Q4 2020 Johnson Outdoors Inc Earnings Call
[music].
Hello, everyone and welcome to the Johnson outdoors fourth quarter 2020 earnings Conference call.
Today's call will be helped by Helen Johnson, Leipold, Johnson outdoors, Chairman and Chief Executive Officer.
So on the call and Steve Johnson, Vice President and Chief Financial Officer.
Prior to the question and answer session, all participants will be placed and listen only mode and.
After the prepared remarks, the question and answer session will begin if.
If youd like to ask a question. During this time. Please press star followed by the number one and your telephone keypad.
This call is being recorded your participation implies consent to our recording this call if.
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 and spend.
Thank you good morning, everyone. Thank you for joining us for our discussion of Johnson outdoors results for the 2020 fiscal fourth quarter. If you need a copy of today's news release. It is available on our website and Johnson outdoors dotcom 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 and performance.
Actual events may differ materially from those statements due to a number of factors many beyond Johnson outdoors and 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 be it is now my pleasure to turn the call over to Helen Johnson Leipold.
Thanks, Pat and 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 and Dave will review financial highlights and then we'll take your questions.
And physical 2020 total company revenue grew 6% to $594.2 million price, it's for $71.1 million and net income was $55.2 million or $5.47 per diluted share a 7% improvement from the price.
Your fiscal year.
The 2022 school year with like no other year in our history. We started the year with a very strong first quarter, but the onset of the pandemic and the initial stay at home and they cut short our momentum and significantly impacted our second and third quarters, which is the heart of our primary selling season and.
And those mandates east we saw demand ramp up and participation growth in fishing camping and watercraft recreation.
Strong positive momentum continued in our fiscal fourth quarter the period when the warm weather outdoor recreation industry. It's historically gearing down for the year total company net sales increased to $164.7 million in the fourth quarter and 58% increase over the prior years.
Corridor and profits were up significantly as well.
Overall this year's performance was fueled by demand created through.
Through People's eagerness to get outdoors, and hard work and dedication of our employees enabled us to meet as much of that demand as possible, while operating under strict health and safety procedures and protocols to reduce the spread of Coke and 19, maybe.
Many people got outdoors during the warm weather month of the pandemic continued their participation post labor day, and we were able to take advantage of the extended sees and leveraging our market leading brands and innovation partner.
Participation and fishing has always been high but it's been even higher this year as it has it and activity that is accessible and lends itself to social distancing and both seasoned anglers and new anglers look to Johnson outdoors for great fishing experiences.
And fishing, our largest business we are continuing to build on a powerful legacy of innovation and transforming coda and hummingbird into the market leading brands they are today.
The latest innovation from our Humminbird brand and just the award winning Mega Threesixty imaging and began shipping this year and consumer response has been very favorable net.
Threesixty imaging is the only sonar option that provides a high resolution 360 degree view with unmatched detail and coverage before and Mega Threesixty anglers were limited to a sonar view either below or to the side of their bodes well moving now with Mega Threesixty anguish can make.
Accurate cash in any direction, even if the vote is anchored.
When Mxnthree 60 imaging is used together will make with me and co spot lock technology. This provides the English with an effort effort lists command of their boat and an uncompromised view of fish and the world below.
And this year Minnkota debuted our award winning Raptor shallow water anchor with two industry first technologies.
So bottom mode, which detects bottom density to determine the right and Green force and active anchoring, which continuously monitors and cream force and adjust automatically for stable bottom painting, it's still early but consumer response to the Minn Kota Raptor has also been favorable.
Looking ahead, sustaining our innovation and technology leadership position and fishing market is a top priority and we have an exciting pipeline of new products on the horizon.
Moving on to watercraft and fishing kayak segment is the fastest growing segment and our old town sportsmen line of power pedal and paddle fishing kayaks has generated a lot of enthusiasm senses slot launch earlier this year.
Flagship model of this innovative new line the award winning sportsmen autopilot 120 utilizes a GPS enabled minnkota trolling motor to propel steer and anchor the kayak with its unique spot lock technology.
Right and Patrick and orders with hands free fishing.
The sportsman line had a great start in its first year on the market and we hope to continue that momentum going into year two.
As more people desire to get out and the water we saw strong demand across our entire watercraft recreation portfolio. Additionally, the increasing use of E commerce as a buyer and channel allowed us to leverage the investment we've made in growing our digital and ecommerce capabilities going forward, our digital presence and E commerce.
And our key priority and we will continue to optimize our online consumer experience.
Camping is an important gateway into the outdoor recreation and one of the most successful outdoor activities that people have been able to do safely.
One state and National parts began to open in both our Jetboil and our Urika brands benefited from search and interest and participation and the activity camp cooking is an integral part of the experience and Jetboil the technology leader and portable outdoor cooking systems continues to be the top choice among tech savvy.
Outdoor enthusiast consumer driven innovation is key to providing the best camping experiences possible and we'll keep investing in that SCUBAPRO is the most trusted value brand in the world and while the diving market has experienced pandemic related headwinds due to travel restrictions our team has been working hard.
We continued our focus on sustained innovation enhancing our digital presence globally and promoting local diving. These efforts will ensure SCUBAPRO is in a strong position for the future looking ahead and Johnson outdoors, we're always investing and understanding our consumers like no one else and turning these days.
Consumer insights into pioneer and innovation, we take a long view working to position our brands and businesses for growth well beyond the next quarter or the next year to continue being a thriving enterprise that is built to last and deliver long term value creation, our companys purpose, which is to inspire.
People to get out there to experience and value the great outdoors for generations to come has never been more important.
Now I'll turn the call over to Dave for a review of the financial highlights.
Thank you Hello, and good morning, everyone.
As Helen mentioned, we came into our historically slow fiscal fourth quarter with strong momentum drew.
Driven by high demand and our fishing camping and watercraft recreation businesses.
We've been working hard to produce as much as we can including adding more shifts and managing our supply chain to increase capacity where possible.
A few other things a highlight from the year gross margin for fiscal 2020 were 44.6% of 20 basis points from the prior year improved cost absorption through higher volumes and a stronger product mix offset a $1 million increase and their costs.
Operating expenses were $7.9 million higher than last year, but down 50 basis points as a percentage of sales.
Volume related expenses, along with increases and headcount compensation costs and R&D expenses were partially offset by lower discretionary spending.
Net income for the year was $55.2 million up 7% from prior fiscal year, the effective tax rate was 25.1% compared to last year's 42.7%.
Higher state and local taxes were the primary drivers behind that rate increase.
Next year, we expect the tax rate to be in the mid Twentys.
We ended the fiscal year with net working capital of about $19 million versus the prior year trade receivables are up about $23 million and inventory of $3 million.
Looking ahead, while demand remains high and this gives us a good start to the season, we'll continue to monitor marketplace dynamics and related supply chain pressures caused by increased demand and.
And covert related capacity constraints.
Our balance sheet is strong our healthy cash position will continue to provide a competitive advantage as we make smart investments is rigs and the business and drive value for our shareholders.
Now I'll turn the call back over to the operating for the Q and a session.
Operator.
Ladies and gentlemen, if youd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.
We have a question from the line of Anthony Lebiedzinski with Sidoti and company. Your line is now open.
Thank you and good morning, everyone.
So looking back on the strong quarter.
Can you give us assets and the progression of the revenue trends throughout the quarter.
Are you talking about month by month or yeah.
Yeah, I mean, if you guys ended and if you could follow with all that'd be day.
Okay.
Let me and this is Helen.
During that quarter, we were.
In the beginning of it we were making up for some of that pent up demand that that GAAP kind of pushed from the third quarter and.
So.
It was a pretty steady increase I would say it just and the momentum just continued going into the fourth quarter and I think it was.
People were trying to stay outdoors as long as they could and make sure. They got the product when it was available because it was tough.
Product availability across the board and our industry. So I would say it it was it started ramping up as soon as.
The.
Everything neat people could go out and and recreate and the demand just kept going I think and.
Also there is no anticipation of being prepared and not missing out on buying a product if.
I think it's a mixture of being prepared and wanting to continue to recreate so it was.
And on the best quarter fourth quarter Weve and.
Yes.
Okay. So.
Can you give us a sense as to what the state of inventories at the retail level and any.
Dave You said it sounds like you are sort of good start here because if you could just maybe expand on that.
There was also a comment in the press release that you continue to scale operations consistent with demand. So if you could just wondering if you could just talk about the inventory levels and your commentary and the press release about scaling your operations.
Yes right.
Right now.
And then strong still and from what we can tell retail inventory is pretty easily.
So we're continuing to to ship product and I think a lot of retailers are also.
They are looking to buy product and anticipation of the season. So.
It seems to still be a pretty lean retail environment out there and our comment about scaling and we.
We.
And then what we can to add shifts to make sure we can.
Do what we can and the production area, but and Covance and the safety protocols.
Automatically put us at like 80% capacity so.
As that demand continued and even our plans to pull forward and do.
More build and before to be prepared for the season is kind of kept as always.
Producing as much as we can you know how to present and so.
Got it Okay and then.
As far as the bill availability of.
Component parts or just to see overall supply chain.
And good shape, it that or is there any issues perhaps.
How should we think about that.
It's it's a challenge and some of these areas I mean, we're we're shipping electric components from Asia and working.
We're competing.
For product with.
All LCD.
Consumers so.
That's a challenge we're doing everything we can and to keep our pipeline going into the supply chain, but frankly, there. It's it's difficult right now.
Okay got it Okay and then.
A couple of more questions. If I can just squeeze those and so.
As far as you know what's happened here with cold weather.
Do you guys have a sense as to.
What the magnitude is of the increase and outdoor participation levels for this past season and kind of what's your expectation is for for next year.
You know we know that we are current consumer base is certainly purchasing more but we know that theres some new consumers jumped.
Jumping in these activities I think so we're we're benefiting from that for sure and its EPS shot and arm for the whole industry day to have.
We have new consumers trying out our activities I think the question is.
How do I think there will be increased participation.
Because of Covance, but how what level that is our and.
When the world gets back to kind of normal and normal activities.
Become available.
Thats. The Big question is is what will be the long term.
As a day of impact.
We know now and yet to be.
We'll have to see how things pan out.
Got it Okay and then last.
Last question for me is looking.
Looking at your very strong balance sheet, you do have a lot of cash what's the priorities for usage of that cash position.
Well, let me just say that.
We are just constantly looking at what's available out there you know we are.
Our industry is being.
Yeah.
Demand in our industry, obviously didnt.
Didnt make this not a buyer's market and there's a lot of companies that are doing very well. There's also a lot of cash sitting in.
In private equity companies, there's a lot of cash and not a lot of opportunities to buy so I would say, it's a very difficult market, but.
We are always looking and were very strategic and I think one of the reasons we need.
You know continue to be have the resiliency is because we are very strategic about and decisions, we make especially with the acquisitions and.
We will not do an acquisition to bump our sales or because we have the cash to do so we have to make sure that there is an acquisition out there that is going to be a benefit.
Beneficial to us and to accelerate our ability to build value overtime. So.
We are looking and we are.
You know being strategic about it.
Got it Okay, I guess is low.
If I could just follow up on the and that is there any possibility that you guys would consider.
Doing a special cash dividend if you continue to build up this cash.
You know and.
And when we look at all options and I think.
It is paramount that we that we are strategic.
Strategic prudent with this cash flow I think.
As Helen said acquisitions are kind of and top of the list. We look at everything in terms of driving shareholder value. So, yes that would that would get options and future potential.
Got it okay, well, thank you and best of luck.
Thanks.
As a reminder, ladies and gentlemen, if youd like to ask a question at this time that's star then one.
I'm not showing any further questions at this time I'd like to turn the call back to Helen Johnson Leipold for closing remarks.
Thank you everyone for joining us today and hope you enjoy the holidays and try to stay safe and stay healthy. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank.
Thank you for participating you may now disconnect.
[music].
[music].
[music].
Hello, everyone and welcome to the Johnson outdoors fourth quarter 2020 earnings Conference call.
Today's call will be helped by Helen Johnson, Leipold, Johnson outdoors, Chairman and Chief Executive Officer awful and the coldest David Johnson, Vice President and Chief Financial Officer.
Part of the question and answer session, all participants will be placed and listen only mode.
After their prepared remarks, the question and answer session will begin.
Like to ask a question. During this time. Please press star followed by the number one on your telephone keypad.
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 and spending.
Thank you good morning, everyone. Thank you for joining us for our discussion of Johnson outdoors results for the 2020 fiscal fourth quarter. If you need a copy of today's news release and is available on our website and Johnson outdoors dotcom 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, our current views and assumptions and are not guarantees of future performance.
Actually that may differ materially from those statements due to a number of factors many beyond Johnson outdoors control.
These risks and uncertainties, including those listed in our press release and filings with the Securities and Exchange Commission.
The other additional questions. Following the call. Please contact Dave Johnson for me and it's now my pleasure to turn the call over to Helen Johnson Leipold.
Thanks, Pat and 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 outlined priorities going forward and Dave will review financial highlights and then we'll take your questions.
And fiscal 2020 total company revenue grew 6% to $594.2 million profits were $71.1 million and net income was $55.2 million or $5.47 per diluted share a 7% improvement and the price.
Our fiscal year.
The 2020 fiscal year, what's the likely know weather here in our history. We started the year with a very strong first quarter, but yeah and set up the pandemic and the initial stay at home and age cut short our momentum and significantly impacted our second and third quarters, which is the heart of our primary selling season and.
And those mandates east we saw demand ramp up and price.
And patient growth and fishing camping and watercraft recreation.
Strong positive momentum continued in our fiscal fourth quarter a period when the warm weather outdoor recreation industry. It's historically gearing down for the year total company net sales increased to $164.7 million in the fourth quarter and 58% increase over the prior years.
Fourth quarter and profits were up significantly as well.
Overall this year's performance was fueled by demand created through through People's eagerness to get outdoors and hard work and dedication of our employees enabled us to meet as much of that demand as possible, while operating under strict health and safety procedures and protocols to reduce the spread of Coke and 19 right.
Right people got outdoors during the warm weather months of the pandemic continue their participation post labor day, and we were able to take advantage of the extended sees and leveraging our market leading brands and innovation partner.
Participation fishing has always been high but it's been even higher and this year as it has and activity that is accessible and lends itself to social distance, Inc, and low season, and anguish and new English look to Johnson outdoors for great fishing experiences.
And fishing, our largest business we are continuing to build on the powerful legacy of innovation and transform minn Kota and non members into the market leading brands they are today.
The latest innovation from our Humminbird brand and just the award winning Mega Threesixty imaging it.
Began shipping this year and consumer response has been very favorable and.
I've got 360 imaging is the only selling our option that provides a high resolution 360 degree view with unmatched detail and coverage before and Mega 360, anguish and were limited to what sonar view either below or to the side of their bodes well moving now with Mega Threesixty anguished can make.
Accurate cash in any direction, even if the boat is anchored.
When Mega Threesixty imaging is used and gathered and linked with me and co spot lock technology. This provides the English with an average effort most command of their boat and Uncompromised view of fish and the world below.
And this year encoder and debuted our award winning the Raptor shallow water anchor with two industry first technologies auto bottom mode, which detects bottom density to determine the right and Green force and active anchoring, which continuously monitors and reinforce and adjust automatically for stable bottom paint.
It's still early but consumer response to them and coda Raptor has also been favorable.
Looking ahead, sustaining our innovation and technology leadership position and fishing market is a top priority and we have an exciting pipeline of new products on the horizon.
Moving on to watercraft sufficiently high and segment is the fastest growing segment and our old town sportsmen line of power pedal and paddle fishing kayaks has generated a lot of enthusiasm senses lot launch earlier this year.
Flagship model of this innovative new line the award winning sportsmen auto pilot 120 utilizes and GPS enabled minnkota trolling motor to propel steer and anchor the kayak and unique spot lock technology.
Right, Okay, and what is with hands free fishing sportsmen line had a great start in its first year on the market and we.
We hope to continue that momentum going into year two.
As more people desire to get out and the water we saw strong demand across our entire watercraft recreation portfolio. Additionally, the increasing use of E commerce as a buyer and channel allowed us to leverage the investment we've made and.
And growing our digital and ecommerce capabilities going forward, our digital presence and E Commerce, our key priority and we will continue to optimize our online consumer experience.
Camping is an important and gateway into the outdoor recreation and one of the most successful outdoor activities that people have been able to do safely.
One state and National parts began to open both jetboil and our Urika brands benefited and search and interest and participation and the activity cash.
And cooking is an integral part of the experience and Jeff oil the technology leader and portable outdoor cooking systems continues to be the top choice and low tech savvy outdoor enthusiast consumer driven innovation is key to providing the best camping experiences possible and we'll keep investing in that.
And probably the most trusted brand in the world and while the diving market has experienced pandemic related headwinds due to travel restrictions. Our team has been working hard to continue to focus and sustained innovation enhancing our digital presence globally and promoting local diving. These efforts will insurers.
It is in a strong position for the future.
Looking ahead, and Johnson outdoors, we're always investing and understanding our consumers like no one else and turning these deep consumer insights into pioneering innovations, we take a long view working to position our brands and businesses for growth well beyond the next quarter or the next year to continue being a thriving and some price.
And is built to last and deliver long term value creation, our companys purpose, which is to inspire people to get out there to experience and and value the great outdoors for generations to come has never been more important.
Now I'll turn the call over to Dave for a review of the financial highlights.
Thank you Hello, and good morning, everyone.
As Helen mentioned, we came into our historically slow fiscal fourth quarter with strong momentum.
Driven by high demand and our fishing camping and watercraft recreation businesses.
We've been working hard to produce as much as we can including adding more ships and managing our supply chain to increase capacity where possible.
A few other things the highlights from the year gross margin for fiscal 2020, with 44.6% up 20 basis points from the prior year and improved cost absorption through higher volumes and stronger product mix help offset a $1 million increase in term costs.
Operating expenses were $7.9 million higher than last year, but down 50 basis points as a percentage of sales.
Volume related expenses, along with increases and headcount compensation costs and R&D expenses were partially offset by lower discretionary spending.
Net income for the year was $55.2 million up 7% from prior fiscal year, the effective tax rate was 25.1% compared to last year's 22.7%.
Higher state and local taxes were the primary drivers behind that rate increase.
Next year, we expect the tax rate to be in the mid Twentys.
We ended the fiscal year with net working capital of about $19 million versus the prior year trade receivables are up about $23 million and inventory up $3 million.
Looking ahead, while demand remains high and this gives us a good start to the season, we'll continue to monitor marketplace dynamics and related supply chain pressures caused by increased demand.
And covert related capacity constraints.
Our balance sheet is strong our healthy cash position will continue to provide a competitive advantage as we make smart investments to strengthen the business and drive value for our shareholders.
Now I'll turn the call back over to the operating for the Q and a session operator.
Ladies and gentlemen, if youd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.
We have a question from the line of Anthony Lebiedzinski with Sidoti and company. Your line is now open.
Thank you and good morning, everyone.
So looking back on share a stronger quarter.
Can you give us assets and progression of the revenue trends throughout the quarter.
Are you talking about month by month or.
Yes.
And then if you could start with that'd be day.
Okay.
Let me and this is Alan.
During that quarter, we were.
In the beginning of it we were making up for some of the pent up demand that that got kind of pushed from the third quarter and that.
So.
And was a pretty steady increase I would say it just and then low.
And then some just continued going into the fourth quarter and I think it was peak.
People were trying to stay outdoors and long as they could and make sure. They got the product when it was available because it was tough.
Product availability across the board and our industry. So I would say it was it started ramping up as soon as.
The.
Everything the people can go out and recreate and the demand growth.
Kept going I think.
Also there is no anticipation of being prepared and not missing out on buying the product if.
I think it's a mixture of being prepared and wanting to continue to recreate so it was.
And on the best quarter fourth quarter, we have and.
Right, yes, okay. So.
Can you give us a sense as to what the state of inventories is at the retail level and.
And Dave you said it sounds like you are sort of good start here, but if you could just maybe expand on that.
There was also a comment in the press release that you can.
And the skill operations consistent with demand. So if you could just wondering if you could just talk about the inventory levels and your commentary and the press release about scaling your operations.
Yes, I mean right now.
And then strong still and from what we can tell retail inventory is pretty easily. So we're continuing to to ship product and I think a lot of retailers are also.
They're looking to buy product and anticipation of the season. So it seems to still be a pretty lean and retail environment out there and.
Our comment about scaling Inc.
We.
And that and what we can to add shifts to make sure we can.
Do what we can in the production area, but and Covance and the safety protocols.
Automatically put us at like 80% capacity so.
And that demand and continued even our plans to pull forward and do.
More bills and before to be prepared for the season.
And it kept as always.
Producing as much as we can.
And so.
Got it Okay, and then as far as avail availability of.
Component parts or just the overall supply chain.
Are you in good shape with that or is there any issues perhaps.
How should we think about that.
Yes, it's a challenge and some of these areas I mean, we're we're shipping electric components from Asia and.
We're competing for.
For product with all LCD.
Consumers so.
Thats a challenge we're doing everything we can to keep our pipeline going into the supply chain, but frankly there is.
It's difficult right now.
Okay got it Okay and then.
A couple of more questions. If I can just squeeze those and so.
As far as what's happening here with me.
And you guys have a sense as to.
What the magnitude is of the increase and outdoor participation levels for this past season and that kind of whats your expectation is for for next year.
You know we know that we are current consumer base is certainly purchasing more but we know that theres some new consumers jump.
Jumping in these activities I think so we're we're benefiting from that for sure and it says shot and arm for the whole industry. They have.
And the new consumers trying out our activities I think the question is how I think there will be increased participation.
Because of Goldman, but how what level that is our.
When the world gets back to kind of normal and normal activities.
Become available.
Thats. The Big question is is what will be the long term positive impact.
We know now and yet to be.
We'll have to see how things pan out.
Got it Okay and then last.
Last question from me is low look.
Looking at your very strong balance sheet, you do have a lot of cash what's the priorities for usage of that cash position.
Well, let me just say that.
We are just constantly looking at what's available out there you know we and our.
Our industry is being.
Yes.
And that demand in our industry, obviously didnt.
Didnt make if not a buyer's market and there is a lot of companies and are doing very well. There was also a lot of cash sitting in.
In private equity companies, there is a lot of cash and not a lot of opportunities to buy so I would say, it's a very difficult market, but.
We are always looking and were very strategic and I think one of the reasons we.
We continue to be have the resiliency is because we are very strategic about the decisions, we make especially with the acquisitions and.
We will not do an acquisition to bump our sales or because we have the cash to do so we have to make sure that there is an acquisition out there that is going to be Bennett.
Beneficial to us and to accelerate our ability to build value overtime. So.
We are looking and we are.
You know being strategic about it.
Got it Okay, I guess is low.
If I could just follow up on that is there any possibility that you guys would consider.
Doing a special cash dividend if you continue to build up this cash.
You know.
And when we look at all options and I think.
It is paramount that we that we are.
Strategic and prudent with this cash flow I think.
And how is that acquisitions are kind of and talk a little less but when we look at everything in terms of driving shareholder value. So, yes that would be an option that future potentially.
Got it okay, well, thank you and best of luck.
Thanks.
As a reminder, ladies and gentlemen, if youd like to ask a question at this time that Star then one.
I'm not showing any further questions at this time I'd like to turn the call back to Helen Johnson Leipold for closing remarks.
Thank you everyone for joining us today and hope you enjoy the holidays and try to stay safe and stay healthy. Thank you.
Ladies and gentlemen, this concludes today's conference call.
Thank you for participating you may now disconnect.