Brunswick sales up 9 percent in 2016 Q1

Brunswick Corp. grew sales in the first quarter of the year, reporting growth in both boat and engine sales.

Brunswick reported results for the first quarter of 2016 on Thursday:

• Consolidated net sales increased 9 percent versus first quarter 2015; 10 percent growth on a constant currency basis; excluding the impact of acquisitions, sales on a constant currency basis increased 6 percent.
• Adjusted operating earnings increased by 13 percent from 2015. On a GAAP basis, operating earnings increased by 8 percent.
• Diluted EPS, as adjusted of $0.71, a $0.12 increase compared to prior year. On a GAAP basis, diluted EPS of $0.68 increased by 15 percent.

“Our reported first quarter revenues increased by 9 percent, or 10 percent on a constant currency basis,” said Brunswick Chairman and CEO Mark Schwabero. “Our top line reflected strong growth rates in our fiberglass outboard boats and marine parts and accessories businesses. This growth was supplemented by another solid performance in outboard engines, as well as benefits from our acquisition strategy.

“Our performance in the first quarter reflected continued successful execution of our growth strategy, including our focus on product leadership and the associated market share gains,” Schwabero continued. “Although it is still early in the marine season, initial marine market data indicates a healthy U.S. marketplace, which is consistent with our assumptions entering the year. Demand in non-U.S. markets remains mixed and we continue to closely monitor and plan to manage through any challenging conditions.”

First Quarter Results

For the first quarter of 2016, the company reported net sales of $1,070.3 million, up from $985.7 million a year earlier. For the quarter, the company reported operating earnings of $96.0 million, which included $3.8 million of restructuring and integration charges related to the Cybex acquisition. In the first quarter of 2015, the company had operating earnings of $88.7 million. For the first quarter of 2016, Brunswick reported net earnings of $63.2 million, or $0.68 per diluted share, compared with net earnings of $56.6 million, or $0.59 per diluted share, for the first quarter of 2015. Diluted EPS for the first quarter of 2016 included $0.03 per diluted share of restructuring and integration charges.

Marine engine segment

The Marine Engine segment, consisting of the Mercury Marine Group, including the marine parts and accessories businesses, reported net sales of $595.5 million in the first quarter of 2016, up 6 percent from $562.2 million in the first quarter of 2015.

International sales, which represented 33 percent of total segment sales in the quarter, were up 8 percent compared to the prior year period. On a constant currency basis, international sales were up 14 percent. For the quarter, the Marine Engine segment reported operating earnings of $78.3 million. This compares with operating earnings of $74.2 million in the first quarter of 2015.

Sales increases in the quarter were led by the segment’s parts and accessories businesses, which included revenues from acquisitions completed in the second and fourth quarters of 2015, and Mercury’s outboard engine business, partially offset by declines in the sterndrive engine business. Higher revenues, cost reductions and a favorable product mix contributed to the increase in operating earnings in the first quarter of 2016. Partially offsetting these positive factors were planned increases in growth investments and the unfavorable impact from foreign exchange.

Boat segment

The boat segment is comprised of the Brunswick Boat Group, and includes 14 boat brands. The boat segment reported net sales of $336.8 million for the first quarter of 2016, an increase of 6 percent compared with $318.0 million in the first quarter of 2015.

International sales, which represented 25 percent of total segment sales in the quarter, decreased by 12 percent compared to the prior year period. On a constant currency basis, international sales were down 9 percent. For the first quarter of 2016, the boat segment reported operating earnings of $16.4 million. This compares with operating earnings of $7.7 million in the first quarter of 2015.

The boat segment’s increased revenue reflected strong growth in fiberglass outboard boats and modest increases in sterndrive/inboard boats, partially offset by slight declines in aluminum boats. Operating earnings benefited from higher sales, a favorable product mix and lower commodity costs and savings from sourcing initiatives.

2016 outlook

“Our outlook for 2016 continues to be generally consistent with our three-year strategic plan and reflects another year of outstanding earnings growth, with excellent cash flow generation,” said Schwabero. “We believe we are well-positioned to generate strong sales and adjusted earnings per share growth of mid-to-high teen percent in 2016 and beyond.

“We expect our businesses’ top-line performance will benefit from the continuation of solid market growth in the U.S. and Europe and the success of our new products, partially offset by weakness in certain other international markets and the negative impact of a stronger U.S. dollar. As a result, our plan, including the Cybex acquisition completed on Jan. 20, 2016, reflects expected revenue growth rates in 2016 to be in the range of 9 to 11 percent, absent any significant changes in our global macroeconomic assumptions. In total, acquisitions are expected to account for about 5 percent of 2016’s projected growth, reflecting the impact of completed transactions.

“For the full-year, we anticipate a slight improvement in both gross margins and operating margins, as we plan to continue benefiting from volume leverage, cost reductions and savings related to sourcing initiatives and modest positive product mix factors, partially offset by incremental investments to support growth as well as foreign currency headwinds. Operating expenses are estimated to increase in 2016; however, on a percentage of sales basis, are expected to be at slightly lower levels than 2015,” Schwabero said.

“We are narrowing the range for our full-year expectations of diluted EPS, as adjusted, from $3.35 to $3.50 to a range of $3.40 to $3.50. Finally, for 2016, we expect to generate positive free cash flow in excess of $200 million,” Schwabero concluded.

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