Brunswick Corp. today reported an increase in net sales for the third quarter and said it swung from a loss a year earlier to a profit for the quarter this year.
Chairman and chief executive Dustan E. McCoy said third-quarter operating earnings were at their highest level since 2006.
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.
Excluding restructuring charges, loss on early extinguishment of debt and special tax items in 2011 and 2010, net earnings were 33 cents and 7 cents a diluted share, respectively.
Debt was reduced by $84 million to the lowest level in more than seven years, and the company reported cash and marketable securities of $546.7 million.
“Our third-quarter results reflected higher shipments of engines and boats that were supported by solid retail growth experienced at our dealers,” McCoy said.
“On a consolidated basis, our year-to-date operating leverage continues to be strong and at targeted levels,” he added. “Finally, our third-quarter and nine-month operating earnings achieved their highest levels since 2006.”
For the quarter, the company reported operating earnings of $35.6 million, which included restructuring and exit charges of $13.2 million. In the third quarter of 2010, Brunswick had operating earnings of $25.2 million, which included $12.2 million of restructuring, exit and impairment charges.
“The factors that positively affected our revenues and earnings in the third quarter of 2011, compared to the previous year, included higher sales levels reflecting market share gains in our continuing marine businesses, as well as in our fitness and bowling and billiards segments, combined with companywide fixed-cost reductions,” McCoy said. “Partially offsetting these factors were higher variable compensation expense and losses on early extinguishment of debt.”
Diluted earnings per share for the third quarter of 2011 included restructuring and exit charges of 14 cents a diluted share, loss on early extinguishment of debt of 13 cents a diluted share and a 1-cent-a-diluted share expense from special tax items. Earnings per diluted share for the third quarter of 2010 included 14 cents a share of restructuring, exit and impairment charges and a 1-cent-a-diluted-share loss on early extinguishment of debt.
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 segment’s outboard engine category experienced its greatest percentage of sales growth during the quarter. The decline in operating earnings reflects higher material costs, a less favorable product mix, higher variable compensation costs and restructuring charges, as well as an increase in research and development spending. Partially offsetting those factors were benefits from higher sales and cost reductions.
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.
On Wednesday, Wells Fargo analyst Timothy Conder reiterated his rating of outperform for Brunswick’s stock, saying the marine industry is driving Brunswick’s position to gain domestic and international market share as a low-cost producer with a strong relative financial position, leading dealer network and diverse international exposure.
“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 said.
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 said.
McCoy expects 2011 earnings per share to be in the range of 65 to 75 cents.
“As we look forward to 2012, we continue to believe that the global economic and marine market outlook will remain challenging,” McCoy said. “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.”
“We further believe that our 2012 net income will benefit from our announced marine cost-reduction activities, lower restructuring costs and a reduction in interest expense,” McCoy said.
Brunswick stock opened Thursday at 20.54 a share.
— Reagan Haynes