Brunswick Corp. today reported a 41 percent gain in total net sales for the second quarter of 2010, with both the boat and engine segments reporting large increases.
The company reported total net sales of $1.01 billion, up from $718.3 million in the same period last year. Net earnings of $13.7 million, or 15 cents a diluted share, contrasted with a net loss of $163.7 million, or $1.85 a diluted share, for the second quarter of 2009.
The results mark the company's first net profit since the first quarter of 2008, chairman and CEO Dustan McCoy noted in a call this morning with analysts.
Operating earnings of $55.7 million, a $201.1 million improvement from the prior year, were also reported.
"The continued successful execution of our strategic initiatives over the past several quarters was a key factor in our improved second-quarter results," 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 second consecutive quarterly operating profit. In addition, during the first half of 2010, our cash balances increased by $93 million and net debt declined by $120 million."
Cash and cash equivalents were $619.6 million at the end of the second quarter, up $93 million from year-end 2009 levels. Net debt (defined as total debt, less cash and cash equivalents) was $204.4 million, down $119.9 million from year-end 2009 levels.
The change in net debt reflects the $93 million increase in cash, along with reductions in debt resulting from debt repurchases. The Lake Forest, Ill.-based company's total liquidity (defined as cash and cash equivalents, plus amounts available under its asset-backed lending facilities) totaled $752 million, up $137 million from year-end 2009 levels.
Today's earnings report was followed by an announcement that Brunswick sold Triton Boats to Fishing Holdings, an affiliate of Platinum Equity. Terms of the transaction were not disclosed.
"This decision was part of our ongoing strategic review to further refine our product portfolio and best focus our resources on those brands and marine segments that we believe are core to our success going forward," McCoy said in a statement.
By the end of the year, Brunswick will have 11 manufacturing facilities, compared with the 28 it had in 2007, the company said.
Brunswick stock stood at $16.45 a share in early afternoon trading, up more than 12 percent from its close on Wednesday of $14.56 a share.
The boat segment, which includes 16 boat brands, reported net sales of $296.6 million for the second quarter, an increase of 114 percent from $138.8 million in the second quarter of 2009. International sales, which represented 38 percent of total segment sales in the quarter, increased by 64 percent during the period.
For the second quarter, the boat segment reported an operating loss of $23.6 million, including restructuring, exit and impairment charges of $21.7 million. This compares with an operating loss of $107.9 million, including restructuring, exit and impairment charges of $17.9 million, in the second quarter of 2009.
Boat manufacturing facilities continued to increase production during the quarter, Brunswick reported. Higher sales, increased fixed-cost absorption and reduced discounts required to support retail sales by dealers were the primary factors affecting the segment's reduction in operating losses in the quarter.
McCoy noted that industry-wide demand for fiberglass boats continues to decline, although the demand for aluminum boats increased slightly in the second quarter.
Marine engine segment
The marine engine segment reported net sales of $579.2 million in the second quarter, up 39 percent from $415.2 million in the year-ago period. International sales, which represented 41 percent of total segment sales in the quarter, increased by 28 percent.
For the quarter, the marine engine segment reported operating earnings of $89.2 million, including restructuring charges of $2.1 million. This compares with an operating loss of $7.8 million in the year-ago quarter, which included $9.6 million of restructuring, exit and impairment charges.
Sales were higher across all of the segment's main operations, including a low-teen increase in the domestic marine service, parts and accessories businesses, which represented 28 percent of total segment sales in the quarter. The segment's sterndrive engine business had the largest percentage sales growth.
Mercury's manufacturing facilities continued to increase production during the quarter in response to customer inventory requirements.
"Conditions in 2010 have indeed been difficult, with end-market results being mixed, not only throughout the U.S., but also globally. Retail demand for our marine market products continues to be at historically record low levels, but the overall market rate of decline has eased," McCoy said.
"During the second half of 2010, we will continue to focus on liquidity and closely manage our overall cost structure," he added. "In addition, we plan to keep our production and wholesale shipment levels closely matched with retail demand and dealer stocking requirements, which will ensure the continuing health of our dealer pipeline inventories."