Bottom line: A roundup of quarterly results

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16_bottomline_01Latest earnings reports from publicly held companies show the industry is still battling downturn

Marine businesses generally reported weak financial results for the most recent quarter, as economic conditions continue to take their toll on the industry. The following is a summary of the most recent earnings reports, including specific steps being taken by some public companies to try and mitigate the impacts caused by the severe downturn.

Brunswick Corp.

For the first quarter of 2009, Brunswick reported a 45 percent decline in net sales driven primarily by a 52 percent drop in marine sales. However, executives say they are successfully managing cash flow.

“This was demonstrated by the $359 million of cash on our balance sheet at the end of the quarter, a $42 million increase from year-end levels,” says chairman and CEO Dustan McCoy.

Net sales for the quarter that ended April 4 totaled $734.7 million, compared to $1.3 billion in the quarter ending March 29, 2008. The company reported a net loss of $184.2 million, or $2.08 per diluted share, compared with net earnings of $13.3 million, or 15 cents per diluted share, for the first quarter of 2008.

“Retail demand for marine products was impacted in the first quarter of 2009 by declining consumer confidence and the tightening of consumer credit terms by national lenders,” McCoy says. “As our dealers work through this difficult economic climate, we continue to reduce our wholesale shipments to reduce the number of boats and engines on their showroom floors.”

In a conference call with analysts, McCoy said the current slump in marine sales likely will continue through 2009, and when the recovery does come it will take longer to return to previous highs.

“My judgment is we haven’t really seen the bottom yet, but we’ve got to be getting close,” he says. “We’re not planning for the market to come back to 2005 levels likely within my working career, and I plan to be around for a while.”

Brunswick’s Marine Engine segment, which now includes the service, parts and accessories businesses from engines and boats, reported net sales of $343.9 million, down 45 percent from $628.6 million in the year-ago first quarter.

The segment reported an operating loss of $50.6 million, including restructuring charges of $11.7 million. This compares with operating earnings of $33.6 million in the year-ago quarter, including $1.5 million of restructuring charges.

Sales were off across the board, with sterndrives experiencing a greater decline than outboards. But sales from the marine service, parts and accessories businesses were down significantly less than Brunswick’s other marine businesses, the company says.

The Boat segment reported net sales of $205.3 million, down 64 percent compared with $565.6 million in the first quarter of 2008. The segment reported an operating loss of $72.3 million, including restructuring charges of $25 million. This compares with an operating loss of $17.4 million, including restructuring charges of $13.8 million, in the first quarter of 2008.

MarineMax

MarineMax reported a sharp decline in revenue and same-store sales for the second quarter, which ended March 31, 2009. Revenue was $129.6 million for the quarter, compared with $233.3 million for the comparable quarter last year. Same-store sales declined approximately 41 percent, compared with a 28 percent decrease in the comparable quarter last year.

18_bottomline_03Revenue from stores recently closed that were not eligible for inclusion in the same-store sales base was $15.2 million. Clearwater, Fla.-based MarineMax operates 74 retail locations around the country.

The net loss for the second quarter of fiscal 2009 was $20.3 million, or $1.09 per share, compared with a net loss of $3.5 million, or 19 cents per share, for the comparable quarter last year. Included in the second quarter fiscal 2009 net loss was approximately $900,000, or 5 cents per share, associated with store-closing costs.

MarineMax also reported a reduction in expenses and inventory this quarter, which is good news for the company, says William McGill Jr., chairman, president and CEO. MarineMax is down about $155 million in inventory during a period in which inventory usually rises.

“We made significant progress in a number of areas during the second quarter despite the continued weak retail conditions,” McGill says. “Our ongoing efforts to aggressively reduce our cost structure allowed us to realize an approximate $20 million decrease in expenses during the quarter, the largest year-over-year quarterly reduction we have reported to date.”

For the six months ending March 31, revenue was $229.8 million, compared with $448.5 million for the comparable period last year. Same-store sales declined approximately 46 percent, compared with a 20 percent decline in the comparable period last year. Net loss for the six months ending March 31 was $34.6 million, or $1.87 per share, compared with a net loss of $9.9 million, or 54 cents per share, for the comparable period last year.

McGill notes that retail financing was more difficult this quarter, and the fallout of customers who were contracted but didn’t receive delivery was higher. Traditionally, MarineMax sees a fallout of 15 to 20 percent, he says. It’s now approaching 50 percent.


West Marine

West Marine reported a 10.9 percent drop in net revenues for the first quarter, but operating results improved by $11 million compared to last year, reflecting the company’s best first-quarter pretax results since 2005.

17_bottomline_02“We are pleased to report these considerably improved operating results, despite a sales decline which reflects market and industry conditions,” says Geoff Eisenberg, West Marine CEO. Eisenberg called the decline in sales “in line with expectations” and noted the importance of being realistic in the current economic climate.

Net revenues for the quarter ending April 4 were $101 million, compared to $113.3 million in the quarter ending March 29, 2008. Same-store sales were down 6.8 percent. The company reported a pretax loss of $14.4 million, compared to $25.4 million last year.

West Marine cut expenses by 21.2 percent, to $36.9 million, in the 2009 quarter, and cash from operating activities improved by $4.9 million. Long-term debt was down $13.2 million, or 14.8 percent, from this time last year, and unused credit facility availability was more than $86 million at the end of the quarter.

Net loss for the recent quarter was $14.8 million, or 67 cents per share, compared to a net loss of $17.6 million, or 81 cents per share, in the first quarter of 2008.

Looking forward to the remainder of 2009, chief financial officer Tom Moran says the general outlook remained “unchanged,” and the company expects sales to decline for the year at roughly the same pace it is currently experiencing.

Other financial results

  • Marine Products Corp. – manufacturer of Robalo and Chaparral boats – reported a 78.9 percent drop in net sales for the first quarter. Net sales fell to $13.8 million in the quarter ending March 31, compared to $65.5 million in the year-ago quarter. The company reported a net loss of $2.5 million, or 7 cents per diluted share, compared to net income of $4.1 million, or 11 cents per diluted share, in the prior year.
  • Garmin reported a 34 percent decrease in overall revenue for the first quarter, including a 32 percent decrease in the marine segment. Total revenue of $437 million was reported, down from $664 million in first quarter 2008. Marine segment revenue was $38 million for the quarter. Garmin reported that the reduction in revenue was seen in all geographic areas, with North American revenue dropping 36 percent for the quarter, from $411 million in the year-ago period to $265 million for the first quarter of 2009.
  • Teleflex reported a 17 percent increase in adjusted earnings for the first quarter, despite a 13 percent decline in revenues. Revenues from continuing operations were $469.7 million, compared to $542.1 million in the year-ago quarter. Net income in the 2009 first quarter was $215.5 million, or $5.40 diluted earnings per share, compared to $22.9 million, or 58 cents per diluted share.
  • KVH Industries reported a 21 percent decline in revenue for the first quarter. Net loss for the period was $2.6 million, or 18 cents per share. During the same period last year, the company reported net income of $1.6 million or 11 cents per share. In the first quarter of 2009, mobile communications revenue from products and services was $11 million, down 39 percent on a year-over-year basis.
  • Gander Mountain Co. reported record consolidated sales of $334.1 million for the fourth quarter of 2008, which ended Jan. 31, 2009. That’s compared to consolidated sales of $317.6 million for the fourth quarter of fiscal 2007, a 5.2 percent increase. Retail segment sales for the fourth quarter were $322 million, an increase of $10 million, or 3.2 percent, compared to the fiscal 2007 fourth quarter. Direct segment sales were $12.1 million for the quarter, compared to $5.5 million for the same quarter last year. For fiscal year 2008, the company reported record sales of $1.1 billion, an increase of 9.8 percent over the prior year. The company reported a net loss for the year of $15.5 million, or a loss of 64 cents per share, compared with a net loss of $31.8 million, or a loss of $1.52 per share, for the 2007 fiscal year.19_bottomline_04
  • Twin Disc reported a drop in sales for the third quarter and nine months ending March 27. Sales for the third quarter were $69.3 million, compared to $85.8 million for the fiscal 2008 third quarter. Year-to-date sales were $232.6 million, compared to $241.3 million for the same period of 2008. Net earnings for the third quarter were $2.85 million, or 26 cents per diluted share, compared with $7.93 million, or 70 cents per diluted share, in the same period of 2008. Year-to-date earnings were $8.75 million, or 78 cents per diluted share, compared to $17.24 million, or $1.51 per diluted share, in the same period of 2008.
  • Caterpillar reported sales and revenues for the first quarter of 2009 were $9.225 billion, down 22 percent from $11.796 billion in the first quarter of 2008. The company reported a loss of 19 cents per share, down $1.64 per share from the first quarter of 2008. Excluding redundancy costs, first-quarter profit was 39 cents per share. Redundancy costs related to reducing employment were $558 million before tax or 58 cents per share in the quarter.
  • Jewett-Cameron Trading Company reported sales and net income for the second quarter were down, in part, because of weakness in industrial wood sales to pleasure-boat manufacturers. Sales for the second quarter of 2009, which ended Feb. 28, totaled $9.35 million, compared to sales of $15 million for the second quarter of 2008. The company reported net income of $256,000, or 11 cents per diluted share, compared to net income of $513,000, or 21 cents per diluted share, in the same period a year ago.
  • Coast Distribution System reported a net loss of $2.3 million in its traditionally weak fourth quarter and a net loss of $1.8 million for the year. For the quarter ending Dec. 31, the company reported a net loss of $2.3 million, or 51 cents per diluted share, on net sales of $16.9 million. For the same period of 2007, the company had a net loss of $1.5 million, or 34 cents per diluted share, on net sales of $26.7 million. For the year ending Dec. 31, Coast reported a net loss of $1.8 million, or 41 cents per diluted share, on net sales of $132.2 million. In 2007, the company reported net earnings of $215,000, or 5 cents per diluted share, on net sales of $164.3 million.

This report was compiled by associate editors Beth Rosenberg and Melanie Winters.

This article originall appeared in the June 2009 issue.

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