Brunswick Corp., Lake Forest, Illinois, reported $1.03 billion in 2017 year-end revenue for its Life Fitness Division, which includes Life Fitness and Cybex International, according to financial earnings released by the company on Feb. 1 This marks a 5 percent increase from the division's 2016 earnings.
The division also reported $304.8 million in 2017 fourth quarter net sales, a 3 percent increase year-over-year.
Brunswick Chairman and CEO Mark Schwabero attributed the annual and quarterly increases to growth in international markets, despite "flat" sales in domestic markets. He also praised the financial impacts of the Indoor Cycling Group, which Brunswick acquired in July 2016.
"Our fitness business is executing against its strategy to address market challenges and enable future growth," Schwabero said in a media release. "Throughout the year, this segment encountered several operating margin headwinds, including higher costs, particularly freight in the fourth quarter, challenging pricing dynamics in certain international markets and unfavorable changes in sales mix.
This earnings report follows a Jan. 30 letter by Brunswick activist investor Owl Creek Asset Management that argued "all Brunswick stakeholders would benefit significantly from a spin-off of the fitness equipment business."
Owl Creek, whose founder criticized Brunswick's recent management of its fitness assets, currently owns 2.8 percent of Brunswick's outstanding common equity.
"Brunswick is always open to constructive input from our shareholders about how we can further strengthen the company, and we appreciate the ongoing dialogue we have had with Owl Creek over the last several weeks," Schwabero said in a Jan. 30 response to Altman's letter.
Moving forward, Schwabero said the success of Brunswick's fitness business relies on "driving product leadership, operational excellence and technology development."
"The long-term fundamentals of the fitness market are favorable, and we are confident that the plans we have developed and are executing against position this business to capitalize on future market opportunities and deliver earnings growth," he said in the release.
In 2017 sales, the division's breakdown was: United States, 54 percent; Europe, 18 percent; Asia-Pacific, 15 percent; Latin America, 5 percent; Africa and Middle East, 5 percent; Canada, 3 percent.
The segment's adjusted operating margin for the fiscal year was 10.4 percent and 6.2 percent on GAAP basis.
International sales represented 45 percent of total sales during the fourth quarter, an increase of 11 percent.
Looking forward, Schwabero outlined three keys for the fitness segment in 2018—margin stabilization, an advancement of digital strategies and the strengthening of customer relationships. He also forecasted that 2018 revenue would grow in "low-single digits," while operating margins would be consistent with 2017 levels,