Jul 31, 2009
Executives
Bruce Byots – VP, Investor and Corporation Relations Dusty McCoy – Chairman and CEO Peter Hamilton – SVP and CFO
Analysts
Ed Aaron -- RBC Capital Markets Hayley Wolff -- Rochdale Research Tim Conder -- Wells Fargo Richard Whiting -- Broadview Advisors Eric Engler -- D.E. Shaw James Hardiman -- FTN Capital Markets
Operator
Good morning, and welcome to Brunswick Corporation's 2009 second quarter earnings conference call. All participants will be in a listen-only mode until the question-and-answer period.
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. Thank you, sir.
You may begin.
Bruce Byots
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 filing and today's press release. All of these documents are available on our Web site at Brunswick.com.
I would now like to turn the call over to Dusty.
Dusty McCoy
Thank you, Bruce. And good morning, everyone.
By now, I hope you've had the opportunity to review our second quarter earnings release. Our results continue to reflect the difficult economic conditions in which we're operating.
We've reported a net loss in the quarter of $1.95 per share on a sales decline of 52%. The net loss includes $0.40 per share of restructuring charges for activities that we previously announced and implemented during the quarter.
The loss also includes a $0.05 per share of non-cash benefits from special tax items that Peter will discuss in his remarks. As we stated on recent earnings calls, we're operating in an extremely harsh economic environment.
Overall, retail demand in the boat industry has been down in the mid-30% range over the last three quarters including the quarter just ended. Demand on our recreational businesses, fitness and bowling and billiards has also weakened, reflecting the broad reach of the weak economy.
Productions in marine demand have been within the range of our expectations and reflect the assumptions we use to develop our liquidity and inventory management and pipeline reduction strategy as well as our cost reduction program. We're very pleased with the progress we've made in these areas, areas that are fundamental to our financial health and Brunswick emerging from this downturn as a stronger company.
Our progress has been founded on the hard work and sacrifices of many. Furloughs, staff reductions, and increased pressures and demand due to this prolonged and difficult period have touched all Brunswick employees.
Throughout, they've remained resilient, flexible, and committed to quality and customer service as demonstrated by the awards and accolades our products continue to receive. I would also like to thank once again and commend our dealers for the aggressive inventory management and resiliency they've demonstrated over this very challenging time.
It's clear we're on the right path. Our strong financial health and ability to emerge from this downturn as a stronger company are becoming increasingly important when we examine the overall state of the global recreation marine industry.
The prolonged economic downturn is affecting the industry at all levels. Bankruptcies, reorganizations outside of the bankruptcy process, restructuring, debt renegotiations and closures have become significantly more numerous for the industry's manufacturing, distribution, and supply segments around the globe.
As a result, we're dealing with the full gamut of issues from potential supply change shortages or delays to a meaningful volume of significantly discounted product from failed manufacturers or dealers coming into the market. We are capably managing through these issues and believe they provide opportunities for those, like us, that emerge in this down turn in a healthy position.
But still lacks sufficient clarity at this time is a perspective of what consumer demand will look like in 2010 and beyond. However, in my concluding remarks today, I would like to share some current perspectives, judgments, and fundamental relationships relating to next year.
But first, let me review some of the preliminary second quarter U.S. Marine industry data, starting with fiberglass, stern drive, and inboard boats, which fell by 34%.
In the prior two quarters, the rate of decline was higher, in the 45% to 47% range. In the second quarter of 2008, units fell by 35%.
Outboard fiberglass boat retail unit demand fell 30% in the second quarter of 2009. In the previous two quarters, declines were higher in the range of 40% to 41%.
In the second quarter of 2008, units fell by 25%. Aluminum product demand fell 26% in the second quarter of 2009, the prior two quarters declined in the range of 27% to 33%.
In the second quarter of 2008, units fell by 21%. The retail financing environment continue to be challenging for consumers as underwriting standards and credit approvals remain tight, making financial terms less attractive to consumers.
Now let's turn to some key factors that influenced our wholesale sales, that is the boats we sold to our dealer network. In addition to the underlying retail demand, another factor that is having an effect on overall wholesale demand is the availability and cost of floor plan financing.
Several traditional floor plan lenders have exited the market or materially reduced their exposure, and the remaining lenders have imposed stricter lending criteria as they seek to protect the quality of their loan portfolios. Although Brunswick dealers continue to benefit from the financing availability provided by BAC, our joint venture with GE, beginning April 1, dealers became subject to revised terms, including higher financing costs and long curtailment payments.
These changes translate to higher costs for dealers to carry inventory, which has led Brunswick and our dealers to reassess and ultimately reduce wholesale orders. This will ultimately lead to a healthier Marine environment with lower inventory levels held in the dealer system.
In response to these market factors, and our strategy to do all we can to protect our dealer network, we've reduced the number of units that we sold to dealers nearly 60% in the second quarter versus last year. This is the same percentage decline experienced in the first quarter of 2009.
Further influencing the overall supply of boats throughout the industry, our units that are entering the system via non-traditional avenues, consumer-related repossession, financing companies exiting the Marine space or from OEMs and dealers going out of business. These supply conditions combine with our pipeline reduction strategy resulted in higher discounts and sales incentives used to facilitate retail boat sales.
We anticipate these factors will continue during the second half. As a result of our reduced wholesale unit levels and the impact of higher discount, Brunswick's boat segment sales declined by 77% in the second quarter, compared to the decline of 64% in the first quarter of 2009.
Similar factors that drove lower sales and earnings in our boat segment also affected Marine engine. The engine segment service, parts, and accessories business, which historically generates its highest volumes in the second quarter, experienced a modest improvement in operating earnings on slightly lower revenues, proving that boaters are continuing to boat.
Boats P&A results partially offset the performance in Mercury's other businesses. In the second quarter, Mercury's overall sales declined by 43% versus the same period in 2008.
This compared to our first quarter decline of 45% and a fourth quarter 2008 decline of 43%. As we execute our strategy to maintain high levels of liquidity and assist the dealer network in this weak Marine market, our production rates during the quarter were well below our wholesale unit sales.
This lower level of production reflected about a 75% decline in units produced versus the second quarter of 2008. This compares to our 60% decline in the second quarter wholesale units, which I have previously mentioned.
More importantly, in our fiberglass boat businesses, our production levels were about 13% of our retail demand. And our engine business, overall production was reduced by approximately 65%, this follows a 75% reduction in the first quarter.
So in summary, execution of our strategy resulted in lower sales and production levels at both our boat and engine facilities, which led to pressure on our Marine operating margins. Additionally, increased discounting activity on retail sales, in response to the industry dislocation I mentioned earlier also had a negative impact on our boat Marines.
These items were partially offset by the successful execution of our cost reduction program. Our three-part strategy, which we previously outlined, has and will continue to remain the focal point of our current business actions.
We are successfully managing through these difficult conditions by, first, maintaining solid liquidity without additional borrowings, secondly, remaining focused and taking appropriate actions to maintain the health of our dealers, and thirdly, continuing to position ourselves (inaudible) this downturn as a stronger company. And as you see by today's results, we performed exceptionally well against this strategy.
We've made outstanding progress in increasing our overall liquidity. We ended the quarter with $461 million of cash on our balance sheet, compared to $359 million at the end of the first quarter.
The increase in our cash position reflects the continuing successful execution of our cost reduction program, together with a very focused working capital management. Working capital contributed nearly $215 million to our cash balances during the first half, which primarily came from reduced inventory levels and lower accounts receivable.
Peter will provide more detail on our cash flows. We continue to work together with our dealers to manage their declining inventory requirements, this is a critical step in maintaining the strength of our dealer network.
Through the joint efforts of Brunswick and our dealers, boat inventory in the field was reduced by 11,600 units versus a year ago, a 38% reduction. As a result, the quarter ended with 28 weeks of product in the pipeline on our trailing 12-month retail basis compared to 31 weeks at the end of the second quarter of 2008, which is a remarkable achievement giving dramatic retail decline.
In addition to improvements to our dealer inventory units and dealer weeks on hand, we are making parallel progress in the health of our floor plan financing metrics. Total floor plan loans outstanding declined 38% in the quarter compared to second quarter 2008 levels and declined 30% versus the first quarter of 2009.
We're particularly pleased to see that our focus on helping dealers sell product greater than 12 months old showing positive results. Outstanding loans and inventory greater than 12 months were reduced by 27% in the second quarter of this year compared to the first quarter.
It remains likely that we will experience an increase in the rate of dealer failures or voluntary market exits in the second half of the year. However, our experience from prior downturns, the continued reduction of floor plan loans outstanding, and our experiences so far during this particular downturn, continue to give us confidence that we will be able to manage through any further dealer dislocation without endangering our financial health.
Our non-Marine businesses, Life Fitness and Brunswick Bowling and Billiards, experienced sales declines of approximately 30% in the quarter. Same-store retail bowling revenues were down in low double-digits.
However, our exercise and bowling equipment businesses, which rely on financing availability to health clubs and bowling centers, declined significantly. Sales improvements will occur as financing becomes available, and as proprietors of health clubs and bowling centers become concerned that dated equipment is affecting their revenues.
Even in these difficult economic times, Life Fitness and Bowling and Billiards are generating strong cash flows. We're very appreciative of their contributions to Brunswick.
Now I'll turn the call over to Peter for a closer look at our financials.
Peter Hamilton
Thanks very much, Dusty. I'd like to begin with a brief description of the $0.35 per share of restructuring and special tax items in the quarterly report.
Restructuring, exit and impairment charges were $35.5 million or $0.40 per share. This amount reflects charges for our continuing actions to realign our manufacturing footprint and associated workforce reductions.
In addition, we incurred non-cash charges for impairments of various underutilized assets. The $0.05 per share non-cash special tax benefit is primarily caused by the reversal as required by GAAP of certain tax valuation allowances.
To put it as simply as I can, while our Company is in a loss position and we are reporting gains in other comprehensive income items on our balance sheet, such as pension experience and foreign currency translation, these gains lower our related deferred tax assets. To match reduction in our deferred tax assets, we have to reverse our previously recorded valuation allowance for these items and the accounting rules require us to record this reversal as a tax benefit in the P&L.
Since we recorded the expense related to the establishment of the tax valuation reserve as a special tax item, we are recording this small reversal in a similar manner. Moving from the financials to the business, Dusty has explained that we expect an increase in the rate of dealer failures and exits in the second half of this year.
Our experience over the past 18 months suggest that we can manage through this activity without major business or financial disruption. During the past 18 months of market weakness, dealers comprising about 16% of our boat group sales have failed voluntarily closed their doors.
This percentage includes the Olympic bankruptcy, previously our second largest dealer. Our expense associated with shifting the inventory of these dealers to stronger alternative dealers has been about $8 million.
Looking at the first half of this year, boats tendered to us for repurchase totaled nearly $11 million, virtually all of which have been placed with alternative dealers. So the actual cost to us of this first half activity has been about $2 million.
We conduct detailed dealer by dealer analysis of potential future repurchase losses as of each quarter. We increased our reserve for this exposure by approximately $4 million in Q2, resulting in a total accrual of $16 million at quarter end.
Therefore, although we do retain certain legal repurchase obligations, we discharge these obligations most of the time by transferring boats to other dealers who want to represent our brands and sell our brands. This not only minimizes our financial exposure, it's also a process steadily improves strength and the effectiveness of our dealer network.
Now let's turn to a more detailed review of cash flow and that's a topic that our entire organization is intentionally focused on, certainly done an outstanding job of managing. As Dusty said, our cash balance at the end of the second quarter was $461 million, which was $144 million greater than year-end 2008 and more than 100 million greater than the first quarter of 2009.
This is the highest level of cash the Company has reported since the third quarter 2006. We did not have cash borrowings under our revolving credit agreement at any time during the first half.
We ended the second quarter with net available revolver borrowing capacity of approximately $80 million. So when you combine the amount of cash on our balance sheet with this amount, we entered the second half with approximately $540 million of available liquidity.
In addition to the cost reductions that helped to mitigate our losses, most significant source of cash in the first half came from a reduction in our networking capital. Reduction in inventory of $121 million in the second quarter and $111 million in the first quarter 2009 was the primary driver of reduced working capital.
And we've enhanced the presentation of our cash flow statement in Q2 to reflect certain major non-cash items in addition to D&A that did affect our earnings, but not our cash. The four major items in the first half included pension expense of $42 million, which represents the amount expensed during the first half, but was non-cash.
Non-cash expense of $31 million, which is non-cash tax expense. This amount reflects the special tax items that we identified in our Q1 and Q2 earnings releases.
As you may recall, in the first quarter, we recorded an approximate $37 million tax valuation allowance per FAS 109, this amount was partially offset by the second quarter tax benefit that I described in my opening comments. The third non-cash expense item reflects additional provisions for doubtful accounts of approximately $27 million and the last item represents other non-cash charges, primarily impairment charges of about $14 million, which mainly relate to our restructuring activities.
Based on first half cash generation, we have updated our cash flow objective for the full year 2009. We're now targeting to end the year with cash balances in excess of $400 million.
As previously stated, we expect our annual D&A to be about $155 million. We now estimate 2009 capital expenditures to approximate $40 million.
We currently estimate that restructuring charges will be in the range of $90 million to $100 million for the full year for actions currently implemented or planned in the second half the vast majority of our restructuring charges will be cash. Our pension funding requirement for the full year will be approximately $10 million.
We also anticipated the second half receiving approximately $10 million of additional tax refunds related to the filing of our final 2008 Federal Income Tax Return and carrying back the net operating loss to prior years. Again, as Dusty said, in light of the excellent working capital management in the first half of the year, we have increased our tax generated from working capital objective to now being at least $300 million for 2009.
Once again, the primary reason for this large contribution is the lower production levels we experienced during the first half combined with what we have planned for the remainder of 2009. We will continue to purchase fewer goods and meet a greater percentage of our sales requirements from inventory currently on hand.
We anticipate that declines in working capital supporting revolving credit facility will be offset by lower letter of credit requirements. As a result, we are expecting to end the year with approximately $80 million of net available borrowing capacity after taking into account the $60 million minimum availability adjustment required by the fixed charge test in the facility.
Therefore, after combining our revised cash flow target with our revolver cash capacity, our objective is to enter 2010 with no less than $480 million of total liquidity. And in addition to maintaining a strong cash position and access to our revolving credit facility, we also expect to consider other potential financing opportunities to maintain a debt portfolio that is appropriately structured to meet our long-term business needs.
I'll now turn the call back to Dusty for some concluding comments.
Dusty McCoy
Thanks, Peter. We've already accomplished much this year.
Our cash position is very healthy at $461 million, our dealer pipeline is lower by thousands of units as well as on a weeks on hand basis compared to last year. The core of our dealer network remains strong, and we are signing new dealers in open markets.
And our fixed costs are significantly and permanently lower. These accomplishments have come with real detriment to our sales and earnings.
We're positioned to emerge from the global recession healthy on an absolute basis and remarkably so on relative basis in the four segments in which we operate. The remainder of this year will be difficult from a sales and earnings perspective as we continue to execute our strategies over the second half.
However, by staying focused on these strategies, we plan to exit 2009 with cash in excess of $400 million, dealer pipelines reduced on a weeks on hand basis to levels not seen in the past 10 years and fixed cost reductions for activities already announced exceeding $260 million in 2009 and $400 million in 2008 and 2009 combined. Accomplishing our goals over the remainder of this year will position us to take advantage of flat and in improving market conditions when those occur.
Our pipeline reductions will result in a number of boats in the pipeline being so low that restocking at our dealers may need to occur on a one for one basis as wholesale shipments match retail volumes over a 12-month period. Because wholesale shipments have been much lower than retail volumes and production volumes have been even lower than wholesale shipments.
We will produce and ship significantly more product in future periods resulting in improved sales dollars. Along with these improved sales, the fixed cost reductions we're achieving will permit us to achieve healthy margins as the market improves even if the Marine market does not return to pre-2008 levels.
We see a few risks in certain areas for Brunswick and the Marine industry during the remainder of 2009. As the selling season winds down, the cash flow naturally decline, builders and dealers will come under additional pressure and we could see some more failures or exits as the year progresses.
This will place additional pressure on pricing and discounts as inventory from failures or exits bleed into the market. While these events are disruptive in the short-term, their passage from healthy builders and dealers to recover more quickly as the economy improves.
In addition to all that we've accomplished we believe there are additional opportunities to improve our competitive position. We will, during the remainder of 2009, continue to examine our manufacturing footprint, brand, models, and cost and operating structure to further improve our margins and earnings acceleration even if the global recreational Marine markets recover slowly.
As an example, you may be aware as a result of publicity in Oklahoma and Wisconsin, where our Mercury U.S. manufacturing facilities are located that we are actively engaged in examining our engine manufacturing footprint with the goal of materially reducing costs and improving margins.
While these and other activities are not yet implemented, they are examples of further actions available to us to improve our already strong competitive position. We can't change global economic conditions, but we can use these conditions as an opportunity to improve Brunswick and we are doing so.
And with that we will be happy to take the questions.
Operator
(Operator instructions). Our first question comes from Ed Aaron with RBC Capital Markets.
Sir, your line is open.
Ed Aaron -- RBC Capital Markets
Thanks. Good morning, guys.
Dusty McCoy
Good morning, Ed.
Ed Aaron -- RBC Capital Markets
Dusty, I was interested in your comment about dealer pipeline inventories expected to be at 10-year lows after the end of this year, can you just remind us what that 10-year low number is historically?
Dusty McCoy
Ed, that's not a number I'm prepared to disclose. But it's obviously quite low.
Ed Aaron -- RBC Capital Markets
Okay. And (inaudible) I've been trying to figure out is, historically, the right level of inventory has been somewhere in the, I guess the low-to-mid 20s, that's kind of a good number for the dealer channel to be, but with everything going on there today, it seems like that right number might be lower going forward.
And just was wondering if you have, what do you consider to be an appropriate reach the inventory target for this business, assuming really no change in the dealer floor plan, financing environment or really no change in demand from here.
Dusty McCoy
Ed Aaron -- RBC Capital Markets
Okay, thanks for the clarity there. Peter, why were the SG&A dollars up sequentially from Q1 to Q2?
Peter Hamilton
Well, let me say they're certainly down compared to the second quarter of '08, and so that's the first point I think is needs to be made. The second point is that there are larger restructuring dollars in there and bad debt reserves, which we call down in the cash flow statement.
Ed Aaron -- RBC Capital Markets
Okay, thanks. And then last question, perhaps I may have missed it during your prepared remarks.
You gave a number in there about what you shipped versus retail demand. It was a 13% number.
I didn't cash exactly what that was.
Dusty McCoy
That actually was in our fiberglass businesses, Ed. We produced 13% of what the dealers actually retailed in terms of even numbers.
The way to think about is, our sales were down in the 70% range -- let's put it this way. Retail was down across the industry in the low 30s.
Our shipments at wholesale were down 60%. Our production levels were down in excess of 80%.
Does that help?
Ed Aaron -- RBC Capital Markets
It does. Pretty staggering comparison, but thanks.
Dusty McCoy
Oh, yes, it's (inaudible). That's obviously what's happening to our sales and earnings, but that's what's positioning us to come out of this, Ed.
Ed Aaron -- RBC Capital Markets
Understood. Thank you.
Dusty McCoy
You're welcome.
Operator
Our next question comes from Hayley Wolff with Rochdale Research. Ma'am, you may ask your question.
Hayley Wolff -- Rochdale Research
Hi, guys.
Dusty McCoy
Hi, Haley.
Hayley Wolff -- Rochdale Research
Just a couple of questions. Just trying to drill down on what Ed was asking.
Can you give us some context for the 11,600 units in the pipeline, maybe percent versus historical average? Because when you think about it on a trailing sales basis, it almost becomes a meaningless number as the industry has shrunk so much over the past 12 months.
So just some context. And then second question, can you give an update on the cost savings that you've generated thus far, how we think about it feathering into 2009 and 2010?
And then lastly, can you clarify for me, I always have this issue, you talked about the dealer inventories coming down, and what your shipments have to look like in terms of restocking. And did you say it means your sales have to go up?
I was kind of unclear on that.
Dusty McCoy
Okay. I'm going to answer the first and third questions and I'll let Peter take the second one.
First, Hayley, the 11,600 units for what the pipeline was reduced by, not what's in the pipeline and that was a 38% reduction, so you can do the math and figure out what's in the pipeline. And the way we actually look at that was the one thing we do disclose is what that is in a weeks basis in terms of trailing 12-month retail.
We also look at it on what we think it is on forward-looking retail, as we make our own views about what the market is going to be. Because we're taking it even lower in the second half, means we've got a great start, we've turned the corner, this has been very hard work now over about six quarters to finally have this breakthrough, but we want to go much, much lower, Hayley.
Now, then if I jump to the third question, and that may be confusing in the way I presented it. What I'm trying to say is by the time we finish this, this year, we're not going to be making many boats, we're not going to be selling much at wholesale, and we’ll not take the pain for the remainder of the year.
We will have our dealer inventory so low that once the market flattens or begins to improve or even has a lower rate of decline, we got to make a lot more boats and sell them at a wholesale into the dealer network, and that's when we will begin to see the increase in volume and sales.
Hayley Wolff -- Rochdale Research
Okay.
Dusty McCoy
Is that helpful? I hope.
Hayley Wolff -- Rochdale Research
Yes.
Peter Hamilton
And then, Hayley, in terms of your question about cost savings, the $260 million of cost savings that we expect to achieve that are incremental to the 140 million in '07, will feather in throughout this year, and so we will exit this year with savings of 260 million in excess of when we began the year, 400 million is a number, of course, for the two year period when we started this journey in real energy in '07. The benefits of those numbers you see come in through SG&A, where despite the fact that pension is up considerably by the amounts we have given, the SG&A numbers are down despite the fact that bad debt is up by the amounts that we've explained, SG&A is down and reductions also come in ways that are harder to see through cost of sales.
Hayley Wolff -- Rochdale Research
And in 2010, there should be incremental cost savings?
Peter Hamilton
Yes, because 2010 will receive the full benefit of the 260 million rather than '09, which is receiving the benefit as the reductions are incrementally rolled in.
Dusty McCoy
And Hayley, towards the end of my prepared remarks, we're going to do more and we're just not prepared to tell people how much that is or the way it will evolve. So we're fundamentally reaching view that the market is going to be a slowly recovering market.
It's not going to recover at a level it did in the past, and we're going to continue that everything we have to do to make ourselves nicely profitable with very nice margins in a much slower market.
Hayley Wolff -- Rochdale Research
Okay. Great.
Thank you.
Operator
Our next question comes from Tim Conder with Wells Fargo. Sir, your line is open.
Tim Conder -- Wells Fargo
Thank you. Dusty, again maybe this is along the line of the previous two questions here.
I don't know if it's an answerable question at this point, but what would you guesstimate the new potential industry cycle range of unit sales could be?
Dusty McCoy
Let me tell you what our planning is, which is a lot different than saying what we think the market will be. If in round numbers, Tim and we all can debate in the industry what numbers we're looking at, so just to put a peg down, let's say this year is 130,000 units, 135,000 units, our planning is that we've got to be nicely profitable at 150,000 units.
And that we've got to be really profitable at 170, and we probably shouldn't plan on the market being over 200. That's compared to, Tim, 310 in the 2007 timeframe.
Tim Conder -- Wells Fargo
Okay. That helps, sir.
Thank you. Back to the channel inventory question regarding the aged inventories, you mentioned it was down, the percentage that you quantified there.
But if we look at it, Dusty, as a percent that is over 12 months old, that is currently in the channel, what is that percentage now versus first quarter versus a year ago? And do you have any guesstimate where that's going to be at year-end?
Dusty McCoy
Right now, the inventory is about half current and half over 12. But we have made more reductions in the over 12 and Peter and I are looking at --
Peter Hamilton
The percentage of age inventory in before weakness in the markets occurred, percentage of age inventory was lower than the approximately 50/50 that we are experiencing now, but I think the point is, as we've said, we made good progress in reducing aged inventory in the last quarter. We're going to continue in pursuing quarters, and the main reason why it seems at a relatively high, 50/50, is that we had such a low number, less than 12 months inventory on the dealers floors at the present time and the less than 12 months that is on the dealers floor is selling pretty well.
Dusty McCoy
When we give that percentage, I want to reiterate what Peter said. We have been wholesaling so little product that product sitting in the field as it reaches a higher percentage.
So that bodes very well then, Tim, for the future, because we have so little product sitting in the network that's co-current. We're going to need to accelerate quickly when this thing turns.
Tim Conder -- Wells Fargo
Okay. And, gentlemen, goals for year-end, as far as that mix, and then along that line, it sounds like, if I'm reading between the lines correctly, sometime in early 2010, the first half of '10, you're actually planning on the production what will definitely have to be up on a year-over-year basis?
Dusty McCoy
Well, I can give you one number that may not mean a lot to you, but it's goal setting. We said we want our non-current at end of the year to have been down more than 50% versus where we ended the year and we're on track to get that.
Yes, we're going to have to increase production next year on almost any market condition, the question we're going to see how much, how fast, when we gear it up.
Tim Conder -- Wells Fargo
And then on the restructuring, you stated that of the 90 million to 100 million for this year that contemplates additional restructuring yet to be announced. By year-end, should we have the majority of material restructurings put on the table, whether that be Mercury or other potential boat areas?
Peter Hamilton
Well, just to clarify, and then perhaps Dusty will want to answer the second part of the question, the 90 million relates to restructuring costs that we currently estimate for projects that are either underway, we absolutely know that we're going to do and are detailed out and there is a business plan for. Now, in possible addition to that….
Dusty McCoy
There will be more, Tim, as we go forward. As we keep thinking of what our cost position really needs to be and our goals that I've outlined for you earlier or maybe Hayley, I forget now, I think in your question, Tim, profitability at certain levels -- Tim, we're very focused on the fact that the industry is going to be smaller, it's going to come back slower, and we want to be best prepared as we can be for that eventuality, and yes, there will be some additional restructuring.
Tim Conder -- Wells Fargo
Okay. Thank you, gentlemen.
I'll get back in queue.
Operator
Our next question comes from Richard Whiting with Broadview Advisors. Sir, your line is open for your question.
Richard Whiting -- Broadview Advisors
Thank you. When we talk about changes in the number of units shipped, like fiber glass units, it tends to be an apples to apples type conversation, but I'm wondering if you're seeing, from either retail or dealer orders, reduction in factory installed content or maybe size of engines, so is the value of a unit in '09 or conceivably in '010 different measurably different than it might have been six quarters ago?
Dusty McCoy
The value on a per unit basis has been in this last quarter, it declined slightly. And in most of our previous quarters, it remained about the same, Richard.
Richard Whiting -- Broadview Advisors
Thank you.
Operator
(Operator instructions). Eric Engler with D.E.
Shaw, your line is open.
Eric Engler -- D.E. Shaw
Hi, guys. Just wondering what you're assuming for the rest of the year in terms of dealer defaults.
Dusty McCoy
Hi, guys. Well, we've increased our reserve slightly and I think Peter gave the number we spent.
Actual cost this year to date, have been 8 million cash cost. We're planning for the remainder of the year that it could be at that number or slightly higher, but not a material number.
Eric Engler -- D.E. Shaw
Okay. Thanks.
Dusty McCoy
You bet.
Operator
Tim Conder, your line is open for your question.
Tim Conder -- Wells Fargo
Thank you. Could you, Peter, just maybe tell us what Forex impact on sales, EBIT, EPS, in the quarter and year-to-date?
I apologize if I missed that.
Peter Hamilton
No, you didn't miss it. Actually I guess in more normal times, the foreign currency impact would have been a more significant or material factor in our earnings in these more turbulent times it seems less so.
The second quarter, Tim, sales were down about $40 million or 3% as a result of the strengthening of the dollar compared to a year ago. Operating earnings affected that was about 7 million.
Although it is 7 million and although it's 3% of sales, it does (inaudible) significance to some of the other more fundamental things that are going on in the Marine market at the current time. We continue to keep an eye on it, we continue to do some plain vanilla modest hedging to smooth and mitigate the effects of currency, but in general, it is really not a significant effect on our business currently.
Tim Conder -- Wells Fargo
Okay. And then along the same lines, Peter, maybe, I don't know, and for competitive reasons if you want to say this or not, but the promos that you're doing this year, year-to-date or what you expect for the year, just sort of have a benchmark as to see what that could come off as things normalize?
Peter Hamilton
I'm going to let the boss answer this one.
Tim Conder -- Wells Fargo
Okay.
Dusty McCoy
That's because I'll definitely get it wrong compared to Peter's analysis. We think discounting for the remainder of the year, and I have touched that in the prepared remarks, Tim, is going to continue to be a significant piece of our business, and are to remain at levels consistent with what we've seen in the last quarter.
I'm not really giving you that number, but in round numbers, it's slightly more than twice what we would have seen in normal circumstances. Once we get through this year, the question is going to be, as we go through the fall, with how many other builders or dealers will fail and how much of their inventory will remain unsold as we go into the selling season, and if there's a lot of it that discounting could still be a factor next year, but this is a very much we're going to have to wait and see.
Tim Conder -- Wells Fargo
Okay. Thank you, guys again.
Dusty McCoy
You're welcome, Tim.
Operator
Our next question comes from Ed Aaron with RBC Capital Markets. Your line is open for your question.
Ed Aaron -- RBC Capital Markets
Great, thanks. Just quick follow-up.
Just trying to think big picture about what your revenue base would look like if we sort of get into a steady state where demand is 150,000 units, there's no real changes happening in the inventory, destocking or restocking. Is $4 billion like roughly is a round number, a decent revenue opportunity for your company as a whole….
Peter Hamilton
You're right in the ballpark, Ed.
Ed Aaron -- RBC Capital Markets
Okay. Thank you.
Peter Hamilton
You're welcome.
Operator
Our next question comes from James Hardiman with FTN Equity Capital Markets.
James Hardiman -- FTN Equity Capital Markets
Good morning. And I apologize if you already answered this.
I missed the very beginning of the call, but Marine Max obviously your biggest customer had a bit of good news on their call earlier this morning saying that July sales were actually comping positive versus last year, there are a lot of caveat around that, clearly they're being more promotional, but can you talk a little bit about if that's a Marine Max specific phenomenon, and if you're seeing that throughout the industry and what your thoughts are on that?
Dusty McCoy
There's not an answer we can give throughout the industry. Even before July, we've had dealers, certain regions, certain brands, certain types of boats, that are up, down on a comp basis versus the previous year in any given month, and we are just absolutely tickled with that at line Max has aggressive units and the way they're moving product right now.
They're doing nice job.
James Hardiman -- FTN Equity Capital Markets
But you do think it's more of an issue of them stepping up their promotions than any change in demand, at least based on what you're seeing?
Dusty McCoy
Well, I really don't know. I know they stepped up their promotions, but as we look around the whole industry, there's a fair number of boats getting sold, in my prepared remarks, I walked through sequentially, it sort of goes the last couple of quarters the industry was down in the 40s, low 40s.
This quarter, it's down low 30s, and in the second quarter, and there's a lot of money moving boats during that time and there's a lot of money available in July moving boats, but I won't be surprised if it's a bit better. Still going to be down, bit better.
James Hardiman -- FTN Equity Capital Markets
Excellent. Thanks, guys.
Dusty McCoy
You're welcome. Well, thank you for all the questions.
At this time, we're going to sign off. We appreciate, first, the quality of the questions, everyone's interest in our Company and listening us to patter on for a long time, but we felt there was a lot we needed to set up.
We're very comfortable with where we are. Thank you.
Operator
That does conclude today's conference. Thank you all for joining.
You may disconnect your lines at this time.