Brunswick grew revenue 9 percent in 2016

Brunswick Corp. grew revenue by 9 percent in 2016 and expects 6 to 8 percent growth in 2017, the company reported Thursday.

Click here to see the full earnings report.

“We target 2017 to be another year of outstanding growth,” Chairman & CEO Mark Schwabero said in an earnings call Thursday.

The company is expecting solid market growth in U.S. and Europe, with some recovery in the rest of the world this year, he added.

Early boat shows are showing “real energy” after some uncertainty heading into the U.S. election last fall.

“As we look at dealer sentiment, consumer sentiment, attendance at the shows … we just think there is some renewed strength that goes beyond the boat market,” Schwabero said.

For 2016, Brunswick had strong growth in both fiberglass outboard boats and marine parts and accessories, as well as “solid performance” in aluminum boats, outboard engines and fiberglass sterndrive/inboard boats, Schwabero said.

“The U.S. marine market exhibited solid fundamentals and growth, which are supported by stable boating participation, favorable replacement cycle dynamics and innovative products being introduced throughout the marketplace,” he said. “Overall, international marine markets were challenging, including weak demand in certain markets such as Latin America, the Middle East and Africa as well as Canada. Our product successes in both our engine and boat segments have enabled continued market share gains and mix benefits.”

2016 full-year results

For the year ended Dec. 31, 2016, the Company reported net sales of $4,488.5 million, up from $4,105.7 million in 2015. For the year, operating earnings were $409.0 million, which included a $55.1 million pension settlement charge and $15.6 million of restructuring, integration and impairment charges. In 2015, the Company reported operating earnings of $331.7 million, which included an $82.3 million pension settlement charge and $12.4 million of restructuring and impairment charges.

For 2016, the Company reported net earnings of $274.4 million, or $2.98 per diluted share, compared with net earnings of $227.4 million, or $2.41 per diluted share, for  2015. The diluted EPS for 2016 included a $0.38 per diluted share pension settlement charge; an $0.11 per diluted share of restructuring, integration and impairment charges and a $0.01 per diluted share expense from special tax items. Diluted EPS for 2015 included a $0.54 per diluted share pension settlement charge; an $0.11 per diluted share of restructuring and impairment charges and a $0.13 per diluted share benefit from special tax items.

Fourth quarter results

For the fourth quarter of 2016, the Company reported net sales of $1,083.0 million, up from $986.1 million a year earlier. For the quarter, the Company reported operating earnings of $28.6 million, which included a $55.1 million pension settlement charge and $6.8 million of restructuring, integration and impairment charges. In the fourth quarter of 2015, the Company had an operating loss of $27.0 million, which included an $82.3 million pension settlement charge and $12.4 million of restructuring and impairment charges.

For the fourth quarter of 2016, Brunswick reported net earnings of $17.8 million, or $0.19 per diluted share, compared with a net loss of $9.0 million, or $(0.10) per diluted share, for the fourth quarter of 2015. The diluted EPS for the fourth quarter of 2016 included $0.38 per diluted share of pension settlement charges, $0.05 per diluted share of restructuring, integration and impairment charges, along with $0.05 per diluted share expense from special tax items. The diluted EPS for the fourth quarter of 2015 included $0.55 per diluted share of pension settlement charges, an $0.11 per diluted share of restructuring and impairment charges and a $0.04 per diluted share benefit from special tax items.

Marine Engine Segment

The Marine Engine segment, consisting of the Mercury Marine Group, including the marine parts and accessories businesses, reported net sales of $500.2 million in the fourth quarter of 2016, up 5 percent from $474.7 million in the fourth quarter of 2015.

International sales, which represented 37 percent of total segment sales in the quarter, were up 4 percent compared to the prior year period. On a constant currency basis, international sales were up 3 percent. For the quarter, the Marine Engine segment reported operating earnings of $51.2 million. This compares with operating earnings of $41.9 million in the fourth quarter of 2015.

Sales increases in the quarter primarily reflected strong growth in the segment’s parts and accessories businesses, which included revenues from acquisitions completed in the fourth quarters of 2015 and 2016 along with slight gains in the sterndrive and outboard engine businesses. Higher revenues and cost reductions, including benefits from lower commodity costs and savings related to sourcing initiatives, contributed to the increase in operating earnings in the fourth quarter of 2016. Partially offsetting these positive factors were the unfavorable effects of foreign exchange.

Boat Segment

The boat segment is comprised of the Brunswick Boat Group and includes 15 boat brands. The Boat segment reported net sales of $358.0 million in the fourth quarter of 2016, an increase of 7 percent compared with $336.0 million in the fourth quarter of 2015. International sales, which represented 25 percent of total segment sales in the quarter, decreased by 2 percent during the period. On a constant currency basis, international sales were down 3 percent. For the fourth quarter of 2016, the boat segment reported operating earnings of $14.9 million, including restructuring charges of $0.6 million. This compares with operating earnings of $2.6 million in the fourth quarter of 2015, including restructuring and impairment charges of $7.7 million.

The segment’s increase in revenue reflected strong growth in fiberglass outboard and sterndrive/inboard boats as well as increases in aluminum boats. Operating earnings benefited from higher sales, which included continued market share gains and a favorable change in product mix.

2017 Outlook

“Our outlook for 2017 is generally consistent with our three-year strategic plan and reflects another year of outstanding earnings growth, with excellent cash flow generation,” said Schwabero. “Our recent results reflect the continued success of our strategy and we believe we are well-positioned to generate sales and earnings growth consistent with our three-year plan.

“We expect our marine businesses’ top-line performance will benefit from the continuation of solid growth in the U.S. and Europe and improving market conditions in certain international markets, along with the success of new products. The Fitness segment is expected to benefit from growth in global commercial fitness markets, as well as contributions from new products, particularly in the second half of 2017. As a result, our plan reflects overall revenue growth rates in 2017 in the range of 6 percent to 8 percent, absent any significant changes in global macro-economic conditions. Completed acquisitions, are included in this guidance and in total, are expected to account for about 1 percent of 2017’s projected growth.

“For the full-year, we anticipate improvement in both gross margins and operating margins, as we plan to continue to benefit from volume leverage, cost reductions related to efficiency initiatives and modest positive product mix factors. Operating expenses are estimated to increase in 2017 as we continue to fund incremental investments to support growth; however, on a percentage of sales basis, are expected to be at slightly lower levels than 2016. Our guidance for 2017 reflects a diluted EPS, as adjusted, range of $3.90 to $4.05. Finally, for the full-year 2017, we expect to generate free cash flow in excess of $250 million,” Schwabero concluded.

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