Brunswick Corporation said total sales for its fourth quarter were $837.7 million, a 42% drop from last year's sales of $1,436.0 million. The company said this drop was primarily the result of marine sales that had dropped 50% as weakness in the global marine marketplace accelerated during the quarter.
Brunswick reported a net loss from continuing operations of $66.3 million, or 75 cents per diluted share, as compared with net earnings from continuing operations of $12.1 million, or 14 cents per diluted share for the fourth quarter of 2007. Diluted earnings per share for the fourth quarter of 2008 included restructuring charges of 34 cents per diluted share, non-cash tax charges of 59 cents per diluted share and a benefit from the reversal of variable compensation accruals of 56 cents per diluted share. Diluted earnings per share for the fourth quarter of 2007 included 7 cents per diluted share of restructuring charges and 5 cents per diluted share of tax-related benefits.
2008 Results
For the year ended Dec. 31, 2008, the company had net sales of $4,708.7 million, compared with $5,671.2 million in 2007. For the year, Brunswick reported an operating loss of $611.6 million, including $511.1 million of non- cash goodwill and trade name impairment charges and $177.3 million of restructuring charges. This compares with operating earnings of $107.2 million in 2007, which included $66.4 million of trade name impairment charges and $22.2 million of restructuring charges.
For 2008, the company had a net loss from continuing operations of $788.1 million, or $8.93 per diluted share, which included $4.43 per diluted share of goodwill and trade name impairment charges, $1.25 per diluted share of restructuring charges, 11 cents per diluted share gain on investment sales and $3.90 per diluted share of non-cash tax charges, primarily related to amounts prescribed by SFAS No. 109, “Accounting for Income Taxes” and FIN 48, “Accounting for Uncertainty in Income Taxes.” This compares with net earnings from continuing operations of $79.6 million, or 88 cents per diluted share in 2007, which included 46 cents per diluted share of trade name impairment charges, 17 cents per diluted share of restructuring charges, and 11 cents per diluted share benefit from special tax items.
Boat Segment
The Brunswick Boat Group comprises the Boat segment and includes 17 boat brands, as well as a marine parts and accessories business. The Boat segment reported net sales for the fourth quarter of 2008 of $293.7 million, down 54% compared with $645.2 million in the fourth quarter of 2007. International sales, which represented 57% of total segment sales in the quarter, increased by 6% during the period. For the fourth quarter of 2008, the Boat segment reported an operating loss of $63.9 million, including restructuring charges of $40.6 million. This compares with an operating loss of $29.9 million, including restructuring charges of $6.0 million in the fourth quarter of 2007.
For the year, Boat segment sales were down approximately 25% to $2,011.9 million from $2,690.9 million in 2007. International sales, which represented 38% of total segment sales in 2008, increased by 13% on a year-to-year basis. For the year, the Boat segment reported an operating loss of $653.7 million for 2008, including goodwill and trade name impairment charges of $483.7 million and restructuring charges of $101.7 million. This compares with an operating loss of $81.4 million for 2007, including $66.4 million of trade name impairment charges and $15.9 million in restructuring charges.
“In 2008, we continued to take a number of significant steps to both address the deepening drop in demand in global marine markets, as well as position our boat businesses to move forward aggressively when markets stabilize,” McCoy explained. “We reduced production, brands, models, the manufacturing footprint, employees, functions, non-manufacturing facilities and other costs, while taking steps to improve productivity and effectiveness by such actions as moving multiple brands into single production facilities.”
Marine Engine Segment
The Marine Engine segment, consisting of the Mercury Marine Group, reported net sales of $297.5 million in the fourth quarter of 2008, down 46% from $548.6 million in the year-ago fourth quarter. International sales, which represented 55% of total segment sales in the quarter, declined by 42% on a year-to-year basis. For the fourth quarter, the Marine Engine segment reported an operating loss of $8.4 million, which benefited from a $2.0 million gain related to restructuring activities. This compares with operating earnings of $21.2 million in the year-ago quarter.
For the full year, Marine Engine segment net sales were down 17% to $1,955.9 million from $2,357.5 million. International sales, which represented 53% of total segment sales in 2008, declined by 8% on a year-to- year basis. Operating earnings for the full year in 2008 were $68.3 million versus $183.7 million in 2007. In 2008, the segment recorded $4.5 million of trade name impairments and $29.4 million of restructuring charges, compared with $3.4 million of restructuring charges during the same period in 2007.
For the quarter, sales were off across all Marine Engine operations, including a double-digit, year-over-year drop in markets outside the United States, reflecting the breadth and rapid decline in the global marine marketplace. In the United States, declines in outboard and sterndrive sales tracked those of boat results, reflecting the difficult market conditions in the final three months of 2008.
Consistent with actions taken in the Boat Group, Mercury also cut production rates and instituted plant furloughs during the quarter to address pipeline levels. Reduced fixed-cost absorption on lower sales had an adverse effect on operating earnings.
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 fourth quarter of 2008 totaled $171.8 million, down 20% from $214.5 million in the year-ago quarter. International sales, which represented 49% of total segment sales in the quarter, declined by 18% on a year-to-year basis. Operating earnings declined 21% to $25.6 million from $32.4 million. The segment recorded $1.2 million in restructuring charges during the fourth quarter of 2008.
For 2008, the Fitness segment reported net sales of $639.5 million, down 2% from $653.7 million in 2007. International sales, which represented 49% of total segment sales in 2008, increased by 3% on a year- to-year basis. Operating earnings in 2008 declined 13% to $52.2 million from $59.7 million. The segment recorded $3.3 million in restructuring charges for the full year during 2008.
Commercial equipment sales, which account for the largest percentage of Fitness segment sales, declined by double digits in the quarter as gym and fitness club operators were cautious about ordering equipment in the final months of the year. Consumer sales also were down double digits year-over- year, reflecting the effects of the weakening economy. Likewise, international sales were off, particularly in Europe, due to increasing economic pressures during the quarter. Operating earnings reflected the favorable effects of continued efforts to reduce operating costs, but were offset by reduced sales levels and higher steel and fuel costs, which did not begin to subside until late in the quarter.
Company Outlook
“As we had anticipated, 2008 proved to be a very challenging year for our businesses and we expect 2009 to also be difficult. We will continue to focus on maintaining our strong liquidity, taking actions necessary to maintain dealer health and positioning ourselves to exit this global downturn as a better business,” McCoy said.
“Although we have limited visibility to a very volatile marketplace entering the year, we expect our revenues to be lower in 2009 with higher relative percentage declines occurring in the first half of the year. Our expectation of lower revenues reflects our view that retail demand will continue to decline, at least through the first six months of the year, and we are planning for production at rates well below the retail rate of decline.
“Our overall profitability versus 2008 will be affected by the expected lower production and sales levels, restructuring charges that will decline to approximately $50 million pretax and incremental pension-related expenses of $75 million pretax. Partially offsetting these factors will be nearly $200 million of net cost reductions resulting from the full-year effect of actions taken in 2008, as well as further cost reduction activities implemented and planned in 2009.
“Liquidity remains important, and although our earnings will be down significantly, we believe we can exit 2009 with cash at or above the amount that we reported on our balance sheet at year-end 2008, without increased borrowings. This net result will be reflective of our continued focus on managing our businesses for cash, which includes vigorous working capital management plans, primarily centered on reducing our overall inventory levels.
“We will continue to carefully and periodically evaluate our re-sizing efforts, including manufacturing footprint, production levels and work force requirements, as the market continues to evolve, while weighing capital spending needs and pursuing continued cost savings efforts. We believe when this economic downturn subsides, we will be well positioned to compete and prosper,” McCoy said.
Brunswick Corporation
Selected Financial Information
(in millions)
(unaudited)
Segment Information
Three Months Ended December 31
Operating
Net Sales Operating Earnings(1) Margin
2008 2007 Change 2008 2007 Change 2008 2007
Boat $293.7 $645.2 -54% $(63.9) $(29.9) NM -21.8% -4.6%
Marine
Engine 297.5 548.6 -46% (8.4) 21.2 NM -2.8% 3.9%
Marine
eliminations(38.4) (95.6) – –
Total Marine 552.8 1,098.2 -50% (72.3) (8.7) NM -13.1% -0.8%
Fitness 171.8 214.5 -20% 25.6 32.4 -21% 14.9% 15.1%
Bowling &
Billiards 113.2 123.3 -8% 16.6 11.1 50% 14.7% 9.0%
Eliminations (0.1) – – –
Corp/Other – – (8.3) (20.6) 60%
Total $837.7 $1,436.0 -42% $(38.4) $14.2 NM -4.6% 1.0%
Years Ended December 31
Operating
Net Sales Operating Earnings(2) Margin
2008 2007 Change 2008 2007 Change 2008 2007
Boat $2,011.9 $2,690.9 -25% $(653.7) $(81.4) NM -32.5% -3.0%
Marine
Engine 1,955.9 2,357.5 -17% 68.3 183.7 -63% 3.5% 7.8%
Marine
elimin-
ations (346.7) (477.6) – –
Total
Marine 3,621.1 4,570.8 -21% (585.4) 102.3 NM -16.2% 2.2%
Fitness 639.5 653.7 -2% 52.2 59.7 -13% 8.2% 9.1%
Bowling &
Billiards 448.3 446.9 0% (12.7) 16.5 NM -2.8% 3.7%
Elimin-
ations (0.2) (0.2) – –
Corp/
Other – – (65.7) (71.3) 8%
Total $4,708.7 $5,671.2 -17% $(611.6) $107.2 NM -13.0% 1.9%
