Brunswick Corporation reported results for the fourth quarter and full-year of 2019.
"Our 2019 performance demonstrated the strength and resilience of our marine-focused portfolio. We expanded gross and operating margins and delivered a tenth consecutive year of adjusted EPS growth, despite a weaker than anticipated marine market in the first half of the year," said Brunswick chief executive officer David Foulkes. "The transformational changes we made to our business in 2019 reinforced our position as the market leader in the marine industry and set us up for further margin expansion and revenue growth in 2020 and beyond.
"Mercury's recent new product introductions continued to provide sales mix benefits in the fourth quarter due to increasing demand for higher horsepower engines. The recently completed manufacturing capacity expansion for these engines strengthened our capability to serve this growing segment of the market and access higher-margin dealer and international sales channels. Retail boat trends continued to stabilize in the second half of the year and we executed disciplined pipeline reduction actions in the fourth quarter as planned, meeting our target of essentially flat weeks on hand versus 2018. Our debut at CES earlier this month, including the launch of the new Sea Ray SLX-R 400e with our proprietary FATHOM e-power technology, developed jointly by our Advanced Systems Group, Boat Group Technology Center and iJet Lab teams, provided a tremendous start to 2020 and illustrated our focus and commitment to using technology across our portfolio to enhance the overall boating experience," Foulkes continued.
Foulkes also mentioned Brunswick's completion of its $400 million share repurchase commitment during the quarter.
For the fourth quarter of 2019, Brunswick reported consolidated net sales of $917.6 million, down from $961.1 million in 2018 which included $5.4 million of sales related to Sport Yacht and Yachts.
For the year ended Dec. 31, 2019, Brunswick reported consolidated net sales of $4,108.4 million, down from $4,120.9 million in 2018. 2018 net sales included $49.4 million of sales related to Sport Yacht and Yachts, which have been excluded from as adjusted reporting.
The marine engine segment, which manufactures and distributes marine propulsion systems and related parts and accessories, reported a slight sales decrease in the quarter as continued strong demand for higher horsepower outboard engine categories and solid growth at Power Products was offset by forecasted reductions in outboard engines 150 horsepower and below, as well as lower sales of sterndrive engines.
Foulkes said operating earnings comparisons were affected by lower purchase accounting amortization and acquisition-related costs in both periods. Excluding these factors, earnings were down slightly as comparisons were unfavorably influenced by the impact of a tariff exemption received in December 2018, along with unfavorable foreign currency exchange impacts. These factors were partially mitigated by a more favorable sales mix and cost reduction actions.
The boat segment, which manufactures and distributes recreational boats, and includes business acceleration operations, including Freedom Boat Club, reported a decline in sales, which the company said is primarily due to continued planned reductions in wholesale unit shipments to rightsize the pipeline, particularly in aluminum and saltwater fish categories.
Freedom Boat Club contributed approximately 2% of sales improvement in the quarter. Operating earnings comparisons reflect reduced losses associated with the exit from the Sport Yacht and Yacht business. Excluding this factor, the company said operating earnings were lower as continued benefits from cost control measures were exceeded by the impact of lower volume and production rates required to bring pipelines to healthy levels by year-end.
"For 2020, we project U.S. marine industry retail unit demand for the year to be flat to slightly up versus 2019. With this retail performance, wholesale shipments are expected to be higher as a result of the 7% unit pipeline reductions achieved in 2019," Foulkes said. "We anticipate continued growth and share gains in higher horsepower engine categories bolstered by our completed capacity expansion efforts. Boat segment sales in 2020 will also benefit from significant new product introductions as well as our continued focus on product with more technology features and content."
"Our propulsion and boat businesses in 2020 will experience more challenging wholesale revenue comparisons early in the year, with more favorable comparisons in the second-half, as a result of the timing of wholesale activity in 2019, including the impact of second-half pipeline reductions," Foulkes added. "The parts and accessories business should benefit from more normal seasonal conditions for boating activity.