Corporate and Financial
Brunswick Reports EPS of $0.15 in First Quarter
LAKE FOREST, Ill., April 24 /PRNewswire-FirstCall/ -- Brunswick
Corporation (NYSE: BC) reported today net earnings from continuing operations
of $0.15 per diluted share for the first quarter of 2008, compared with $0.38
per diluted share for the year-ago quarter. Results for the 2008 period
include a $0.07 per diluted share loss on the planned divestiture of Baja
boats, $0.09 per diluted share of restructuring and other impairment charges,
and an investment sale gain of $0.10 per diluted share. Results for the first
quarter of 2007 include $0.06 per diluted share of restructuring charges and
$0.03 per diluted share of tax-related benefits.
Brunswick Chairman and Chief Executive Officer Dustan E. McCoy commented,
"Sales for the quarter reflected lower demand for marine products,
particularly in the United States where industry retail sales were down about
17 percent in units in the first quarter. This weakness was partially offset
by sales growth from our bowling and fitness operations, as well as strong
sales outside the United States in all business segments. While benefiting
from favorable currency exchange rates, our success in regions outside of the
United States is also the result of our strategic focus on better serving the
unique needs of our customers in these markets. Operationally, we continue to
introduce innovative new products and implement initiatives to improve quality
and productivity, as well as manage pipeline inventories and reduce expenses
in response to current weak market conditions for our marine products.
Financially, our balance sheet remains strong with $267 million of cash and
debt-to-total capital at 27.6 percent at the end of the quarter. Though
difficult times and more hard work are ahead, we are pleased with our progress
to date."
First Quarter Results
The company said that sales in the first quarter of 2008 totaled
$1,346.8 million, down 3 percent from $1,386.1 million for the year-ago
quarter. Operating earnings in the first quarter of 2008 totaled
$10.3 million, compared with $53.0 million a year ago. Operating earnings in
the first quarter of 2008 include an $8.9 million loss on the planned
divestiture of Baja and $13.3 million of restructuring and other impairment
charges. In the first quarter of 2007, operating earnings include
$7.6 million of restructuring charges.
The company reported net earnings from continuing operations of
$13.3 million, or $0.15 per diluted share, in the first quarter of 2008,
versus $34.3 million, or $0.38 per diluted share, in the year-ago quarter.
Results for the first quarter of 2008 include a pretax gain on the dissolution
of a bowling joint venture in Japan of $19.7 million, or $0.10 per diluted
share, as well as the loss on the planned divestiture equivalent to $0.07 per
diluted share and other restructuring and impairment charges equivalent to
$0.09 per diluted share. Diluted earnings per share for the first quarter of
2007 include the previously mentioned $0.06 of restructuring charges and $0.03
of tax-related benefits.
The restructuring and other impairment charges in the first quarter of
2008 include severance and plant closure costs, asset write-downs and
impairment charges associated with a number of actions undertaken to shrink
the company's manufacturing footprint, exit certain market segments and reduce
expenses. During the quarter, the company completed the closure of its
Aberdeen, Miss., boat plant and closed its bowling pin manufacturing facility
in Antigo, Wis. In addition, the company announced that it will cease boat
manufacturing at its facility in Merritt Island, Fla., mothball its Swansboro,
N.C., boat plant and close its boat plant in Bucyrus, Ohio, in conjunction
with the proposed sale of its Baja boat business.
The effective tax rate of 48.4 percent in the first quarter of 2008 was
primarily due to a higher tax rate on the $19.7 million pretax gain on the
dissolution of the bowling joint venture. Fully diluted common shares
outstanding totaled 88.3 million in the first quarter of 2008, compared with
92.0 million shares in the same period of 2007.
Boat Segment
The Boat segment consists of the Brunswick Boat Group, which produces and
distributes fiberglass and aluminum boats and marine parts and accessories,
and offers dealer management systems. The Boat segment reported sales for the
first quarter of 2008 of $637.8 million, down 9 percent compared with
$699.0 million in the first quarter of 2007. Sales in the U.S. were down
double digits reflecting the continued weak retail markets. The drop in
domestic sales was partially offset by growth in sales outside of the U.S.,
primarily driven by higher sales in Europe. For the first quarter of 2008,
the Boat segment had an operating loss of $14.7 million, down from operating
earnings of $19.5 million in the year-ago quarter. The reduction in operating
earnings was primarily due to lower fixed-cost absorption on lower sales, as
well as $13.8 million of restructuring and impairment charges related to
actions described above. The year-ago first quarter includes $4.8 million of
comparable charges.
"In response to market conditions, we continued to lower production rates
to reduce pipeline inventories held by our dealers," McCoy said. "At the end
of the quarter, there were approximately 2,800 fewer boats in our dealers'
inventories than at the same time last year. Nevertheless, we had 35 weeks of
supply on hand at quarter end, up from 34 weeks of supply a year ago, and we
will be making further production cuts in the months ahead. Consumers remain
cautious in the face of an uncertain economy, a poor housing market and rising
food and energy prices that erode their spending power for discretionary
purchases such as boats."
"Against this backdrop, we continued to make progress towards transforming
our global manufacturing profile to achieve a smaller, more flexible
manufacturing footprint as well as rationalizing our brand portfolio," McCoy
added. "We announced that we will cease making boats at several manufacturing
facilities, and we will transfer that production to other plants that will
make multiple models and brands to lower our overall cost position and improve
capacity utilization. We will also continue to strategically refine our
product portfolio, focusing on those brands and product segments where we see
the greatest opportunity for profitable growth."
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group,
reported sales of $566.0 million in the first quarter of 2008, down 1 percent
from $572.6 million in the year-ago first quarter. Operating earnings in the
first quarter were $30.9 million versus $34.7 million, and operating margins
declined to 5.5 percent compared with 6.1 percent for the same quarter in
2007.
"Sales from areas outside the United States were up double digits, which
helped to mitigate the U.S. sales decline. The U.S. sales shortfall was
driven by lower engine sales to boat builders, as well as lower parts and
accessories sales, which are tied to boat usage and engine sales," McCoy
explained. "The decline in operating earnings was primarily due to lower
sales of high-margin sterndrive engines as well as reduced fixed-cost
absorption on lower sales."
Fitness Segment
The Fitness segment is comprised of the Life Fitness Division, which
manufactures and sells Life Fitness, Hammer Strength and ParaBody fitness
equipment. For the first quarter of 2008, segment sales increased 3 percent
to $149.2 million, up from $145.0 million in the year-ago quarter. Segment
operating earnings were $8.1 million for the first quarter of 2008, flat from
the first quarter a year ago. Operating margins were 5.4 percent versus 5.6
percent in the year-earlier quarter.
"Sales growth was driven by a significant increase in commercial equipment
sales, which were up nearly double digits," McCoy said. "This was offset by a
steep decline in the consumer segment, as individuals continue to defer
purchasing discretionary items. Operating earnings and margins were affected
by a shift in commercial product mix as the growth in strength equipment
sales, which carry lower margins relative to cardiovascular equipment, was
disproportionately higher than the growth in cardio sales."
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 2008 totaled
$113.6 million, up 7 percent from $105.8 million in the year-ago quarter.
Operating earnings were $0.9 million in the first quarter versus $8.3 million
in the year-ago quarter. Operating margins were 0.8 percent as compared with
7.8 percent in 2007.
"Sales were up in both our bowling products and retail segments,
offsetting lower billiards sales," McCoy said. "Operating earnings for the
segment during the quarter were affected by a $5.6 million charge for costs
associated with the closing of the Antigo, Wis., bowling pin plant, as well as
other restructuring and impairment costs."
"The retail segment, in particular, continues to benefit as we build
additional Brunswick Zone XL bowling centers, with the most recent opening in
the Chicagoland area in the first quarter," McCoy said. "Billiards sales,
however, continued to face pressure due to the slowdown in the housing market
and the overall weak economy."
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; Albemarle, Arvor, Baja, Bayliner, Bermuda, Boston Whaler,
Cabo Yachts, Crestliner, Cypress Cay, Harris, Hatteras, Kayot, Laguna, Lowe,
Lund, Maxum, Meridian, Ornvik, Palmetto, Princecraft, Quicksilver, Rayglass,
Savage, Sea Boss, Sea Pro, Sea Ray, Sealine, Triton, Trophy, Uttern and
Valiant boats; Attwood marine parts and accessories; Land 'N' Sea, Kellogg
Marine, Diversified Marine and Benrock parts and accessories distributors; IDS
dealer management systems; Life Fitness, Hammer Strength and ParaBody fitness
equipment; Brunswick bowling centers, equipment and consumer products;
Brunswick billiards tables; and Dynamo, Tornado and Valley pool tables, 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)
Three Months Ended
March 29, March 31,
2008 2007 % Change
Net sales $1,346.8 $1,386.1 -3%
Cost of sales 1,077.3 1,085.2 -1%
Selling, general and administrative
expense 203.1 206.8 -2%
Research and development expense 33.9 33.5 1%
Restructuring, exit and impairment
charges 22.2 7.6 NM
Operating earnings 10.3 53.0 -81%
Equity earnings 4.8 6.3 -24%
Investment sale gain 19.7 - NM
Other income (expense), net 1.1 (0.4) NM
Earnings before interest and income
taxes 35.9 58.9 -39%
Interest expense (11.5) (13.6) -15%
Interest income 1.4 1.8 -22%
Earnings before income taxes 25.8 47.1 -45%
Income tax provision 12.5 12.8
Net earnings from continuing
operations 13.3 34.3 -61%
Discontinued operations:
Earnings from discontinued
operations, net of tax - 3.4 NM
Gain on disposal of discontinued
operations, net of tax - 7.9 NM
Net earnings from discontinued
operations - 11.3 NM
Net earnings $13.3 $45.6 -71%
Earnings per common share:
Basic
Net earnings from continuing
operations $0.15 $0.38 -61%
Earnings from discontinued
operations, net of tax - 0.03 NM
Gain on disposal of discontinued
operations, net of tax - 0.09 NM
Net earnings $0.15 $0.50 -70%
Diluted
Net earnings from continuing
operations (1) $0.15 $0.38 -61%
Earnings from discontinued
operations, net of tax - 0.03 NM
Gain on disposal of discontinued
operations, net of tax - 0.09 NM
Net earnings $0.15 $0.50 -70%
Weighted average number of shares
used for computation of:
Basic earnings per share 88.2 91.4 -4%
Diluted earnings per share 88.3 92.0 -4%
Effective tax rate (2) 48.4% 27.2%
(1) Net earnings from continuing operations of $0.15 per diluted share for
the first quarter of 2008 include a loss on the planned divestiture of
Baja boats of $0.07 per diluted share, other restructuring, exit and
impairment charges of $0.09 per diluted share, and an investment sale
gain of $0.10 per diluted share. Net earnings from continuing
operations of $0.38 per diluted share for the first quarter of 2007
include restructuring, exit and impairment charges of $0.06 per
diluted share and special tax-related benefits of $0.03 per diluted
share.
(2) The increase in the effective tax rate for the first quarter of 2008
was primarily due to a higher tax rate associated with the investment
sale gain.
Brunswick Corporation
Selected Financial Information
(in millions)
(unaudited)
Segment Information
Three Months Ended
Net Sales Operating Earnings (1) Operating Margin
March 29, March 31, % March 29, March 31, % March 29, March 31,
2008 2007 Change 2008 2007 Change 2008 2007
Boat $637.8 $699.0 -9% $(14.7) $19.5 NM -2.3% 2.8%
Marine
Engine 566.0 572.6 -1% 30.9 34.7 -11% 5.5% 6.1%
Marine
elimi-
nations (119.8) (136.2) - -
Total
Marine 1,084.0 1,135.4 -5% 16.2 54.2 -70% 1.5% 4.8%
Fitness 149.2 145.0 3% 8.1 8.1 0% 5.4% 5.6%
Bowling &
Billiards 113.6 105.8 7% 0.9 8.3 -89% 0.8% 7.8%
Eliminations - (0.1) - -
Corp/Other - - (14.9) (17.6) 15%
Total $1,346.8 $1,386.1 -3% $10.3 $53.0 -81% 0.8% 3.8%
(1) Operating earnings in the first quarter of 2008 include a $22.2
million pretax restructuring charge, consisting of $13.8 million in
the Boat segment, $1.5 million in the Marine Engine segment, $5.6
million in the Bowling & Billiards segment and $1.3 million in
Corp/Other. Operating earnings in the first quarter of 2007 include a
$7.6 million pretax restructuring charge, consisting of $4.8 million
in the Boat segment and $2.8 million in the Marine Engine segment.
Brunswick Corporation
Comparative Consolidated Condensed Balance Sheets
(in millions)
March 29, December 31, March 31,
2008 2007 2007
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $267.3 $331.4 $204.0
Accounts and notes receivables,
net 648.8 572.4 565.5
Inventories
Finished goods 494.3 446.7 461.2
Work-in-process 346.0 323.4 338.8
Raw materials 143.9 136.6 145.2
Net inventories 984.2 906.7 945.2
Deferred income taxes 241.9 249.9 223.0
Prepaid expenses and other 57.5 53.9 80.0
Current assets held for sale - - 30.3
Current assets 2,199.7 2,114.3 2,048.0
Net property 1,034.4 1,052.8 1,016.9
Other assets
Goodwill and other intangibles 921.0 924.5 984.0
Investments and other long-term
assets 256.3 274.0 343.1
Long-term assets held for sale - - 22.6
Other assets 1,177.3 1,198.5 1,349.7
Total assets $4,411.4 $4,365.6 $4,414.6
Liabilities and shareholders' equity
Current liabilities
Short-term debt $0.9 $0.8 $0.6
Accounts payable 488.0 437.3 435.4
Accrued expenses 832.2 858.1 788.1
Current liabilities held for sale - - 23.3
Current liabilities 1,321.1 1,296.2 1,247.4
Long-term debt 729.1 727.4 725.8
Other long-term liabilities 444.2 449.1 534.0
Long-term liabilities held for sale - - 9.5
Common shareholders' equity 1,917.0 1,892.9 1,897.9
Total liabilities and shareholders'
equity $4,411.4 $4,365.6 $4,414.6
Supplemental Information
Debt-to-capitalization rate 27.6% 27.8% 27.7%
Brunswick Corporation
Comparative Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Three Months Ended
Revised
March 29, March 31,
2008 2007 (1)
Cash flows from operating activities
Net earnings $13.3 $45.6
Net earnings from discontinued
operations - 11.3
Net earnings from continuing
operations 13.3 34.3
Depreciation and amortization 44.3 41.0
Changes in non-cash current assets
and current liabilities (136.6) (132.2)
Impairment charges 8.4 -
Income taxes and other, net (3.5) 31.1
Net cash used for operating activities
of continuing operations (74.1) (25.8)
Net cash used for operating activities
of discontinued operations - (22.6)
Net cash used for operating activities (74.1) (48.4)
Cash flows from investing activities
Capital expenditures (28.3) (39.8)
Acquisitions of businesses, net of
cash acquired - (0.1)
Investments (4.1) (5.5)
Proceeds from investment sale 40.4 -
Proceeds from sale of property,
plant and equipment 1.7 0.3
Other, net 0.2 12.8
Net cash provided by (used for) investing
activities of continuing operations 9.9 (32.3)
Net cash provided by investing activities
of discontinued operations - 30.4
Net cash provided by (used for) investing
activities 9.9 (1.9)
Cash flows from financing activities
Net issuances of commercial paper
and other short-term debt 0.3 -
Payments of long-term debt including
current maturities (0.2) (0.2)
Stock repurchases - (33.4)
Stock options exercised - 4.5
Net cash provided by (used for) financing
activities of continuing operations 0.1 (29.1)
Net cash used for financing activities
of discontinued operations - -
Net cash provided by (used for) financing
activities 0.1 (29.1)
Net decrease in cash and cash equivalents (64.1) (79.4)
Cash and cash equivalents at beginning
of period 331.4 283.4
Cash and cash equivalents at end of period $267.3 $204.0
Free Cash Flow from Continuing
Operations
Net cash used for operating activities
of continuing operations $(74.1) $(25.8)
Net cash provided by (used for):
Capital expenditures (28.3) (39.8)
Proceeds from sale of property,
plant and equipment 1.7 0.3
Proceeds from investment sale 40.4 -
Other, net 0.2 12.8
Total free cash flow from continuing
operations $(60.1) $(52.5)
(1) The company expanded its presentation of the consolidated statement of
cash flows to include net earnings and net earnings from discontinued
operations. Accordingly, the company revised the quarterly 2007
consolidated statement of cash flows. Net cash flows from operating,
investing and financing activities have not changed.
SOURCE: Brunswick Corporation
CONTACT: Kathryn Chieger, Vice President - Corporate and Investor
Relations of Brunswick Corporation, +1-847-735-4612
Web site: http://www.brunswick.com
