Johnson Outdoors posted weak results for its fiscal third quarter ended July 1, with profits tumbling against the year-ago period due to non-cash goodwill impairment charges of $6.2 million for the Diving segment. Net income plummeted by 31.5 percent to $6.8 million.
These charges were triggered by the company's decision to reduce cash flow projections in the Diving segment due to ongoing geopolitical and economic turmoil in key dive markets in the Middle East and Europe, which led to a reevaluation of the unit's intangible assets. This was partially offset by a $4.6 million drop in legal expenses, which had soared in the year-ago quarter due to a patent dispute with Garmin International that Johnson Outdoors eventually won.
The company, which owns a large portfolio of brands including Jetboil outdoor cooking systems and Scubapro diving equipment, posted sales that remained flat at $139.3 million, but inched up by 0.3 percent on a constant-currency basis.
Revenues from the Outdoor equipment segment dropped by 15.3 percent to $13.2 million, mainly due to a decline in Eureka tent sales at large outdoor retailers, and despite significantly higher Jetboil revenues from specialty camping retailers. The segment's operating profit fell by 25.5 percent to $1.17 million.
The company said that Eureka is feeling the impact of difficult conditions this year in the camping tent market, noting that steps have been taken to reduce the cost structure in the near term.
In the Diving segment, revenues slipped by 4.8 percent to $18.8 million, largely due to an ongoing decline in sales to the diving markets in the Middle East. This, coupled with the effects of currency fluctuations, resulted in an operating loss of $6.2 million, compared with a profit of $947,000 a year earlier. Sales remained flat in the Watercraft segment but increased by 2.2 percent in the Marine Electronics segment.
The company's gross margin gained 0.9 percentage points over the year-ago quarter, rising to 42.6 percent, while the operating margin fell by 1.9 percentage points to 9.8 percent.