RNS Number:0480Y
Brunswick Corp
27 April 2004
Brunswick Reports EPS of $0.50 in First Quarter
LAKE FOREST, Ill., April 27 -- Brunswick Corporation (NYSE: BC) reported today
net earnings of $48.0 million, or $0.50 per diluted share, for the first quarter
of 2004. This compares to net earnings of $3.8 million, or $0.04 per diluted
share for the year-ago quarter, which includes a $25.0 million ($0.18 per
diluted share) litigation charge to operating earnings relating to the
settlement of a lawsuit.
Commenting on the quarter, Brunswick Chairman and Chief Executive Officer George
W. Buckley said, "We started the year on a very strong note with a 28 percent
increase in sales in the quarter coming on double-digit gains reported by all of
our operating units. The primary drivers were our marine engine and boat groups,
which benefited from a better marine retail environment than we've seen in some
time. Acquisitions also played a role in the sales gain. Excluding the sales
from business units we didn't own in the first quarter last year, sales rose 19
percent, illustrating the strong performance delivered by our base operations.
Higher sales and production volumes, along with our ongoing focus on effective
cost management, contributed to a doubling of operating earnings to $78.5
million and a 240 basis point improvement in operating margins, excluding the
litigation charge. We ended the quarter with our balance sheet in excellent
shape. Debt-to-total capital was 30.4 percent at quarter end compared with 35.9
percent a year earlier. Our strong balance sheet provides us with tremendous
financial flexibility to pursue additional investment and acquisition
opportunities to build our core businesses. All in all it was a great quarter
and further evidence of the successful execution of our growth strategy."
First Quarter Results
For the quarter ended March 31, 2004, the company reported a net sales increase
of 28 percent to $1,199.6 million, up from $934.5 million a year earlier.
Operating earnings rose to $78.5 million compared with $13.0 million in the
year-ago quarter, and operating margins improved to 6.5 percent from 1.4
percent. Excluding the $25.0 million litigation charge in the first quarter of
2003, operating earnings totaled $38.0 million, and operating margins were 4.1
percent.
Net earnings totaled $48.0 million, or $0.50 per diluted share, up from $3.8
million, or $0.04 per diluted share, for the first quarter of 2003. Excluding
the previously mentioned litigation charge, net earnings totaled $19.8 million,
or $0.22 per diluted share, in the first quarter of 2003.
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group and Brunswick
New Technologies, reported sales of $527.9 million in the first quarter of 2004,
up 28 percent from $412.8 million in the year-ago first quarter. Operating
earnings in the first quarter more than doubled to $42.6 million versus $19.3
million, and operating margins increased to 8.1 percent compared with 4.7
percent for the same quarter in 2003.
"Mercury Marine had an excellent quarter with strong performances from all units
-- outboard and sterndrive engines and parts and accessories -- contributing to
the sales gain," Buckley said. "Strong retail demand was the primary driver
behind the improved results."
"Highlighting the quarter was the much-anticipated launch of Verado, our family
of high-horsepower supercharged four-stroke outboard engines. Customer response
to the new engines has been outstanding, and we began shipping product this
week," Buckley added. "Verado's power, torque, near-silent running, excellent
fuel economy and low-emission characteristics are unlike anything available in
the market today. We believe Verado reaffirms Mercury's standing as the
technology leader in marine propulsion."
"Brunswick New Technologies (BNT) also contributed to the sales gain for the
Marine Engine segment, primarily due to the acquisition of Navman NZ Limited, a
producer of global positioning system-based products, which was completed in the
second quarter of 2003," Buckley added. "We have been very pleased with Navman's
financial results and growth rates, fueled primarily by the success of new
products. In addition, Navman, working in conjunction with Northstar and other
BNT units, is an important contributor to our product development and boat
electronics integration initiatives."
Boat Segment
The Brunswick Boat Group comprises the Boat segment and includes the Sea Ray,
Bayliner, Maxum, Hatteras, Sealine, Meridian, Boston Whaler, Trophy, Baja,
Crestliner, Lowe, Lund 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 first quarter of $512.0 million, up 35
percent compared with $378.6 million in the first quarter of 2003. Boat segment
sales benefited from incremental sales from its new parts and accessories (P&A)
business, which began with the acquisition of Land 'N' Sea and Attwood last
year. Excluding the P&A business, boat sales increased 23 percent in the
quarter. Operating earnings increased to $32.0 million, more than double the
$14.1 million reported in the first quarter of 2003, and operating margins rose
to 6.3 percent, up from 3.7 percent. The acquisition of the Crestliner, Lowe and
Lund brands was completed at the end of the quarter and, therefore, did not have
any impact on sales or operating earnings for the Boat Group in the first
quarter of 2004.
"We are seeing strong retail demand for all of our boat brands, which is leading
to stronger wholesale shipments to our dealers," Buckley said. "Early boat shows
are showing positive trends. Even more encouraging is that we are seeing
strength in all parts of the country and across our entire product range. New
models in all portions of the product spectrum are selling especially well,
including the Bayliner 175 runabout, the Sea Ray 500 Sundancer, and the Hatteras
80 Motor Yacht. Demand for these particular models is nearly outstripping our
ability to supply. Higher volumes and effective cost management account for the
significant improvement in operating margins."
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 first
quarter of 2004 totaled $130.6 million, up 10 percent from $119.2 million in the
year-ago quarter. Operating earnings for the quarter totaled $9.2 million
compared with an operating loss of $12.5 million for the year-ago quarter, which
includes the $25 million litigation charge. Operating margins were 7.0 percent
in the first quarter of 2004. Excluding the litigation charge, operating
earnings totaled $12.5 million, and operating margins were 10.5 percent in the
first quarter of 2003.
"In the past two years, Life Fitness has introduced 90 new products. They have
been very well received in the marketplace, and strong customer demand is the
primary driver of the sales gain in the quarter," Buckley noted. "That's the
good news. However, the pace and the timing of these new product launches, 40 of
which were introduced in the fourth quarter of 2003 alone, are having a
temporary impact on operating margins for the segment. The start-up of new model
production at our Ramsey, Minn., facility came at the same time we were
transitioning production to Ramsey from our Paso Robles, Calif., facility, which
we closed during the quarter. Operating inefficiencies, higher freight cost to
meet customer delivery requirements, along with costs associated with the Paso
Robles closure, had an adverse impact on operating margins. As actions to
resolve the operational issues take hold over the coming months, we expect the
margin pressure for the segment to be mitigated."
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 2004 totaled $110.2 million, up 29
percent compared with $85.1 million in the year-ago quarter. Operating earnings
were up 61 percent to $13.5 million in the first quarter versus $8.4 million,
and operating margins improved to 12.3 percent compared with 9.9 percent in
2003.
"Each business unit -- bowling retail centers, bowling products and billiards --
contributed to the strong sales and earnings performance for the segment,"
Buckley said. "In addition, Valley-Dynamo, the leading player in coin-operated
pool tables that we acquired last June, continues to perform at expected levels.
Excluding incremental sales from this acquisition, segment sales increased 19
percent in the quarter. Higher volumes, effective cost management and accretive
margins from the Valley-Dynamo acquisition accounted for the significant
improvement in operating margins for the segment."
Looking Ahead
"2004 is shaping up to be a record year for Brunswick in both sales and
earnings," Buckley commented. "The success of innovative new products, cost
management efforts and accretive acquisitions, all buoyed by improved economic
and marine market conditions, are behind our more optimistic outlook for the
year. As we previously announced, we have raised our earnings estimate for 2004
to $2.45 to $2.65 per share, up from $2.10 to $2.30 per share. For our marine
segments combined, we expect sales growth in the 27 to 29 percent range,
assuming an increase in marine retail in the low- to mid-teens and including the
incremental sales from acquisitions. For our fitness and bowling and billiards
segments, we maintain our earlier expectations of sales growth in the
high-single digits. Overall, 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
and the margin impact of the transition to low-emission outboard engines. Our
earnings estimates assume full-year operating margin improvement in the range of
150 to 200 basis points. Looking at the second quarter, which is seasonally the
strongest for marine product sales, we're estimating earnings in the range of
$0.82 to $0.90 per share, as compared with $0.59 per share for the second
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; competitive pricing pressures; the ability to
maintain effective distribution; the success of global sourcing and supply chain
management initiatives; the ability to successfully integrate acquisitions; the
success of new product introductions; the impact of weather conditions on sales
of marine products and retail bowling center revenues; the financial strength of
dealers and independent boat builders; shifts in currency exchange rates; the
impact of interest rates and fuel prices on demand for marine products; the
impact of financial markets on pension expense and funding levels; the ability
to maintain market share in high-margin products; the ability to maintain
product quality and service standards expected by our customers; the success of
marketing and cost management programs; the ability to develop product
technologies that comply with regulatory requirements; adverse foreign economic
conditions; the ability to maintain good relationships with its labor unions;
the ability to successfully manage pipeline inventories; the ability to complete
environmental remediation efforts and resolve claims and litigation at the cost
estimated; 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 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; MotorGuide trolling motors; 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; 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 www.brunswick.com .
Brunswick Corporation
Comparative Consolidated Statements of Income
(in millions, except per share data)
(unaudited)
Quarter Ended March 31
2004 2003 % Change
Net sales $1,199.6 $934.5 28%
Cost of sales 902.3 725.7 24%
Selling, general and administrative
expense 186.1 143.1 30%
Research and development expense 32.7 27.7 18%
Litigation settlement - 25.0
Operating earnings (A) 78.5 13.0 NM
Interest expense (10.1) (10.7) 6%
Other income 3.2 3.6
Earnings before income taxes 71.6 5.9 NM
Income tax provision 23.6 2.1
Net earnings $48.0 $3.8 NM
Earnings per common share:
Basic $0.51 $0.04 NM
Diluted 0.50 0.04 NM
Average shares used for computation of:
Basic earnings per share 93.7 90.6 3%
Diluted earnings per share 95.6 90.6 6%
Effective tax rate 33.0% 35.8%
(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.
NM = Not Meaningful
Brunswick Corporation
Selected Financial Information
(in millions)
(unaudited)
Segment Information
Quarter Ended March 31
Net Sales Operating Operating
Earnings Margin
% %
2004 2003 Change 2004 2003 Change 2004 2003
Marine Engine $527.9 $412.8 28% $42.6 $19.3 NM 8.1% 4.7%
Boat 512.0 378.6 35% 32.0 14.1 NM 6.3% 3.7%
Marine
eliminations (80.2) (61.2) - -
Total Marine 959.7 730.2 31% 74.6 33.4 NM 7.8% 4.6%
Fitness (A) 130.6 119.2 10% 9.2 (12.5) NM 7.0% -10.5%
Bowling &
Billiards 110.2 85.1 29% 13.5 8.4 61% 12.3% 9.9%
Eliminations (0.9) - - -
Corp/Other - - (18.8) (16.3) -15%
Total $1,199.6 $934.5 28% $78.5 $13.0 NM 6.5% 1.4%
(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.
NM = Not Meaningful
Brunswick Corporation
Comparative Consolidated Balance Sheets
(in millions)
March 31, December 31, March 31,
2004 2003 2003
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $173.8 $345.9 $280.0
Accounts and notes receivables, net 455.3 374.4 441.7
Inventories
Finished goods 394.7 325.3 293.4
Work-in-process 222.6 205.7 209.8
Raw materials 105.5 92.8 64.5
Net inventories 722.8 623.8 567.7
Prepaid income taxes 297.5 302.3 302.6
Prepaid expenses and other 51.4 68.8 43.4
Current assets 1,700.8 1,715.2 1,635.4
Net property 847.8 827.1 777.8
Other assets
Goodwill and other intangibles 857.3 699.7 577.9
Investments and other long-term
assets 384.3 360.5 298.9
Total assets $3,790.2 $3,602.5 $3,290.0
Liabilities and shareholders' equity
Current liabilities
Short-term debt $48.8 $23.8 $30.7
Accounts payable 334.1 321.3 281.0
Accrued expenses 758.4 756.7 650.5
Current liabilities 1,141.3 1,101.8 962.2
Long-term debt 585.8 583.8 588.1
Other long-term liabilities 609.8 593.9 633.9
Common shareholders' equity 1,453.3 1,323.0 1,105.8
Total liabilities and shareholders'
equity $3,790.2 $3,602.5 $3,290.0
Supplemental Information
Debt-to-capitalization rate 30.4% 31.5% 35.9%
Brunswick Corporation
Comparative Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Quarter Ended March 31
2004 2003
Cash flows from operating activities
Net earnings $48.0 $3.8
Depreciation and amortization 38.3 35.6
Changes in noncash current assets and
current liabilities (155.6) (110.3)
Income taxes and other, net 54.1 28.7
Net cash used for operating activities (15.2) (42.2)
Cash flows from investing activities
Capital expenditures (32.5) (19.9)
Investments (4.9) (11.9)
Acquisitions of businesses, net of debt and
cash acquired (196.2) -
Other, net (0.9) -
Net cash used for investing activities (234.5) (31.8)
Cash flows from financing activities
Net issuances of commercial paper and other
short-term debt 24.2 2.2
Stock options exercised 53.4 0.4
Net cash provided by financing activities 77.6 2.6
Net decrease in cash and cash equivalents (172.1) (71.4)
Cash and cash equivalents at January 1 345.9 351.4
Cash and cash equivalents at March 31 $173.8 $280.0
Free Cash Flow
Net cash used for operating activities $(15.2) $(42.2)
Net cash used for:
Capital expenditures (32.5) (19.9)
Other, net (0.9) -
Total Free Cash Flow $(48.6) $(62.1)
SOURCE Brunswick Corporation 04/27/2004
/CONTACT: Kathryn Chieger, Vice President - Corporate and Investor
Relations of Brunswick Corporation, +1-847-735-4612/
/Web site: http://www.brunswick.com / BC
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Statements in this press release regarding Brunswick Corporation's
business which are not historical facts are "forward-looking statements" that
involve risks and uncertainties. For a discussion of such risks and
uncertainties, which could cause actual results to differ from those contained
in the forward-looking statements, see "Risk Factors" in the Company's Annual
Report or Form 10-K for the most recently ended fiscal year.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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