Corporate and Financial
Brunswick Accelerates Resizing and Fixed-Cost Reduction Efforts; Will Record Non-Cash Impairment Charge in Third Quarter
LAKE FOREST, Ill., Oct. 9 /PRNewswire-FirstCall/ -- Brunswick Corporation
(NYSE: BC) today announced it will accelerate its previously announced efforts
to resize the company and to remove $300 million in fixed costs by the end of
2009. The company is taking the action in light of extraordinary developments
within the global financial markets that are affecting the recreational marine
industry.
"We are living and working in the most turbulent economic times in recent
history," commented Brunswick Chairman and Chief Executive Officer Dustan E.
McCoy. "From the start of the year, we've experienced a 3,500-point drop in
the Dow, mortgage and housing crises, record prices for oil, and, now,
shrinking credit availability for companies and individuals. The poor economy
and the accompanying weak consumer sentiment have pressured marine markets,
eroding the demand for boats and engines these past few months at a swifter
pace than originally anticipated.
"For the past few years, Brunswick has been implementing a strategy to
fundamentally transform the way we design, engineer and manufacture our
products; shrink our manufacturing footprint so that each facility produces at
higher volumes and lower costs; and reduce our level of fixed costs in our
manufacturing operations and within operating expenses. While these times are
unprecedented, they provide an opportunity and mandate, consistent with the
pursuit of our strategy, that we step up our efforts to accomplish our
restructuring goals," McCoy stated.
Plant closures and furloughs
As previously announced, Brunswick had planned to close four boat
manufacturing facilities in early 2009, but will now accelerate that process.
Three manufacturing facilities to be permanently closed are located in
Pipestone, Minn., Roseburg, Ore., and Arlington, Wash. A fourth plant, in
Navassa, N.C., will be mothballed.
Production of the fiberglass boats manufactured in these plants will be
transitioned to other Brunswick facilities. The company said that these
actions will result in the eventual elimination of approximately 1,450 hourly
and salaried positions at these facilities, while increasing the efficiency
and utilization at the receiving plants. The Arlington, Navassa and Roseburg
shutdowns are expected to be completed by the end of 2008, with the Pipestone
shutdown expected to be completed during the first quarter of 2009.
"In these difficult times as we move into the slowest selling season in
the marine industry, it is clear that we must aggressively support our dealer
network as they cope with the effects of the economic turbulence. Among the
significant actions we can take is to meter the production of boats consistent
with demand, which is in a pronounced downturn across all consumer durable
industries, including the recreational marine industry," McCoy said.
Brunswick will temporarily suspend production at three of its boat
manufacturing facilities near Knoxville, Tenn., beginning the week of October
27 and continuing through the remainder of 2008. During this period, the
transition of boat models from the plants that are closing into these
facilities will begin.
Financial implications
"Our efforts to reduce production and cut costs have helped to mitigate
some of the challenges we have faced in 2008, as well as prepare and position
Brunswick to prosper in an improved economic environment," McCoy said. "We
remain on target to reduce fixed costs by $300 million by the end of 2009
compared with 2007 spending levels, and expect to exit 2008 with more than
$125 million of fixed-cost reductions implemented. In fact, actions completed
or currently under way will deliver about $75 million of cost savings this
year. We also continue our intense focus on liquidity and expect to report
cash at the end of the third quarter of approximately $340 million.
"As noted above, however, we will be closing plants and temporarily
suspending production at others, which will result in significantly lower
sales in the fourth quarter. Given the effect of lower fixed-cost absorption
on these reduced sales in the remainder of 2008, we are no longer confident of
achieving our goal of posting positive earnings for the full year, excluding
restructuring and impairment charges."
The company said its estimate of restructuring charges to achieve its cost
reduction targets remains in the range of $200 million to $220 million pretax,
of which approximately $180 million will be recorded in 2008. These charges
include asset write-downs, severance and facility closing and other costs. Of
the total restructuring costs, approximately half will be cash.
Further, as prescribed by SFAS No. 142, Goodwill and Other Intangible
Assets, the company concluded that a significant portion of its goodwill and
indefinite-lived intangibles was impaired. Accordingly, the company said it
will record non-cash goodwill and trade name impairment charges, associated
primarily with certain boat brands, totaling approximately $496 million pretax
in the third quarter.
Conference Call Today
Brunswick will host a conference call today at 3:30 p.m. CDT to further
discuss these actions. At that time, McCoy will be joined by Peter B.
Hamilton, 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) 787-0200 (passcode: Brunswick). Callers outside of North
America should call +1 (312) 470-7130 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 Oct. 16,
2008, by calling 866-358-4539 or 203-369-0140 (replay passcode: 3846). 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 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
June 28, 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;
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
