Quarterly earnings reports a mixed bag

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Brunswick posts loss despite sales gain, MarineMax profitable for year, West Marine's profits fall

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The marine industry's publicly traded companies had mixed results in their most recent quarters.

Brunswick, the largest boatbuilder, reported a net sales gain, including a 77 percent increase in boat sales. However, it also reported a net loss for the quarter, although the loss was considerably smaller than in the year-earlier period.

Retailer MarineMax ended its fiscal year with a net profit, but reported a drop in revenue and same-store sales for the most recent quarter. And West Marine posted an increase in revenue, but profits fell for the quarter.

Here are summaries of the results:

Brunswick Corp.

Brunswick Corp. reported a 22 percent gain in third-quarter net sales, including a 77 percent increase in boat sales and an 18 percent increase in marine engine segment sales.

The company reported net sales of $815.4 million, up from $665.8 million in the same period last year. Operating earnings were $25.2 million, which included $12.2 million of restructuring, exit and impairment charges. In the third quarter last year, the company had a $109.4 million operating loss that included $28.8 million of restructuring, exit and impairment charges.

The Lake Forest, Ill.-based company said it had a net loss of $7.2 million, or 8 cents a diluted share, in this year's third quarter, which ended Oct. 2. The company had a net loss of $114.3 million, or $1.29 a share, in the third quarter a year earlier.

The boat segment, which includes 16 brands, reported net sales of $209.2 million for the quarter, an increase of 77 percent from $118.2 million in the quarter last year. International sales, which represented 34 percent of total segment sales, increased by 39 percent.

The boat segment reported an operating loss of $26.3 million, including restructuring, exit and impairment charges of $10.2 million. This compares with an operating loss of $86.7 million, including restructuring, exit and impairment charges of $6.6 million, in the third quarter of 2009.

Boat manufacturing facilities "significantly increased production" from 2009 levels to replenish dealer inventory. Reduced discounts required to support retail sales by dealers, increased fixed-cost absorption, higher sales and a reduction in variable compensation expense were the primary factors affecting the segment's reduction in operating losses for the quarter.

The marine engine segment reported net sales of $429.2 million in the quarter, up 18 percent from $363.5 million in the third quarter last year. International sales, which represented 38 percent of total segment sales in the quarter, increased 5 percent.

The marine engine segment reported quarterly operating earnings of $49 million, including restructuring charges of $1.7 million. This compares with an operating loss of $13.4 million in the year-earlier quarter that included $18.8 million of restructuring and impairment charges.

Sales were higher across all of the segment's main operations, including a high single-digit increase in the domestic marine service, parts and accessories businesses, which represented 32 percent of total segment sales in the quarter. The segment's sterndrive engine business had the highest percentage of sales growth.

MarineMax

MarineMax reported a drop in revenue and same-store sales for its fourth quarter. The company also reported lower revenue for its fiscal year, but ended the year with a net profit.

Revenue was $124.4 million for the quarter ending Sept. 30, compared with $207.2 million for the comparable quarter last year. Same-store sales declined about 36 percent, compared with a 41 percent increase last year. Revenue from stores recently closed that were not eligible for inclusion in the same-store sales base was $12.3 million.

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"The company's revenue in the year-ago quarter ended Sept. 30, 2009, benefited from the company's aggressive reduction of inventory in light of the deteriorating industry conditions," Clearwater, Fla.-based MarineMax said in a statement. "This planned strategy resulted in a significant reduction in the company's margins and unusually strong same-store sales growth."

Net loss for the fourth quarter of fiscal 2010 was $1.8 million, or 8 cents a share, compared with a net loss of $33 million, or $1.72 a share, in the comparable quarter last year.

Inventory in the fourth quarter declined $17.2 million, or 8 percent, to $188.7 million, compared with $205.9 million on Sept. 30, 2009. Short-term borrowings declined $48.2 million, or 34 percent, to $93.8 million, compared with $142 million on Sept. 30, 2009.

Net income for the fiscal year was $2.5 million, or 11 cents a diluted share, compared with a net loss of $76.8 million, or $4.11 a share, for fiscal 2009.

West Marine

Revenue rose, but profits fell in the third quarter at West Marine, and the boating supplies retailer saw its operating results decline after seven quarters of improvement.

Net revenue was $172.5 million for the 13-week period ending Oct. 2, an increase of 2.6 percent from $168.2 million in the same quarter a year earlier. Comparable-store sales for the Watsonville, Calif.-based company rose $5.2 million, or 3.7 percent. A driver of this growth was increased sales to wholesale customers through the company's stores.

Net income was $7.4 million, or 32 cents a share, compared with $8.5 million, or 38 cents a share, a year earlier. For the year to date, earnings per share were $1.44, compared with $1.13 for the same period last year.

New stores that opened during 2009 and the first three quarters of this year increased revenue by $9.2 million over last year. Stores that closed during these periods effectively reduced revenue by $8.3 million.

Most of the closings occurred in connection with the company's effort to evolve into a business that has fewer, but larger, stores. During the quarter, West Marine opened standard-format stores of 12,000 square feet in Mount Pleasant, S.C., and 12,400 square feet in Jupiter, Fla.

The company announced plans to open a larger flagship store in Sarasota, Fla., and smaller standard-size stores in Kent Island, Md., and Olympia, Wash., before the end of the year. Chief executive Geoff Eisenberg said the company plans to open a flagship store in the first quarter of next year in Woburn, Mass. In the second quarter, additional flagship stores will open in St. Petersburg and North Palm Beach, Fla., he said.

By the end of next year, Eisenberg said, the company will open a 50,000-square-foot store in Fort Lauderdale that it believes will be the "world's largest and hopefully most exciting boat equipment store."

Other industry results

Marine Products Corp.: The builder of Chaparral and Robalo Boats reported an increase of more than $17 million in third-quarter net sales.

For the quarter ending Sept. 30, Marine Products generated net sales of $24 million, compared with $7 million in the same period last year. The increase was attributable to a significant increase in the number of boats sold and lower retail incentive costs as a percentage of net sales, partially offset by a 4.9 percent decrease in the average selling price per boat, the company said.

Gross profit for the quarter was $4 million, or 17 percent of net sales, compared with a gross loss of $585,000 in the prior year. Net income for the quarter was $1 million, or 3 cents a share, compared with a net loss of $1.61 million, or 4 cents a share, in the prior year.

Net sales for the nine-month period ending Sept. 30 were $80.2 million, a 181.9 percent increase from the first nine months of 2009. Net income for the nine-month period was $3.4 million, or 9 cents a share, compared with a net loss of $7.9 million, or 22 cents a share, in the prior year.

Garmin: The Switzerland-based company announced a drop in total revenue for the third quarter, which ended Sept. 25, but said marine segment revenue was up 1 percent.

Garmin reported total revenue of $692 million, down 11 percent from $781 million in the third quarter last year. Marine segment revenue increased 1 percent, to $46 million. The marine segment posted strong margin performance for the quarter, and operating income grew 33 percent, the company said.

Garmin reported pro forma earnings of 70 cents a share for the quarter, compared with $1.02 a share for the same period last year.

For the year to date, Garmin reported total revenue of $1.85 billion, down 2 percent from $1.89 billion for the same period last year. In the marine segment, year-to-date revenue increased 13 percent, to $162 million.

For the year, Garmin expects revenue of $2.65 billion to $2.75 billion.

Teleflex: Teleflex saw 1 percent growth in third-quarter net revenue to $443 million. In the commercial segment, which includes the company's marine-related business, third-quarter revenue increased 15 percent, to $51.1 million, from $44.3 million in the same period last year.

Core revenue growth of 15 percent was the result of increased sales of marine OEM and aftermarket sales, the company said.

Commercial segment operating profit and margins in the third quarter, which ended Sept. 26, were $6.2 million, or 12.1 percent, compared with $4.1 million, or 9.3 percent, in the same period in 2009.

The company expects full-year 2010 revenue to be approximately $1.8 billion and now expects full-year 2010 diluted earnings per share from continuing operations, excluding special items, to be in the range of $4 to $4.10.

Cummins: Cummins reported that third-quarter sales and profits increased sharply from the same period a year earlier, with the company's continued strong performance in international markets a primary driver of the improved results.

Sales of $3.4 billion in the third quarter, which ended Sept. 26, rose 34 percent from $2.53 billion in the same quarter in 2009. Net income attributable to Cummins Inc. in the third quarter tripled to $283 million, or $1.44 a share, compared with $95 million, or 48 cents a share, in the same period a year earlier.

The sales gains were led by the company's engine and power generation segments, which reported 44 percent sales improvements from the same period in 2009. Distribution sales increased 36 percent, and component sales rose 30 percent.

Caterpillar: Caterpillar reported a third-quarter profit of $792 million, 96 percent higher than the company's $404 million profit in the third quarter last year. The profit per share was $1.22, an increase from 64 cents a share in the third quarter of 2009.

Sales and revenues of $11.1 billion were up 53 percent from $7.3 billion in the third quarter of 2009. Engine sales were $3.25 billion in the quarter, up 21 percent, or $572 million, from the same period in 2009.

The 2010 profit outlook is a range of $3.80 to $4 a share, an increase of 173 percent from 2009 at the midpoint of the range. The previous outlook range was $3.15 to $3.85 a share.

Twin Disc: Twin Disc reported an increase in sales for the first quarter of fiscal 2011, which ended Sept. 24. The company also reported continued challenges in its megayacht business.

Sales for the period improved to $61.4 million from $47.1 million in the same period last year. The improvement was the result of growing demand from customers in the oil and gas market.

Stable demand continues from the airport, rescue and firefighting, land- and marine-based military and commercial marine markets.

Net earnings attributable to Twin Disc for the fiscal 2011 first quarter were $2.7 million, or 24 cents a diluted share, compared with a net loss of $2.4 million, or 22 cents a share, for the fiscal 2010 first quarter.

This article originally appeared in the December 2010 issue.

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