Brunswick Corporation expects that the combined effects of high fuel prices, lower consumer confidence and Hurricane Katrina could contribute to a slowing of the economy just as the marine industry moves into the off season.
“Retail demand for our marine products has remained robust relative to last year with several of our boat brands registering double-digit retail growth in July and August. Further, our pipeline inventories remain at healthy levels,” said Brunswick Chairman and Chief Executive Officer George W. Buckley. “As we go into the marine off season when retail activity tapers off, however, our financial results are driven primarily by demand at the wholesale level, which is affected by confidence in the economy. We are concerned that if high fuel prices, the drop in consumer confidence and Katrina lead to slower overall economic conditions, then wholesale demand for marine products could be affected. We believe that in this confusing economic environment, it is prudent for us to be cautious and proactively manage pipeline inventories down even further still. Therefore, we intend to cut production rates to position ourselves and our marine customers in the best possible way entering the marine off season. Should the economy not be impacted by this confluence of events, or in fact accelerate, we will readjust production rates to meet stronger wholesale demand. In addition, we have several new products scheduled to launch in the coming months and healthy pipelines permit these products to reach the marketplace in a rapid and effective fashion.”
“Given this developing view, we have tempered the assumptions behind our previous earnings estimates,” Buckley added. “We continue to see strong performances from our fitness, electronics and bowling and billiards businesses, which are heading into their stronger seasons. We will also benefit from a more favorable tax structure brought on by investments in our global manufacturing footprint. Lower sales and fixed cost absorption in our marine businesses, however, will temporarily offset those benefits. Most recently, we had estimated that diluted earnings per share for 2005 would fall in the range of $3.30 to $3.40. This is compared with $2.67 per diluted share reported a year ago, which excludes $0.10 from a nonrecurring tax benefit recorded in the third quarter of 2004. Our current thinking is that a range of $3.20 to $3.25 is more appropriate under the circumstances. For the quarter ending Sept. 30, 2005, we are estimating diluted earnings per share in the range of $0.70 to $0.74, which compares to $0.65 in the year-ago third quarter, excluding the previously mentioned $0.10 tax benefit in 2004.” The company noted that estimates for 2005 exclude a $0.32 per diluted share gain on the sale of securities recorded in the first quarter of the year, as well as anticipated tax adjustments, which are estimated to be in the same order of magnitude as the $0.10 per diluted share tax benefit recorded in the third quarter of 2004.
