Slide 1: Earnings Conference Call Q2, 2019
Earnings Conference Call Q2, 2019
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. Forward-looking statements are based on current expectations, estimates, and projections about Brunswick
Slide 3: Use of Non-GAAP Financial Information and Constant Currency Reporting
Brunswick Corporation – Earnings Release Use of Non-GAAP Financial Information and Constant Currency Reporting 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 ca
Slide 4: Discontinued Operations
Brunswick Corporation – Earnings Release Discontinued Operations On June 27, 2019, Brunswick completed the sale of its Fitness business. Starting with the second quarter of 2019, the historical and future results of this business are now reported as discontinued operations. Therefore, for all period
Slide 5: Business Overview
BUSINESS OVERVIEW Dave Foulkes – CEO |5
Slide 6: Overview of Q2 2019
Brunswick Corporation – Earnings Release Overview of Q2 2019 Pivotal point in Challenging Earnings growth and Completed sale of transition to pure- demand margin accretion due Fitness business to play marine environment in first- to Power Products, KPS – increased company -- focus half, due in overa
Slide 7: Marine Engine Segment – Q2 Overview
Brunswick Corporation – Earnings Release Marine Engine Segment – Q2 Overview1 Top-line growth of 4.5%, adjusted operating margin improvement of 160 bps • Continued strong demand and market share gains in 175+ horsepower outboard categories • Planned capacity investments on target for Q4 completion -
Slide 8: Boat Segment – Q2 Overview
Brunswick Corporation – Earnings Release Boat Segment – Q2 Overview1 Adjusted net sales down 2.1%, adjusted operating margin decline of 10 bps • Sales growth in certain premium product categories, including Lund and Sea Ray Sport Boats and Cruisers • Investment in new products continues -- significa
Slide 9: YTD Revenue Growth Rates By Region
Brunswick Corporation – Earnings Release YTD Revenue Growth Rates By Region1 Region Engines Boats Total BC 2018 Mix U.S. (2)% 4% 1% 71% YTD Global Europe 11% (11)% 5% 11% revenue grew by Canada 5% (5)% (1)% 7% 6 percent, with Asia-Pacific 13% (4)% 10% 7% 2 percent growth Rest-of-World 6% 16% 8% 4% o
Slide 10: U.S. Powerboat Industry – Percentage Change in Retail Units
Brunswick Corporation – Earnings Release U.S. Powerboat Industry – Percentage Change in Retail Units Category 1H-19 1H-18 FY-18 FY-17 Outboard Boats (6)% 5% 5% 6% Fiberglass SD/IB YTD 2019 industry Boats (12)% (8)% (4)% (5)% unit volume for Main Powerboat (7)% 4% 4% 5% the main Segments powerboat To
Slide 11: Capital Strategy / Fitness Proceeds
Brunswick Corporation – Earnings Release Capital Strategy / Fitness Proceeds We plan to fully deploy the Fitness proceeds by the end of 2019 • Closed Fitness sale transaction at end of Q2 – approximately $470M net proceeds • Increased share repurchase authorization to $600 million • Plan to complete
Slide 12: Financial Overview
FINANCIAL OVERVIEW Bill Metzger – CFO | 12
Slide 13: Overview of Second Quarter 2019
Brunswick Corporation – Earnings Release Overview of Second Quarter 20191 Consolidated results on an as adjusted basis vs. Q2 2018: Diluted EPS of $1.45, Operating margin of 15.5 Net sales up 3 percent percent, up 160 bps up 9 percent Operating earnings Operating leverage of increased 15 percent 65
Slide 14: Overview of First Half of 2019
Brunswick Corporation – Earnings Release Overview of First Half of 20191 Consolidated results on an as adjusted basis vs. 1H 2018: Diluted EPS of $2.39, Operating margin of 13.8 Net sales up 6 percent percent, up 120 bps up 8 percent Operating earnings Operating leverage of increased 16 percent 31 p
Slide 15: Marine Engine Segment – Q2 Performance
Brunswick Corporation – Earnings Release Marine Engine segment – Q2 Performance1 Product Category Sales ($M) % Change Propulsion $404.9 (5%) Parts & Accessories 466.6 14% Total $871.5 4%2 Operating Margin Operating Earnings - Adjusted @ 19.8 percent, up 160 bps - Adjusted of $172.4M, up 14 percent -
Slide 16: Boat Segment – Q2 Performance
Brunswick Corporation – Earnings Release Boat segment – Q2 Performance1 % Change in Product Category Sales ($M) Adjusted Net Sales Aluminum Freshwater $160.8 (5%) Recreational Fiberglass 120.2 (0%) Saltwater Fishing 82.6 (2%) Business Acceleration 3.7 NM Total $367.3 (2%) Operating Margin Operating
Slide 17: Review of Brunswick Boat Segment Pipeline Metrics
Brunswick Corporation – Earnings Release Review of Brunswick Boat segment pipeline metrics Ending Change Units in Change Wholesale unit Year Weeks on Versus Prior Pipeline Versus Prior shipments are down Hand Year (WOH) (thousands) Year (Units) 7 percent YTD 19 35 +5 weeks 22.8 6% In the second-
Slide 18: Other Factors Affecting GAAP Operating Earnings
Brunswick Corporation – Earnings Release Other factors affecting GAAP operating earnings1 Q2 $ in Millions 2019 2018 Restructuring, exit, impairment, and other charges $5.9 $34.2 Purchase accounting amortization 7.3 - Acquisition Related Costs 1.3 2.5 Sport Yacht & Yachts 2.9 27.4 Total $17.4 $64.1
Slide 19: 2019 Guidance
2019 Guidance Diluted EPS, as adjusted, range of $4.20 - $4.30 (vs. $4.13 in 2018 on a comparable basis) Revenue up slightly versus 2018 Solid improvement in gross and operating margins Operating earnings growth of low-to-mid-single digit percent Q3 – Revenue and operating earnings down mid-to- high
Slide 20: Tariff Update
Brunswick Corporation – Earnings Release Tariff Update Change from Q1 call 2019 estimates incorporate exclusion granted on 40 to 60 horsepower engines We anticipate an impact to 2019 Assumes Wave 3 staying at 25% rate, does pre-tax earnings not assume any impact for Wave 4 (minimal of $17 to $22 to
Slide 21: 2019 Outlook – P&L and Cash Flow
Brunswick Corporation – Earnings Release 2019 Outlook – P&L and Cash Flow Change from Prior 2019 Estimates Conference Call Estimate Free cash flow1 In excess of $260 million Lower Working capital usage ~$20 - $40 million Slightly Higher Depreciation and ~$100 - $110 million No Change amortization2 A
Slide 22: 2019 Outlook – Capital Strategy Assumptions
Brunswick Corporation – Earnings Release 2019 Outlook – Capital Strategy Assumptions Change from Prior 2019 Estimates Conference Call Estimate Debt retirement ~$150 - $200 million No Change Capital expenditures ~$240 - $260 million No Change Share repurchases ~$400 million Higher Quarterly dividends
Slide 23: 2019 Outlook
2019 OUTLOOK Dave Foulkes – CEO | 23
Slide 24: Marine Engine Segment
Marine Engine Segment Modest Revenue Growth and Solid Margin Improvement Operating and Strategic Priorities Continue growing Capacity initiatives market share in to enable growth outboard engines Integration of Power New product Products and pipeline organic P&A growth 2019 Segment Financial Targets
Slide 25: Boat Group Segment
Boat Group Segment Revenue and Margin Declines Operating and Strategic Priorities Operational Cost reduction efficiency actions improvements New products and Consumer technology engagement enhancements activities 2019 Segment Financial Targets Net Sales 6 to 7 percent decline Operating Margins 70 to
Slide 26: 2019 Performance Overview
2019 Performance Overview Despite challenging market conditions, 2019 will be a very successful year. Key actions and achievements include: Our core Completed portfolio moves (e.g., divesting Fitness, acquiring business has Freedom) outperformed Aggressively executing capital strategy the broade
Slide 27: 2020 EPS Targets
2020 EPS Targets We remain confident in our ability to reach our 2020 EPS target assuming market and macro economic conditions consistent with 2019 Capital strategy deployment Full-year benefit of structural cost reduction activities Increased capacity to support 175-300hp outboard engines A
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Slide 29: Appendix
Appendix | 29
Slide 30: GAAP to Non-GAAP Reconciliations
Brunswick Corporation – Earnings Release GAAP to Non-GAAP Reconciliations | 30 ©2019 Brunswick Co. Confidential and all rights reserved.
Slide 31: Q2 Adjusted Net Sales increased by $35.4 million, or 3.1 percent
Brunswick Corporation – Earnings Release Q2 Adjusted Net Sales increased by $35.4 million, or 3.1 percent Net Sales - GAAP Net Sales - As Adjusted 1 Segments (in % % millions) Q2 2019 Q2 2018 Change Q2 2019 Q2 2018 Change Marine Engine $ 871.5 $ 834.3 4.5% $ 871.5 $ 834.3 4.5% Boat 366.6 394.9 (7.2)
Slide 32: YTD Adjusted Net Sales increased by $134.2 million, or 6.4 percent
Brunswick Corporation – Earnings Release YTD Adjusted Net Sales increased by $134.2 million, or 6.4 percent Net Sales - GAAP Net Sales - As Adjusted 1 Q2 2019 Q2 2018 Q2 2019 Q2 2018 Segments (in millions) YTD YTD % Change YTD YTD % Change Marine Engine $ 1,637.5 $ 1,521.4 7.6% $ 1,637.5 $ 1,521.4 7
Slide 33: Q2 Adjusted Net Sales
Brunswick Corporation – Earnings Release Q2 Adjusted1 Net Sales . 1Excludes net sales related to Sea Ray Sport Yacht and Yacht operations, see today's Form 8-K for reconciliation to GAAP figures and for information on marine eliminations | 33 ©2019 Brunswick Co. Confidential and all rights reserved.
Slide 34: YTD Adjusted Net Sales
Brunswick Corporation – Earnings Release YTD Adjusted1 Net Sales . 1Excludes net sales related to Sea Ray Sport Yacht and Yacht operations, see today's Form 8-K for reconciliation to GAAP figures and for information on marine eliminations | 34 ©2019 Brunswick Co. Confidential and all rights reserved
Slide 35: Tax Provision
Brunswick Corporation – Earnings Release Tax Provision Estimated 2019 Q2 2019 2018 effective book tax Effective tax rate - GAAP 22.0% 19.4% rate, as adjusted, Effective tax rate, as adjusted (1) 21.3% 21.3% is approximately 22 percent on tax guidance issued to date; cash tax rate expected to be high
Slide 36: Review of Foreign Currency Impact
Brunswick Corporation – Earnings Release Review of Foreign Currency Impact1 Q2 2019: • Unfavorable impact on sales of approximately 1 LA/Other percent • Unfavorable impact on operating earnings of Canada approximately $6 million Outlook for Full-Year 2019: Asia Pacific • Unfavorable impact on consol
Slide 37: Free Cash Flow
Brunswick Corporation – Earnings Release Free Cash Flow Six Months Ended (#039;s in millions) 2019 2018 Net cash provided by operating activities from continuing operations $ 147.4 $ 167.0 Net cash provided by (used for): Plus: Capital expenditures (135.2) (81.7) Plus: Proceeds from sale of property, p