Brunswick Corporation (NYSE: BC) today reported results for the third quarter of 2019.
"Our third quarter performance reflects the continued successful execution of our marine strategy and reinforces the tremendous confidence we have in the future growth opportunities within each of our businesses," said Brunswick chief executive officer David Foulkes. "Both gross and operating margins expanded during the quarter, despite anticipated decreases in sales, demonstrating the positive effects of our cost reduction activities as well as the strength of our overall business portfolio including the Power Products business acquired in August of last year. The more favorable retail demand environment across the U.S. in the third quarter of 2019, along with planned lower wholesale shipment activity during the quarter, resulted in better than expected pipeline inventory improvements across boat and engine product lines, with field inventories for boats now down slightly on a unit basis versus the prior year. We are confident that we will achieve our year-end pipeline goals, setting up for a clean start to 2020."
For the third quarter of 2019, Brunswick reported consolidated net sales of $976.6 million, down from $1,044.1 million a year earlier, which included $9.0 million of sales related to Sport Yacht and Yachts. Diluted EPS for the quarter was ($2.74) on a GAAP basis and $1.10 on an as adjusted basis.
The Marine Engine segment, which manufactures and distributes marine propulsion systems and related parts and accessories, reported sales reductions in the quarter as the addition of Power Products and continued gains in higher horsepower outboard engine categories were partially mitigated by the impacts of planned reductions in outboard engines 150 horsepower and below resulting from the challenging market environment in the first half of the year, as well as lower sales of sterndrive engines.
Brunswick said operating earnings comparisons were affected by acquisition-related costs in 2018. Excluding this factor, earnings were down slightly as cost reductions, benefits from Power Products, and a more favorable sales mix were mostly neutralized by lower volumes, primarily in the lower horsepower engine categories. Operating margins continued to expand during the quarter despite revenue softness.
The Boat segment, which manufactures and distributes recreational boats, and includes Business Acceleration operations, had sales and operating earnings comparisons that were both affected by the exit from the Sport Yacht and Yacht business in the second-half of 2018. Excluding this factor, Brunswick said sales decreased primarily due to planned reductions in wholesale unit shipments in response to the challenging retail market environment in the first half of the year. Slight sales gains in recreational fiberglass were offset by planned reductions in saltwater fishing, pontoons, and value aluminum products. The Freedom Boat Club acquisition contributed approximately 2% of sales in the quarter. Operating earnings were lower as benefits from cost control measures were exceeded by the impact of lower volume and production rates required to right-size pipelines to healthy levels by year-end.
"2019 is shaping up to be another year of record earnings, led by solid improvements in gross and operating margins, with strong free cash flow generation. Each of our businesses continue to benefit from steady investment in new products and technology and we believe we are well positioned for success in 2020 and beyond," said Foulkes.