Brunswick Reports Q1 Results

 Brunswick Corporation (NYSE:BC) reported results for the first quarter of 2010:
  --  Total net sales of $844.4 million, up 15 percent versus 2009.
  --  A net loss of $13.0 million, or $0.15 per diluted share, which includes $0.08 per diluted share of restructuring and impairment charges and $0.02 per diluted share of benefits from special tax items.
  --  Operating earnings of $10.1 million, a $137.6 million improvement from prior year.
  --  Cash totaled $552.4 million, up from 2009 year-end balance of $526.6 million.
  --  Low beginning-of-year marine dealer inventories led to increased production and wholesale shipments.

"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 earnings 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.

First Quarter Results
For the first quarter of 2010, the company reported net sales of $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.

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.