Transcript NMTA October 15 2008 - Pacific Coast Congress of

Spotlight on the Economy
Outlook for Boating
2009 PCC Annual Membership Conference
Surviving and Thriving in Hard Times
April 16, 2009
Boating Magazine – May 2009
2
Agenda

What is happening in the economy?

How does it impact boating?

What should we expect in the near-term
future?
3
Impacts on Boating
4
Perfect Storm



Loss of wealth

House values

Stock Market
Rising unemployment
Loss of credit
5
Case-Schiller Housing Price Index
Drop from peak as of Jan 2009:
300
- Los Angeles -39%
- San Diego -41%
- San Francisco -43%
- Portland -18%
- Seattle -20%
250
200
150
100
50
CA-Los Angeles
CA-San Diego
CA-San Francisco
OR-Portland
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
0
WA-Seattle
6
Dow Jones Industrial Average
Oct 2008
Down ~40% from the peak
Now
7
Staggering Loss of Wealth
Hit by the double whammy of declining
home prices and a falling stock market,
U.S. households saw their net worth
fall by $12.9 trillion since mid 2007,
wiping out five years of gains,
according to the Federal Reserve.
In the fourth quarter alone, household net
worth fell by $5.1 trillion, a record 31%
annualized decline.
At the same time that their assets were
falling, households were taking on less
debt, deleveraging their balance sheets
after five years of double-digit growth in
debt. In the fourth quarter, households
paid off more debt than they took on for
the first time since at least 1952.
8
Intersection of Greed & Stupidity
9
Baby Boomers Loss of Wealth

1) The median household with a person between the ages of 45 to 54 saw
its net worth fall by more than 45 percent between 2004 and 2009, from
$172,400 in 2004 to just $94,200 in 2009 (all amounts are in 2009
dollars).

2) The situation for early baby boomers is somewhat worse. The median
household with a person between the ages of 55 and 64 saw its wealth fall
by almost 50 percent from $315,400 in 2004 to $159,800 in 2009.

3) As a result of the plunge in house prices, many baby boomers now
have little or no equity in their home.

Nearly 30 percent of households headed by someone between the ages of 45
to 54 will need to bring money to their closing (to cover their mortgage and
transactions costs) if they were to sell their home.
The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble David Rosnick
and Dean Baker; February 2009, Center for Economic and Policy Research
10
Demographics of Boat Owners – Age (NMMA)
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
18-30
31-49
Power boat
50-64
65 plus
Sail boat
11
Employment or Lack Thereof
12
Change in U.S. Employment After 15 Months:
Current Recession vs. 10 Postwar Recessions
13
Washington State Response to Recessions
Loss of Jobs by Month
Percent loss of non-farm jobs
6
4
2
0
-2
-4
-6
Puget Sound lost 87,000 jobs in 1969 in the Boeing Bust.
-8
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Number of months from prior peak
1969
1973
1980
1981
1990
2001
2007
14
Oregon State Response to Recessions
Loss of Jobs by Month
Percent loss of non-farm jobs
4
2
0
-2
-4
-6
-8
It took 59 months (~six years) to replace all
of the jobs lost in the 1981 recession.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Number of months from prior peak
1969
1973
1980
1981
1990
2001
2007
15
California State Response to Recessions
Loss of Jobs by Month
Percent loss of non-farm jobs
3
2
1
0
-1
-2
-3
Very bleak situation.
-4
-5
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Number of months from prior peak
1969
1973
1980
1981
1990
2001
2007
16
Alaska State Response to Recessions
Loss of Jobs by Month
Percent loss of non-farm jobs
45
40
Very little impact due to nature of economy.
35
30
25
20
15
10
5
0
-5
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Number of months from prior peak
1969
1973
1980
1981
1990
2001
2007
17
Comparative Response in This Recession
Loss of Jobs by Month
Percent loss of non-farm jobs
2
1
0
-1
-2
-3
-4
-5
-6
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Number of months from prior peak
Alaska
Washington
Oregon
California
18
Lincoln County (OR) Unemployment Rate
19
Worried Consumers
20
Consumer Confidence IndexTM
Present Situation
2008-7
2007-9
2006-11
2006-1
2005-3
2004-5
2003-7
2002-9
2001-11
2001-1
0
2000-3
1999-5
1998-7
1997-9
1996-11
1996-1
1995-3
1994-5
1993-7
1992-9
1991-11
1991-1
1990-3
1989-5
1988-7
1987-9
1986-11
1986-1
1985-3
1984-5
1983-7
1982-9
1981-11
1981-1
Consumer Confidence - Pacific Coast
Source: The Conference Board
200
180
160
140
120
100
80
60
40
20
Lowest Levels since 1981.
Expectations
21
Problems for the Marine Industry
22
More than half of marine industry is
unemployed

Tuesday April 7, 2009

CHICAGO, Ill. — The National Marine Manufacturers Association
estimates that as of late March, marine industry unemployment was
more than 50 percent, NMMA President Thom Dammrich told the
Springfield Business Journal for an article published yesterday.

Retail boat sales fell off precipitously in July 2008, Dammrich said.

In the fourth-quarter of 2008, one in three NMMA members
furloughed operations for a period of time, and one in 10 closed down
a plant entirely, he told the paper.

"What it comes down to is that, until the consumer starts feeling
more confident about the future," he told the Journal, "they're
holding off on some purchases."
23
All 15 Foot+ Powerboat Sales Trend
Rolling 12 month year-over-year % change in unit sales
Decline began in 2006
Down 32%
as of Feb 09
Based on new US boat registrations. Bellwether states are geographically
dispersed states representing roughly half of the US boat
market (varies by market segment and time of year).
24
25
Brunswick switched from 28 to 14 plants
26
Brunswick

Beleaguered boat maker Brunswick Corp. said October 2008 it will cut
1,400 more jobs as the company shuts four plants, including ones in
Oregon and Washington, and furloughs workers at three more.

The announcement, which sent the manufacturer's stock to a more than
15-year low -- comes four months after the suburban Chicago company
said it would eliminate 1,000 jobs because of the falling demand for
recreational boats amid a poor economic environment.

Brunswick said it will permanently close plants in Roseburg, Ore.,
Arlington, Wash., and Pipestone, Minn., while mothballing a plant in
Navassa, N.C. The closures -- the latest in a series since 2006 -- will be
completed by the first quarter of 2009. When the cuts are complete, the
company will have closed more than 40 percent of the boat plants open
three years ago.
27
Brunswick International Sales
28
Olympic Boat Center






The ship has sailed for one of the largest boat retailers in the world.
Olympic Boat Centers of Redmond went on the auction block in a
California bankruptcy court on Tuesday.
In bankruptcy court, boat maker Brunswick bought some of Olympic's
assets. A spokesperson said the company bought back the Bayliner boats
on Olympic's lots for $2 million, but not the company itself.
Court documents state Olympic owed lenders more than $47 million.
Shareholders blame an industry-wide sales slowdown. When the housing
market crashed, buyers couldn't use their home equity to finance a
boat.
In a statement released on Tuesday afternoon, Olympic said Brunswick,
which is headquartered in Lake Forest, Illinois, will have the rights to the
name Olympic Boat Centers once the sale is complete. And to pay off the
debt, all of its inventory will be sent to other dealers around the Northwest
as well as in California.
29
Boater’s World Closes





Friday March 20, 2009
BELTSVILLE, Md. — Ritz Camera Centers Inc. has court approval to
liquidate the bankrupt company's Boater's World stores, according to
a report from Bloomberg News.
Ritz should collect $40 million from going-out-of business sales at the
129 stores, company attorney Irving Walker said, noting that the sale was
in the best interest of the company's creditors.
"The Boater's World business proved to be a positive contributor to the
company's profitability for a number of years, and generated positive cash
flow through 2007. In the spring of 2008, however, the price of oil
skyrocketed, leading to a sharp rise in the price of gas, and that in
turn, with other macroeconomic factors, led to a sharp drop in the
sales and profitability of the Boater's World business,'' Ritz said in its
bankruptcy filing.
Ritz also expects to close more than half of its 800 camera stores and
reorganize the rest, according to Bloomberg.
30
New Paradigm is Less Rosy

“Our research indicates that the U.S. boating industry continues to experience a down cycle, as evidenced
by lower sales trends in each of our business segments compared to last year, lower new and used boat
sales, and declining boat registrations in key states. ” (West Marine)
31
U.S. Marine Expenditures (NMMA, USBEA)
$12,000,000
$8,000,000
$11,000,000
$7,000,000
$9,000,000
$6,000,000
$8,000,000
$6,000,000
$4,000,000
$5,000,000
$3,000,000
$4,000,000
$3,000,000
$2,000,000
$2,000,000
$1,000,000
$1,000,000
$0
$0
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Real GDP
$5,000,000
$7,000,000
Real Marine Expenditures
$10,000,000
Real GDP (Millions)
Real Marine Expenditures ($1,000s)
Real means adjusted for inflation: arrows represent economic downturns
32
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
% Change Real Marine Exp
60%
30%
4%
20%
10%
2%
0%
0%
-30%
Real GDP (Millions)
Real GDP % Change
U.S. Marine Expenditures, GDP (% Change; NMMA)
8%
50%
6%
40%
-10%
-2%
-20%
-4%
Real Marine Expenditures ($1,000s)
33
U.S. Marine Expenditures (Gain & Loss: NMMA)
-0.4%
-3.1%
Nov. 1973-March 1975 (16 months)
8.8%
Jan. 1980-July 1980 (6 months) & July 1981-Nov. 1982 (16
months)
July 1990-March 1991 (8 months)
-13.2%
12.6%
-25.9%
7.0%
1997 Dotcom bust
-3.0%
-1.1%
March 2001-Nov. 2001 (8 months)
6.0%
5.4%
average
-35.0%
-7.8%
-25.0%
Loss during event
-15.0%
-5.0%
5.0%
15.0%
Gain three years after event
34
Marine Expenditures - Pacific (NMMA)
$1,600,000
$1,400,000
$1,000s
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Washington
Oregon
California
35
Uncertainty is a troublesome thing!
36
Anti-wealth crusaders
37
For sale: Saddam Hussein's luxury yacht

The sale of the 269-foot Ocean
Breeze, built for Saddam
Hussein and docked on the
French Riviera.

Only $34 million but potential
buyers are avoiding the auction.
38
Let’s Count our Blessings


$3.40

$3.20
$2.80
$2.60
$2.40

$2.20
Motor Gasoline
Diesel Fuel
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
$2.00
2005
2006$
$3.00


Fuel prices should remain
lower.
Construction costs are
decreasing.
Remaining businesses in
the industry will be
stronger.
Consumers will be wiser
and not over-borrow.
Government oversight will
be more vigilant.
Bottom-line (hopefully) = a
more sustainable industry.
39
BST Associates
Questions & Answers
Paul Sorensen
BST Associates
PO Box 82388
Kenmore, WA 98028
[email protected]
(425) 486-7722