Slide 1: Brunswick Earnings Conference Call Q4, 2016
Brunswick Earnings Conference Call Q4, 2016 January 26, 2017
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: Mark Schwabero and Bill Metzger
Brunswick Corporation – Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer January 26, 2017 4
Slide 5: Overview of 2016
Brunswick Corporation – Earnings Release Overview of 2016 • Revenue increased 9 percent -- on a constant currency basis1, sales increased by 10 percent. Strong growth in fitness, fiberglass outboard boats and marine parts & accessories as well as solid growth in aluminum boats, outboard engines and
Slide 6: U.S. Powerboat Industry – Percentage Change in Units
Brunswick Corporation – Earnings Release U.S. Powerboat Industry – Percentage Change in Units Q1-16 Q2-16 Q3 - 16 Q4 - 16 2016 AL – Fish 12% 1% -0% 3% 3% AL - Pontoon 24% 10% 3% -1% 9% FG - Outboard 11% 6% 2% -2% 5% Outboard Boats 14% 6% 2% 0% 6% FG – SD/IB (14-30 ft.) 9% -3% -11% -13% -4% FG – SD/I
Slide 7: 2016 Revenue By Region – Marine Segments
Brunswick Corporation – Earnings Release 2016 Revenue By Region – Marine Segments Region 2016 vs. 2015 2016 Growth Rates* Mix** U.S. +7% 71% Europe +12% 11% Canada +0% 7% Asia Pacific +5% 7% Latin America -22% 3% Africa & Middle East -27% 1% Total +5% 100% Global revenue in our combined marine segme
Slide 8: 2016 Revenue By Region – Fitness Segment
Brunswick Corporation – Earnings Release 2016 Revenue By Region – Fitness Segment Region 2016 vs. 2015 2016 Growth Rates* Mix** U.S. +4% 55% Europe +9% 19% Asia Pacific +15% 13% Latin America -5% 5% Africa & Middle East -2% 4% Canada -3% 4% Total +5% 100% Global revenue in our fitness segment experi
Slide 9: Mark Schwabero and Bill Metzger
Brunswick Corporation – Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer January 26, 2017 9
Slide 10: Net Sales increased by $382.8 million, or 9%
Brunswick Corporation – Earnings Release Net Sales increased by $382.8 million, or 9% Net Sales Twelve Months Ended December 31, December 31, % Change Acquisition 1 Segment (#039;s in millions) 2016 2015 GAAP Constant Currency Contribution Marine Engine $ 2,441.1 $ 2,314.3 5% 6% 1% Boat 1,369.9 1,274.6
Slide 11: Adjusted Operating Earnings increased by $53.3 million, or 13%
Brunswick Corporation – Earnings Release Adjusted Operating Earnings increased by $53.3 million, or 13% Operating Earnings - Excluding Charges Twelve Months Ended December 31, December 31, Segment (#039;s in millions) 2016 2015 Change Marine Engine $ 378.0 $ 350.4 $ 27.6 Boat 61.4 45.3 16.1 Total Marin
Slide 12: Q4 Net Sales increased by $96.9 million, or 10%
Brunswick Corporation – Earnings Release Q4 Net Sales increased by $96.9 million, or 10% Net Sales Three Months Ended December 31, December 31, % Change Acquisition Segment (#039;s in millions) 2016 2015 GAAP1 Constant Currency Contribution Marine Engine $ 500.2 $ 474.7 5% 4% 1% Boat 358.0 336.0 7% 6%
Slide 13: Q4 Adjusted Operating Earnings increased by $22.8 million, or 34%
Brunswick Corporation – Earnings Release Q4 Adjusted Operating Earnings increased by $22.8 million, or 34% Operating Earnings - Excluding Charges Three Months Ended December 31, December 31, Segment (#039;s in millions) 2016 2015 Change Marine Engine $ 51.2 $ 41.9 $ 9.3 Boat 15.5 10.3 5.2 Total Marine
Slide 14: Marine Engine segment – Q4 sales by region
Brunswick Corporation – Earnings Release Marine Engine segment – Q4 sales by region Q4 - 2016 % Change Region % of Sales* GAAP* Constant Currency* United States 63% 5% 5% Europe 12% 5% 7% Rest-of-World 25% 3% 1% Total 100% 4% 4% Based on Constant Currency • U.S. sales increased in parts and accessor
Slide 15: Q4 Outboard and Sterndrive Engines
Brunswick Corporation – Earnings Release Q4 Outboard and Sterndrive Engines Outboard • Slight growth in Q4 sales reflecting the timing of wholesale demand and a less favorable market environment • Market share gains in targeted saltwater, repower and commercial markets reflecting recently launched p
Slide 16: Q4 Marine Engine segment's Parts & Accessories
Brunswick Corporation – Earnings Release Q4 Marine Engine segment’s Parts & Accessories Service Parts Boating Accessories Propellers • Revenue benefited from market share gains, recent acquisitions and new product launches • Lower fuel costs a positive factor Oil & Lubes Trolling Motors Controls/Rig
Slide 17: Factors affecting Marine Engine segment's Q4 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Marine Engine segment’s Q4 operating earnings Key Factors • Higher sales • Cost reductions, including benefits from lower commodity costs and savings related to sourcing initiatives • Foreign exchange had an unfavorable impact Q4 operating m
Slide 18: Boat segment – Q4 sales by region
Brunswick Corporation – Earnings Release Boat segment – Q4 sales by region Q4 - 2016 % Change Region % of Sales GAAP Constant Currency United States 75% 10% 10% Europe 8% 26% 27% Rest-of-World 17% (11)% (12)% Total 100% 7% 6% Based on Constant Currency • In addition to the favorable retail demand fo
Slide 19: Review of Brunswick Boat segment sales metrics versus prior year
Brunswick Corporation – Earnings Release Review of Brunswick Boat segment sales metrics versus prior year U.S Global Q4 FY Q4 FY Retail (units) (1)% 8% (8)% 3% Wholesale (units) 8% 6% 3% 2% Net Sales (dollars)* 10% 12% 6% 8% Wholesale unit growth rate in balance with retail unit growth rate for full
Slide 20: Review of Brunswick Boat segment pipeline metrics
Brunswick Corporation – Earnings Release Review of Brunswick Boat segment pipeline metrics Ending Change % Change in Pipeline % Change in Weeks on Versus Wholesale Levels Retail Units Hand Prior Year Units FY 14 35 +1 week 1% 2% FY 15 35 Flat 2% 4% FY 16 35 Flat 2% 3% Q1 16 38 -2 weeks (6)% 10% Q2 1
Slide 21: Factors affecting Boat segment's Q4 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Boat segment’s Q4 operating earnings* Key Factors • Higher sales • Favorable change in product mix Q4 adjusted operating margin at 4.3%; On a GAAP basis at 4.2% *As adjusted, see slide 25 for discussion of restructuring charges. January 26,
Slide 22: Fitness segment – Q4 sales by region
Brunswick Corporation – Earnings Release Fitness segment – Q4 sales by region % Change Q4 - 2016 Constant Ex. Region % of Sales GAAP Currency Acquisition United States 58% 27% 27% 2% Europe 17% 7% 14% 6% Rest-of-World 25% 32% 29% 6% Total 100% 24% 25% 4% Based on Constant Currency, Excluding Acquisi
Slide 23: Factors affecting Fitness segment's Q4 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Fitness segment’s Q4 operating earnings* Key Factors • Contribution from Cybex acquisition • Higher sales • Net unfavorable impact of change in sales mix Q4 adjusted operating margin at 16.3%; On a GAAP basis at 14.9% *As adjusted, see slide
Slide 24: International Sales – Review of foreign currency impact
Brunswick Corporation – Earnings Release Review of foreign currency impact1 40% FY 2016: 35% • Unfavorable impact on sales of approximately one half of one percent 30% LA/Other • Unfavorable impact on operating earnings of approximately $14 million 25% International Sales Canada % of Total Sales Out
Slide 25: Other factors affecting GAAP pre-tax earnings
Brunswick Corporation – Earnings Release Other factors affecting GAAP pre-tax earnings Q4 Full Year $ in millions 2016 2015 2016 2015 Restructuring, integration and impairment charges $ 6.8 $ 12.4 $ 15.6 $ 12.4 In 2017, we are planning to incur $11 to $13 million of restructuring and integration cos
Slide 26: Pension Plan Update
Pension Plan Update Percent Funded* 79% 78% • De-risking plan continues 76% • Pension expense in 2017 is expected to be lower due to de-risking actions 74% • Goal to achieve full-funding by 2020; contributions over planning period of $70 million per year (pre tax) 2013 2014 2015 2016 Unfunded $255M
Slide 27: Tax provision
Brunswick Corporation – Earnings Release Tax provision Q4 Full-Year 2016 2015 2016 2015 Effective tax rate - GAAP 25.8% 71.7% 29.6% 27.9% Effective tax rate, as adjusted* 29.1% 23.1% 30.5% 32.6% Change in full year effective tax rate, as adjusted, between years includes benefits from optimizing inte
Slide 28: Cash Flow – Continuing Operations
Brunswick Corporation – Earnings Release Cash Flow – Continuing Operations (#039;s in millions) 2016 2015 Net earnings* $ 274.4 $ 227.4 Depreciation and amortization 103.9 88.9 Pension (funding), net of expense (4.8) 20.4 Changes in certain current assets and current liabilities (30.4) (63.7) Income ta
Slide 29: Free Cash Flow – Continuing Operations
Brunswick Corporation – Earnings Release Free Cash Flow – Continuing Operations (#039;s in millions) 2016 2015 Net cash provided by operating activities* $ 425.7 $ 338.3 Net cash provided by (used for): Capital expenditures (193.9) (132.5) Proceeds from sale of property, plant and equipment 1.9 2.4 Eff
Slide 30: 2017 Outlook – P&L
Brunswick Corporation – Earnings Release 2017 Outlook – P&L • Depreciation and amortization estimate of approximately $120 million • Pension expense of approximately $10 million • Net interest expense of approximately $26 million • Combined equity earnings and other income slightly higher than 2016
Slide 31: 2017 Outlook: Cash Flow Assumptions
Brunswick Corporation – Earnings Release 2017 Outlook: Cash Flow Assumptions • Current plan anticipates working capital changes to result in a usage of cash of $30 million to $50 million • Capital expenditure levels of between $185 million and $195 million • Pension cash contributions of approximate
Slide 32: Mark Schwabero and Bill Metzger
Brunswick Corporation – Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer January 26, 2017 32
Slide 33: Outlook for Brunswick 2017
Outlook for Brunswick 2017 2017 Financial Targets • Revenue growth of 6 percent to 8 percent • Improvement in gross margin levels • Operating expenses, as a percent of sales, to be slightly lower than prior year • Gains in operating margins • Operating leverage of high-teen percentage • Diluted EPS,
Slide 34: Marine Engine Segment: Solid Revenue and Strong Margins
Marine Engine Segment Solid Revenue and Strong Margins 2017 Financial Targets • Revenue growth in the mid-single digits • Solid improvement in operating margin January 26, 2017 34
Slide 35: Boat Group Segment: Strong Revenue Growth with Improved Profitability
Boat Group Segment Strong Revenue Growth with Improved Profitability 2017 Financial Targets • Revenue growth in the high-single-digits • Improvement in operating margin of approximately 110 - 130 basis points January 26, 2017 35
Slide 36: Fitness Segment: Strong Revenue Growth with Strong Margins
Fitness Segment Strong Revenue Growth with Strong Margins 2017 Financial Targets • Revenue growth in the high-single digits • Improved operating margins January 26, 2017 36
Slide 37: Earnings Conference Call Q4, 2016
Brunswick Earnings Conference Call Q4, 2016
Slide 38: Appendix
BRUNSWICK Appendix
Slide 39: Q4 Adjusted Pretax Earnings increased by $23.0 million, or 37%
Brunswick Corporation – Earnings Release Q4 Adjusted Pretax Earnings increased by $23.0 million, or 37% Adjusted Pretax Earnings Three Months Ended December 31, December 31, (#039;s in millions) 2016 2015 Change Adjusted operating earnings $ 90.5 $ 67.7 $ 22.8 Net interest expense (6.1) (6.3) (0.2) Oth
Slide 40: Adjusted Pretax Earnings increased by $50.5 million
Brunswick Corporation – Earnings Release Adjusted Pretax Earnings increased by $50.5 million, or 12% Adjusted Pretax Earnings Twelve Months Ended December 31, December 31, (#039;s in millions) 2016 2015 Change Adjusted operating earnings $ 479.7 $ 426.4 $ 53.3 Net interest expense (25.7) (25.6) (0.1) O
Slide 41: Cash and Marketable Securities
Brunswick Corporation – Earnings Release Cash and Marketable Securities Main Factors Affecting Changes in $669 Cash Balances • Free cash flow of $234 million $458 • Share repurchases of $120 million (approximately 2.7 million shares) $’s in millions • Dividends paid of $55 million • Acquisition expe
Slide 42: Diluted EPS, as adjusted, increased by $0.55, or 19%
Brunswick Corporation – Earnings Release Diluted EPS, as adjusted, increased by $0.55, or 19% Earnings Per Share Twelve Months Ended December 31, December 31, 2016 2015 Diluted EPS from continuing operations $ 2.98 $ 2.41 Pension settlement charges 0.38 0.54 Restructuring, integration and impairment
Slide 43: Q4 Diluted EPS, as adjusted, increased by $0.15, or 29%
Brunswick Corporation – Earnings Release Q4 Diluted EPS, as adjusted, increased by $0.15, or 29% Earnings Per Share Three Months Ended December 31, December 31, 2016 2015 Diluted EPS from continuing operations $ 0.19 $ (0.10) Pension settlement charges 0.38 0.55 Restructuring, integration and impair