LAKE FOREST, Ill. — Brunswick Corporation, parent company of Mercury Marine, on Thursday reported total third quarter sales of $665.8 million, down 36 percent compared to 2008.

Brunswick, in a news release, said the lower sales were primarily the result of marine sales that dropped by 40 percent from year-ago levels.

The company reported a net loss for the quarter of $114.3 million, or $1.29 per diluted share, which includes 32 cents per diluted share of restructuring charges, and 24 cents per diluted share of benefits from special tax items.

Brunswick said its pipeline reduction and inventory management strategies led to lower dealer inventory levels and company cash flow benefits, while having a negative impact on the company's revenue and earnings.

"We continue to make great strides in improving our overall liquidity position, reducing our marine dealer pipeline and executing our cost reduction program," said Brunswick's Chairman and Chief Executive Officer Dustan McCoy in the release. "These significant accomplishments have been achieved against a global marine market that has experienced its lowest level of demand in more than 45 years."

Marine Engine segment

The Marine Engine segment, consisting of the Mercury Marine Group, including the marine service, parts and accessories businesses, reported net sales of $363.5 million in the third quarter of 2009 — down 29 percent from $515.2 million in the year-ago third quarter.

International sales, which represented 41 percent of total segment sales in the quarter, declined by 27 percent.

For the quarter, the Marine Engine segment reported an operating loss of $13.4 million, including restructuring charges of $18.8 million. That compares with an operating loss of $9.7 million in the year-ago quarter, which included $18.6 million of impairment and restructuring charges.

Brunswick reported that sales were off across all Marine Engine operations, with sterndrive engines experiencing a greater sales decline than outboard engines.

Sales from the segment's domestic marine service, parts and accessories businesses, which represented 35 percent of total segment sales in the quarter, were down mid-single digits, as boat usage and the purchase of parts and accessories remained relatively stable.

Mercury's manufacturing facilities continued to cut production rates and take plant furloughs during the quarter in response to lower retail demand and to reduce pipeline levels. Lower sales, reduced fixed-cost absorption on lower production and higher bad debt expense had an adverse effect on operating earnings, which were partially offset by Mercury Marine's expense reductions.

Boat segment

The Boat segment reported net sales for the third quarter of 2009 of $118.2 million, down 62 percent compared with $314.2 million in the third quarter of 2008. International sales, which represented 43 percent of total segment sales in the quarter, decreased by 60 percent during the period.

For the third quarter of 2009, the Boat segment reported an operating loss of $86.7 million, including restructuring charges of $6.6 million. This compares with an operating loss of $536.3 million, including impairment and restructuring charges of $491.6 million, in the third quarter of 2008.

Looking to the future

"As we enter the fourth quarter of 2009 and begin planning for 2010, our near-term operating and financial strategies will continue to be focused on maintaining strong liquidity without additional borrowing, taking all reasonable actions to protect our dealer network, and positioning ourselves to take advantage of improvements in economic conditions as they occur," McCoy said.

Strategic actions pertaining to the company's inventory management and pipeline reduction strategy, he said, will continue during the fourth quarter, with a target to further reduce boat inventory and to minimize the seasonal growth in pipeline inventories.

The actions, McCoy said, should continue to negatively affect sales and earnings as they have in the previous three quarters.

"As we enter 2010, the majority of our boat and engine manufacturing facilities will begin to ramp up production," he said. "This is primarily the result of dealer inventories being at historically low levels, which means we will need to increase our wholesale shipments of boats and engines to meet retail demand. Increased production combined with higher wholesale shipments should provide improved revenue and reduced losses throughout 2010."

McCoy noted that during the third quarter, Brunswick, in its continuing efforts to evaluate its manufacturing footprint, brands, models, and cost and operating structures, made a strategic decision to consolidate Mercury Marine's two largest U.S. manufacturing operations.

"The consolidation of manufacturing operations in Fond du Lac, Wis., is expected to generate the highest returns with the lowest execution risk," he said. "As a result of this decision, we will transition during the next 24 months our manufacturing operations from Stillwater, Okla., to our facility in Wisconsin.

"This consolidation, combined with the net fixed-cost reductions achieved over the past two years, should help uniquely position Brunswick for continued market leadership in our marine and recreation businesses."