Fitness equipment and billiards will go hand-in-hand now at Brunswick Corp., the parent company of Life Fitness and Hammer Strength, as the company moves its billiards group into its fitness segment. The company also says it is expanding its manufacturing capability and will look at acquisition possibilities.
In January when Brunswick, Lake Forest, IL, shared its fourth quarter 2014 and full-year 2014 financials, it said that its Brunswick Billiards products, which had been part of its bowling and billiards segment, would move into the fitness segment of its company, which already consisted of Life Fitness and Hammer Strength. All earnings from the billiards segment were reported in the fitness segment for those periods. However, the company did not put out an official press release about the move of the billiards group into the fitness segment until yesterday.
In September, Brunswick completed the sale of its retail bowling business. With this sale and the billiards segment move, Brunswick now has three segments: marine engine, boat and fitness.
"We recognized natural synergies between the Brunswick Billiards, Life Fitness and Hammer Strength brands as these products are all tailored for the recreational and active lifestyle markets," Chris Clawson, president of Life Fitness, said in the press release announcing the move.
The Brunswick Billiards product line consists of billiards tables, table tennis, foosball, Air-Hockey, shuffleboard, putting greens and game room furniture and accessories. These products will be merged with the Life Fitness and Hammer Strength brands into what a company spokesperson calls "activity products."
In the company's most recent 10-k, Brunswick noted that "the billiards industry continues to experience competitive pressure from low-cost billiards manufacturers outside the United States."
Growth Plans, Acquisition Talk
Dustan McCoy, CEO of Brunswick, noted in the January financial call that the company plans to grow the fitness segment by expanding into new product categories and growing distribution in customer segments and regions that it serves throughout the world.
"In addition, we're currently exploring and evaluating certain adjacency opportunities in both the fitness equipment and health and wellness sectors as well as evaluating acquisitions," he said.
McCoy noted that in the fitness segment the company would look at acquisitions "that bring significantly more synergies and real ability to grow later."
McCoy noted that Brunswick is making significant investments in capacity, product and people in its fitness segment, including expanding one of its manufacturing plants in Hungary.
Because of these investments, he said he anticipates operating margins to decline slightly in 2015 but to still be "healthy margins." He said that lower margins could continue into 2016, as the company has additional investment plans for next year that it is not ready to discuss.
The company also is looking to expand capacity by putting new and better equipment in fitness facilities and changing layouts to get more capacity, McCoy said. He added that the company has introduced "so much great product, we just need to be making more of it, and we got our sleeves rolled up to do it."
The company's fourth quarter 2014 and full-year 2014 financials show that fitness segment sales were up 8 percent from $217.2 million in fourth quarter 2013 to $235 million in fourth quarter 2014. International sales, which represented 47 percent of total segment sales for the quarter, increased by 10 percent over fourth quarter 2013. For the quarter, the fitness segment reported operating earnings of $40.8 million compared with operating earnings of $36.6 million in fourth quarter 2013.
"The segment continued to benefit from new product introductions in all regions, with this quarter representing its ninth consecutive quarter of year-over-year revenue growth," William L. Metzger, chief financial officer and senior vice president, said in the conference call with analysts.
For the full-year 2014, the fitness segment had net sales of $769.3 million, an increase of 7 percent compared to 2013 net sales of $716 million. For 2014, the fitness segment had operating earnings of $115.3 million compared with $108.1 million in 2013, an increase of 7.2 percent. Again, these numbers combine the former billiards segment with the fitness segment.
The company also invested more in research and development for the fitness division in 2014. Last year, it spent $23.4 million on R&D compared to $21.8 million in 2013 and $19.3 million in 2012.
A Little Billiards History
Brunswick's history with billiards is longer than its history with fitness equipment. Founded in Cincinnati, OH, as the Cincinnati Carriage Making Company in 1845 by John Brunswick, the company produced its first billiards table that same year. Word of mouth spread quickly, the company's website says, and by 1878 the company had become the largest billiards table manufacturer in the world, producing more tables than all its competitors combined. Life Fitness was founded in 1968, and later was purchased by Brunswick. Life Fitness sold the first computer-controlled exercise bike.