LAKE FOREST, Ill. — Driven mainly by a 56-percent drop in marine sales, Brunswick today reported that its second quarter sales of $718.3 million were down 52 percent versus 2008.
That left the company with a net loss of $163.7 million, or $1.85 per diluted share, which includes $0.40 per diluted share of restructuring charges and $0.05 per diluted share of non-cash benefits from special tax items. The company reported a net loss of $6.0 million, or $0.07 per diluted share, for the second quarter of 2008.
Cash on hand at quarter’s end was up to $461.2 million from a 2008 year-end balance of $317.5 million. Dustan E. McCoy, Brunswick’s chairman and CEO, stressed the importance of the company’s cash reserves in the Q2 report.
“We continue to successfully execute our strategy to maintain liquidity without borrowing, take all reasonable actions to protect our dealer network, and position ourselves to take advantage of improvements in economic conditions as they occur,” McCoy said. “While the actions undertaken to execute our strategy have negatively affected our sales and earnings in the first half of this year, as they will in the second half, they are purposeful and necessary to position Brunswick for success.”
The company’s Marine Engine segment, which consists 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 sterndrive engines experiencing a greater sales decline than outboard engines. Sales from the segment’s marine service, parts and accessories businesses, which represented 35 percent of total segment sales in the quarter, were down only a few percentage points.
Mercury’s manufacturing facilities continued to cut production rates and take plant furloughs during the quarter in response to lower retail demand and to reduce pipeline levels. Lower sales, reduced fixed-cost absorption on lower production and higher bad debt expense had an adverse effect on operating earnings, Brunswick said, which was partially offset by Mercury Marine’s expense reductions.
The company’s boat segment, which comprises the Brunswick Boat Group and includes 17 boat brands, reported net sales for the second quarter of 2009 of $138.8 million, down 77 percent compared with $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 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 held by the company and its dealers. 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, as in the engine segment, were partially offset by the Boat Group’s expense reductions.
“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,” McCoy said. “This strategy has enabled us to reduce overall marine inventories and has assisted our dealers in reducing the number of boats and engines on their showroom floors. Additionally these efforts have supported our strategy of maintaining the health of our dealers, which was reflected in our second quarter boat repurchase obligations, which remain at manageable levels.”
For the quarter, Brunswick’s fitness segment reported operating earnings of $0.2 million, and its bowling & billiards segment recorded an operating loss of $5.9 million.
“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.”