Brunswick closings possible [The Knoxville News-Sentinel, Tenn.]
RECENT BC NEWS
Dec. 14--In an ominous signal that economic conditions continue to be choppy, the head of Brunswick Corp., parent company of East Tennessee's Sea Ray Boats, is saying more plant closings are imminent.
Dusty McCoy, Brunswick chairman and CEO who formerly headed the company's Knoxville-based Boat Group, noted in a presentation to investors and analysts this week that Brunswick has closed 12 plants since 2001.
He then indicated "more to come."
McCoy's three-word statement appeared as part of a presentation on company objectives aimed at shrinking Brunswick's manufacturing footprint and increasing revenue per plant.
Brunswick's key Boat Group division and three marine production plants are in the Knoxville area and employ about 1,800 people.
In East Tennessee this year, Sea Ray has had two rounds of layoffs totaling about 180 people.
McCoy did not elaborate on further closings.
Brunswick spokesman Dan Kubera said there were no specific details available on plant closings at the company that makes leisure products, including boats, bowling and billiard gear.
McCoy gave a generally upbeat presentation about Brunswick following two years of declines in the U.S. marine market. International sales of Brunswick boats have and are increasing, McCoy noted.
Saying the boating industry isn't all bad, McCoy pointed out that high-end boats more than 60 feet are growing at more than 10 percent annually and that motor yachts are outselling sailing yachts by a 10-to-1 ratio, potentially generating up to $10 billion in revenue. He also noted that U.S. boat builders' exports have grown dramatically amid improved cost position, a weak dollar and improved production.
He said ongoing inflationary pressure on vital commodities used to make boats will affect savings but added that the Boat Group division was able to post $41 million in savings in 2006-2007.
While more Brunswick plants will apparently close, the company is adding capacity for making larger boats.
"As economic conditions impacting the marine industry level and improve, Brunswick will be uniquely positioned to outperform the market," according to McCoy.
While painful, McCoy said the company has successfully dealt with the major problem of too many boats in production.
"We now have nearly 3,000 fewer boats in our pipeline than at this time last year, and almost 2,000 of which are higher-margin fiberglass boats," he said.
"Obviously, to accomplish that caused real pain to our margins. Production cuts, reduced sales, lower fixed-cost absorption and increased promotional spending, together with costs associated with plant closures and the startup of our newly acquired plant in North Carolina were all factors in our results," he said.
Those results have allowed earnings to remain healthy.
"We're producing earnings in this difficult environment and we are reaffirming our $1.20 to $1.30 earnings per share guidance for 2007," he said.
Another accomplishment is the company has maintained the critical component of cash on hand, McCoy said.
"Maintaining a sufficient level of cash is important, and as we ended the third quarter we had $328 million of cash and, importantly, we continued to generate solid cash flow under these conditions," he said.
"So, all in all, we're in a good position in a difficult market. The marine industry continues to be down in double digits," he said.
However, McCoy said there's no relief in the near term for sagging sales.
"The prolonged market decline in the outboard boat market is the primary driver of the $66 million in pre-tax impairment we recorded in the quarter for certain trade names in our outboard boat business," he said.
STOCK WATCH Brunswick Corp.: BC on NYSE 52-week range: $18.43-$34.99 Thursday close: down $.31 to $18.75
RECENT BC NEWS
Dec. 14--In an ominous signal that economic conditions continue to be choppy, the head of Brunswick Corp., parent company of East Tennessee's Sea Ray Boats, is saying more plant closings are imminent.
Dusty McCoy, Brunswick chairman and CEO who formerly headed the company's Knoxville-based Boat Group, noted in a presentation to investors and analysts this week that Brunswick has closed 12 plants since 2001.
He then indicated "more to come."
McCoy's three-word statement appeared as part of a presentation on company objectives aimed at shrinking Brunswick's manufacturing footprint and increasing revenue per plant.
Brunswick's key Boat Group division and three marine production plants are in the Knoxville area and employ about 1,800 people.
In East Tennessee this year, Sea Ray has had two rounds of layoffs totaling about 180 people.
McCoy did not elaborate on further closings.
Brunswick spokesman Dan Kubera said there were no specific details available on plant closings at the company that makes leisure products, including boats, bowling and billiard gear.
McCoy gave a generally upbeat presentation about Brunswick following two years of declines in the U.S. marine market. International sales of Brunswick boats have and are increasing, McCoy noted.
Saying the boating industry isn't all bad, McCoy pointed out that high-end boats more than 60 feet are growing at more than 10 percent annually and that motor yachts are outselling sailing yachts by a 10-to-1 ratio, potentially generating up to $10 billion in revenue. He also noted that U.S. boat builders' exports have grown dramatically amid improved cost position, a weak dollar and improved production.
He said ongoing inflationary pressure on vital commodities used to make boats will affect savings but added that the Boat Group division was able to post $41 million in savings in 2006-2007.
While more Brunswick plants will apparently close, the company is adding capacity for making larger boats.
"As economic conditions impacting the marine industry level and improve, Brunswick will be uniquely positioned to outperform the market," according to McCoy.
While painful, McCoy said the company has successfully dealt with the major problem of too many boats in production.
"We now have nearly 3,000 fewer boats in our pipeline than at this time last year, and almost 2,000 of which are higher-margin fiberglass boats," he said.
"Obviously, to accomplish that caused real pain to our margins. Production cuts, reduced sales, lower fixed-cost absorption and increased promotional spending, together with costs associated with plant closures and the startup of our newly acquired plant in North Carolina were all factors in our results," he said.
Those results have allowed earnings to remain healthy.
"We're producing earnings in this difficult environment and we are reaffirming our $1.20 to $1.30 earnings per share guidance for 2007," he said.
Another accomplishment is the company has maintained the critical component of cash on hand, McCoy said.
"Maintaining a sufficient level of cash is important, and as we ended the third quarter we had $328 million of cash and, importantly, we continued to generate solid cash flow under these conditions," he said.
"So, all in all, we're in a good position in a difficult market. The marine industry continues to be down in double digits," he said.
However, McCoy said there's no relief in the near term for sagging sales.
"The prolonged market decline in the outboard boat market is the primary driver of the $66 million in pre-tax impairment we recorded in the quarter for certain trade names in our outboard boat business," he said.
STOCK WATCH Brunswick Corp.: BC on NYSE 52-week range: $18.43-$34.99 Thursday close: down $.31 to $18.75