RNS Number:3873B
Brunswick Corp
29 July 2004
Brunswick Reports EPS of $0.93 in Second Quarter
LAKE FOREST, Ill., July 29 -- Brunswick Corporation (NYSE: BC) reported today a
68 percent increase in net earnings on 33 percent sales growth and a 60 percent
improvement in operating earnings for the second quarter of 2004. Net earnings
totaled $90.1 million, or $0.93 per diluted share, for the second quarter,
compared with net earnings of $53.6 million, or $0.59 per diluted share, for the
year-ago quarter.
"All of our operations -- marine, fitness and bowling and billiards --
registered double-digit sales growth for the period, contributing to the
company's outstanding performance in the quarter," said Brunswick Chairman and
Chief Executive Officer George W. Buckley. "A stronger marine retail
environment, popular new boats, engines and fitness equipment and recent
acquisitions were the primary drivers behind the 33 percent sales gain.
Excluding the effects of acquired businesses that were not part of the company a
year ago, sales were up a strong 17 percent in the quarter. In addition, higher
sales and production volumes, combined with effective cost management, resulted
in a 60 percent increase in operating earnings to $139.5 million and a 170 basis
point improvement in operating margins to 9.8 percent for the quarter. Our
balance sheet remains in excellent shape, with debt-to-total capital of 31.9
percent at quarter end as compared with 34.9 percent a year earlier, and cash
reached $438.2 million. The combination of sales growth, earnings growth and
cash flow performance was quite remarkable this quarter."
Second Quarter Results
For the quarter ended June 30, 2004, net sales increased 33 percent to $1,422.7
million, up from $1,071.0 million a year earlier. Operating earnings rose to
$139.5 million compared with $87.2 million in the year-ago quarter, and
operating margins improved to 9.8 percent from 8.1 percent. Net earnings totaled
$90.1 million, or $0.93 per diluted share, up 68 percent from $53.6 million, or
$0.59 per diluted share, for the second quarter of 2003.
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group and Brunswick
New Technologies (BNT), reported sales of $665.2 million in the second quarter
of 2004, up 27 percent from $521.9 million in the year-ago second quarter.
Operating earnings in the second quarter increased 49 percent to $95.6 million
versus $64.2 million, and operating margins advanced 210 basis points to 14.4
percent compared with 12.3 percent for the same quarter in 2003.
"While recent acquisitions contributed to this segment's solid results, sales
for our core marine engine operations alone were up 21 percent, well
outstripping industry numbers. Sales of outboard and sterndrive engines were up
double digits for the quarter as were our parts and accessories and
international sales," Buckley said. "A strong retail environment and excitement
generated by our new Verado outboard engine, which we started shipping in April,
helped set a positive tone and build momentum for the quarter."
"When we launched Verado in February, we promised it would be unlike anything
seen in the marketplace today, and we have succeeded in doing that," Buckley
said. "Customer response has been very enthusiastic with Verado garnering
critical acclaim and industry buzz. This high-horsepower, four- stroke outboard
range is the only production supercharged engine on the market. Our investment
has produced an engine unmatched in power, torque, near-silent running,
excellent fuel economy and low-emissions."
"During the quarter, BNT continued on plan, establishing itself as an integral,
growing and increasingly valuable member of the Brunswick family," Buckley said.
"While all BNT units did well, we have been particularly pleased with the
performance of Navman NZ Limited, a producer of global positioning system-based
products. Indeed, during the quarter, we purchased the remaining 30 percent of
Navman, which had been our intent when we made the initial investment in June
2003. We believe that the combined strengths of Navman and Brunswick will lead
to continued growth and more innovative products in this increasingly important
market segment."
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 second quarter of $629.9 million, up 50
percent compared with $418.9 million in the second quarter of 2003. Boat segment
sales for the quarter benefited from the full impact of our 2003 acquisitions of
Land 'N' Sea and Attwood, which serve as the foundation for a new boat parts and
accessories business, as well as the Crestliner, Lowe and Lund aluminum boat
brands acquired at the end of the first quarter of 2004. Excluding the sales of
these businesses, Boat segment sales increased 17 percent in the quarter.
Operating earnings increased to $57.0 million, 76 percent ahead of the $32.3
million reported in the second quarter of 2003, and operating margins rose 130
basis points to 9.0 percent, up from 7.7 percent.
"We are particularly gratified by the performance of our leading boat brands,"
Buckley explained. "US Marine, maker of our Bayliner brand, joins our Sea Ray,
Boston Whaler, Baja and Sealine brands registering double-digit sales gains for
the quarter. Such performance points to our boat brands' appeal and reach, as
well as our continuing focus on leading-edge products and innovation. The
Bayliner 175 runabout, the Sea Ray 500 Sundancer, the Boston Whaler 305 Conquest
and the Trophy 2502 Walkaround are among our best selling models. But, we also
saw superb growth in all of our new models and a strong order book emerging on
large boats, especially Hatteras, which is as good or better than what we saw in
1999."
"I'm also pleased to report that US Marine continued its quite remarkable
turnaround, operating profitably for a second consecutive quarter, with sales up
29 percent in the quarter," Buckley noted. "Further, our Boat Group continues to
benefit from higher volumes and effective cost management, which also
contributed to the improved 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 second
quarter of 2004 reached $122.3 million, up 16 percent from $105.1 million in the
year-ago quarter. Operating earnings for the quarter totaled $2.9 million
compared with $5.3 million in the second quarter of 2003, and operating margins
were 2.4 percent compared with 5.0 percent a year ago.
"We were pleased with the growth in our fitness sales for the quarter," Buckley
said. "This reflects the strength of our brands in the market as well as the
steady drum beat of new products we have maintained for the past two years.
Margins contracted somewhat in this off-season period, however, due to a
combination of competitive pricing pressure in Europe, a shift in product mix
towards hot selling but lower margin strength equipment, technology licensing
costs and increases in steel pricing. We have made great progress in
productivity improvements at our Ramsey, Minn., facility, which has been busily
integrating products from the closure of our Paso Robles, Calif., facility, and
productivity run rates are approaching pre-facility merger numbers. We expect
steel pricing and technology costs to abate in the coming year, which, along
with further reductions in delivery and installation costs, should help to
narrow the year-over-year operating margin gap."
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 second quarter of 2004 totaled $105.8 million, up
12 percent compared with $94.1 million in the year-ago quarter. Operating
earnings more than doubled to $4.2 million in the second quarter versus $1.9
million, and operating margins improved to 4.0 percent compared with 2.0 percent
in 2003.
"The quarter saw strong sales gains in our bowling products group, led by the
success of our new Vector scoring system," Buckley said. "Billiards sales were
also up double digits, aided by the acquisition of Valley-Dynamo in June 2003.
Excluding Valley-Dynamo, Bowling & Billiards segment sales increased 6 percent.
Valley-Dynamo, which concentrates on the coin-operated pool table market, gives
Brunswick a solid one-two punch along side its traditional billiards operations,
where new tables, such as the contemporary Metro, have energized sales."
"During the quarter, we opened two new bowling entertainment centers located in
suburban Chicago and Denver, which are based on an enhanced Brunswick Zone
concept," Buckley said. "These newly built centers are about twice the size of
our traditional centers and feature not only bowling, but expanded recreation
options designed to attract families who come to have fun, which is what our
retail centers are all about. Initial sales in these two new centers were very
encouraging and were multiples of what we typically see in traditional bowling
centers in the slow summer season. A new business model in bowling is clearly
beginning to emerge, and we intend to capitalize on it."
Six-Month Results
For the six months ended June 30, 2004, the company had net sales of $2,622.3
million, up 31 percent from $2,005.5 million for the first half of 2003.
Excluding contributions from acquired businesses, sales were up 17 percent.
Operating earnings totaled $218.0 million for the first half of 2004, more than
double the $100.2 million reported for the corresponding period in 2003, and
operating margins expanded 330 basis points, reaching 8.3 percent versus 5.0
percent a year ago. Operating earnings for the first six months of 2003 include
a $25.0 million litigation charge ($16.0 million after tax) recorded in the
first quarter of 2003. Excluding the litigation charge, operating earnings were
$125.2 million, and operating margins were 6.2 percent for the first half of
2003.
Net earnings for the first six months of 2004 reached $138.1 million, or $1.43
per diluted share, up from $57.4 million, or $0.63 per diluted share, for the
same period in 2003. Excluding the previously mentioned litigation charge, net
earnings for the first half of 2003 totaled $73.4 million, or $0.81 per diluted
share.
Looking Ahead
"Based on our performance in the first six months and our current outlook, 2004
is shaping up to be a record year for Brunswick, which is testimony to the
soundness of our strategy and our capabilities to execute against that plan,"
Buckley commented. "Likewise, we have been bolstered by the steadily improving
economic climate and marine marketplace, having anticipated and reacted to
market changes and opportunities. Retail demand for our marine products is
tracking at our estimates, and higher volumes are resulting in improved
operating margins. Inventories are in great shape with 21 weeks supply of boats
and 17 weeks supply of engines in the pipeline, both down about two weeks from a
year ago. This is just where we want to be as we enter the new boat model year
-- clean pipelines and good momentum. When we consider all these factors, along
with contributions from recent acquisitions, we are again raising our estimate
for 2004 to $2.60 to $2.68 per share from our previous estimate of $2.45 to
$2.65 per share. For the third quarter, we're estimating earnings in the range
of $0.60 to $0.65 per share. Free cash flow has also been significantly better
than our estimates, and we should close the year at almost $290 million."
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 ability to
maintain effective distribution; the success of global sourcing and supply chain
initiatives; the ability to successfully integrate acquisitions; the success of
new product introductions; the impact of weather conditions on demand for marine
products and retail bowling center revenues; the financial strength of dealers
and independent boat builders; shifts in currency exchange rates; adverse
foreign economic conditions; the company's ability to develop product
technologies that comply with regulatory requirements; 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 successfully manage pipeline inventories;
the ability to complete environmental remediation efforts and resolve claims and
litigation at the cost estimated; competition from new technologies; impact of
possible duties on Japanese-manufactured outboard engines sold in the United
States; imports from Asia and increased competition from Asian competitors; and
increases in tariffs on the Company's bowling equipment sales into Europe.
Additional factors are included in the company's Annual Report on Form 10-K for
2003 and Quarterly Report on Form 10-Q for the quarter ended March 31, 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 GPS-based products; IDS dealer
management systems; Sea Ray, Bayliner, Maxum, Hatteras, Meridian, Sealine,
Bermuda, Ornvik, Savage and Uttern pleasure boats; Baja high- performance boats;
Arvor, 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
http://www.brunswick.com .
Brunswick Corporation
Comparative Consolidated Statements of Income
(in millions, except per share data)
(unaudited)
Quarter Ended June 30
2004 2003 % Change
Net sales $1,422.7 $1,071.0 33%
Cost of sales 1,054.9 807.2 31%
Selling, general and administrative
expense 198.9 149.1 33%
Research and development expense 29.4 27.5 7%
Operating earnings 139.5 87.2 60%
Interest expense (10.4) (10.1) 3%
Other income 5.4 5.3 2%
Earnings before income taxes 134.5 82.4 63%
Income tax provision 44.4 28.8 54%
Net earnings $90.1 $53.6 68%
Earnings per common share:
Basic $0.94 $0.59 59%
Diluted $0.93 $0.59 58%
Average shares used for computation of:
Basic earnings per share 95.4 90.8 5%
Diluted earnings per share 97.2 91.3 6%
Effective tax rate 33.0% 34.9%
Brunswick Corporation
Comparative Consolidated Statements of Income
(in millions, except per share data)
(unaudited)
Six Months Ended June 30
2004 2003 % Change
Net sales $2,622.3 $2,005.5 31%
Cost of sales 1,957.2 1,532.9 28%
Selling, general and administrative
expense 385.0 292.2 32%
Research and development expense 62.1 55.2 13%
Litigation charge - 25.0 NM
Operating earnings (A) 218.0 100.2 NM
Interest expense (20.5) (20.8) -1%
Other income 8.6 8.9 -3%
Earnings before income taxes 206.1 88.3 NM
Income tax provision 68.0 30.9 NM
Net earnings $138.1 $57.4 NM
Basic earnings per common share $1.46 $0.63 NM
Diluted earnings per common share $1.43 $0.63 NM
Average shares used for computation of:
Basic earnings per share 94.5 90.7 4%
Diluted earnings per share 96.4 91.0 6%
Effective tax rate 33.0% 35.0%
(A) Operating earnings include a $25.0 million litigation charge
recorded in the first quarter 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 June 30
Net Sales Operating Operating
Earnings Margin
% %
2004 2003 Change 2004 2003 Change 2004 2003
Marine Engine $665.2 $521.9 27% $95.6 $64.2 49% 14.4% 12.3%
Boat 629.9 418.9 50% 57.0 32.3 76% 9.0% 7.7%
Marine
eliminations (99.9) (68.8) - -
Total Marine 1,195.2 872.0 37% 152.6 96.5 58% 12.8% 11.1%
Fitness 122.3 105.1 16% 2.9 5.3 -45% 2.4% 5.0%
Bowling &
Billiards 105.8 94.1 12% 4.2 1.9 NM 4.0% 2.0%
Eliminations (0.6) (0.2) - -
Corporate/Other - - (20.2) (16.5) 22%
Total $1,422.7 $1,071.0 33% $139.5 $87.2 60% 9.8% 8.1%
Six Months Ended June 30
Net Sales Operating Operating
Earnings Margin
% %
2004 2003 Change 2004 2003 Change 2004 2003
Marine Engine $1,193.1 $934.7 28% $138.2 $83.5 66% 11.6% 8.9%
Boat 1,141.9 797.5 43% 89.0 46.4 92% 7.8% 5.8%
Marine
eliminations (180.1) (130.0) - -
Total Marine 2,154.9 1,602.2 34% 227.2 129.9 75% 10.5% 8.1%
Fitness (A) 252.9 224.3 13% 12.1 (7.2) NM 4.8% -3.2%
Bowling &
Billiards 216.0 179.2 21% 17.7 10.3 72% 8.2% 5.7%
Eliminations (1.5) (0.2) - -
Corporate/Other - - (39.0) (32.8) 19%
Total $2,622.3 $2,005.5 31% $218.0 $100.2 NM 8.3% 5.0%
(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)
June 30, December 31, June 30,
2004 2003 2003
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $438.2 $345.9 $254.1
Accounts and notes receivables, net 459.5 374.4 496.7
Inventories
Finished goods 363.5 325.3 310.4
Work-in-process 240.7 205.7 203.5
Raw materials 109.0 92.8 71.0
Net inventories 713.2 623.8 584.9
Prepaid income taxes 311.5 302.3 313.0
Prepaid expenses and other 53.5 68.8 43.1
Current assets 1,975.9 1,715.2 1,691.8
Net property 846.8 827.1 787.4
Other assets
Goodwill and other intangibles 892.2 699.7 653.4
Investments and other long-term
assets 380.0 360.5 307.1
Total assets $4,094.9 $3,602.5 $3,439.7
Liabilities and shareholders' equity
Current liabilities
Short-term debt $13.4 $23.8 $43.6
Accounts payable 351.0 321.3 308.6
Accrued expenses and accrued
income taxes 811.1 756.7 729.6
Current liabilities 1,175.5 1,101.8 1,081.8
Long-term debt 726.5 583.8 588.5
Deferred items 610.4 593.9 592.8
Common shareholders' equity 1,582.5 1,323.0 1,176.6
Total liabilities and shareholders'
equity $4,094.9 $3,602.5 $3,439.7
Supplemental Information
Debt-to-capitalization rate 31.9% 31.5% 34.9%
Brunswick Corporation
Comparative Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Six Months Ended June 30
2004 2003
Cash flows from operating activities
Net earnings $138.1 $57.4
Depreciation and amortization 76.9 72.9
Changes in noncash current assets
and current liabilities (91.7) (61.9)
Income taxes and other, net 46.7 (7.0)
Net cash provided by operating activities 170.0 61.4
Cash flows from investing activities
Capital expenditures (72.7) (52.2)
Investments (2.3) (11.7)
Acquisitions of businesses, net of
debt and cash acquired (214.0) (97.4)
Other, net 3.9 3.3
Net cash used for investing activities (285.1) (158.0)
Cash flows from financing activities
Net issuances of commercial paper
and other short-term debt (5.5) 1.5
Net proceeds from issuances of long-term debt 149.1 -
Payments of long-term debt including
current maturities (5.6) (5.0)
Stock options exercised 69.4 2.8
Net cash provided by (used for)
financing activities 207.4 (0.7)
Net increase (decrease) in cash and
cash equivalents 92.3 (97.3)
Cash and cash equivalents at January 1 345.9 351.4
Cash and cash equivalents at June 30 $438.2 $254.1
Free Cash Flow
Net cash provided by operating activities $170.0 $61.4
Net cash provided by (used for):
Capital expenditures (72.7) (52.2)
Other, net 3.9 3.3
Total Free Cash Flow $101.2 $12.5
SOURCE Brunswick Corporation 07/29/2004
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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