Brunswick Corp. Reports Operating Results (10-Q)
Brunswick Corporation has a market cap of $1.92 billion; its shares were traded at around $21.37 with a P/E ratio of 15.3 and P/S ratio of 0.5. The dividend yield of Brunswick Corporation stocks is 0.2%.
Highlight of Business Operations:The Company experienced strong earnings growth in the second quarter of 2012 despite challenging global economic conditions. Economic conditions in Europe, including weak consumer confidence and tightening credit in some market segments, had a significant impact on European demand. Net sales decreased three percent during the second quarter of 2012 to $1,067.0 million from $1,096.3 million in the second quarter of 2011, which was driven by the Company's Boat and Bowling & Billiards segments, partially offset by increases in net sales for the Marine Engine and Fitness segments. Net sales to European markets in the second quarter of 2012 declined by $60.6 million or 30.7 percent when compared with the second quarter of 2011. This decline affected all of the Company's segments with $19.9 million of the decline being associated with the Company's former Sealine boat brand, which was divested in August of 2011. Additionally, the Marine segments were negatively affected by weaker global demand for larger fiberglass boats and sterndrive engines while international sales were negatively affected by unfavorable foreign currency translation. Partially offsetting these decreases were: increases in the Marine Engine segment's domestic marine service, parts and accessories and outboard engine businesses; improved demand in the Boat segment's aluminum and fiberglass outboard market segments, resulting from favorable industry trends and market share gains; and higher revenues in the Fitness segment due to strengthening sales to non-European commercial customers. Net sales during the six months ended 2012 decreased two percent to $2,041.2 million from $2,082.2 million in the comparable period in 2011 due to the same factors contributing to the decrease in second quarter sales. Net sales to European markets were lower during the six months ended June 30, 2012 by $92.7 million or 25.0 percent when compared to the same period in the prior year. This decline included $32.0 million of net sales in 2011 from the divested Sealine boat brand. Also contributing to lower net sales during the first six months of 2012 were the sterndrive production ramp-up issues experienced in the first quarter of 2012 resulting from plant consolidation activities in Fond du Lac, Wisconsin, and the absence of a large order from one of Fitness' major customer categories in the first half of 2011.
Operating earnings in the second quarter of 2012 were $114.8 million, with an operating margin of 10.8 percent. These results included $1.0 million of restructuring, exit and impairment charges recorded during the second quarter of 2012. In the second quarter of 2011, the Company recorded quarterly operating earnings of $107.9 million, with an operating margin of 9.8 percent, which included restructuring, exit and impairment gains of $0.3 million. Operating earnings during the six months ended June 30, 2012 were $182.4 million, with an operating margin of 8.9 percent. These results included $1.2 million of restructuring, exit and impairment charges recorded during the first six months of 2012. In the six months ended July 2, 2011, the Company recorded operating earnings of $174.9 million, with an operating margin of 8.4 percent, which included $5.0 million of restructuring, exit and impairment charges. The improvement in operating earnings during the quarter and year-to-date periods of 2012 when compared with the same periods in 2011 reflects lower warranty and variable compensation expense, realized benefits from successful cost-reduction efforts, as well as lower depreciation and reduced pension expense, partially offset by increased company-wide investments in growth initiatives. Also affecting the year-to-date comparisons were lower restructuring, exit and impairment charges in 2012 when compared with 2011, partially offset by the absence of favorable gains and recoveries recorded in the Marine Engine segment during 2011.
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 2012, the Company recorded a charge of $1.0 million related to these restructuring activities as compared with a net gain of $0.3 million in the second quarter of 2011. Included in the second quarter of 2012 and 2011 restructuring, exit and impairment charges are gains on the sales of certain Marine Engine segment and Boat segment facilities. Restructuring charges during the first six months of 2012 were $1.2 million, as compared with $5.0 million in 2011. See Note 2 – Restructuring Activities in the Notes to Condensed Consolidated Financial Statements for further details.
In the first six months of 2012, net cash provided by operating activities totaled $45.2 million. The primary driver of the cash provided by operating activities was earnings adjusted for non-cash expenses. A seasonal increase in working capital had a negative effect on net cash provided by operating activities. Working capital is defined as Accounts and notes receivable, Inventories and Prepaid expenses and other, net of Accounts payable and Accrued expenses as presented in the Condensed Consolidated Balance Sheets. Accounts and notes receivable increased $99.2 million during the first six months of 2012, due primarily to seasonally higher sales in the Marine Engine segment. The decrease in Accrued expenses of $70.5 million during the first six months of 2012 was driven primarily by the payment of the prior year's variable compensation, which had been accrued as of December 31, 2011. Partially offsetting these items was an increase in Accounts payable of $39.6 million, which was a result of seasonal increases in production in the Company's Marine Engine and Boat segments.
Net cash provided by investing activities during the first six months of 2012 totaled $10.1 million, which included net proceeds from marketable securities of $25.1 million that were used to satisfy interim working capital requirements during the quarter. See Note 10 - Investments in Notes to Condensed Consolidated Financial Statements for further discussion of the Company's marketable securities. The Company also received $18.1 million in proceeds from the sale of idle property, plant and equipment in its Boat and Marine Engine segments. Partially offsetting these items was $38.2 million of capital expenditures in the first six months of 2012. The Company's capital spending is focused on growth initiatives and new product introductions, as well as high priority, profit-maintaining capital and investments required to reduce operating costs.
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