Slide 1: Brunswick Earnings Conference Call Q3, 2014
Brunswick Earnings Conference Call Q3, 2014 October 23, 2014 Helping Active People Live Active Lives
Slide 2: Forward-Looking Statements
Brunswick Corporation – Earnings Release Forward-Looking Statements Certain statements in this presentation are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on current expectations, estimates and projections about Brunswick’s business.
Slide 3: Use of Non-GAAP Financial Information
Brunswick Corporation – Earnings Release Use of Non-GAAP Financial Information In this presentation, Brunswick uses certain non-GAAP financial measures, which are numerical measures of a registrant’s historical or future financial performance, financial position or cash flows that exclude amounts, o
Slide 4: Discontinued Operations
Brunswick Corporation – Earnings Release Discontinued Operations On July 17, 2014, the Company announced: 1) the signing of an agreement to sell its Retail Bowling business, and 2) its intention to sell its Bowling Products business. On Sept. 18, 2014, the sale of the Retail Bowling business was com
Slide 5: Overview of Third Quarter, 2014
Brunswick Corporation – Earnings Release Overview of Third Quarter, 2014 • Revenue increased 13 percent as growth in outboard boats and engines, marine parts and accessories, fiberglass sterndrive/inboard boats and fitness equipment was partially offset by a decline in sterndrive engines • Gross mar
Slide 6: Q3 Net Sales increased by $107.7 million, or 13%
Brunswick Corporation – Earnings Release Q3 Net Sales increased by $107.7 million, or 13% Net Sales Three Months Ended September 27, September 28, Segment (#039;s in millions) 2014 2013 % Change Marine Engine $ 566.9 $ 511.1 11 % Boat 234.6 191.7 22 % Marine eliminations (58.4) (49.1) Total Marine 743.
Slide 7: First Nine Months Net Sales increased by $127.2 million, or 5%
Brunswick Corporation – Earnings Release First Nine Months Net Sales increased by $127.2 million, or 5% Net Sales Nine Months Ended September 27, September 28, Segment (#039;s in millions) 2014 2013 % Change Marine Engine $ 1,724.4 $ 1,664.6 4% Boat 841.5 792.3 6% Marine eliminations (200.1) (182.8) To
Slide 8: Q3 Adjusted Operating Earnings increased by $29.3 million
Brunswick Corporation – Earnings Release Q3 Adjusted Operating Earnings increased by $29.3 million Operating Earnings - Excluding Charges Three Months Ended September 27, September 28, Segment (#039;s in millions) 2014 2013 Change Marine Engine $ 93.3 $ 75.2 $ 18.1 Boat (6.1) (14.3) 8.2 Total Marine 87
Slide 9: First Nine Months Adjusted Operating Earnings increased by $33.5 million
Brunswick Corporation – Earnings Release First Nine Months Adjusted Operating Earnings increased by $33.5 million Operating Earnings - Excluding Charges Nine Months Ended September 27, September 28, Segment (#039;s in millions) 2014 2013 Change Marine Engine $ 277.5 $ 266.1 $ 11.4 Boat 22.6 10.1 12.5 T
Slide 10: Q3 Adjusted Pretax Earnings increased by $32.3 million
Brunswick Corporation – Earnings Release Q3 Adjusted Pretax Earnings increased by $32.3 million Adjusted Pretax Earnings Three Months Ended September 27, September 28, Change (#039;s in millions) 2014 2013 Adjusted operating earnings $ 94.6 $ 65.3 $ 29.3 Net interest expense (6.7) (7.9) 1.2 Other incom
Slide 11: First Nine Months Adjusted Pretax Earnings increased by $48.6 million
Brunswick Corporation – Earnings Release First Nine Months Adjusted Pretax Earnings increased by $48.6 million Adjusted Pretax Earnings Nine Months Ended September 27, September 28, Change (#039;s in millions) 2014 2013 Adjusted operating earnings $ 317.9 $ 284.4 $ 33.5 Net interest expense (22.0) (33.
Slide 12: Q3 Diluted EPS, as adjusted, increased by $0.05
Brunswick Corporation – Earnings Release Q3 Diluted EPS, as adjusted, increased by $0.05 Earnings Per Share Three Months Ended September 27, September 28, 2014 2013 Diluted EPS from continuing operations $ 0.64 $ 0.61 Restructuring, exit and impairment charges 0.01 0.02 Loss on early extinguishment
Slide 13: First Nine Months Diluted EPS, as adjusted, decreased by $0.32
Brunswick Corporation – Earnings Release First Nine Months Diluted EPS, as adjusted, decreased by $0.32 Earnings Per Share Nine Months Ended September 27, September 28, 2014 2013 Diluted EPS from continuing operations $ 2.07 $ 1.90 Restructuring, exit and impairment charges 0.03 0.11 Loss on early e
Slide 14: U.S. Powerboat Industry - September, 2014 (Preliminary Results)
Brunswick Corporation – Earnings Release U.S. Powerboat Industry - September, 2014 (Preliminary Results) 2014 vs. 2013 - YoY Growth % Q1 Q2 Q3 YTD 16-> All Aluminum Aluminum Fish 2.5% 6.1% 4.3% 4.7% Pontoon 4.0% 5.0% 5.0% 4.9% 11-40 ft* OB Fiberglass All (Inshore/Offshore) 5.9% 9.7% 11.6% 9.3% 14-30
Slide 15: Marine Engine segment – sales by region
Brunswick Corporation – Earnings Release Marine Engine segment – sales by region Q3 - 2014 Change vs. Region % of Sales* Prior Year United States 66% 9% Europe 12% 35 % Rest-of-World 22% 2% Total 100% 11 % • U.S. sales increased in outboard engines and parts and accessories, partially offset by lowe
Slide 16: Q3 Outboard and Sterndrive engines
Brunswick Corporation – Earnings Release Q3 Outboard and Sterndrive engines Outboard • Favorable retail demand environment continues in overall U.S. outboard boat categories, including recently launched products • International markets also experienced growth Sterndrive • Unfavorable global retail d
Slide 17: Q3 Marine Engine segment's Parts & Accessories
Brunswick Corporation – Earnings Release Q3 Marine Engine segment’s Parts & Accessories Service Parts Boating Accessories Propellers • Growth in most major markets, except for Latin America • Revenue benefited from recent acquisitions, new product launches and market Oil & Lubes Trolling Motors Cont
Slide 18: Factors affecting Marine Engine segment's Q3 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Marine Engine segment’s Q3 operating earnings Key Factors • Higher sales • Benefits from recently launched outboard products • Favorable warranty experience • Investments in growth initiatives Q3 operating margin at 16.5% 18 October 23, 2014
Slide 19: Boat segment – sales by region
Brunswick Corporation – Earnings Release Boat segment – sales by region Q3 - 2014 Change vs. Region % of Sales Prior Year United States 71% 31% Europe 7% 36% Rest-of-World 22% (2)% Total 100% 22% • U.S. sales continue to benefit from overall retail growth in outboard boat categories; fiberglass ster
Slide 20: Review of Brunswick Boat segment metrics
Brunswick Corporation – Earnings Release Review of Brunswick Boat segment metrics Wholesale and Retail Metrics • In the third quarter, Brunswick’s global retail unit sales increased by 7 percent compared to prior year; global wholesale unit shipments increased by 7 percent • For the nine months, glo
Slide 21: Factors affecting Boat segment's Q3 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Boat segment’s Q3 operating earnings Key Factors • Higher sales, including several new product introductions along with increased production rates and capacity Q3 operating margin, excluding charges, at (2.6)%; on a GAAP basis at (3.0)% 21 O
Slide 22: Fitness segment - sales by region
Brunswick Corporation – Earnings Release Fitness segment - sales by region Q3 - 2014 Change vs. Region % of Sales Prior Year United States 48% 11% Europe 21% (4)% Rest-of-World 31% 23% Total 100% 11% • Growth in sales reflects gains in the U.S. to health clubs, hospitality and local and federal gove
Slide 23: Factors affecting Life Fitness segment's Q3 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Life Fitness segment’s Q3 operating earnings Key Factors • Higher sales • Lower gross margin percent and increased investment in growth initiatives Q3 operating margin at 13.7% 23 October 23, 2014
Slide 24: Foreign currency impact
Brunswick Corporation – Earnings Release Foreign currency impact* Third quarter 2014: • Minimal impact on sales and operating earnings Full-year 2014: • Minimal impact on sales and operating earnings; slight unfavorable impact expected for Q4 * Includes the impact of hedging activity. 24 October 23,
Slide 25: Tax provision
Brunswick Corporation – Earnings Release Tax provision Note: Effective tax rates for 2014 exclude any potential benefit from extension of U.S. R&D tax credit Q3 First Nine Months (#039;s in millions) 2014 2013 2014 2013 Effective tax rate - GAAP 31.4% (4.8%) 33.4% 14.3% Effective tax rate, as adjusted*
Slide 26: Cash Flow
Brunswick Corporation – Earnings Release Cash Flow Nine Months Ended September 27, September 28, (#039;s in millions) 2014 2013 Net earnings from continuing operations $ 197.2 $ 178.1 Depreciation and amortization 58.4 52.7 Pension funding, net of expense (61.5) (11.9) Excess tax benefits from share-ba
Slide 27: Free Cash Flow
Brunswick Corporation – Earnings Release Free Cash Flow Nine Months Ended September 27, September 28, (#039;s in millions) 2014 2013 Net cash provided by operating activities of continuing operations $ 122.7 $ 140.5 Net cash provided by (used for): Capital expenditures (79.6) (79.3) Proceeds from sale
Slide 28: Cash and Marketable Securities
Brunswick Corporation – Earnings Release Cash and Marketable Securities $597 Main factors affecting cash balances • Free cash flow of $49 million $369 • Discontinued operations (net) of $262 million $’s in millions • Acquisitions of ($42) million • Dividends paid of ($30) million 12/31/2013 9/27/201
Slide 29: 2014 Outlook – P&L
Brunswick Corporation – Earnings Release 2014 Outlook – P&L • Depreciation and amortization estimate of approximately $80 million • Pension expense of approximately $15 million, a decrease of $4 million • Net interest expense of approximately $28 million to $29 million • Effective book tax rate of a
Slide 30: 2014 Outlook: Cash Flow Assumptions
Brunswick Corporation – Earnings Release 2014 Outlook: Cash Flow Assumptions • Pension cash contributions of approximately $75 million • Current plan anticipates working capital changes to result in a modest usage of cash • Capital expenditure levels of approximately $140 million • Generate positive
Slide 31: Outlook for Brunswick 2014
Outlook for Brunswick 2014 Adjusted for Bowling Divestitures 2014 Financial Targets • Revenue growth of approximately 6 percent • Solid improvement in gross margin levels • Operating expenses, as a percent of sales, to be lower than prior year • Adjusted pretax earnings growth of 28 percent to 31 pe
Slide 32: Marine Engine Segment
Marine Engine Segment Continued Revenue and Operating Earnings Growth Summary of Growth Strategy Financial Targets • 2014 to 2016 Targets • Drive consistent, profitable growth • Revenue CAGR in mid-single • Product leadership digit percent range • Be the best partner • Operating margins in the • Enh
Slide 33: Boat Group Segment
Boat Group Segment Gain Market Share and Improve Profitability Summary of Growth Strategy Financial Targets • Establishing product leadership • 2014 to 2016 Targets through repeated product feature • Revenue CAGR in mid-single to innovation on key consumer values high-single digit range • Leveraging
Slide 34: Fitness Segment
Fitness Segment Continued Revenue Growth with Strong Margins Summary of Growth Strategy Financial Targets • Aggressively leverage innovation to • 2014 to 2016 Targets achieve competitive differentiation • Revenue CAGR in mid-single to • Develop new products and services high-single digit range compl
Slide 35: Capital Strategy - 2014 to 2016
Capital Strategy - 2014 to 2016 2014 to 2016 Plan • Maintain strong cash and liquidity positions and regain investment grade credit rating • Strengthen Marine and Fitness segments: • Investing in growth is first priority • Pursue acquisition opportunities with initial focus on Mercury parts and acce
Slide 36: Brunswick Earnings Conference Call Q3, 2014
Brunswick Earnings Conference Call Q3, 2014 Helping Active People Live Active Lives
Slide 37: Appendix
Appendix Helping Active People Live Active Lives
Slide 38: U.S. Powerboat Industry - September, 2014 (Preliminary Results)
Brunswick Corporation – Earnings Release U.S. Powerboat Industry - September, 2014 (Preliminary Results) 2014 - Units Q1 Q2 Q3 YTD 16-> All Aluminum Aluminum Fish 8,500 17,802 7,643 33,945 Pontoon 4,781 21,518 9,660 35,959 11-40 ft* OB Fiberglass All (Inshore/Offshore) 8,385 16,052 9,806 34,243 14-3