Brunswick Corp. today reported an increase in net sales for the fourth quarter and the full year, as well as a lower net loss per share for the quarter and the year.
"We believe we hit the bottom in 2010," Brunswick chairman and CEO Dustan McCoy told analysts this morning, adding it was a "transitional" year for the company and Brunswick is in "an excellent position to return to profitability in 2011."
McCoy said it's too early to say whether the marine industry will continue to bounce on the bottom this year or see improvements, but from what he's heard from dealers, an uptick is likely.
Brunswick dealers are saying that traffic at shows and in their stores has increased and people seem interested in buying, rather than just looking. Also, he added, macroeconomic conditions are "clearly improving." Additionally, the number of used boats has declined, as has discounting, McCoy said.
Net sales of $728.8 million were reported for the quarter, which ended Dec. 31, up from $657.3 million, or 11 percent, compared with the same period in 2009. For the full year, net sales of $3.4 billion were reported, up from $2.77 billion, or 23 percent, from 2009.
For the fourth quarter, Brunswick recorded a net loss of $1.17 a diluted share, compared with a net loss of $1.40 a diluted share in the prior-year period. For 2010, a net loss of $1.25 a diluted share was reported, compared with a net loss of $6.63 a diluted share in the prior year.
"In 2010, we continued to make significant strides in rationalizing our manufacturing footprint and executing against strategies that have allowed us to operate our businesses more efficiently, contributing to strong levels of operating leverage," chairman and CEO Dustan McCoy said in a statement.
"During 2010, our annual revenues increased by 23 percent and, excluding restructuring charges, our operating earnings increased by approximately $477 million as compared to 2009," he added. "In addition, we achieved our objective of being free-cash-flow positive during 2010."
For 2010, Brunswick reported operating earnings of $16.3 million, which included $62.3 million of restructuring, exit and impairment charges. In 2009, the company had an operating loss of $570.5 million, which included $172.5 million of restructuring, exit and impairment charges.
For the fourth quarter, the company reported an operating loss of $74.7 million, which included $18.5 million of restructuring, exit and impairment charges. In the fourth quarter of 2009, the company had an operating loss of $188.2 million, which included $68.6 million of restructuring, exit and impairment charges.
"The factors that positively affected our revenues and earnings in the fourth quarter of 2010, compared to the previous year, included higher sales levels in our marine and fitness businesses and lower discounts required to facilitate retail boat sales," McCoy said. "During the quarter, we also benefited from lower restructuring charges and reduced losses on early extinguishment of debt, as well as lower pension and bad debt expenses. Partially offsetting these factors were higher income tax provisions."
The boat segment, which is composed of the Brunswick Boat Group and includes 16 brands, reported net sales of $163.6 million for the fourth quarter of 2010, an increase of 7 percent from $153.4 million in the fourth quarter of 2009.
International sales were 41 percent of the company's boat sales in 2010, compared with 42 percent in 2009, McCoy said. Demand in China, Brazil, Russia and the Middle East, as well as the Nordic region, is improving, McCoy said. Demand in southern Europe remains weak, but demand in Australia remains steady.
Boat segment production increased during the fourth quarter, compared with the low levels in the fourth quarter of 2009, in response to the inventory requirements of dealers.
McCoy said this morning that the industry saw 132,000 units sell at retail this year, a decline of about 14 percent. However, the aluminum market, particularly pontoons, appears stable, while fiberglass remains a weaker sector.
Brunswick, he said, lost some of its market share this year. Not a significant amount, he added, "but enough that we felt it."
Marine engine segment
The marine engine segment, consisting of the Mercury Marine Group, including the marine parts and accessories businesses, reported net sales of $353.3 million in the fourth quarter of 2010, up 17 percent from $302.4 million in the fourth quarter of 2009.
International sales, which represented 51 percent of total segment sales in the quarter, increased by 15 percent. For the quarter, the marine engine segment reported an operating loss of $17.4 million, including restructuring charges of $7.4 million. This compares with an operating loss of $59.4 million in the year-earlier quarter, which included $8.2 million of restructuring and impairment charges.
Sales were higher across all of the segment's main operations, including a 10 percent increase in the domestic marine parts and accessories businesses, which represented 21 percent of total segment sales in the quarter. The segment's outboard engine business experienced the greatest percentage sales growth.
Mercury's manufacturing facilities continued to increase production during the quarter in response to customer requirements.
"In 2011, we will continue to remain disciplined to generate positive free cash flow, perform better than the market and demonstrate outstanding operating leverage," McCoy said in a statement.
"We currently expect to have positive earnings per share in 2011, beginning in the first quarter," he added. "We believe the significant decline in overall industry marine retail demand has bottomed in 2010, but at this early point in the marine selling season we are unable to determine if 2011 marine retail demand will remain consistent with 2010 or improve."
The level of 2011 revenue and earnings growth will be primarily governed by marine retail demand, he said.
"Our current manufacturing footprint and cost structure should allow us to report strong future earnings leverage. Without considering the effects of changes to our fixed manufacturing cost structure or operating expenses, our earnings leverage [on incremental revenue] should approximate 30 percent," McCoy added.
Brunswick expects its 2011 earnings per share to be in the range of 5 cents a share to 40 cents a share.
Brunswick's stock opened Thursday at $20.58 a share. Its 52-week high and low are $22.89 and $10.