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Brunswick Reports Fourth Quarter Results
Posted by: gurufocus (IP Logged)
Date: January 29, 2009 10:01AM
Press Release: Brunswick Reports Fourth Quarter Results
-- Total sales for the fourth quarter of $837.7 million were down 42 percent versus a year ago, primarily the result of marine sales that had dropped 50 percent, as weakness in the global marine marketplace accelerated during the quarter. -- A net loss from continuing operations of $66.3 million, or $0.75 per diluted share, for the fourth quarter of 2008, which includes $0.34 per diluted share of restructuring charges, $0.59 per diluted share of non- cash tax charges and a benefit of $0.56 per diluted share from the reversal of variable compensation accruals. -- Cash on hand at year's end was $317.5 million, down slightly from the 2007 year-end balance of $331.4 million.
"The continued decline in global recreational marine markets experiencedthroughout the first nine months of the year increased during the fourthquarter of 2008, driven by the accelerating decline in global economicconditions. We also began to see the weakening global economy affect ourFitness and Bowling & Billiards segments in the quarter," said Brunswick'sChairman and Chief Executive Officer
"In this difficult economic climate we remain focused on three principles: -- "Maintain strong liquidity, without increasing debt. We ended the year with $317.5 million of cash without any borrowings under our revolving credit agreement, compared with $331.4 million of cash at year-end 2007. We also enhanced our liquidity and financial flexibility by completing an amendment to our revolving credit facility in the fourth quarter of 2008; -- "Take actions necessary to maintain dealer health. During 2008 we reduced the dealer pipeline by 6,700 units, a 22 percent reduction, and ended the year with 34.5 weeks of product in the pipeline on a trailing 12 months retail basis, compared with 34 weeks at the end of 2007. Our weeks-on-hand and the decline in the absolute number of boats in the pipeline are remarkable in the current retail environment, but burdened our earnings as we exited 2008 with the percentage decline in our fiberglass boat manufacturing volumes more than double the percentage of decline we saw in retail demand; and, -- "Position our businesses to emerge from the global economic crisis stronger than before. Brunswick continues to execute a comprehensive set of plans to reduce our manufacturing footprint, reduce brands and models, reduce headcount, consolidate functional activities across businesses, reduce fixed costs, improve our sourcing and logistics effectiveness, reduce layers of management, consolidate businesses, and a myriad of other actions to improve our costs, productivity and effectiveness in the future. The results of our work to date are demonstrated by significant reductions in operating expenses and improving the operating leverage decline as our sales weaken. These actions position Brunswick to exit this global economic crisis with a significantly improved cost structure, a more agile operating model and an increased focus on the most profitable segments of our business."
Fourth Quarter Results
For the quarter ended
For the fourth quarter of 2008, Brunswick reported a net loss fromcontinuing operations of
For the year ended
For 2008, the company had a net loss from continuing operations of
The Brunswick Boat Group comprises the Boat segment and includes 17 boatbrands, as well as a marine parts and accessories business. The Boat segmentreported net sales for the fourth quarter of 2008 of
For 2008, Boat segment sales were down approximately 25 percent to
"In 2008, we continued to take a number of significant steps to bothaddress the deepening drop in demand in global marine markets, as well asposition our boat businesses to move forward aggressively when marketsstabilize," McCoy explained. "We reduced production, brands, models, themanufacturing footprint, employees, functions, non-manufacturing facilitiesand other costs, while taking steps to improve productivity and effectivenessby 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
For the full year, Marine Engine segment net sales were down 17 percent to
For the quarter, sales were off across all Marine Engine operations,including a double-digit, year-over-year drop in markets outside
Consistent with actions taken in the Boat Group, Mercury also cutproduction rates and instituted plant furloughs during the quarter to addresspipeline levels. Reduced fixed-cost absorption on lower sales had an adverseeffect on operating earnings.
The Fitness segment is comprised of the Life Fitness Division, whichmanufactures and sells Life Fitness and Hammer Strength fitness equipment.Fitness segment sales in the fourth quarter of 2008 totaled
For 2008, the Fitness segment reported net sales of
Commercial equipment sales, which account for the largest percentage ofFitness segment sales, declined by double digits in the quarter as gym andfitness club operators were cautious about ordering equipment in the finalmonths of the year. Consumer sales also were down double digits year-over-year, reflecting the effects of the weakening economy. Likewise, internationalsales were off, particularly in
Bowling & Billiards Segment
The Bowling & Billiards segment is comprised of the Brunswick retailbowling centers; bowling equipment and products; and billiards, Air Hockey andfoosball tables. Segment sales in the fourth quarter of 2008 totaled
For 2008, the segment reported net sales of
For the quarter, a mid-single digit increase in bowling product salespartially offset lower sales in billiards and retail bowling. Althoughhistorically recession resistant, economic pressures drove revenues lower bymid-single digits at retail bowling centers. Operating earnings benefitedfrom cost reductions throughout the segment, partially offset by lower levelsof revenue.
"As we had anticipated, 2008 proved to be a very challenging year for ourbusinesses and we expect 2009 to also be difficult. We will continue to focuson maintaining our strong liquidity, taking actions necessary to maintaindealer health and positioning ourselves to exit this global downturn as abetter business," McCoy said.
"Although we have limited visibility to a very volatile marketplaceentering the year, we expect our revenues to be lower in 2009 with higherrelative percentage declines occurring in the first half of the year. Ourexpectation of lower revenues reflects our view that retail demand willcontinue to decline, at least through the first six months of the year, and weare planning for production at rates well below the retail rate of decline.
"Our overall profitability versus 2008 will be affected by the expectedlower production and sales levels, restructuring charges that will decline toapproximately
"Liquidity remains important, and although our earnings will be downsignificantly, we believe we can exit 2009 with cash at or above the amountthat we reported on our balance sheet at year-end 2008, without increasedborrowings. This net result will be reflective of our continued focus onmanaging our businesses for cash, which includes vigorous working capitalmanagement plans, primarily centered on reducing our overall inventory levels.
"We will continue to carefully and periodically evaluate our re-sizingefforts, including manufacturing footprint, production levels and work forcerequirements, as the market continues to evolve, while weighing capitalspending needs and pursuing continued cost savings efforts. We believe whenthis economic downturn subsides, we will be well positioned to compete andprosper," McCoy said.
Conference Call Scheduled
Brunswick will host a conference call today at
The call will be broadcast over the Internet at [www.brunswick.com.To] listen to the call, go to the Web site at least 15 minutes before the callto register, download and install any needed audio software.
Security analysts and investors wishing to participate via telephoneshould call (800) 857-1754 (passcode: Brunswick Q4). Callers outside of
Certain statements in this news release are forward looking as defined inthe Private Securities Litigation Reform Act of 1995. These statementsinvolve certain risks and uncertainties that may cause actual results todiffer materially from expectations as of the date of this news release.These risks include, but are not limited to: the effect of (i) the amount ofdisposable income available to consumers for discretionary purchases, and (ii)the level of consumer confidence on the demand for marine, fitness, billiardsand bowling equipment, products and services; the ability to successfullycomplete restructuring efforts in the timeframe and cost anticipated; theability to successfully complete the disposition of non-core assets; theeffect of higher product prices due to technology changes and added productfeatures and components on consumer demand; the effect of competition fromother leisure pursuits on the level of participation in boating, fitness,bowling and billiards activities; the effect of interest rates and fuel priceson demand for marine products; the ability to successfully manage pipelineinventories; the financial strength of dealers, distributors and independentboat builders; the ability to maintain mutually beneficial relationships withdealers, distributors and independent boat builders; the ability to maintaineffective distribution and to develop alternative distribution channelswithout disrupting incumbent distribution partners; the ability to maintainmarket share, particularly in high-margin products; the success of new productintroductions; the ability to maintain product quality and service standardsexpected by customers; competitive pricing pressures; the ability to developcost-effective product technologies that comply with regulatory requirements;the ability to transition and ramp up certain manufacturing operations withintime and budgets allowed; the ability to successfully develop and distributeproducts differentiated for the global marketplace; shifts in currencyexchange rates; adverse foreign economic conditions; the success of globalsourcing and supply chain initiatives; the ability to obtain components andraw materials from suppliers; increased competition from Asian competitors;competition from new technologies; the ability to complete environmentalremediation efforts and resolve claims and litigation at the cost estimated;and the effect of weather conditions on demand for marine products and retailbowling center revenues. Additional factors are included in the company'sAnnual Report on Form 10-K for 2007 and Quarterly Report on Form 10-Q/A forthe quarter ended
Brunswick Corporation Comparative Consolidated Statements of Operation (in millions, except per share data) Three Months Ended December 31 2008 2007 % Change (unaudited) Net sales $837.7 $1,436.0 -42% Cost of sales 719.8 1,174.5 -39% Selling, general and administrative expense 82.3 204.2 -60% Research and development expense 25.1 34.3 -27% Goodwill impairment charges - - NM Trade name impairment charges - - NM Restructuring, exit and other impairment charges 48.9 8.8 NM Operating earnings (loss) (38.4) 14.2 NM Equity earnings (loss) (3.6) 4.9 NM Investment sale gain - - NM Other income (expense), net (4.2) 0.5 NM Earnings (loss) before interest and income taxes (46.2) 19.6 NM Interest expense (18.6) (12.6) -48% Interest income 1.3 3.1 -58% Earnings (loss) before income taxes (63.5) 10.1 NM Income tax provision (benefit) 2.8 (2.0) Net earnings (loss) from continuing operations (66.3) 12.1 NM Discontinued operations: Loss from discontinued operations, net of tax - (6.4) NM Gain on disposal of discontinued operations, net of tax - 1.1 NM Net loss from discontinued operations - (5.3) NM Net earnings (loss) $(66.3) $6.8 NM Earnings per common share: Basic Net earnings (loss) from continuing operations $(0.75) $0.14 NM Loss from discontinued operations, net of tax - (0.07) NM Gain on disposal of discontinued operations, net of tax - 0.01 NM Net earnings (loss) $(0.75) $0.08 NM Diluted Net earnings (loss) from continuing operations $(0.75) $0.14 NM Loss from discontinued operations, net of tax - (0.07) NM Gain on disposal of discontinued operations, net of tax - 0.01 NM Net earnings (loss) $(0.75) $0.08 NM Weighted average shares used for computation of: Basic earnings per share 88.3 88.5 0% Diluted earnings per share 88.3 88.6 0% Effective tax rate -4.4% -19.8% Supplemental Information Diluted net earnings (loss) from continuing operations $(0.75) $0.14 NM Restructuring, exit and other impairment charges, net of tax 0.34 0.07 NM Special tax items 0.59 (0.05) NM Diluted net earnings from continuing operations, as adjusted $0.18 $0.16 13% Brunswick Corporation Comparative Consolidated Statements of Operation (in millions, except per share data) Years Ended December 31 2008 2007 % Change (unaudited) Net sales $4,708.7 $5,671.2 -17% Cost of sales 3,841.3 4,513.4 -15% Selling, general and administrative expense 668.4 827.5 -19% Research and development expense 122.2 134.5 -9% Goodwill impairment charges 377.2 - NM Trade name impairment charges 133.9 66.4 NM Restructuring, exit and other impairment charges 177.3 22.2 NM Operating earnings (loss) (611.6) 107.2 NM Equity earnings 6.5 21.3 -69% Investment sale gains 23.0 - NM Other income (expense), net (2.6) 7.8 NM Earnings (loss) before interest and income taxes (584.7) 136.3 NM Interest expense (54.2) (52.3) -4% Interest income 6.7 8.7 -23% Earnings (loss) before income taxes (632.2) 92.7 NM Income tax provision 155.9 13.1 Net earnings (loss) from continuing operations (788.1) 79.6 NM Discontinued operations: Earnings from discontinued operations, net of tax - 2.2 NM Gain on disposal of discontinued operations, net of tax - 29.8 NM Net earnings from discontinued operations - 32.0 NM Net earnings (loss) $(788.1) $111.6 NM Earnings per common share: Basic Net earnings (loss) from continuing operations $(8.93) $0.88 NM Earnings from discontinued operations, net of tax - 0.02 NM Gain on disposal of discontinued operations, net of tax - 0.34 NM Net earnings (loss) $(8.93) $1.24 NM Diluted Net earnings (loss) from continuing operations $(8.93) $0.88 NM Earnings from discontinued operations, net of tax - 0.02 NM Gain on disposal of discontinued operations, net of tax - 0.34 NM Net earnings (loss) $(8.93) $1.24 NM Weighted average shares used for computation of: Basic earnings per share 88.3 89.8 -2% Diluted earnings per share 88.3 90.2 -2% Effective tax rate -24.7% 14.1% Supplemental Information Diluted net earnings (loss) from continuing operations $(8.93) $0.88 NM Goodwill impairment charges, net of tax 3.40 - NM Trade name impairment charges, net of tax 1.03 0.46 NM Restructuring, exit and other impairment charges, net of tax 1.25 0.17 NM NBK investment sale gain, net of tax (0.11) - NM Special tax items 3.90 (0.11) NM Diluted net earnings from continuing operations, as adjusted $0.54 $1.40 -61% 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%
(1) Operating earnings in the fourth quarter of 2008 include
(2) Operating earnings in 2008 include
Brunswick Corporation Comparative Condensed Consolidated Balance Sheets (in millions) December 31, December 31, 2008 2007 (unaudited) Assets Current assets Cash and cash equivalents $317.5 $331.4 Accounts and notes receivables, net 444.8 572.4 Inventories Finished goods 457.7 446.7 Work-in-process 248.2 323.4 Raw materials 105.8 136.6 Net inventories 811.7 906.7 Deferred income taxes 103.2 249.9 Prepaid expenses and other 59.7 53.9 Current assets 1,736.9 2,114.3 Net property 917.6 1,052.8 Other assets Goodwill, net 290.9 678.9 Other intangibles, net 86.6 245.6 Investments 75.4 132.1 Other long-term assets 116.5 141.9 Other assets 569.4 1,198.5 Total assets $3,223.9 $4,365.6 Liabilities and shareholders' equity Current liabilities Short-term debt $3.2 $0.8 Accounts payable 301.3 437.3 Accrued expenses 696.7 858.1 Current liabilities 1,001.2 1,296.2 Long-term debt 728.5 727.4 Other long-term liabilities 764.3 449.1 Common shareholders' equity 729.9 1,892.9 Total liabilities and shareholders' equity $3,223.9 $4,365.6 Supplemental Information Debt-to-capitalization rate 50.1% 27.8% Brunswick Corporation Comparative Condensed Consolidated Statements of Cash Flows (in millions) Year Ended December 31 2008 2007 (unaudited) Cash flows from operating activities Net earnings (loss) $(788.1) $111.6 Less: net earnings from discontinued operations - 32.0 Net earnings (loss) from continuing operations (788.1) 79.6 Depreciation and amortization 177.2 180.1 Changes in non-cash current assets and current liabilities (100.0) 3.5 Goodwill impairment charges 377.2 - Trade name impairment charges 133.9 66.4 Other impairment charges 53.2 0.4 Income taxes and other, net 134.5 14.1 Net cash provided by (used for) operating activities of continuing operations (12.1) 344.1 Net cash used for operating activities of discontinued operations - (29.8) Net cash provided by (used for) operating activities (12.1) 314.3 Cash flows from investing activities Capital expenditures (102.0) (207.7) Acquisitions of businesses, net of cash acquired - (6.2) Investments 20.0 4.1 Proceeds from investment sales 45.5 - Proceeds from sale of property, plant and equipment 28.3 10.1 Other, net 17.2 25.6 Net cash provided by (used for) investing activities of continuing operations 9.0 (174.1) Net cash provided by investing activities of discontinued operations - 75.6 Net cash provided by (used for) investing activities 9.0 (98.5) Cash flows from financing activities Net issuances of short-term debt (7.4) - Net proceeds from issuance of long-term debt 252.0 0.7 Payments of long-term debt including current maturities (251.0) (0.9) Cash dividends paid (4.4) (52.6) Stock repurchases - (125.8) Stock options exercised - 10.8 Net cash used for financing activities of continuing operations (10.8) (167.8) Net cash used for financing activities of discontinued operations - - Net cash used for financing activities (10.8) (167.8) Net increase (decrease) in cash and cash equivalents (13.9) 48.0 Cash and cash equivalents at beginning of period 331.4 283.4 Cash and cash equivalents at end of period $317.5 $331.4 Free Cash Flow from Continuing Operations Net cash provided by (used for) operating activities of continuing operations $(12.1) $344.1 Net cash provided by (used for): Capital expenditures (102.0) (207.7) Proceeds from investment sales 45.5 - Proceeds from sale of property, plant and equipment 28.3 10.1 Other, net 17.2 25.6 Total free cash flow from continuing operations $(23.1) $172.1
(1) Operating earnings in the fourth quarter of 2008 include
(2) Operating earnings in 2008 include
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