RNS Number:3075R
Brunswick Corp
24 October 2003
Brunswick Reports EPS of $0.41 in Third Quarter
LAKE FOREST, Ill., Oct. 24 -- Brunswick Corporation (NYSE: BC) announced today a
58 percent increase in diluted earnings per share on a 15 percent sales gain and
a 32 percent increase in operating earnings in the third quarter of 2003.
Diluted earnings per share rose to $0.41 compared with $0.26 per diluted share
for the third quarter of 2002.
"Our results in the quarter reflect the success of our efforts to solidify the
operating performance of our core businesses and leverage the capabilities in
our marine units as well as the benefit of recent acquisitions," said Brunswick
Chairman and Chief Executive Officer George W. Buckley. "Improved marine market
conditions were also a plus. Due in part to a more stable economy, the pickup in
retail demand for boats that began toward the end of the second quarter
continued into the third, leading to higher wholesale shipments. While wholesale
shipments increased, pipeline inventories remain in very good shape and are
unchanged from a year ago at 16 weeks of supply for engines and 21 weeks of
supply for boats. Acquisitions also played a significant role in the 15 percent
sales gain in the quarter. Contributions from recent purchases, primarily Land
'N' Sea and Navman NZ Limited, accounted for just over half of the increase in
sales."
"Meanwhile, overall operating margins improved by 70 basis points to 6.0
percent, benefiting from higher boat sales, and our efforts to relentlessly
reduce costs across all of our business units," Buckley added. "Our strong
results for the quarter are also reflected in our balance sheet, which shows
debt-to-total capital at 33.3 percent at the end of the third quarter compared
with 35.9 percent at the end of 2002. Through the first three quarters of 2003,
we generated $214.8 million of free cash flow after capital expenditures of
$93.7 million."
Third-Quarter Results
For the quarter ended Sept. 30, 2003, the company reported net sales of $1,036.3
million, up 15 percent from $900.0 million a year earlier. Operating earnings
rose to $62.5 million, up 32 percent from $47.3 million, and operating margins
reached 6.0 percent versus 5.3 percent a year ago. In addition to the higher
sales, the company said that effective cost management throughout the
organization is reflected in the improved operating leverage and helped offset a
$7 million increase in pension, health care and insurance costs compared with
the third quarter a year ago. Further, the company said that joint venture and
interest income added approximately $6 million to pre-tax earnings in the third
quarter. Net earnings totaled $37.9 million, or $0.41 per diluted share, up from
$23.6 million, or $0.26 per diluted share, in the year-ago third quarter.
Nine-Month Results
For the nine months ended Sept. 30, 2003, the company had net sales of $3,041.8
million, up 9 percent from $2,783.9 million for the first nine months of 2002.
Operating earnings reached $162.7 million for the first three quarters of 2003,
which includes a $25 million litigation charge recorded in the first quarter of
this year. Excluding the litigation charge, operating earnings were up nearly 21
percent to $187.7 million in the first nine months of 2003 from $155.5 million
for the same period a year ago. Net earnings for the first three quarters of
2003 were $95.3 million, or $1.04 per diluted share, which includes the
aforementioned litigation charge ($0.18 per diluted share). Excluding the
litigation charge, earnings for the first nine months of 2003 totaled $1.22 per
diluted share. Net earnings for the year-ago period totaled $57.9 million, or
$0.64 per diluted share. The cumulative effect of adoption of Financial
Accounting Standards Board SFAS No. 142, "Goodwill and Other Intangible Assets"
is included in the 2002 results. Adoption of this accounting standard resulted
in a non-cash, after-tax charge of $25.1 million, or $0.28 per diluted share, in
the first quarter of 2002.
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group and Brunswick
New Technologies (BNT), reported net sales of $500.8 million in the third
quarter of 2003, up 18 percent from $426.2 million in the year-ago third
quarter. Segment sales growth in the quarter was driven by acquisitions
completed for BNT and continued strong performance in Mercury's international
markets. Excluding incremental sales from acquisitions, segment sales in the
quarter increased 11 percent. Segment operating earnings in the third quarter
increased 18 percent to $60.9 million, and operating margins improved slightly
to 12.2 percent compared with 12.1 percent in the third quarter of 2002.
"Mercury's international sales were up sharply in Europe and Asia, reflecting
higher shipments of sterndrive engines and parts and accessories as well as the
benefit from the weaker U.S. dollar," Buckley noted. "On the domestic front,
Mercury's sales increased 4 percent in the quarter, driven by higher sales of
sterndrive engines and an improving trend for outboard engines, which were up
slightly versus the year-ago quarter. We also saw a rebound in sales of parts
and accessories in the third quarter compared with the first half of the year
when cold weather delayed the start of the boating season in the United States
and P&A sales dropped 10 percent."
"The slight uptick in operating margins in the quarter demonstrates the benefit
of cost-cutting measures taken in the first half of this year, which are
offsetting shifts in product mix, higher pension, health care and insurance
costs and recent investments in BNT," Buckley added.
Boat Segment
The Brunswick Boat Group comprises the Boat segment and includes the Sea Ray,
Bayliner, Meridian, Maxum, Sealine, Hatteras, Boston Whaler, Trophy, Baja and
Princecraft boat brands. The Boat segment reported sales for the third quarter
of $404.5 million, up 21 percent compared with $333.9 million in the year-ago
quarter. Operating earnings rose to $8.2 million from $0.2 million reported for
the corresponding period last year. Operating margins in the third quarter
improved to 2.0 percent from 0.1 percent a year ago.
"Our boat brands had a very good quarter, producing 10 percent sales growth with
improvements reported by nearly all of our product lines. Sales of Bayliner
runabouts and Sea Ray sport boats were especially strong. In particular, we are
very encouraged by the success of our Bayliner 175, which is driving significant
share gains in the runabout category," Buckley said. "Incremental sales from the
recently acquired Land 'N' Sea and Attwood marine parts and accessories
businesses accounted for the balance of the Boat segment's healthy sales gain."
"US Marine, manufacturer of our Bayliner, Meridian, Maxum and Trophy brands, had
a solid quarter reducing losses in the division to half of what they were a year
ago and making good progress toward returning to profitability, which we expect
to occur next year," Buckley added. "Improvements at US Marine, cost management
efforts across the Boat Group, higher boat sales along with contributions from
the acquisitions resulted in the increase in operating margins in the quarter."
Fitness Segment
The Fitness segment is comprised of the Life Fitness division, which
manufactures and sells Life Fitness, Hammer Strength and ParaBody fitness
equipment, and operates Omni Fitness retail stores. Segment sales in the third
quarter of 2003 totaled $105.1 million, down 3 percent from $108.7 million in
the year-ago quarter. Operating earnings declined 10 percent to $8.7 million
from $9.7 million, and operating margins were 8.3 percent, down from 8.9 percent
in the third quarter of 2002.
"Life Fitness' equipment sales in the quarter were up 4 percent in the United
States and up double digits in most international markets. These gains, however,
were more than offset by lower sales in Europe," Buckley said. "This was
primarily due to a slowdown in equipment purchases by many of the larger health
club chains that are undergoing financial restructurings following a period of
rapid expansion. While this has reduced our expected growth rates in the near
term, we believe the European market will return to more normal growth patterns
toward the end of next year. In the quarter, we made an important investment in
a Hungarian strength equipment manufacturer that will not only allow us to
reduce costs, but also significantly reduce delivery times, which should help
improve sales in the long run. Producing equipment closer to our European
customers will result in shorter lead times, lower freight costs and the ability
to respond more quickly to changes in the marketplace."
"New products coming out this year, including our new Signature Strength Series,
have been very well received by our customers," Buckley noted. "Meeting this
high demand has proved challenging for our Ramsey, Minn., plant as it ramps up
production of the new strength product lines. With consolidation of strength
equipment manufacturing in Ramsey, we plan to close our Paso Robles, Calif.,
plant by next March. In the meantime, costs associated with closing the plant
and production inefficiencies during the consolidation are impacting operating
margins."
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 third quarter of 2003 totaled $97.5 million, up 10
percent compared with $88.7 million in the year-ago quarter. Operating earnings
were $0.1 million in the quarter versus break-even performance in the comparable
quarter in 2002.
"The sales gain for the segment was primarily driven by the recent acquisition
of Valley-Dynamo, which is performing right on plan, as well as higher sales
from retail bowling centers," Buckley said.
"During the third quarter, which is the slowest season for our retail bowling
centers, we invested in upgrading our time and labor management system and in
training our center managers on its application. The cost of these activities
and other efforts to enhance the productivity of our retail operations, along
with higher pension expense in the bowling products unit, affected segment
operating earnings and margins in the quarter. In addition to the contribution
from Valley-Dynamo, operating earnings benefited from ongoing efficiency gains
in bowling products," Buckley explained.
Looking Ahead
"Our results for 2003 continue to track with our expectations," Buckley said.
"When we look at the fourth quarter and consider marine market conditions, the
low level of marine pipeline inventories, our dealers' purchase commitments, the
couple of cents we'll get from recent acquisitions and a lower effective tax
rate, we estimate earnings between $0.28 and $0.33 per diluted share in the
quarter versus $0.22 last year. Excluding the $0.18 per share litigation charge
taken in the first quarter, this would bring diluted EPS for the year to $1.50
to $1.55, slightly above our previously indicated range of $1.45 to $1.50 and
compared with $1.14 reported for 2002."
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 release. These risks
include, but are not limited to, the effect of a weak economy and stock market
on consumer confidence and thus on demand for marine, fitness, billiards and
bowling equipment and products; the impact of interest rates, fuel prices and
weather conditions on demand for marine products; the ability to develop and
produce new products and technologies; the ability to maintain product quality
and service standards expected by our customers; the ability to successfully
integrate acquisitions; the ability to maintain effective distribution;
competitive pricing pressures; the success of new product introductions; the
success of marketing and cost management programs; the ability to maintain or
increase market share; the financial strength of dealers and independent boat
builders; the ability to successfully manage pipeline inventories; adverse
foreign economic conditions; shifts in currency exchange rates; the effect of
weak financial markets on pension expense and funding levels; the ability to
complete environmental remediation efforts and resolve claims and litigation at
the cost estimated; the success of global sourcing and supply chain management
initiatives; the ability to maintain good relationships with its labor unions;
competition from new technologies; possible increases in tariffs on the
company's boat and bowling equipment sales into Europe; and imports from Asia
and increased competition from Asian competitors. Additional factors are
included in the company's Annual Report on Form 10-K for 2002 and Quarterly
Report on Form 10-Q for the quarter ended June 30, 2003.
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; Teignbridge propellers; MotoTron electronic controls; Northstar marine
electronics; Navman GPS-based products; IDS dealer management systems; Sea Ray,
Bayliner, Maxum, Hatteras, Meridian and Sealine pleasure boats; Baja
high-performance boats; Boston Whaler and Trophy offshore fishing boats;
Princecraft 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
www.brunswick.com .
Brunswick Corporation
Comparative Consolidated Statements of Income
(in millions, except per share data)
(unaudited)
Quarter Ended September 30
2003 2002 % Change
Net sales $1,036.3 $900.0 15%
Cost of sales 781.2 694.4
Selling, general and administrative
expense 192.6 158.3
Operating earnings 62.5 47.3 32%
Interest expense (10.1) (10.9) -7%
Other income 5.9 0.5
Earnings before income taxes 58.3 36.9 58%
Income tax provision 20.4 13.3
Net earnings $37.9 $23.6 61%
Earnings per common share:
Basic $0.42 $0.26 62%
Diluted $0.41 $0.26 58%
Average shares used for computation of:
Basic earnings per share 91.2 90.5 1%
Diluted earnings per share 92.3 91.0 1%
Effective tax rate 35.0% 36.0%
Brunswick Corporation
Comparative Consolidated Statements of Income
(in millions, except per share data)
(unaudited)
Nine Months Ended September 30
2003 2002 % Change
Net sales $3,041.8 $2,783.9 9%
Cost of sales 2,314.1 2,147.1
Selling, general and administrative
expense 540.0 481.3
Litigation charge 25.0 -
Operating earnings (A) 162.7 155.5 5%
Interest expense (30.9) (32.5) -5%
Other income 14.8 6.5
Earnings before income taxes 146.6 129.5 13%
Income tax provision 51.3 46.5
Earnings before cumulative effect of
change in accounting principle 95.3 83.0 15%
Cumulative effect of change in
accounting principle, net of tax (B) - (25.1)
Net earnings $95.3 $57.9 65%
Basic earnings per common share:
Earnings before cumulative effect of
change in accounting principle $1.05 $0.92 14%
Cumulative effect of change in
accounting principle (B) - (0.28)
Net earnings $1.05 $0.64 64%
Diluted earnings per common share:
Earnings before cumulative effect of
change in accounting principle $1.04 $0.92 13%
Cumulative effect of change in
accounting principle (B) - (0.28)
Net earnings $1.04 $0.64 63%
Average shares used for computation of:
Basic earnings per share 90.9 89.8 1%
Diluted earnings per share 91.4 90.7 1%
Effective tax rate 35.0% 35.9%
(A) Operating earnings include a $25.0 million litigation charge
recorded in the first quarter of 2003 in connection with a patent
infringement lawsuit relating to the design of a cross trainer.
(B) The company adopted SFAS No. 142, effective Jan. 1, 2002.
Brunswick Corporation
Selected Financial Information
(in millions)
(unaudited)
Segment Information
Quarter Ended September 30
Net Sales
%
2003 2002 Change
Marine Engine $500.8 $426.2 18%
Boat 404.5 333.9 21%
Marine eliminations (71.6) (57.5)
Total Marine 833.7 702.6 19%
Fitness 105.1 108.7 -3%
Bowling & Billiards 97.5 88.7 10%
Corporate/Other - -
Total $1,036.3 $900.0 15%
Quarter Ended September 30
Operating Earnings Operating Margin
%
2003 2002 Change 2003 2002
Marine Engine $60.9 $51.7 18% 12.2% 12.1%
Boat 8.2 0.2 NM 2.0% 0.1%
Marine eliminations - -
Total Marine 69.1 51.9 33% 8.3% 7.4%
Fitness 8.7 9.7 -10% 8.3% 8.9%
Bowling & Billiards 0.1 - NM 0.1% 0.0%
Corporate/Other (15.4) (14.3) 8%
Total 62.5 47.3 32% 6.0% 5.3%
Nine Months Ended September 30
Net Sales
%
2003 2002 Change
Marine Engine $1,435.5 $1,302.4 10%
Boat 1,202.0 1,061.1 13%
Marine eliminations (201.8) (171.5)
Total Marine 2,435.7 2,192.0 11%
Fitness (A) 329.4 317.3 4%
Bowling & Billiards 276.7 274.6 1%
Corporate/Other - -
Total $3,041.8 $2,783.9 9%
Nine Months Ended September 30
Operating Earnings Operating Margin
%
2003 2002 Change 2003 2002
Marine Engine $144.4 $154.2 -6% 10.1% 11.8%
Boat 54.6 14.5 NM 4.5% 1.4%
Marine eliminations - -
Total Marine 199.0 168.7 18% 8.2% 7.7%
Fitness (A) 1.5 22.6 NM 0.5% 7.1%
Bowling & Billiards 10.4 6.8 53% 3.8% 2.5%
Corporate/Other (48.2) (42.6) 13%
Total $162.7 $155.5 5% 5.3% 5.6%
(A) Fitness segment operating earnings include a $25.0 million
litigation charge recorded in the first quarter of 2003, in
connection with a patent infringement lawsuit relating to the design
of a cross trainer.
NM = Not Meaningful
Brunswick Corporation
Comparative Consolidated Balance Sheets
(in millions)
Sept. 30, Dec. 31, Sept. 30,
2003 2002 2002
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $353.9 $351.4 $368.1
Accounts and notes receivables,
net 348.1 401.4 418.8
Inventories
Finished goods 297.6 272.5 254.6
Work-in-process 210.8 201.6 194.5
Raw materials 89.7 72.8 64.6
Net inventories 598.1 546.9 513.7
Prepaid income taxes 321.8 305.1 331.2
Prepaid expenses and income tax
refunds receivable 45.2 55.4 40.2
Current assets 1,667.1 1,660.2 1,672.0
Net property 797.5 792.7 776.7
Other assets
Goodwill and other intangibles 687.5 570.3 554.9
Investments and other long-term
assets 426.9 383.9 369.6
Total assets $3,579.0 $3,407.1 $3,373.1
Liabilities and shareholders' equity
Current liabilities
Short-term debt $30.5 $28.9 $29.6
Accounts payable 317.8 291.2 253.0
Accrued expenses and accrued
income taxes 724.2 685.5 669.4
Current liabilities 1,072.5 1,005.6 952.0
Long-term debt 584.5 589.5 597.7
Deferred items 689.1 710.2 586.9
Common shareholders' equity 1,232.9 1,101.8 1,236.5
Total liabilities and shareholders'
equity $3,579.0 $3,407.1 $3,373.1
Supplemental Information
Debt-to-capitalization rate 33.3% 35.9% 33.7%
Brunswick Corporation
Comparative Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Nine Months Ended September 30
2003 2002
Cash flows from operating activities
Net earnings $95.3 $57.9
Depreciation and amortization 111.2 111.4
Change in accounting principle,
net of tax - 25.1
Changes in noncash current assets
and current liabilities 98.1 39.6
Income taxes (23.0) 41.7
Other, net 23.5 41.8
Net cash provided by operating
activities 305.1 317.5
Cash flows from investing activities
Capital expenditures (93.7) (64.8)
Investments (35.6) (6.7)
Acquisitions of businesses, net of
cash acquired (172.6) (8.8)
Other, net 3.4 8.4
Net cash used for investing
activities (298.5) (71.9)
Cash flows from financing activities
Net issuances (repayments) of
commercial paper and other
short-term debt 3.1 (8.6)
Payments of long-term debt
including current maturities (19.3) (17.6)
Stock options exercised 12.1 40.2
Net cash provided by (used for)
financing activities (4.1) 14.0
Net increase in cash and cash
equivalents 2.5 259.6
Cash and cash equivalents at January 1 351.4 108.5
Cash and cash equivalents at
September 30 $353.9 $368.1
Free Cash Flow
Net cash provided by operating
activities $305.1 $317.5
Net cash provided by (used for):
Capital expenditures (93.7) (64.8)
Other, net 3.4 8.4
Total Free Cash Flow $214.8 $261.1
SOURCE Brunswick Corporation 10/24/2003
/CONTACT: Kathryn Chieger, Vice President - Corporate and Investor
Relations of Brunswick Corporation, +1-847-735-4612/
/Web site: http://www.brunswick.com /(BC)
This information is provided by RNS
The company news service from the London Stock Exchange
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