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Results show signs of prerecession levels

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Brunswick’s third-quarter operating earnings at 5-year high; West Marine posts 50 percent increase in profits

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The marine industry’s publicly traded companies had mostly positive earnings reports in the most recent quarter, with some reporting earnings at their highest levels in years.

Following is an overview of current earnings reports:

Brunswick Corp.

Brunswick Corp. reported an increase in net sales for the third quarter and says it swung from a loss a year earlier to a profit for the quarter this year.

Brunswick reported net sales of $876.7 million, up 8 percent from $815.4 million in the quarter last year. Operating earnings improved by $10.4 million. The company reported net earnings of $4.7 million, or 5 cents a diluted share, compared with a loss of $7.2 million, or 8 cents a share, last year.

“Our third-quarter results reflected higher shipments of engines and boats that were supported by solid retail growth experienced at our dealers,” chairman and chief executive Dustan E. McCoy says. “On a consolidated basis, our year-to-date operating leverage continues to be strong and at targeted levels. Finally, our third-quarter and nine-month operating earnings achieved their highest levels since 2006.”

The marine engine segment reported net sales of $467.2 million in the quarter, up 9 percent from $429.2 million in the 2010 quarter. International sales represented 39 percent of the total segment sales in the quarter and increased by 12 percent.

The segment reported operating earnings of $44.5 million, which included $4.2 million of restructuring charges. This compares with operating earnings of $49 million in the third quarter of 2010, which included $1.7 million of restructuring charges.

The boat segment reported net sales of $209.2 million, equal to the $209.2 million reported in the third quarter of 2010. International sales represented 29 percent of the total segment sales, decreasing by 16 percent from the third quarter last year.

The boat segment reported an operating loss of $17.9 million, including restructuring charges of $8.7 million, compared with an operating loss of $26.3 million in 2010, which included restructuring charges of $10.2 million.

Boat segment production and wholesale unit shipments increased during the quarter in response to solid retail demand. Revenue growth from increases in wholesale unit shipments was partially offset by the timing of the sale of Brunswick’s Sealine brand on Aug. 31, which resulted in only a partial recognition of third-quarter 2011 sales for Sealine, compared with a full quarter of sales in 2010.

A greater sales mix of smaller boats and lower sales to non-U.S. markets also had a negative effect on sales during the quarter. Increased fixed-cost absorption and cost reductions had a positive effect on the segment’s improved quarterly results.

“For the first nine months of 2011 we have successfully executed our core strategy of generating free cash flow, performing better than the market and demonstrating outstanding operating leverage,” McCoy says.

The marine retail market for 2011 is unfolding generally as expected, with aluminum and fiberglass outboard boat markets experiencing solid growth and fiberglass sterndrive boat markets continuing to decline, albeit at a more moderate pace, McCoy says.

“As we look forward to 2012, we continue to believe that the global economic and marine market outlook will remain challenging,” McCoy adds. “As a result, our entire organization is focused on maintaining its favorable cost position and generating continued revenue and earnings growth through a focus on organic growth initiatives.”

MarineMax

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MarineMax, the nation’s largest recreational boat retailer, reported a decline in revenue for the fourth quarter, but an increase in revenue for the full fiscal year. However, the retailer ended the fiscal year with a net loss.

Revenue was $119.8 million for the quarter that ended Sept. 30, compared with $124.4 million for the comparable quarter last year. Same-store sales decreased about 2 percent, compared with a 36 percent decrease for the comparable quarter in 2010.

The net loss for the fourth quarter of fiscal 2011 was $5.7 million, or 25 cents a share, compared with a net loss of $1.8 million, or 8 cents a share, for the comparable quarter last year.

Revenue was $480.9 million for the fiscal year, compared with $450.3 million for fiscal 2010. Same-store sales increased about 8 percent, compared with a 17 percent decrease in the previous fiscal year.

The net loss for the fiscal year was $11.5 million, or 52 cents a share, compared with net income of $2.5 million, or 11 cents a share, for fiscal 2010. The company’s results for the fiscal year, however, included the reversal of $3.9 million of stock-based compensation expense, or 18 cents a share, which significantly affects the expense comparability between the fiscal years, as well as a tax benefit of about $19.6 million, or 89 cents a share, primarily related to the recognition of tax net operating loss carry-backs.

Included in the company’s results for fiscal 2011 and 2010 was about $750,000, or 3 cents a share, and $1.2 million, or 5 cents a share, respectively, associated with store-closing and lease-termination costs.

Inventory was $219.6 million on Sept. 30, compared with $188.7 million on Sept. 30, 2010, an increase of 16 percent. Most of the increase, however, related to new brand expansions, as well as the timing of receipt of inventory this year, compared with last year.

“The September quarter was our fourth consecutive quarter of new boat unit sales growth, albeit at a slower pace. We generated the unit growth while also incrementally increasing product margins and improving our already strong market share position,” MarineMax chairman, president and CEO William McGill Jr. says.

“However, with softer than expected fourth-quarter sales, we are focusing on reducing expenses to improve our operating results. Toward that end, as we ended fiscal 2011 we closed three stores and implemented additional cost reductions, which we believe will be achieved without compromising our outlook for growth or the experience we deliver to our customers,” McGill adds.

Marine Products Corp.

Marine Products Corp., the builder of Chaparral and Robalo boats, reported lower net sales, but a higher net profit for the third quarter.

Net income for the quarter that ended Sept. 30 was $1.2 million, a 20 percent increase from $1 million in the quarter a year earlier. The company says net income rose primarily because operating profits were higher.

Marine Products says it generated net sales of $22.25 million during the quarter, a 7.4 percent decrease from $24.03 million a year earlier. The company says the decline was attributable to a 22 percent decrease in the number of boats sold, partially offset by a 20 percent increase in the average selling price per boat.

“There were several positive developments during the quarter which improved our financial results and encouraged us regarding the near-term selling environment for our products in spite of the lower unit sales generated during the quarter,” CEO Richard Hubbell says.

“First, we realized strong unit sales in our Chaparral 327, 287 and 267 SSX models. These boats carry higher average selling prices and contributed to generating higher gross profit in the third quarter of 2011 than in the third quarter of last year. In addition, we received strong dealer orders for our new 2012 Chaparral H2O Sport and Fish & Ski Boats at our annual dealer conference. We believe that this new entry-level Chaparral lineup will allow us to achieve a number of our objectives related to improved manufacturing cost efficiencies, meeting dealer requests for entry-level models and increasing retail market share,” he adds.

The company says gross profit for the quarter was $4.63 million, or 20.8 percent of net sales, compared with $4.08 million, or 17 percent, in the prior year. The company says the increase was the result of a favorable model mix of fewer small boats and more larger boats.

West Marine

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West Marine reported a 50 percent increase in profit for the third quarter in what its chief executive describes as “a rather tepid market.”

Net income for the quarter that ended Oct. 1 was $11.2 million, or 48 cents a diluted share, compared with $7.4 million, or 32 cents a share, a year earlier. Net revenue for the period was $180.3 million, an increase of 4.5 percent from $172.5 million in the quarter last year.

“We are pleased with the solid results delivered during the third quarter, which fully met our expectations,” president and CEO Geoff Eisenberg says. “We continue to be optimistic about our business, as exemplified by the upcoming opening in just a few weeks of our super-flagship store in Fort Lauderdale, which will be almost twice as large as any store we’ve ever done.”

Net income for the first nine months of the year was $43.6 million, or $1.88 a diluted share, a 30.6 percent increase from $33 million, or $1.44 a diluted share, in the same period last year.

Revenue in the stores segment was $163.8 million in the third quarter, up $6.4 million, or 4.1 percent, compared with the same period last year. Comparable-store sales grew 3.9 percent from the period a year earlier.

In addition to the Fort Lauderdale superstore, West Marine will open four stores between now and the end of the first quarter next year. Eisenberg says flagship stores of 25,000 square feet will open in Honolulu, Old Saybrook, Conn., and Clear Lake, Texas, and an 11,000-square-foot standard store will open in Biloxi, Miss.

West Marine says in its earnings report that the primary driver of third-quarter growth was increased sales to Port Supply (wholesale) customers through the company’s store locations as part of ongoing efforts to better serve that group and to leverage the store facilities. Revenue from stores that opened in 2010 and the first nine months of this year contributed $8.5 million to stores segment sales. Stores that closed during those periods effectively reduced revenue by $7 million.

The company says the majority of the closings were a result of its ongoing real estate optimization strategy.

The company’s Port Supply segment revenue, representing sales through West Marine’s distribution centers, for the third quarter was $7 million, an increase of $300,000, or 4.8 percent, from the same period last year.

Other earnings reports

• Actuant Corp., the parent company of Marinco Electrical Group and Mastervolt, announced higher sales for the fourth quarter and the fiscal year. Consolidated sales for the fourth quarter, which ended Aug. 31, were $403 million, 30 percent higher than during the same quarter a year earlier. Earnings and earnings per share from continuing operations were $37.3 million and 50 cents, respectively, compared with $20.9 million and 29 cents in the year-earlier quarter. In the electrical segment, 2011 fourth-quarter sales were $80 million, 28 percent higher than they were in the year-earlier quarter.

Excluding foreign currency rate changes and the Mastervolt acquisition, core sales were unchanged, as most of the segment’s end markets, including retail, wholesale distribution, marine and OEM, remain sluggish, the company says.

For the fiscal year that ended Aug. 31, sales were $1.45 billion, 25 percent higher than the $1.16 billion in the prior year. Earnings and earnings per share from continuing operations for the year were $124.5 million, or $1.68 a diluted share, compared with $70.4 million, or 97 cents a diluted share, in the prior year.

For 2012, the company is projecting full-year core sales growth of 5 to 8 percent.

• Caterpillar reported a third-quarter 2011 profit per share of $1.71, up 40 percent from $1.22 a share in the third quarter of 2010. Profit was $1.14 billion, an increase of 44 percent from $792 million in the third quarter of 2010. Sales and revenue of $15.7 billion, an all-time record for the company, were up 41 percent from $11.1 billion in the third quarter of 2010.

The outlook for 2011 sales and revenue, and profit has improved, the company says. Total company sales and revenue are expected to be about $58 billion in 2011. The previous outlook was a range of $56 billion to $58 billion.

The profit outlook also has improved and Caterpillar now expects 2011 profit of about $6.75 a share. The prior outlook was a range of $6.25 to $6.75.

• FLIR Systems, the parent company of Raymarine announced an increase in revenue and net income for the third quarter. Revenue was $371.3 million, up 12 percent from third-quarter 2010 revenue of $332.5 million. Operating income for the quarter that ended Sept. 30 was $85.4 million, compared with $85.8 million in the third quarter of 2010, and it was negatively affected by severance costs, primarily in the government systems division, of about $5.3 million before taxes.

Third-quarter 2011 net income was $64.7 million, or 40 cents a diluted share, compared with net income of $63 million, or 39 cents a diluted share, in the quarter a year earlier.

Revenue from the company’s commercial systems division increased 16 percent from the third quarter of 2010, to $196.4 million. Raymarine contributed $35.4 million of revenue during the quarter. Revenue from the company’s government systems division increased 7 percent from the third quarter of 2010, to $174.9 million.

• Garmin Ltd. announced an increase in revenue in its marine segment despite an overall decrease in total revenue in the third quarter. The company posted net income of $150.4 million, or 77 cents a share, for the quarter that ended Sept. 24, compared with $279.6 million, or $1.43 a share, in the quarter a year earlier. Pro-forma net income for the quarter rose to $137.6 million, or 71 cents a share, from $137.2 million, or 70 cents a share, in the prior year.

Revenue in marine increased 4 percent, to $48 million, the company reported. Garmin also saw revenue increases in its outdoor, fitness and aviation segments, but decreases in its automotive/mobile segments.

Total revenue for the period was down 4 percent, from $692 million in the third quarter last year to $667 million in the most recent period. Year-to-date revenue in marine is up 10 percent, to $179 million, the company reported. Total revenue for the year to date is flat, compared with a year earlier, at $1.85 billion.

• Twin Disc reported increases in sales and profits for its first quarter, which ended Sept. 30. Sales for the quarter, seasonally the weakest quarter of the company’s fiscal year, improved to $81.3 million from $61.4 million for the same period last year.

Net earnings attributable to Twin Disc for the quarter were $9.6 million, or 83 cents a diluted share, compared with $2.7 million, or 24 cents a diluted share, for the first quarter a year earlier. Gross margin for the fiscal 2012 first quarter was a record 37.8 percent, compared with 32.6 percent in the first quarter last year.

This article originally appeared in the December 2011 issue.

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