Brunswick Corporation reported net sales of $789.1 million, up 8 percent versus fourth quarter 2010 and said it reduced its operating losses by $56.6 million from fourth quarter 2010 to a net loss of 33 cents per diluted share versus net loss of $1.17 per diluted share in the prior year.
For the full year, the company generated net sales of $3.748 billion, up 10 percent versus 2010 and operating earnings improved by $176.1 million from 2010. Net earnings of 78 cents per diluted share versus a net loss of $1.25 per diluted share in the prior year. Excluding restructuring, exit and impairment charges, losses on early extinguishment of debt and special tax items, net earnings were $1.17 per share in 2011, compared to a net loss of 46 cents per share in 2010.
The company reduced its debut by $138 million during 2011.
“In 2011, our company made significant progress in growing our revenue and improving our earnings,” said Brunswick Chairman and Chief Executive Officer Dustan E. McCoy. “We achieved double-digit revenue growth and an increase in operating earnings of $176 million despite a flat overall marine market and challenging global economic conditions. Our ability to achieve market share gains throughout our segments, combined with continuing success in improving production and operating efficiencies, enabled us to report our highest level of operating earnings since 2006. In addition, we continued to reduce our debt levels, ending 2011 with net debt at $185 million.”
For the year ended Dec. 31, 2011, the company reported net sales of $3.74 billion, up from $3.40 billion a year earlier. For the year, operating earnings were $192.4 million, which included $22.7 million of restructuring, exit and impairment charges. In 2010, the company reported operating earnings of $16.3 million, which included $62.3 million of restructuring, exit and impairment charges.
For 2011, the company reported net earnings of $71.9 million, or 78 cents per diluted share, compared with a net loss of $110.6 million, or $1.25 per diluted share, for 2010. The diluted earnings per share for 2011 included restructuring, exit and impairment charges of 25 cents per diluted share, losses on early extinguishment of debt of 21 cents per diluted share and a 7 cent per diluted share benefit from special tax items. The loss per diluted share for 2010 included 70 cents per diluted share of restructuring, exit and impairment charges, 6 cents per diluted share of losses on early extinguishment of debt and a 3 cents per diluted share charge from special tax items.
Fourth Quarter Results
For the fourth quarter of 2011, the company reported net sales of $789.1 million, up from $728.8 million a year earlier. For the quarter, the company reported an operating loss of $18.1 million, which included restructuring, exit and impairment charges of $4.5 million. In the fourth quarter of 2010, the company had an operating loss of $74.7 million, which included $18.5 million of restructuring, exit and impairment charges. For the fourth quarter of 2011, Brunswick reported a net loss of $29.6 million, or $0.33 per diluted share, compared with a net loss of $104.1 million, or $1.17 loss per diluted share, for the fourth quarter of 2010. The diluted loss per share for the fourth quarter of 2011 included restructuring, exit and impairment charges of $0.05 per diluted share, loss on early extinguishment of debt of $0.03 per diluted share and a $0.05 per diluted share benefit from special tax items. The loss per diluted share for the fourth quarter of 2010 included $0.21 per diluted share of restructuring, exit and impairment charges and a $0.02 per diluted share charge from special tax items.
“The factors that positively affected our earnings in the fourth quarter of 2011, compared to the previous year, included higher sales levels resulting from market share gains in our marine businesses, as well as in our Fitness and Bowling & Billiards segments, combined with company wide cost reductions and lower warranty costs, restructuring charges and tax provisions. Partially offsetting these factors were higher variable compensation expense, losses on early extinguishment of debt and a charge pertaining to the announced dissolution of a marine engine joint venture,” McCoy said.
Review of Cash Flow and Balance Sheet
Cash and marketable securities totaled $507.8 million at the end of 2011, down $149.3 million from year-end 2010 levels. This decrease primarily reflects the impact of $163.3 million of cash used towards the retirement of debt, partially offset by net cash provided by operations, less net cash used for investing and other financing activities. Net cash provided by operating activities was unfavorably affected by contributions made to the company`s defined benefit pension plans and changes in working capital, excluding cash.
Net debt (defined as total debt, less cash and marketable securities) was $185.0 million, an increase of $11.5 million from year-end 2010 levels. The increase in net debt reflects a $137.8 million reduction in total debt, which was more than offset by a $149.3 million decrease in total cash and marketable securities. The company`s total liquidity (defined as cash and marketable securities, plus amounts available under its asset-based revolving credit facility) was $739 million.
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group, including the marine parts and accessories businesses, reported net sales of $373.3 million in the fourth quarter of 2011, up 6 percent from $353.3 million in the fourth quarter of 2010. U.S. sales, which represented 52 percent of total segment sales in the quarter, increased by 10 percent, while international sales decreased by 2 percent. For the quarter, the Marine Engine segment reported an operating loss of $2.3 million, which included $3.8 million of restructuring and impairment charges. This compares with an operating loss of $17.4 million in the fourth quarter of 2010, which included $7.4 million of restructuring charges.
The segment`s outboard engine and parts and accessories businesses experienced solid sales growth during the quarter. The decline in operating losses reflects higher sales and cost reductions, as well as lower warranty costs and restructuring charges. Partially offsetting these factors were higher material and higher variable compensation costs.
Boat Segment
The Boat segment is comprised of the Brunswick Boat Group, and includes 15 North American-based boat brands. The Boat segment reported net sales of $196.8 million for the fourth quarter of 2011, up 20 percent from the $163.6 million reported in the fourth quarter of 2010. U.S. sales, which represented 69 percent of total segment sales in the quarter, increased by 34 percent. International sales decreased by 10 percent, which was driven largely by the absence of sales related to the Sealine brand, which was divested in the third quarter of 2011. For the fourth quarter of 2011, the Boat segment reported an operating loss of $28.4 million, which included a gain from restructuring activities of $0.9 million. This compares with an operating loss of $69.3 million, including restructuring charges of $10.0 million, in the fourth quarter of 2010.
Boat segment production and wholesale unit shipments increased during the quarter, compared with the fourth quarter of 2010, in response to solid retail demand for Brunswick`s boat brands. Revenue growth from the increase in wholesale unit shipments was partially offset by the absence of sales from the Sealine brand, which was divested on Aug. 30, 2011. A greater sales mix of smaller boats also had a negative effect on sales during the quarter. The decline in operating losses reflects higher sales, increased fixed-cost absorption, cost reductions and lower restructuring costs. Partially offsetting these factors were a less favorable product mix and higher variable compensation costs.
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 fourth quarter of 2011 totaled $180.0 million, up 11 percent from $162.0 million in the fourth quarter of 2010. U.S. sales, which represented 55 percent of total segment sales in the quarter, increased by 14 percent, while international sales increased by 7 percent. For the quarter, the Fitness segment reported operating earnings of $28.3 million. This compares with operating earnings of $24.4 million in the fourth quarter of 2010.
Commercial sales increased during the quarter, compared with the fourth quarter of 2010, reflecting sales growth in all of the segment`s major distribution channels. Improved operating earnings in the fourth quarter of 2011 resulted from higher sales and a more favorable product mix, partially offset by higher variable compensation expense.
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 fourth quarter of 2011 totaled $80.9 million, which is comparable to the $79.5 million reported in the year-ago quarter. U.S. sales, which represented 79 percent of total segment sales in the quarter, increased by 4 percent, while international sales decreased by 6 percent. For the quarter, the segment reported operating earnings of $3.0 million, which included $1.6 million of restructuring and impairment charges. This compares with operating earnings of $0.2 million in 2010, which included $1.2 million of restructuring charges.
For the quarter, bowling products experienced a solid increase in sales, while equivalent-center sales for retail bowling were up slightly. The improvement in operating earnings in the fourth quarter of 2011, when compared with 2010, reflects lower bad debt expense and improved operating efficiencies.
Outlook
“In 2012, we will remain focused on revenue and earnings growth,” McCoy said. “We believe that the global economic and marine market outlook will continue to be challenging and that demand characteristics will be comparable to those demonstrated in 2011. The successful execution of our various operational and financial strategic initiatives during these past several quarters gives us the confidence that we can achieve sustainable revenue and earnings growth, even in a relatively flat marketplace.
“Our entire organization will concentrate its efforts on maintaining its favorable cost position and generating growth through the continuation of market share gains and the execution of organic growth initiatives.
“To support our growth plans, we expect our capital expenditures, SG&A and research and development expenses to be greater than those experienced in 2011. However, even at these higher levels, we plan to continue to generate positive free cash flow and execute our ongoing strategic financial objectives of reducing debt levels and improving the funded status of pension liabilities.
“In addition to solid top-line growth, we expect net income will benefit from our previously announced marine plant consolidations and asset sales, lower restructuring costs, and reductions in interest, depreciation, variable compensation and pension expenses. After taking all these factors into consideration, we currently expect our 2012 earnings per share to be in the range of $1.20 per share to $1.50 per diluted share,” McCoy concluded.
