USA. Brunswick Reports First Quarter Results

Friday, 28 April 2017


8% Growth in Revenue;

GAAP Diluted EPS of $0.71 and Diluted EPS, as adjusted of $0.84;

2017 Guidance: Increased Diluted EPS, as adjusted, Range to $3.95 to $4.10

Brunswick Corporation (NYSE: BC) today reported results for the first quarter of 2017:

• Consolidated net sales increased 8.4 percent versus first quarter 2016; excluding the impact of acquisitions, sales increased 5.9 percent.

• On a GAAP basis, diluted EPS of $0.71 increased by $0.03 compared to the prior year. Diluted EPS, as adjusted of $0.84, a $0.13 increase.

• Diluted EPS on a GAAP and an as adjusted basis in 2017 reflects a $0.06 per share net income tax benefit from share-based compensation activity. This benefit relates to new accounting guidance adopted in the first quarter of 2017.

 “Our first quarter revenues increased by 8 percent,” said Brunswick Chairman and

Chief Executive Officer Mark Schwabero. “Our top line reflected strong growth rates in all three of our primary boat categories, as well as in our marine parts and accessories, Fitness and outboard engine businesses.

“Our performance in the first quarter reflected continued successful execution of our

growth strategy, including our focus on product leadership and the associated market share gains,” Schwabero continued. “Although it is still early in the marine season, initial marine market data indicates a healthy U.S. marketplace, which is consistent with our assumptions entering the year. Overall demand in non-U.S. marine markets was also strong, led by gains in Europe and improving conditions in other regions.

"Our Fitness business continues to successfully execute against its integration and

transformation plans, which in 2017 include new product introductions, changes to the manufacturing footprint and further cost realignment actions. The benefits from these activities will begin to favorably impact segment growth rates and margin performance in the second half of 2017.

“Adjusted operating earnings increased by 4 percent compared to the prior year

quarter. An improvement in the effective tax rate, combined with higher operating

earnings and fewer shares outstanding, led to an 18 percent increase in diluted

earnings per common share, as adjusted,” Schwabero concluded.

First Quarter Results

For the first quarter of 2017, the Company reported net sales of $1,160.3 million, up

from $1,070.3 million a year earlier. For the quarter, the Company reported operating earnings of $89.0 million, which included $15.2 million of restructuring, exit and integration charges. In the first quarter of 2016, the Company had operating earning of $96.0 million, which included $3.8 million of restructuring, exit and integration charges.

For the first quarter of 2017, Brunswick reported net earnings of $64.9 million, or $0.71 per diluted share, compared with net earnings of $63.2 million, or $0.68 per diluted share, for the first quarter of 2016. Diluted EPS for the first quarter of 2017 included $0.14 per diluted share of restructuring, exit and integration charges and a $0.01 per diluted share benefit from special tax items. The diluted EPS for the first quarter of 2016 included $0.03 per diluted share of restructuring, exit and integration charges.

Review of Cash Flow and Balance Sheet

Cash and marketable securities totaled $285.2 million at the end of the first quarter,

down $184.2 million from year-end 2016 levels. This decrease reflects net cash used or operating activities of $86.3 million. Net cash used for operating activities was affected by seasonal changes in working capital and planned pension contributions during the quarter.

In addition, net cash used for investing and financing activities of $65.5 million reduced cash and marketable securities balances. Investing and financing activities during the quarter included $60.8 million of capital expenditures, $20.0 million of common stock repurchases and $14.8 million of dividend payments, partially offset by $35.0 million of proceeds from the maturities of marketable securities.

Marine Engine Segment

The Marine Engine segment, consisting of the Mercury Marine Group, including the

marine parts and accessories businesses, reported net sales of $631.8 million in the first quarter of 2017, up 6 percent from $595.5 million in the first quarter of 2016.

International sales, which represented 31 percent of total segment sales in the quarter, were up 9 percent compared to the prior year period. For the quarter, the Marine Engine segment reported operating earnings of $88.5 million. This compares with operating earnings of $78.3 million in the first quarter of 2016.

Sales increases in the quarter were led by the segment’s parts and accessories

 businesses, which included revenue from an acquisition completed in the fourth quarter of 2016, and by the outboard engine business, partially offset by declines in the sterndrive engine business. Higher revenues, favorable product mix and improved costefficiencies contributed to the increase in operating earnings in the first quarter of 2017. Partially offsetting these factors were the unfavorable impact from foreign exchange and planned increases in growth investments.

Boat Segment

The Boat segment is comprised of the Brunswick Boat Group, and includes 15 boat

brands. The Boat segment reported net sales of $382.7 million for the first quarter of

2017, an increase of 14 percent compared with $336.8 million in the first quarter of

2016. International sales, which represented 24 percent of total segment sales in the quarter, increased by 9 percent compared to the prior year period. For the first quarter of 2017, the Boat segment reported operating earnings of $3.2 million, which included $10.4 million of restructuring, exit and integration charges. This compares with operating earnings of $16.4 million in the first quarter of 2016.

The Boat segment's revenue reflected strong growth in the fiberglass and aluminum

outboard categories. Sales of the fiberglass sterndrive/inboard boat category

increased, in spite of anticipated declines in large fiberglass sterndrive/inboard boats.

The decline in operating earnings included higher restructuring, exit and integration

charges. In addition, comparisons were also affected by the aforementioned reduction in sales volumes and unfavorable reserve adjustments in large fiberglass sterndrive/inboard boats, along with the net unfavorable impact of changes in sales mix and higher commodity costs in our aluminum boat business. These factors more than offset favorable performance in the fiberglass outboard boat business.

Fitness Segment

The Fitness segment designs, manufactures and sells strength and cardiovascular

fitness equipment and active recreation products. Fitness segment sales in the first

quarter of 2017 totaled $235.6 million, up 8 percent from $218.3 million in the first

Brunswick Corporation quarter of 2016. International sales, which represented 46 percent of total segment sales in the quarter, increased by 11 percent.

Excluding the impact of acquisitions, Fitness segment sales on a constant currency

basis increased by one percent in the quarter compared to the prior year. For the

quarter, the Fitness segment reported operating earnings of $18.3 million, including

restructuring, exit and integration charges of $2.4 million. This compares with operating earnings of $20.1 million which included $3.8 million of restructuring, exit and integration charges in the first quarter of 2016.

Sales in the U.S. were down, excluding the impact of acquisitions, reflecting anticipated declines in Cybex revenues, while overall commercial fitness revenue trends were stable. Overall international sales were strong, led by the benefits of the ICG acquisition and growth in Asia Pacific. The decline in operating earnings resulted mostly from the unfavorable impact of changes in sales mix, as well as planned costs associated withcapacity expansions, new product introductions and manufacturing transitions. These factors more than offset contributions from acquisitions, including synergy benefits fromthe Cybex acquisition.

2017 Outlook

"Our outlook for 2017 continues to be generally consistent with our three-year strategic plan and reflects another year of outstanding earnings growth, with excellent cash flow generation,” said Schwabero. “We believe we are well-positioned to generate strong sales and adjusted earnings per share growth in 2017 and beyond.

“We expect our marine businesses’ top-line performance will benefit from the

continuation of solid market growth in the U.S. and Europe and the success of our new products. The Fitness segment is expected to benefit from overall growth in global commercial Fitness markets, as well as contributions from new products, particularly in the second half of 2017. As a result, our consolidated plan continues to reflect revenue growth rates in 2017 in the range of 6 to 8 percent. In total, acquisitions are expected to account for about one percent of 2017’s projected growth, reflecting the impact of completed transactions.

“For the full-year, we anticipate improvement in both gross margins and operating

margins as we plan to continue benefiting from volume leverage and cost reductions related to efficiency initiatives. Operating expenses are estimated to increase in 2017 as we continue to fund incremental investments to support growth; however, on a percentage of sales basis, they are expected to be at slightly lower levels than 2016,” Schwabero said.

“We are increasing the range for our full-year expectations of diluted EPS, as adjusted, from $3.90 to $4.05 to a range of $3.95 to $4.10. The increase in full-year guidance includes the benefits from a lower effective tax rate and reflects our overall confidence that the underlying assumptions for business performance are playing out in line with our expectations. Finally, for 2017, our expectation remains that we will generate positive free cash flow in excess of $250 million,” Schwabero concluded.

Use of Non-GAAP Financial Information; Constant Currency Reporting

A reconciliation of GAAP to non-GAAP financial measures is provided in the

reconciliation sections of the consolidated financial statements accompanying this

release.

For purpose of comparison, percentage changes in first quarter 2017 net sales are also shown using first quarter 2016 exchange rates for the comparative period to enhance the visibility of the underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations.

Brunswick does not provide forward-looking guidance for certain financial measures on a GAAP basis because it is unable to predict certain items contained in the GAAP measures without unreasonable efforts. These items may include pension settlement charges, restructuring, exit and integration costs, special tax items and certain other unusual adjustments.

Brunswick Corporation

Conference Call Scheduled

Brunswick will host a conference call today at 10 a.m. CDT, hosted by Mark D. Schwabero, chairman and chief executive officer, William L. Metzger, senior vice president and chief financial officer, and Phillip C. Haan, vice president - investor relations.

The call will be broadcast over the Internet at ir.brunswick.com. To listen to the call, go to the website at least 15 minutes before the call to register, download and install any needed audio software.

See Brunswick’s website for slides used to supplement conference call remarksat ir.brunswick.com.

Security analysts and investors wishing to participate via telephone should call

888-771-4371 (passcode: Brunswick Q1). Callers outside of North America should call 847-585-4405 (passcode: Brunswick Q1) to be connected. These numbers can be accessed 15 minutes before the call begins, as well as during the call. A replay of the conference call will be available through midnight CDT Thursday, May 4, 2017, by calling 888-843-7419 or international dial 630-652-3042 (passcode: 4465 8147#). The replay

will also be available at www.brunswick.com.

Forward-Looking Statements

Certain statements in this news release are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations, estimates and projections about Brunswick’s business and by their nature address matters that are, to different degrees, uncertain. Words such as “may,”“could,” “expect,” “intend,” “target,” “plan,” “seek,” “estimate,” “believe,” “predict,”“outlook” and similar expressions are intended to identify forward-looking statements.

Such statements are not guarantees of future performance and 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: adverse general economic conditions, including reductions in consumer discretionary spending; negative currency trends; our ability to complete and integrate targeted acquisitions; our ability to implement our strategic plan and growth initiatives; adequate financing access for dealers and customers and our ability to access capital and credit markets; maintaining effective distribution; retaining our relationships with dealers, distributors and independent boat builders; credit and collections risks; retaining key customers; protecting our brands and intellectual property; absorbing fixed costs in production; managing expansion or consolidation of manufacturing facilities; meeting supply objectives; meeting pension funding obligations; managing our share repurchases;

higher energy and fuel costs; competitive pricing pressures; developing new and

innovative products at a competitive price, in legal compliance; maintaining product

quality and service standards; outages or breaches of technology systems; competitor activity; product liability, warranty and other claims risks; increased costs of legal and egulatory compliance; having to record an impairment to the value of goodwill and other assets; international business risks; attracting and retaining key contributors; and weather and catastrophic event risks.

Additional risk factors are included in the Company’s Annual Report on Form 10-K for 2016. Forward-looking statements speak only as of the date on which they are made and Brunswick does not undertake any obligation to update them to reflect events or circumstances after the date of this news release or for changes by wire services or

Internet service providers.

About Brunswick

Headquartered in Lake Forest, Ill., Brunswick Corporation’s leading consumer brands include Mercury and Mariner outboard engines; Mercury MerCruiser sterndrives andinboard engines; MotorGuide trolling motors; Attwood, Garelick and Whale marine parts and accessories; Land 'N' Sea, Kellogg Marine, Payne’s Marine and BLA parts and accessories distributors; Bayliner, Boston Whaler, Brunswick Commercial and Government Products, Crestliner, Cypress Cay, Harris, Lowe, Lund, Meridian, Princecraft, Quicksilver, Rayglass, Sea Ray, Thunder Jet and Uttern; Life Fitness, Hammer Strength, Cybex, Indoor Cycling Group and SCIFIT fitness equipment; In Movement products and services for productive well-being; and Brunswick billiards tables, accessories and game room furniture. For more information, visit http:// www.brunswick.com.

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Last Updated ( Friday, 28 April 2017 )