Brunswick optimistic despite 2Q earnings report

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Despite a 2 percent drop in sales and a net loss of $6 million for the second quarter, Brunswick Corp. executives remain upbeat about the company’s efforts to reduce inventory pipeline, cut costs and remain profitable in the current economic downturn.

“We had a solid quarter in a difficult economic climate,” chairman and CEO Dustan McCoy told analysts this morning in a conference call.

“The actions we are taking are working,” he continued. “We’re well positioned to handle this tough market.”

For the quarter ending June 28, Brunswick had net sales of $1.48 billion, down from $1.52 billion a year earlier.

“Increased sales of commercial fitness equipment, bowling products and from our retail bowling centers, as well as 19 percent growth in non-U.S. sales, helped offset the decline in sales of marine products in the United States,” McCoy explained.

The company reported a net loss of $6 million, or 7 cents per share, down from net earnings of $57.3 million, or 63 cents per share for the second quarter of 2007. The second quarters of 2008 and 2007 include restructuring charges of $83.1 million, or 59 cents per share, and $1.1 million, or 1 cent per share, respectively. The 2008 charges are primarily for costs associated with resizing the company and reducing fixed costs by $300 million versus 2007 spending levels by the end of 2009.

The Brunswick Boat Group reported a 6 percent decline in net sales for the second quarter of 2008 to $687.9 million, from $732.8 million in the 2007 quarter.

“Sales outside of the United States for the segment were up 35 percent in the quarter, which helped offset the effect of both lower unit volume and exiting certain saltwater and high-performance brands,” McCoy said. “Sales also benefited from a shift in product mix, higher prices and contributions from Boston Whaler, Hatteras Yachts and several outboard boat brands.”

Net sales in the marine engine segment were down 4 percent to $643.5 million in the second quarter of 2008, compared to $669.6 million in the year-ago quarter.

“The segment benefited from growth in non-U.S. sales, which were up 10 percent in the quarter, helping to offset the decline in domestic outboard and sterndrive sales,” McCoy said.

For the six months ending June 28, net sales fell 3 percent to $2.8 billion, from $2.9 billion for the first half of 2007. Net earnings for the first six months of 2008 were $7.3 million, or 8 cents per share, down from $102.9 million, or $1.13 per share, for the same period in 2007.

Looking forward, McCoy outlined several priorities for the remainder of 2008: continue to lower production levels to achieve reductions in pipeline inventories held by dealers; reduce spending across the company and implement the company’s resizing and fixed-cost reduction initiatives announced last month.

Most of Brunswick’s fiberglass boat plants will be shut down for one month during the third quarter. The company also reduced its capital expenditure budget for this year and halted all discretionary spending. The restructuring charges related to cutting production will result in a loss for the second half of the year, McCoy noted.

“Nevertheless, given what we know today, we expect to report positive earnings for the full year, excluding restructuring charges,” he said. “What we are unable to predict is whether a change in market conditions would necessitate additional production cuts, or the possibility of further write-downs of goodwill or other intangibles.”

— Melanie Winters
m.winters@tradeonlytoday.com

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