Brunswick Corporation (NYSE: BC) recently reported results for the fourth quarter and full-year of 2018.
For the fourth quarter of 2018, Brunswick reported net sales of $1,248.9 million, up from $1,182.1 million a year earlier, with $5.4 million and $38.3 million of sales related to Sport Yacht and Yacht operations in the fourth quarter of 2018 and 2017, respectively. Diluted EPS for the quarter was $0.47 on a GAAP basis versus $0.98 on an as adjusted basis.
For the year ended Dec. 31, 2018, Brunswick reported net sales of $5,159.2 million, up from $4,835.9 million a year earlier, with $49.4 million and $151.
“Our combined marine portfolio had a fantastic 2018, which led to the company’s ninth consecutive year of adjusted EPS growth,” said Brunswick Chief Executive Officer David Foulkes. “The financial results demonstrate the outstanding execution of our marine strategy, where our focus on product and technology leadership, along with capacity investments and operational excellence, generated strong improvements. We leveraged our successful performance in a steady marine market into significant top-line growth, margin expansion, and record earnings.”
Foulkes reported that in the fourth quarter, Mercury’s propulsion business continued to excel behind powerful demand for new outboard products, which generated 20 percent revenue growth in the quarter.
The parts and accessories business, which was augmented by the first full quarter of results from the Power Products acquisition, also delivered impressive topline and earnings growth.
In addition, the boat business achieved solid earnings improvements, led by growth in Boston Whaler, Harris pontoons, and Sea Ray Sport Boats and Cruisers.
“As I step into my new role as CEO, I am looking forward to executing against our strategic objectives and leading the company and our over 15,000 dedicated employees to even greater success in 2019 and beyond,” Foulkes said.
Marine Engine Segment
The Marine Engine segment, which manufactures and distributes marine propulsion systems and related parts and accessories, reported net sales of $669.5 million in the fourth quarter of 2018, up 18.6 percent from $564.6 million in the fourth quarter of 2017.
The Power Products acquisition contributed approximately 9 percent to the growth rate in the quarter. International sales, which represented 31 percent of total segment sales in the quarter, were up 18 percent compared to the prior year period.
For the quarter, the Marine Engine segment reported operating earnings of $81.5 million, which included $11.8 million of purchase accounting amortization and $0.8 million of transaction costs, each related to the Power Products acquisition. This compares with $59.2 million of operating earnings in the fourth quarter of 2017.
Foulkes said significant growth in both the outboard engine and parts and accessories businesses, including the results of the recent Power Products acquisition, drove sales increases in the quarter.
The Boat segment, which manufactures and distributes recreational boats, reported net sales of $377.3 million for the fourth quarter of 2018, a decrease from $386.5 million in the fourth quarter of 2017. Net sales included $5.4 million and $38.3 million of Sport Yacht and Yacht sales in the fourth quarter of 2018 and 2017, respectively.
International sales, which represented 20 percent of total segment sales in the quarter, decreased by 24 percent compared to the prior year, primarily due to lower sales into Canada due to the impact of retaliatory tariffs on wholesale shipments. For the fourth quarter of 2018, the Boat segment reported operating earnings of $10.3 million, which included $8.6 million of restructuring, exit, integration, and impairment charges, as well as additional losses in excess of restructuring charges of $11.0 million related to the Sport Yacht and Yacht operations. This compares to operating losses of $22.7 million in the fourth quarter of 2017 which included $36.9 million of restructuring, exit, integration, and impairment charges and $10.7 million of operating losses, each related to Sport Yachts and Yachts.
Foulkes said the boat segment’s quarterly operating earnings showed meaningful improvement reflecting benefits from higher net sales, with growth at Boston Whaler, Harris pontoons, and Sea Ray Sport Boats and Cruisers.
“We are diligently executing against our marine strategy, and expect the operational, strategic, and growth advancements achieved by our marine business to lead us to greater success in 2019,” said Foulkes. “With the pending separation of the Fitness segment, we are providing additional outlook comments and guidance for the company exclusive of the Fitness business. This presentation provides increased visibility into the expectations for the performance of the marine operations and will minimize adjustments to our outlook at separation.”
“In our combined marine business, we expect top-line performance to benefit from a steady global marine market, along with ongoing benefits from customer migration to higher horsepower engines and boats with increased technology and content. In addition, we anticipate market share gains due in part to the continued strong demand and acceptance of new outboard products.”
Foulkes went on to say the parts and accessories business will also continue to bolster its healthy aftermarket business, while investing in expanding product categories, such as controls, rigging and electrical systems, to increase sales to boat manufacturers.
“As a result, absent significant changes in the global macroeconomic climate, our plan reflects overall revenue growth rates in 2019 in the range of 9 to 11 percent, including an approximate 4 percent benefit from completed acquisition,” Foulkes said.