賓士域 (BC) 2011 Q1 法說會逐字稿

Good morning, and welcome to the Brunswick Corporation 2011 First Quarter Earnings Conference Call. All participants will be in listen-only mode until the question and answer portion. Today's meeting will be recorded. If you have any objections, you may disconnect at this time. I would now like to introduce, Bruce Byots, Vice President, Corporate and Investor Relations.

Good morning, and thank you for joining us. On the call this morning is Dusty McCoy, Brunswick's Chairman and CEO, and Peter Hamilton, our CFO. Before we begin with our prepared remarks, I would like to remind everyone that during this call our comments will include certain forward-looking statements about future results. Please keep in mind that our actual results could differ materially from these expectations.

For the details on the factors to consider, please refer to our recent SEC filings and today's press release. All these documents are available on our website at Brunswick.com. I would now like to turn the call over to Dusty.

Thank you Bruce, and good morning everyone. By now, I hope you've had the opportunity to review our first quarter earnings release. Our strong performance in the first quarter reflected higher Marine wholesale shipments compared to the prior year. Our Marine Engine segment continued to perform well across its entire product offering, including its Parts and Accessories business. Life Fitness experienced strong revenue and earnings growth. And as we experienced throughout 2010, our consolidated results continued to reflect strong levels of operating leverage.

Our first quarter results have put us in an excellent position to achieve our previously stated target of returning to profitability in 2011. I will discuss in my outlook [comments] some of the factors that need to be considered when evaluating our potential results in the remaining three quarters. Our results in the quarter reflect revenue growth of 17% and net earnings of $0.30 per share, including $0.05 per share of restructuring charges. This compares to a loss of $0.15 per share in the prior year, which included $0.08 per share of restructuring charges, $0.02 per share of benefit from special tax items.

Operating earnings, excluding restructuring, exit, and impairment charges, were $72 million in the quarter, an improvement of $55 million as compared to the prior year period. Our operating margin, excluding restructuring charges, was 7.3%, representing our highest consolidated operating margin for a first quarter since 2001. In addition to higher sales levels, our earnings benefited from increased fixed cost absorption, improved operating efficiencies, and Company-wide cost reductions. SG&A remained relatively consistent and decreased as a percentage of net sales during the quarter. The decrease was primarily a result of our successful cost reduction efforts and a gain on the sale of a distribution facility.

Our cash and marketable securities totaled just under $550 million, and net debt at quarter end was $263 million. Peter will comment in his remarks on the key factors that resulted in our cash issues during the quarter, as well as provide you with a perspective of our 2011 cash flow targets, supporting our objective of generating positive free cash flow.

Let's review the preliminary first quarter US Marine Industry data. [Fiberglass] sterndrive and inboard [boat unit] demand fell by 25%. This compares to declines of 34% in the fourth quarter of 2010, and 21% in the first quarter of 2010. Outboard fiberglass boat retail unit demand fell 2% in the first quarter. This compare declines of 13% in the fourth quarter of 2010, and 18% in the first quarter of 2010.

Aluminum product demand increased by 9% in the quarter. This compares to an increase of 2% in the fourth quarter of 2010, and a 7% decline in the first quarter of 2010. After taking into account the different changes in unit volumes, preliminary total industry unit demand declined approximately 1% in the first quarter. This compares to a 9% decline in the fourth quarter of 2010, and a 14% decline in the first quarter of 2010.

2010 industry data provided by the states and Coast Guard to Statistical Survey Incorporated continued to be updated subsequent to our January earnings call. The latest submission of data not reflects updates to the fourth quarter and full year, but also for some of 2010's earlier quarters. Total industry demand in 2010 declined by 10%, versus the prior estimate of a decline of 14%, resulting in United States retail power boat units in 2010 of approximately 139,000. The end result was therefore consistent with our 2010 plan for a 10% decline in overall industry boat unit sales.

On the international front, our Engine segment sales outside the US increased by 6% for the quarter compared the first quarter 2010. Our boat sales outside the US increased by 18% during the same period. Looking at our growth in Marine markets outside the US, we see diverse results across our global markets. Demand in key emerging markets vary, with Q1 volumes in China, Brazil, and Russia all up substantially, while in Africa and the Middle East, volume was lower compared to a year ago, primarily due to the political instability in these two regions.

Across the European markets, demand in France, Italy and Germany continued to improve. On the other hand, demand across southern Europe, while stable, remains relatively weak, especially and specifically in those countries most affected by the sovereign debt crisis. The usually steady markets of Australia and New Zealand were affected by natural disasters, with severe flooding in the northern states of Australia, and a devastating earthquake in New Zealand's south island city of Christchurch.

Let's turn to our Dealer pipeline. Compared to last year, our first quarter [ending] Pipeline reflected about 1,400 more units, or an 8% increase. The amount of [h] product in our pipeline continues to reflect normal levels. Our production in [o-sell] shipments increased in the first quarter compared to the prior year. The higher quarterly wholesale shipments and increased dealer inventory levels reflect our plan for a stable retail market in 2011, compared to the declining market in 2010, as well as our plan to ensure that our dealers have the appropriate levels of inventory to meet early season demand. Additionally, we did not incur the same magnitude of ramp up production issues in 2011 as we experienced in the early part of 2010.

As we noted in January this year, our 2011 Pipeline Management Plan will reflect quarterly movements in inventory levels, resulting from seasonal demand factors and our strategy for a pull model from our dealers versus the push model that was used in prior years. As a result, our first quarter wholesale unit shipments were greater than units sold at retail, as dealers prepared for the upcoming selling season. This trend will reverse itself in the second and third quarters, with an ultimate goal of maintaining inventories at appropriate stocking levels. The affect of the increased wholesale unit shipment levels slightly lower discounts, partially offset by the effect of a higher mix of smaller boat sales, led to a Boat Segment sales increase of 16%, in the first quarter. Higher sales, increased fixed cost absorption, and fixed cost reductions led to lower operating losses and resulted in an operating margin of minus 1.3%. This is the segment's best quarterly performance since the second quarter of 2007, and compares favorably to the minus 11% margin in the first quarter of 2010. I will also note that [grants] comprising almost 90% of our Boat Segment Group revenues had positive operating earnings in the quarter, a great reflection of the progress we are making in our Boat Segment categories.

In our Engine business, global production in the quarter was higher than year ago levels. In the first quarter, all of Mercury's main operations experienced increases in sales, leading to the segment's overall growth of 17%. Mercury's strong top line growth, which was weighted more heavily towards the Sterndrive Engine Business, the combined effect of cost reductions, increased fixed cost absorption, and the improved operating efficiencies, as well as a gain on the sale of a distribution facility, helped drive improvements in first quarter operating earnings.

I'll also now take a few minutes to give you a brief report on our engine production in Japan, as well as give you an update on Mercury's global supply status, pertaining to various parts at sources from the area that was affected by the devastating earthquake and tsunami. Mercury produces engines and parts primarily in North America and Asia, and these facilities are operating with no current disruptions. The manufacturing of MerCruiser sterndrive packages has been virtually unaffected by supplier issues. In addition, our P&A operations have not received any indication from suppliers that near-term shortages are anticipated.

Mercury's small outboards are produced in Japan, through a joint venture with Tohatsu Corporation. This facility was not damaged by the earthquake, but did shut town production for a week in early April, in order to effectively manage its parts on hand. It continues to work closely with its suppliers to monitor and balance the availability of parts and to minimize disruptions in production, but a backlog of orders does exist, as the joint venture works to return to full production levels.

As for our global supply requirements, we continue to monitor the situation closely, because many of our direct suppliers depend on materials and goods from other companies, some of which have been affected to varying degrees by the situation in Japan. However, we are not at this time experiencing any shortages of a material nature.

In summary, we believe Mercury is well positioned to continue to meet market demand for its outboard product above 30 horsepower and sterndrive engines. Availability of outboard engines below 30 horsepower will improve as our joint venture moves forward with its production recovery plans. Our thoughts and prayers go out to the people of Japan as they continue the recovery process from these devastating events.

Now let's turn our attention to our two Recreational Segments. Life Fitness continued to perform exceptionally well. Sales were up 31%, as compared to last year's first quarter. Commercial revenues benefited from a large order received in one of its major customer categories. Segment operating earnings grew by about $14 million. In addition to the benefits of increased unit volumes, a more favorable product mix, and increased fixed cost absorption contributed to the higher level of profits.

Sales in Bowling and Billiards declined 5% in the quarter. Same store retail Bowling revenues were flat, while Bowling products experienced a decline in sales. The segment's operating earnings were slightly below last year's levels, due to lower sales. I will now turn the call over to Peter for a closer look at our financials, and then I will come back to give you update on our perspective for 2011.

Thank you, Dusty. I would like to begin with an overview of certain items included in our first quarter P&L and will also comment on certain forward-looking data points. Let me start with restructuring, exit, and impairment charges, which were $5.3 million or $0.05 a share in the quarter. The charges in the quarter primarily reflect actions at our Marine operations, including those relating to plant consolidation actions at Mercury, and the consolidation of production of our Cabo Yacht brand into our existing Hatteras manufacturing facility. Our current estimate for full year restructuring charges continues to be $15 million.

Net interest expense, which includes interest expense, interest income, and debt extinguishment losses, was $27 million in the quarter, an increase of $3 million versus the same period in 2010. During the first quarter of 2011, we recorded a debt extinguishment loss of $4.3 million on the retirement of $18.7 million, of 11.75% 2013 notes, which were retired at a premium versus their book value. This compares to a debt extinguishment loss of $300,000 in the first quarter of 2010.

In March, we entered in to a new $300 million revolving credit facility. The new revolver provides us with improved terms and conditions that enhance our overall financial flexibility and will lower our interest costs in subsequent quarters. In the first quarter, however, our interest expense did include approximately $1 million of additional charges that resulted from the write-off of capitalized expenses associated with our previous revolver.

In addition to the $19 million of debt retirements completed in the first quarter, we have thus far purchased $20 million of debt in the second quarter. The second quarter activities reflect purchases of our 11.75% 2013 notes and [7-1/8] % 2027 debentures. As a result of the additional second quarter debt retirements, combined with lower costs associated with our new revolver, we expect that net interest expense, absent any additional retirement of debt, for the remainder of the year will be approximately $20 million per quarter.

During the quarter, foreign currency had a modestly negative effect on operating earnings as compared to the prior year, which reflected a mix of favorable and unfavorable exchange rate improvements. Thin includes the impact of hedging activity, which helps to moderate the impact that currency exchange rate fluctuations have on our year-over-year earnings comparisons. Changes in foreign currency had a modestly favorable effect on our sales in the quarter. In the first quarter, we recorded a tax provision of $13.2 million, which primarily relates to our foreign operations. In the first quarter of 2010, we recorded a provision of about $300,000. Higher pre-tax income was a primary factor for the increase in tax expense.

As a quick reminder, due to the Company's three years of cumulative book losses in various taxing jurisdictions, GAAP requires that the realization of related deferred tax assets be considered uncertain. Consequently, we continue to adjust our deferred tax valuation allowance, resulting in effectively no reported federal tax benefit or provision associated with our losses or income from US operations. Our 2011 tax expense will therefore continue to be comprised primarily of foreign and state income taxes.

We anticipate recording favorable tax adjustments by year end, for matters that have not yet been concluded in several foreign jurisdictions, which will more than offset the impact of a modest increase in earnings from our foreign operations this year. As a result, we now expect our overall 2011 tax provision to be less than our 2010 tax expense. As for interim tax provisioning, our quarterly provision or benefit will be correlated to our pre-tax earnings or losses during the quarter, and reflects an effective tax rate, which is currently 32.4%. Therefore in periods of a pre-tax loss, we would expect to record a tax benefit.

Now let's turn to a review of our cash flow statement. Cash used for operations in the first quarter was $83 million. Some of the key items in this section of the Cash Flow Statement include adjustments to earnings for non-cash charges, such as depreciation and amortization of $28 million. Our current estimate for D&A in 2011 is $105 million. Pension expense, resulting from our defined benefit pension plans, totaled approximately $8 million in the first quarter, compared to $10 million in the prior year.

In the quarter, the Company made cash contributions to its defined benefit pension plans of approximately $1 million. These items are netted on the cash flow statement. We expect our full year pension expense to be approximately $32 million; which is a decrease of $7 million from 2010. This reflects a benefit of higher asset levels, planned contributions, and lower interest costs associated with planned liabilities. For the full year, the Company plans on making cash contributions to its defined benefit pension plans of approximately $60 million to $65 million.

Changes in our primary working capital accounts were use of cash in the quarter and totaled approximately $170 million. This change is largely a result of the seasonal requirements of our Marine customers. By category, accounts and notes receivable increased by $148 million, inventories increased by $23 million, crude expenses decreased by $49 million, and partially offsetting these uses of cash was an increase in accounts payable of $51 million. For 2011, our working capital performance will primarily be a function of our revenue assumptions. We currently believe that the range should be between flat to a modest usage of cash. Given the seasonality of our Marine businesses, we anticipate the liquidation of working capital in the subsequent three quarters to have a positive effect on cash flow.

Capital expenditures for the quarter were $13 million. Our 2010 plan continues to reflect approximately $80 million in expenditures. This increase, versus 2010, reflects expenditures to develop new products in anticipation of improving market conditions and to fund Marine Manufacturing Plant consolidation activities. Partially offsetting our capital expenditures in the quarter was $10 million if in proceeds from the sale of property plant and equipment, including a marine engine distribution facility in Australia.

Beginning in the fourth quarter of 2010, the company expanded its cash investment program to include marketable securities with maturity beyond 90 days. During the first quarter of 2010, the cash flow statement includes about $20 million of net investments made in short and long-term marketable securities. The new program is designed to increase earnings on a portion of the Company's cash reserves. Investments have maturities of two years or less, and include high grade corporate commercial paper and government securities. The purchases and sales of these marketable securities do not affect our calculation of free cash flow.

So in summary, during the first quarter, we used approximately $83 million in free cash flow. This along with the $23 million spent to retire debt were primarily responsible for the $108 million reduction in cash and marketable securities in the quarter, ending with a balance of $549 million. Supplementing our cash and marketable securities balances is the net available borrowing capacity from our new revolver of approximately $207 million, which, when combined with our cash and marketable securities, provides a total available liquidity of $756 million, about $70 million higher than at the end of the first quarter of 2010.

And finally, when comparing year-over-year free cash flow amounts and cash balances for the first quarter, I would remind you of the $109 million federal tax refund that we received in the first quarter of 2010. I'll now turn the call back to Dusty, for some concluding comments.

Thanks Peter. I'll conclude the call today by reviewing our 2011 outlook. As in 2010, we will continue in 2011 to remain disciplined to generate positive free cash flow, perform better than the market, and demonstrate outstanding operating leverage. Our 2011 operating leverage will be strong, but we do expect quarter to quarter variations throughout the year, as a result of timing of fixed cost savings and potential quarterly differences in variable compensation expense. While we are only 3-plus months in to the year and are just beginning the retail Marine season, our view is that 2011 is unfolding as we discussed with you in January. As we stated then and reiterate today, we believe that significant decline in the industry Marine retail demand bottomed in 2010. But at this early point in the season, we are unable to determine if 2011 Marine retail demand will match our plan for a flat market.

It remains our view that smaller boats, as they did in 2010, will continue to outperform larger ones. The first quarter demand statistics that I previously cited support this assumption, as larger fiberglass boats continue to show signs of softness. We're planning for a solid consolidated revenue growth for the Company, with a level of 2011 revenue and earnings growth primarily governed by Marine retail demand, as well as by the success of the Company's efforts to improve market share in all of its business segments. Our 2011 net income should also benefit from our previously announced Marine Plant consolidations, as well as from the items Peter has already discussed with you, lower restructuring costs, along with reduced net interest, pension, and depreciation expenses.

After taking all these factors into consideration, we expect our 2011 earnings per share to be in the range of $0.30 per share to $0.50 per share. As a result of seasonal factors that affect our Marine business, we currently expect to report a profitable second quarter, followed by net loss in the second half of the year. In order to truly understand our guidance and evaluate our potential future results, you should understand that should the Marine retail market materially decline in 2011, the remainder of the year would be at risk to lower levels of Marine wholesale unit shipments, in order to keep our dealers' inventories at the desired healthy levels.

As we look at 2011 retail demand, we are continuing to watch the development of higher crude oil prices and the headwind they are creating in the economy. At the time of our next earnings release, we should have a better view of Marine retail demand for 2011, and we will provide an updated outlook at that time. Thanks for your attention, and let's now take your questions.

(Operator Instructions) Your first question comes from the line of Ed Aaron from RBC Capital Markets.

Thanks. Good morning everybody.

Good morning, Ed.

I wanted to maybe start with the guidance change for the full year. Just wondering how much of that increase comes from a change in your operating expectations versus other factors like the lower tax?

Actually, the main reason is we have become a bit more comfortable about the flat market and our ability to gain share, Ed. Those are the real two drivers of the change. But I do have to say our businesses are operating very well, and we continue to remain confident about our ability to operate.

Okay, I guess on that note, you're feeling more confident with the flat market potential. When I read the press release and listened to prepared remarks, I kind of got the sense that you were talking a little bit more about the risk of a down market this year than the possibility of an up market. Just wondering if that was an accurate read on my part, and just to get a little bit better sense of how your thought process has evolved or changed over the past 90 days or so.

Sure. Well, I would say the possibility of a down market exceeds that of an up market. And I think the longer we go with higher crude oil prices, food costs, all the things that in the real world affect consumers, the longer those continue, the more convinced we are that there is more downside risk versus upside. It's just too early for us to call sitting here today, Ed, whether our plan that the market would be flat is right or wrong, but we are going to get a real good feel here in the coming weeks.

Okay, and then one more and then I will jump back in the queue. I guess you were vindicated a little bit on your call on the market for 2010 being revised to down 10%. So should we be thinking about the flat outlook for this year as relative to that revised 139,000 unit market, or should we think about it more just in an absolute sense relative to what you thought the market declined last year.

You ought to compare to the 139,000, Ed.

Okay. Thank you.

You're welcome.

Your next question comes from the line of James Hardiman from Longbow Research.

Good morning. A couple of questions for you guys. Obviously as usual, there is a lot of focus on the overall industry numbers. All in, I think you guys said down 1% if you aggregate everything. As you think about your particular business, obviously the negative is that you're more highly exposed to the fiberglass boats, and so your mix of end markets from an industry perspective would look a little bit worse, but then from a market share perspective, I guess I was hoping you could, in terms of your end market, compare what you are seeing with what the industry is looking like, at least through the first quarter? And then beyond that, just generally what the momentum looked like within the quarter, if you can help with that as well.

Sure. First, we are clearly moving to smaller product. And just to give everybody a couple of take points, because this keeps coming up, and we can pick any time period, but let's say from 2008, our Aluminum in the first quarter have gone from 42% of wholesale sales, this is in units, to 58%, in 2011. And we have seen a small increase, for instance in a brand like Sea Ray, over the same time period, in the number of sport boats as a percentage of total unit sales.

We have felt that coming, I think we have been talking about it for a whole bunch of quarters now. And I think the first thing to understand is all the work we have done in our Aluminum business, and our Aluminum business was profitable in Q1. In fact, it was nicely profitable, and that's through a lot of work to get the brands right, a lot of work around product, and significant changes in the manufacturing footprint in that business. So while, in years past, this would have been a lot more problem, it would have been significant problem for our Boat business, and you can see the improvement in earnings on a comparable basis and on a quarter to quarter basis in our Boat business, even with this mix down, that's occurring.

As far as momentum, we didn't see, I'll do it this way, James, the momentum is all over the map. You can go to different cities in the same state, different states, and one gets a different answer. But here is what I would say, momentum has not been increasing as we go through the month of April, and we are going to get a better look here in a couple of weeks as to whether it leveled or began to decline.

But I do want to keep highlighting we are watching crude oil prices and their impact on the economy, and I think we all have to understand that they're impacting the economy negatively, and how it will translate into Boat sales is a bit yet to be seen. But I have seen nothing that would tell us that momentum is improving. We're hoping for a flat momentum, and we'll see where the momentum is declining in April.

And just on the market share piece, did you feel like you were up, down, flat in the first quarter?

It depends on the segment. Overall, our view is that we have gained share. We've done it primarily, but I will say it this way, there is probably only one relatively small segment where we did not think we gained share, and it would be insignificant in terms of earnings perspective. And in all of our other businesses, we're pretty relaxed that we're gaining share.

Okay. Great. Just a second couple of questions here. Gross margin looked really strong within the quarter. Obviously a lot of that was some leverage from the strong sales levels, but can you tell us about what some of the other puts and takes were, was it a better, more profitable mix of product that you were selling, was it a currency impact? Was it better cost saves? What drove the gross margin in the quarter?

It was. It's Peter, James. It was basically a function, as you say of volume, plus the significant cost reduction activities that we have put in place, plus some depreciation reductions that we have talked about in the past. Those were the really big factors.

We had slightly less discounts that we also that were also (inaudible).

That's true as well.

Great, thanks.

You're welcome.

Your next question comes from Rommel Dionisio of Wedbush Securities.

Hi, yes. Good morning. Thank you. My question is actually on the Fitness business, it is my understanding that your fastest growing customers have been the value-priced fitness chains there, and so I would have thought product mix might be negative, but you said it was positive. Could you just walk through some of the drivers, why that was a pleasant surprise, why it was a favorable mix shift there?

We actually experienced sales growth across all of our segments in Fitness, and it was greater with larger clubs and bigger accounts, but in our smaller accounts in the U.S. and in the stronger economy areas of overseas like Asia and Germany and France, we experienced strong growth. So there really has not been a large variation in the growth we have seen; we've seen it across virtually all our segments in Fitness.

If I could add one more thing also, I think an assumption was built in to your question that a value club is a place where we make less margin, and I don't think that's an assumption you ought to use. We have pretty consistent margins across all of our product line.

That's true, because the value clubs buy commercial grade equipment.

Okay, great. Thank you very much.

You're welcome.

Your next question comes from the line of Tim Conder from Wells Fargo.

Thank you. Just a couple here. Gentlemen, on the overall, your market expectations in Marine, and then, your share gains. First of all, any color on the first quarter as to whether there were some inclement weather impacts in different regions? And then secondly, any feedback yet on April, given that the Midwest in particular, and down into the south especially over the last couple of weeks, has had a significant amount of rain, whether that's positively or negatively impacting anything at retail? And then I have just a couple of follow ups after that.

One of the things we laughingly talk about here is we hate to say, we hate to attribute any impact to the weather because there is weather every day, all around the world. With a bit less tongue in cheek, I think globally, first, we have seen a weather impact. Weather was pretty tough in the first quarter in significant parts of Europe that are good boating areas, and especially so in Scandinavia, so that part of the market coming back has been very slow. Here in the US, while we don't try to quantify it, Tim, there is absolutely no question that weather has had an impact in some regions, probably not the southeast, but at least up until this front froze and began to hammer Missouri, Arkansas, Tennessee, Kentucky, places like that. So there probably has been some impact on weather, but honestly we don't measure it, and we try to look past it, because there is not a lot we can do about it.

Okay. Then are you seeing, or expectations; you're saying at this point in time, kind of looking at a flat market for the new side of the units, what about total, given that a lot of the other products have been exhausted? How would you look at the total new and used power boat market on a year-over-year basis, here in 2011?

First, I want to be really careful, we are not predicting, I talk about this a lot, we are not predicting what the market will do. We are just telling you how we are planning, and then we've got to be nimble and able to react to the market, Tim. And our plan right now is flat, and based upon what we've seen to date, although it's early, it looks like our plan was pretty well right and we will keep executing it, but we'll change if we have to.

As to the total market, my judgment is it will be flat also, because there no longer can be a big influx of used boats. I think we really saw the used boat market stabilize in 2010, and therefore the real movement will be driven by the new boat category, and again if our plan is flat, the math says then the total market ought to be flat.

Okay. Then lastly, gentlemen, operating leverage, I think you'd referenced before that on incremental revenue, all in, you are looking at about a 30% flow down rate. I think you had referenced that was beyond this year, but for this year it could be a little bit higher. Just maybe give us a little bit of an update there on your assumptions.

It's Peter, Tim. You're correct that we said that over time we expect about a 30% variable contribution margin, and that would be enhanced this year by things like the depreciation and amortization improvement in cost, and it would be improved this year by the effects of the continuing cost reduction efforts, particularly at Mercury. Those would be the big factors that would drive the 30% to something somewhat more than that.

For this year, correct?

Yes, and then next year and the subsequent years is a question of what other fixed cost variations can be driven into the years.

Okay. Then, so around that 30% looking forward would still be reasonable?

Yes. Now, in this business with our consolation businesses, which incidentally have varying variable contribution margins, it's not as if all of our portfolios of business have the same percentage, and that's why this margin will, as Dusty pointed out in his remarks, it will differ over various quarters, because we have a different mix of businesses due to seasonality over the various quarters. And as we look out over this year's, as we look out over next year, that 30% seems very reasonable. I'm not talking about a 5 or 10-year period, we are talking about a 1or 2-year period.

Right, okay. Thank you, gentlemen.

You're welcome.

Your next question comes from the line of Joe Hovorka from Raymond James.

Thanks, a couple of quick questions, did you give the week's inventory number for the dealers?

I don't think I gave it in weeks, I gave it as the number of units that it had increased, but we can sure come up with that. We are at 37 and a half weeks, and that's total.

Okay. I must have missed the unit number too, what was the unit number increase?

1,800 or 1,400.

1,800 from 1,400?

No, I'm sorry. An 8% increase in; let me dig it out here, for you, Joe, so I can give it to you exactly.

I apologize for missing that.

No, no, no, I'm - - 1,400 more units, 8%.

Okay, and to clarify, you gave the Aluminum as a percent of mix, going from 42 to 58, was that in 1Q 2010 to 1Q 2011, that was the time frame?

No, that was 1Q 2008 to 1Q to 2011.

1Q 2008, okay. And I think the mix is, if I remember in revenues we've gone from about 80%, fiberglass in '09 frame to 75% in '10, and I'm assuming that goes lower again in 2011? Do I have the numbers right?

Yes. You are right.

Should I use the, I think the last call you gave I think 65 fiberglass sterndrive, 15 fiberglass outboard, and 25 aluminum? How would I update that?

I don't have that in front of me.

I think I gave you those, Joe.

You may have, okay. I can follow up.

Yes, I think that's a fair assessment still.

That still sounds fair for 2011?

Yes.

Okay, and let me see I had something else in here. Actually, no, I think the other questions were answered. I'm good. Thanks, guys.

Thanks, Joe.

Your next question is a follow-up question from the line of Tim Conder, Wells Fargo.

Yes, I guess this goes back to a degree your market share gain expectations. To what degree do you feel that competitors are more supply constrained than yourselves, and obviously it all depends on the trajectory of the market, but given that you guys remain fairly, on a relative basis, liquid relative to most of the rest of the manufacturers in the industry and were able to pay people, of then course some of the disruptions that have come from unfortunate incidents in Japan, how does that all factor in to your market share opportunities? And then a totally separate question, Peter any details on the gain on sale from that facility?

I will answer your last question first. You can actually see the mention of that gain in the cash flow statement, because it's listed a as non-cash gain in the first third of the cash flow statement, $7.4 million.

Okay, I apologize. Thanks Peter.

No, that's fine it's hard to dig out in 20 minutes.

Tim, I don't think any of our boat competitors are supply constrained. It remains to be seen from an engine competitor perspective, because we primarily compete against three Japanese outboard engine manufacturers, and they're clearly in a bit of a different situation than we are, except for our under 30-horsepower engines which are produced in the joint venture in Japan. And we are going to have to watch that one play out, but clearly they have been slightly, I guess is the word I would use, supply constrained up to this point. But we have no idea what their inventories look like around the world and their ability to supply their both OEMs and dealer customers.

So I don't think that's really going to be an issue that we ought to the worry about longer term. Frankly, I think our ability to gain share is probably driven more in 2011 by our dealer network than anything. We have often cited that the overall dealer network was down as a result of the issues in the Marine industry and the economy in the range of 30%, and our dealer network in terms of store fronts is fundamentally flat, and I think there is the opportunity for us to get share gain, and that's what we feel like we are seeing here in the first quarter.

Okay. Thank you.

You're welcome.

Your next question comes from the line of Jimmy Barker from B. Riley & Company.

Good morning, I just have a couple of follow-ons to the share gain comments, and I guess also to mix. The market share gain expectations that you said are built in to your guidance, are you speaking about expected gains in both the Boat Group and Mercury?

Yes.

Okay. So correct me if I'm wrong and this is not what you're observing, but it seems like we're seeing more meaningful disproportionate strength in the Pontoon market relative to Fiberglass. I'm wondering if you could break out your Aluminum sales, what percentage of those sales are Pontoon?

Jimmy, that's not something I'm not going to do, but it's strictly for competitive purposes.

Okay. Would you say that Pontoons are a segment in the market you feel like you might be underexposed to? I know you have Pontoon lines, but have you or would you consider adding to that portfolio, especially since most pontoons are sold without boards, where Mercury doesn't enjoy the share that it has in sterndrives.

I don't think we will be adding to our product line, but we will continue to invest in the existing brands that we have, because you are right, it is a nicely growing segment.

Okay. Just my last question, could you talk about maybe opportunities or your desire to selectively grow your dealer base as the market recovers?

I don't know that we have any particular growth plans with the dealer base. Anything we'll be doing, Jimmy, will be fundamentally to replace dealers that may have issues and the like. And the reason is, we work fairly hard to make sure that there is appropriate separation between all of our dealers, and I think to begin to add to the dealer network overall in the United States is probably not something we'll be doing. Now we are looking to grow and strengthen the dealer base outside the United States, and we have a fairly active process underway to continue that.

Okay. Thank you.

You're welcome.

Your next question is a follow-up question from the line of Ed Aaron from RBC Capital Markets. Please proceed.

Great, thank you. I was trying to get a better sense of how mix is going to look within the Boat Segment over the balance of the year. And the reason I ask is that I seem to remember in this quarter last year, you had shipments in units of about 30%, but the dollar growth was quite a bit lower than that, because there was a negative mix in that quarter, and I'm wondering if the mix comparisons get normalized as you move through the year, is that going to put more pressure on the year-over-year ASP trends moving through the year?

We don't anticipate any significant change in our ASPs over the year, Ed, based upon how we see the market right now. Our view is that dollar growth will be slightly less than unit growth for the remainder of the year.

Okay. Thank you.

Your next question comes from the line of James Hardiman from Longbow Research. Please proceed.

(Inaudible - microphone inaccessible) overall is essentially flat, the mix is decidedly towards aluminum. I guess at the end of the day, and I don't even know if you guys actually have this data, but would you say that retail sales of Brunswick Boats specifically is in line with that 1% decline, is it better than that, is it worse than that? How should I think about wrapping all those things together?

The way to think of it is as better for us, because - - and that's why we think we are gaining share.

Okay. So you think that sales of your boats are better than that down 1%, so flat to up at this stage of the game?

I'll just say they're better, which means yes, we're down 1.

Then, sort of related question, you touched on why ultimately the 17% increase in your Marine segment isn't necessarily indicative of better demand. Obviously you are saying that you're still shipping more boats into the channel than are being sold out, but ultimately in your conversations with your dealers, can you just characterize those conversations? Are these guys more optimistic than they've been? It seemed like it was a pretty good Boat Show season, and certainly, as you get more towards pull versus push, is there more pulling taking place, to the extent that some of the boats that are being ordered have some lead times?

When we are on a strictly pull model right now, and therefore our wholesales sales are strictly being pulled by the dealer network. So I think that tells you that certainly the majority of our dealers are quite bullish right now. What we are watching with them, and what we all want to be careful about, is what is going on in the economy and what is going to be the ultimate impact on US Marine retail demand, as well as global retail demand. And we and they are going to be ready to make adjustments as soon as we see any difference, if any happens at all, James.

Excellent. That's really helpful. Thanks, guys.

You're welcome.

At this time, we would like to turn the call back over to Dusty McCoy for concluding remarks.

Thank you, thanks for everyone's attention. We have been going nearly an hour, and as always I appreciate the quality of the questions and the candor by which we get the questions. And we will look forward to seeing you guys at the investor events that are coming up over the next several months, and more importantly, we look forward to talking to you in July when we have a much better feel for what Marine demand is. Thanks everyone for your time. We do appreciate it.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.