Brunswick reports 1Q results - Trade Only Today

Brunswick reports 1Q results

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Brunswick Corp. today reported first-quarter increases in net sales in its boat and engine segments, but an operating loss in the boat segment.

Overall, the company reported net sales of $985.9 million for the quarter that ended April 2, up 17 percent from the same period last year, when sales of $844.4 million were reported.

Brunswick reported net earnings for the quarter of $27.5 million, or 30 cents a share, compared with a net loss of $13 million, or 15 cents a share, for the quarter last year.

Per-share earnings for the first quarter of this year included restructuring, exit and impairment charges of 5 cents a share. The loss for the first quarter of 2010 included 8 cents a share of restructuring and impairment charges and a 2-cent-a-share benefit from special tax items.

For this year's quarter, Brunswick reported operating earnings of $67.0 million, which included $5.3 million of restructuring, exit and impairment charges. In the first quarter of 2010, the company had operating earnings of $10.1 million, which included $7.4 million of restructuring and impairment charges.

"Our first-quarter results reflected higher marine wholesale shipments, compared to the prior year, together with outstanding operating leverage achieved by our operating businesses," Brunswick chairman and CEO Dustan McCoy said in a statement.

"Shipments into our dealer pipeline continue to be consistent with our strategy to closely match wholesale and retail demand units on an annual basis," he added. "The higher quarterly wholesale shipments reflect our plan that retail demand in 2011 will be stable, compared to the declining market in 2010, as well as our plan to ensure that our dealers have the appropriate levels of inventory to meet early-season demand."

The boat segment, which is composed of the Brunswick Boat Group and includes 16 boat brands, reported net sales of $283.6 million for the quarter, an increase of 16 percent from $243.6 million a year earlier. International sales, which represented 37 percent of total segment sales in the quarter, rose 18 percent during the period.

For the first quarter of 2011, the boat segment reported an operating loss of $3.8 million, including restructuring, exit and impairment charges of $1 million. This compares with an operating loss of $26.7 million, including restructuring charges of $4.1 million, in the first quarter of 2010.

The increase in wholesale unit shipments was partially offset by the effect of a higher mix of smaller-boat sales, the company said. Higher sales, increased fixed-cost absorption, fixed-cost reductions and lower restructuring, exit and impairment charges had a positive effect on the segment's improved quarterly results.

In a conference call this morning with analysts, McCoy noted that in the overall industry demand fell by 1 percent in the first quarter, with only the aluminum segment seeing an increase. However, that compares with a 14 percent decline in demand for the same period in 2010, when 139,000 units were sold.

McCoy said he expects that Brunswick gained market share during the first quarter.

Heading into April and the key spring selling season, however, momentum seems to be "all over the map," he said. But with gas and food prices rising there's nothing to tell him momentum is improving, McCoy noted.

Although he wouldn't predict what the market will do in the coming months, McCoy said Brunswick is planning for a flat year, based on what it has seen.

However, he added, "The possibility of a down market exceeds that of an up market. It's just too early for us to call sitting here today."

The marine engine segment, consisting of the Mercury Marine Group, including the marine parts and accessories businesses, reported net sales of $520.5 million in the first quarter, up 17 percent from $445.7 million a year earlier. International sales, which represented 43 percent of total segment sales in the quarter, increased by 6 percent.

For the quarter, the segment reported operating earnings of $51.6 million, including restructuring charges of $4.3 million. This compares with operating earnings of $26.5 million in the first quarter of 2010, which included $2.4 million of restructuring charges.

Sales were higher across all of the segment's main operations. The segment's global sterndrive engine product category had the largest percentage sales growth, according to Brunswick.

Mercury's manufacturing facilities continued to increase production during the quarter in response to customer requirements. Higher sales, the combined effect of cost reductions, increased fixed-cost absorption and improved operating efficiencies, as well as a gain on the sale of a distribution facility, had a positive effect on operating earnings during the quarter.

"The retail marine market for 2011 is unfolding as expected for the year. We continue to believe that the significant decline in overall industry marine retail demand bottomed in 2010," McCoy said. "However, with the majority of the selling season still ahead of us, we are not yet able to determine if our 2011 retail demand will match our plan for a flat market.

"The range of 2011 revenue and earnings growth expectations for the company's results will continue to be governed primarily by marine retail demand, as well as by the success of the company's efforts to improve market share in all of its business segments," he added.

McCoy said company officials continue to watch for the potential effect of higher crude oil prices. In the event of a declining retail marine market, the remainder of the year would be at risk to lower levels of marine wholesale unit shipments in order to keep dealer inventories at desired levels, he said.

McCoy said Brunswick has no plans to add to its product line or significantly increase its U.S. dealer base, although it is looking to add dealers internationally.

"We continue to believe that our 2011 net income will benefit from our previously announced marine plant consolidations, lower restructuring costs and reductions in net interest, depreciation and pension expenses," McCoy added.

Brunswick expects 2011 earnings to be in the range of 30 to 50 cents a share. The company expects to report a profitable second quarter, followed by a net loss in the second half of the year.

Brunswick stock opened Thursday at $26.36 a share. Its 52-week high and low are $27.70 and $11.72.

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