Corporate and Financial
Brunswick Reports EPS of $0.96 in First Quarter
LAKE FOREST, Ill., April 26 /PRNewswire-FirstCall/ -- Brunswick
Corporation (NYSE: BC) reported today net earnings of $94.6 million, or $0.96
per diluted share, for the first quarter of 2005, up from net earnings of
$48.0 million, or $0.50 per diluted share, for the year-ago quarter. Results
for the first quarter of 2005 include a $0.32 per diluted share gain on the
sale of securities. The company said operating earnings increased 26 percent
on a 17 percent sales gain in the first quarter.
Commenting on the quarter, Brunswick Chairman and Chief Executive Officer
George W. Buckley said, "Once again our marine operating units led the way
with combined engine and boat sales up 21 percent during the period. The
sales gain was driven by strong dealer response to new product introductions
as well as continued strength in international markets. We are reaping the
benefits of our customer-led strategy to provide the right products at the
right price sold through the best dealer network in the industry."
Buckley also noted that acquisitions played a role in Brunswick's 17
percent sales increase in the quarter. "Excluding sales from business units
we didn't own in the first quarter last year, sales rose 10 percent,
illustrating the strong performance delivered by our base operations.
Further, we continue to look for more effective ways to leverage our top-line
growth down to the bottom line," Buckley explained. "Higher volumes combined
with our focus on effective cost management resulted in an increase in
operating margins to 7.1 percent, up from 6.5 percent a year ago. In
addition, we continued to maintain a strong balance sheet, with debt-to-total
capital at 28.9 percent at quarter end compared with 30.4 percent a year
earlier. This provides us with the financial flexibility to invest in our
ongoing businesses, while seeking attractive acquisitions."
First Quarter Results
For the quarter ended March 31, 2005, the company reported that net sales
increased 17 percent to $1,401.1 million, up from $1,199.6 million a year
earlier. Operating earnings rose to $99.1 million compared with $78.5 million
in the year-ago quarter, and operating margins improved to 7.1 percent from
6.5 percent. Net earnings totaled $94.6 million, or $0.96 per diluted share,
up from $48.0 million, or $0.50 per diluted share, for the first quarter of
2004.
As previously announced, during the first quarter of 2005 the company
completed the sale of approximately 1.9 million shares of MarineMax, Inc.
stock. The sale resulted in a pre-tax gain of $38.7 million, equivalent to
$0.32 per diluted share in the quarter.
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group and
Brunswick New Technologies (BNT), reported sales of $605.6 million in the
first quarter of 2005, up 15 percent from $527.9 million in the year-ago first
quarter. Operating earnings in the first quarter advanced 22 percent to
$52.0 million versus $42.6 million, and operating margins increased to 8.6
percent compared with 8.1 percent for the same quarter in 2004.
"We continue to see strong demand for our new products, which is driving
sales growth in the segment," Buckley said. "During the first quarter we
extended our Verado family of supercharged four-stroke outboard engines with
the launch of the 135-, 150- and 175- horsepower models. Like their
previously introduced, larger-horsepower counterparts, these models enhance
Verado's reputation for power, reduced noise and vibration, and technological
sophistication, setting the performance bar ever higher in marine propulsion."
"BNT, particularly our Navman unit, also contributed to segment sales
growth in the quarter," Buckley added. "We are beginning to see the results
of Navman's accelerated research and development investments as well as its
increasing presence in markets around the world."
"In the first quarter, Mercury opened a new production facility in China.
The 174,000-square-foot plant produces four-stroke outboard engines between 40
and 60 horsepower," Buckley noted. "We also opened a new 275,000-square-foot
facility in Japan with our joint venture partner Tohatsu, where we make 2.5 to
30 horsepower four-stroke outboards. Worker training and production
validation have been completed, and the plants have now begun production. As
the year continues, we expect the plants will ramp up volume and, in turn,
increase our cost competitiveness in these market segments."
Boat Segment
The Brunswick Boat Group comprises the Boat segment and produces
fiberglass and aluminum boats as well as marine parts and accessories. The
Boat segment reported sales for the first quarter of $677.5 million, up 32
percent compared with $512.0 million in the first quarter of 2004. Operating
earnings increased 55 percent to $49.5 million, up from $32.0 million, and
operating margins were up 100 basis points to 7.3 percent from 6.3 percent.
"The success of new products contributed to the sales gain with double-
digit growth reported by Sea Ray, Boston Whaler, Sealine, Princecraft and
Baja. The boat parts and accessories business also reported sales gains
during the quarter," Buckley noted. A portion of the Boat segment sales gain
was due to the acquisition of the Crestliner, Lowe, Lund and Sea Pro brands,
which were not included in the prior-year quarter. "Excluding incremental
sales from these acquisitions, Boat segment sales were up 17 percent. Higher
volumes and effective cost management accounted for the significant
improvement in operating margins," Buckley explained.
"We continue to execute our strategy of 'covering the waterfront' by
'filling in the white spaces' to gain or strengthen our participation in
certain market segments," Buckley said. "During the quarter, we added the
Albemarle brand. This acquisition enabled us to extend our offering of
offshore sportfishing boats, which, along with Hatteras, now range from 24 to
90 feet."
"On the smaller-boat side, we continue to see strong demand for our
Bayliner 175 and Bayliner 185 entry-level runabouts. During the quarter, we
opened a second boat plant in Mexico, which doubled our capacity to produce
these and other popular models in this family," Buckley added.
Fitness Segment
The Fitness segment is comprised of the Life Fitness Division, which
manufactures and sells Life Fitness, Hammer Strength and ParaBody fitness
equipment. Segment sales in the first quarter of 2005 totaled $127.5 million,
down 2 percent from $130.6 million in the year-ago quarter. The sales decline
is attributable to Brunswick's divestiture of the Omni Fitness retail stores,
which was completed in late 2004. Excluding Omni sales in the year-ago
quarter, fitness equipment sales were up 5 percent. Segment operating
earnings for the first quarter of 2005 totaled $6.4 million compared with
$9.2 million for the year-ago quarter, and operating margins were 5.0 percent
compared with 7.0 percent a year ago.
"We continue to see strong demand for fitness equipment," Buckley
explained, "underscoring the power of our brands and the success of new
products. Operating earnings, however, were adversely affected by higher
steel costs, pricing pressures in the international marketplace, higher costs
for delivery and installation as well as a shift in product mix in the quarter
to lower-margin strength equipment. We are actively pursuing several avenues
to improve productivity and operating results within the Fitness segment, with
an immediate emphasis on manufacturing and supply chain efficiencies."
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 2005 totaled
$111.5 million, up 1 percent compared with $110.2 million in the year-ago
quarter. Operating earnings totaled $11.1 million in the first quarter versus
$13.5 million, and operating margins were 10.0 percent compared with 12.3
percent in 2004.
"Our bowling product and retail businesses led the sales gain in the
quarter," Buckley noted. "We are especially pleased with the success of our
expanded Brunswick Zone retail bowling centers, which continue to grow at
rates higher than our traditional centers. These family-friendly centers have
helped us attract casual bowlers who now outnumber league bowlers. The drop
in segment operating earnings and margins was primarily due to legal expenses
associated with an ongoing arbitration proceeding in China."
Looking Ahead
"We continue to be very encouraged by the trends we are seeing in the
marine market, especially as we enter the spring selling season," commented
Buckley. "Our marine pipeline inventories are at 31 weeks of supply for boats
and 29 weeks of supply for engines, up three weeks and five weeks,
respectively from a year ago, representing a return to more normal levels.
The pipeline build is due to a number of factors, including higher dealer
inventories in international markets in response to strong demand and the
introduction of new boat models both here and abroad. Also keep in mind that
retail sales in the first quarter of 2004 were exceptionally high, resulting
in a rapid draining of pipeline inventories to almost unprecedented low levels
at this time last year. The current level of inventories represents our
dealers' expectations for growth in retail demand this year. In addition, a
healthier pipeline will help us avoid the shortage of popular new models that
we experienced in some categories last year."
"While always being cognizant of the influence of underlying economic and
stock market conditions, we remain on track for another very good year,"
Buckley said. "Given our performance in the first quarter, we are raising our
estimate for the year by $0.05 to $3.52 to $3.67 per diluted share, which
includes the $0.32 gain on the stock sale. This compares with $2.77 per
diluted share for 2004. For the second quarter, we are estimating earnings in
the range of $1.08 to $1.13 per diluted share, compared with $0.93 per diluted
share for the year-ago second quarter."
The company said its new estimate assumes sales growth for the year of
between 12 percent and 13 percent and operating margin improvement of between
90 and 110 basis points. Versus its previous estimate, this represents a one
percent increase in the rate of sales growth and 10 to 20 basis points higher
operating margin expansion.
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 success of new product introductions; the ability to maintain market share
in high-margin products; competition from new technologies; imports from Asia
and increased competition from Asian competitors; the ability to obtain
component parts from suppliers; the ability to maintain effective
distribution; the financial strength of dealers, distributors and independent
boat builders; the ability to maintain product quality and service standards
expected by our customers; the ability to successfully manage pipeline
inventories; the success of global sourcing and supply chain initiatives; the
ability to successfully integrate acquisitions; the success of marketing and
cost management programs; the ability to develop product technologies that
comply with regulatory requirements; the ability to complete environmental
remediation efforts and resolve claims and litigation at the cost estimated;
the impact of weather conditions on demand for marine products and retail
bowling center revenues; shifts in currency exchange rates; adverse foreign
economic conditions; and the impact of interest rates and fuel prices on
demand for marine products. Additional factors are included in the company's
Annual Report on Form 10-K for 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 marine and GPS-based
products; IDS dealer management systems; Sea Ray, Bayliner, Maxum, Hatteras,
Meridian, Sealine, Bermuda, Ornvik, Quicksilver, Savage and Uttern pleasure
boats; Baja high-performance boats; Albemarle, Arvor, Boston Whaler, Palmetto,
Sea Boss, Sea Pro 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 March 31
2005 2004 % Change
Net sales $1,401.1 $1,199.6 17%
Cost of sales 1,059.2 902.3 17%
Selling, general and administrative
expense 208.6 186.1 12%
Research and development expense 34.2 32.7 5%
Operating earnings 99.1 78.5 26%
Interest expense (13.0) (10.1) -29%
Investment sale gain (1) 38.7 - NM
Other income 6.8 3.2 NM
Earnings before income taxes 131.6 71.6 84%
Income tax provision 37.0 23.6
Net earnings $94.6 $48.0 97%
Earnings per common share:
Basic $0.97 $0.51 90%
Diluted 0.96 0.50 92%
Average shares used for computation of:
Basic earnings per share 97.7 93.7 4%
Diluted earnings per share 99.0 95.6 4%
Effective tax rate (2) 28.1% 33.0%
(1) The Company sold its investment in MarineMax, Inc., pursuant to a
registered public offering by MarineMax.
(2) The decrease in the effective tax rate for the first quarter of
2005 was primarily due to lower tax expense associated with the
gain on sale of the investment in MarineMax, Inc. Excluding the
tax effect of this gain, the effective tax rate was 32.0 percent.
NM = Not Meaningful
Brunswick Corporation
Selected Financial Information
(in millions)
(unaudited)
Segment Information
Quarter Ended March 31
Net Sales Operating Earnings Operating
% % Margin
2005 2004 Change 2005 2004 Change 2005 2004
Marine Engine $605.6 $527.9 15% $52.0 $42.6 22% 8.6% 8.1%
Boat 677.5 512.0 32% 49.5 32.0 55% 7.3% 6.3%
Marine
eliminations (119.5) (80.2) - -
Total
Marine 1,163.6 959.7 21% 101.5 74.6 36% 8.7% 7.8%
Fitness 127.5 130.6 -2% 6.4 9.2 -30% 5.0% 7.0%
Bowling &
Billiards 111.5 110.2 1% 11.1 13.5 -18% 10.0% 12.3%
Eliminations (1.5) (0.9) - -
Corp/Other - - (19.9) (18.8) -6%
Total $1,401.1 $1,199.6 17% $99.1 $78.5 26% 7.1% 6.5%
Brunswick Corporation
Comparative Consolidated Balance Sheets
(in millions)
March 31, December 31, March 31,
2005 2004 2004
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $439.7 $499.8 $173.8
Accounts and notes receivables, net 505.1 463.2 455.3
Inventories
Finished goods 436.6 389.9 394.7
Work-in-process 283.6 260.5 222.6
Raw materials 146.8 136.4 105.5
Net inventories 867.0 786.8 722.8
Prepaid income taxes 292.0 292.7 297.5
Prepaid expenses and other 43.7 56.2 51.4
Current assets 2,147.5 2,098.7 1,700.8
Net property 871.4 876.4 847.8
Other assets
Goodwill and other intangibles 952.4 952.8 857.3
Investments and other long-term
assets 371.1 418.5 384.3
Total assets $4,342.4 $4,346.4 $3,790.2
Liabilities and shareholders' equity
Current liabilities
Short-term debt $6.1 $10.7 $48.8
Accounts payable 389.9 387.9 334.1
Accrued expenses and accrued
income taxes 776.2 855.2 758.4
Current liabilities 1,172.2 1,253.8 1,141.3
Long-term debt 723.2 728.4 585.8
Other long-term liabilities 654.0 651.9 609.8
Common shareholders' equity 1,793.0 1,712.3 1,453.3
Total liabilities and shareholders'
equity $4,342.4 $4,346.4 $3,790.2
Supplemental Information
Debt-to-capitalization rate 28.9% 30.2% 30.4%
Brunswick Corporation
Comparative Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Quarter Ended March 31
2005 2004
Cash flows from operating activities
Net earnings $94.6 $48.0
Depreciation and amortization 38.4 38.3
Changes in noncash current
assets and current liabilities (213.1) (155.6)
Income taxes and other, net 68.7 54.1
Net cash used for operating activities (11.4) (15.2)
Cash flows from investing activities
Capital expenditures (32.5) (32.5)
Investments (8.1) (4.9)
Acquisitions of businesses, net
of debt and cash acquired (13.7) (196.2)
Other, net 6.0 (0.9)
Net cash used for investing activities (48.3) (234.5)
Cash flows from financing activities
Net issuances of commercial
paper and other short-term debt (4.0) 24.2
Payments of long-term debt
including current maturities (1.3) -
Stock options exercised 4.9 53.4
Net cash provided by (used
for) financing activities (0.4) 77.6
Net decrease in cash and cash equivalents (60.1) (172.1)
Cash and cash equivalents at January 1 499.8 345.9
Cash and cash equivalents at March 31 $439.7 $173.8
Free Cash Flow
Net cash used for operating activities $(11.4) $(15.2)
Net cash provided by (used for):
Capital expenditures (32.5) (32.5)
Other, net 6.0 (0.9)
Total Free Cash Flow (1) $(37.9) $(48.6)
(1) Free Cash Flow in 2005 includes pre-tax proceeds from the sale of the
Company's investment in MarineMax, Inc., net of selling costs, of
$56.8 million.
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
