Brunswick reports loss despite growth in marine business, shares drop

By Alexa Adler

Medill Reports

Brunswick Corp., operator of marine, fitness and billiards businesses, swung to a quarterly loss, primarily due to increased pension settlement and restructuring charges and a charge reflecting recent tax legislation, as well as weakness in the fitness business.

The performance was mitigated by growth in the company’s marine business.

Adjusted earnings per share of 70 cents, up from 66 cents per share in the fourth quarter of 2016, failed to meet analysts’ expectations, compiled by Yahoo Finance, of 74 cents per share.

In New York Stock Exchange trading, Brunswick’s shares closed at $60.19, down $2.59 or 4.1 percent.

The GAAP net loss for the quarter ended Dec. 31 was $116.9 million, or $1.32 per diluted share, as compared with net income of $17.7 million, or 19 cents per share, in the prior-year quarter.

Although revenues increased 10.9 percent to $1.09 billion from $986.3 million, earnings were dragged down by a $96.6 million charge related to the settlement of pension plan obligations for certain participants, up from $55.1 million in the year ago quarter, a one-time $71.8 million charge related to an adjustment to deferred tax balances and a tax charge for repatriated earnings, and $40.2 million in charges pertaining to the Cybex line of fitness products related primarily to trade name impairment and field campaign costs. Brunswick’s net operating margin declined to a negative 3.1 percent from a positive 2.7 percent in the prior-year quarter.

Operating earnings in the marine business increased a healthy 23.4 percent for the quarter to $79.4 million from $64.3 million in the prior-year quarter, as a result of strong sales in outboard engines, parts and accessories and aluminum and fiberglass outboard boats. But operating earnings in the fitness business decreased 16.9 percent to $38.1 million from $47.9 million in the prior-year period, resulting from lower margins reflecting higher freight costs, international competition and unfavorable changes in sales mix.

For the full year 2017, net income declined 47 percent to $146.4 million or, $1.62 per share, from $276.0 million, or $3.00 per share, in 2016. Revenue increased 8.6 percent to $4.51 billion from $4.15 billion.

CEO Mark Schwabero, in a press release, attributed the company’s year-to-year revenue growth primarily to the marine business, citing “strong growth in all three of our primary boat categories and the outboard engine business, along with solid growth in our parts and accessories business.” He went on to state that strong market demand, as well as “Successful product launches and continued strong market share, combined with an effective acquisition strategy, have positioned our marine businesses for success in 2018 and beyond.”

The company provided guidance for 2018 revenue growth of between 5 percent and 7 percent and increased adjusted earnings per share guidance to between $4.45 and $4.65, reflecting a lower 2018 tax rate resulting from the recent tax legislation and anticipated share repurchases.

Photo at top: Brunswick’s principal business is boats and engines. (Brunswick Corp.)