Q4 2019 Earnings Call
Hello, everyone and welcome to the Johnson outdoors fourth quarter 2019 earnings Conference call today's call will be led by Helen Johnson Leopold Johnson outdoors, Chairman and Chief Executive Officer also on the call. It's David Johnson, Vice President and Chief Financial Officer. Prior to the question answer session all participants.
Replaced and I'll listen only mode. After their prepared remarks. The question and answer session will began if he would like to ask the question during that time. Please press Star then the number one on your telephone keypad. This call is being recorded your participation implies consent are 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 of Johnson outdoors. Please go ahead Mr. hyndman.
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 is available on our website. The Johnson outdoors dot 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 actually 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 for me.
It is now my pleasure to turn the call over to how indefinitely.
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 [noise].
Excuse me and outline priorities going forward. They will review the financial highlights and then we'll take your questions in fiscal 2019 revenue grew 3% to $562.4 million profits or $63.8 million and net income was 51.4 million dollar.
The $5 in 11 cents per diluted share at 26.4% improvement from the prior fiscal year.
Strong positive momentum continued into our fiscal fourth quarter the period when the warm weather outdoor recreation industry is gearing down for the year.
Total company net sales were $104 million a 14%.
Greece over prior years 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 experience as 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 yet the right price.
All our critical factors behind or continued success in sustained growth.
Fishing business continued its profitable growth trajectory with the ongoing success of new and legacy technologies.
Our successful track record pioneering innovation was made has made me encoding and Humminbird. The go to brands for the best possible fishing experiences on the water our deep consumer insights coupled with the advancements in GPS in wireless technologies enable us to constantly reimagine and redefine how to help English.
Catch more pitch hummingbird had a great year, driven primarily by continued demand and excitement for our Mega imaging, particularly our helix fish finders series, our state of the art Mega sonar imaging Gibbs anglers deep unclear underwater views. In addition to small and midsize helix series opens the door.
On this technology to an even larger group of fishing consumer.
For some English 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 a trip sonar allows ice angers to quickly map the train of remote or Unmapped late and more easily locate productive fishing halt and the.
I mean ice helix one of the best of ice fishing awarded Iced I kept earlier. This year also launched it ICAST our latest innovation Mega Threesixty imaging and it's the only sonar option that provides a high risk resolution 360 degree view with unmatched detailing coverage before mega three six.
Steve English have to move their vote over a spot to know what was under water, but with Mega Threesixty. They can make every caf count by targeting directly in front of the boat.
We're always looking for new ways that our products can seamlessly integrate and communicate megabit threesixty images together with Minn Kota Spotlight 10 technology allowed English to have efforts command their vote and view under the water. We will continue to invest in building upon our strength, our knowledge of fishing and fish.
And consumers coupled with our technical know how to sustain minn Kota and hummingbird 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 isn't all important gateway market place it touches more outdoor recreation consumers than any other importantly participation in camping is strong and growing among the next generation setting the stage.
The 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 Rex business continues to face challenging marketplace dynamics, that's why our focus is on investing in innovation and technology to position our brands for success in the future. The fishing kayak segment continues to grow and were sustaining it we're gaining share in the segment with innovation like old town top order pedal powered.
Fishing kayak the tap water offers the most advanced pedal powered propulsion ever design for English is precise pedal controlled gearing and agility. Both forward to any reverse allows the answer to keep their hands free to really look 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.
European market was flat in 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 Orange will ensure.
Our scuba program remains the world's most trusted died brands.
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 five key strategic drivers consumer understanding sustained innovation leadership, new sources and passive growth in our markets accelerating digital sophistication and increasing focus on e-commerce .
We will continue to make smart strategic investments to sustain technology 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 experience is possible now I'll turn the call over to Dave for a review of the finance.
I will highlight Dave.
Thank you Hello, and good morning, everyone I wanted to highlight a few things from a quarter end the year.
As Harold mentioned, we came into our seasonally slow fourth quarter with a strong tailwinds driven by continued demand at our fishing and camping businesses.
Operating profit in the fourth quarter compared favorably to the prior years 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 fiscal 2019.
For fiscal nice fiscal 2019 sales grew moderately over the prior year and gross margins remained steady despite $2.9 million for your negative impact from tariffs.
Exclusions and other mitigation efforts throughout the year help 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 province in the range of $5 million to $6 million.
As was the case in fiscal 2018, we will pursue all possible mitigation efforts in hopes of reducing the impact of tariff.
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 us federal corporate income tax rate.
Fiscal 2018 for your effective tax rate was 22.7%.
Compared to the prior fiscal years rate of 40.3%.
Next year, we expect the effective tax rate to be around the mid twentys.
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 today's session operator.
Thank you as a reminder to ask the question you will need to press star one on your telephone switch on your question. Please press the pound key please standby, while we compile the county roster.
Our first question costs from Anthony Linda.
Of Sidoti Your line is that open.
Good morning, guys. Thank you for taking the questions. So.
Yeah, obviously very.
Performance here in the quarter.
I know you guys talked about little bit Harris as well so.
Dave I guess of the reason that you expect.
And back to be more negative in fiscal 2000 versus 19 is because of the tariff.
This is just the timing of.
The.
Some issues, maybe you could just clarify that for US yes. It's 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.
Alright, and then.
In terms of fishing categories. So it was.
Certainly.
Very good in the.
Quarterly.
Good.
Yes, there is there.
Couple of competitiveness in the field so just wondering.
You guys.
Have you seen anything from the retail partners as far as your ability to mean maintain your floor space.
Well to do that or.
Just trying to get a better sense. So how you.
Looking to.
To tackle the some of this new competition.
Yes, it's still early.
Earlier, but.
So far.
Selling news 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.
Building up the cash.
What are your thoughts as to deploying that cash.
Well you know weve been looking at all options.
Thanks, a lot of looking obviously as opportunities.
To do acquisitions.
We are actively out there I would say that fit that.
Right now.
We are.
And if the opportunities are good it's not good timing from.
The standpoint, those the multiples.
And but again, we're looking at everything and.
Considering all the options, it's great to have a strong balance trees.
Points.
Absolutely.
And last question for me can you give us some updated thoughts as to how you doing with your direct to consumer business I know you significantly improves your web sites.
So just wanted to get to.
Update on that thank you.
It's it's doing well.
Our our direct to consumer we consider it all E. Commerce is so our E. Tailers are very important.
Steve It seems is just a piece of it.
But having the the new.
Yeah.
Revised web sites has really helped us from a marketing communication standpoint, and it's driving both sales into our bricks and mortar as well through our ecommerce 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 it's great that we've got all businesses.
Actively.
Participating in need.
Channel opportunity.
Got it thank you and best of luck.
Thanks.
Thank you 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 in that have a great holiday season. Thank you.
Fully and gentlemen, this concludes today's conference call. Thank you for participating we've all disconnect.
Hello, everyone and welcome to the Johnson outdoors fourth quarter 2019, earning conference call today's call will be led by Helen Johnson <unk> Johnson outdoors, Chairman and Chief Executive Officer also on the call, It's David Johnson, Vice President and Chief Financial Officer.
Actually the question answer session. All participants will you. Please listen only mode. After their prepared remarks. The question answer session will be God. If he likes to ask the question during that time. Please press Star then the number one on your telephone keypad.
This call is being recorded your participation implies consent are recording this call. If he did not agree to these trends simply drop off the line I would now like to turn the call over to Patricia Penman of Johnson outdoors. Please go ahead Mr. and then.
Thank you good morning, everyone. Thank you for joining us for a discussion of Johnson outdoors results.
2019 fiscal fourth quarter and full year.
If you need a copy of today's news release that is available on our website Johnson outdoors dot 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.
Actually them may differ materially from those statements to a number of factors many beyond Jonathan North control these risks and uncertainties, including 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 for me.
It is now my pleasure to turn the call over to how indefinitely.
Thanks, Pat and good morning, and thank you for joining us outside <unk> comments on the quarter and full year results. It's kind of key performance drivers in each business [laughter] excuse me and outlined priorities going forward. They will review the financial highlights and then we'll take your questions in fiscal 2019 revenue grew 3%.
Sure $562.4 million profits or $63.8 million and net income was $51.4 billion $5 in 11 cents per diluted share I, 26.4% improvement from the prior fiscal year.
Strong positive momentum continued into our fiscal fourth quarter 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 years fourth quarter, two 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 experience is 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 yet the right price.
All are critical factors behind our continued success insisting grow our fishing business continued its profitable growth trajectory with the ongoing success I view and legacy technologies are successful track record pioneering innovation was made has made me code and Humminbird thing go to grow.
And for the best possible fishing experiences on the water our deep consumer insights coupled with the advancements in GPS and wireless technologies and enable us to constantly reimagine and redefine how to help anglers catch more gosh, I mean bird had a great year in driven primarily by continued demand and excitement for our men.
The imaging, particularly our helix fish finder series, our state of the art Mega filling our imaging Gibbs anglers deep clear underwater views. In addition to small and midsize helix series opens the door on this technology to an even larger group fishing consumer.
For some English 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 he likes with dual spectrum a trip sonar allows IC English to quickly map the drain of remote or Unmapped lakes and more easily locate productive fishing halt and the all new.
I see you like one of the best of ice fishing awarded ice I kept earlier. This year also launched ICAST, our latest innovation Mega Threesixty imaging and it's the only sonar option. It provides a high resolution 360 degree view with unmatched detailing coverage before magic 360.
English have to lose their boat over spot to know what what's under water, but with Mega Threesixty. 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 nugget threesixty image. It together with Minn Kota Spotlight 10 technology allows English to have efforts to manage their boat and view under the water. We will continue to invest in building upon our strength our knowledge of fishing.
Fishing consumers, coupled with our technical know how to sustaining code and hummingbird 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.
Being isn't all important gateway market place it touches more outdoor recreation consumers than any other importantly participation in campaign 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 system.
Continues to grow giving us a strong position with the new emerging group object 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 direct business continues to face challenging marketplace dynamics, that's why our focus is on investing in innovation and technology to position our brands for success in the future fishing kayak segment continues to grow and were sustaining it we're gaining share in the segment with innovation like all trunk top water pedal powered.
Fishing kayak tap water offers the most advanced pedal powered propulsion ever designed for English, it's precise that'll controlled gearing and agility. Both forward any reverse allows the anchor to keep their hands free to real in the fish.
More work and more time are necessary to strengthen invasion and capitalize on opportunities for long term goals of our watercraft recreation brands.
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 European market was flat in Asia declined primarily due to political unrest in Hong Kong.
Going forward, we will leverage our learnings to support our brand building efforts into strengthening our diving business beyond North America, our digital efforts along with sustained innovation and continued simplification of our business model Orange will ensure scuba froman remains the world's most trusted guide brand for nearly 50 years, we've taken the long.
You 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 five key strategic drivers consumer understanding sustained innovation leadership, new sources and passive growth in our markets accelerating digital sophistication and increasing focus on e-commerce .
We will continue to make smart strategic investments to sustain technology market leadership positions in an increasingly competitive outdoor recreation industry and most importantly, the provide the next generation of outdoor consumers with the best outdoor recreation experience is possible now I'll turn the call over to Dave for a review of the finance.
I will highlight Dave.
Thank you Hello, and good morning, everyone I wanted to highlight a few things from a quarter end the year.
That's how I mentioned, we came into our seasonally slow fourth quarter with a strong tailwinds driven by continued demand at our fishing and camping businesses.
Operating profit in the fourth quarter compared favorably to the prior years 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 fiscal 2019.
For fiscal night fiscal 2019, and sales grew moderately over the prior year and gross margins remained steady despite $2.9 million full year negative impact from tariffs.
Exclusions another mitigation efforts throughout the year help 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 2018, we will pursue all possible mitigation efforts in hopes of reducing the impact of tariff.
Operating expenses were higher for the year, driven largely by higher sales volume related costs and increased bad debt expense.
Additionally, investment and 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 full your effective tax rate was 22.7%.
Compared to the prior fiscal years rate of 40.3%.
Next year, we expect the effective tax rate should be around the mid twentys.
Looking ahead to next year, we expect continued moderate sales growth our balance sheet is strong and our healthy cash position enabled us to continue to invest in growth opportunities.
Now I'll turn the call back over to the operator for the Q and a session. Operator. Thank you as a reminder to ask the question you will need to press star one on the telephones, which all your question. Please press the pound key please standby, while we compile the county roster.
Our first question comes from Anthony.
We have Sidoti your line is the open.
Good morning, guys. Thank you for taking the questions. So.
Obviously, a very solid performance here in the quarter.
I know you guys talked about little bit, but Harris as well.
Dave I guess of the reason that you expect.
The tax impact would be more negative in fiscal 2000 versus the school.
Teen because of the new territory.
Just the timing of.
The.
Some issues, maybe you could just clarify that for us.
Yes, it's it's both at 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.
Got it.
Alright, and then.
In terms of fishing categories. So it was.
Certainly.
Very good in the.
What are they just reported.
Yes, there was there.
Couple of new competitors in the field. So just wondering.
You guys.
Are you seeing anything from your retail partners as far as your ability to mean, maintaining or floor space have you been able to do that or.
Just to try to get a better sense as to how your.
Looking to.
To tackle the some of this new competition.
Yes, it's still early early.
Earlier, but.
So far.
Our selling news 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.
Building up cash.
What are your thoughts as to deploying that cash.
Well you know we are they looking at all options.
A lot of looking obviously add opportunities.
To do acquisition.
We are actively out there I would say that that fit.
Right now.
We are.
And if the opportunities are good it's not good timing from.
The standpoint.
The multiples.
And but again, we're looking at everything and.
Considering all the options, it's great to have strong balance sheet at this point.
Absolutely.
And last question for me can you give us some updated thoughts as to how you doing with your direct to consumer business I know you significantly improves your web sites.
So just wanted to get a.
Update on that thank you.
It's it's doing well.
Our our direct to consumer we consider it all E. Commerce is so our E. Tailers are very important.
Steve to see if it's just a piece of it.
But having that the new.
Yes.
Revise web sites has really helped us from a marketing communication standpoint, and it's driving both sales into our bricks and mortar as well through our ecommerce channel. So we're feeling good about it we still have a lot of work to do and it won't be constantly evolving but it's it's great that we've got all businesses.
Actively.
Participating.
On channel opportunity.
Great. Thank you and best of luck.
Thanks.
Thank you 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 in that have a great holiday season. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.