Corporate and Financial
Brunswick Announces Plan to Resize in Line With Smaller U.S. Marine Market and Reduce Fixed Costs by $300 Million
LAKE FOREST, Ill., June 26, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Brunswick Corporation
(NYSE: BC) announced today a set of comprehensive actions to resize the
company to improve profitability during the current downturn in the U.S.
marine market, including actions to reduce its fixed-cost structure by $300
million versus 2007 spending levels.
For the past several years, we have been implementing initiatives to
fundamentally change our cost structure by reducing our manufacturing
footprint, and leveraging purchases of common components and materials across
our brands and operations, explained Dustan E. McCoy, Brunswick's chairman
and chief executive officer. In addition, we have addressed the prolonged
downturn in the U.S. marine market by continually reducing production rates
throughout our marine businesses, divesting under-utilized assets, exiting or
divesting certain businesses, eliminating discretionary spending and reducing
headcount. While these efforts have resulted in significant savings, the
realities of the current U.S. marine market have caused us to step up the pace
and magnitude of these efforts.
Retail unit sales of power boats in the United States have been in
decline since late 2005; however, the rate of decline has been accelerating,
McCoy added. Industry retail unit sales were down 13 percent in the fourth
quarter of 2007 and down 21 percent in the first quarter of 2008 compared with
the respective year-ago quarters. Further, these reductions were recorded off
of an already low base. Total unit sales of power boats in the United States
in 2007 were at their lowest in more than 40 years.
An uncertain economy, high fuel and food prices, slumping home sales and
values, rising unemployment and other factors continue to erode U.S.
consumers' confidence and are reducing their ability and desire to purchase
discretionary items such as boats, and billiards tables and fitness equipment
for their homes, McCoy explained. For our planning purposes, we are not
assuming that these pressures will abate any time soon. As a result, we are
planning for an environment in which the U.S. marine market will be smaller in
the near term, and we will resize our company accordingly. Our objective is
to thrive and prosper while the U.S. marine market remains under pressure and
to outperform when we see a rebound in demand.
Cost Savings Efforts
Brunswick stated that its $300 million cost savings target will be
achieved in part by further shrinking its North American manufacturing
footprint. The company plans to have 17 or fewer boat plants by the end of
2009, compared with the 29 it had in 2007. This will require the closure of
four plants in addition to eight plant closures already completed or announced.
Brunswick will also continue its efforts to reduce the complexity of its
operations, including reducing the number of models and option packages,
focusing on those that are popular and clearly resonate with consumers. The
company's efforts also entail assessing the outlook for continued
participation in certain market segments across its operations that may not
offer opportunities to generate acceptable levels of profitability.
The company said it will further reduce costs by implementing a new matrix
operating model that will more efficiently provide common support functions
and administrative services across all Brunswick business units, lowering
spending in all functional and operations activities, and reducing its work
force.
Going Forward
These obviously are hard decisions, dictated by a difficult economy that
has both constricted and altered the U.S. marine market, McCoy said. We
have chosen to act now to recast and resize our operations with the objective
of being profitable within a smaller marine market. We are confident that
these targeted savings and other changes are realistic and achievable, as well
as necessary, to create a leaner organization that will be able to both
prosper within these market conditions, as well as take advantage of any
uptick in demand.
Our immediate focus remains on managing pipeline inventories at our
marine dealers, as well as enhancing our solid liquidity at Brunswick, McCoy
said. We will continue to produce at rates below retail demand to lower
pipeline inventories. A reduction in production rates also results,
unfortunately, in the need for fewer workers. The company said that it had
notified employees today that it would be reducing its hourly and salaried
work force at certain of its marine plants by 1,000. Further work force
reductions of approximately 1,000 hourly and 700 salaried employees across the
company's marine business units and staff functions are contemplated as
additional plant closures and consolidations and other cost-cutting measures
are completed.
Maintaining liquidity will continue to be a key priority in these
uncertain times, McCoy added. We are focusing on generating cash through
good working capital management, paring inventories and discretionary spending.
Our balance sheet is solid, and we expect to generate positive cash flow
benefits in 2008 by further reducing capital spending and from positive
contributions from changes in working capital.
Financial Effect
The company said that these actions are estimated to result in
restructuring charges in the range of $200 million to $220 million pretax,
which includes approximately $75 million of previously announced restructuring
charges related to actions taken earlier this year. The charges primarily
consist of asset write-downs and asset impairments, including approximately
$18 million relating to the Valley-Dynamo commercial pool table business;
severance; and costs associated with manufacturing footprint changes. The
company estimates that 85 percent of these charges will be recorded in 2008,
of which about 50 percent will be non-cash. The company noted that $22
million of the restructuring charges had been recorded in the first quarter of
2008.
Conference Call Today
Brunswick will host a conference call today at 10 a.m. CDT to further
discuss these actions. At that time, McCoy will be joined by Peter G.
Leemputte, senior vice president and chief financial officer, and Kathryn J.
Chieger, vice president -- corporate and investor relations.
The call will be broadcast over the Internet at http://www.brunswick.com.
To listen to the call, go to the Web site at least 15 minutes before the call
to register, download and install any needed audio software.
Security analysts and investors wishing to participate via telephone
should call (888) 972-9341 (passcode: Brunswick). Callers outside of North
America should call +1 (212) 287-1618 to be connected. These numbers can be
accessed 15 minutes before the call begins, as well as during the call. A
replay of the conference call will be available through midnight CDT July 3,
2008, by calling 866-420-4829 or 203-369-0791. The replay will also be
available at http://www.brunswick.com.
Forward-Looking Statements
Certain statements in this news release are forward looking as defined in
the Private Securities Litigation Reform Act of 1995. These statements
involve certain risks and uncertainties that may cause actual results to
differ 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 of
disposable income available to consumers for discretionary purchases, and (ii)
the level of consumer confidence on the demand for marine, fitness, billiards
and bowling equipment and products; the ability to successfully complete
restructuring efforts in the timeframe and cost anticipated; the effect of
higher product prices due to technology changes and added product features and
components on consumer demand; the effect of competition from other leisure
pursuits on the level of participation in boating, fitness, bowling and
billiards activities; the effect of interest rates and fuel prices on demand
for marine products; the ability to successfully manage pipeline inventories;
the financial strength of dealers, distributors and independent boat builders;
the ability to maintain mutually beneficial relationships with dealers,
distributors and independent boat builders; the ability to maintain effective
distribution and to develop alternative distribution channels without
disrupting incumbent distribution partners; the ability to maintain market
share, particularly in high-margin products; the success of new product
introductions; the success of marketing and cost management programs; the
ability to maintain product quality and service standards expected by
customers; competitive pricing pressures; the ability to develop cost-
effective product technologies that comply with regulatory requirements; the
ability to transition and ramp up certain manufacturing operations within time
and budgets allowed; the ability to successfully develop and distribute
products differentiated for the global marketplace; shifts in currency
exchange rates; adverse foreign economic conditions; the success of global
sourcing and supply chain initiatives; the ability to obtain components and
raw materials from suppliers; increased competition from Asian competitors;
competition from new technologies; the ability to complete environmental
remediation efforts and resolve claims and litigation at the cost estimated;
the effect of weather conditions on demand for marine products and retail
bowling center revenues; and the ability to successfully integrate
acquisitions. Additional factors are included in the company's Annual Report
on Form 10-K for 2007 and Quarterly Report on Form 10-Q for the quarter ended
March 29, 2008.
About Brunswick
Headquartered in Lake Forest, Ill., Brunswick Corporation endeavors to
instill Genuine Ingenuity(TM) in all its leading consumer brands, including
Mercury and Mariner outboard engines; Mercury MerCruiser sterndrives and
inboard engines; MotorGuide trolling motors; Teignbridge propellers; MotoTron
electronic controls; Albemarle, Arvor, Bayliner, Bermuda, Boston Whaler, Cabo
Yachts, Crestliner, Cypress Cay, Harris, Hatteras, Kayot, Lowe, Lund, Maxum,
Meridian, Ornvik, Princecraft, Quicksilver, Rayglass, Savage, Sea Ray, Sealine,
Triton, Trophy, Uttern and Valiant boats; Attwood marine parts and accessories;
Land 'N' Sea, Kellogg Marine, Diversified Marine and Benrock parts and
accessories distributors; IDS dealer management systems; Life Fitness, Hammer
Strength and ParaBody fitness equipment; Brunswick bowling centers, equipment
and consumer products; Brunswick billiards tables; and Dynamo, Tornado and
Valley pool tables, Air Hockey and foosball tables. For more information,
visit http://www.brunswick.com.
SOURCE: Brunswick Corporation
http://www.brunswick.com
