Johnson Outdoors Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended September 29, 2023 (52 weeks). The filing is an annual report; it also reports fourth-quarter results. Unless otherwise noted, figures below are in U.S. dollars and millions.
Business context and reporting period
Johnson Outdoors designs, manufactures and markets branded outdoor recreation products through Fishing (Minn Kota, Humminbird, Cannon), Camping (Jetboil and Eureka!), Watercraft Recreation (Old Town) and Diving (SCUBAPRO). Results reflect a return to more traditional seasonal patterns and moderation from pandemic-era demand. In 2023, the Company sold Eureka!’s Military and Commercial Tent product lines and decided to exit the remaining Eureka! consumer business, with plans to focus Camping on Jetboil.
Key financial metrics
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $663.8 | $743.4 |
| Gross profit / margin | $244.1 / 36.8% | $271.3 / 36.5% |
| Operating expenses | $232.3 | $205.0 |
| Operating profit / margin | $11.7 / 1.8% | $66.3 / 8.9% |
| Net income / diluted EPS | $19.5 / $1.90 | $44.5 / $4.37 |
| Cash provided by (used for) operations | $41.7 | $(62.1) |
| Capital expenditures | $22.7 | $31.7 |
| Cash and cash equivalents at year-end | $111.9 | $129.8 |
| Working capital / current ratio | $354.7 / 4.4:1 | $365.6 / 4.2:1 |
| Outstanding debt | None | None |
At year-end, the Company also held $40.7 million of marketable securities ($26.8 million current and $13.9 million non-current). It had a $75 million revolving credit facility, with a potential $50 million accordion subject to lender approval; no amounts were outstanding. Operating lease liabilities were $52.3 million. The effective tax rate was 24.4%, unchanged from FY2022.
Material changes versus FY2022
- Sales fell 11% as outdoor recreation demand moderated and customers managed inventories more tightly. Foreign exchange reduced sales by less than 1%.
- Fishing sales declined 6% to $492.9 million; operating profit fell to $41.3 million from $65.4 million, reflecting lower volume and higher operating expenses.
- Camping sales declined 36% to $45.3 million, including about $6.6 million of lower sales associated with the tent-line sale. Segment operating profit fell to $0.5 million from $13.4 million.
- Watercraft Recreation sales declined 40% to $40.8 million; the segment moved to a $1.8 million operating loss from $6.2 million of profit.
- Diving sales rose 8% to $85.1 million, and operating profit increased to $6.1 million from $4.7 million, supported by tourism recovery and pricing.
- Gross margin edged up to 36.8% from 36.5% as materials and freight costs eased. However, operating expenses increased 13%, including higher marketing, research and development, headcount and deferred-compensation costs.
Outlook, management commentary, risks and unusual items
- No quantified guidance: The filing does not provide specific revenue or earnings guidance. Management says it expects to focus Camping resources on Jetboil and wind down Eureka! consumer operations in FY2024.
- Fourth-quarter weakness and exit costs: FY2023 fourth-quarter sales were $96.3 million versus $196.4 million a year earlier, as the prior-year quarter benefited from fulfillment of backlogged orders. The quarter recorded a $22.6 million operating loss and $16.0 million net loss. FY2023 Eureka! wind-down-related expenses totaled about $4.8 million, including a roughly $2.0 million inventory donation, inventory reserves and exit costs.
- Asset-sale gain: The Military and Commercial Tent product lines were sold for a stated purchase price of $15.0 million. After purchase-price adjustments, the final gain was about $6.6 million, recorded in other income.
- Cash and working capital: Operating cash flow improved from a $62.1 million use in FY2022 to $41.7 million provided in FY2023, supported in part by customer collections on prior backlogged orders. Inventory increased to $261.5 million from $248.6 million, and inventory-reserve provisions were $10.2 million. The auditor identified the Fishing inventory reserve as a critical audit matter.
- Other income and expense: Net other income was $9.7 million, including the tent-line sale gain and deferred-compensation plan asset earnings; related compensation expense largely offsets deferred-compensation asset mark-to-market gains and losses.
- Principal risks: Discretionary consumer demand, seasonality and weather, competition, customer and inventory levels, supply availability and input costs, tariffs, foreign exchange, cybersecurity, and execution of the Eureka! exit may affect results. About 14% of FY2023 revenue was denominated in currencies other than the U.S. dollar.
- Contingencies and controls: The Company reported no litigation considered material and said pending matters were not expected to have a material adverse effect. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Most important facts for investors to verify
- Whether demand and customer ordering stabilize after the post-pandemic downturn, particularly in Fishing and Watercraft Recreation.
- Whether inventory levels and reserves are appropriate, given the increase in finished goods, reserve charges and the auditor’s critical audit matter.
- The total remaining cost, timing and operational effects of the Eureka! exit, and the performance of Jetboil as Camping’s focus.
- Whether operating cash flow remains positive and cash, investments and borrowing availability remain adequate through seasonal working-capital swings.
- The quality and sustainability of FY2023 earnings, including the tent-sale gain and deferred-compensation-related offsetting items.
- The Company’s governance and voting structure: the Johnson Family held approximately 75% of total voting power, and Class B shares carry ten votes per share on most matters.