Brunswick Corp. reported net sales of nearly $1.3 billion for its 2018 third quarter, up from $1.14 billion a year earlier.
The company had $9 million and $21.3 million in sales related to sport yacht and yacht operations in the third quarter of 2018 and 2017, respectively.
"Despite headwinds caused by trade policy, tariffs and other input cost increases, which we were largely able to offset with pricing actions, our combined marine business had adjusted revenue growth of 18 percent in the quarter, adjusted operating margin gains of 160 basis points and adjusted operating earnings growth versus third quarter 2017 of 31 percent — an overwhelming accomplishment,” CEO Mark Schwabero said in a statement.
Brunswick announced today that Schwabero will retire at the end of the year.
Brunswick increased and narrowed its full-year guidance expectations of diluted earnings per share, as adjusted, from $4.65 to $4.70.
Diluted earnings per share in 2018 was $0.80 on a GAAP basis versus $1.28 on an adjusted basis.
Cash and marketable securities totaled $312.7 million at the end of the third quarter, down $146.3 million from year-end 2017. The reduction includes net cash of $234 million provided by operating activities during the first nine months of the year, a decrease of $21.1 million versus the prior year primarily due to “planned increases in pension contributions,” the company said.
“Led by increased production of our new outboard engine lineup, continued success of our leading parts and accessories business, which was augmented by the closing of the Power Products acquisition in August, and improving operating execution across the marine business, we delivered financial results in the quarter that demonstrate the effectiveness of our strategy," Schwabero said.
The company expects cost increases resulting from tariffs to be mostly offset by “pricing actions,” he said.
The marine engine segment reported net sales of $802.7 million for the quarter, up 19.9 percent from $669.2 million in the third quarter of 2017.
"During the quarter, Mercury overachieved versus planned run-rate production of our new 175- to 300-hp, V-6 and V-8 outboard engines, with the substantial demand for these products continuing to far exceed expectations,” Schwabero said. “Despite a midteens percent increase in year-to-date production levels of outboard engines greater than 75 hp, we expect demand will still outpace production for these horsepower categories into 2019, even as we execute against our planned investments and initiatives to further increase capacity.”
Acquisitions, primarily driven by Power Products, contributed approximately 6 percent to the growth rate in the quarter.
International sales, which represented 29 percent of total segment sales in the quarter, were up 14 percent compared to the prior year. The segment reported operating earnings of $128.1 million, which included $10.5 million of transaction costs and $9.4 million of purchase accounting amortization, each related to the Power Products acquisition. That compares with $115.2 million of operating earnings in the third quarter of 2017.
For the third quarter of 2018, the boat segment reported operating losses of $5 million, as losses from sport yacht and yacht operations — still in the process of being discontinued — exceeded the positive earnings contributions from the rest of the boat portfolio.
Specifically, third quarter results included $9.4 million of restructuring, exit, integration and impairment charges, as well as additional losses in excess of restructuring charges of $11.9 million related to the sport yacht and yacht operations. Operating earnings in the third quarter of 2017 included $9.8 million of operating losses from sport yachts and yachts.
Those losses were partly offset by growth in the saltwater fishing category, due in part to the impact of hurricanes on 2017 results. Excluding the yacht and sport yacht losses, operating earnings showed improvement, reflecting higher net sales and favorable changes in product mix, the company said.
The segment overall reported net sales of $322.6 million for the third quarter, an increase from $309.3 million in the third quarter of 2017.
International sales, which represented 18 percent of total segment sales in the quarter, decreased by 15 percent compared to the prior year period.
“In our combined marine business, we expect top-line performance to continue benefitting from a steady global marine market, increases in average selling prices, including benefits from customer migration to higher horsepower engines and boats with increased content, market share gains resulting from the unprecedented demand and acceptance of new outboard products, and our growing parts and accessories business,” Schwabero said.