Brunswick Corp. today reported a small increase in third-quarter sales, but a decline in profits.
The company said it had net sales of $884.8 million for the quarter that ended Sept. 29, up 1 percent from $876.7 million a year earlier.
Brunswick reported net earnings of $2 million, or 2 cents a share, down 57 percent from $4.7 million, or 5 cents a share, for the third quarter of 2011.
Earnings per share for this year’s quarter included 31 cents a share of restructuring, exit and impairment charges, an 8-cent-a-share loss on the early extinguishment of debt and a 2-cent-a-share charge from special tax items, the company said.
Excluding the effects of the charges and other items, the company said its adjusted net earnings for the quarter were 43 cents a share, up 10 cents a share from the prior year’s quarter.
Earnings per share for the 2011 quarter included 14 cents a share of restructuring, exit and impairment charges, a 13-cent-a-share loss on the early extinguishment of debt and a 1-cent-a-share charge from special tax items.
“We continue to successfully execute our business strategy despite challenging global economic conditions,” Brunswick chairman and CEO Dustan E. McCoy said in a statement.
“Despite a 19 percent reduction in sales from Europe, the company experienced slight revenue growth. Further, excluding restructuring items, debt extinguishment losses and special tax items, our gross profit, operating earnings and net earnings per share each increased by double-digit percentages versus the third quarter of 2011.”
Brunswick reported operating earnings of $37.5 million in this year’s quarter, including $28.2 million of restructuring, exit and impairment charges. In the third quarter of 2011, the company said, it had operating earnings of $35.6 million that included $13.2 million of restructuring, exit and impairment charges.
Timothy Conder, an analyst at Wells Fargo Securities, said in a report today that Brunswick had solid third-quarter engine results in North America, excluding restructuring and debt charges, and expected weakness in Europe.
He said he saw a strong revenue upside in U.S. aluminum and fiberglass outboard boats and clear evidence of Brunswick’s operating leverage because of cost-reduction activities and operating efficiencies.
Conder said Brunswick appears to be continuing to post solid market share gains in multiple segments.
“We feel the U.S. boat industry could be up [more than 5.8 percent year over year] in 2012,” he said. “We believe investors will keep a cautious view” because of concerns about Europe and the impending “fiscal cliff” crisis in the United States “despite solid execution by [Brunswick] management of everything within its control.”
“We continue to be opportunistic buyers of this quality cyclical name,” he said.
Marine engine segment
The marine engine segment, which consists of the Mercury Marine Group, including the marine parts and accessories businesses, reported net sales of $503.5 million for the quarter, up 11 percent from $455.6 million in the quarter a year earlier. International sales, which represented 34 percent of total segment sales in the quarter, decreased by 2 percent.
For the quarter, the segment reported operating earnings of $74.5 million, including restructuring charges of $400,000. The figure compares with operating earnings of $52.9 million in the third quarter of 2011, which included restructuring charges of $4.2 million.
Brunswick said sales were higher in the segment’s outboard engine and parts and accessories businesses. The growth was partially offset by sales declines in its sterndrive engine product category.
The company said higher sales and engine production, a decrease in restructuring charges and successful cost-reduction activities contributed to the increase in operating earnings in the quarter this year. Partially offsetting those factors was the effect of increased investments for long-term growth, Brunswick said.
The boat segment, composed of the Brunswick Boat Group and including 18 boat brands, reported net sales of $205.8 million for the quarter, a decrease of 7 percent from $221.1 million a year earlier.
Excluding divested brands, third-quarter net sales decreased by 5 percent, compared with the prior year. International sales, which represented 34 percent of total segment sales in the quarter, decreased by 2 percent during the period.
Excluding divested brands, third-quarter international sales increased by 6 percent from the prior year. For the third quarter of this year, the segment reported an operating loss of $43.5 million, including restructuring and impairment charges of $27.7 million, compared with an operating loss of $21.2 million, which included restructuring charges of $8.7 million, in the third quarter of 2011.
The company said the segment’s wholesale shipments were up slightly from the prior year’s quarter, which was less than the 5 percent increase in retail demand. The increase in wholesale shipments reflected strong growth in demand for aluminum and outboard-powered fiberglass products, which was mostly offset by a continued weakness in fiberglass sterndrive boat products.
The revenue effect of this shift in boat mix, along with the impact of weak European markets and the absence of sales from the Sealine brand (which was divested on Aug. 30, 2011), were the main factors contributing to the decline in the segment’s sales, the company said.
Lower sales, combined with higher restructuring from consolidation actions and impairment charges primarily associated with certain fiberglass brands, contributed to the higher operating losses reported in the quarter, compared with the prior year, the company said.
“In the fourth quarter, we anticipate that our end-markets will reflect mixed demand trends comparable to those experienced thus far in 2012, both from a product line and geographical perspective,” McCoy said. “As we continue to execute our strategic growth initiatives, as well as focus on cost reductions and operating efficiencies throughout our organization, we expect to be able to demonstrate improved sales and operating earnings during the final quarter of the year as compared to 2011, resulting in strong full-year earnings growth.
“After taking all these factors into consideration, we currently expect our 2012 diluted earnings per common share, as adjusted, to be in the range of $1.65 to $1.75, which is equivalent to $1.08 to $1.18 on a GAAP basis.”
The diluted earnings per common share estimate, on a GAAP basis, includes 57 cents of restructuring items, debt extinguishment losses and special tax items. The company’s previous estimate of full-year diluted earnings per common share on a GAAP basis was $1.45 to $1.60, which is equivalent to $1.60 to $1.75, as adjusted.