Brunswick Corp. reported GAAP net sales of $1.05 billion, an 8.7 percent increase over the first quarter of 2018.
The company reported consolidated net sales of $1.27 billion, up from $1.21 billion a year earlier, with $15.1 million of sales related to its discontinued sport yacht and yacht operations in the first quarter of 2018.
"Our marine engine segment continued to post strong top-line growth, led by benefits from the Power Products acquisition and healthy demand for recently introduced higher horsepower outboard products," said Brunswick CEO David Foulkes in a statement. “These sales gains, along with impressive operating leverage and margin accretion, led to robust earnings growth in this segment.”
The boat business reported modest sales growth led by gains in premium offerings, including Sea Ray sport boats and cruisers, while earnings declined slightly, Foulkes said.
The fitness business made “significant progress” toward separation from Brunswick Corp., and reported top-line and margin results mostly consistent with expectations for the quarter, he said.
Cash and marketable securities totaled $171.4 million at the end of the first quarter, down $132.8 million from year-end 2018 levels. This reflects seasonal reductions resulting from cash used by operating activities during the first three months of the year of $79.4 million, which increased by $12.3 million versus the prior year, primarily as a result of a tax refund received in the first quarter of 2018.
"After a slower than expected start to the marine selling season, due in part to more challenging weather conditions in much of the U.S., we believe that global unit market demand for the year will reflect modest growth,” said Foulkes.
The company expects 2019 to be another year of “solid earnings growth,” he said.
The engine segment had net sales of $766 million for the quarter, up 11.5 percent from $687.1 million in the first quarter of 2018, driven by gains in outboard engine sales and the addition of Power Products.
The Power Products acquisition contributed approximately 8 percent to the growth rate in the quarter. International sales, which represented 32 percent of total segment sales in the quarter, were up 15 percent compared to the prior year period.
For the quarter, the marine engine segment reported operating earnings of $112.9 million, which included $7.2 million of purchase accounting amortization related to the Power Products acquisition, compared to $95.7 million of operating earnings in the first quarter of 2018.
The boat segment reported net sales of $373.3 million, a decrease from $376.5 million in the first quarter of 2018.
Net sales in the first quarter of 2018 included $15.1 million of sport yacht and yacht sales. International sales, which represented 27 percent of total segment sales in the quarter, decreased by 2 percent compared to the prior year.
For the first quarter of 2019, the boat segment reported operating earnings of $22 million, which included $2 million of restructuring, exit, integration, and impairment charges. That compares to operating earnings of $14.4 million in the first quarter of 2018, which included $8.1 million of sport yacht and yacht operating losses and $2.6 million of restructuring, exit, integration, and impairment charges.
Sales and operating earnings comparisons were both affected by the absence of activity related to the sport yacht and yacht business. Excluding that, sales increased, including benefits from strong gains in premium categories.
Despite positive mix benefits, operating earnings declined as margins were temporarily influenced by less favorable plant efficiencies at certain of its boat facilities, due in part to new product integrations and related complexities. In addition, the boat business had elevated spending on profit improvement initiatives in the quarter.
"Our full-year guidance for the combined marine business remains relatively unchanged,” said Foulkes. “Absent significant changes in the macro-economic climate and the marine market, we anticipate overall revenue growth rates in the range of 8 to 10 percent which, while slightly lower than the previous estimate, still represents strong top-line growth for the year. Operating expenses are estimated to be lower than 2018 on a percentage of sales basis as we continue to fund investments in growth while driving improved cost efficiencies. We believe that these factors, together with ongoing benefits from new products and acquisitions, will enable strong leverage and margin growth, and allow us to achieve our initial operating earnings growth guidance for the marine business of high-teens percent for the year.”
Guidance for the year remains unchanged at $4.50 to $4.70.