Glimmers of hope in quarterly reports

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Brunswick cites inventory progress, West Marine a gain in earnings, MarineMax a July uptick in sales

The most recent quarter was tough on publicly held marine companies, but there were signs of improvement in the earnings reports.

Brunswick Corp., for example, reported more than $460 million in cash on hand at the end of the quarter, up from around $317 million at the end of 2008. West Marine announced net revenues of $215.4 million for the second quarter of 2009, a small decrease of 5 percent compared to the same quarter of 2008. And MarineMax reported a $17 million reduction in expenses for the quarter, as well as a reduction in inventory levels by $175 million year-over-year.

Here is a recap of each company's most recent earnings report:

Brunswick Corp.

Brunswick reported total sales of $718.3 million for the second quarter, down 52 percent from the 2008 quarter, primarily the result of a 56 percent drop in marine sales from year-ago levels.

The company reported a net loss of $163.7 million, or $1.85 per share, which includes 40 cents per share of restructuring charges and five cents of non-cash benefits from special tax items.

The boat segment reported net sales of $138.8 million for the quarter, down 77 percent compared to $591.7 million in the second quarter of 2008. The marine engine segment reported net sales of $415.2 million, down 43 percent from $723.6 million in the year-ago quarter.

The marine engine segment reported an operating loss of $7.8 million for the quarter, including restructuring charges of $9.6 million. This compares with operating earnings of $58.9 million in the year-ago quarter.

While demand is down in all segments, the company has made progress in such areas as pipeline reduction, inventory management and liquidity, says Brunswick chairman and CEO Dustan McCoy. "Our ongoing inventory management and pipeline reduction strategy is to produce fewer units than we are wholesaling and sell wholesale at lower levels than our dealers are retailing," he says.

The pipeline has been reduced by 11,600 units from a year ago - a 38 percent reduction, he says. By the time the market flattens or begins to rebound, dealer inventory will be so low Brunswick will have to produce more boats to fully supply its network, and that's when the company will see an increase in volume and sales, McCoy says, predicting a "slowly recovering market."

McCoy says the inventory in the marketplace is about half current year and half more than 12 months old, but the company is "making progress" in reducing aged inventory. "We plan to end the year with cash in excess of $400 million, dealer pipelines at levels lower than at any time in the past 10 years, a reduction in net fixed costs of $260 million in 2009 alone, and new low-cost products in our marine markets," McCoy says.

"In addition, we continue to analyze our manufacturing footprint, brands, models, and cost and operating structure," he says. "Our success in navigating through these very difficult market conditions places us in a strong competitive position when economic conditions improve."

West Marine

West Marine announced net revenues of $215.4 million for the second quarter, a decrease of 5 percent compared to the same quarter of 2008. Comparable-store sales dropped 1 percent.

Earnings per share were $1.46, compared to 20 cents for the same period last year, which included 72 cents per share of non-recurring, non-cash charges. "We are extremely pleased with our operating results for the second quarter," says CEO Geoff Eisenberg. "Our profitability and cash flow increased significantly, and we dramatically lowered debt."

"While the boating industry overall has continued to struggle, we believe we've benefited from an uptick in boat usage in many markets, a movement toward more do-it-yourself projects, and very good customer acceptance of our product line expansions," he adds.

Gross profit for the quarter was $73.1 million, a decline of $5.3 million from the 2008 period. Net revenues for the 26 weeks ending July 4 were $316.3 million, a 6.9 percent decrease, compared to net revenues of $339.9 million for the 26 weeks ending June 28, 2008. Comparable-store sales declined 2.9 percent from the same period a year ago. Comparable-store sales for the first half of 2009 benefited by $13.3 million, or 4.4 percent, from a fiscal calendar shift.

Gross profit for the 26 weeks ending July 4 was $95 million, a decrease of $5.9 million from 2008.

MarineMax

MarineMax reported lower revenue for its fiscal 2009 third quarter, amid continuing weak boat sales, a tight retail lending environment and low consumer confidence. Also, executives say dealer failures and boat repossessions will continue, resulting in short-term dumping of product into the market for the remainder of this year.

"The recovery will take longer than typical recessions," says MarineMax chairman, president and CEO William H. McGill Jr.

Nevertheless, he says, "We are confident that the tactical actions we are taking will position MarineMax to strategically capitalize on the opportunities as conditions improve. The actions we have taken have allowed us to generate over $100 million in cash flow from operations during the first nine months of fiscal 2009, which in turn has allowed us to substantially reduce our outstanding borrowings."

The company was starting to see some signs of retail improvement, with July sales up from July 2008.

Revenue for the third quarter, which ended June 30, was $151.5 million, compared to $271.3 million for the comparable quarter last year. Same-store sales declined about 39 percent, compared to a 27 percent decrease in the year-ago quarter. Revenue from stores recently closed that were ineligible for inclusion in the same-store sales base was $25.2 million.

Net loss for the recent quarter was $9.2 million, or 49 cents per share, compared to a net loss of $113.3 million, or $6.15 per share, for the comparable quarter last year.

This article originally appeared in the September 2009 issue.

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