Earnings point to a better 2012Posted on
Industry’s top manufacturers and retailers posted promising results in the fourth quarter of 2011
Many of the industry’s publicly traded companies reported positive results for the October-December quarter. Declines, when recorded, were generally less severe than in recent years, and many companies reported increases in sales and profits.
Here is an overview of the results:
Brunswick reported increases in sales for the fourth quarter and the 2011 fiscal year, as well as an increase in operating earnings and a reduction in debt for the year.
“In 2011, our company made significant progress in growing our revenue and improving our earnings,” chairman and CEO Dustan McCoy says. “We achieved double-digit revenue growth and an increase in operating earnings of $176 million, despite a flat overall marine market and challenging global economic conditions.
“Our ability to achieve market share gains throughout our segments, combined with continuing success in improving production and operating efficiencies, enabled us to report our highest level of operating earnings since 2006,” he added.
For the year that ended Dec. 31, the company reported net sales of $3.75 billion, up from $3.4 billion a year earlier. Operating earnings for the year were $192.4 million, which included $22.7 million of restructuring, exit and impairment charges. In 2010, the company reported operating earnings of $16.3 million, which included $62.3 million of restructuring, exit and impairment charges.
For 2011, the company reported net earnings of $71.9 million, or 78 cents a diluted share, compared with a net loss of $110.6 million, or $1.25 a diluted share, for 2010.
For the fourth quarter of 2011, Brunswick reported net sales of $789.1 million, up from $728.8 million a year earlier. The company reported an operating loss for the quarter of $18.1 million, which included restructuring, exit and impairment charges of $4.5 million. In the fourth quarter of 2010, the company had an operating loss of $74.7 million, which included $18.5 million of restructuring, exit and impairment charges.
For the fourth quarter of 2011, Brunswick reported a net loss of $29.6 million, or 33 cents a diluted share, compared with a net loss of $104.1 million, or $1.17 a diluted share, for the fourth quarter of 2010.
The boat segment reported net sales of $196.8 million for the fourth quarter, up 20 percent from the $163.6 million reported in the fourth quarter of 2010. U.S. sales, which represented 69 percent of total segment sales in the quarter, increased by 34 percent. International sales decreased by 10 percent, driven largely by the absence of sales related to the Sealine brand, which was divested in the third quarter of 2011.
For the fourth quarter of 2011, the boat segment reported an operating loss of $28.4 million, which included a gain from restructuring activities of $900,000. This compares with an operating loss of $69.3 million, including restructuring charges of $10 million, in the fourth quarter of 2010.
Boat segment production and wholesale unit shipments increased during the quarter, compared with the fourth quarter of 2010, in response to solid retail demand for Brunswick’s boat brands. A greater sales mix of smaller boats had a negative effect on sales during the quarter.
The marine engine segment, consisting of the Mercury Marine Group, including the marine parts and accessories businesses, reported net sales of $373.3 million in the quarter, up 6 percent from $353.3 million in the fourth quarter of 2010. U.S. sales, which represented 52 percent of total segment sales in the quarter, increased by 10 percent and international sales decreased by 2 percent.
For the quarter, the marine engine segment reported an operating loss of $2.3 million, which included $3.8 million of restructuring and impairment charges. This compares with an operating loss of $17.4 million in the fourth quarter of 2010, which included $7.4 million of restructuring charges.
“In 2012 we will remain focused on revenue and earnings growth,” McCoy says. “We believe that the global economic and marine market outlook will continue to be challenging and that demand characteristics will be comparable to those demonstrated in 2011.
“Our entire organization will concentrate its efforts on maintaining its favorable cost position and generating growth through the continuation of market share gains and the execution of organic growth initiatives,” he added.
Brunswick is targeting mid-single-digit revenue growth in a flat market for the year, McCoy says, noting that he expected a slow start to the year, with revenue likely down in the mid-single-digit range in the first quarter.
Timothy Conder, senior analyst with Wells Fargo Securities, says, “All else being equal, [Brunswick] should continue posting solid market share gains in multiple segments. Near-term, we see [Brunswick] shares potentially consolidating recent gains, but within an upward fundamental trend. We continue to be buyers of this quality cyclical name and see pullbacks as shallow.”
“Brunswick controls several best-in-class assets that should allow it to grow faster than its end markets while driving exceptional returns,” writes B. Riley analyst Jimmy Baker. “The company has revolutionized much of its core marine businesses over the past several years, emerging from the marine industry depression with a leaner, more agile business model. In sum, we believe Brunswick is positioned to rapidly grow earnings in the absence of an economic tailwind, primarily through continued expense reduction and market share gains.”
McCoy says he expects sales of aluminum boats, outboard fiberglass and small sterndrive product will see increases in 2012. Dealers, he says, are focusing on maintaining good inventory levels, adding that “none of us are pie-in-the-sky” as to sales expectations. McCoy is hearing from dealers that there is not enough good used product available to satisfy demand because people are holding on to boats longer.
A good used boat may have a waiting list, he says, and selling prices are back to pre-2008 historical norms.
“We’re pleased with ’11,” says McCoy. “We’ve got a good plan for ’12. We know we’ve got a lot of work to do, our sleeves are rolled up, and we’re at it.”
MarineMax announced a small decline in revenue for its first quarter, but reported a slight increase in same-store sales for the period.
Revenue was $91.8 million for the quarter that ended Dec. 31, compared with $92.2 million for the comparable quarter in fiscal 2011. Same-store sales increased more than 2 percent, compared with an 8 percent decrease in the comparable fiscal 2011 quarter.
Revenue from closed stores that were not eligible for inclusion in the same-store sales base was $2.5 million.
The company reported a net loss of $4.2 million for the quarter, or 19 cents a share, compared with a net loss of $4.7 million, or 21 cents a share, for the fiscal 2011 first quarter.
Net loss for the quarter was reduced by about $1.4 million related to the favorable resolution of various amounts due from a manufacturer whose brands the company no longer carries, MarineMax says. Excluding the benefit from the favorable resolution, net loss for the period was $6.1 million, or 27 cents a share.
Inventory was $224.7 million, compared with $189.2 million on Dec. 31, 2010. Sequentially, inventory increased by $5.1 million, or 2 percent, compared with the quarter that ended Sept. 30, 2011.
“The December quarter was our fifth consecutive quarter of new-boat unit sales growth,” says chairman, president and CEO William McGill Jr. “We produced a modest increase in same-store sales while expanding our gross margins, which resulted in a meaningful improvement in our results on a comparable basis.”
McGill says MarineMax generated increases in its higher-margin businesses of brokerage, finance and insurance, parts and accessories, service and storage that contributed, along with higher product margins, to drive an increase in its overall gross margins for the quarter.
“While total revenue was approximately flat to the prior year, our new-boat unit sales are well above reported industry trends,” he added. “We attribute the outperformance to our proven retailing strategies and the appeal of the broad boat and yacht brands that we offer. Although the marine retail environment continues to present challenges, our well-capitalized balance sheet and industry leadership allow us to remain focused on maximizing opportunities to improve our performance.”
McGill also says the company is comfortable with its inventory levels, and early results from the boat shows at which it has exhibited have produced encouraging results.
MarineMax’s getaway trips “are the most powerful [marketing] tool we have,” he says, and although the company still participates in boat shows, the focus is on “making the [boat] shows look better and spending less on them.”
MarineMax has organized more than 1,000 events for its customers in the last few years — ranging from weekend trips to two-week getaways — and many were overbooked or 100 percent full. It’s the best thing MarineMax can do to get repeat and referral customers, McGill adds.
CFO Michael McLamb says sales in January were finishing ahead of last year, but MarineMax will need to see growth in the key second and third quarters for real growth.
There has been an uptick in sales in boats under 24 feet, he says, and those are generally new buyers, as opposed to repeat customers. MarineMax is also starting to see an uptick in the 25- to 35-foot range, he adds.
McGill says there has been a lot more interest in aluminum pontoon boats recently because people are looking for greatest value for their dollars.
Marine Products Corp.
Marine Products Corp., the builder of Chaparral and Robalo boats, reported a 34.2 percent increase in fourth-quarter net sales and ended its fiscal year with a 5.4 percent increase in sales.
For the quarter ended Dec. 31, Marine Products generated net sales of $27.9 million, compared with $20.8 million last year. The increase was attributable to a 37.4 percent increase in the number of boats sold. Unit sales increased in most product lines, and also rose because of sales of Chaparral’s H2O Sport and Fish & Ski boats and its entry-level Robalo 180 and 200, the company reports.
This increase was partially offset by a slight decrease in the average selling price per boat. Average selling prices decreased because of a shift in model mix toward the production of smaller boats.
Gross profit for the quarter was $5.51 million, or 19.7 percent of net sales, compared with a gross profit of $3.6 million, or 17.3 percent of net sales, in the prior year. The increase in gross profit in the fourth quarter of 2011, compared with the prior year, was attributable to higher unit sales during the fourth quarter of 2011.
Operating profit for the quarter was $2.06 million, a significant increase, compared with an operating profit of $414,000 in the fourth quarter of last year. Marine Products says its operating profit increased primarily because of higher net sales and gross profit.
Net sales for the 12 months ended Dec. 31 were $106.44 million, a 5.4 percent increase from the previous year. Net income in 2011 was $6.73 million, or 18 cents a diluted share. Net income, excluding other income, for the 12-month period was $4,71 million, or 13 cents a diluted share, compared with net income of $3.85 million, or 11 cents a diluted share, in the prior year.
“During the fourth quarter of 2011, Marine Products Corp. generated increased sales, compared to the prior quarter and prior year, for the first time in several quarters,” says CEO Richard Hubbell. “A significant percentage of our net sales increase was due to sales of our new Chaparral H2O. In addition, our value-priced Robalo outboard sportfishing boat has been well received by dealers and consumers, and we are beginning to generate increased unit sales from this model, as well. In spite of lower average selling prices resulting from sales of these two models, our gross profit margin has improved due to leverage of our fixed overhead costs over higher production volumes.”
Hubbell says the company has a “generally favorable outlook for 2012,” adding that the board of directors voted to reinstate a regular quarterly dividend.
Other marine companies
• Actuant Corp., the parent company of Marinco Electrical Group and Mastervolt, announced strong first-quarter results, including core sales growth of 7 percent and a 39 percent year-over-year increase in diluted earnings per share from continuing operations. Consolidated sales for the first quarter were $393 million, 23 percent higher than the comparable prior-year quarter. Core sales increased 7 percent, with acquisitions contributing an additional 15 percent. Fiscal 2012 first-quarter net earnings from continuing operations were $37.2 million, compared with $26.7 million in the comparable prior-year quarter. EPS of 50 cents in the first quarter of fiscal 2012 was 39 percent higher than the 36 cents in the comparable quarter. The electrical segment saw sales of $82.8 million, compared with $55.4 million in the prior year.
• Caterpillar Inc. reported record-breaking 2011 sales and revenue of $60.14 billion, an increase of 41 percent from $42.59 billion in 2010. Profit in 2011 was $4.93 billion, an increase of 83 percent from $2.7 billion in 2010. Profit per share of $7.40 was up 78 percent from $4.15 in 2010. Fourth-quarter sales and revenue in 2011 were an all-time quarterly record of $17.24 billion, an increase of 35 percent from $12.81 billion in the fourth quarter of 2010. Fourth-quarter profit was $1.55 billion, compared with $968 million in the fourth quarter of 2010. Profit of $2.32 a share was 58 percent higher than the $1.47 a share in the fourth quarter of 2010. The outlook for 2012 sales and revenue has increased and is expected to be in a range of $68 billion to $72 billion, the company says.
• Cummins Inc. reported record sales, profits and cash flow from operations for all of 2011 as well as strong results for the fourth quarter. Fourth-quarter revenue of $4.9 billion increased 19 percent from the same quarter in 2010 and set a new quarterly record for the company. Net income attributable to Cummins in the fourth quarter was $548 million ($2.86 a diluted share). Earnings before interest and taxes were $768 million for the fourth quarter. Revenue for the full year was $18 billion, up 36 percent from 2010, with strong growth in most geographic regions, Cummins says. Based on the current forecast, Cummins anticipates that total company revenue will increase 10 percent in 2012, with earnings before interest and taxes in the range of 14.5 to 15 percent of sales.
• Johnson Outdoors says revenue grew 2 percent, to more than $80 million, during the first quarter despite a 66 percent drop in year-over-year military sales. The company reported a net loss of $2.9 million, or 30 cents a diluted share, during the first fiscal quarter, compared with a net loss of $1.2 million, or 13 cents a diluted share, in the same quarter last year. Total operating loss during the quarter was $3.7 million, compared with an operating loss of $1.3 million in the prior-year period. Johnson Outdoors’ first fiscal quarter results historically reflect a loss because of the seasonality of the warm-weather outdoor recreational products industry, the company says. Marine electronics revenue increased 11 percent from last year, driven in large part by an increase of more than 25 percent in sales of Humminbird side- and down-imaging sonar products. Watercraft sales grew 22 percent, primarily because of low-margin year-end closeouts in the sporting goods channel, as core specialty channel revenue held steady.
• Twin Disc reported an increase in sales and gross margin for its second quarter, ended Dec. 30. Sales for the second quarter of fiscal 2012 improved to $82.94 million, from $75.16 million in the same period last year. For the fiscal year to date, sales are $164.27 million, compared with $136.56 million for the fiscal 2011 first half. Gross margin for the second quarter of fiscal 2012 was 35.6 percent, compared with 31.6 percent in the second quarter of fiscal 2011 and 37.8 percent in the first quarter of fiscal 2012. Net earnings attributable to Twin Disc for the second quarter of fiscal 2012 were $5.86 million, or 51 cents a diluted share, compared with $4.03 million, or 35 cents a diluted share, for the fiscal 2011 second quarter.
This article originally appeared in the March 2012 issue.