Hello everyone. And welcome to the Johnson Outdoors Fourth Quarter 2020 Earnings Conference Call. Today’s call will be held by Helen Johnson-Leipold, Johnson Outdoors Chairman and Chief Executive Officer. Also on the call 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. 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, Ms. Penman..

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 at johnsonoutdoors.com under Investor Relations. I also need to remind you that this conference 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. Actual 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 releases and filings with the Securities and Exchange Commission. If you have additional questions, following the call, please contact Dave Johnson or me. It is now my pleasure to turn the call over to Helen Johnson-Leipold..

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 and outlined priorities going forward. Dave will review financial highlights and then we’ll take your questions.

In 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 from the prior fiscal year. The 2020 fiscal year was 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 mandates cut short our momentum and significantly impacted our second and third quarters, which is the heart of our primary selling season.

As those mandates eased, we saw demand ramp up and participation grow in Fishing, Camping and Watercraft Recreation. Strong positive momentum continued in our fiscal fourth quarter, the period when the warm weather outdoor recreation industry is historically gearing down for the year.

Total company net sales increased to $164.7 million in the fourth quarter, a 58% increase over the prior year’s fourth quarter and profits were up significantly as well. Overall, this year’s performance was fueled by demand created through people’s eagerness to get outdoors.

The 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 COVID-19.

Many people got outdoors during the warm weather months of the pandemic continued their participation post-Labor Day and we were able to take advantage of the extended season leveraging our market leading brands and innovation..

Thank you, Helen. Good morning, everyone. As Helen mentioned, we came into our historically slow fiscal fourth quarter with strong momentum, driven by high demand in our Fishing, Camping and Watercraft Recreation businesses.

We’ve been working hard to produce as much as we can, including adding warships and managing our supply chain to increase capacity were possible. A few other things to highlight from the year, gross margin for fiscal 2020 was 44.6%, up 20 basis points from the prior year.

Improved cost absorption through higher volumes and a stronger product mix help offset a $1 million increase in tariff 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 in headcount, compensation costs and R&D expenses were partially offset by lower discretionary spending..

We have a question from a line of Anthony Lebiedzinski with Sidoti & Company.

Your line is now open?.

Thank you, and good morning, everyone.

So looking back at your stronger quarter, can you give us a sense as to the progression of the revenue trends throughout the quarter?.

Are you talking about month-by-month or?.

Yeah.

I mean, if you could -- maybe if you could start with that, that’d be great?.

Yeah. Let me -- this is Helen. During that quarter, we were -- in the beginning of it, we were making up for some of the pent-up demand that got kind of pushed from the third quarter and so it was a pretty steady increase. I would say, it just -- 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 in our industry. So I would say, it was -- it started ramping up as soon as the -- everything -- the people could go out and recreate and the demand just kept going.

I think also there’s a whole anticipation of being prepared and not missing out on buying a product is, I think, is a mixture of being prepared and wanting to continue to recreate. So it was the best fourth quarter we have had..

Okay. Of course. Okay. So, can you give us a sense as to what the state of inventories is at the retail level and I know, Dave, you said that you sounds like you’re off to a good start here, but if you could just maybe expand on that. There was also a comment in the press release that you’ll continue to scale operations consistent with demand.

So if you just wondering if you could just talk about the inventory levels and your commentary in the press release about scaling your operations?.

Yeah. I mean, right now demand is strong still and from what we can tell retail inventory is pretty lean. So we’re continuing to ship product and I think a lot of retailers are also -- they’re looking to buy product in anticipation of the season. So it seems to still be a pretty lean retail environment out there..

And our comment about scaling, I mean, we have done what we can to add shifts to make sure we can do what we can in the production area, but the COVID and the safety protocols automatically put us at, like, 80% capacity.

So, as that demand continued, even our plans to go forward and do more builds before to be prepared for the season, it kind of kept us always producing as much as we can 100% of the time, so..

Got it. Okay.

And then, as far as the availability of component parts or just the overall supply chain, are you in good shape with that or is there any issues perhaps or how should we think about that?.

It’s a challenge in some of these areas. I mean, we’re shipping electric components from Asia and we’re competing for product with all LCD consumers. So that’s the challenge. We’re doing everything we can to keep our pipeline going through the supply chain, but frankly, they -- it’s difficult right now..

Okay. Got it. Okay. And then a couple of more questions, if I can just squeeze those in.

So, as far as, what’s happened here with COVID? I mean, do you guys have a sense as to what the magnitude is of the increase in outdoor participation levels for this past season and kind of what your expectation is for next year?.

We know that we -- our current consumer base is certainly purchasing more. But we know that there are some new consumers jumping in these activities, I think, so we’re benefiting from that for sure and it’s a shot in the arm for the whole industry, they have new consumers trying out our activities.

I think the question is, how -- I think there will be increased participation, because of COVID. But how -- what level that is or when the world gets back to kind of normal and normal activities become available, that’s the big question is what will be the long-term positive impact. We don’t know and yet to be -- we’ll have to see how things pan out..

God. Okay. And then, last question, for me is, looking at your very strong balance sheet. You do have a lot of cash.

What’s the priorities for usage of that cash position?.

Helen Johnson-Leipold:.

Got it. Okay.

I guess, 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?.

Anthony, we look at all options and I think it’s paramount that we are strategic and prudent with this cash. So, I think, as Helen said, acquisitions are kind of at the top of the list, but we look at everything in terms of driving shareholder value. So, yeah, that would be an option in the future potentially..

Got it. Okay. Well, thank you and best of luck..

Thank you..

Thanks..

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..