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Brunswick Corp. Reports Operating Results (10-Q)

August 09, 2011 | About:
10qk

10qk

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Brunswick Corp. (BC) filed Quarterly Report for the period ended 2011-07-02.

Brunswick Corp. has a market cap of $1.33 billion; its shares were traded at around $15.19 with a P/E ratio of 74.4 and P/S ratio of 0.4. The dividend yield of Brunswick Corp. stocks is 0.3%.
This is the annual revenues and earnings per share of BC over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of BC.


Highlight of Business Operations:

The Company continued to experience strong operating leverage during the second quarter of 2011 on higher net sales and improved operating earnings. Net sales during the second quarter of 2011 increased 8 percent to $1,096.3 million from $1,014.7 million in the second quarter of 2010, which was driven by the Company s Marine Engine, Boat and Fitness segments. During the six months ended July 2, 2011, net sales increased 12 percent to $2,082.2 million from $1,859.1 million during the six months ended July 3, 2010, driven by the Company s Marine Engine, Boat and Fitness segments, partially offset by declines in the Company s Bowling & Billiards segment. Higher sales in the marine businesses during the three months and six months ended July 2, 2011, when compared with the prior year, resulted from increased wholesale shipments, which were supported by solid retail growth, reflecting a stable marine market and market share growth in the Company s Marine Engine and Boat segments. Fitness segment net sales increased during the three months and six months ended July 2, 2011 when compared with the three months and six months ended July 3, 2010, primarily due to increased purchases of new equipment by global commercial customers, including a large order from one of the segment s major customer categories. The Company also experienced international sales growth in its Fitness, Boat and Marine Engine segments during the first half of 2011, when compared with 2010.

Operating earnings in the second quarter of 2011 were $107.9 million, with an operating margin of 9.8 percent. These results included $0.3 million of net restructuring, exit and impairment gains recorded during the second quarter of 2011. In the three months ended July 3, 2010, the Company recorded quarterly operating earnings of $55.7 million, with an operating margin of 5.5 percent, which included restructuring, exit and impairment charges of $24.2 million. Operating earnings during the six months ended July 2, 2011 were $174.9 million, with an operating margin of 8.4 percent. These results included $5.0 million of restructuring, exit and impairment charges recorded during the first six months of 2011. In the first six months of 2010, the Company recorded operating earnings of $65.8 million, with an operating margin of 3.5 percent, and included $31.6 million of restructuring, exit and impairment charges. The improvement in operating earnings during the quarter and year-to-date periods ended July 2, 2011 when compared with the corresponding periods ended July 3, 2010 was mainly the result of higher overall wholesale unit sales discussed above, lower restructuring, exit and impairment charges, reduced costs from successful cost-reduction efforts, lower bad debt expense and improved fixed-cost absorption from increased production levels. Additionally, operating earnings in the first six months of 2011 benefited from a gain recognized on the sale of a distribution facility in Australia. Partially offsetting these factors were higher material costs and increased variable compensation expense recorded in the first six months of 2011.

The Company recognized an income tax provision of $15.2 million and $15.5 million for the three months and six months ended July 3, 2010, respectively, which primarily related to foreign and domestic jurisdictions where the Company was not in a cumulative loss position. In addition, the three month and six month tax provision included a charge of $1.3 million and a benefit of $0.8 million, respectively, related to the reassessment of tax reserves. For the three months and six months ended July 3, 2010, the Company determined that the use of a discrete, or actual, method of computing the Company s income tax provision was more appropriate than the annual effective tax rate method historically used by the Company, which would not be reliable due to its sensitivity to minimal changes in forecasted annual pretax earnings. Under the discrete method, the Company determined income tax expense based upon actual results as if the interim period were an annual period. The effective tax rate for the three months and six months ended July 3, 2010 was 52.6 percent and 95.7 percent, respectively.

Restructuring, exit and impairment charges. The Company implemented initiatives to improve its cost structure, better utilize overall capacity and improve general operating efficiencies. During the second quarter of 2011, the Company recorded a net gain of $0.3 million related to restructuring activities, which included gains on the sale of certain Marine Engine properties, as compared with charges of $24.2 million in the second quarter of 2010. Restructuring charges during the first six months of 2011 were $5.0 million, compared with $31.6 million during the first six months of 2010. See Note 2 – Restructuring Activities in the Notes to Condensed Consolidated Financial Statements for further details.

Loss on early extinguishment of debt. The Company repurchased $25.0 million and $43.7 million of notes during the three months and six months ended July 2, 2011, respectively. The Company recorded a Loss on early extinguishment of $0.9 million and $5.2 million during the three months and six months ended July 2, 2011, respectively. During the three months and six months ended July 3, 2010, the Company recorded a Loss on early extinguishment of debt of $4.1 million and $4.4 million, respectively, as the Company retired $24.8 million and $27.8 million of notes, respectively.

Tax items. The Company recognized an income tax provision of $17.6 million and $30.8 million for the three months and six months ended July 2, 2011, respectively. The Company also recognized an income tax provision of $15.2 million and $15.5 million for the three months and six months ended July 3, 2010, respectively. The effective tax rate, which is calculated as the income tax provision as a percentage of pretax income, for the three months and six months ended July 2, 2011, was 20.3 percent and 24.1 percent, respectively. The effective tax rate for the three months and six months ended July 3, 2010 was 52.6 percent and 95.7 percent, respectively. See Note 13 – Income Taxes in Notes to Consolidated Financial Statements for further details.

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