Mark Schwabero, the newly appointed chairman and CEO of Life Fitness parent company Brunswick Corp., said that despite strong sales, Brunswick missed expectations in third quarter 2016 mainly because of the Life Fitness segment and its acquisition of Cybex.
Brunswick Corp. reported net sales of $1.1 billion in third quarter 2016, up 10 percent from net sales of $992 million in the same period a year ago, but the company missed expectations by about $20 million. Brunswick’s Life Fitness division consists of Life Fitness, Cybex, Hammer Strength, SCIFIT, InMovement and the newly acquired Indoor Cycling Group. Life Fitness acquired Cybex in January.
“Sales of Cybex products have been unfavorably affected by some changes in distribution and decreasing demand for certain products,” Schwabero said on a call with analysts on Thursday, according a transcript from SeekingAlpha.com. “In addition, in the U.S., sales of certain fitness channels were weak, including retail, as well as local and federal governments.”
The Life Fitness division generated $237.6 million in net sales in third quarter 2016, a 20 percent increase compared to $197.5 million in third quarter 2015. International sales, which represented 48 percent of total segment sales in third quarter 2016, increased by 23 percent. Excluding the impact of acquisitions, fitness segment sales in the quarter, on a constant currency basis, increased by 4 percent compared to the prior year.
The fitness segment also had operating earnings of $29.1 million in third quarter 2016 — including restructuring and integration charges of $2.4 million — compared to operating earnings of $27.6 million in third quarter 2015.
Brunswick’s operating earnings were $122.5 million in third quarter 2016 compared to $115.8 million in third quarter 2015. Net earnings were $85.3 million in third quarter 2016 compared to $72.2 million in the same period last year.
Schwabero said Brunswick is “continuing to make outstanding progress” integrating Cybex into the Life Fitness segment, and the company plans on making its near-term and long-term earnings objectives for the Cybex acquisition.
“Our fitness business continues to benefit from solid demand, particularly in the global health club and hospitality markets,” Schwabero said. “While we have experienced uneven quarterly growth in global revenue, through the first three quarters of the year, we remain comfortable with the overall demand fundamentals and the ability to capitalize on the evolving marketing opportunities.”
Last week, Life Fitness announced it is moving Cybex production from its Medway, Mass., facility to facilities in Minnesota and Illinois.