Brunswick Reports Patent Verdict to Affect Second Quarter Earnings
LAKE FOREST, Ill., Aug. 1 /PRNewswire-FirstCall/ -- Brunswick Corporation (NYSE: BC) reported today that on Friday, July 27, a jury found for the plaintiff in a patent infringement suit against Brunswick before the United States District Court of Northern Virginia. The jury found that Brunswick's Mercury Marine Group had infringed on a patent of Electromotive, Inc. The patent at issue had expired in 2006 and describes a method for engine timing and the firing of cylinders.
The jury awarded Electromotive approximately $3 million in damages, representing less than 3 percent of the amount originally sought by Electromotive. The court had previously rejected Electromotive's claim that the damage award should be trebled, finding that Mercury Marine had not engaged in any willful infringement.
The judgment will be included in the financial statements to be issued with the company's quarterly report on Form 10-Q for the second quarter to be filed today. Brunswick will report net earnings from continuing operations for the second quarter of 2007 of $56.9 million, or $0.63 per diluted share. Previously, the company had reported net earnings from continuing operations of $58.9 million, or $0.65 per diluted share, for the second quarter. The company said it is maintaining its previously announced full-year earnings estimate of $1.20 to $1.35 per diluted share for 2007.
Forward-Looking Statements
Certain statements in this news 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 news release. These risks include, but are not limited to: the effect of (i) the amount of disposable income available to consumers for discretionary purchases, and (ii) the level of consumer confidence on the demand for marine, fitness, billiards and bowling equipment and products; the effect of higher product prices due to technology changes and added product features and components on consumer demand; the effect of competition from other leisure pursuits on the level of participation in boating, fitness, bowling and billiards activities; the effect of interest rates and fuel prices on demand for marine products; the ability to successfully manage pipeline inventories; the financial strength of dealers, distributors and independent boat builders; the ability to maintain mutually beneficial relationships with dealers, distributors and independent boat builders; the ability to maintain effective distribution and to develop alternative distribution channels without disrupting incumbent distribution partners; the ability to maintain market share, particularly in high-margin products; the success of new product introductions; the success of marketing and cost management programs; the ability to maintain product quality and service standards expected by customers; competitive pricing pressures; the ability to develop cost-effective product technologies that comply with regulatory requirements; the ability to transition and ramp up certain manufacturing operations within time and budgets allowed; the ability to successfully develop and distribute products differentiated for the global marketplace; shifts in currency exchange rates; adverse foreign economic conditions; the success of global sourcing and supply chain initiatives; the ability to obtain components and raw materials from suppliers; increased competition from Asian competitors; competition from new technologies; the ability to complete environmental remediation efforts and resolve claims and litigation at the cost estimated; the effect of weather conditions on demand for marine products and retail bowling center revenues; and the ability to successfully integrate acquisitions. Additional factors are included in the company's Annual Report on Form 10-K for 2006 and Quarterly Report on Form 10- Q for the quarter ended March 31, 2007.
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; Albemarle, Arvor, Baja, Bayliner, Bermuda, Boston Whaler, Cabo Yachts, Crestliner, Harris, Hatteras, Kayot, Laguna, Lowe, Lund, Maxum, Meridian, Ornvik, Palmetto, Princecraft, Quicksilver, Savage, Sea Boss, Sea Pro, Sea Ray, Sealine, Triton, Trophy, Uttern and Valiant boats; Attwood marine parts and accessories; Land 'N' Sea, Kellogg Marine, Diversified Marine and Benrock parts and accessories distributors; IDS dealer management systems; Life Fitness, Hammer Strength and ParaBody fitness equipment; Brunswick bowling centers, equipment and consumer products; Brunswick billiards tables; and Dynamo, Tornado and Valley pool tables, Air Hockey and foosball tables. For more information, visit http://www.brunswick.com.
(Note to editors: Revised financial statements below.)
Brunswick Corporation
Comparative Consolidated Statements of Income
(in millions, except per share data)
(unaudited)
Three Months Ended
June 30, July 1,
2007 2006 % Change
Net sales $1,522.9 $1,543.1 -1%
Cost of sales 1,190.6 1,188.3 0%
Selling, general and administrative
expense 210.3 182.6 15%
Research and development expense 35.7 34.0 5%
Operating earnings 86.3 138.2 -38%
Equity earnings 7.1 6.6 8%
Other income (expense), net 0.2 (2.6) NM
Earnings before interest and income
taxes 93.6 142.2 -34%
Interest expense (13.3) (14.2) -6%
Interest income 1.9 2.5 -24%
Earnings before income taxes 82.2 130.5 -37%
Income tax provision 25.3 36.0
Net earnings from continuing
operations 56.9 94.5 -40%
Discontinued operations:
Earnings (loss) from discontinued
operations, net of tax 0.6 (11.3) NM
Gain (loss) on disposal of
discontinued operations, net of tax (0.2) -
Net earnings (loss) from
discontinued operations 0.4 (11.3) NM
Net earnings $57.3 $83.2 -31%
Earnings per common share:
Basic
Net earnings from continuing
operations $0.63 $1.00 -37%
Earnings (loss) from discontinued
operations, net of tax - (0.12) NM
Gain (loss) on disposal of
discontinued operations, net of tax - -
Net earnings $0.63 $0.88 -28%
Diluted
Net earnings from continuing
operations $0.63 $0.99 -36%
Earnings (loss) from discontinued
operations, net of tax - (0.12) NM
Gain (loss) on disposal of
discontinued operations, net of tax - -
Net earnings $0.63 $0.87 -28%
Weighted average number of shares
used for computation of:
Basic earnings per share 90.5 94.7 -4%
Diluted earnings per share 91.0 95.5 -5%
Effective tax rate (1) 30.8% 27.6%
Supplemental earnings per common
share information
Diluted net earnings from continuing
operations $0.63 $0.99 -36%
Non-recurring tax benefits (1) - (0.06) NM
Diluted net earnings from continuing
operations, as adjusted $0.63 $0.93 -32%
(1) The increase in the effective tax rate for the second quarter of 2007
was primarily due to lower non-recurring tax benefits compared with
the second quarter of 2006.
Brunswick Corporation
Comparative Consolidated Statements of Income
(in millions, except per share data)
(unaudited)
Six Months Ended
June 30, July 1,
2007 2006 % Change
Net sales $2,909.0 $2,956.4 -2%
Cost of sales 2,280.3 2,288.2 0%
Selling, general and administrative
expense 420.2 367.3 14%
Research and development expense 69.2 64.5 7%
Operating earnings 139.3 236.4 -41%
Equity earnings 13.4 11.8 14%
Other expense, net (0.2) (2.7) 93%
Earnings before interest and income
taxes 152.5 245.5 -38%
Interest expense (26.9) (27.8) -3%
Interest income 3.7 5.4 -31%
Earnings before income taxes 129.3 223.1 -42%
Income tax provision 38.1 54.5
Net earnings from continuing
operations 91.2 168.6 -46%
Discontinued operations:
Earnings (loss) from discontinued
operations, net of tax 4.0 (18.0) NM
Gain (loss) on disposal of
discontinued operations, net of tax 7.7 -
Net earnings (loss) from
discontinued operations 11.7 (18.0) NM
Net earnings $102.9 $150.6 -32%
Earnings per common share:
Basic
Net earnings from continuing
operations $1.00 $1.77 -44%
Earnings (loss) from discontinued
operations, net of tax 0.04 (0.19) NM
Gain (loss) on disposal of
discontinued operations, net of tax 0.09 -
Net earnings $1.13 $1.58 -28%
Diluted
Net earnings from continuing
operations $1.00 $1.76 -43%
Earnings (loss) from discontinued
operations, net of tax 0.04 (0.19) NM
Gain (loss) on disposal of
discontinued operations, net of tax 0.09 -
Net earnings $1.13 $1.57 -28%
Weighted average number of shares
used for computation of:
Basic earnings per share 91.0 95.2 -4%
Diluted earnings per share 91.5 96.1 -5%
Effective tax rate (1) 29.5% 24.4%
Supplemental earnings per common
share information
Diluted net earnings from continuing
operations $1.00 $1.76 -43%
Non-recurring tax benefits (1) (0.02) (0.19) NM
Diluted net earnings from continuing
operations, as adjusted $0.98 $1.57 -38%
(1) The increase in the effective tax rate for the first half of 2007 was
primarily due to lower non-recurring tax benefits compared with the
first half of 2006.
Brunswick Corporation
Selected Financial Information
(in millions)
(unaudited)
Segment Information
Three Months Ended
Net Sales Operating Earnings Operating Margin
June 30, July 1, % June 30, July 1, % June 30, July 1,
2007 2006 Change 2007 2006 Change 2007 2006
Boat $732.8 $769.7 -5% $19.3 $53.1 -64% 2.6% 6.9%
Marine Engine 669.6 668.5 0% 80.3 94.7 -15% 12.0% 14.2%
Marine
eliminations (126.7) (134.9) - -
Total Marine 1,275.7 1,303.3 -2% 99.6 147.8 -33% 7.8% 11.3%
Fitness 144.0 129.7 11% 7.4 7.4 0% 5.1% 5.7%
Bowling &
Billiards 103.2 110.1 -6% (2.7) 0.6 NM -2.6% 0.5%
Eliminations - - - -
Corp/Other - - (18.0) (17.6) -2%
Total $1,522.9 $1,543 -1% $86.3 $138.2 -38% 5.7% 9.0%
Six Months Ended
Net Sales Operating Earnings Operating Margin
June 30, July 1, % June 30, July 1, % June 30, July 1,
2007 2006 Change 2007 2006 Change 2007 2006
Boat $1,431.8 $1,520.7 -6% $38.8 $101.5 -62% 2.7% 6.7%
Marine Engine 1,242.2 1,223.5 2% 115.0 139.6 -18% 9.3% 11.4%
Marine
eliminations (262.9) (276.2) - -
Total Marine 2,411.1 2,468.0 -2% 153.8 241.1 -36% 6.4% 9.8%
Fitness 289.0 263.7 10% 15.5 16.3 -5% 5.4% 6.2%
Bowling &
Billiards 209.0 224.8 -7% 5.6 13.4 -58% 2.7% 6.0%
Eliminations (0.1) (0.1) - -
Corp/Other - - (35.6) (34.4) -3%
Total $2,909.0 $2,956.4 -2% $139.3 $236.4 -41% 4.8% 8.0%
Brunswick Corporation
Comparative Condensed Consolidated Balance Sheets
(in millions)
June 30, December 31, July 1,
2007 2006 2006
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $278.8 $283.4 $310.6
Accounts and notes receivables, net 575.4 492.3 542.5
Inventories
Finished goods 462.2 410.4 393.4
Work-in-process 328.9 308.4 338.6
Raw materials 141.5 143.1 141.9
Net inventories 932.6 861.9 873.9
Deferred income taxes 240.7 249.9 266.4
Prepaid expenses and other 63.6 85.4 64.4
Current assets held for sale 27.4 105.5 113.5
Current assets 2,118.5 2,078.4 2,171.3
Net property 1,020.9 1,014.9 989.0
Other assets
Goodwill and other intangibles 988.8 986.2 995.3
Investments and other long-term
assets 331.3 338.0 385.5
Long-term assets held for sale 24.6 32.8 92.3
Other assets 1,344.7 1,357.0 1,473.1
Total assets $4,484.1 $4,450.3 $4,633.4
Liabilities and shareholders' equity
Current liabilities
Short-term debt $0.4 $0.7 $1.0
Accounts payable 414.6 448.6 406.5
Accrued expenses 850.1 748.9 786.7
Current liabilities held for sale 19.4 95.0 64.9
Current liabilities 1,284.5 1,293.2 1,259.1
Long-term debt 724.8 725.7 722.6
Other long-term liabilities 544.1 550.9 601.4
Long-term liabilities held for sale 10.7 8.7 6.8
Common shareholders' equity 1,920.0 1,871.8 2,043.5
Total liabilities and shareholders'
equity $4,484.1 $4,450.3 $4,633.4
Supplemental information
Debt-to-capitalization rate 27.4% 28.0% 26.2%
Brunswick Corporation
Comparative Condensed Consolidated
Statements of Cash Flows
(in millions)
(unaudited)
Six Months Ended
June 30, July 1,
2007 2006
Cash flows from operating activities
Net earnings from continuing operations $91.2 $168.6
Depreciation and amortization 84.8 81.7
Changes in noncash current assets
and current liabilities (97.3) (150.9)
Income taxes and other, net 55.8 27.0
Net cash provided by operating activities
of continuing operations 134.5 126.4
Net cash used for operating activities
of discontinued operations (26.8) (32.7)
Net cash provided by operating
activities 107.7 93.7
Cash flows from investing activities
Capital expenditures (82.5) (97.3)
Acquisitions of businesses, net of
cash acquired (1.6) (74.0)
Investments 4.5 2.7
Proceeds from the sale of property,
plant and equipment 1.6 5.4
Other, net 12.4 -
Net cash used for investing activities
of continuing operations (65.6) (163.2)
Net cash provided by (used for)
investing activities of
discontinued operations 30.2 (3.5)
Net cash used for investing
activities (35.4) (166.7)
Cash flows from financing activities
Net issuances (repayments) of commercial
paper and other short-term debt - 0.4
Payments of long-term debt
including current maturities (0.5) (0.6)
Stock repurchases (87.2) (117.3)
Stock options exercised 10.8 13.4
Net cash used for financing activities
of continuing operations (76.9) (104.1)
Net cash used for financing activities
of discontinued operations - -
Net cash used for financing
activities (76.9) (104.1)
Net decrease in cash and cash equivalents (4.6) (177.1)
Cash and cash equivalents at
beginning of period 283.4 487.7
Cash and cash equivalents at end of period $278.8 $310.6
Free cash flow from continuing operations
Net cash provided by operating activities
of continuing operations $134.5 $126.4
Net cash provided by (used for):
Capital expenditures (82.5) (97.3)
Proceeds from the sale of property,
plant and equipment 1.6 5.4
Other, net 12.4 -
Free cash flow from continuing operations $66.0 $34.5
SOURCE Brunswick Corporation
Released August 1, 2007