RNS Number:7921U
Brunswick Corp
29 January 2004
Brunswick Reports EPS of $0.43 in Fourth Quarter
LAKE FOREST, Ill., Jan 29, 2004 -- Brunswick Corporation (NYSE: BC) reported
today net earnings of $39.9 million, or $0.43 per diluted share, for the fourth
quarter of 2003, nearly double net earnings of $20.5 million, or $0.22 per
diluted share, for the year-ago quarter. The company said the 95 percent
increase in net earnings came on a 17 percent increase in sales and a 43 percent
improvement in operating earnings.
Commenting on the quarter, Brunswick Chairman and Chief Executive Officer George
W. Buckley said, "We reported an excellent fourth quarter, and we are very
pleased with the performance of all of our business units. Each of our operating
segments -- Marine Engine, Boat, Fitness and Bowling & Billiards -- reported
double-digit sales growth for the quarter. These results reflect the success of
our strategy to develop and introduce new products and technologies that inspire
and excite our customers, as well as the benefit of acquisitions and the impact
of a weaker U.S. dollar. Excluding acquisitions, net sales for the quarter were
up 10 percent. Ongoing effective cost management efforts contributed to the
increase in operating earnings and a 100 basis point improvement in operating
margins to 5.4 percent."
"We enter 2004 with our balance sheet in excellent shape, largely due to our
ability to generate significant free cash flow. Good working capital management
combined with the increase in earnings resulted in $240 million of free cash
flow for the year after capital expenditures of $160 million. Debt- to-total
capital at year end was 31.5 percent compared with 35.9 percent a year earlier,
providing us the financial flexibility to seek out opportunities to continue to
improve and grow our business," Buckley said.
Fourth Quarter Results
For the quarter ended Dec. 31, 2003, the company reported that net sales
increased 17 percent to $1,086.9 million, up from $928.0 million a year earlier.
Sales in the fourth quarter of 2003 benefited from higher volumes, improved
performance at the company's US Marine division, the impact of a weaker U.S.
dollar and incremental sales from acquisitions that were not in the year-ago
quarter. Operating earnings rose to $58.7 million compared with $41.1 million in
the year-ago quarter, and operating margins improved to 5.4 percent from 4.4
percent. In addition to the higher sales, the company said that effective cost
management throughout the organization led to the improved operating leverage
and helped offset a $7 million increase in pension and health-care costs
compared with the year-ago fourth quarter. Other income, consisting primarily of
earnings from joint ventures and equity investments as well as interest income,
contributed $5.9 million of pre-tax earnings in the fourth quarter of 2003
versus $1.8 million in the fourth quarter a year ago.
Net earnings totaled $39.9 million, or $0.43 per diluted share, up from $20.5
million, or $0.22 per diluted share, for the fourth quarter of 2002. Net
earnings in the fourth quarter of 2003 also benefited from a lower effective tax
rate. The company said its effective tax rate for the year was reduced to 32.75
percent from 35 percent through the first three quarters of 2003. To make the
cumulative adjustment for the year, the effective tax rate in the fourth quarter
was 26.7 percent compared with 36.1 percent in the year- ago quarter. The
company was able to reduce its effective tax rate in large part due to the
prepayment of taxes related to an outstanding IRS case and higher international
earnings that were taxed at rates lower than domestic rates.
2003 Results
For the year ended Dec. 31, 2003, the company had net sales of $4,128.7 million,
up 11 percent from $3,711.9 million in 2002. All business segments contributed
to the company's good performance for the year, along with the benefit of
acquisitions. Excluding acquisitions, net sales were up 8 percent. Operating
earnings reached $221.4 million for the year, which includes a $25 million
litigation charge recorded in the first quarter, and operating margins were 5.4
percent. Excluding the litigation charge, operating earnings rose 25 percent to
$246.4 million, up from $196.6 million for 2002, and operating margins improved
to 6.0 percent from 5.3 percent a year ago. Further, the company said that
earnings from joint ventures and equity investments plus interest income
contributed $20.7 million to pre-tax earnings in 2003, compared with $8.3
million a year ago.
Net earnings for 2003 were $135.2 million, or $1.47 per diluted share, which
includes the aforementioned litigation charge ($0.18 per diluted share).
Excluding the litigation charge, earnings per diluted share totaled $1.65 for
the year. Net earnings for 2002 totaled $78.4 million, or $0.86 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. Excluding the effect of the accounting change, net earnings for 2002
totaled $103.5 million, or $1.14 per diluted share.
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group and Brunswick
New Technologies, reported sales of $473.4 million in the fourth quarter of
2003, up 18 percent from $402.8 million in the year-ago fourth quarter.
Operating earnings in the fourth quarter were up 60 percent to $26.7 million
versus $16.7 million, and operating margins increased to 5.6 percent compared
with 4.1 percent for the same quarter in 2002.
For the full year, Marine Engine segment sales rose 12 percent to $1,908.9
million, and operating earnings were $171.1 million versus $170.9 million a year
ago. Operating margins for the year declined to 9.0 percent versus 10.0 percent
in 2002.
"Mercury Marine's international unit had an excellent 2003 with sales increasing
22 percent, driven by share gains as well as the impact of the weaker U.S.
dollar," Buckley said. "Higher sales in the domestic market during the latter
part of the year helped offset a slow start in the first half resulting in
relatively flat year-over-year domestic sales. Pipeline engine inventories
continue to be in excellent shape at 22 weeks of supply at the end of 2003 as
compared with 23 weeks of supply a year ago."
"Brunswick New Technologies also contributed to the sales gain for the Marine
Engine segment, primarily due to the acquisition of Navman NZ Limited, which was
completed in the second quarter," Buckley added. "The addition of this producer
of global positioning system-based products further enhances our ability to
manufacture boats with integrated marine electronics."
"The Marine Engine segment posted a significant improvement in operating margins
in the second half of the year, despite higher R&D spending in support of
Brunswick New Technologies, increased pension and health-care expense and margin
pressure from a shift in our outboard product mix to low-emission engines that
have lower margins," Buckley said. "The investments in BNT and new engine
technologies are an important part of our strategy to enhance our capabilities
and product offerings for the long term."
"During the year, we completed the development of Project "X", our high
horsepower four-stroke outboard engine. This game-changing engine will be
formally launched at the Miami International Boat Show in a couple of weeks,
with shipments scheduled to begin in April," Buckley noted.
Boat Segment
The Brunswick Boat Group comprises the Boat segment and includes the Sea Ray,
Bayliner, Maxum, Hatteras, Sealine, Meridian, Boston Whaler, Trophy, Baja and
Princecraft boat brands and the Land 'N' Sea and Attwood marine parts and
accessories distribution and manufacturing businesses. The Boat segment reported
sales for the fourth quarter of $414.9 million, up 21 percent compared with
$344.2 million in the fourth quarter of 2002. Boat segment sales benefited from
incremental sales from its new P&A business, which began with the acquisition of
Land 'N' Sea and Attwood Marine in June and September of 2003, respectively.
Excluding these acquisitions, sales increased 13 percent in the quarter.
Operating earnings for the Boat segment increased to $9.3 million, more than
double the $4.5 million reported in the fourth quarter of 2002, and operating
margins rose to 2.2 percent, up from 1.3 percent.
For 2003, Boat segment sales were up 15 percent to $1,616.9 million from
$1,405.3 million in 2002. Excluding the new P&A businesses, Boat segment sales
were up 11 percent for the year. Operating earnings for the Boat segment more
than tripled to $63.9 million from $19.0 million in 2002, and operating margins
improved to 4.0 percent compared with 1.4 percent in 2002.
"Our Boat Group showed remarkable strength across all brands and segments in
2003," Buckley said. "The improvement in retail demand that began toward the end
of the second quarter has continued, leading to stronger wholesale shipments to
our dealers. Importantly, pipeline inventories are in excellent shape at 28
weeks of supply at year end, unchanged from the same time a year ago."
"Among the most significant accomplishments during the year has been the
turnaround at our US Marine Division, which we expect to return to profitability
in 2004," Buckley remarked. "By starting with exciting new products such as the
Bayliner 175 (an entry-level boat, engine and trailer package with a suggested
retail price of $9,995), and then adding the Bayliner 185, we've re-established
Bayliner as the leader in family boating. Sea Ray also contributed to the Boat
segment's strong performance for the year with double-digit sales and earnings
growth driven by the success of a number of new models."
"During 2003, we continued to expand our offerings of products and services,
including boat parts and accessories and wholesale financing," Buckley added.
"The acquisition of Land 'N' Sea and Attwood and the launch of Brunswick
Acceptance Company were instrumental in achieving our goal of enveloping our
dealers with the competitive advantages that will make them, and Brunswick, more
successful."
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 fourth
quarter of 2003 totaled $157.2 million, up 13 percent from $139.4 million in the
year-ago quarter. Operating earnings rose 27 percent to $28.3 million from $22.3
million, and operating margins were 18.0 percent, up 200 basis points from 16.0
percent in the fourth quarter of 2002.
For 2003, the Fitness segment reported sales of $486.6 million, up 7 percent
from $456.7 million in 2002. Operating earnings in 2003 increased 22 percent to
$54.8 million and operating margins rose to 11.3 percent, excluding the
previously mentioned $25 million litigation charge. Operating margins, including
the charge, were 6.1 percent in 2003. In 2002, operating earnings were $44.9
million and operating margins were 9.8 percent.
"During 2003, Life Fitness successfully introduced 50 new products," Buckley
said. "The market's response to our Pro II and Signature strength products and
the industrial design of our cardiovascular products was beyond our
expectations. The success of these products, increased market share and the
weaker U.S. dollar are behind the strong sales and earnings performance for the
Fitness segment."
"To better serve our European customers, in November we began shipping strength
products manufactured in our new plant in Hungary," Buckley added. "By
manufacturing closer to our customers, we reduce lead times and freight costs.
We are also seeking to improve our operating efficiency in the United States by
consolidating the manufacture of strength equipment in our Ramsey, Minn., plant.
As previously announced, this will result in the closure of our Paso Robles,
Calif., plant, which will be completed in the next few months."
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 fourth quarter of 2003 totaled $115.7 million, up
12 percent compared with $103.1 million in the year-ago quarter. Operating
earnings were up 4 percent to $15.2 million in the quarter versus $14.6 million
in the comparable quarter in 2002. Operating margins were 13.1 percent in the
fourth quarter of 2003 compared with 14.2 percent in 2002.
For 2003, the segment reported sales of $392.4 million, up 4 percent from $377.7
million in 2002. Operating earnings for the year were up 20 percent to $25.6
million from $21.4 million in 2002, and operating margins improved to 6.5
percent from 5.7 percent.
"During the year, we expanded into the coin-operated billiards table segment
with the acquisition of Valley-Dynamo, which continues to meet expectations.
Incremental sales from this acquisition drove the sales gain for the year,"
Buckley said. "We have also been investing heavily in R&D and quality programs
to enhance our offerings of bowling products and services such as Vector, a new
bowling center scoring and business management system introduced in the fourth
quarter. We also continue to convert our bowling centers into Brunswick Zones
with 13 completed in 2003. About one-third of our centers have been converted to
date, and we will have 10 more Brunswick Zones by the end of 2004. In addition
to providing a clean, family-friendly environment, we are expanding our customer
base by offering more features that attract the casual bowler."
Looking Ahead
"As we enter 2004, we are very encouraged that many of our strategic initiatives
are starting to take hold," Buckley noted. "With the economy showing more
stability and consumer confidence on the rise, we estimate marine retail market
growth in the mid-single digits for the year. When we couple these factors along
with new product introductions, share gains and incremental sales from
acquisitions completed in 2003, we expect to post sales growth for our marine
businesses in the low-double digits, and for our fitness and bowling and
billiards businesses in the high-single digits. Operating margins will benefit
from higher volumes as well as our ongoing focus on effective cost management.
This should more than offset costs associated with new product introductions and
new plant openings in Mexico and China, and the margin impact of the transition
to low-emission outboard engines. Our overall operating margins improved by 70
basis points in 2003, and we would expect to do better than that in 2004. As a
result, we estimate diluted earnings per share in the range of $2.10 to $2.30
for 2004."
"When looking at the first quarter, keep in mind that we got off to a very slow
start in the first quarter of 2003 with marine retail down 15 to 20 percent,"
Buckley explained. "Given the easy comparison, our first quarter 2004
performance should exceed the growth rates estimated for the full year. We are
estimating diluted earnings per share for the first quarter to be between $0.35
and $0.40, compared with $0.22 per diluted share for 2003, excluding the $0.18
per diluted share litigation charge recorded in the first quarter of 2003."
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
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 and negotiate favorable
terms with its labor unions; competition from new technologies; possible
increases in tariffs on certain of the company's products sold 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 Sept. 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 December 31
2003 2002 % Change
Net sales 1,086.9 $928.0 17%
Cost of sales 817.5 704.9
Selling, general and administrative expense 177.7 152.5
Research and development expense 33.0 29.5
Operating earnings 58.7 41.1 43%
Interest expense (10.1) (10.8) -6%
Other income 5.9 1.8
Earnings before income taxes 54.5 32.1 70%
Income tax provision 14.6 11.6
Net earnings $39.9 $20.5 95%
Earnings per common share:
Basic $0.43 $0.23 87%
Diluted $0.43 $0.22 95%
Average shares used for computation of:
Basic earnings per share 92.2 90.5 2%
Diluted earnings per share 93.5 90.6 3%
Effective tax rate 26.7% 36.1%
Brunswick Corporation
Comparative Consolidated Statements of Income
(in millions, except per share data)
Year Ended December 31
2003 2002 % Change
(unaudited)
Net sales $4,128.7 $3,711.9 11%
Cost of sales 3,131.6 2,852.0
Selling, general and administrative
expense 632.5 560.5
Research and development expense 118.2 102.8
Litigation charge 25.0 -
Operating earnings (A) 221.4 196.6 13%
Interest expense (41.0) (43.3) -5%
Other income 20.7 8.3
Earnings before income taxes 201.1 161.6 24%
Income tax provision 65.9 58.1
Earnings before cumulative effect of
change in accounting principle 135.2 103.5 31%
Cumulative effect of change in
accounting principle, net of tax (B) - (25.1)
Net earnings $135.2 $78.4 72%
Basic earnings per common share:
Earnings before cumulative effect of
change in accounting principle $1.48 $1.15 29%
Cumulative effect of change in
accounting principle (B) - (0.28)
Net earnings $1.48 $0.87 70%
Diluted earnings per common share:
Earnings before cumulative effect of
change in accounting principle $1.47 $1.14 29%
Cumulative effect of change in
accounting principle (B) - (0.28)
Net earnings $1.47 $0.86 71%
Average shares used for computation
of:
Basic earnings per share 91.2 90.0 1%
Diluted earnings per share 91.9 90.7 1%
Effective tax rate 32.75% 36.0%
(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)
Segment Information
Quarter Ended December 31
Net Sales
%
2003 2002 Change
(unaudited)
Marine Engine $473.4 $402.8 18%
Boat 414.9 344.2 21%
Marine eliminations (74.3) (61.5)
Total Marine 814.0 685.5 19%
Fitness 157.2 139.4 13%
Bowling & Billiards 115.7 103.1 12%
Corporate/Other - -
Total $1,086.9 $928.0 17%
Quarter Ended December 31
Operating Earnings Operating Margin
%
2003 2002 Change 2003 2002
(unaudited)
Marine Engine $26.7 $16.7 60% 5.6% 4.1%
Boat 9.3 4.5 NM 2.2% 1.3%
Marine eliminations - -
Total Marine 36.0 21.2 70% 4.4% 3.1%
Fitness 28.3 22.3 27% 18.0% 16.0%
Bowling &
Billiards 15.2 14.6 4% 13.1% 14.2%
Corporate/Other (20.8) (17.0) 22%
Total $58.7 $41.1 43% 5.4% 4.4%
Year Ended December 31
Net Sales
%
2003 2002 Change
(unaudited)
Marine Engine $1,908.9 $1,705.2 12%
Boat 1,616.9 1,405.3 15%
Marine eliminations (276.1) (233.0)
Total Marine 3,249.7 2,877.5 13%
Fitness (A) 486.6 456.7 7%
Bowling & Billiards 392.4 377.7 4%
Corporate/Other - -
Total $4,128.7 $3,711.9 11%
Year Ended December 31
Operating Earnings Operating Margin
%
2003 2002 Change 2003 2002
(unaudited)
Marine Engine $171.1 $170.9 0% 9.0% 10.0%
Boat 63.9 19.0 NM 4.0% 1.4%
Marine eliminations - -
Total Marine 235.0 189.9 24% 7.2% 6.6%
Fitness (A) 29.8 44.9 NM 6.1% 9.8%
Bowling
& Billiards 25.6 21.4 20% 6.5% 5.7%
Corporate/Other (69.0) (59.6) 16%
Total $221.4 $196.6 13% 5.4% 5.3%
(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)
December 31
2003 2002
(unaudited)
Assets
Current assets
Cash and cash equivalents $345.9 $351.4
Accounts and notes receivables, net 374.4 401.4
Inventories
Finished goods 325.3 272.5
Work-in-process 205.7 201.6
Raw materials 92.8 72.8
Net inventories 623.8 546.9
Prepaid income taxes 302.3 305.1
Prepaid expenses and other 68.8 55.4
Current assets 1,715.2 1,660.2
Net property 827.1 792.7
Other assets
Goodwill and other intangibles 699.7 570.3
Investments and other long-term assets 360.5 291.5
Total assets $3,602.5 $3,314.7
Liabilities and shareholders' equity
Current liabilities
Short-term debt $23.8 $28.9
Accounts payable 321.3 291.2
Accrued expenses 756.7 685.5
Current liabilities 1,101.8 1,005.6
Long-term debt 583.8 589.5
Deferred items 593.9 617.8
Common shareholders' equity 1,323.0 1,101.8
Total liabilities and shareholders' equity $3,602.5 $3,314.7
Supplemental Information
Debt-to-capitalization rate 31.5% 35.9%
Brunswick Corporation
Comparative Consolidated Statements of Cash Flows
(in millions)
Year Ended December 31
2003 2002
(unaudited)
Cash flows from operating activities
Net earnings $135.2 $78.4
Depreciation and amortization 151.4 148.4
Change in accounting principle, net of tax - 25.1
Changes in noncash current assets
and current liabilities 100.8 90.8
Income taxes (19.5) 64.3
Other, net 27.2 6.0
Net cash provided by operating activities 395.1 413.0
Cash flows from investing activities
Capital expenditures (159.8) (112.6)
Investments (39.3) (8.9)
Acquisitions of businesses, net of
cash acquired (177.3) (21.2)
Proceeds on the sale of property,
plant and equipment 7.5 13.2
Other, net (3.0) (0.2)
Net cash used for investing activities (371.9) (129.7)
Cash flows from financing activities
Net issuances (repayments) of commercial
paper and other short-term debt 1.8 (9.4)
Payments of long-term debt including
current maturities (24.5) (26.2)
Cash dividends paid (45.9) (45.1)
Stock options exercised 39.9 40.3
Net cash used for financing activities (28.7) (40.4)
Net increase (decrease) in cash and
cash equivalents (5.5) 242.9
Cash and cash equivalents at January 1 351.4 108.5
Cash and cash equivalents at December 31 $345.9 $351.4
Free Cash Flow
Net cash provided by operating activities $395.1 $413.0
Net cash provided by (used for):
Capital expenditures (159.8) (112.6)
Proceeds on the sale of property, plant
and equipment 7.5 13.2
Other, net (3.0) (0.2)
Total Free Cash Flow $239.8 $313.4
Kathryn Chieger, Vice President - Corporate and Investor
Relations, of Brunswick Corporation, +1-847-735-4612
http://www.brunswick.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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