Brunswick Corp.’s Q2 Earnings Soar on 8 Percent Sales Gain

Brunswick Corporation reported net sales of $1.10 billion, up from $1.01 billion a year earlier in the second quarter ended July 2. Operating earnings reached $107.9 million, which included a gain from restructuring activities of $300,000, primarily resulting from the sale of certain idled marine properties. That compared to operating earnings of $55.7 million  in the year earlier quarter, which included $24.2 million of restructuring and impairment charges.

For the second quarter of 2011, Brunswick reported net earnings of $69.3 million, or $0.75 per diluted share, compared with net earnings of $13.7 million, or $0.15 per diluted share for the second quarter of 2010.  The diluted earnings per share for the second quarter of 2011 included a $0.02 per diluted share benefit from special tax items.  The earnings per diluted share for the second quarter of 2010 included $0.26 per diluted share of restructuring, exit and impairment charges, and a $0.02 per diluted share of expense from special tax items.

“The factors that positively affected our revenues and earnings in the second quarter of 2011, compared to the previous year, included higher sales levels in our marine and fitness businesses, lower restructuring and impairment charges, companywide fixed-cost reductions and lower net interest expense.  Partially offsetting these factors were higher material costs and variable compensation expense,” McCoy said.

 
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group, including the marine parts and accessories businesses, reported net sales of $618.5 million in the second quarter of 2011, up 7 percent from $579.2 million in the second quarter of 2010.  International sales, which represented 41 percent of total segment sales in the quarter, increased by 6 percent.  For the quarter, the Marine Engine segment reported operating earnings of $95.5 million, which included a gain from restructuring activities of $0.3 million, primarily related to the sale of certain idled properties.  This compares with operating earnings of $89.2 million in the second quarter of 2010, which included $2.1 million of restructuring charges.

The segment`s domestic outboard engine product category experienced the greatest percentage sales growth during the quarter.  Higher sales and cost reductions had a positive effect on operating earnings during the quarter.  Partially offsetting these positive factors were a less favorable product mix, higher variable compensation costs, and an increase in research and development spending.

Boat Segment
The Boat segment is comprised of the Brunswick Boat Group, and includes 16 boat brands.  The Boat segment reported net sales of $326.7 million for the second quarter of 2011, an increase of 10 percent compared with $296.6 million in the second quarter of 2010.  International sales, which represented 39 percent of total segment sales in the quarter, increased by 14 percent during the period.  For the second quarter of 2011, the Boat segment reported operating earnings of $9.4 million.  This compares with an operating loss of $23.6 million, including restructuring charges of $21.7 million, in the second quarter of 2010.

Boat segment production and wholesale shipments increased during the quarter, compared with the second quarter of 2010, in response to solid retail demand and market share gains among Brunswick boat brands. Revenue growth resulted from an increase in wholesale unit shipments, partially offset by the effect of a slightly greater mix of smaller boat sales.  Higher sales, lower restructuring, exit and impairment charges, increased fixed-cost absorption, and fixed-cost reductions all had a positive effect on the segment`s improved quarterly results.

Fitness Segment
The Fitness segment is comprised of the Life Fitness Division, which designs, manufactures, and sells Life Fitness and Hammer Strength fitness equipment.  Fitness segment sales in the second quarter of 2011 totaled $141.6 million, up 15 percent from $123.2 million in the second quarter of 2010.  International sales, which represented 53 percent of total segment sales in the quarter, increased by 13 percent.  For the quarter, the Fitness segment reported operating earnings of $19.1 million.  This compares with operating earnings of $8.7 million in the second quarter of 2010.

Global commercial sales increased during the quarter, compared with the second quarter of 2010, reflecting growth in sales to all of the segment`s major distribution channels. Improved operating earnings in the second quarter of 2011 resulted from higher sales, a more favorable product mix, and improved warranty experience.

Bowling & Billiards Segment
The Bowling & Billiards segment is comprised of Brunswick retail bowling centers; bowling equipment and products; and billiards tables and accessories.  Segment sales in the second quarter of 2011 totaled $77.5 million, up slightly compared with $77.3 million in the year-ago quarter.  International sales, which represented 25 percent of total segment sales in the quarter, increased by 4 percent.  For the quarter, the segment reported operating earnings of $1.5 million.  This compares with an operating loss of $2.6 million, including restructuring charges of $0.2 million, in the second quarter of 2010.

For the quarter, equivalent-center sales for retail bowling were up by a low-single-digit percentage, while bowling products experienced a slight decline in sales.  The improvement in operating earnings in the second quarter of 2011, when compared with 2010, reflects an absence of a second quarter 2010 facility write-down, improved operating efficiencies and lower bad debt expense.

Outlook
“In 2011, our strategy is to remain disciplined to generate substantial free cash flow, perform better than the market and demonstrate outstanding operating leverage,” McCoy said.

“The retail marine market for 2011 is unfolding generally as we expected. We continue to believe that the significant decline in overall industry marine retail demand bottomed in 2010.

“The range of 2011 revenue and earnings growth expectations for the Company`s results will continue to be governed primarily by marine retail demand, as well as by the success of the Company`s efforts to improve market share in all of its business segments.

“We continue to believe that our 2011 net income will benefit from our previously announced marine plant consolidations, lower restructuring costs, reductions in interest, depreciation and pension expenses, as well as from a lower effective tax rate.

“After taking all these factors into consideration, we currently expect our 2011 earnings per share to be in the range of $0.60 per share to $0.75 per share,” McCoy concluded.

Segment Information