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Brunswick reports 1Q results - Trade Only Today

Brunswick reports 1Q results

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Brunswick Corp. today reported a 15 percent increase in net sales for the first quarter, which includes a rise in sales in both the boat and engine segments.

For the first quarter of 2010, the company reported net sales of $844.4 million, up from $734.7 million a year earlier. For the quarter, the company reported operating earnings of $10.1 million, which included $7.4 million of restructuring and impairment charges.

In the first quarter of 2009, the company had an operating loss of $127.5 million, which included $39.6 million of restructuring and impairment charges.

For the first quarter, Brunswick reported a net loss of $13 million, or 15 cents per diluted share, compared with a net loss of $184.2 million, or $2.08 per diluted share, for the first quarter of 2009.

"We continue to applaud management's execution in what has likely been one of the worst marine downturns in history," said analyst Tim Conder, of Wells Fargo Securities. "We believe [Brunswick] is well-positioned to expand its lead - market share, profitability, etc. - in the industry as the recovery unfolds in '11."

Brunswick stock opened this morning at $18.27 per share, rising above $20 by midmorning trading. The 52-week high and low are $19.71 and $3.49.

"The successful execution of our strategic initiatives over the past several quarters was a key factor in our improved first quarter results," Brunswick chairman and CEO Dustan McCoy said in a statement. "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 first quarterly operating profit since the first quarter of 2008. In addition, our net debt declined by $22 million, as cash balances increased by $26 million."

In a call this morning with analysts, McCoy noted that there are 11,000 fewer units in the field than at this time last year, a 38 percent drop. To meet demand, Brunswick increased production in the first quarter by more than 50 percent, and shipments are up more than 40 percent versus last year.

However, demand remains down, he said. Demand was down about 20 percent in the first quarter, though the decline slowed in March to reflect a 13 percent drop, McCoy said. Brunswick will monitor this closely, he said, and will adjust production if needed.

The boat segment reported net sales of $243.6 million for the first quarter, an increase of 19 percent compared to $205.3 million in the first quarter of 2009. International sales, which represented 37 percent of total segment sales in the quarter, increased by 8 percent during the period.

For the first quarter of 2010, the boat segment reported an operating loss of $26.7 million, including restructuring and impairment charges of $4.1 million. This compares with an operating loss of $72.3 million, including restructuring and impairment charges of $25 million, in the first quarter of 2009.

Boatbuilding facilities began to ramp up production during the quarter to address inventory requirements of their dealers. Higher sales, increased fixed-cost absorption, fixed-cost reductions, lower restructuring charges and reduced discounts required to support retail sales by dealers were the primary factors behind the segment's reduction in operating losses in the quarter, Brunswick reported.

The marine engine segment reported net sales of $445.7 million in the first quarter of 2010, up 30 percent from $343.9 million in the year-ago quarter. International sales, which represented 47 percent of total segment sales in the quarter, increased by 37 percent.

For the quarter, the marine engine segment reported operating earnings of $26.5 million, including restructuring charges of $2.4 million. This compares with an operating loss of $50.6 million in the year-ago quarter, which included $11.7 million in restructuring charges.

Sales were higher across all of the engine segment's main operations, except for low single-digit declines in domestic marine service, parts and accessories businesses, which represented 22 percent of total segment sales in the quarter. The segment's sterndrive business experienced the greatest level of growth.

Mercury's manufacturing facilities increased production during the quarter in response to customer inventory requirements. Higher sales, increased fixed-cost absorption, lower restructuring charges and fixed-cost reductions, as well as reduced pension and lower bad debt expense, had a positive effect on operating earnings during the quarter.

"As we have said previously, our boat wholesale shipment and production planning in 2010 has been based on the assumption that the retail marketplace would decline by approximately 10 percent," McCoy said. "Preliminary data for the January-to-March period indicate a reduction in industry retail sales of about 20 percent. As we head into the heart of the marine selling season, we will monitor retail demand closely and will be prepared to adjust production and shipments to maintain appropriate levels of boat inventories with our dealers."

McCoy added: "We continue to believe that wholesale shipments will increase throughout the year versus 2009, as we return to a more normal relationship where wholesale shipments approximate retail demand. In addition to higher revenues, we expect our earnings in 2010 will also reflect lower restructuring and impairment costs and reduced pension and bad debt expense."

- Beth Rosenberg

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