Brunswick Corporation (BC) Q1 2012 Earnings Call April 26, 2012 11:00 am ET Executives Bruce Byots - VP, Corporate and IR Dusty McCoy - Chairman and CEO Peter Hamilton - CFO Analysts James Hardiman - Longbow Research Ed Aaron - RBC Capital Markets Tim Conder - Wells Fargo Securities Scott Hamann - KeyBanc Capital Markets Gerrick Johnson - BMO Capital Markets Jimmy Baker - B. Riley & Co. Craig Kennison - Robert W. Baird Rommel Dionisio - Wedbush Securities Joe Hovorka - Raymond James Presentation Operator
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» Brunswick CEO Discusses Q1 2011 Results - Earnings Call Transcript
Now I would now like to turn the call over to Dusty.Dusty McCoy Thank you, Bruce, and good morning, everyone. I'll start with the few overview remarks regarding our first quarter results, a quarter which represented our ninth consecutive of year-over-year earnings per share growth. This was a good quarter from many perspectives. Our first quarter increase in earnings per share demonstrates the continuing success of our business strategy. Short-term financial performance continues to improve even as we make increased investments for long-term organic growth. As anticipated consolidated sales were modestly lower due to specific factors, affecting our Marine Engine and Life Fitness segment on which I will elaborate shortly. Our gross margin of 24.2% represents an increase of 20 basis points from the prior year. Low depreciation and pension expenses combined with the successful cost reduction activities contributed to the higher gross margin. During the quarter SG&A and R&D expenses in the aggregate increased by 3% which is inclusive of company-wide investments in growth initiatives, many of which we highlighted in our Investor Meeting in Miami earlier this year. As well as the absence are beginning from a sale of properties and insurance settlements recognized in Q1 2011, partially offset by lower variable compensation. Preliminary U.S. retail boat demand was up in the quarter with strong improvements continuing in aluminum and fiberglass outboard product categories. And lower net interest expense and a reduced income tax provision contributed to higher net earnings during the quarter. Sales decreased by 1% in the first quarter. Three of our four segments reported modest growth in the period which was more than offset by a 2% decline in the engine segment. Operating earnings excluding restructuring, exit and impairment charges were $68 billion for the quarter, a decline of $5 million as compared to 2011. Operating margins, ex-charges, decreased by about 30 basis points to 7%. Factors causing the decline in operating earnings largely occurred in Engine Segment which I will describe in more detail in a few minute.
Net earnings for the quarter were $0.43 per share including $0.02 charge from special tax items. Excluding these item, our diluted earnings per share would have been $0.45 per share. This compares to a net earnings of $0.30 per share in the prior year which included $0.05 of restructuring charges, and a $0.05 loss on debt impairments. Again, excluding these items, 2011 earnings per share would have been $0.40. In summary, our adjusted EPS increased by $0.05.Now let's turn to our operating segments and we'll start with the Engine segment. From a geographic perspective, sales to U.S. markets were flat while sales to Mercury non-U.S. customers decreased by 7% in the quarter. In aggregate, the segment sales declined 2% a quarter. U.S. sales continue to experience growth from our outboard and parts and accessories businesses. They were offset by decline in sterndrive engine. Non-U.S. revenues were affected by varying market conditions around the world. Growth across Asia continued to be healthy, especially in China. On the other end of the spectrum, Australia continued to be weak even during the height of the retail selling season. In Europe, business conditions were off versus the prior year with variations across the continent. There was a growth in Russia, stability in Central Europe that would be Germany, France and the Netherlands and weakness in much of the Nordic region as well as Italy and other Southern European markets. On certain economic conditions are having an impact on overall demand in this region. From a product category perspective, sales in our U.S. outboard engine business continued to deliver solid growth, reflecting an improving aluminum and fiberglass outboard boat marketplace, in addition to the market share gains. Outboard engine production in Mercury in the quarter was higher than year-ago levels. Read the rest of this transcript for free on seekingalpha.com