Brunswick39s fitness segment reported operating earnings of 201 million in the first quarter which includes 38 million in restructuring costs integration costs and purchase accounting impacts associated with the SCIFIT and Cybex acquisitions Photo courtesy Brunswick handout

Brunswick's fitness segment reported operating earnings of $20.1 million in the first quarter, which includes $3.8 million in restructuring costs, integration costs and purchase accounting impacts associated with the SCIFIT and Cybex acquisitions. (Photo courtesy Brunswick handout.)

Brunswick's Fitness Segment Grows Q1 Sales to $218.3 Million

Brunswick CEO Mark Schwabero said the first quarter growth for the company's fitness segment, which includes Life Fitness, SCIFIT and Cybex, was "modest," and the company expects "high single-digit growth" from the segment excluding its acquisitions in 2016.

Brunswick, Lake Forest, Illinois, reported first quarter fitness segment sales of $218.3 million, according to financials released on Thursday.

Brunswick's fitness segment, which consists of the Life Fitness, SCIFIT and Cybex brands, increased sales 18 percent from the $185.6 million reported in the first quarter of 2015. The 18 percent growth was attributed to the July 2015 SCIFIT acquisition and the $195 million Cybex acquisition completed in January, according to the earnings release. Sales on a constant currency basis increased 19 percent over first quarter 2015.

The fitness segment's first quarter growth was "modest" and Brunswick expects "high single-digit growth" from the segment excluding the acquisitions in 2016, Brunswick CEO Mark Schwabero said in a conference call with investors. Including the acquisitions, the 2016 fitness segment outlook remained unchanged from January's financial disclosure when Brunswick said it expects revenue growth in the mid to high 20 percent range with total revenue approaching $1 billion. Life Fitness reported revenue of $769.3 million in 2015.

"In our fitness segment, our plan is based upon continued revenue growth and maintaining strong operating margins," Schwabero told analysts.

The fitness segment reported operating earnings of $20.1 million in the first quarter, which includes $3.8 million in restructuring costs, integration costs and purchase accounting impacts associated with the SCIFIT and Cybex acquisitions. Segment operating earnings were $25.8 million in the first quarter of 2015.

Cybex margins have historically been lower than those of Life Fitness largely due to a higher operating cost based on a percentage of sale basis, Schwabero noted.

"However, after the initial period of margin dilution, we expect to return the combined business margin level to traditional Life Fitness margins by 2018 due to cost reduction and revenue growth," Schwabero said.

Excluding the impact of the acquisitions, fitness segment sales on a constant currency basis in the quarter increased slightly compared to the prior year. U.S. sales declined slightly, excluding the impact of acquisitions, reflecting improvement in sales to local and federal governments and slight increases to health clubs. Those sales were more than offset by weakness in consumer channels, according to the earnings release.

International sales represented 44 percent of total segment sales in the quarter and increased by 12 percent over the first quarter of 2015. European sales accounted for 18 percent of total segment sales, and other international markets accounted for 26 percent of total segment sales. The "strong" international sales were led by the benefit of acquisitions and growth in Europe and Asia in spite of continued weakness in certain international markets, according to the earnings release.

Brunswick reported net sales of $1.07 billion across all of its segments in the first quarter, up $985.7 million from the first quarter of 2016.

“Our top line reflected strong growth rates in our fiberglass outboard boats and marine parts and accessories businesses," Schwabero said in a statement. "This growth was supplemented by another solid performance in outboard engines, as well as benefits from our acquisition strategy."

Schwabero added: “We expect our businesses’ top-line performance will benefit from the continuation of solid market growth in the United States and Europe and the success of our new products, partially offset by weakness in certain other international markets and the negative impact of a stronger U.S. dollar. As a result, our plan, including the Cybex acquisition completed on Jan. 20, 2016, reflects expected revenue growth rates in 2016 to be in the range of 9 to 11 percent, absent any significant changes in our global macroeconomic assumptions. In total, acquisitions are expected to account for about 5 percent of 2016’s projected growth, reflecting the impact of completed transactions."

Brunswick stock (NYSE:BC) declined 4.8 percent to $48.82 per share in midday trading on Thursday.

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