Brunswick Reports EPS of $0.89 in Third Quarter; On Track for Record Earnings in 2005

Brunswick Corporation reported today net earnings of $88.4 million, or $0.89 per diluted ;share, for the third quarter of 2005, compared with net earnings of $72.9 ;million, or $0.75 per diluted share, for the year-ago quarter. The company ;said diluted earnings per share include $0.16 and $0.10 in the third quarters ;of 2005 and 2004, respectively, from tax-related items, discussed below. "We reported a good third quarter with sales up 13 percent. When you ;factor in the combined effects of high fuel prices, lower consumer confidence ;and two hurricanes, we are very pleased with our results," commented Brunswick ;Chairman and Chief Executive Officer George W. Buckley. "Sales growth was ;driven by strong contributions from Brunswick New Technologies, good ;performance from our marine businesses, as well as acquisitions completed ;since the end of 2004. Excluding acquisitions, our organic sales growth was 7 ;percent, led by significant gains from some of our most established boat ;brands. Operating earnings rose 7 percent in the third quarter, and operating ;margins declined slightly by 40 basis points to 7.4 percent. This was ;primarily due to higher investment spending to expand our global manufacturing ;footprint and to develop new products, the shift in product mix to low- ;emission outboard engines, and the impact of lower production rates to ;maintain pipeline inventories at healthy levels as we enter the off-season." "From a balance sheet perspective, we ended the quarter in excellent ;shape," Buckley added. "Debt-to-total capital was 26.9 percent at quarter ;end, compared with 30.7 percent a year earlier. For the first nine months of ;2005, we generated $164.5 million of free cash flow. With cash totaling ;$535.9 million at quarter end, we have significant financial flexibility to ;invest in our core businesses, to make acquisitions and to repurchase stock." ;The company said that during the third quarter of 2005, it repurchased 375,000 ;shares of Brunswick common stock at an average price of $41.90 per share. To ;date in the fourth quarter of 2005, the company has repurchased an additional ;1 million shares of common stock at an average price of $37.80 per share. ; ;Third Quarter Results For the quarter ended Sept. 30, 2005, net sales increased 13 percent to ;$1,434.6 million, up from $1,273.2 million a year earlier. Operating earnings ;rose 7 percent to $105.9 million compared with $99.3 million in the year-ago ;quarter, and operating margins were down slightly to 7.4 percent from 7.8 ;percent. Net earnings totaled $88.4 million, or $0.89 per diluted share, up ;21 percent from $72.9 million, or $0.75 per diluted share, for the third ;quarter of 2004. The company said that net earnings and diluted earnings per ;share in both 2005 and 2004 benefited from lower tax provisions. ; ;Tax Provisions Due to the large growth opportunities emerging in Europe and Asia, the ;company said that earnings from certain of its foreign subsidiaries would be ;indefinitely reinvested outside of the United States, resulting in a change in ;the application of APB 23, "Accounting for Income Taxes - Special Areas," ;effective July 1, 2005, for those entities. Further, the company said it had ;refined its tax planning strategies for research and foreign export tax ;benefits. The cumulative effect of these actions reduced the company's tax ;provision for the third quarter of 2005, which benefited earnings by ;approximately $0.16 per diluted share. In the third quarter 2004, the Internal Revenue Service completed its ;routine audit of tax years 1998 through 2001. Following the completion of the ;examination of this four-year period, Brunswick reduced its tax reserves and, ;consequently, its tax provision, by approximately $10 million, or ;approximately $0.10 per diluted share, in the third quarter of 2004. "We have made a concerted effort these past five years to reduce our ;effective tax rate through good tax planning and by supporting manufacturing ;investments in low-cost and low-tax-rate areas. These efforts have produced a ;steady reduction in tax rates over time, and we expect that to continue. In ;the third quarter, we lowered our estimated full-year effective tax rate for ;2005 to 30.6 percent from 32 percent for the first half of 2005, and we ;estimate that for 2006 it will remain in the 30 percent to 31 percent range," ;Buckley noted. For 2004, the company's full-year effective tax rate was 31.4 ;percent. The 2005 and 2004 effective tax rates exclude the impact of the tax ;items noted above. ; ;Marine Engine Segment The Marine Engine segment, consisting of the Mercury Marine Group and ;Brunswick New Technologies (BNT), reported net sales of $643.4 million in the ;third quarter of 2005, up 12 percent from $575.5 million in the year-ago ;quarter. Operating earnings in the third quarter decreased 8 percent to $64.9 ;million versus $70.7 million, while operating margins declined to 10.1 percent ;from 12.3 percent for the same quarter in 2004. "BNT and Mercury's international operations led the sales gain for the ;segment during the quarter," Buckley said. "BNT sales were up 82 percent for ;the period, with Navman once again the source of this growth, nearly doubling ;its sales from the year-ago quarter. Navman continues to expand its offerings ;of GPS-based land navigation products, as well as its marine electronics ;products." "Though Hurricanes Katrina and Rita caused disruptions, outboard and ;sterndrive sales still grew in single digits during the quarter," Buckley ;said. "We are also working through the migration of our customers from ;conventional two-stroke outboard engines to low-emission outboards, which are ;a growing percentage of our sales mix. Low-emission engines accounted for 95 ;percent of Mercury's outboard sales during the third quarter, up from 63 ;percent a year ago. This transition affects operating margins for the segment ;as low-emission engines are more technically complex, have higher-cost ;components and, consequently, lower margins." The company said that segment operating margins were also affected by ;higher research and development spending for new products, cost of new product ;launches, lower production rates, and start-up spending for Asian ;manufacturing plants. "As we ramp up production and realize cost reductions ;at these facilities, we anticipate margin improvement for the segment," ;Buckley added. "Managing pipeline inventories is especially important in a cyclical ;business. While retail demand remains robust, to ensure that our production ;is in alignment with wholesale demand, we selectively reduced production rates ;in some product areas during the quarter," Buckley said. "Due to the seasonal ;nature of the marine industry, we would typically see inventories begin to ;build during the third quarter from levels at the end of June. In this ;quarter, however, engine pipeline inventories declined by one week to 19 weeks ;of supply at the end of September, a very healthy level for this time of the ;year. As we announced last month, we will adjust production rates as needed ;to ensure that inventories remain healthy." ; ;Boat Segment The Brunswick Boat Group comprises the Boat segment. The group has 19 ;boat brands, including Sea Ray, Bayliner, Hatteras, Meridian, Boston Whaler, ;Trophy and Triton along with the Land 'N' Sea, Attwood and Kellogg Marine ;parts and accessories distribution and manufacturing businesses. The Boat segment reported net sales for the third quarter of $682.7 ;million, up 20 percent compared with $567.3 million in the third quarter of ;2004. Boat segment sales for the quarter benefited from the Albemarle, Sea ;Pro, Triton, Kellogg Marine and HarrisKayot acquisitions, all made since the ;end of 2004. Excluding the sales of these businesses, organic Boat segment ;sales increased 7 percent in the quarter. Operating earnings increased to ;$38.0 million as compared with $36.1 million reported in the third quarter of ;2004, and operating margins were 5.6 percent, down from 6.4 percent. "Sales gains in the Boat segment were again led by several of our leading ;brands, including Sea Ray, Boston Whaler and Hatteras," noted Buckley. "All ;showed double-digit sales increases as did the Boat Group's parts and ;accessories business. Operating margins were affected by higher research and ;development spending, costs associated with new product launches and lower ;production rates noted earlier at certain of our boat brands to manage ;pipeline inventories." "As we enter the marine off-season when retail activity slows, we are ;carefully adjusting production rates on selected brands to ensure production ;remains consistent with current market conditions," Buckley added. "At ;quarter end, boat pipeline inventories stood at 22 weeks of supply, down one ;week from 23 weeks at the end of June. Again, this is the same trend we saw ;on the engine side of our business. In addition, boat pipelines are down one ;week from 23 weeks of supply at the end of the third quarter of 2004. Our ;goal is to position ourselves and our boat customers, just like our engine ;customers, in the best possible manner as we prepare for the spring selling ;season," Buckley explained. "We aim to have healthy pipelines and fresh ;product for our dealers to address consumer desires." ; ;Fitness Segment The Fitness segment is comprised of the Life Fitness Division, which ;manufactures and sells Life Fitness, Hammer Strength and ParaBody fitness ;equipment. Fitness equipment sales were flat for the quarter, excluding sales ;from the Omni retail stores that were sold in late 2004. Segment sales in the ;third quarter of 2005 reached $127.4 million, down from $132.2 million in the ;year-ago quarter, which included Omni retail sales. Fitness segment operating ;earnings for the quarter totaled $14.2 million, up 69 percent from $8.4 ;million in the third quarter of 2004, and operating margins advanced 470 basis ;points to 11.1 percent from 6.4 percent a year ago. "We are very pleased with the margin improvement at Life Fitness. The ;significant increase in operating margins was primarily due to a higher sales ;mix of cardiovascular equipment versus strength equipment, improved ;manufacturing efficiencies and ongoing effective cost management," Buckley ;said. "Further, our expanded manufacturing plant in Hungary is giving us ;access to lower material and labor costs, as well as reduced shipping costs ;and improved delivery times to our European customers." ; ;Bowling & Billiards Segment The Bowling & Billiards segment is comprised of the Brunswick retail ;bowling centers; bowling equipment and products; and billiards, Air Hockey and ;foosball tables. Segment sales in the third quarter of 2005 totaled $111.9 ;million, up 5 percent compared with $106.6 million in the year-ago quarter. ;Operating earnings increased 43 percent in the third quarter to $5.7 million ;versus $4.0 million, and operating margins improved by 130 basis points to 5.1 ;percent compared with 3.8 percent in 2004. "Segment sales were driven by advances in both bowling retail centers and ;bowling products," Buckley said. "Bowling products, with its popular bowling ;balls and turnkey packages for new and modernized bowling centers, had a ;double-digit gain for the quarter, with sales especially strong in Europe. ;Likewise, our strategy of pursuing the Brunswick Zone retail concept, as well ;as still larger, destination-oriented centers that offer families a growing ;number of entertainment options, contributed to the segment's good ;performance. Additionally, effective target marketing efforts concentrated ;around center locations have been quite effective in driving increased traffic ;and volume through our centers during peak and off-peak hours." ; ;Nine-Month Results For the nine months ended Sept. 30, 2005, the company had net sales of ;$4,434.3 million, up 14 percent from $3,895.5 million for the first three ;quarters of 2004. Excluding contributions from acquired businesses, sales ;were up 9 percent, led by new products and share gains. Operating earnings ;totaled $376.7 million for the first nine months of 2005, up 19 percent from ;the $317.3 million for the corresponding period in 2004, and operating margins ;were 8.5 percent versus 8.1 percent a year ago. Net earnings for the first nine months of 2005 increased 41 percent to ;$297.1 million, or $3.00 per diluted share, from $211.0 million, or $2.18 per ;diluted share, for the same period in 2004. As previously announced, during ;the first quarter of 2005 the company completed the sale of approximately 1.9 ;million shares of MarineMax, Inc. stock. Results for the first nine months of ;2005 include a pre-tax gain of $38.7 million, equivalent to $0.32 per diluted ;share, recorded on the stock sale in the first quarter. Net earnings and ;diluted earnings per share in the first three quarters of 2005 and 2004 also ;benefited from the tax-related actions described above. ; ;Looking Ahead "As we approach the end of 2005, we continue to see strong retail demand ;for marine products, consistent with our assumption that retail would be up in ;the mid-single digits for the year," Buckley remarked. "While we will keep a ;watchful eye on pipeline inventories as we enter the off-season, we remain ;confident that we are on track for another record earnings year for Brunswick, ;and we expect continued growth next year. We are maintaining our previously ;announced estimate of earnings for 2005 in the range of $3.20 to $3.25 per ;diluted share, excluding the gain on the MarineMax stock and the tax matters ;mentioned earlier. This would imply earnings in the fourth quarter of $0.68 ;to $0.73 per diluted share, which compares with $0.59 per diluted share for ;the year-ago fourth quarter." ; ;Forward-Looking Statements Certain statements in this press release are forward looking as defined in ;the Private Securities Litigation Reform Act of 1995. These statements ;involve certain risks and uncertainties that may cause actual results to ;differ materially from expectations as of the date of this filing. These ;risks include, but are not limited to: the effect of a weak economy and stock ;market on consumer confidence and thus the demand for marine, fitness, ;billiards and bowling equipment and products; competitive pricing pressures; ;the success of new product introductions; the ability to maintain market share ;in high-margin products; competition from new technologies; imports from Asia ;and increased competition from Asian competitors; the ability to obtain ;component parts from suppliers; the ability to maintain effective ;distribution; the financial strength of dealers, distributors and independent ;boat builders; the ability to transition and ramp up certain manufacturing ;operations within time and budgets allowed; the ability to maintain product ;quality and service standards expected by our customers; the ability to ;successfully manage pipeline inventories; the success of global sourcing and ;supply chain initiatives; the ability to successfully integrate acquisitions; ;the success of marketing and cost management programs; the ability to develop ;product technologies that comply with regulatory requirements; the ability to ;complete environmental remediation efforts and resolve claims and litigation ;at the cost estimated; the impact of weather conditions on demand for marine ;products and retail bowling center revenues; shifts in currency exchange ;rates; adverse foreign economic conditions; and the impact of interest rates ;and fuel prices on demand for marine products. Additional factors are ;included in the company's Annual Report on Form 10-K for 2004 and Quarterly ;Report on Form 10-Q for the quarter ended June 30, 2005. ; ;About Brunswick Headquartered in Lake Forest, Ill., Brunswick Corporation endeavors to ;instill "Genuine Ingenuity"(TM) in all its leading consumer brands, including ;Mercury and Mariner outboard engines; Mercury MerCruiser sterndrives and ;inboard engines; MotorGuide trolling motors; Teignbridge propellers; MotoTron ;electronic controls; Northstar marine electronics; Navman marine and GPS-based ;products; IDS dealer management systems; Albemarle, Arvor, Baja, Bayliner, ;Bermuda, Boston Whaler, Crestliner, HarrisKayot, Hatteras, Lowe, Lund, Maxum, ;Meridian, Ornvik, Palmetto, Princecraft, Quicksilver, Savage, Sea Boss, Sea ;Pro, Sea Ray, Sealine, Triton, Trophy, Uttern and Valiant boats; Attwood ;marine parts and accessories; Land 'N' Sea and Kellogg Marine parts and ;accessories distributors; Life Fitness, Hammer Strength and ParaBody fitness ;equipment; Brunswick bowling centers, equipment and consumer products; ;Brunswick billiards tables; and Valley-Dynamo pool, Air Hockey and foosball ;tables. For more information, visit http://www.brunswick.com . ; ; ; Brunswick Corporation Comparative Consolidated Statements of Income (in millions, except per share data) (unaudited) Three Months Ended September 30 2005 2004 % Change Net sales $1,434.6 $1,273.2 13% Cost of sales 1,101.6956.2 15% Selling, general and administrative expense 191.3186.5 3% Research and development expense35.8 31.2 15% Operating earnings 105.9 99.3 7% Interest expense(13.5) (12.1) -12% Other income 7.0 4.4 59% Earnings before income taxes 99.4 91.6 9% Income tax provision 11.0 18.7 Net earnings $88.4$72.9 21% ; Earnings per common share: Basic $0.90$0.76 18% Diluted0.89 0.75 19% ; Weighted average number of shares used for computation of: Basic earnings per share 98.1 96.2 2% Diluted earnings per share 99.3 97.7 2% ; Effective tax rate (1) 11.1%20.5% ; (1) The decrease in the effective tax rate for the three months ended September 30, 2005, was primarily due to non-recurring tax benefits arising from a change in assertions on indefinitely reinvested earnings in selected international operations, refined tax planning strategies for research and foreign export tax benefits, and projected higher foreign earnings in lower effective-tax-rate jurisdictions. ; ; ; Brunswick Corporation Comparative Consolidated Statements of Income (in millions, except per share data) (unaudited) Nine Months Ended September 302005 2004 % Change Net sales $4,434.3$3,895.5 14% Cost of sales 3,346.8 2,913.4 15% Selling, general and administrative expense 604.7 571.5 6% Research and development expense 106.1 93.3 14% Operating earnings 376.7 317.3 19% Interest expense (39.6) (32.6)21% Investment sale gain (1) 38.7 - Other income 23.0 13.0 77% Earnings before income taxes 398.8 297.7 34% Income tax provision 101.7 86.7 Net earnings $297.1 $211.0 41% ; Earnings per common share: Basic $3.03 $2.22 36% Diluted $3.00 $2.18 38% ; Weighted average number of shares used for computation of: Basic earnings per share 97.9 95.1 3% Diluted earnings per share 99.2 96.8 2% ; Effective tax rate (2) 25.5% 29.1% ; (1) The Company sold its investment in MarineMax, Inc., pursuant to a registered public offering by MarineMax. (2) The decrease in the effective tax rate for the nine months ended September 30, 2005, was primarily due to non-recurring tax benefits arising from a change in assertions on indefinitely reinvested earnings in selected international operations, refined tax planning strategies for research and foreign export tax benefits, and projected higher foreign earnings in lower effective-tax-rate jurisdictions. ; ; ; Brunswick Corporation Selected Financial Information (in millions) (unaudited) ; Segment Information ; Three Months Ended September 30 Operating Net Sales Operating EarningsMargin % %20052004 Change 2005 2004 Change 2005 2004 ; Marine Engine $643.4 $575.5 12% $64.9 $70.7 -8% 10.1% 12.3% Boat 682.7 567.3 20% 38.0 36.1 5% 5.6% 6.4% Marine eliminations (130.1) (107.1) - - Total Marine 1,196.0 1,035.7 15% 102.9 106.8 -4% 8.6% 10.3% ; Fitness 127.4 132.2 -4% 14.28.4 69% 11.1% 6.4% Bowling & Billiards 111.9 106.6 5%5.74.0 43% 5.1% 3.8% Eliminations (0.7) (1.3) - - Corporate/Other - - (16.9) (19.9) 15% Total $1,434.6 $1,273.2 13% $105.9 $99.3 7% 7.4% 7.8% ; ; Nine Months Ended September 30 Operating Net Sales Operating Earnings Margin % %2005 2004 Change 2005 2004 Change 2005 2004 ; Marine Engine $2,004.5 $1,768.6 13% $223.9 $208.9 7% 11.2% 11.8% Boat 2,102.4 1,709.2 23% 162.3 125.1 30% 7.7% 7.3% Marine eliminations (383.0) (287.2) - - Total Marine 3,723.9 3,190.6 17% 386.2 334.0 16% 10.4% 10.5% ; Fitness 375.3 385.1 -3% 25.7 20.5 25% 6.8% 5.3% Bowling & Billiards 338.3 322.6 5% 22.0 21.7 1% 6.5% 6.7% Eliminations (3.2) (2.8) - - Corporate/Other - - (57.2) (58.9) 3% Total $4,434.3 $3,895.5 14% $376.7 $317.3 19% 8.5% 8.1% ; ; ; Brunswick Corporation Comparative Consolidated Condensed Balance Sheets (in millions) ; September December September 30, 31, 30, 2005 2004 2004 (unaudited)(unaudited) Assets Current assets Cash and cash equivalents $535.9 $499.8$493.1 Accounts and notes receivables, net 488.1463.2 432.0 Inventories Finished goods 443.3389.9 386.5 Work-in-process314.6260.5 260.3 Raw materials 168.3136.4 130.0 Net inventories 926.2786.8 776.8 Deferred income taxes 293.7292.7 314.9 Prepaid expenses and other 54.6 56.2 55.9 Current assets 2,298.5 2,098.7 2,072.7 ; ; Net property 934.2876.4 852.4 ; Other assets Goodwill and other intangibles 1,026.1952.8 894.8 Investments and other long-ter ;ssets 359.7418.5 382.1 ; Total assets$4,618.5 $4,346.4 $4,202.0 ; ; Liabilities and shareholders' equity Current liabilities Short-term debt $5.8$10.7 $13.5 Accounts payable 447.5387.9 341.0 Accrued expenses and accrue ;ncome taxes803.0855.2 838.3 Current liabilities 1,256.3 1,253.8 1,192.8 ; Long-term debt 726.8728.4 729.8 Other long-term liabilities 641.6651.9 604.1 Shareholders' equity 1,993.8 1,712.3 1,675.3 ; Total liabilities and shareholders' equity$4,618.5 $4,346.4 $4,202.0 ; ; Supplemental Information Debt-to-capitalization rate 26.9%30.2% 30.7% ; ; ; Brunswick Corporation Comparative Consolidated Condensed Statements of Cash Flows (in millions) (unaudited) Nine Months Ended September 3020052004 ; Cash flows from operating activities Net earnings $297.1 $211.0 Depreciation and amortization 118.4 117.5 Changes in noncash current asset ;nd current liabilities (135.6) (122.2) Income taxes and other, net(27.2) 43.8 Net cash provided by operating activities 252.7 250.1 ; Cash flows from investing activities Capital expenditures (157.8) (114.0) Acquisitions of businesses, net o ;ash and debt acquired (130.2) (213.9) Investments 2.5(2.6) Proceeds from investment sale 57.9 - Other, net 11.7 4.7 Net cash used for investing activities (215.9) (325.8) ; Cash flows from financing activities Net issuances (repayments) o ;ommercial paper an ;ther short-term debt 4.4(5.1) Net proceeds from issuances o ;ong-term debt-150.1 Payments of long-term deb ;ncluding current maturities (3.8) (6.0) Stock repurchases(15.7) - Stock options exercised14.483.9 Net cash provided by financing activities (0.7) 222.9 ; Net increase in cash and cash equivalents 36.1 147.2 Cash and cash equivalents at January 1 499.8 345.9 ; Cash and cash equivalents at September 30$535.9 $493.1 ; ; Free Cash Flow Net cash provided by operatin ;ctivities$252.7 $250.1 ; Net cash provided by (used for): Capital expenditures (157.8) (114.0) Proceeds from investment sale (1)57.9 - Other, net 11.7 4.7 Total Free Cash Flow $164.5 $140.8 ; (1) Pre-tax proceeds from the sale of the Company's investment in MarineMax, Inc., net of selling costs. ; ; ;

Author:  

Email:    

Topic:    

Content:

Related Articles

• Nam Tai Electronics, Inc. Conditional General Cash Offer to Privatize its 2 Subsidiaries Listed on the Hong Kong Stock Exchange
  23 October 2005



• Winland Electronics, Inc. Announces Record Third Quarter 2005 Revenue of $7.4 Million and Earnings of $0.12 per Share
  21 October 2005



• ESCA Catalyst 2005 Winter Symposium Explores Constant Change in the Electronics Supply Chain; Offers Futuristic Look at the Industry
  20 October 2005



• LG Electronics Launches Production of HDTV Set-Top Boxes for DIRECTV
  20 October 2005



• NEC Electronics America Introduces MOSFET Devices With Super Low On Resistance
  18 October 2005



• International ISP Dialer.net Provides Worldwide Visitors with Global Roaming Service and Internet Access at Hong Kong Electronics Fair
  16 October 2005



• Record-breaking China Sourcing Fair: Electronics & Components Opened Today in Shanghai
  15 October 2005



• X-EMI Adds XM1011 Clock Synthesizer to Product Portfolio, Unveils to Asian Customer Base at Taitronics International Electronics Show
  12 October 2005



• Richardson Electronics Announces Stockholders' Meeting and Web Conference Availability
  12 October 2005



• Allied Electronics Announces Promotional Contest Winner
  12 October 2005