Hello, everyone, and welcome to the Johnson Outdoors First Quarter 2012 Earnings Conference Call. Today's call will be led by Helen Johnson-Leipold, Johnson Outdoors' Chairman and Chief Executive Officer; also on the call is David Johnson, Vice President and Chief Financial Officer. [Operator Instructions] 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 Cynthia Georgeson from Johnson Outdoors. Please go ahead, Ms. Georgeson.

Thank you, operator. Good morning, everyone. Thank you for joining us for our discussion of Johnson Outdoors results for the first quarter of fiscal year 2012. If you need a copy of the news release we issued this morning, it's available on the Johnson Outdoors website 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 intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical fact are considered forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond Johnson Outdoors' control, that could cause actual results to differ materially from those set forth in, or implied by, such forward-looking statements. These risks and uncertainties include those listed in our media release from today and our filings with the SEC. If you have further questions after the call, please call Dave Johnson or me at (262) 631-6600. It's now my pleasure to turn the call over to Helen Johnson-Leipold.

Good morning. I hope you've had an opportunity to review our first fiscal quarter earnings announcement. I'll start off with comments on the results, share our outlook on outdoor rec markets this year and provide perspective on the future. Dave will cover some key financials, then we'll take your questions. Net sales for the quarter rose slightly above last year to $80.2 million. Increased demand Marine Electronics, particularly in Humminbird and strong year-end closed out orders in Watercraft more than offset a 66% decline in military sales. Due to the seasonality of the warm weather outdoor rec industry, Johnson Outdoors historically records a loss in the first fiscal quarter. Ongoing efforts to reduce infrastructure and asset cost contributed to higher losses this quarter. However, the longer term benefit of these actions outweighs the one-time impact on bottom-line results. Dave will discuss this more in detail in his comments. As we've said before, steady recovery of outdoor recreational markets is key to our continued progress against our current strategic plan to ensure sustained profitability. The competition for discretionary dollars is very top and current economic conditions in key regions present a mixed picture of expectations for outdoor markets the remainder of the year. It's far too early to get a crystal clear view on how the year will unfold but there is some initial indicators into the challenges and opportunities that lie ahead. First, let's look at the U.S., which represents about 2/3 of Johnson Outdoors revenue. In the U.S., outdoor industry holiday sales were strong, which is unusually -- is usually a good sign. However, a lackluster winter season have left many retailers, including outdoor specialty retailers, with inflated inventory. The outdoor specialty channel is a key focus for our Outdoor Gear and Watercraft businesses, and retailers in this channel…

Thank you, Helen. Let me start off by reminding everyone that the first quarter results are not indicative of the full year performance. It's our slowest quarter that reflects the ramp up for the primary selling period of our products over the next 6 months. As you can see, despite higher sales, working capital is flat and inventory is down $5 million versus the prior-year quarter. Cash-to-cash days are also favorable by 3 days. Debt is $14 million below prior year and interest expense is also favorable to the prior year. And we've had positive cash flow for the trailing 12-month period. Obviously, the anomaly in the results comparison is higher losses on higher sales. A slight decline in gross margin had nominal impact on the quarterly loss. The key driver was higher operating expenses, which fall into 3 buckets. One, restructuring charges of $1.1 million. Helen explained what we've done in Europe to bring costs down which accounted for about $700,000 of these charges. The rest came from the asset write-off associated with our donation of the historic Old Town Canoe building to the City of Old Town, Maine. Two, external drivers, which had -- which added $600,000 to expenses. Legal fees increased year-over-year as did bad debt write-off in Europe. I'm not concerned about either one currently but we're keeping a very careful eye on Europe receivables. Three, sales-related expenses, freight expense and commissions fall under here as do advertising and promotional dollars. In total, increased spending in these areas accounted for another $700,000 of additional operating expense. Just to reiterate what Helen said, we feel good about our plans and our position heading in to the season. And at this time, we remain focus on driving continued progress against our 2012 plan. Now I'll turn the call back over to the operator for questions. Operator?

[Operator Instructions] Our first question comes from James Fronda with Sidoti & Company.

The operating expense stuff seems pretty self-explanatory. But I guess if things fell apart in Europe, I mean, do you think it will have a major impact on your business or you could be able to mitigate everything?

Good question. Europe is about 20% of our revenue base, roughly. So it just depends, depends on what happens in the marketplace. And we're doing everything we can now to make sure we're nimble and we can react both positively and negatively. So it's hard to answer that question.

Yes. Okay. And I guess in terms of the Military business. Do you expect further sales decline in the segment going forward or could things be bottoming out here, I mean do you have any thoughts on that segment?

Yes. I think we should see comps to be -- the comps -- the bad comps are probably over now. We -- last year, military was about $5 million revenue in the prior-year quarter, and this year it's about $1.7 million. And I know we've said before we think the sustainability in the mid-teens. But I think right now we're at -- we're kind of at a place where we think the comp comparisons are okay, now.

Okay. All right. And I guess -- in term -- I know you mentioned the inflated inventory in some of your retails. Are you seeing that pretty much all across the board or is it just more some retailers over others or do you have any ideas on that?

Well, it -- there is not a consistency across retailers. And actually it depends if they did a heavy business in the winter sports then they may have a little more inventory, some don't deal in the winter sports but -- so it's not consistent. But it's really related to the warm winter.

Right. Okay. All right. Okay. And I know since it's mixed picture in fiscal '12. In terms of your investments in new technologies, I mean do you think fiscal '12 it's going to be a little bit higher spending in R&D than previous years or would it be relatively the same?

Well, we have mentioned that we have invested in R&D in our Marine Electronics business, which we absolutely think is the right thing to do so you'll see some increase on that end. But technology to provide the innovation is critical. So it will be a little higher this year. But it's all good.

Okay. Yes, I agree with you. And I guess finally, David, do you have a tax rate that I might be able to forecast out for fiscal '12 and fiscal '13?

I think we're forecasting in the high 30s, like 37 or so.

[Operator Instructions] Our next question comes from Brian Rafn with Morgan Dempsey Capital.

If you look -- going to military sales, is that just specifically tents or do you guys sell folding chairs and sleeping bags and other things to the military?

We specifically sell tents to the military. So it's related to the tents [indiscernible]

Okay. Now, given the fact that as you see military units coming home, the history of U.S. military has been to abandon equipment. Obviously, we're seeing some very large strategic weapon platforms, ballistic missile subs, being the kind of old bombers, that type of thing being curtailed. As the military returns, they abandon this equipment. Do you get a sense, are you hearing anything, visibility, why is that there may be a replenishment cycle to that type of thing after these 2 Persian Gulf campaigns?

We get -- we don't have a lot of visibility into what they're thinking. And also what they're thinking doesn't necessarily always play out in what they spend because the money kind of gets trapped in different places. So again that's hard to predict. But as Dave said, I think the first quarter is not indicative of the year. It's truly a pacing thing, and we're hoping that year-on-year we can hold it steady.

Okay. Let me ask you the military a little different. Is it -- has been your experience that the military could just suddenly show up out of the blue and say here is a PO, here is what we're looking for, or would you see subtle clues that there is a replenishment cycle?

I would say it is a little more on the spontaneous side than not, which makes it a difficult. That's part of the difficulty of dealing with the military. There's not a lot of planning ahead of time that they share with us.

Okay. And then, on the military side, is there any differentiation between Army National Guard or Marine units? Or is it collectively a purchase that you don't even know where these tents are going?

They are -- there are many different factions that we deal with. So we do know where they're going and we connect with the -- all the different factions of the military in this. But again, I think they're all in the same boat in terms of where their funding comes from and sometimes that's the difficulty.

Sure. Sure. Sure. You mentioned, and I wanted to get this right, you mentioned about, and I -- correct me if I'm wrong, about a shift in value, kind of price quality. Is that a comment that I heard correctly or is it more elasticity sensitivity price because you guys have always built in premium quality brands?

I think -- as we referred to it as kind of the new normal, and we're trying to define that. But we do think that certainly the price value have become, I think, more important to the consumer. And to some degree, that helps us because we do deliver the value. But we just need to make sure that we're -- we understand exactly the consumer mindset in each of our businesses because it will drive some of our product development going forward.

Okay. Okay. Let me ask you. You talked about the first quarter being seasonally the weakest. Are there specific product lines like the fishfinder, locators or specifically smaller items, scuba gear that lend themselves to a holiday Christmas sale?

I would say that it's more in -- it's in Marine Electronics that's on the Humminbird side that is more conducive. And I would say there is some consumer tents that lend themselves. But the Christmas season has not necessarily been a big time for us. We have leveraged the Black Friday event to help us get rid of some of our excess inventory and that helps. But in general, we're not a significant holiday item.

Okay. Okay. You talked about -- you've made a -- you started to plan for the development, rolling out SUBGEAR leverage off SCUBAPRO. How many -- I'm assuming that's primarily a specialty boutique dive shop type sale. How many door fronts might you be selling across the world? Would you be thousands, tens of thousands, how many, I'm just curious?

I would say it's in the thousands and it is -- it's -- the 95% of the Diving sales that we participate in are through the specialty dive dealer network. And so it's very fragmented and there is a lot of little dealers around the world.

Okay. What -- of those thousands of dive shops, how many of them today that are SCUBAPRO vendors would also now be adding SUBGEAR?

Well, it’s hard to say. I mean, we've -- they -- SCUBAPRO is an iconic brand and I think they like us in that premium space and getting them to think of us having 2 brands, 1 in the mid-price point, is a little bit of educational process. So I think over time, we will have a significant portion of our dealers distributing the SUBGEAR brand. But I think one of the opportunities with SUBGEAR is it allows us to open up dealers that potentially aren't doing SCUBAPRO. We have a very exclusive distribution strategy for SCUBAPRO and the SUBGEAR brand allows us to be a little more open with our distribution policy. So it does provide us an opportunity to increase penetration among more dealers, as well as go into current dealers. And that would be -- it's working well in Europe. We launched ahead of U.S. and it's way ahead of budget over there. And I think, it just seems to be taking a little longer but we feel pretty good about it. It will continue to grow in our minds.

Okay. If you look at the SUBGEAR, Helen, could you, as you bring that kind of medium quality point down, a little more affordability with an elastic consumer. Is that something that someday could be in a big box, the categories, superstore, the Dick's Sporting Goods, or Sports Authority, or the Cabela's, is there anything that you could bring that down or is it always going to be a dealer?

Just so you know, I mean, we -- the difference between the 2 brands is not quality because we -- this a life-support business. We do high quality in both. What we do is we don't offer the same features or function that we do in SCUBAPRO. So the quality is certainly the best in both. But I would say this SUBGEAR brand was not meant to play in the big box and that's not the goal for it. It still is a very high quality scuba brand. I think it will emphasize more of the soft goods versus the hard goods. But it still holds a very solid position in the mid-price point. And not dropping down in quality or price certainly that it would -- that is currently being circulated in the bigger box stores.

Okay. I'll ask just one more and get back in line. For Dave, in cost of goods sold, are you seeing any commodity feedstocks, plastics, metals, stainless, anything that's going up and then if you have a budget for CapEx for 2012?

Yes. I think commodities are -- they're not going down but we haven't seen significant increases yet for the most part. Some metals, they've kind of been going up a little bit, but it hasn't been significant. In terms of capital spending, I think we'll see a little bit of an increase versus last year. I think, we're -- right around $10 million to $11 million, I think is a reasonable number.

I'm showing no further question at this time. I would now like to turn the call back over to Helen Johnson-Leipold for closing remarks.

Thanks, everyone, for joining us. Once again if you have further questions, please give either Dave or Cynthia a call. Thank you.

Ladies and gentlemen, this concludes today's conference. Thanks for your participation and have a wonderful day.