LAKE FOREST, Ill. — While marine market conditions are clearly taking their toll on marine industry giant Brunswick Corp. (NYSE: BC), its chairman and CEO said in a statement this morning that the company is “increasingly confident that we are well positioned to benefit from an economic recovery.”
The first quarter earnings statement released by Brunswick today suggested that a 45-percent drop in Marine Engine Segment sales and a 64-percent drop in Boat Segment sales during the first quarter contributed to the company’s net loss of $184.2 million.
“Our businesses continued to be under pressure from a variety of harsh economic factors that affected both domestic and international demand for our products, especially in our recreational marine markets,” said Brunswick’s Chairman and Chief Executive Officer Dustan E. McCoy.
First quarter net loss hits $184.2 million
For the first quarter of 2009, Brunswick reported a net loss of $184.2 million, or $2.08 per diluted share, as compared with net earnings of $13.3 million, or $0.15 per diluted share, for the first quarter of 2008.
“The year began as expected with the continuation of unprecedented low levels of demand experienced in the second half of 2008, especially during the fourth quarter," McCoy said in the report. "Retail demand for marine products was impacted in the first quarter of 2009 by declining consumer confidence and the tightening of consumer credit terms by national lenders.”
Cash on hand at quarter’s end was $359.1 million, up from the 2008 year-end balance of $317.5 million. The company's revolving credit facility remained undrawn throughout the quarter.
Total restructuring charges for the coming year are estimated to be $75 million; however, the company expects to generate additional 2009 cost reductions of approximately $40 million above the $200 million of savings previously announced.
Marine Engine Segment
The Marine Engine segment, which consists of the Mercury Marine Group, including affiliated marine service, parts and accessories businesses, reported net sales of $343.9 million in the first quarter of 2009, down 45 percent from $628.6 million from last year. (Brunswick realigned the management of its marine service, parts and accessories businesses, previously part of the Boat segment, during 2009. Results for 2007 and 2008 have been restated to reflect the change.)
Sales were off across all Marine Engine operations with sterndrive engines experiencing a greater sales decline than outboard engines, the company reported. However, Brunswick said sales from marine service, parts and accessories businesses were down significantly less than its other marine businesses.
International sales, which represented 43 percent of total segment sales in the quarter, declined by 45 percent on a year-to-year basis.
For the quarter, the Marine Engine segment reported an operating loss of $50.6 million, including restructuring charges of $11.7 million. This compares with operating earnings of $33.6 million in the year-ago quarter, including $1.5 million of restructuring charges.
The Brunswick Boat Group, which includes 17 boat brands, reported net sales for the first quarter of $205.3 million, down 64 percent from $565.6 million in the first quarter of 2008.
International sales, which represented 40 percent of total segment sales in the quarter, decreased by 59 percent. For the first quarter of 2009, the Boat segment reported an operating loss of $72.3 million, including restructuring charges of $25.0 million. This compares with an operating loss of $17.4 million, including restructuring charges of $13.8 million in the first quarter of 2008.
While McCoy stressed he is confident the company is well positioned for a recovery when it comes, he is not counting on one in the near future.
“We are not planning for any meaningful economic recovery in 2009," McCoy said, "and our near-term focus remains clear, which is to: maintain strong liquidity without additional borrowings, take all appropriate actions to maintain dealer health and position ourselves to exit this global downturn as a stronger company.”
As stated above, the company's goals for 2009 are to manage for cash and avoid increased borrowings.
“Our full-year 2009 results will be negatively affected by lower sales levels, reduced fixed-cost absorption, and higher pension-related expenses when compared with 2008, as well as by continuing restructuring charges," McCoy reported. "Partially offsetting these factors will be approximately $240 million of 2009 cost reductions resulting from the full-year effect of actions taken in 2008, as well as further cost reduction activities initiated or planned in 2009. And although our 2009 earnings will be down significantly compared with 2008 earnings before restructuring charges, impairments, and special tax items, it remains our goal to exit 2009 with cash at or above the amount that we reported on our balance sheet at year-end 2008, without increased borrowings."
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