Results improve, with an eye to 2011

Posted on 30 August 2010

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Brunswick, MarineMax swing from loss a year earlier to profit for the quarter

A number of marine businesses reported positive results in the latest quarter, including better-than-expected earnings at Brunswick, a profit at MarineMax and West Marine's seventh consecutive quarter of improved operating results, compared with the corresponding quarter of the prior year.

Although results are improved from the year-earlier quarter, company officials, on calls with analysts, were quick to point out that challenges lie ahead. Brunswick officials say they are focused on returning to profitability in 2011. MarineMax officials say more dealer failures are expected this fall and winter, which could lead to more market share for the boating retailer.

Following is a roundup of the latest industry earnings reports:

Brunswick Corp.

Brunswick reported a 41 percent gain in total net sales for the second quarter of 2010, with both the boat and engine segments reporting large increases.

The company reported total net sales of $1.01 billion, up from $718.3 million in the same period last year. Net earnings of $13.7 million, or 15 cents a diluted share, contrasted with a net loss of $163.7 million, or $1.85 a diluted share, for the second quarter of 2009.

The results mark the Lake Forest, Ill.-based company's first net profit since the first quarter of 2008, according to chairman and CEO Dustan McCoy. Operating earnings of $55.7 million, a $201.1 million improvement from the prior year, were also reported.

"The continued successful execution of our strategic initiatives over the past several quarters was a key factor in our improved second-quarter results," McCoy says. "Historically low marine dealer inventories as we entered the year led to improved wholesale shipments. This, combined with significant fixed-cost reductions achieved over the past two years, enabled us to report our second consecutive quarterly operating profit. In addition, during the first half of 2010, our cash balances increased by $93 million and net debt declined by $120 million."

The boat segment, which includes 15 boat brands, reported net sales of $296.6 million for the second quarter, an increase of 114 percent from $138.8 million in the second quarter of 2009.

For the second quarter, the boat segment reported an operating loss of $23.6 million, including restructuring, exit and impairment charges of $21.7 million. This compares with an operating loss of $107.9 million, including restructuring, exit and impairment charges of $17.9 million, in the second quarter of 2009.

The marine engine segment reported net sales of $579.2 million in the second quarter, up 39 percent from $415.2 million in the year-earlier period.

For the quarter, the marine engine segment reported operating earnings of $89.2 million, including restructuring charges of $2.1 million. This compares with an operating loss of $7.8 million in the year-earlier quarter, which included $9.6 million in restructuring, exit and impairment charges.

"Conditions in 2010 have indeed been difficult, with end-market results being mixed, not only throughout the U.S., but also globally. Retail demand for our marine market products continues to be at historically record low levels, but the overall market rate of decline has eased," McCoy says.

"During the second half of 2010, we will continue to focus on liquidity and closely manage our overall cost structure," he adds. "In addition, we plan to keep our production and wholesale shipment levels closely matched with retail demand and dealer stocking requirements, which will ensure the continuing health of our dealer pipeline inventories."

MarineMax

MarineMax reported a decline in revenue for its third fiscal quarter, but the retailer swung from a net loss a year earlier to a profit in this year's quarter.

Revenue was $115.4 million for the quarter that ended June 30, compared with $151.5 million for the comparable quarter last year. Same-store sales declined approximately 17 percent, compared with a 39 percent decline in the quarter last year.

Revenue from stores recently closed that were ineligible for inclusion in the same-store sales base was $12.3 million.

Net income for the third quarter of fiscal 2010 was $512,000, or 2 cents a diluted share, compared with a net loss of $9.2 million, or 49 cents a share, for the comparable quarter last year.

Inventory declined $158.4 million, or 47 percent, to $181.4 million, compared with $339.8 million on June 30, 2009.

Revenue was $325.9 million for the nine months that ended June 30, compared with $381.3 million for the comparable period last year. Same-store sales declined approximately 5 percent, compared with a 44 percent decline in the comparable period last year.

Net income for the nine-month period was $4.3 million, or 19 cents a diluted share, compared with a net loss of $43.8 million, or $2.37 a share, for the comparable period last year.

During the third quarter, Clearwater, Fla.-based MarineMax operated with 56 stores, nine fewer than it operated on June 30, 2009.

"We have demonstrated this quarter that we can achieve profitability from lower levels of revenue than we ever have in the past," MarineMax chairman, president and CEO William McGill Jr. says. "We attribute this improvement to the substantial progress we have made in our key initiatives. These include lowering our inventories to better align supply and demand, resulting in higher boat margins, as well as growing our higher-margin service businesses and reducing our cost structure over the past 18 months."

McGill adds: "These efforts allowed us to generate a slight profit in the quarter despite the ongoing economic pressure on our industry and the impact of the BP oil spill in the Gulf of Mexico on customers' purchasing decisions."

McGill notes that industry sources say about 1,400 marine dealers have gone out of business and that more dealer failures are expected this winter.

This, he says, provides an opportunity for MarineMax and leaves the company "well positioned to benefit as pent-up demand continues to grow." However, additional dealer failures also could lead to more lower-priced repos on the market, which could create a challenge.