Outdoor financials: Johnson outsourcing to improve watercraft division efficiency, plus Russell, Wellman, Rocky, Cabela's, Sports Chalet

Johnson turning to outsourcing in watercraft and announces sales and profits increases for Q3,Russell reports 2Q sales growth, Wellman reports sales increases in face of DOJ investigation, Rocky Shoes sales up 32.1 percent, Cabela's Q2 revenue climbs 11.3 percent, and Sport Chalet reports Q1 sales up 15.4 percent.

Johnson turning to outsourcing in watercraft and announces sales and profits increases for Q3 Johnson Outdoors Inc. (Nasdaq: JOUT ) has announced that the company will outsource manufacturing at its Grand Rapids, Mich., facility to KL Industries (KL) of Muskegon, Michigan to manufacture the company’s Escape, Waterquest and Rogue River branded products. KL is the water recreational products division of Ameriform, a vertically integrated plastic products company with QS-9000 certification. In addition, Johnson will be shifting production from Mansonville, Canada, to its Old Town, Maine operation, as part of the company’s on-going efforts to increase efficiency and improve profitability of its Watercraft business unit. Costs and charges associated with these plans are estimated at $3.0 million and will be incurred across two fiscal years (2004 and 2005). The decision will result in the termination of 69 employees at the two locations. Johnson has indicated the company is providing severance and outplacement assistance to those who have lost their jobs.

The changes in the watercraft division come as no surprise considering the company’s struggles of late. The division, though showing improvement, continues to drag down Johnson’s bottom line. YTD operating profits show the watercraft division with a loss of just under $4.9 million. Overall, the company showed an increase in net sales of 11.6 percent for Q3 and an increase in operating profit of 53.5 percent. The recent acquisition of Hummingbird certainly served to bolster the bottom line. In the outdoor division, sales increased moderately on the heels of strong military tent sales that the company acknowledged in its conference call would not continue into 2005. Net sales in the diving division were bolstered by a $2 million settlement from a lawsuit with a former employee.

Russell reports 2Q sales growth
Russell Corporation (NYSE: RML) has reported fiscal 2004 second quarter earnings of $10.2 million or $.31 per diluted share, which includes the previously announced 8 1/2 cents per share one-time gain on the sale of a minority interest in Marmot Mountain Ltd. On an ongoing basis, 2004 second quarter earnings were $7.4 million ($.22 per diluted share), at the top end of the previous projection and up 10 percent from earnings of $6.7 million ($.20 per diluted share) in the second quarter of 2003. Russell also reported second quarter net sales of $289.8 million, an 8 percent increase over the comparable period last year. Incremental sales from acquisitions accounted for $12.9 million of the increase versus prior year, with a 3 percent increase in the Company’s ongoing businesses. Solid gains in the Athletic Group were led by double-digit ongoing increases at Spalding and Mossy Oak. Gross profit was $80.3 million, or a 27.7 percent gross margin, for the 2004 second quarter versus a gross profit of $77.4 million, or a 28.9 percent gross margin in the prior year. The company is also increasing its 2004 fiscal year sales forecast to be in the range of $1.30 billion to $1.33 billion versus $1.186 billion in 2003.

Wellman reports sales increases in face of DOJ investigation
Wellman (NYSE:WLM) reported good Q2 news to its investors in the face of a Department of Justice investigation.Net sales improved to $329.0 million from $293.8 million, an increase of approximately 12 percent, and gross profit rose to $23.3 million from $17.4 million and the gross profit percentage improved to 7.1 percent from 5.9 percent. The company stated that sales rose to record levels in the second quarter of 2004, led by higher PET resin sales. Wellman’s earnings benefited from improved PET resin margins, record volumes in PET resins, fiber volumes which are higher than they have been during the past two years, and reduced operating costs resulting from the company’s cost reduction programs. But not all was good news however. The Department of Justice is seeking to indict Wellman Inc. (WLM) as part of an ongoing probe into an alleged conspiracy to fix prices of polyester staple fiber. According to a letter received by Wellman, lawyers from the Dallas field office of the Justice Department’s antitrust division are seeking to present an indictment to a grand jury to charge Wellman in connection with the alleged price-fixing scheme. Wellman, along with other polyester makers, is facing a purported class-action lawsuit as part of ongoing federal grand-jury investigation into the pricing practices of the polyester staple fiber industry. The company first received a subpoena in connection with the probe in January 2001. KoSa, another supplier of polyester fibers, pled guilty to price-fixing charges in November 2002. Wellman has stated publicly it denies that the company or any of its employees have engaged in price-fixing practices.

Rocky Shoes sales up 32.1 percent
Rocky Shoes & Boots Inc (Nasdaq: RCKY) reported Q2 net income climbed 32.1 percent to $1.4 million, from $1.1 million last year. Net sales increased 25.5 percent to $27.4 million. The company attributed the $5.6 million sales jump to a 13 percent increase in branded sales, led by Gates branded goods and Rocky brand apparel, as well as strong sales of boots for delivery to the U.S. military.

Cabela’s Q2 revenue climbs 11.3 percent
Cabela’s (NYSE:CAB) Q2 revenue increased 11.3 percent to $279.1 million. Net income was $2.0 million for Q2 compared to $3.1 million last year. Total revenue for the six months ended July 3 increased 15.6 percent to $593.1 million compared to $513.1 million for the six months ended June 28, 2003. Net income for the six-month period increased 62.7 percent to $10.0 million, compared to $6.2 million for the six months ended June 28, 2003. On June 30, 2004, Cabela’s Inc. closed its initial public offering of 7,812,500 shares of its common stock at a price of $20 per share, as well as the underwriter’s over-allotment option for 1,171,875 shares. Of the total offering, 6,250,000 shares were sold by the Company, raising net proceeds of approximately $115.2 million for the Cabela’s.

Sport Chalet reports Q1 sales up 15.4 percent
Sport Chalet’s (Nasdaq: SPCH) Q1 sales increased 15.4 percent to $61.5 million.The retailer attributes the increase to opening three new stores in late Fall 2003 in addition to a same-store sales increase of 6.1 percent. More importantly, the gross profit margin increased from 27.7 percent to 28.8 percent due to reduced costs from more efficient inbound logistics as well as continued improvements in inventory procurement. Selling, general and administrative expenses, as a percentage of sales, decreased primarily due to the increase in same store sales, as well as labor savings and lower advertising expenses, partially offset by an increase in workers’ compensation expense.

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