Quarterly earnings take a weather hitPosted on Written by Reagan Haynes
The unsurprising mantra from companies that issued quarterly earnings reports in April was “weather.” The winter that wouldn’t end depressed boat and gear sales throughout the January-March quarter, but many are optimistic that increasing customer demand will translate to delayed 2014 sales, at least in some segments.
Here are highlights from the reports of publicly held marine companies:
Brunswick Corp. says first-quarter net sales fell 3 percent, to $969.2 million. Sales were flat in the marine engine parts and accessories business, and engine sales declined. The boat segment saw a 2 percent decline in sales for the quarter, which ended March 29.
CEO Dustan E. McCoy and CFO Bill Metzger released infographics demonstrating the chilling effects that cold weather had on sales. “At this early point in the marine season we believe that retail sales could be deferred to later months,” Metzger said during a conference call with investors and analysts.
Metzger said the previous spring also was marred by cold and harsh weather, causing a larger overall drop in sales than it did this year despite worse conditions in 2014. Fiberglass outboard boats continued to show solid growth, and the aluminum category, the “most vulnerable to cold and ice,” was down modestly, Metzger said.
For Brunswick, the hiccup was not just in demand. It also had to do with delayed production and delivery, McCoy said. “What we’re hearing from dealers is that they’ve got products sitting around, sold, that they’re not able to deliver,” McCoy said. “That’s especially true in the Midwest,” where there was still ice on the water in April.
The new Sea Ray L650 Fly, launched in Miami, as well as the SLX 350 and the 510 Fly, launched in Fort Lauderdale, are all sold through 2014, McCoy said. “So the issue there is not demand, but the ability of our folks to get the product out, and I’m convinced they’ll be able to do it because they’re really good.”
During the next 18 months to two years, the company may be looking to acquire “support marine parts and accessories businesses,” McCoy said.
The marine group will continue a focus on affordable boating options that has been successful, “but a bit differently than I would have predicted,” McCoy said. For example, the 350 SLX, a dayboat costing $150,000 less than a 35-foot cruiser, has surpassed expectations. “So bringing product with exactly the right features into a size segment that transacts for significantly less than same-sized boats with different features is a home run,” McCoy said.
Lund has made strides to grow margins and market share by taking the price of a 19-foot boat down to what an 18-foot boat used to cost, and an 18-foot boat into the 17-foot price range, and so forth. “What we’re seeing quite interestingly is people moving up in size,” McCoy said. “Folks who used to want a 17 are now buying an 18. So it works, but not quite the way people thought it would.”
Although cold weather cut into second-quarter boat sales at MarineMax, company executives remain confident that the lag will be offset by early spring sales.
“We continue to see demand in just about everything that is new, somewhat innovative and priced right,” MarineMax CEO Bill McGill told analysts and investors during a conference call to discuss the company’s results for the quarter. “In some cases the demand for new product is the strongest I’ve seen in my 41 years in the industry.”
The company has had a hard time getting enough boats to meet demand, even in the challenged sterndrive and inboard segments, McGill said. Anticipated new product from core suppliers such as Brunswick Corp. “should help push demand and drive additional sales and growth,” McGill said.
Revenue was $136.6 million for the quarter that ended March 31, compared with $160 million in the comparable quarter last year. Same-store sales declined about 16 percent, primarily because of poor weather, after two consecutive March quarters of double-digit percentage same-store sales growth on a year-over-year basis.
“During the March quarter we had more days where stores closed than in their prior 16 years in the market,” CFO Mike McLamb said. “As March ended we had significantly greater backlog than last year. As we approach the end of April, we believe we’ll end with strong double-digit improvement over last year, potentially fully offsetting the decline. May and June are critical months. While the momentum feels good, we have work to do. We started April with a materially larger improvement in backlog. We have the potential to make up entirely for March with our April backlog. That will give you an idea of the uptick of contracts we’re in.”
“We still have the selling months ahead of us, based on what we’re hearing from customers, based on backlogs … we believe this will be a fine quarter,” McGill said. “We need things to go right up there. We understand there will be cold weather up north … after a little break. Customers are looking forward to the country warming up so they can get back on the water.”
MarineMax delivered about a half-dozen Sea Ray SLX 350 models during the quarter, but it has more than 50 under contract, McGill said. “The same goes for 650s and 510s. You know, this quarter would’ve looked better if we could’ve gotten those 50 SLXs delivered.”
Marine Products Corp.
Sales of higher-priced boats helped the Chaparral and Robalo builder realize a 36.5 percent first-quarter gain in profits, to nearly $2 million. Weather might have come into play in regard to the number of units sold — the company saw a 5.4 percent decrease from the 2013 quarter.
The company said sales rose 7.7 percent and that it earned $1.98 million, or 5 cents a diluted share, during the quarter that ended March 31, compared with $1.45 million, or 4 cents a share, a year earlier. Net sales totaled $47.7 million, compared with $44.3 million in the quarter last year, and the company attributed the gain to a 13.4 percent increase in the average selling price per boat and an increase in parts and accessories sales.
The company said average selling prices and parts and accessories sales increased, compared with the prior year, because of a favorable model mix that included larger Chaparral H2O models, improved sales of large Robalo models and a significant number of the company’s 307 SSX Sportboats, which were introduced in the 2014 model year.
Gross profit for the quarter was $8.84 million, or 18.5 percent of net sales, a 24.3 percent increase from $7.1 million, or 16.1 percent of net sales, in the same period in the prior year.
Also citing the cold spring, West Marine said its first-quarter revenue was $113.3 million, a decline of less than 1 percent from a year earlier, and comparable-store sales were down 1.7 percent.
The California-based boating supplies and accessories retailer reported a net loss for the quarter that ended March 29 of $11 million, or 46 cents a share, missing projections by 8 cents, compared with a loss of $9.7 million, or 41 cents a share, for the quarter last year.
The company will continue to invest in strategies that will make it less dependent on weather, CEO Matt Hyde said.
“We had mixed results this quarter,” he said in a statement. “The top line reflected disappointing retail sales, largely driven by a cold and snowy winter and spring. We also experienced, as expected, soft sales as a result of the initial transition to our new e-commerce platform, though recently we’ve begun to recover from the transition.”
“Despite the tough quarter we remain optimistic,” Hyde said.
Caterpillar reported a first-quarter profit of $922 million, or $1.44 a share, an increase from $880 million, or $1.31 a share, in the first quarter of 2013.
First-quarter 2014 sales and revenues were $13.24 billion, about flat with $13.21 billion in the quarter last year. Increases in construction industries and energy and transportation were offset by declines in resource Industries.
The company’s outlook for sales and revenue remains unchanged at $56 billion in a range of plus or minus 5 percent. Although the sales-and-revenue outlook range remains unchanged, the company is increasing its 2014 profit outlook by 25 cents a share. Excluding restructuring costs of 17 cents a share, the company’s profit per share was $1.61 for the quarter. Profit in the first quarter of 2013 was $1.31 a share.
FLIR Systems saw first-quarter revenue rise 1 percent, to $350.5 million, from $348.6 million in 2013. Revenue from the maritime segment was $52.6 million, up 4 percent from the year-earlier quarter.
Operating income for the quarter that ended March 31 was $42.5 million, compared with $69.1 million last year, and was affected by $8.4 million in pretax charges related to previously announced restructuring initiatives.
Profit for the quarter was $29.9 million, or 21 cents a diluted share, compared with $51.6 million, or 35 cents a share, in the year-earlier quarter. The net after-tax effect of the restructuring charges in the first quarter was about $6.4 million, or 4 cents a share.
Oregon-based FLIR’s backlog of firm orders for delivery in the next 12 months was about $514 million as of March 31, an increase of $24 million during the quarter.
Marine segment revenue grew 19 percent at Garmin Ltd. as demand for new products, including autopilot solutions, chart plotters and radars improved. The company reported $583 million in total revenue for the quarter that ended March 29, with outdoor, fitness, aviation and marine delivering 58 percent of total revenue and growing 22 percent from 2013.
Net income for the quarter was $118.8 million, or 61 cents a diluted share, compared with $88.7 million, or 45 cents a share, a year earlier. For the marine segment, gross margins improved year-over-year, to 52 percent, in the quarter, with the product mix shifting toward new products with higher-margin profiles.
Garmin said that although first-quarter results exceeded its expectations it will wait until the second quarter to update guidance because the first quarter is historically its seasonally weakest quarter of the year.
Twin Disc’s sales were down, but margins rose for its fiscal third quarter. Although it was hard to quantify how much weather had to do with the drop, president and CEO John Batten said severe winter weather in the United States and Canada affected supply chain performance and caused shipments at the Wisconsin-based company to be delayed.
Echoing other comments about the late winter and early spring months, Batten emphasized that demand remained strong. Sales dropped to $60.7 million for the quarter that ended March 28 from $68.2 million a year earlier, and the company reported a net loss of $393,000, or 3 cents a share, compared with a loss of $757,000, or 7 cents a share, last year.
Gross margin for the quarter was 27.4 percent, compared with 25.9 percent a year earlier. The company said the increase was the result of a more profitable mix of business. For the year to date, gross margin was 29.3 percent, compared with 28.4 percent for the first nine months of fiscal 2013.
This article originally appeared in the June 2014 issue.