Brunswick Corporation net sales grew 6.4 percent, or 11 percent on a currency-neutral basis, in the fiscal third quarter ended Oct. 3 lead by double-digit growth at its Boat division. Despite currency headwinds, sales at the Mercury Marine Group and the Life Fitness Division grew 4 percent compared with the year earlier quarter.
Net sales reached $991.9 million, up from $932.1 million a year earlier. Operating earnings reached $115.8 million, compared to $93.7 million in the prior year, which included $0.9 million of net restructuring, exit and impairment charges.
Brunswick reported net earnings of $72.2 million, or $0.77 per diluted share, compared with net earnings of $61.0 million, or $0.64 per diluted share, for the third quarter of 2014. The diluted earnings per share for the third quarter of 2014 included $0.01 per diluted share of restructuring, exit and impairment charges and $0.02 per diluted share benefit from special tax items.
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group, including the marine parts and accessories businesses, reported net sales of $588.2 million in the third quarter of 2015, up 4 percent from $566.9 million in the third quarter of 2014.
International sales, which represented 32 percent of total segment sales in the quarter, were down 5 percent compared to the prior year period. On a constant currency basis, international sales were up 10 percent. For the quarter, the Marine Engine segment reported operating earnings of $102.5 million. This compares with operating earnings of $93.3 million in the third quarter of 2014.
Sales increases in the quarter were led by the segment’s parts and accessories businesses, which included revenues from acquisitions completed in the second quarter of 2015 and during the third quarter of 2014. Higher revenues, a more favorable product mix, cost reductions and savings related to sourcing initiatives contributed to the increase in operating earnings in the third quarter of 2015. Partially offsetting these positive factors were the unfavorable effects of foreign exchange.
Boat Segment
The Boat segment is comprised of the Brunswick Boat Group, and includes 14 boat brands. The Boat segment reported net sales of $271.3 million for the third quarter of 2015, an increase of 16 percent compared with $234.6 million in the third quarter of 2014.
International sales, which represented 21 percent of total segment sales in the quarter, decreased by 16 percent during the period. On a constant currency basis, international sales were down 6 percent. For the third quarter of 2015, the Boat segment reported operating earnings of $6.4 million. This compares with an operating loss of $7.0 million in the third quarter of 2014, including net restructuring charges of $0.9 million.
The Boat segment's revenue growth reflected a strong increase in units shipped to dealers, as well as higher average selling prices. Operating earnings benefited from higher sales and a more favorable product mix, as well as savings related to sourcing initiatives and cost reductions.
Fitness Segment
The Fitness segment is comprised of the Life Fitness Division, which designs, manufactures and sells strength and cardiovascular fitness equipment and billiards tables. Fitness segment sales in the third quarter of 2015 totaled $197.5 million, up 4 percent from $189.0 million in the third quarter of 2014. International sales, which represented 47 percent of total segment sales in the quarter, decreased by 4 percent. On a constant currency basis, international sales were up 4 percent. For the quarter, the Fitness segment reported operating earnings of $27.6 million. This compares with operating earnings of $25.8 million in the third quarter of 2014.
The increase in revenue reflected growth in the U.S. at health clubs and local and federal governments. Sales in the quarter included revenues from an acquisition completed in the third quarter of 2015. The increase in operating earnings included benefits from higher sales, cost reductions and savings related to sourcing initiatives, partially offset by an unfavorable impact from foreign exchange.
2015 Outlook
“We continue to target 2015 to be another year of strong earnings growth, with outstanding cash flow generation. Our plan reflects a 7 percent annual sales growth, which includes benefits from the success of our new products and the continuation of solid growth in the U.S. and Europe, partially offset by the negative impact of a stronger U.S. dollar and weakness in certain international markets.
“For the full-year, we anticipate a slight improvement in gross margin levels and solid gains in operating margins, as we plan to continue to benefit from volume leverage, modest positive product mix factors, cost reductions and savings related to sourcing initiatives, partially offset by foreign currency headwinds.
“Our guidance for 2015 reflects adjusted pretax earnings growth of 18 percent to 20 percent, and we are narrowing the range for our expectations of diluted EPS, as adjusted, to $2.80 to $2.85. Finally, for the full-year, we expect free cash flow to exceed $200 million,” McCoy concluded.
