RNS Number:5471L
Brunswick Corp
26 April 2005
Brunswick Reports EPS of $0.96 in First Quarter
LAKE FOREST, Ill., April 26 -- Brunswick Corporation (NYSE: BC) reported today
net earnings of $94.6 million, or $0.96 per diluted share, for the first quarter
of 2005, up from net earnings of $48.0 million, or $0.50 per diluted share, for
the year-ago quarter. Results for the first quarter of 2005 include a $0.32 per
diluted share gain on the sale of securities. The company said operating
earnings increased 26 percent on a 17 percent sales gain in the first quarter.
Commenting on the quarter, Brunswick Chairman and Chief Executive Officer George
W. Buckley said, "Once again our marine operating units led the way with
combined engine and boat sales up 21 percent during the period. The sales gain
was driven by strong dealer response to new product introductions as well as
continued strength in international markets. We are reaping the benefits of our
customer-led strategy to provide the right products at the right price sold
through the best dealer network in the industry."
Buckley also noted that acquisitions played a role in Brunswick's 17 percent
sales increase in the quarter. "Excluding sales from business units we didn't
own in the first quarter last year, sales rose 10 percent, illustrating the
strong performance delivered by our base operations. Further, we continue to
look for more effective ways to leverage our top-line growth down to the bottom
line," Buckley explained. "Higher volumes combined with our focus on effective
cost management resulted in an increase in operating margins to 7.1 percent, up
from 6.5 percent a year ago. In addition, we continued to maintain a strong
balance sheet, with debt-to-total capital at 28.9 percent at quarter end
compared with 30.4 percent a year earlier. This provides us with the financial
flexibility to invest in our ongoing businesses, while seeking attractive
acquisitions."
First Quarter Results
For the quarter ended March 31, 2005, the company reported that net sales
increased 17 percent to $1,401.1 million, up from $1,199.6 million a year
earlier. Operating earnings rose to $99.1 million compared with $78.5 million in
the year-ago quarter, and operating margins improved to 7.1 percent from 6.5
percent. Net earnings totaled $94.6 million, or $0.96 per diluted share, up from
$48.0 million, or $0.50 per diluted share, for the first quarter of 2004.
As previously announced, during the first quarter of 2005 the company completed
the sale of approximately 1.9 million shares of MarineMax, Inc. stock. The sale
resulted in a pre-tax gain of $38.7 million, equivalent to $0.32 per diluted
share in the quarter.
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group and Brunswick
New Technologies (BNT), reported sales of $605.6 million in the first quarter of
2005, up 15 percent from $527.9 million in the year-ago first quarter. Operating
earnings in the first quarter advanced 22 percent to $52.0 million versus $42.6
million, and operating margins increased to 8.6 percent compared with 8.1
percent for the same quarter in 2004.
"We continue to see strong demand for our new products, which is driving sales
growth in the segment," Buckley said. "During the first quarter we extended our
Verado family of supercharged four-stroke outboard engines with the launch of
the 135-, 150- and 175- horsepower models. Like their previously introduced,
larger-horsepower counterparts, these models enhance Verado's reputation for
power, reduced noise and vibration, and technological sophistication, setting
the performance bar ever higher in marine propulsion."
"BNT, particularly our Navman unit, also contributed to segment sales growth in
the quarter," Buckley added. "We are beginning to see the results of Navman's
accelerated research and development investments as well as its increasing
presence in markets around the world."
"In the first quarter, Mercury opened a new production facility in China. The
174,000-square-foot plant produces four-stroke outboard engines between 40 and
60 horsepower," Buckley noted. "We also opened a new 275,000-square-foot
facility in Japan with our joint venture partner Tohatsu, where we make 2.5 to
30 horsepower four-stroke outboards. Worker training and production validation
have been completed, and the plants have now begun production. As the year
continues, we expect the plants will ramp up volume and, in turn, increase our
cost competitiveness in these market segments."
Boat Segment
The Brunswick Boat Group comprises the Boat segment and produces fiberglass and
aluminum boats as well as marine parts and accessories. The Boat segment
reported sales for the first quarter of $677.5 million, up 32 percent compared
with $512.0 million in the first quarter of 2004. Operating earnings increased
55 percent to $49.5 million, up from $32.0 million, and operating margins were
up 100 basis points to 7.3 percent from 6.3 percent.
"The success of new products contributed to the sales gain with double- digit
growth reported by Sea Ray, Boston Whaler, Sealine, Princecraft and Baja. The
boat parts and accessories business also reported sales gains during the
quarter," Buckley noted. A portion of the Boat segment sales gain was due to the
acquisition of the Crestliner, Lowe, Lund and Sea Pro brands, which were not
included in the prior-year quarter. "Excluding incremental sales from these
acquisitions, Boat segment sales were up 17 percent. Higher volumes and
effective cost management accounted for the significant improvement in operating
margins," Buckley explained.
"We continue to execute our strategy of 'covering the waterfront' by 'filling in
the white spaces' to gain or strengthen our participation in certain market
segments," Buckley said. "During the quarter, we added the Albemarle brand. This
acquisition enabled us to extend our offering of offshore sportfishing boats,
which, along with Hatteras, now range from 24 to 90 feet."
"On the smaller-boat side, we continue to see strong demand for our Bayliner 175
and Bayliner 185 entry-level runabouts. During the quarter, we opened a second
boat plant in Mexico, which doubled our capacity to produce these and other
popular models in this family," Buckley added.
Fitness Segment
The Fitness segment is comprised of the Life Fitness Division, which
manufactures and sells Life Fitness, Hammer Strength and ParaBody fitness
equipment. Segment sales in the first quarter of 2005 totaled $127.5 million,
down 2 percent from $130.6 million in the year-ago quarter. The sales decline is
attributable to Brunswick's divestiture of the Omni Fitness retail stores, which
was completed in late 2004. Excluding Omni sales in the year-ago quarter,
fitness equipment sales were up 5 percent. Segment operating earnings for the
first quarter of 2005 totaled $6.4 million compared with $9.2 million for the
year-ago quarter, and operating margins were 5.0 percent compared with 7.0
percent a year ago.
"We continue to see strong demand for fitness equipment," Buckley explained,
"underscoring the power of our brands and the success of new products. Operating
earnings, however, were adversely affected by higher steel costs, pricing
pressures in the international marketplace, higher costs for delivery and
installation as well as a shift in product mix in the quarter to lower-margin
strength equipment. We are actively pursuing several avenues to improve
productivity and operating results within the Fitness segment, with an immediate
emphasis on manufacturing and supply chain efficiencies."
Bowling & Billiards Segment
The Bowling & Billiards segment is comprised of the Brunswick retail bowling
centers; bowling equipment and products; and billiards, Air Hockey and foosball
tables. Segment sales in the first quarter of 2005 totaled $111.5 million, up 1
percent compared with $110.2 million in the year-ago quarter. Operating earnings
totaled $11.1 million in the first quarter versus $13.5 million, and operating
margins were 10.0 percent compared with 12.3 percent in 2004.
"Our bowling product and retail businesses led the sales gain in the quarter,"
Buckley noted. "We are especially pleased with the success of our expanded
Brunswick Zone retail bowling centers, which continue to grow at rates higher
than our traditional centers. These family-friendly centers have helped us
attract casual bowlers who now outnumber league bowlers. The drop in segment
operating earnings and margins was primarily due to legal expenses associated
with an ongoing arbitration proceeding in China."
Looking Ahead
"We continue to be very encouraged by the trends we are seeing in the marine
market, especially as we enter the spring selling season," commented Buckley.
"Our marine pipeline inventories are at 31 weeks of supply for boats and 29
weeks of supply for engines, up three weeks and five weeks, respectively from a
year ago, representing a return to more normal levels. The pipeline build is due
to a number of factors, including higher dealer inventories in international
markets in response to strong demand and the introduction of new boat models
both here and abroad. Also keep in mind that retail sales in the first quarter
of 2004 were exceptionally high, resulting in a rapid draining of pipeline
inventories to almost unprecedented low levels at this time last year. The
current level of inventories represents our dealers' expectations for growth in
retail demand this year. In addition, a healthier pipeline will help us avoid
the shortage of popular new models that we experienced in some categories last
year."
"While always being cognizant of the influence of underlying economic and stock
market conditions, we remain on track for another very good year," Buckley said.
"Given our performance in the first quarter, we are raising our estimate for the
year by $0.05 to $3.52 to $3.67 per diluted share, which includes the $0.32 gain
on the stock sale. This compares with $2.77 per diluted share for 2004. For the
second quarter, we are estimating earnings in the range of $1.08 to $1.13 per
diluted share, compared with $0.93 per diluted share for the year-ago second
quarter."
The company said its new estimate assumes sales growth for the year of between
12 percent and 13 percent and operating margin improvement of between 90 and 110
basis points. Versus its previous estimate, this represents a one percent
increase in the rate of sales growth and 10 to 20 basis points higher operating
margin expansion.
Forward-Looking Statements
Certain statements in this press release are forward looking as defined in the
Private Securities Litigation Reform Act of 1995. These statements involve
certain risks and uncertainties that may cause actual results to differ
materially from expectations as of the date of this filing. These risks include,
but are not limited to: the effect of a weak economy and stock market on
consumer confidence and thus the demand for marine, fitness, billiards and
bowling equipment and products; competitive pricing pressures; the success of
new product introductions; the ability to maintain market share in high-margin
products; competition from new technologies; imports from Asia and increased
competition from Asian competitors; the ability to obtain component parts from
suppliers; the ability to maintain effective distribution; the financial
strength of dealers, distributors and independent boat builders; the ability to
maintain product quality and service standards expected by our customers; the
ability to successfully manage pipeline inventories; the success of global
sourcing and supply chain initiatives; the ability to successfully integrate
acquisitions; the success of marketing and cost management programs; the ability
to develop product technologies that comply with regulatory requirements; the
ability to complete environmental remediation efforts and resolve claims and
litigation at the cost estimated; the impact of weather conditions on demand for
marine products and retail bowling center revenues; shifts in currency exchange
rates; adverse foreign economic conditions; and the impact of interest rates and
fuel prices on demand for marine products. Additional factors are included in
the company's Annual Report on Form 10-K for 2004.
About Brunswick
Headquartered in Lake Forest, Ill., Brunswick Corporation endeavors to instill
"Genuine Ingenuity"(TM) in all its leading consumer brands, including Mercury
and Mariner outboard engines; Mercury MerCruiser sterndrives and inboard
engines; MotorGuide trolling motors; Teignbridge propellers; MotoTron electronic
controls; Northstar marine electronics; Navman marine and GPS-based products;
IDS dealer management systems; Sea Ray, Bayliner, Maxum, Hatteras, Meridian,
Sealine, Bermuda, Ornvik, Quicksilver, Savage and Uttern pleasure boats; Baja
high-performance boats; Albemarle, Arvor, Boston Whaler, Palmetto, Sea Boss, Sea
Pro and Trophy offshore fishing boats; Crestliner, Lowe, Lund and Princecraft
aluminum fishing, deck and pontoon boats; Attwood marine parts and accessories;
Land 'N' Sea marine parts and accessories distributor; Life Fitness, Hammer
Strength and ParaBody fitness equipment; Brunswick bowling centers, equipment
and consumer products; Brunswick billiards tables; and Valley-Dynamo pool, Air
Hockey and foosball tables. For more information, visit http://
www.brunswick.com.
Brunswick Corporation
Comparative Consolidated Statements of Income
(in millions, except per share data)
(unaudited)
Quarter Ended March 31
2005 2004 % Change
Net sales $1,401.1 $1,199.6 17%
Cost of sales 1,059.2 902.3 17%
Selling, general and administrative
expense 208.6 186.1 12%
Research and development expense 34.2 32.7 5%
Operating earnings 99.1 78.5 26%
Interest expense (13.0) (10.1) -29%
Investment sale gain (1) 38.7 - NM
Other income 6.8 3.2 NM
Earnings before income taxes 131.6 71.6 84%
Income tax provision 37.0 23.6
Net earnings $94.6 $48.0 97%
Earnings per common share:
Basic $0.97 $0.51 90%
Diluted 0.96 0.50 92%
Average shares used for computation of:
Basic earnings per share 97.7 93.7 4%
Diluted earnings per share 99.0 95.6 4%
Effective tax rate (2) 28.1% 33.0%
(1) The Company sold its investment in MarineMax, Inc., pursuant to a
registered public offering by MarineMax.
(2) The decrease in the effective tax rate for the first quarter of
2005 was primarily due to lower tax expense associated with the
gain on sale of the investment in MarineMax, Inc. Excluding the
tax effect of this gain, the effective tax rate was 32.0 percent.
NM = Not Meaningful
Brunswick Corporation
Selected Financial Information
(in millions)
(unaudited)
Segment Information
Quarter Ended March 31
Net Sales Operating Earnings Operating
% % Margin
2005 2004 Change 2005 2004 Change 2005 2004
Marine Engine $605.6 $527.9 15% $52.0 $42.6 22% 8.6% 8.1%
Boat 677.5 512.0 32% 49.5 32.0 55% 7.3% 6.3%
Marine
eliminations (119.5) (80.2) - -
Total
Marine 1,163.6 959.7 21% 101.5 74.6 36% 8.7% 7.8%
Fitness 127.5 130.6 -2% 6.4 9.2 -30% 5.0% 7.0%
Bowling &
Billiards 111.5 110.2 1% 11.1 13.5 -18% 10.0% 12.3%
Eliminations (1.5) (0.9) - -
Corp/Other - - (19.9) (18.8) -6%
Total $1,401.1 $1,199.6 17% $99.1 $78.5 26% 7.1% 6.5%
Brunswick Corporation
Comparative Consolidated Balance Sheets
(in millions)
March 31, December 31, March 31,
2005 2004 2004
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $439.7 $499.8 $173.8
Accounts and notes receivables, net 505.1 463.2 455.3
Inventories
Finished goods 436.6 389.9 394.7
Work-in-process 283.6 260.5 222.6
Raw materials 146.8 136.4 105.5
Net inventories 867.0 786.8 722.8
Prepaid income taxes 292.0 292.7 297.5
Prepaid expenses and other 43.7 56.2 51.4
Current assets 2,147.5 2,098.7 1,700.8
Net property 871.4 876.4 847.8
Other assets
Goodwill and other intangibles 952.4 952.8 857.3
Investments and other long-term
assets 371.1 418.5 384.3
Total assets $4,342.4 $4,346.4 $3,790.2
Liabilities and shareholders' equity
Current liabilities
Short-term debt $6.1 $10.7 $48.8
Accounts payable 389.9 387.9 334.1
Accrued expenses and accrued
income taxes 776.2 855.2 758.4
Current liabilities 1,172.2 1,253.8 1,141.3
Long-term debt 723.2 728.4 585.8
Other long-term liabilities 654.0 651.9 609.8
Common shareholders' equity 1,793.0 1,712.3 1,453.3
Total liabilities and shareholders'
equity $4,342.4 $4,346.4 $3,790.2
Supplemental Information
Debt-to-capitalization rate 28.9% 30.2% 30.4%
Brunswick Corporation
Comparative Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Quarter Ended March 31
2005 2004
Cash flows from operating activities
Net earnings $94.6 $48.0
Depreciation and amortization 38.4 38.3
Changes in noncash current
assets and current liabilities (213.1) (155.6)
Income taxes and other, net 68.7 54.1
Net cash used for operating activities (11.4) (15.2)
Cash flows from investing activities
Capital expenditures (32.5) (32.5)
Investments (8.1) (4.9)
Acquisitions of businesses, net
of debt and cash acquired (13.7) (196.2)
Other, net 6.0 (0.9)
Net cash used for investing activities (48.3) (234.5)
Cash flows from financing activities
Net issuances of commercial
paper and other short-term debt (4.0) 24.2
Payments of long-term debt
including current maturities (1.3) -
Stock options exercised 4.9 53.4
Net cash provided by (used
for) financing activities (0.4) 77.6
Net decrease in cash and cash equivalents (60.1) (172.1)
Cash and cash equivalents at January 1 499.8 345.9
Cash and cash equivalents at March 31 $439.7 $173.8
Free Cash Flow
Net cash used for operating activities $(11.4) $(15.2)
Net cash provided by (used for):
Capital expenditures (32.5) (32.5)
Other, net 6.0 (0.9)
Total Free Cash Flow (1) $(37.9) $(48.6)
(1) Free Cash Flow in 2005 includes pre-tax proceeds from the sale of the
Company's investment in MarineMax, Inc., net of selling costs, of
$56.8 million.
CONTACT: Kathryn Chieger, Vice President - Corporate and Investor Relations of
Brunswick Corporation,
1-847-735-4612
Web site: http://www.brunswick.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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