Brunswick Corporatoin said net sales for the first quarter of 2010reached  $844.4 million, up from $734.7 million a year earlier.  For the quarter, the company reported operating earnings of $10.1 million, which included $7.4 million of restructuring and impairment charges.  In the first quarter of 2009, the company had an operating loss of $127.5 million, which included $39.6 million of restructuring and impairment charges. 


For the first quarter, Brunswick reported a net loss of $13.0 million, or $0.15 per diluted share, compared with a net loss of $184.2 million, or $2.08 per diluted share, for the first quarter of 2009.  The diluted loss per share for the first quarter of 2010 included restructuring and impairment charges of $0.08 per diluted share and $0.02 per diluted share of benefits from special tax items.  Diluted loss per share for the first quarter of 2009 included $0.45 per diluted share of restructuring and impairment charges, and $0.40 per diluted share of non-cash charges for special tax items.


“The successful execution of our strategic initiatives over the past several quarters was a key factor in our improved first quarter results,” said Brunswick’s Chairman and Chief Executive Officer Dustan E. McCoy.  “Historically low marine dealer inventories as we entered the year led to improved wholesale shipments.  This, combined with significant fixed-cost reductions achieved over the past two years, enabled us to report our first quarterly operating profit since the first quarter of 2008.  In addition, our net debt declined by $22 million, as cash balances increased by $26 million.

 

“The factors that positively affected our revenues and earni

ngs in the first quarter of 2010, compared to the previous year, included: higher overall unit production and sales levels and improved fixed-cost absorption in our marine businesses, combined with lower discounts required to facilitate retail boat sales.  During the quarter, we also benefited from lower special tax items, cost savings from our fixed-cost reduction activities, lower restructuring and impairment charges, as well as reduced pension and bad debt expense.  Partially offsetting these factors was higher interest expense,” McCoy said. 


 

Review of Cash Flow and Balance Sheet

Cash and cash equivalents were $552.4 million at the end of the first quarter, up $25.8 million from year-end 2009 levels.  The company’s increased cash position reflects the receipt of a $109.5 million federal tax refund, which was more than offset by changes in certain current assets and current liabilities along with net losses experienced during the quarter.  The change in certain current assets and current liabilities was largely the result of seasonal increases in the company’s accounts and notes receivable and inventory, partially offset by increases in accounts payable.  The company’s accrued expenses also decreased in the quarter.


Net debt (defined as total debt, less cash and cash equivalents) was $302.0 million, down $22.3 million from year-end 2009 levels.  The company’s total liquidity (defined as cash and cash equivalents, plus amounts available under its asset-backed lending facilities) totaled $677 million, up $62 million from year-end 2009 levels.


Marine Engine Segment


The Marine Engine segment, consisting of the Mercury Marine Group, including the marine service, parts and accessories businesses, reported net sales of $445.7 million in the first quarter of 2010, up 30 percent from $343.9 million in the year-ago first quarter.  International sales, which represented 47 percent of total segment sales in the quarter, increased by 37 percent. For the quarter, the Marine Engine segment reported operating earnings of $26.5 million, including restructuring charges of $2.4 million.  This compares with an operating loss of $50.6 million in the year-ago quarter, which included $11.7 million of restructuring charges.


Sales were higher across all Marine Engine’s main operations, except for low single-digit declines in the segment’s domestic marine service, parts and accessories businesses, which represented 22 percent of total segment sales in the quarter.  The segment’s sterndrive engine business experienced the greatest level of growth. 


Mercury’s manufacturing facilities ramped up production during the quarter in response to customer inventory requirements.  Higher sales, increased fixed-cost absorption, lower restructuring charges, fixed-cost reductions, as well as reduced pension and lower bad debt expense, had a positive effect on operating earnings during the quarter.


Boat Segment


The Boat segment is comprised of the Brunswick Boat Group, and includes 16 boat brands.  The Boat segment reported net sales of $243.6 million for the first quarter of 2010, an increase of 19 percent compared with $205.3 million in the first quarter of 2009. International sales, which represented 37 percent of total segment sales in the quarter, increased by 8 percent during the period.  For the first quarter of 2010, the Boat segment reported an operating loss of $26.7 million, including restructuring and impairment charges of $4.1 million.  This compares with an operating loss of $72.3 million, including restructuring and impairment charges of $25.0 million, in the first quarter of 2009.


Boat manufacturing facilities began to ramp up production during the quarter to address inventory requirements of their dealers.  Higher sales, increased fixed-cost absorption, fixed-cost reductions, lower restructuring charges and reduced discounts required to support retail sales by dealers were the primary factors behind the segment’s reduction in operating losses in the quarter. 


Fitness Segment


The Fitness segment is comprised of the Life Fitness Division, which manufactures and sells Life Fitness and Hammer Strength fitness equipment.  Fitness segment sales in the first quarter of 2010 totaled $119.0 million, up slightly from $118.6 million in the year-ago quarter.  International sales, which represented 52 percent of total segment sales in the quarter, increased by 15 percent.  For the quarter, the Fitness segment reported operating earnings of $9.5 million.  This compares with operating earnings of $0.3 million in the first quarter of 2009, which included restructuring charges of $1.0 million.


Commercial and consumer equipment sales were flat during the quarter.  Higher operating earnings in the first quarter of 2010, when compared with 2009, reflect the favorable effect of lower material and freight costs and other cost efficiencies.


Bowling & Billiards Segment


The Bowling & Billiards segment is comprised of Brunswick retail bowling centers; bowling equipment and products; and billiards tables and accessories.  Segment sales in the first quarter of 2010 totaled $91.9 million, down 8 percent compared with $99.9 million in the year-ago quarter.  For the quarter, the segment reported operating earnings of $14.9 million, including restructuring charges of $0.2 million.  This compares with operating earnings of $10.6 million, including restructuring charges of $0.8 million in the first quarter of 2009.


For the quarter, retail bowling equivalent-center sales declined by a low-single-digit percentage.  The bowling products and the billiards businesses also experienced declines, as bowling center operators and retail billiards customers remained cautious about purchases.  The increase in operating earnings in the first quarter of 2010, when compared with 2009, reflects fixed-cost reductions and lower pension expenses, partially offset by the unfavorable effect of the reduced sales.


Outlook



“As we have said previously, our boat wholesale shipment and production planning in 2010 has been based on the assumption that the retail marketplace would decline by approximately 10 percent,” McCoy said.  “Preliminary data for the January to March period indicate a reduction in industry retail sales of about 20 percent.  Although the January to March preliminary industry data indicate this 20 percent reduction, the month of March preliminary data is significantly better and more consistent with our planning.  However, if the first quarter 20 percent reduction in retail demand were to continue into some or all of the second quarter, it would put pressure on our current planning assumption.  As we head into the heart of the marine selling season, we will monitor retail demand closely, and will be prepared to adjust production and shipments to maintain appropriate levels of boat inventories with our dealers.


“We continue to believe that wholesale shipments will increase throughout the year versus 2009, as we return to a more normal relationship where wholesale shipments approximate retail demand. In addition to higher revenues, we expect our earnings in 2010 will also reflect lower restructuring and impairment costs and reduced pension and bad debt expense.


“We remain committed to the strategic focus that has ensured our financial strength and uniquely positioned us compared to most of our competitors in the marine, fitness and bowling and billiards segments.  We will continue our focus on liquidity, taking all reasonable actions to protect our dealer network, and doing the work necessary to come out of this downturn stronger than when we began the period. 


“In 2010, in addition to liquidity, we will extend our focus to continuous improvement in both our financial results and relative strength versus the competition in all of our business segments.  We believe that by continuing to successfully execute against our strategies, absent a more pronounced decline in marine demand, we can achieve our objective of returning to profitability in 2011.


“Although the economy, and the specific markets in which our businesses operate, may remain challenging, this transition requires that in 2010 and beyond, as the world’s economies improve, we remain disciplined to: generate positive cash flow, perform better than the market in each of our business segments, and demonstrate outstanding operating leverage,” McCoy concluded.
































































































Comparative Consolidated Statements of Operations




(in millions, except per share data)




(unaudited)





Three Months Ended


April 3,

April 4,



2010

2009

% Change











Net sales

$                            844.4

$                               734.7

15%

Cost of sales

665.8

643.5

3%

Selling, general and administrative expense


138.8

155.2

-11%

Research and development expense

22.3

23.9

-7%

Restructuring, exit and impairment charges

7.4

39.6

-81%
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