million | -$17.6 million | Cash use increased |
Gross margin improved mainly because of lower material and inbound freight costs. Lower sales volume more than offset those savings and reduced operating profit to near break-even. The effective tax rate rose to 33.0% from 28.0%, primarily due to the geographic mix of profits and losses.
Segments and material changes
- Fishing: Sales fell 20% to $110.5 million; operating profit declined to $11.5 million from $15.6 million. Management cited softer demand and customers managing inventory more tightly after prior-year replenishment.
- Camping: Sales declined 49% to $5.9 million; operating profit was $358,000 versus $753,000. The comparison also reflects the prior-year sale of the Military and Commercial Tent product lines.
- Watercraft Recreation: Sales fell 50% to $4.8 million, and the segment recorded a $2.1 million operating loss versus a $415,000 loss.
- Diving: Sales declined 8% to $17.5 million, with foreign exchange reducing reported sales by approximately 6%; the segment recorded a $578,000 loss versus $13,000 of profit.
Management attributed the broad sales decline to a more challenging market and softer consumer demand, with Diving demand generally modestly lower after excluding currency effects. The company also completed its planned exit from the Eureka! brand; remaining fiscal 2024 wind-down costs were not expected to be material.
Cash, liquidity and debt
- Cash and cash equivalents were $80.5 million; short-term investments were $29.1 million. Together they totaled $109.6 million at quarter-end, versus $103.4 million a year earlier.
- Operating cash use was $33.7 million, mainly reflecting seasonal working-capital needs, including a $39.5 million increase in accounts receivable and higher inventory purchases. Cash and cash equivalents fell $31.4 million during the quarter.
- Inventory was $267.3 million, up $15.8 million year over year; management highlighted elevated inventory, primarily in Fishing. Accounts receivable was $83.0 million, down $37.5 million year over year.
- The company had no debt outstanding. Its unsecured revolving credit facility provides up to $75 million, with a lender-approved accordion feature of up to an additional $50 million, and expires July 15, 2026. The facility includes leverage and interest-coverage covenants.
- Operating lease liabilities totaled $53.5 million. Capital expenditures were $5.0 million; management said additional fiscal 2024 capital expenditures are expected to be funded by working capital.
Unusual items, outlook and risks
Other income was $4.7 million, including an approximately $1.9 million gain from the sale of a Fishing-segment building and gains on assets associated with the non-qualified deferred compensation plan. These items supported reported pre-tax income despite minimal operating profit. No numeric full-year guidance was provided. Management cautioned that consumer demand, seasonality and end-customer purchasing remain uncertain, and that first-quarter results may not indicate full-year results.
Risks discussed include changes in consumer spending and economic conditions, foreign exchange, interest rates and commodity costs, supply-chain disruptions, customer payment ability, competition, weather and climate-related impacts, and execution of the company’s strategic plans. Management said there were no material changes to the risk factors in its latest Form 10-K. It did not believe pending legal matters would materially adversely affect the company. Disclosure controls were assessed as effective at a reasonable-assurance level.
Investor verification priorities
- Track whether sales and consumer demand stabilize, particularly in Fishing, and whether customer inventory management continues to suppress orders.
- Monitor elevated inventory and operating cash use, including the timing of seasonal receivable collections and inventory conversion.
- Assess the sustainability of gross-margin improvement and the effect of lower material and freight costs as sales volumes change.
- Separate recurring operating performance from the building-sale gain and deferred-compensation-related income when evaluating earnings.
- Review the company’s fiscal-year outlook in subsequent filings; this filing provides no quantified guidance and emphasizes seasonal uncertainty.