Brunswick profits reflect market conditions

LAKE FOREST, Ill. – Marine industry giant Brunswick Corp.’s (NYSE: BC) sales in the first quarter of 2008 totaled $1,346.8 million, down 3 percent from $1,386.1 million for the year-ago quarter, the company reported in a statement yesterday.

“Sales for the quarter reflected lower demand for marine products, particularly in the United States where industry retail sales were down about 17 percent in units in the first quarter,” said Brunswick Chairman and Chief Executive Officer Dustan E. McCoy. “This weakness was partially offset by sales growth from our bowling and fitness operations, as well as strong sales outside the United States in all business segments.”

Operating earnings in the first quarter of 2008 totaled $10.3 million, compared with $53.0 million a year ago and included an $8.9 million loss on the planned divestiture of Baja and $13.3 million of restructuring and other impairment charges.

The company reported net earnings from continuing operations of $13.3 million, or $0.15 per diluted share, in the first quarter of 2008, versus $34.3 million, or $0.38 per diluted share, in the year-ago quarter.

More boat production cuts ahead

The Boat segment reported sales for the first quarter of $637.8 million, down 9 percent compared with $699.0 million in the first quarter of 2007.

Sales in the United States were down double digits, reflecting the continued weak retail markets, according to the company. The drop in domestic sales was partially offset by growth in sales outside of the U.S., primarily driven by higher sales in Europe, Brunswick reported. For the first quarter of 2008, the Boat segment had an operating loss of $14.7 million, down from operating earnings of $19.5 million in the year-ago quarter.

“In response to market conditions, we continued to lower production rates to reduce pipeline inventories held by our dealers,” McCoy said. “At the end of the quarter, there were approximately 2,800 fewer boats in our dealers’ inventories than at the same time last year. Nevertheless, we had 35 weeks of supply on hand at quarter end, up from 34 weeks of supply a year ago, and we will be making further production cuts in the months ahead.”

“Against this backdrop, we continued to make progress towards transforming our global manufacturing profile to achieve a smaller, more flexible manufacturing footprint as well as rationalizing our brand portfolio,” McCoy added. “We announced that we will cease making boats at several manufacturing facilities, and we will transfer that production to other plants that will make multiple models and brands to lower our overall cost position and improve capacity utilization. We will also continue to strategically refine our product portfolio, focusing on those brands and product segments where we see the greatest opportunity for profitable growth.”

International biz helps stabilize marine engine segment

The Marine Engine segment, consisting of the Mercury Marine Group, reported sales of $566.0 million in the first quarter of 2008, down 1 percent from $572.6 million in the year-ago first quarter. Operating earnings in the first quarter were $30.9 million versus $34.7 million, and operating margins declined to 5.5 percent compared with 6.1 percent for the same quarter in 2007.

“Sales from areas outside the United States were up double digits, which helped to mitigate the U.S. sales decline. The U.S. sales shortfall was driven by lower engine sales to boat builders, as well as lower parts and accessories sales, which are tied to boat usage and engine sales,” McCoy explained. “The decline in operating earnings was primarily due to lower sales of high-margin sterndrive engines as well as reduced fixed-cost absorption on lower sales.”

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