Hello everyone and welcome to the Johnson Outdoors Third Quarter 2021 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. Prior to the question-and-answer session all participants will be 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 2021 fiscal third 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 call 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 release 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 will begin with an overview on the quarter and year-to-date results and then I will share perspective on the performance and outlook for our businesses. Dave will review key financials and then we will take your questions. During the fiscal third quarter the warm weather outdoor recreation season is in high gear and continued strong demand and increased interest in outdoor activities delivered another quarter of unprecedented results. Sales surged to $213.6 million during the third quarter, 54% ahead of last year’s third quarter, continued strong operational efforts allowed the company to deliver these results. Year-to-date total company sales stand at $585.4 million, a 36% increase over last year’s fiscal nine-month period. Of note compared to fiscal 2019 we are up 28% for the year-to-date period. Total company operating profit of $97.7 million was 16.7% of net sales, an increase of 4.7 points over the prior year-to-date period. And margin improvement was driven primarily by operational efficiencies as a result of increased sales volumes. For the third fiscal quarter total operating profit was $38.1 million versus $12.9 million in the previous quarter. Net income in the quarter more than doubled to $28.8 million or $2.83 per diluted share. Dave will discuss the key financial drivers later in the call. In fishing high demand for Minn Kota and Humminbird technologies continued through the third quarter in both new and seasoned and we continued to look at Johnson Outdoors for the best fishing experience possible. Our most recent innovation in Humminbird, the new MEGA Live Imaging captured Best in Electronics honors at this year’s ICAST, the world’s most prestigious fishing show marking our 10th award in this category in the past 11 years. MEGA Live Imaging delivers the clarity and detail…

Thank you, Helen. Good morning everyone. I wanted to highlight a few items from the quarter. As Helen mentioned, sales for the third quarter rose 54% over the prior year quarter and increased 36% on a year-to-date basis, driven by continued high demand across fishing, watercraft raft, and camping as well as some recovery in diving. Our excellent sales performance was the key driver to increasing profits both during the quarter and the year-to-date period. Gross margin of 45.7% rose slightly versus the prior year quarter as increased costs due to tariffs and inbound airfreight were more than offset by sales volume driven operating efficiencies. Total company operating profit was $38.1 million for the third quarter compared with $12.9 million during the prior year's third quarter. Operating expenses for the quarter increased $9.38 million driven primarily by higher sales volume driven expenses and higher health insurance claims, but decreased as a percent of sales. Net income for the quarter more than doubled to $28.8 million compared to $12.9 million in the prior fiscal year third quarter. On a fiscal year-to-date basis, the effective tax rate is 25.3% compared to last year's rate of 24.4%. We expect the full year tax rate to be in the mid 20s. Looking ahead, our factories are still running and supply chain issues remain an ongoing challenge that we are continually managing. The balance sheet and cash position remains strong, providing us with the capacity and flexibility to strategically invest to drive future growth and to continue to pay out a cash dividend to shareholders. Now, I'll turn the call back over to the operator for the Q&A session. Operator.

. Our first question comes from the line of Anthony with Sidoti & Company. Your line is now open.

Thank you and good morning, everyone. So certainly you've seen a strong demand as you've noted here. Just wondering what are the inventory levels at your key retailers like now that you're winding down the season, so just wanted to get a better sense of that?

Well, our inventory levels have been very stressed this whole season just because the demand is high. So, I would say that they are below normal and we continue to make as much product as possible.

Got it, okay. And at the retail level, would you say they're also below normal as well?

Yes, I think across the board that’s true.

Got it. Okay. Thanks for that. So, just wondering so with the Delta variant certainly disrupting thing last few weeks here. Just wondering have you guys seen any -- recently any notable changes to end user demand as far as buying patterns?

You know, so far we have not seen a reaction to that at all, but it's still early. So we would be monitoring that.

Got it, okay. Thanks. And then regarding the supply chain, I'll certainly understand all the issues there. As far as airfreight, you did call that out in the press release. So just wondering if you could just comment on how much of that was an impact in the quarter and how do you see a usage of airfreight versus ocean freight to here going forward?

Yeah, it's one of the strategies we've employed to kind of battle the container shortage and the lead time issues we're seeing on the components coming from Asia. So, I mean, we've always used air freight a little bit here and there historically, but it's just much more pronounced this year. It is probably -- it probably impacted our margin modestly compared to the cost of goods sold inputs, it was kind of compared to that. So -- and we'll continue to look to use that strategy in the future as things kind of continue to be challenging.

Got it. Okay. And then in terms of labor costs or any other cost issues, I know you called out higher healthcare costs, I don't know if that was a one off quarter here, but if you could just comment on any cost issues that you expect that would be different than what you've seen near-term kind of what you're thinking here versus maybe what you were thinking at the beginning of the fiscal year?

Yeah. I'm hoping the healthcare is a one off thing just because there's no activity in prior year's quarter. And in terms of the labor inputs, I mean if there's pressure there, I think we're doing okay so far with that. But I think as we look into next year, that'll be another fact that we will consider in our strategies, the wage rate and what happens there.

Got it, okay. And again, two more questions for me. So, you mentioned Helen about the fishing segment that you've been able to certainly increase yourselves nicely about existing anglers and new anglers. So just wondering if you could give us maybe some more data or maybe some more insight as to what you've seen as far as participation ways that as far as in your new participants into the segments?

It's a little -- the participation data, there's a lag time in getting that information. We know that it is up and really to get our arms around that we have to wait till we get the data, but some of them are a short-term, but we do feel some of the longer-term. But we'll see how it all plays out. Certainly, there was a lot of existing fishermen that were in the market buying equipment given what was going on with the pandemic. So it was a mix of both.

Got it, okay. And then as far as your cash flow priorities, can you talk about like what you're looking to do as far as with all the cash that you've been accumulating on the balance sheet?

Yes. The first priority is to grow the business and so that's what we're looking to do with the cash. A piece of that is M&A, a piece of that is investing in organic growth. So those are both key for us. We'll continue to do that. We've talked about the fact that we're very active out there and we are. We continue to look at a lot of different things. But with our strategy, it's pretty discerning and so that tends to put a filter on what we're actually excited about. So that's kind of the key thing for us. And then beyond that, we'll continue to look to grow the dividend, hopefully, the regular dividend and we look at alternative uses of cash continually, so those are always options that we could look at.

Right. Okay and then just a follow-up about that as far as a dividend -- as far as a special dividend, is that something you guys have looked at or just wanted to get your thoughts on that?

Yes, I mean, that's part of the alternate use of cash strategy that we look at. And we have looked at buybacks and specials, and we'll continue to look at that as potential uses of cash. No doubt about it.

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

Thank you.

Thank you. There are no further questions. I will now turn the call over to Helen Johnson-Leipold for closing remarks.

Thanks everyone for joining us. I hope you have a great day. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.