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Brunswick posts loss, but stock leaps on improved liquidity
by Michael Beller
Oct 29, 2009
The Lake Forest, Ill.-based market leader in the marine, bowling, billiards and fitness industries reported a loss of $114.3 million, or $1.29 per diluted share, for the quarter ended Oct. 3, sharply narrower than its loss of $729.1 million, or $8.26 per diluted share, in the year-earlier quarter. But the result was in line with Wall Street’s estimate, which called for a net loss of $124 million, or $1.295 per diluted share.
Sales plunged 35.9 percent to $665.8 million from $1.04 billion, due largely to a 40 percent decline in marine sales.
CEO Dustan McCoy attributed the loss to “lower overall unit sales levels across the company, combined with higher discounts and incentives to facilitate retail boat sales,” in a press release. He also said the company “continued to experience reduced fixed-cost absorption and higher pension and bad debt expenses.”
Restructuring charges cost the company 32 cents per diluted share, and it lost an additional 24 cents per diluted share in special tax items.Included in the restructuring charges is $14.1 million associated with moving a Mercury Marine location from Stillwater, Okla. to Fond du Lac, Wis., Chief Financial Officer Peter Hamilton said in a conference call with analysts.
In the conference call, McCoy said the majority of the Brunswick’s boat and engine manufacturing facilities will increase production in the current quarter and next year to boost historically low levels of dealer inventory.
“From a sales perspective it was another tough quarter, but that’s not really their focus right now,” said Philip Gorham, analyst with Morningstar Inc. in Chicago. “They’re focused on liquidity and making sure they have enough cash to run the business, and I think they’ll be able to do that.
“What was significant in the last quarter was they managed to roll some debt that was due in 2011 that has given them something of a cash cushion for the next 18 months or so.”
Brunswick's cash totaled $624.1 million, up from the 2008 year-end balance of $317.5 million.
Regarding Brunswick’s poor sales, Gorham said, “These are really high ticket items and consumers started to cut back on spending before the economy took a nosedive, so it’s partly that and it’s also partly a lack of available credit for this kind of purchase."
“Increased production, combined with higher wholesale shipments, should provide improved revenue and reduced losses throughout 2010,” McCoy said.
For the nine months ended Oct. 3, Brunswick registered a net loss of $462.2 million, or $5.23 per diluted share, shrinking from $721.8 million, or $8.18 per diluted share, in the same period a year earlier. Sales totaled $2.12 billion, a precipitous drop of 45.3 percent from $3.87 billion in the previous year’s first nine months.
Brunswick closed at $10.31, up 83 cents.
