Brunswick Corporation motored to $1.0 billion in sales in the second quarter ended July 3 as dealers rushed to restock their inventories. Rebounding sales of boats and marine engines combined with recent cost cutting improved margins, resulting in a huge swing in profits. Net earnings reached $13.7 million, or 15 cents per diluted share, despite 26 cents per diluted share of restructuring, exit and impairment charges and 2 cents per diluted share of expense from special tax items.


Operating earnings reached $55.7 million, a $201.1 million improvement from prior year. The company ended the quarter with $619.6 million in cash, up $526.6 million at the end of 2009.

 

BC said increased production and wholesale shipments resulted from low beginning-of-year marine dealer inventories.

“The factors that positively affected our revenues and earnings in the second quarter of 2010, compared to the previous year, included higher overall unit production and sales levels, improved fixed-cost absorption in our marine businesses, and lower discounts required to facilitate retail boat sales,” said Brunswick's Chairman and Chief Executive Officer Dustan E. McCoy.

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 $579.2 million in the second quarter of 2010, up 39 percent from $415.2 million in the year-ago second quarter. 


International sales, which represented 41 percent of total segment sales in the quarter, increased by 28 percent.  For the quarter, the Marine Engine segment reported operating earnings of $89.2 million, including restructuring charges of $2.1 million.  This compares with an operating loss of $7.8 million in the year-ago quarter, which included $9.6 million of restructuring, exit and impairment charges.

Sales were higher across all of the segment's main operations, including a low-teen increase in the domestic marine service, parts and accessories businesses, which represented 28 percent of total segment sales in the quarter.  The segment's sterndrive engine business experienced the greatest percentage sales growth. 

Mercury's manufacturing facilities continued to increase production during the quarter in response to customer inventory requirements.  Higher sales, lower bad debt expense, fixed-cost reductions, increased fixed-cost absorption, improved operating efficiencies, lower restructuring, exit and impairment charges and reduced pension expense all 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 $296.6 million for the second quarter of 2010, an increase of 114 percent compared with $138.8 million in the second quarter of 2009. 

 

International sales, which represented 38 percent of total segment sales in the quarter, increased by 64 percent during the period.  For the second quarter of 2010, the Boat segment reported an operating loss of $23.6 million, including restructuring, exit and impairment charges of $21.7 million.  This compares with an operating loss of $107.9 million, including restructuring, exit and impairment charges of $17.9 million, in the second quarter of 2009.

Boat manufacturing facilities continued to increase production during the quarter to address inventory requirements of their dealers.  Higher sales, increased fixed-cost absorption, and reduced discounts required to support retail sales by dealers were the primary factors affecting 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 second quarter of 2010 totaled $123.2 million, up 17 percent from $105.0 million in the year-ago quarter.  International sales, which represented 54 percent of total segment sales in the quarter, increased by 39 percent.  For the quarter, the Fitness segment reported operating earnings of $8.7 million, including restructuring charges of $0.1 million.  This compares with operating earnings of $0.2 million in the second quarter of 2009, which included restructuring charges of $0.2 million.

Global commercial and consumer equipment sales increased during the quarter.  Higher operating earnings in the second quarter of 2010, when compared with 2009, reflect higher sales, a more favorable product sales mix, lower material and freight costs and other operating 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 second quarter of 2010 totaled $77.3 million, down slightly compared with $77.4 million in the year-ago quarter.  International sales, which represented 24 percent of total segment sales in the quarter, increased by 17 percent.  For the quarter, the segment reported an operating loss of $2.6 million, including restructuring charges of $0.2 million.  This compares with an operating loss of $5.9 million, including restructuring and exit charges of $3.2 million in the second quarter of 2009. 

For the quarter, retail bowling equivalent-center sales declined by a mid-single-digit percentage.  Bowling products experienced a solid increase in sales, as international bowling center operators increased purchases.  The reduction in operating losses in the second quarter of 2010, when compared with 2009, reflects lower restructuring and exit charges and pension expense.

Outlook
“We entered 2010 with planning assumptions that reflected continued challenging conditions in the economy and in the markets in which our businesses operate,” McCoy said.  “We further believed that if we continued to successfully execute against our strategic objectives, we would be able to generate positive cash flow and demonstrate outstanding operating leverage.  We have achieved these objectives in the first half of 2010.

“Conditions in 2010 have indeed been difficult, with end-market results being mixed, not only throughout the U.S., but also globally.  Retail demand for our marine market products continues to be at historically record low levels, but the overall market rate of decline has eased.  
“During the second half of 2010, we will continue to focus on liquidity and closely manage our overall cost structure.  In addition, we plan to keep our production and wholesale shipment levels closely matched with retail demand and dealer stocking requirements, which will ensure the continuing health of our dealer pipeline inventories.

“The continued execution of our strategic plans will help us maintain outstanding operating leverage in subsequent quarters and enable us to come out of this downturn stronger than we began the period.  As we continue to progress on this path, subject to the state of the global economy and retail marine markets, we maintain our objective of returning to profitability in 2011,” McCoy concluded.





































































































































































































































Brunswick Corporation


 


 


 


 


 

 

Comparative Consolidated Statements of Operations


 


 


 


 


 

 

(in millions, except per share data)


 


 


 


 

 

(unaudited)





Three Months Ended


July 3,

July 4,



2010

2009

% Change













Net sales

$ 1,014.7

$  718.3

41%

Cost of sales

772.4

644.3

20%

Selling, general and administrative expense


140.0

162.6

-14%

Research and development expense

22.4

21.3

5%

Restructuring, exit and impairment charges

24.2

35.5

-32%

 Operating earnings (loss)

55.7

(145.4)

NM

Equity earnings (loss)

0.9

(4.1)

NM

Other expense, net

(0.4)

(0.2)

NM

 Earnings (loss) before interest, loss on early extinguishment of debt

56.2

(149.7)

NM

    and income taxes





Interest expense

(23.9)

(18.3)

-31%

Interest income

0.7

1.0

-30%

Loss on early extinguishment of debt

(4.1)

–

NM

 Earnings (loss) before income taxes

28.9

(167.0)

NM

Income tax provision (benefit)

15.2

(3.3)


 Net earnings (loss)

$      13.7

$ (163.7)

NM







Earnings (loss) per common share:





 Basic

$      0.15

$   (1.85)


 Diluted

$      0.15

$   (1.85)

































































Brunswick Corporation

 

Selected Financial Information

 

(in millions)

 

(unaudited)



Segment Information



























Three Months Ended




Net Sales


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