Hello, everyone, and welcome to the Johnson Outdoors Second 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 of our recording of 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 of Johnson Outdoors. Your line is open.

Thank you, Tyrone. Good morning, and welcome to our discussion of Johnson Outdoors' results for the 2012 fiscal second quarter. If you need a copy of our news release issued this morning, it is 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. These statements are made on the basis of our views and assumptions at this time, and are not guarantees of future performance. Actual events or results may differ materially from those statements due to a number of potential factors, many of which will be on Johnson Outdoors' control. These risks and uncertainties include those listed in our media release from today and our filings with the Securities and Exchange Commission. If you have additional questions following this morning's call, please contact either Dave Johnson or me. It's now my pleasure to turn the call over to Helen Johnson-Leipold, Chairman and CEO.

Good morning. I hope you've had an opportunity to review our second quarter earnings announcement. I'll begin with comments on our results and market place and give you our perspective for the remainder of the year. Dave will cover some key financials, then we'll take your questions. In last year's second quarter, we reported record sales and profits. This quarter revenue matched the prior year high, and operating profit grew 22% due to a favorable settlement with our insurance carriers to resolve a long-standing dispute. Including the benefit of the settlement, operating profit would have been flat with the prior year's quarter's record profit. The decline in net income this period was due to a substantially higher effective tax rate, and Dave will cover accounting for taxes in a few minutes. Overall, we're pleased with the quarter and year-to-date performance. Our 2 largest businesses, Marine Electronics and Diving, are heading into a warm weather outdoor retail selling season and is in strong position. In these markets, innovation is critical to winning at the shelf with key target consumers, avid fishing and diving enthusiasts. These enthusiasts are trend setters, they want the latest and greatest and they're willing to pay a premium for it. Exceptional new products in these new 2 business units have created strong pre-season momentum across all channels, particularly in North America and Asia. First, Marine Electronics, where the goal is to drive technology to enhance the fishing and boating experience. This year, new products represent nearly 60% revenue for our Minn Kota, Humminbird, Cannon and Lake Master brands. For example, the Minn Kota Talon. The Talon is a shallow water anchor competing in an estimated $30 million segment. Shallow water anchors are used primarily by bass fishermen, the largest contingency of anglers in the U.S. And the…

Thank you, Helen. Helen gave you a good picture of what's happening in our markets and our businesses, so I'll just take a couple of minutes to give you a little more perspective on the key year-to-date financials. I'll start with accounting for taxes which resulted in the 57.4% effective tax rate for the quarter. The reason for this is simple. In those countries where income is being generated, like the U.S., we're being taxed. In countries where losses were incurred, tax valuation allowances exist, but no tax benefit was derived. Importantly, end of year actual cash taxes are expected to be well below what's currently being booked based on projected utilization of net operating loss carryforwards and other applicable tax credits. Our gross margins declined for the quarter due to 2 primary factors. First, inventory reserves were taken related to the closure of a facility in Southern Europe. Second, unfavorable product mix in both Watercraft and Marine Electronics. Our full perspective sales of lower-priced entry-level products into Walmart more than doubled during the first 6 months of this year. At the same time, lower selling costs on these products helped reduce operating costs as well. Moving on to operating expense, which is $5 million favorable to last year's second quarter. Excluding the $3.5 million favorable settlement from our insurance carriers, operating expense in the quarter was still $1.5 million below prior year. On a year-to-date basis, increased healthcare costs and bad debt in Europe offset the benefit of the favorable settlement. Next, working capital. We continue to focus on keeping inventory in check as we work to meet demand for our products. Working capital has declined 8.5% since this time last year, so good job by all the businesses. Overall, our balance sheet remains strong. Debt is down $21 million, or 22% year-over-year. We're in good shape heading into the final 6 months of the fiscal year and feel good about our position heading into the third quarter, where we'll see consumer response at shelf. Now I'll turn the call back over to the operator for questions. Operator?

[Operator Instructions] We do have a question from Brian Rafn of Sparta Capital.

Dave, can you go back and talk a little bit about the mix issue. You talked about Walmart. Was that camping or kayaks or canoes, or what was that specifically about the lower mix.

That's mostly Marine Electronics entry-level product. So we're seeing that particular customer get more into the sporting goods over the past couple of years, and so we've got more volume going through there. And it goes beyond just Walmart too. There's other products that are -- lower entry-priced level products are more of the volume in both Watercraft and Marine Electronics.

Okay. Is some of that lower mix, Dave, is that just Walmart, or would that be Cabela's and Dick's Sports and Bass Pro shops or is it just the big box retailer?

It goes beyond Walmart, it's mostly big box type stuff though.

Okay, okay. What is the ability when you come out with like 360 Sonar and that electron -- the anchor that you guys talked about. Is that something, or i-Pilot, is that something that a big-box retailer might stock or is there a favorable difference like something like a Cabela's would stock, but not at Walmart?

Hi, this is Helen. The higher end -- truly, the higher end items are most likely to not be in the Walmarts, but we do find that depending on what the item is, like i-Pilot is very appealing and does cross channels. So it really depends on the item. But primarily, the higher end goes into the sporting goods channel.

Okay. Now would it be fair to say that when you come out with something innovative that the first movers or the first innovators are going to be those specialty boutiques, not certainly the big box?

Well, I wouldn't define them as specialty boutiques. I think the Cabela's and the Bass Pros of the world certainly get out there ahead in the sporting goods area.

Okay, okay. And then, Dave, some conversations from the last couple of quarters. With some of the smaller retail channels, I might go back and use the word kind of specialty, given the fact of some of these people that might have had a very tough season in snowboarding or alpine skiing or downhill, has that continued to effect their ramp-up in your orders or inventory build for the summer season?

No. I think initially, that might have been an issue, but we've seen that our retailers have done a very good job of managing their inventory. And certainly, the fishing category is an area that they try hard to get product in early on. So I would say it's probably mixed. But in general, our customers have done a good job of managing their inventory.

Okay. Okay. And then just one on -- Dave, you mentioned about the healthcare, is that an issue where you're meeting those kind of episodic expenses or are you seeing higher premiums or is it a structural cost or is it just case-by-case employee issues?

Yes, it tends to be more case-by-case. We had a really good -- we did a good job last year controlling it. And this year we're just seeing a few more incidences of costs coming in, claims coming in. So over the long run, I think we're doing a good job managing things. It just so happens over this first 6 months, we're seeing a little bit more activity.

Okay. Anything on cost of goods from the standpoint of raw materials, Dave. Anything -- any of your kind of basic feedstocks, plastics or metals, aluminum, anything that you're seeing, kind of a trend maybe as you go into summer.

We haven't seen anything significant, either up or down. And I think that's good news as we fulfill the season here. We'll keep our fingers crossed as we finish the fiscal, though.

[Operator Instructions] I'm showing no further questions at this time. I'd like to turn the call over -- I apologize, we do have a question that just came in. The question is a follow-up from Brian Rafn from Sparta Capital.

I'll just keep going. There was a comment about some weakness, you talked about inventory, maybe a write-down, a closure point. In southern Europe, is that a scuba diving specific with the Mediterranean or kind of Southern Europe or is that a different product category?

There's a Marine Electronics office in Italy.

Okay, okay. Okay. All right, okay. And then, turning -- what's the sense -- a little more color on -- what is that -- it's not SCUBAPRO, but the more -- the little lower-end scuba gear, kind of what's been the ramp-up of your second product category?

The second brand is SUBGEAR, and it's an entry into the mid-price point category. And we have seen very strong acceptance, and we have seen significant growth year-over-year. So it's doing well.

Okay. I'm curious, maybe you can kind of quote this off the top of your head. How many SKUs might you have in SCUBAPRO versus SUBGEAR? I mean, would SUBGEAR be 20% of what you'd offer in SCUBAPRO or would you add as many SKUs?

Well, I think just because of the length of the time that the brand has been on the market, we have certainly a very full offering of SKUs in SCUBAPRO. But SUBGEAR, we make sure that when we came out, we had a full line of product. And we tend to emphasize more the non-life support product and have a little more offering in that area. But at this point, it's a young brand and has fewer SKUs, but still a full offering.

Okay. And then, I didn't catch -- I didn't get the -- because I'm on the road traveling, the press release. What -- do you have a dollar amount for the drawdown in the military sales for the camping stuff?

It ended up being most of the Outdoor Gear decline, so I'm not going to give you an exact number, but it's most of the decline.

Most of the decline. Okay. Any forward vision on -- as forces rotate back from Iraq and Afghanistan, do you get any sense of reorders or recouping replacements. A lot of times, forces will leave equipment with lower value, maybe not tanks or helicopters, but they'll leave equipment in the theater and then come home and re-up with a new purchase. Anything kind of you're getting from the Marines or the Army?

No. I think we expect this fiscal year to be comparable to last year's sales, so right around flat.

There are no further questions at this time. I'd like to turn the call over to management for any closing remarks.

Thanks, everyone for joining us. Again, if you have any questions, you can give either Dave or Cynthia a call. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect, and have a wonderful day.