LAKE FOREST, Ill. – Sales from Brunswick Corp.’s (NYSE: BC) marine engine segment rose 28 percent in the first quarter of 2004 and boat segment sales were up 35 percent, compared to the same quarter of 2003, the industry giant reported in a press release today.
For the quarter ended March 31, the company posted 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, according to Brunswick. 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.
Brunswick posted net earnings of $48.0 million, or $0.50 per diluted share for the quarter. Those earnings represented significant gains for the company when compared to earnings of $3.8 million, or $0.04 per diluted share for the year-ago quarter, which included a $25.0 million ($0.18 per diluted share) litigation charge to operating earnings relating to the settlement of a lawsuit, Brunswick 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, said George W. Buckley Brunswick chairman and CEO. “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.”
Marine engine segment sees strong retail demand
Brunswick’s 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, Brunswick said.
“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.”
Buckley said customer response to Brunswick’s Verado family of outboard engines has been “outstanding,” and that the company will begin shipping product this week. He also said that Brunswick New Technologies contributed to the sales gain for the segment, primarily because of the acquisition of Navman NZ Limited, a producer of global positioning system-based products.
Demand outstripping supply in some parts of boat segment
The company’s boat segment reported first-quarter sales of $512.0 million, up 35 percent compared with $378.6 million in the first quarter of 2003, Brunswick said.
This segment is comprised of 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.
Incremental sales from its new parts and accessories (P&A) business, which began with the acquisition of Land ‘N’ Sea and Attwood last year, helped those sales numbers, Brunswick said.
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, according to Brunswick.
“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.”
Buckley said the Bayliner 175 runabout, the Sea Ray 500 Sundancer, and the Hatteras 80 Motor Yacht were doing especially well for the company.
“Demand for these particular models is nearly outstripping our ability to supply,” Buckley said.
Brunswick expecting record year
2004 is “shaping up to be a record year for Brunswick in both sales and earnings,” with the success of new products, cost management and acquisitions, buoyed by improved economic and marine market conditions, Buckley explained.
The company has raised its earnings estimate for 2004 to $2.45 to $2.65 per share, up from $2.10 to $2.30 per share, with combined sales growth in the marine segments expected 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, Brunswick said.
“Our earnings estimates assume full-year operating margin improvement in the range of 150 to 200 basis points,” Brunswick said. “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.”