LAKE FOREST, Ill. – While boating industry giant Brunswick Corp. (NYSE: BC) is feeling the pain of current market conditions, as one might expect, its international business is keeping the company on track, allowing it to meet its earnings projections for the quarter.
The company reported net earnings from continuing operations of $34.3 million for the first quarter of 2007, compared with net earnings from continuing operations of $74.1 million for the year-ago quarter.
“We are pleased with our results for the quarter, demonstrating our ability to produce good earnings despite challenging marine market conditions,” said Brunswick Chairman and Chief Executive Officer Dustan E. McCoy in a recent company statement. “Helping to mitigate the effects of a soft domestic marine market were strong sales contributions from our international marine operations and fitness segment, growth in marine parts and accessories, and incremental sales from acquired businesses.”
McCoy added that the company is affirming its earnings expectations for 2007, which it had previously stated were in the range of $1.65 to $2.00 per diluted share.
Brunswick’s sales in the first quarter of 2007 totaled $1,386.1 million, down 2 percent from $1,413.3 million for the year-ago quarter. Excluding sales from businesses acquired subsequent to the first quarter of 2006, sales declined 3 percent quarter-over-quarter.
Operating earnings in the first quarter of 2007 totaled $53.0 million, compared with $98.2 million a year ago. The company reported net earnings from continuing operations of $34.3 million in the first quarter of 2007, versus $74.1 million in the year-ago quarter.
In April 2006, the company announced its decision to pursue the sale of its Brunswick New Technologies (BNT) business unit, which is being accounted for as a discontinued operation. During the quarter, the company completed the sale of BNT’s marine electronics and portable navigation device businesses in separate transactions. Sale of the final piece of BNT, the wireless fleet tracking business, is progressing, the company stated.
P&A gains help offset boat sales declines
The Brunswick Boat Group, which produces fiberglass and aluminum boats and marine parts and accessories and offers dealer management systems, reported sales for the first quarter of 2007 of $699.0 million, down 7 percent compared with $751.0 million for the first quarter of 2006. Excluding incremental sales from acquired businesses, segment sales declined 9 percent.
Operating earnings were $19.5 million, down from $48.4 million for the quarter, and operating margins were 2.8 percent compared with 6.4 percent in the prior year.
“Sales benefited from gains in Boat Group parts and accessories and increased sales outside of the United States, which helped offset declines in domestic boat shipments to reduce pipeline inventories,” McCoy explained. “Operating earnings were affected by lower sales, reduced fixed-cost absorption from production cuts, costs associated with previously announced restructuring efforts, as well as by increased discounts offered to spur retail demand.”
McCoy added that at the end of the quarter, boat pipeline inventories stood at 34 weeks of supply compared with 32 weeks of supply a year ago.
“While up, we are making progress,” he said. “The two-week inventory build year-over-year was below the three-week build we saw at the end of the December quarter. Pipeline reductions were particularly pronounced in fiberglass boats.”
Marine Engine segment sales up, despite decline in domestic engine sales
The Marine Engine segment, consisting of the Mercury Marine Group, reported sales of $572.6 million in the first quarter of 2007, up 3 percent from $555.0 million in the year-ago first quarter. Operating earnings in the first quarter declined to $34.7 million versus $44.9 million, and operating margins were 6.1 percent compared with 8.1 percent for the same quarter in 2006.
“Similar to our boat business, the engine segment reported strong sales growth from areas outside the United States as well as from Mercury’s parts and accessories business,” McCoy explained. “These gains helped to offset declines in domestic engine sales, reflecting continuing difficult market conditions. The decline in operating earnings was due in large part to lower fixed-cost absorption resulting from reduced production rates and a shift in product mix. At the end of the quarter there were 31 weeks of supply of engines in the pipeline, up from 28 weeks a year ago. The increase was partially due to higher shipments to customers who made purchases in advance of a systems conversion at Mercury.”
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