Brunswick reports 2Q results


Brunswick Corp. today reported total sales of $718.3 million for the second quarter of 2009, down 52 percent versus 2008, primarily the result of marine sales that dropped by 56 percent from year-ago levels.

The company reported a net loss of $163.7 million, or $1.85 per diluted share, which includes 40 cents per diluted share of restructuring charges and 5 cents per diluted share of non-cash benefits from special tax items.

Cash on hand at quarter's end was $461.2 million, up from a 2008 year-end balance of $317.5 million.

The boat segment reported net sales for the quarter of $138.8 million, down 77 percent compared to $591.7 million in the second quarter of 2008. International sales, which represented 49 percent of total segment sales in the quarter, decreased by 75 percent during the period.

For the second quarter of 2009, the boat segment reported an operating loss of $107.9 million, including restructuring charges of $17.9 million. This compares with an operating loss of $42.2 million, including restructuring charges of $37.6 million, in the second quarter of 2008.

Boat manufacturing facilities also continued to significantly cut production rates and take plant furloughs during the quarter to address inventory levels. Lower sales, reduced fixed-cost absorption on lower production, and higher discounts and sales incentives on retail sales by dealers had an adverse effect on operating earnings, which were partially offset by a reduction in expenses.

While demand is down in all segments, the company has made progress in areas such as pipeline reduction, managing inventory and liquidity, Brunswick chairman and CEO Dustan McCoy said this morning in a conference call with analysts.

"Our ongoing inventory management and pipeline reduction strategy is to produce fewer units than we are wholesaling, and sell at wholesale at lower levels than our dealers are retailing," he said.

The pipeline has been reduced by 11,600 units from a year ago — a 38 percent reduction, he said.

By the time the market flattens or begins to rebound, dealer inventory will be so low that Brunswick will have to produce many more boats to fully supply its dealer network. That's when the company will see an increase in volume and sales, McCoy said, predicting a "slowly recovering market."

"We're going to have to accelerate quickly when this thing turns," he added.

McCoy said the inventory out in the marketplace is about half current year and half more than 12 months old, but the company is "making progress" in reducing the aged inventory.

Also, officials noted, about $8 million has been spent shipping inventory from dealers that have closed to other sellers. That number will likely go up through the remainder of 2009.

The marine engine segment, consisting of the Mercury Marine Group, including the marine service, parts and accessories businesses, reported net sales of $415.2 million in the second quarter of 2009, down 43 percent from $723.6 million in the year-ago second quarter. International sales, which represented 42 percent of total segment sales in the quarter, declined by 45 percent.

For the quarter, the marine engine segment reported an operating loss of $7.8 million, including restructuring charges of $9.6 million. This compares with operating earnings of $58.9 million in the year-ago quarter, including $17.6 million of restructuring charges.

Sales were off across all marine engine operations, with sterndrives experiencing a greater sales decline than outboards. Sales from the segment's marine service, parts and accessories businesses, which represented 35 percent of total segment sales in the quarter, were down low single digits, as boat usage and the purchase of parts and accessories remained relatively stable.

McCoy, during this morning's call, touched on the ongoing discussions surrounding the possible consolidation of Mercury plants in Wisconsin and Oklahoma, saying it was an example of how the company is continuing to look at reducing its manufacturing footprint.

McCoy said the company remained poised to come out of the recession stronger, though he predicted the remainder of the year would be difficult.

"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 said.

"In addition, we continue to analyze our manufacturing footprint, brands, models, and cost and operating structure," he added. "Our success in navigating through these very difficult market conditions places us in a strong competitive position when economic conditions improve. As such, we are uniquely positioned for continued market leadership in our marine and recreation businesses."

Brunswick shares were trading at $6.14 early this afternoon.

— Beth Rosenberg


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