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April 27, 2006

First-quarter Profits Slip at Brunswick

Soundings Trade Only Today report first-quarter profits slip at brunswick

Brunswick Corp. today reported first-quarter profits of $67.4 million, a 29-percent drop from earnings in the same quarter a year ago.

Still, it was a solid quarter, considering the flat retail environment and the rising cost of fuels, said Dustan E. McCoy, Brunswick's chairman and CEO, in a conference call.

The financial results released today were adjusted to reflect operations without Brunswick New Technology group. The company today announced it will sell off the unit, which primarily produces GPS products for the land-based navigation market.

Overall sales for the quarter were $1.41 billion, up 5 percent compared to sales of $1.34 billion for the same quarter last year. The company reported pro forma earnings per share of 64 cents, compared with 63 cents for the year-ago quarter.

"The 5 percent sales growth from ongoing operations was driven primarily by contributions from boat companies acquired subsequent to the first quarter last year," said McCoy. Increased sales from the company's bowling and billiards and fitness segment also contributed to the increase. 

Brunswick Boat Group reported sales for the first quarter of $751 million, up 10 percent compared to $680.7 million in the first quarter of last year. McCoy says the sales gain was driven by acquisitions. Organic sales, which excludes boat brands not in the company's portfolio last year fell by less than 1 percent. McCoy attributes the decline, in part, to a "very robust" demand in the first quarter of 2005, compared to a relatively flat retail environment this year.

The Boat Group's earnings were $48.4 million, down from $49.1 million from the first quarter last year.

The marine engine segment, which includes Mercury Marine, reported a decline in earnings to $44.9 million the first quarter, down from $52 million the same quarter last year. The division's sales were up 3 percent to $557.2 million, compared to $543.2 million in the year-ago period.

McCoy says the division benefited from increased sales of sterndrive engines and parts and accessories. The shift to low-emission outboards from traditional carbureted 2-stroke outboards, again, cut into the company's profits. The company discontinued selling traditional 2-strokes July 1, 2005. McCoy says the company will no longer have unfavorable quarter-to-quarter comparisons after the second quarter, as figures for traditional 2-stroke sales will no longer be included in financial results.

McCoy says the company will realize more savings in the second half of the year from the lower-cost manufacturing plants in Asia, which will ramp up production.

He says the company's pipeline management efforts are paying off, with a 28-week supply of engines.

"We will continue to manage our production to keep pipelines at healthy levels as we move into the spring selling season," said McCoy.

McCoy is cautious about the coming quarter, and the year-end financial results.

He projects continued weakness in the market, with retail demand for the full year to be flat to down slightly. McCoy adds that rising fuel costs could continue to affect the company's bottom line, with increased costs in shipping and raw materials.

McCoy projects the company's second-quarter earnings will be down when compared with a strong 18-percent increase reported in second quarter 2005.

-- JoAnn Goddard

j.goddard@tradeonlytoday.com