Boat, engine sales up as Brunswick reports second quarter results

Brunswick Corp. reported strong revenue growth Thursday for the second quarter of 2016, with sales up in marine engines, boats and fitness equipment.

“Our reported second quarter net sales increased by 9 percent,” said Brunswick Chairman and CEO Mark Schwabero. “Our top line reflected strong growth rates in our fitness segment and fiberglass outboard and aluminum boats. This growth was complemented by another solid performance in marine parts and accessories and outboard engines. The growth was also supplemented by the benefits from our acquisition strategy."

Strong U.S. and European sales are offsetting challenges in other parts of the world, Schwabero said during a call discussing Thursday's earnings report.

For Brunswick's boat segment, sales were up 10 percent in the U.S. and up 21 percent in Europe, but down 16 percent for the rest of the world, with weaker demand in Canada and Latin America having a large impact, said CFO Bill Metzger.

For the engine segment, which includes Mercury engines as well as parts and accessories, sales were up 5 percent in the U.S., up 10% in Europe and flat for the rest of the world, Metzger said.

Currency challenges had a $5 million impact on the company's operating earnings for the quarter, he added.

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Some other highlights of Thursday's earnings report:

  • Consolidated net sales increased 8.8 percent versus second quarter 2015; 9.1 percent growth on a constant currency basis; excluding the impact of acquisitions, sales on a constant currency basis increased 5.4 percent
  • On a GAAP basis, operating earnings increased by 5 percent versus the prior year. Adjusted operating earnings increased by 7 percent from 2015.
  • On a GAAP basis, diluted EPS of $1.17 increased by 3 percent versus the second quarter of 2015. Diluted EPS, as adjusted, of $1.19; a 13 percent increase compared to prior year.
  • Year-to-date net cash from operations was $213.1 million and free cash flow was $130.3 million; both were improved versus the prior year.

“The U.S. marine market continues to reflect solid fundamentals and growth, which are supported by stable boating participation, favorable replacement cycle dynamics and innovative products being introduced throughout the marketplace," Schwabero said. "Our product successes in both our engine and boat segments have enabled continued market share gains and mix benefits.

“In addition, our fitness business continues to benefit from solid demand, particularly in
the global health club and hospitality markets. This foundational core growth, combined
with favorable trends in the rehabilitation and active aging category, as well as
increased participation in group exercise activities, is providing a healthy marketplace in
which to execute our fitness strategy. We are making outstanding progress integrating
Cybex into our Fitness segment and remain on plan to achieve our near-term and longterm
financial objectives for this acquisition," Schwabero said.

Second quarter results

For the second quarter of 2016, the company reported net sales of $1,242.2 million, up from $1,142.0 million a year earlier. For the quarter, the company reported operating earnings of $161.9 million, which included $2.6 million of restructuring and integration charges related to the Cybex acquisition. This compares with operating earnings of $154.2 million in the second quarter of 2015. For the second quarter of 2016, Brunswick reported net earnings of $108.1 million, or $1.17 per diluted share, compared with net earnings of $107.6 million, or $1.14 per diluted share, for the second quarter of 2015. Diluted EPS for the second quarter of 2016 included $0.02 per diluted share of restructuring and integration charges, compared with a $0.09 per diluted share benefit related to special tax items in the second quarter of 2015.

Marine engine segment

The Marine engine segment, consisting of the Mercury Marine Group, including the marine parts and accessories businesses, reported net sales of $719.7 million in the second quarter of 2016, up 4 percent from $689.2 million in the second quarter of 2015.

International sales, which represented 29 percent of total segment sales in the quarter, were up 2 percent compared to the prior year period. On a constant currency basis, international sales were up 4 percent. For the quarter, the Marine Engine segment reported operating earnings of $139.0 million. This compares with operating earnings of $131.8 million in the second quarter of 2015.

Sales increases in the quarter were led by Mercury’s parts and accessories businesses and the segment’s outboard engine business, partially offset by declines in the sterndrive engine business. Higher revenues and cost reductions contributed to the increase in operating earnings in the second quarter of 2016. Partially offsetting these positive factors were the unfavorable impacts from foreign exchange and planned
increases in growth investments.

Boat segment

The boat segment is comprised of the Brunswick Boat Group, and includes 15 boat brands. The Boat segment reported net sales of $368.1 million for the second quarter of 2016, an increase of 5 percent compared with $349.3 million in the second quarter of 2015. International sales, which represented 27 percent of total segment sales in the quarter, decreased by 5 percent compared to the prior year period. On a constant currency basis, international sales were down 4 percent. For the second quarter of 2016, the Boat segment reported operating earnings of $22.7 million. This compares with operating earnings of $20.9 million in the second quarter of 2015.

The Boat segment's increased revenue reflected strong growth in fiberglass outboard and aluminum boats, partially offset by declines in sterndrive/inboard boats. Operating earnings benefited from higher sales and lower commodity costs and savings from sourcing initiatives, partially offset by the impact of lower sales volume of large sterndrive/inboard boats.

2016 Outlook

"Our outlook for 2016 continues to reflect another year of outstanding earnings growth, with excellent cash flow generation,” said Schwabero. “We believe we are well-positioned to generate strong sales growth and adjusted earnings per share growth at a mid-to-high-teen percent rate throughout our three-year plan.

“We expect our businesses’ top-line performance for the year 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 acquisitions reflects revenue growth rates in 2016 to be in the range of 10 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 sales growth, reflecting the impact of announced transactions in 2015 and 2016."

Read the full earnings release here.

 

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