Brunswick Corp. reported net sales of $1.14 billion in the third quarter, up 4.4 percent from $1.1 billion last year, and net sales for the engine segment grew 7 percent, to $669.2 million.
“Certain headwinds” in the quarter, such as continually declining sterndrive sales and production disruptions attributable to Hurricane Irma, led to a decline in boat earnings, the company said.
Those factors prompted Brunswick to lower its earnings guidance to a range of $3.85 to $3.87 a share, down from previous expectations in the range of $4 to $4.10 a share, as the company expected headwinds that it faced in the third quarter to continue to affect the fourth.
"We faced certain headwinds in the quarter, which led to a decline in boat earnings," Brunswick CEO Mark Schwabero said in a statement. "As previously discussed on the second-quarter call, we significantly lowered production in our large fiberglass sterndrive [and] inboard boat category as we meaningfully reduced pipelines from second-quarter levels in response to weak retail demand over the last several quarters. In addition, during September, Hurricane Irma disrupted our Florida-based manufacturing operations.”
On a GAAP basis, operating earnings at Brunswick decreased by 9 percent, to $111.7 million, from $122.5 million last year.
Net earnings were $79 million for the quarter on a GAAP basis, or 88 cents a diluted share. That compared with $85.3 million last year, or 93 cents a share, last year.
The marine engine segment reported net sales of $669.2 million, up 7 percent from $625.7 million. International sales, which represented 30 percent of total segment sales in the quarter, were up 14 percent from the prior year.
The engine segment reported operating earnings of $115.2 million, up from $109.5 million in the 2016 quarter.
The company cited the outboard engine business and solid growth from parts and accessories as reasons for the growth.
The increase in operating earnings in the third quarter was primarily the result of higher net sales, improved cost efficiencies and favorable effects from changes in foreign exchange rates, which were partially offset by the unfavorable impact of planned increases in growth investments in advance of new-product introductions, the company said.
The boat segment reported net sales of $309.3 million for the quarter, a slight increase from $307 million in the quarter last year.
International sales, which represented 22 percent of total segment sales in the quarter, increased by 8 percent from the prior-year period.
The boat segment reported operating earnings of $100,000 for the quarter. That compares with $6.8 million last year.
The boat segment's revenue reflected growth in the aluminum outboard boat business, particularly pontoon boats, the company said.
That was partly offset by declines in the large fiberglass sterndrive and inboard category, as well as disruptions in the company’s Florida-based operations.
The decrease in operating earnings resulted mostly from an unfavorable change in sales mix for the segment, resulting from the factors affecting sales comparisons, as well as manufacturing inefficiencies, including costs associated with the hurricane.
"Despite unanticipated headwinds, 2017 is expected to be another year of strong revenue and earnings performance, along with excellent cash-flow generation,” said Schwabero. “Our marine engine segment continues to perform as anticipated, and we expect our collective marine businesses to continue to generate solid top-line growth over the remainder of the year.”
The company expects full-year 2017 revenue growth rates to be about 7 percent; the fourth-quarter rates are expected to be slightly lower.
“For the full year, we anticipate a modest decrease in operating margins,” Schwabero said. “Gross margin percentage will be down for the year, but not to the same degree as our year-to-date comparisons. Operating expenses are estimated to increase for full-year 2017, including continued investments in advance of planned new product introductions, but on a percentage-of-sales basis are expected to be at lower levels than those of 2016.”