Brunswick Corporation net sales for the third quarter of 2010 were $815.4 million, up 22% versus third quarter 2009.
Third Quarter Highlights:
- Net loss of $7.2 million, or 8 cents per diluted share, which includes 14 cents per diluted share of restructuring, exit and impairment charges.
- Operating earnings of $25.2 million, a $134.6 million improvement from third quarter 2009.
- Cash totaled $676.5 million, up from 2009 year-end balance of $526.6 million.
- Increased production and wholesale shipments versus prior year levels, resulting from low beginning-of-year marine dealer inventories.
“Throughout the first nine months of 2010, we have successfully executed against our strategic initiatives,” said Brunswick Chairman and Chief Executive Officer Dustan E. McCoy. “This is evidenced by the outstanding operating leverage that we have demonstrated on our revenue growth during the year. For the nine months ended Oct. 2, 2010, excluding restructuring charges, our operating earnings increased by more than $410 million, as compared to 2009.
In addition, we have achieved our objective of being cash flow positive during this period. All of this has been accomplished against the backdrop of a very difficult marine market.”
“The factors that positively affected our revenues and earnings in the third quarter of 2010, compared to the previous year, included lower discounts required to facilitate retail boat sales, improved fixed-cost absorption as a result of higher overall unit production and higher sales levels in our marine businesses. During the quarter, we also benefited from lower restructuring, exit and impairment charges, a reduction in variable compensation expense and lower pension expense. Partially offsetting these factors were higher income taxes,” McCoy said.
Third Quarter Results
For the third quarter of 2010, the company reported net sales of $815.4 million, up from $665.8 million a year earlier. For the quarter, the company reported operating earnings of $25.2 million, which included $12.2 million of restructuring, exit and impairment charges. In the third quarter of 2009, the company had an operating loss of $109.4 million, which included $28.8 million of restructuring, exit and impairment charges.
For the third quarter of 2010, Brunswick reported a net loss of $7.2 million, or 8 cents per diluted share, compared with a net loss of $114.3 million, or $1.29 per diluted share, for the third quarter of 2009. The diluted loss per share for the third quarter of 2010 included restructuring, exit and impairment charges of 14 cents per diluted share. The loss per diluted share for the third quarter of 2009 included 32 cents per diluted share of restructuring, exit and impairment charges, and a 24 cents per diluted share benefit from special tax items.
Review of Cash Flow and Balance Sheet
Cash and cash equivalents were $676.5 million at the end of the third quarter, up $149.9 million from year-end 2009 levels. The company's increased cash position reflects net cash provided by operating activities of $192.6 million, which included the receipt of a $109.5 million federal tax refund. Net cash provided by operating activities was negatively affected by changes in certain current assets and current liabilities during the first nine months of 2010. These changes were largely the result of increases in net inventories and accounts and notes receivable.
Net debt (defined as total debt, less cash and cash equivalents) was $157.6 million, down $166.7 million from year-end 2009 levels. The change in net debt reflects the $149.9 million increase in cash, along with reductions in debt resulting primarily from debt repurchases. The company's total liquidity (defined as cash and cash equivalents, plus amounts available under its asset-backed lending facilities) was $780 million, up $165 million from year-end 2009 levels.
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 third quarter of 2010 totaled $137.7 million, up 9% from $126.8 million in the year-ago quarter. International sales, which represented 56% of total segment sales in the quarter, increased by 10%. For the quarter, the Fitness segment reported operating earnings of $17.0 million. This compares with operating earnings of $12.5 million in the third quarter of 2009, which included restructuring charges of $400,000.
Global commercial equipment sales increased during the quarter, which were partially offset by a decline in U.S. consumer equipment sales. Higher operating earnings in the third quarter of 2010, when compared with 2009, reflect higher sales, lower material costs and increased fixed-cost absorption.
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 third quarter of 2010 totaled $74.6 million, down 4% compared with $77.5 million in the year-ago quarter. International sales, which represented 26% of total segment sales in the quarter, increased by 1%. For the quarter, the segment reported break-even operating earnings, including restructuring charges of $200,000. This compares with an operating loss of $3.8 million, including restructuring and exit charges of $800,000 in the third quarter of 2009.
For the quarter, equivalent-center sales for retail bowling declined by a low-single-digit percentage. Bowling products also experienced a modest decline in sales. The reduction in operating losses in the third quarter of 2010, when compared with 2009, reflects reduced pension expense, lower restructuring and exit charges and lower bad debt expense.
Comparative Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
Three Months Ended
------------------------------------
October 2, October 3,
2010 2009 % Change
----------- ----------- ----------
Net sales $ 815.4 $ 665.8 22%
Cost of sales 632.1 590.2 7%
Selling, general and
administrative expense 122.8 136.7 -10%
Research and development expense 23.1 19.5 18%
Restructuring, exit and impairment
charges 12.2 28.8 -58%
----------- -----------
Operating earnings (loss) 25.2 (109.4) NM
Equity loss (2.0) (3.8) 47%
Other income (expense), net (2.2) 0.3 NM
----------- -----------
Earnings (loss) before
interest, loss on early
extinguishment of debt
and income taxes 21.0 (112.9) NM
Interest expense (22.7) (23.6) 4%
Interest income 0.9 0.7 29%
Loss on early extinguishment of
debt (1.1) (0.1) NM
----------- -----------
Loss before income taxes (1.9) (135.9) 99%
Income tax provision (benefit) 5.3 (21.6)
----------- -----------
Net loss $ (7.2) $ (114.3) 94%
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Loss per common share:
Basic $ (0.08) $ (1.29)
Diluted $ (0.08) $ (1.29)
