Helen Johnson-Leipold - Chairman and CEO David Johnson - VP and CFO Patricia Penman - VP, Global Marketing Services & Communication.

Analysts:.

Hello, everyone. And welcome to the Johnson Outdoors Second Quarter 2016 Earnings Conference Call. Today’s call will be held by Helen Johnson-Leipold, Johnson Outdoors’ Chairman and Chief Executive Officer. Also on the call today is David Johnson, Vice President and Chief Financial Officer.

Prior to the question-and-answer session, all participants will be placed in a listen-only mode. After the prepared remarks, the question-and-answer session will begin. [Operator Instructions] This call is being recorded.

Your participation implies consent to our recording of this call, if you do not agree to these terms, simply drop-off the line at this time. I would now like to turn the call over to Patricia Penman from Johnson Outdoors. Please go ahead, Ms. Penman..

Thank you, Andrew. Good afternoon, everyone and thank you for joining us for our discussion of Johnson Outdoors’ results for the 2016’s fiscal second quarter. If you need a copy of our earnings release that is available on the Johnson Outdoors’ Web site at www.johnsonoutdoors.com under Investor Relations.

Before I turn the call over to Helen, I need to remind you that this conference call may contain forward-looking statements. These statements are made on the basis of our views and assumptions at this time and are not guarantees of future performance.

Actual events may differ materially from those statements due to a number of factors, many of which are beyond Johnson Outdoors’ control. These risks and uncertainties include those listed in today’s press release and our filings with the Securities and Exchange Commission.

If you have additional questions following the call, please contact either Dave Johnson or me. It is now my pleasure to turn the call over to Helen Johnson-Leipold..

Good morning. I’ll begin with an overview of results for the second quarter and first six months then discuss new product performance this year and close with comments on the future. Dave will review key financials and then we'll take your questions.

During the first six months of the year, we are ramping up in the initial selling period for the primary retail selling season for our warm weather outdoor recreation product.

It was great this quarter behind double digit growth in sales and as anticipated sales evened out a bit in the March quarter with net sales ending about 1% ahead of last year's quarter. On a year-to-date basis net sales were up 7.6% year-over-year at $219.5 million, so top line performance is quite good.

Bottom line performance is even better with operating profit of 98% compared with last year's second quarter. And year-to-date operating profit increased even more significantly. Higher gross margins and reduced operating expense drove the profit improvement.

Last year operating expenses reflect higher non-reoccurring legal cost primarily related to our side scan sonar patent infringement losses against garments. Last November the international trade commission, the ITC affirmed that some garments sonar products infringe one of our patents and issued an order barring import sale or distribution of those.

Late yesterday was announced that the settlement agreement has been reached resolving the litigation which includes the licensing of three side scan sonar patents to garment. This agreement will bring closer to related legal matters pending before the ITC and in the US federal circuit court and district court.

As noted in the joint announcement terms of the agreement are confidential. Our intellectual property is an invaluable asset providing us critical advantage in an increasingly competitive and rapidly changing marketplace. Innovation is our lifeblood and is what Johnson Outdoors has delivered consistently for nearly 50 years.

It is the driving force behind our legacy of continuous growth and success. This is why we invest heavily in development and protection of our proprietary innovations and vigorously defend them against unauthorized use.

Today’s announcement settlement and licensing agreement are the latest acknowledgment of the validity of our side scan sonar patents by our competitors as a firm consistently by the court. We are pleased with the resolution of this matter.

We are also pleased by the strong rebound in earnings this year, net income improved 150% to $9.3 million or $0.93 per diluted share for the quarter and on a year-to-date basis net income grew significantly to $8.8 million or $0.88 per diluted share.

Overall, we head into the consumer retail season with our family of brands well positioned for continued growth and success behind award winning innovation as its generating excitement and demand in our market.

New product innovation like the Minn Kota's Ulterra the first automatic still in deploy fishing motor which we introduced last year for fresh water fishing. This year we have launched the riptide Ulterra for salt water handlers both are exceeding expectations.

Time tested innovation is doing just as well just as the Minn Kota's Talon are required push button to deploy shallow water anchor in the Minn Kota i-Pilot Link for hands-free steering and navigation.

The feature enriched Hummingbird Helix series is perhaps the biggest news in fishing this year offering our patent to side scan sonar technology with the most advanced cartography design and display for wider angling audience with spring sizes from 5 to 12 inches. We are working hard to keep up with demand that continues to be strong.

Minn Kota and Hummingbird are pioneers in fishing electronics and our ability to continue to deliver new products that enhance the fishing experience is critical. This was a key factor behind our acquisition of North port systems announced last month.

North port brings us new cartography capabilities and partnerships which can broaden our innovation horizon, accelerate speed to market and further enhance potential for bigger new product success and sustained growth in fishing.

Jeff Boyle’s patented [indiscernible] technology is making base camp and family camp cooking abridge reliable simple and fast. It's innovation that truly enhances the outdoor experience. Expands consumer appeal and reach of our camping and hiking products and drives growth.

This year's new Jeff Boyle genesis dual burning cooking system has been named Gearbear by national geographic adventure outside magazine and gear junkie publications just to name a few. And it's fueled double digit growth for the brand this year.

Four years ago we streamlined our watercraft recreation business to reinvigorate innovation and align resources against fast growing segments in core trade channel. Our efforts are paying off as demonstrated by the ongoing positive momentum behind the Old Town predator series of Kayak over the past two years.

And as a result of watercraft unit is on a solid profitable growth trajectory. And in our diving business we are moving forward on plans to spur more innovation in underwater electronics and computers that keep focus behind our acquisition of SeaBear technology last November.

SeaBear's unique technical expertise combined with our deep knowledge of dive consumer and the dive marketplace is a win-win formula for the future of SCUBAPRO world's most trusted and respected dive gear brand. Innovation is what consumers demand, what consumers expect and what we have to continue to deliver.

That's why we are stepping our game on innovation front raising the bar across the board to achieve even bigger, even better new product launch. Our market research efforts are giving us a deeper understanding of our target consumers who they are, what they need, what makes them tick and how our family brands can uniquely deliver for them.

These insights are innovation guide post for what we now see to be an expanding plain field of growth opportunities across brands and business. These insights are also shaping our voice and interface with the consumer everywhere in advertising in store and online.

We are making big changes to take a big step forward, a bigger better future, a future we are very excited about and committed to making happen. Right now the number one focus is on effective and efficient execution of our plans to maximize potential marketplace success this year.

Now here in the US we are seeing positive indicators with respect to consumer discretionary spending and retailers are stocked for this season accordingly. Overseas, the economic picture is less certain, but we are working hard to implement plans to achieve share gain.

Ultimately it is too soon to predict full year performance as pleased as we are with bottom line results to-date we are still not satisfied and continue to work hard to achieve a better balance of profit contribution across our units with the goal of delivering sustained profitable growth.

Now I would like to turn the call over to Dave for comments and our financial overview..

Thank you, Helen. Good morning everyone. As Helen mentioned we are pleased with the growth on operating profit and earnings both for the quarter and the first half of the year. Increased volume, gross margin expansion and lower expense all contribute to that improvement.

Helen spoke to the primary reason for this year's reduced operating expenses and I will cover the fact just behind this year's improved margins. Specifically gross margin for the quarter was 41% a 2 point increase over the last year's quarter.

On a year-to-date basis, gross margin was 40.2% which was 1.4 point increase over the first six months of last year. Importantly margin gains were reported in every unit during the second quarter.

On the year-to-date basis sales are up more than 7%, so we have had a strong sell in with a very favorable trade response to new products which resulted in a better product mix and improved absorption on the higher volume this year.

Gross margins also benefited from improved commodity cost and price increases which helped offset the negative impact of foreign currency in Canada and Europe. Let me also mention that inventory has increased.

Given how early we are in the season and the great response we have had to new products, we are expecting those levels to moderate throughout the remainder of the year and bring working capital up as prior year.

The balance sheet is strong and we have a healthy growing cash position that enables us to continue to invest in opportunities to expand and grow our fishing, camping, hiking, diving, and watercraft recreation businesses. We remain confident in our belief implants create long term value and consistently pay dividend to our shareholders.

Now I will turn the call back over to the operator for the Q&A period.

Operator?.

Operator:.

Thank you again for joining us, we look forward to speaking with you again soon. Have a great day..

Ladies and gentlemen, thank you again for you participation in today's conference. This now concludes the program and you may all disconnect yourself from the lines at this time. Everyone have a great day..