Fitness financials: Brunswick narrows Q3 loss, plus Amer Sports

Brunswick Corp., parent of Life Fitness and Hammer Strength, narrowed its third-quarter loss, and Amer Sports, parent of Precor, reported a 5-percent decline in third-quarter net sales.

Brunswick narrows Q3 loss

Brunswick Corp. (NYSE: BC), parent of Life Fitness and Hammer Strength, narrowed its third-quarter loss as restructuring charges dropped dramatically.

For the quarter ended Oct. 3, net loss was $114.3 million, or $1.29 per share, compared with $729.1 million, or $8.26 per share, in the year-ago period.

Sales fell 36 percent to $665.8 million from $1.04 billion. The company said its marine sales -- its core business -- sank 40 percent on the lowest levels of demand in nearly half a century.

"The buyers of discretionary products remained quite cautious about their near-term outlook," said CEO Dustan McCoy on the third-quarter call with analysts Oct. 29.

The recent quarter's results included a restructuring charge of $0.32 per share and a benefit of $0.24 per share related to special tax items. Last year, the results included $4.59 per share in impairment and restructuring charges, and $3.34 per diluted share in charges for special tax items.

"Our overall liquidity at the end of the third quarter was $740 million, $222 million higher than existed at the end of 2008," said McCoy in a statement. "During the quarter, we retired notes maturing in 2011, which eliminates any material debt maturities over the next three years."

Fitness segment sales in the third quarter totaled $126.8 million, down 22 percent from $161.6 million in the year-ago quarter. International sales declined 15 percent and represented 55 percent of total segment sales in the quarter.

For the quarter, the fitness segment reported operating earnings of $12.5 million, including $0.4 million of restructuring charges. This compares with operating earnings of $10.3 million, including restructuring charges of $0.8 million, in the third quarter of 2008.

The company said commercial equipment sales, which account for the largest percentage of the segment's sales, declined in the quarter as gym and fitness club operators remained cautious about ordering equipment. Sales of consumer exercise equipment were also down, it said, although at lower rates than sales of commercial equipment.

Higher operating earnings in the third quarter of 2009 versus 2008 reflect actions taken by Life Fitness to reduce expenses, which were partially offset by the unfavorable effect of lower sales, it added.

"Our expectations for the fourth quarter of Life Fitness reflect further revenue declines on year-over-year basis," McCoy said, "all be it at a lesser rate."

Q3 sales for Amer Sports drop 5 percent

Amer Sports, parent of Precor, reported a 5-percent decline in third-quarter net sales, saying the U.S. market continues to post lower numbers than its European counterpart.

Net sales for the company dropped 5 percent to EUR 410.6 million (USD $607.1 million) from EUR 433.2 million (USD $640.6 million) last year. In local currencies, net sales decreased by 6 percent.

Gross profit was down 8 percent -- 9 percent in local currencies -- to EUR 171.3 million (USD $253.3 million) versus EUR 186.2 million (USD $275.3 million) last year.

EBIT was EUR 40.7 million (USD $60.1 million) compared to EUR 51.5 million (USD $76.1 million) -- a 21-3percent drop -- mainly reflecting the weaker profitability of the company's North American operations, the company said.

Earnings before taxes were EUR 38.4 million (USD $56.7 million), down 12 percent from last year's EUR 43.8 million (USD $64.7 million). Earnings per share were down 16 percent to EUR 0.38 (USD $0.56) compared to EUR 0.45 (USD $0.66).

"The overall sales trend during the third quarter followed the one seen during the first half of the year. The U.S. market continues to be more challenging than the European market, and consumers have been moving to value price points," said Roger Talermo, Amer Sports' president and CEO, in a statement.

The company said it will continue to focus on cost controls and is planning to take its cost base further down in order to protect the bottom line.

"We do not anticipate a quick recovery of the sporting goods market, even if trading conditions would start to improve next year," Talermo said. "We are also considering alternatives to shift the focus of the business portfolio more towards categories where we believe the best long-term opportunities exist and where the best group-wide synergies can be achieved."

Net sales for the fitness segment, which includes Precor, dropped 19 percent to EUR 44.8 million (USD $66.2 million) versus EUR 55 million (USD $81.3 million) last year. In local currencies, the drop was 20 percent.

Amer Sports said the market situation is unchanged from that of the first half of 2009, with the general economic climate being the largest driver of Precor's performance.

EBIT was a loss of EUR 1.4 million (USD $2.0 million) versus a positive EUR 2.8 million (USD $4.1 million) the year before. The decline was due to the significant fall in sales and lower gross margins, resulting from a lower capacity utilization rate and pricing pressure, it said.

The company said demand for commercial equipment for both North America and EMEA has been affected as customers defer purchase decisions in light of the financial uncertainty. The specialty fitness stores are generating as little as half the business they did during the peak of 2007, it noted. Availability of credit and of financing are also having an impact, particularly in Europe, it added.

The company also said consumer products sales have been greatly affected by significant lower consumer spending due to the uncertain economic environment and significant reduction among specialty dealers in comparison to the previous year. Consumer sales' pick-up in the late fall and the coming season will be an important measure of the health of the market, it added.

Construction of a new strength equipment production facility in North Carolina is slated to open December. It will provide needed capacity for the recently launched selectorized strength lines and reduce manufacturing costs.

Amer Sports said guidance for the overall company is unchanged: FY '09 EBIT will be below last year's level. The expected improvement for winter sports equipment due to previously implemented cost-efficiency measures is more than offset by weakness in other Amer Sports businesses.

(Conversion of Euros into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of Oct. 29.)

--Compiled by Wendy Geister

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