Brunswick Corporation reported a strong second quarter, with double-digit sales gains evident across all divisions, while significant net income growth was impacted only by a decline in operating margins in the companys Fitness division, which includes the Life Fitness, Hammer Strength and ParaBody fitness equipment brands and operates the Omni Fitness retail stores.
BC saw consolidated net sales increase 32.8% to $1.42 billion in Q2, up from $1.07 billion in Q2 last year, or up 17% excluding acquisitions since last year. Operating earnings rose to $139.5 million compared with $87.2 million in the year-ago quarter. Consolidated net earnings increased 68.0% to $90.1 million, or 93 cents per diluted share, for the second quarter, compared with net earnings of $53.6 million, or 59 cents per diluted share, for the year-ago quarter.
Fitness Segment sales increased 16.4% in the quarter to reach $122.3 million, versus $105.1 million in the year-ago period. However, operating earnings declined 45.3% for the period to $2.9 million compared with $5.3 million in the second quarter of 2003, due primarily to margin contraction from competitive pricing pressure in Europe, a shift in product mix towards lower margin strength equipment, technology licensing costs, and increases in steel pricing. Operating margins were 2.4% compared with 5.0% a year ago.
BC said they expect steel pricing and technology costs to abate in the coming year, which, along with further reductions in delivery and installation costs, should help to narrow the year-over-year operating margin gap.
Bowling & Billiards Segment sales, which include results from the Brunswick retail bowling centers and bowling equipment, as well billiards, Air Hockey and foosball tables, were up 12.4% to $105.8 million, compared with $94.1 million in the year-ago quarter. Operating earnings for the segment “more than doubled” to $4.2 million in Q2 versus $1.9 million in the year-ago period, pushing operating margins to 4.0% of sales compared with 2.0% in 2003.
Billiards sales were also up double-digits, aided by the acquisition of Valley-Dynamo in June 2003. Excluding Valley-Dynamo, Bowling & Billiards segment sales increased 6.0% for the period.
Marine Engine Segment sales were up 27.5% to $665.2 million in the quarter and operating earnings increased 48.9% to $95.6 million, or 14.4% of sales.
Boat Segment sales were up 50.4% to $629.9 million in Q2 and operating earnings increased 76.5% to $57.0 million, or 9.0% of sales.
Based on the strong quarter and YTD performance, Brunswick is again raising EPS guidance for the year to $2.60 to $2.68 per share from a previous estimate of $2.45 to $2.65 per share.
