Corporate and Financial
Brunswick Reports EPS of $0.59 in Fourth Quarter
LAKE FOREST, Ill., Jan. 27 /PRNewswire-FirstCall/ -- Brunswick Corporation
(NYSE: BC) reported today net earnings of $58.8 million, or $0.59 per diluted
share, for the fourth quarter of 2004, up from net earnings of $39.9 million,
or $0.43 per diluted share, for the year-ago quarter. The company said the 47
percent increase in net earnings came on a 23 percent increase in sales and a
42 percent improvement in operating earnings.
Commenting on the quarter, Brunswick Chairman and Chief Executive Officer
George W. Buckley said, "We had a strong finish to an excellent year with our
Marine Engine, Boat and Fitness segments posting double-digit sales increases
for the quarter. Excluding acquisitions completed earlier in the year, net
sales for the quarter were up 16 percent. Due to our continual emphasis on
operations excellence and effective cost management, we leveraged these sales
gains into increased operating earnings and a 90-basis-point improvement in
operating margins to 6.3 percent for the final quarter of the year."
Fourth Quarter Results
For the quarter ended Dec. 31, 2004, the company reported that net sales
increased 23 percent to $1,333.8 million, up from $1,086.9 million a year
earlier. Sales in the fourth quarter of 2004 benefited from higher boat
volumes and acquisitions. Led by double-digit improvements in the Marine
Engine, Boat and Bowling & Billiards segments, operating earnings rose 42
percent to $83.4 million, compared with $58.7 million in the year-ago quarter,
and operating margins improved to 6.3 percent from 5.4 percent. Net earnings
rose to $58.8 million, or $0.59 per diluted share, up from $39.9 million, or
$0.43 per diluted share, for the fourth quarter of 2003.
2004 Results
For the year ended Dec. 31, 2004, the company had net sales of
$5,229.3 million, up 27 percent from $4,128.7 million in 2003. Sales in 2004
benefited from acquisitions made earlier in the year, as well as incremental
sales from acquisitions completed in 2003. Excluding acquisitions, net sales
were up 16 percent. Operating earnings reached $400.7 million for the year,
up 81 percent from $221.4 million in 2003, and operating margins reached 7.7
percent versus 5.4 percent a year ago. Operating earnings for 2003 include a
$25.0 million litigation charge ($16.0 million after tax, or $0.18 per diluted
share) recorded in the first quarter of 2003. Excluding the litigation
charge, operating earnings were $246.4 million and operating margins were 6.0
percent in 2003. Net earnings for 2004 doubled to $269.8 million, or $2.77
per diluted share, compared with $135.2 million, or $1.47 per diluted share,
in 2003. Excluding the previously mentioned litigation charge, net earnings
totaled $151.2 million, or $1.65 per diluted share, in 2003.
For the year, higher sales and effective cost management helped to
mitigate increased research and development (R&D) spending, higher variable
compensation costs, costs of integrating acquisitions, investments in new
manufacturing plants and higher spending to support new product introductions.
The company said that, during the third quarter of 2004, the Internal
Revenue Service completed its routine audit of tax years 1998 through 2001.
Following the completion of the examination of this four-year period,
Brunswick reduced its tax reserves and, consequently, its tax provision by
approximately $10 million in the third quarter of 2004. This is equivalent to
approximately $0.10 per diluted share. In addition, Brunswick reduced its
effective tax rate for the year to 31.4 percent, excluding the impact of the
audits, compared with 32.75 percent in 2003. This was due to effective tax
planning, higher tax benefits from export sales and higher research and
development tax credits. The company said it expects its effective tax rate
for 2005 to be between 31 percent and 32 percent.
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group and
Brunswick New Technologies, reported sales of $584.6 million in the fourth
quarter of 2004, up 23 percent from $473.4 million in the year-ago fourth
quarter. Operating earnings in the fourth quarter were up 28 percent to
$34.3 million versus $26.7 million, and operating margins increased to 5.9
percent compared with 5.6 percent for the same quarter in 2003.
For the full year, Marine Engine segment sales rose 23 percent to
$2,353.2 million, and operating earnings were $243.2 million versus
$171.1 million a year ago. Operating margins increased by 130 basis points
for the year to 10.3 percent from 9.0 percent in 2003.
"For the year, Mercury Marine benefited from strong international sales,
which were up 17 percent for the year to $713 million," commented Buckley.
"Our domestic operations also posted double-digit sales gains with domestic
outboards up 13 percent to $476 million, domestic sterndrive engines up 19
percent to $542 million, and our parts and services businesses up 20 percent
to $329 million. Operating margin improvement was registered in all units
with the exception of domestic outboards where we continue to experience
significant competitive pricing pressure from Japanese imports."
"Mercury, however, got a well-earned sales boost from the introduction of
the Verado family of outboard engines earlier in the year," Buckley said.
"This high-horsepower, four-stroke engine is the only supercharged production
outboard engine in the world. We will be launching three more models within
the Verado family next month. Verado has received critical acclaim, and
should help to offset to some extent a continually challenging domestic
outboard market, in which we believe unfair trade practices by Japanese
competitors have artificially depressed prices and harmed American
manufacturers, severely hampering operating margins."
"Brunswick New Technologies (BNT), our newest operating unit, also posted
strong gains with sales reaching $202 million for the year," Buckley
explained. "BNT results were led by Navman and BNT Marine Electronics, which
markets the Northstar brand of components. BNT is quickly completing an
aggressive push to broaden its product line and expand its markets. By the
middle of this year, BNT will offer a full suite of marine electronics, which
we will continue to integrate and install at the factory level to improve the
convenience, quality and reliability of our marine products."
Boat Segment
The Brunswick Boat Group comprises the Boat segment and includes the Sea
Ray, Bayliner, Maxum, Hatteras, Sealine, Meridian, Boston Whaler, Trophy, Sea
Pro, Baja, Crestliner, Lowe, Lund and Princecraft boat brands and the Land 'N'
Sea, Swivl-Eze and Attwood marine parts and accessories distribution and
manufacturing businesses. The Boat segment reported sales for the fourth
quarter of $561.9 million, up 35 percent compared with $414.9 million in the
fourth quarter of 2003. Boat segment sales benefited from healthy sales
across its boat brands, including those of its Aluminum Boat Group, which was
formed in early 2004 with the acquisition of the Crestliner, Lowe and Lund
brands.
Excluding the aluminum boat acquisitions, sales increased 17 percent in
the quarter, pointing to strong organic growth within the Boat Group,
particularly among Boston Whaler, Sea Ray, US Marine and Hatteras, all of
which posted double-digit sales gains. Operating earnings for the Boat
segment increased to $24.2 million, up 160 percent from $9.3 million reported
in the fourth quarter of 2003, and operating margins increased by 210 basis
points to 4.3 percent.
For 2004, Boat segment sales were up 40 percent to $2,271.1 million from
$1,616.9 million in 2003. Excluding incremental sales from acquisitions, Boat
segment sales were up 19 percent for the year. Operating earnings for the
Boat segment more than doubled to $149.3 million from $63.9 million in 2003,
and operating margins improved to 6.6 percent compared with 4.0 percent in
2003.
"The strong growth in sales reflects the first increase in retail demand
for the boating industry since 2000 and the success of new and innovative
products introduced in 2004," Buckley said. "We are also pleased to report
the successful turnaround of our US Marine Division, which returned to
profitability for the first time since 2000. This, along with effective cost
management, was a significant contributor to the improved operating earnings
performance of the Boat segment."
"Our Boat Group has done a wonderful job of continuing to broaden and
build its presence and appeal in the marketplace," Buckley added. "The
acquisition of the Lowe, Lund and Crestliner aluminum boat brands earlier in
the year, along with our Princecraft brand, has positioned Brunswick in an
important segment of the market that we had previously underserved. Our
offerings in the offshore saltwater fishing category were also enhanced with
the acquisition of the Sea Pro brands last month. With an eye towards deeper
and better partnerships with our distribution network, we continue to seek
ways to better serve our dealers and deliver superior products to consumers."
"By offering a wider range of products and services, including the growing
ability to provide parts on a same-day or next-day basis to nearly all of
North America, we continue to make our dealers more competitive and able to
serve a larger portion of boating consumers," said Buckley. "Developing a
boat parts and accessories business is an important component of our 'embrace
the dealer' strategy. Benefiting from strategic acquisitions completed in
2003, boat P&A sales reached $193 million in 2004."
"Further, we have stayed the course in product development to bring
innovative, affordable and easy-to-use products to excite current boaters and
draw others to the water," Buckley said. "During 2004 we saw strong demand
across our complete product line, from our affordable Bayliner 175 (an entry-
level boat, engine and trailer package with a suggested retail price of
$9,995), through our Sea Ray cruisers and Hatteras yachts. We have continued
to invest in new products, with more than 37 new models scheduled for launch
in 2005."
Fitness Segment
The Fitness segment is comprised of the Life Fitness Division, which
manufactures and sells Life Fitness, Hammer Strength and ParaBody fitness
equipment. Segment sales in the fourth quarter of 2004 totaled
$173.2 million, up 10 percent from $157.2 million in the year-ago quarter.
Operating earnings declined 13 percent to $24.7 million from $28.3 million,
and operating margins were 14.3 percent, down from 18.0 percent in the fourth
quarter of 2003.
For 2004, the Fitness segment reported sales of $558.3 million, up 15
percent from $486.6 million in 2003. Operating earnings in 2004 increased to
$45.2 million from $29.8 million, and operating margins were 8.1 percent
versus 6.1 percent a year ago. Operating earnings in 2003 include a
$25.0 million litigation charge recorded in the first quarter of 2003.
Excluding the charge, Fitness segment operating earnings for 2003 totaled
$54.8 million, and operating margins were 11.3 percent.
"During the year, Life Fitness experienced a shift in its sales mix to
popular, but lower-margin strength products. It also coped with increasing
prices for raw materials such as steel as well as weak performance from the
Omni retail chain, the divestiture of which was completed at the end of last
year," Buckley explained. "Additionally, the impact of manufacturing
inefficiencies during the ramp-up of production at our expanded Ramsey, Minn.,
plant in early 2004 put additional pressure on margins. Life Fitness is
beginning to see the results of cost cutting measures and other productivity
improvements pursued to mitigate operating margin pressure."
"Life Fitness has recently introduced several new products, maintaining
its tradition of innovation, which have been well received in the
marketplace," Buckley said. "These include the Life Fitness G5 cable motion
system. This product joins an ever expanding line-up, which includes three
products that were chosen as Health magazine's Best of Fitness 2005 award
winners - the Life Fitness T9i treadmill, R9i Lifecycle and ParaBody GS6 Gym
System."
"Further, Life Fitness continues to expand its global manufacturing
footprint, particularly in Europe, to better serve its customers, and take
advantage of lower costs and other efficiencies," Buckley added. "We now
manufacture both strength and cardiovascular equipment in Hungary, reducing
lead times and freight costs to our European customers."
Bowling & Billiards Segment
The Bowling & Billiards segment is comprised of the Brunswick retail
bowling centers; bowling equipment and products; and billiards, Air Hockey(R)
and foosball tables. Segment sales in the fourth quarter of 2004 totaled
$119.8 million, up 4 percent compared with $115.7 million in the year-ago
quarter. Operating earnings were up 32 percent to $20.0 million in the
quarter versus $15.2 million in the comparable quarter in 2003. Operating
margins advanced 360 basis points to 16.7 percent in the fourth quarter of
2004 compared with 13.1 percent in 2003.
For 2004, the segment reported sales of $442.4 million, up 13 percent from
$392.4 million in 2003. Operating earnings for the year were up 63 percent to
$41.7 million from $25.6 million in 2003, and operating margins improved to
9.4 percent from 6.5 percent.
"Our bowling and billiards teams have done a great job of both launching
new products and wringing out costs," Buckley said. "Top-line growth was
driven by double-digit sales gains in bowling products, led by increases in
scoring and bowling center management systems. On the retail side, sales
benefited from the opening during the year of two new expanded Brunswick Zone
centers. In billiards, we continue to build our presence in the commercial
and home markets with successful introductions of new Brunswick billiards
tables, as well as in the coin-operated billiards table segment served by
Valley-Dynamo. The significant improvement in operating earnings is
attributable to cost reduction and supply chain programs along with the
benefit of higher sales volumes. These efforts offset higher research and
development, sales and marketing expenses in support of new products, as well
as the impact of inflation on raw material costs."
"In bowling, we saw double-digit sales growth in our products business to
complement the rock steady performance of our retail operations, where we
continue to expand our Brunswick Zone concept. In 2005, we will construct
three new expanded Brunswick Zone centers. We also are beginning to reap the
benefits of our active R&D investments in this segment, with such products as
the Vector scoring and center management system."
Looking Ahead
"We start 2005 well-positioned to take advantage of another year of
increased retail demand for marine products, which we estimate will be up in
the mid-single digits for the industry," Buckley noted. "Marine pipeline
inventories stand at 30 weeks of supply for boats and 26 weeks of supply for
engines, up two and four weeks, respectively, from the same time a year ago,
reflecting our marine dealers' expectations for solid growth in 2005.
Further, we have a full complement of new products on tap for introduction
this year that we expect will drive our marine sales up in the mid-teens. In
the Fitness and Bowling & Billiards segments, we are assuming mid-single digit
sales growth. Fitness sales growth is affected by the absence in 2005 of
sales from Omni Fitness retail stores, which were sold."
"Increased volumes along with our continued focus on effective cost
management are expected to result in operating margin improvement of 70 to 100
basis points," Buckley noted. "This is despite an estimated $50 million of
incremental investments for new product development and launches, information
technology systems, and other growth and cost initiatives across all our
segments. These investments and the full benefit of four new manufacturing
plants starting up in the first quarter of 2005 should enable us to accelerate
margin improvement in 2006. Further, for 2005 our budget assumes we will
incur approximately $9 million in possible duties on outboard engines imported
from Japan and an estimated $4 million for the expensing of stock options in
the second half of the year."
"By leveraging an estimated 11 to 12 percent sales growth with improved
operating margins, we are budgeting earnings for 2005 at $3.25 per diluted
share," Buckley said. "Given that we are still early in the marine season,
and the challenges facing us with the transition to low-emission outboard
engines, the number of new products scheduled for introduction and the start
up of new manufacturing plants, we are estimating earnings per diluted share
in the range of $3.15 to $3.30 for 2005, and $0.55 to $0.60 per diluted share
for the first quarter of 2005. This compares with earnings per diluted share
of $2.77 and $0.50 for the full year and first quarter of 2004, respectively."
Forward-Looking Statements
Certain statements in this press release are forward looking as defined in
the Private Securities Litigation Reform Act of 1995. These statements
involve certain risks and uncertainties that may cause actual results to
differ materially from expectations as of the date of this filing. These
risks include, but are not limited to: the effect of a weak economy and stock
market on consumer confidence and thus the demand for marine, fitness,
billiards and bowling equipment and products; competitive pricing pressures;
the success of new product introductions; the ability to maintain market share
in high-margin products; competition from new technologies; imports from Asia
and increased competition from Asian competitors; the ability to obtain
component parts from suppliers; the ability to resolve contract disputes with
suppliers; the impact of possible duties on Japanese-manufactured outboard
engines imported into the United States; the ability to maintain effective
distribution; the financial strength of dealers, distributors and independent
boat builders; the ability to maintain product quality and service standards
expected by our customers; the ability to successfully manage pipeline
inventories; the success of global sourcing and supply chain initiatives; the
ability to successfully integrate acquisitions; the success of marketing and
cost management programs; the company's ability to develop product
technologies that comply with regulatory requirements; the ability to complete
environmental remediation efforts and resolve claims and litigation at the
cost estimated; the impact of weather conditions on demand for marine products
and retail bowling center revenues; shifts in currency exchange rates; adverse
foreign economic conditions; and the impact of interest rates and fuel prices
on demand for marine products. Additional factors are included in the
company's Annual Report on Form 10-K for 2003 and Quarterly Report on Form 10-
Q for the quarter ended Sept. 30, 2004.
About Brunswick
Headquartered in Lake Forest, Ill., Brunswick Corporation endeavors to
instill "Genuine Ingenuity"(TM) in all its leading consumer brands, including
Mercury and Mariner outboard engines; Mercury MerCruiser sterndrives and
inboard engines; MotorGuide trolling motors; Teignbridge propellers; MotoTron
electronic controls; Northstar marine electronics; Navman marine and GPS-based
products; IDS dealer management systems; Sea Ray, Bayliner, Maxum, Hatteras,
Meridian, Sealine, Bermuda, Ornvik, Quicksilver, Savage and Uttern pleasure
boats; Baja high-performance boats; Arvor, Boston Whaler, Palmetto, Sea Boss,
Sea Pro and Trophy offshore fishing boats; Crestliner, Lowe, Lund and
Princecraft aluminum fishing, deck and pontoon boats; Attwood marine parts and
accessories; Land 'N' Sea marine parts and accessories distributor; Life
Fitness, Hammer Strength and ParaBody fitness equipment; Brunswick bowling
centers, equipment and consumer products; Brunswick billiards tables; and
Valley-Dynamo pool, Air Hockey and foosball tables. For more information,
visit http://www.brunswick.com .
Brunswick Corporation
Comparative Consolidated Statements of Income
(in millions, except per share data)
(unaudited)
Quarter Ended December 31
2004 2003 % Change
Net sales $1,333.8 $1,086.9 23%
Cost of sales 1,001.7 817.5 23%
Selling, general and administrative
expense 210.9 177.7 19%
Research and development expense 37.8 33.0 15%
Operating earnings 83.4 58.7 42%
Interest expense (12.6) (10.1) -25%
Other income 10.0 5.9 69%
Earnings before income taxes 80.8 54.5 48%
Income tax provision 22.0 14.6
Net earnings $58.8 $39.9 47%
Earnings per common share:
Basic $0.60 $0.43 40%
Diluted $0.59 $0.43 37%
Average shares used for computation of:
Basic earnings per share 97.2 92.2 5%
Diluted earnings per share 98.8 93.5 6%
Effective tax rate 27.1% 26.7%
Brunswick Corporation
Comparative Consolidated Statements of Income
(in millions, except per share data)
Year Ended December 31
2004 2003 % Change
Net sales $5,229.3 $4,128.7 27%
Cost of sales 3,915.1 3,131.6 25%
Selling, general and administrative
expense 782.4 632.5 24%
Research and development expense 131.1 118.2 11%
Litigation charge - 25.0
Operating earnings (1) 400.7 221.4 81%
Interest expense (45.2) (41.0) -10%
Other income 23.0 20.7 11%
Earnings before income taxes 378.5 201.1 88%
Income tax provision 108.7 65.9
Net earnings $269.8 $135.2 NM
Basic earnings per common share: $2.82 $1.48 91%
Diluted earnings per common share: $2.77 $1.47 88%
Average shares used for computation of:
Basic earnings per share 95.6 91.2 5%
Diluted earnings per share 97.3 91.9 6%
Effective tax rate (2) 28.7% 32.75%
(1) Operating earnings include a $25.0 million litigation charge recorded
in the first quarter of 2003 in connection with a patent infringement
lawsuit relating to the design of a cross trainer.
(2) The decrease in the effective tax rate for the year ended 2004 was
primarily due to a reduction in tax reserves of approximately
$10 million arising from the completion of audit examinations of years
1998 to 2001. The tax rate excluding the impact of the audit
examinations was 31.4 percent in 2004 and 32.75 percent in 2003.
Brunswick Corporation
Selected Financial Information
(in millions)
Segment Information
Quarter Ended December 31
Net Sales Operating Earnings Operating
Margin
% %
2004 2003 Change 2004 2003 Change 2004 2003
(unaudited) (unaudited)
Marine Engine $584.6 $473.4 23% $34.3 $26.7 28% 5.9% 5.6%
Boat 561.9 414.9 35% 24.2 9.3 NM 4.3% 2.2%
Marine
eliminations (104.2) (73.6) 0.1 -
Total
Marine 1,042.3 814.7 28% 58.6 36.0 63% 5.6% 4.4%
Fitness 173.2 157.2 10% 24.7 28.3 -13% 14.3% 18.0%
Bowling &
Billiards 119.8 115.7 4% 20.0 15.2 32% 16.7% 13.1%
Eliminations (1.5) (0.7) -
Corporate/
Other - - (19.9) (20.8)
Total $1,333.8 $1,086.9 23% $83.4 $58.7 42% 6.3% 5.4%
Year Ended December 31
Net Sales Operating Earnings Operating
Margin
% %
2004 2003 Change 2004 2003 Change 2004 2003
Marine
Engine $2,353.2 $1,908.9 23% $243.2 $171.1 42% 10.3% 9.0%
Boat 2,271.1 1,616.9 40% 149.3 63.9 NM 6.6% 4.0%
Marine
eliminations (391.4) (275.1) 0.1 -
Total
Marine 4,232.9 3,250.7 30% 392.6 235.0 67% 9.3% 7.2%
Fitness (1) 558.3 486.6 15% 45.2 29.8 52% 8.1% 6.1%
Bowling &
Billiards 442.4 392.4 13% 41.7 25.6 63% 9.4% 6.5%
Eliminations (4.3) (1.0) - -
Corporate/Other - - (78.8) (69.0)
Total $5,229.3 $4,128.7 27% $400.7 $221.4 81% 7.7% 5.4%
(1) Fitness segment operating earnings include a $25.0 million litigation
charge recorded in the first quarter of 2003, in connection with a
patent infringement lawsuit relating to the design of a cross
trainer.
NM = Not Meaningful
Brunswick Corporation
Comparative Consolidated Balance Sheets
(in millions)
December 31
2004 2003
Assets
Current assets
Cash and cash equivalents $499.8 $345.9
Accounts and notes receivable, net 463.2 374.4
Inventories
Finished goods 389.9 325.3
Work-in-process 260.5 205.7
Raw materials 136.4 92.8
Net inventories 786.8 623.8
Prepaid income taxes 292.7 302.3
Prepaid expenses and other 56.2 68.8
Current assets 2,098.7 1,715.2
Net property 876.4 827.1
Other assets
Goodwill and other intangibles 952.8 699.7
Investments and other long-term assets 418.5 360.5
Total assets $4,346.4 $3,602.5
Liabilities and shareholders' equity
Current liabilities
Short-term debt $10.7 $23.8
Accounts payable 387.9 321.3
Accrued expenses and accrued income taxes 855.2 756.7
Current liabilities 1,253.8 1,101.8
Long-term debt 728.4 583.8
Deferred items 651.9 593.9
Common shareholders' equity 1,712.3 1,323.0
Total liabilities and shareholders'
equity $4,346.4 $3,602.5
Supplemental Information
Debt-to-capitalization rate 30.2% 31.5%
Brunswick Corporation
Comparative Consolidated Statements of Cash Flows
(in millions)
Year Ended December 31
2004 2003
Cash flows from operating activities
Net earnings $269.8 $135.2
Depreciation and amortization 157.5 150.6
Changes in noncash current assets
and current liabilities (68.7) 100.8
Income taxes 50.1 (19.5)
Other, net 6.5 28.0
Net cash provided by operating activities 415.2 395.1
Cash flows from investing activities
Capital expenditures (171.3) (159.8)
Investments (16.2) (39.3)
Acquisitions of businesses, net of
debt and cash acquired (267.8) (177.3)
Proceeds on the sale of property,
plant and equipment 13.4 7.5
Other, net 2.0 (3.0)
Net cash used for investing activities (439.9) (371.9)
Cash flows from financing activities
Net issuances (repayments) of commercial
paper and other short-term debt (8.8) 1.8
Net proceeds from issuances of long-term debt 152.3 -
Payments of long-term debt including current
maturities (6.3) (24.5)
Cash dividends paid (58.1) (45.9)
Stock options exercised 99.5 39.9
Net cash provided by (used for)
financing activities 178.6 (28.7)
Net increase (decrease) in cash and
cash equivalents 153.9 (5.5)
Cash and cash equivalents at January 1 345.9 351.4
Cash and cash equivalents at December 31 $499.8 $345.9
Free Cash Flow
Net cash provided by operating activities $415.2 $395.1
Net cash provided by (used for):
Capital expenditures (171.3) (159.8)
Other, net 15.4 4.5
Total Free Cash Flow $259.3 $239.8
SOURCE Brunswick Corporation
-0- 01/27/2005
/CONTACT: Kathryn Chieger, Vice President - Corporate and Investor
Relations of Brunswick Corporation, +1-847-735-4612/
/Web site: http://www.brunswick.com /
(BC)
CO: Brunswick Corporation
ST: Illinois
IN: LEI MAR
SU: ERN
AB-AM
-- CGTH008 --
0366 01/27/2005 09:03 EST http://www.prnewswire.com
