Brunswick blames falling profits on weak U.S. market

May 2008 News

The Lake Forest, Ill.-based company's profits were $13.3 million, or 15 cents per diluted share, in the first quarter of 2008, compared to $45.6 million, or 38 cents per diluted share, in the comparable quarter a year ago. The company reported sales of $1.34 billion, down 3 percent from $1.39 billion for the year-ago quarter. 

"Sales for the quarter reflected lower demand for marine products, particularly in the United States where industry retail sales were down about 17 percent in units in the first quarter," Brunswick chairman and CEO Dustan E. McCoy said. 

McCoy, in a conference call today, says the company's financial results are good, considering the "unprecedented" market conditions. 

Weakness was partially offset by sales increases for its bowling and fitness operations, as well as strong sales outside the United States in all business segments, he said. 

The company's boat segment reported first-quarter sales of $637.8 million, down 9 percent compared with $699.0 million in the first quarter of 2007. 

The drop in domestic sales was partially offset by growth in sales outside of the U.S., primarily driven by higher sales in Europe, according to the company. 

McCoy says the company will continue to curb production to reduce inventory. At the end of the quarter, there were approximately 2,800 fewer boats in dealers' inventories than at the same time last year. 

The company's engine segment reported sales of $566 million in the first quarter of 2008, down 1 percent from $572.6 million in the comparable quarter a year ago. 

The company during the first quarter incurred $13 million in costs associated with restructuring and plant closures, according to CFO Peter Leemputte. 

The company completed the closure of its Aberdeen, Miss., boat plant and a bowling pin manufacturing plant in Antigo, Wis. In addition, it announced it will cease operations at other plants and close its Bucyrus, Ohio plant, in conjunction with the proposed sale of its Baja boat business. The sale of its Baja operations to Fountain is expected to be completed during the company's second quarter. 

"Further closures are likely," McCoy said. 

While Brunswick plans further cost-cutting measures, McCoy says the company will continue to invest in research and development. New products drive sales, so new product development is particularly important in the current market, he said.

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