Brunswick’s boat and engine sales up in 3Q

LAKE FOREST, Ill. – Brunswick Corp.’s boat segment reported sales for the third quarter, ended Sept. 30, of $567.3 million, up 40 percent compared with $404.5 million in the third quarter of 2003, the company reported in a press release this morning.

Operating earnings increased to $36.1 million, more than quadruple the $8.2 million reported in the third quarter of 2003, Brunswick said.

The boat segment’s operating margins increased by 440 basis points, rising to 6.4 percent for the quarter from 2.0 percent a year ago. About half of the sales gain was due to incremental sales from acquisitions, primarily the aluminum boat brands purchased in April of this year. But boat segment sales absent acquisitions were up 18 percent for the quarter, according to the company.

Brunswick’s marine engine segment, consisting of the Mercury Marine Group and Brunswick New Technologies, reported sales of $575.5 million in the third quarter of 2004, up 15 percent from $500.8 million in the year-ago third quarter.

Operating earnings increased 16 percent to $70.7 million versus $60.9 million, and operating margins were up slightly to 12.3 percent as compared with 12.2 percent for the same quarter in 2003.

“Our outboard and sterndrive engine sales increased during the quarter in both the domestic and international markets,” said Brunswick Chairman and CEO George W. Buckley. “We continue to see strong demand for our Verado family of high-horsepower, four-stroke outboard engines. Operating margins, however, were adversely affected by the typical start-up costs associated with the introduction of Verado, the transition to low-emission outboards that carry lower margins, expenses related to our China manufacturing plant currently under construction, as well as by higher research and development spending, primarily for BNT and new Verado models to be released next year.”

Buckley said parts and accessories sales, while up in the quarter, were adversely affected by the unprecedented hurricane activity throughout the Southeast. He also reported that BNT recorded strong sales growth in the quarter, along with positive overall operating margins, due primarily to the contributions from Navman, a producer of global positioning system-based products.

“Margin improvement will continue to be a focus in our Marine Engine segment as we seek to mitigate the cost pressures through effective cost management, global sourcing and applying the principles of Lean Six Sigma to improve productivity,” Buckley said. “Our China plant and our expanded Japanese manufacturing plant are scheduled to come on line late in the first quarter next year, which will gradually help improve our margins.”

Buckley said Brunswick’s boat group – comprised of the boat segment, which 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 – were also hurt by the hurricanes.

“The hurricanes had a significant impact on the Boat segment,” Buckley said. “We shut down our Sea Ray and Boston Whaler plants on the East Coast of Florida for each of the hurricanes, losing several production days. In addition, our Land ‘N’ Sea distribution facility in Lake Suzy, Fla., was virtually destroyed by Hurricane Charley. We are grateful that all of our employees made it safely through the storms and are pleased to report that our boat plants are all operational, and our Land ‘N’ Sea customers are being serviced from our other distribution centers.”

Company-wide results

Overall, Brunswick Corp. reported net earnings of $72.9 million, or $0.75 per diluted share, for the third quarter of 2004, compared with $37.9 million, or $0.41 per diluted share, for the year-ago quarter. The company said that earnings in the 2004 third quarter benefited by approximately $0.10 per diluted share from completion of a tax audit, discussed below. Operating earnings in the third quarter of 2004 rose 59 percent on a 23 percent sales gain.

“Higher unit volumes due to market growth and the success of new products, strength in international markets and contributions from acquisitions completed earlier this year were the primary drivers behind the 23 percent sales gain,” Buckley said. “Excluding sales from companies that were not in the portfolio a year ago, sales were up 14 percent in the third quarter. Through effective cost management and higher unit volumes, we leveraged our top-line growth into a 59 percent increase in operating earnings to $99.3 million and a 180 basis point improvement in operating margins.”

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