Ruh Roh… Brunswick’s in Deep Doo Doo
Not sure if any of you have been following this over the past few weeks, but Brunswick is in just a wee bit of trouble. First, they lay off 1,400 workers. Then, RBC Analyist Edward Aaron cut his price target to $9 from $15 a couple weeks ago. According to Aaron, “The primary risk to our price target is that Brunswick is not successful in negotiating with its lenders to ensure sufficient liquidity”.
One week later, Moodys cut Brunswick’s debt rating to junk status. “The downgrade reflects our concerns that the continuing turmoil in the financial markets will result in a significant contraction in discretionary consumer spending over the foreseeable future and may put pressure on the company’s dealer network and its liquidity position,” Cassidy said in a statement. “While Moody’s believes that Brunswick will continue to attempt to protect its credit metrics and liquidity, we are concerned about the company’s reduced financial flexibility as its ability to comply with a financial covenant is uncertain.” Finally, last week Brunswick reported a loss of $591.4 million vs. a profit of $1.9 million for the same period last year.
Now what’s interesting about this is that their bowling and billiards business isn’t getting hit that hard. Brunswick doesn’t really generate much revenue anymore from bowling and billiards, as their primary focus is making boats, but if you look at their total revenue of $1.04 billion for the period, you’ll notice that their bowling and billiards branch was only down 3%, bringing in $111.1 million. If you’re interested, here’s how it breaks out for Brunswick.
Boats – $392.5 million (down 36%)
Marine Engines - $448.9 million (down 21%)
Exercise Equipment – $161.6 million (up 8%)
Bowling and Billiards – $111.1 million (down 3%)
In total, Brunswick has now fired or laid off 5,300 workers since the start of the year, which represents 34% of their total workforce. According to their 10-Q, they’re also looking to sell their Valley-Dynamo coin-operated commercial billiards business. Should be interesting to see what happens with the company over the coming months. By the way, if you are a believer in the company, you can go buy some shares at 1980’s prices as the last time the stock was trading in the $3 range was back in April of 1983.
