Slide 1: Brunswick Earnings Conference Call Q3, 2018
Brunswick Earnings Conference Call Q3, 2018 October 25, 2018
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: Presentation of Sea Ray Sport Yacht and Yacht Results
Brunswick Corporation - Earnings Release Presentation of Sea Ray Sport Yacht and Yacht Results • As a result of the June 25, 2018 announcement regarding Sea Ray, the results of the entire Sea Ray business are again being reported in continuing operations for GAAP purposes, which matches the basis of
Slide 5: Mark Schwabero and Bill Metzger
Brunswick Corporation - Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer October 25, 2018 4
Slide 6: Overview of Third Quarter 2018
Brunswick Corporation - Earnings Release Overview of Third Quarter 2018 • Global marine market remained steady as we concluded the primary retail selling season • Outstanding execution of marine strategy leads to extremely strong financial results – Combined marine business with 18 percent adjusted1
Slide 7: Overview of Third Quarter 2018 (adjusted)
Brunswick Corporation - Earnings Release Overview of Third Quarter 2018 On an adjusted1 basis: – Diluted EPS of $1.28 is up 30.6 percent over Q3 2017 – Revenue increased by 15.1 percent, up 11.7 percent ex-acquisitions – Operating margin of 11.9 percent, up 20 bps ◦ Combined marine business margins
Slide 8: U.S. Powerboat Industry - Percentage Change in Retail Units
Brunswick Corporation - Earnings Release U.S. Powerboat Industry - Percentage Change in Retail Units Q1-18 Q2-18 Q3-18 YTD-18 YTD-17 AL – Fish 2% 6% 8% 6% 4% AL - Pontoon 4% 2% 11% 5% 7% FG - Saltwater (<23 ft) (9)% (4)% (5)% (6)% 0% FG - Saltwater (>23 ft) 12% 1% 10% 7% 13% FG - Freshwater 10% 3% 6
Slide 9: Review of Brunswick Boat segment retail unit sales metrics
Brunswick Corporation - Earnings Release Review of Brunswick Boat segment retail unit sales metrics1 Retail Boat (units) Growth Rates U.S. Global Q3 2018 (8)% (3)% Q3 2018 ex-Lowe2 (2)% 1% Q3 2017 9% 4% YTD 2018 (1)% 0% YTD 2018 ex-Lowe 3% 3% YTD 2017 4% 3% FY 2017 6% 5% FY 2016 8% 3% YTD retail gro
Slide 10: Year-to-date Revenue By Region - Marine segments
Brunswick Corporation - Earnings Release Year-to-date Revenue By Region - Marine segments YTD 2018 vs. 2017 Region Growth Rates 1 2017 Mix 2 U.S. 10% 70% Europe 3% 12% Canada 7% 7% Asia-Pacific 2% 7% Rest-of-World (0%) 4% Total 8% 100% YTD global revenue in our combined marine segments grew 11 perce
Slide 11: Year-to-date Revenue By Region - Fitness segment
Brunswick Corporation - Earnings Release Year-to-date Revenue By Region - Fitness segment YTD 2018 vs. 2017 Region Growth Rates 1 2017 Mix 2 U.S. (1)% 54% Europe 6% 18% Asia-Pacific 8% 15% Canada (1)% 3% Rest-of-World 3% 10% Total 2% 100% YTD global revenue in our Fitness segment grew by 3 percent,
Slide 12: Mark Schwabero and Bill Metzger
Brunswick Corporation - Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer October 25, 2018 11
Slide 13: Q3 Adjusted Net Sales increased by $168.8 million, or 15.1%
Brunswick Corporation - Earnings Release Q3 Adjusted1 Net Sales increased by $168.8 million, or 15.1% Third Quarter 2018 vs. Third Quarter 2017 Sales Growth Drivers Engine Boat Marine Fitness Brunswick Organic (constant currency) 15 % 9% 15 % 5% 13 % Acquisitions 6% — 4% — 3% Currency (1)% — (1)% —
Slide 14: YTD Adjusted Net Sales increased by $325.8 million, or 9.2%
Brunswick Corporation - Earnings Release YTD Adjusted1 Net Sales increased by $325.8 million, or 9.2% Year-to-date 2018 vs. Year-to-date 2017 Sales Growth Drivers Engine Boat Marine Fitness Brunswick Organic (constant currency) 9% 5% 8% 2% 7% Acquisitions 3% — 2% — 1% Currency — 1% 1% 1% 1% 2018 Adj
Slide 15: Marine Business Adjusted Gross Margins Improving
Brunswick Corporation - Earnings Release Marine Business Adjusted Gross Margins1 Improving Adjusted Gross Margin Percentage Q3 2018 Q3 2017 YTD 2018 YTD 2017 Total Marine 28.1% 27.4% 27.0% 27.1% Fitness 26.2% 32.5% 27.1% 31.6% Total Brunswick 27.8% 28.5% 27.1% 28.0% Marine business adjusted gross ma
Slide 16: Q3 Adjusted Operating Earnings increased by $22.5 million, or 17%
Brunswick Corporation - Earnings Release Q3 Adjusted Operating Earnings increased by $22.5 million, or 17% Operating Earnings Three Months Ended Sept. 29 Sept. 30 Segment (#039;s in millions) 2018 2017 Change Marine Engine $ 148.0 $ 115.2 $ 32.8 Boat 16.3 9.9 6.4 Total Marine 164.3 125.1 39.2 Fitness 1
Slide 17: YTD Adjusted Operating Earnings increased by $21.9 million, or 5%
Brunswick Corporation - Earnings Release YTD Adjusted Operating Earnings increased by $21.9 million, or 5% Operating Earnings Nine Months Ended Sept. 29 Sept. 30 Segment (#039;s in millions) 2018 2017 Change Marine Engine $ 395.3 $ 352.1 $ 43.2 Boat 70.1 60.8 9.3 Total Marine 465.4 412.9 52.5 Fitness 4
Slide 18: Marine Engine segment - Q3 sales
Brunswick Corporation - Earnings Release Marine Engine segment - Q3 sales Q3 - 2018 GAAP Ex-Acq. Product Category % of Sales % Change % Change Propulsion 49% 24% 24% P&A Businesses 51% 16% 5% Total 100% 20% 14% • Strong growth in both propulsion, driven by outboard engines, and the parts and accesso
Slide 19: Factors affecting Marine Engine segment's Q3 operating earnings
Brunswick Corporation - Earnings Release Factors affecting Marine Engine segment's Q3 operating earnings1 Key Factors • Higher sales • Favorable impact from changes in sales mix, including benefits from new products • Power Products acquisition Q3 adjusted operating margin of 18.4 percent; on GAAP b
Slide 20: Boat segment - Q3 sales
Brunswick Corporation - Earnings Release Boat segment - Q3 sales1 Q3 - 2018 Product Category % of Sales % Change Aluminum Freshwater 42% 2% Recreational Fiberglass 30% 2% Saltwater Fishing 28% 32% Total 100% 9% • Robust top-line growth for the saltwater fishing category Q3 2018 revenue by region: U.
Slide 21: Review of Brunswick Boat segment sales metrics versus prior year
Brunswick Corporation - Earnings Release Review of Brunswick Boat segment sales metrics versus prior year Q3 181 YTD 2018 Global U.S. Global U.S. Wholesale (units) (6)% (2)% (4)% (4)% Net Sales (dollars) 9% 15% 5% 6% Q3 17 YTD 2017 Global U.S. Global U.S. Wholesale (units) 6% 8% 7% 8% Increases in a
Slide 22: 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 YTD 15 27.0 Flat 4% 4% YTD 16 26.4 -0.6 weeks 2% 4% YTD 17 27.4 +1 week 7% 3% YTD 18 27.5 +0.1
Slide 23: Factors affecting Boat segment's Q3 operating earnings
Brunswick Corporation - Earnings Release Factors affecting Boat segment's Q3 operating earnings1 Key Factors • Higher sales • Favorable impact from changes in product mix Q3 adjusted operating margin of 5.2 percent; on GAAP basis, (1.5) percent 1 As adjusted, excluding restructuring, exit, integrati
Slide 24: Fitness segment - Q3 sales
Brunswick Corporation - Earnings Release Fitness segment - Q3 sales Q3 - 2018 Product Category % of Sales % Change Commercial Cardio 58% 2% Commercial Strength 36% 14% Consumer Fitness 6% (17)% Total 100% 5% • Continued strong sales growth in global commercial strength category • Slight increase in
Slide 25: Factors affecting Fitness segment's Q3 operating earnings
Brunswick Corporation - Earnings Release Factors affecting Fitness segment's Q3 operating earnings1 Key Factors • Higher sales • Lower margins reflecting several factors including: – Higher freight costs – Unfavorable impact from changes in sales mix – Inventory cost adjustments – Cost inflation and
Slide 26: International Sales: Review of foreign currency impact
Brunswick Corporation - Earnings Release Review of foreign currency impact1 35% Q3 2018: • Unfavorable impact on sales of 30% approximately 1 percent LA/Other • Unfavorable impact on operating earnings of approximately $6 million 25% Canada Outlook for Full-Year 2018: % of Total Sales International
Slide 27: Other factors affecting GAAP pre-tax earnings
Brunswick Corporation - Earnings Release Other factors affecting GAAP pre-tax earnings Q3 Year-to-date $ in millions 2018 2017 2018 2017 Restructuring, exit, integration and impairment charges1 $ 17.7 $ 6.8 $ 56.3 $ 27.7 Acquisition-related costs 15.6 — 18.1 — Sport Yacht & Yacht operations 11.9 9.8
Slide 28: Tax Provision
Brunswick Corporation - Earnings Release Tax Provision Q3 Year-to-date 2018 2017 2018 2017 Effective tax rate - GAAP 6.5% 27.5% 18.7% 27.3% Effective tax rate, as adjusted (1) 21.0% 29.9% 20.9% 28.1% Estimated full-year 2018 effective book tax rate, as adjusted, is approximately 21 percent based on
Slide 29: Free Cash Flow
Brunswick Corporation - Earnings Release Free Cash Flow Nine Months Ended (#039;s in millions) 2018 2017 Net cash provided by operating activities $ 234.0 $ 255.1 Net cash provided by (used for): Plus: Capital expenditures (124.8) (153.4) Plus: Proceeds from sale of property, plant and equipment 6.5 8.
Slide 30: 2018 Outlook - P&L
Brunswick Corporation - Earnings Release 2018 Outlook - P&L Change from Prior 2018 Estimate Conference Call Depreciation and amortization1 ~$145 - $150 million Higher Combined equity earnings and other ~$5 - $10 million No Change income (excluding pension expense) Pension expense ~$8 million No Chan
Slide 31: 2018 Outlook: Cash Flow Assumptions
Brunswick Corporation - Earnings Release 2018 Outlook: Cash Flow Assumptions Change from Prior 2018 Estimate Conference Call Estimate Free cash flow1 Exceeding $220 million Higher Free cash flow ex-pensions2 Exceeding $320 million Higher Capital expenditures ~$200 - $220 million Lower Working capita
Slide 32: Mark Schwabero and Bill Metzger
Brunswick Corporation - Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer October 25, 2018 31
Slide 33: Outlook for Brunswick - Full-Year 2018
Outlook for Brunswick - Full-Year 2018 2018 Financial Targets1 • Diluted EPS, as adjusted, guidance range increased and narrowed to $4.65 - $4.70 • Revenue growth of approximately 9 percent • Solid improvement in marine business adjusted gross and operating margins • Operating expenses, as a percent
Slide 34: Updated Tariff Impact
Updated Tariff Impact • No change in 2018 estimate of $10 to $15 million of net impact • Applied for exemption on 40 - 60 horsepower engines (Wave 1) • Wave 3 tariffs to move from 10% to 25% on January 1, 2019 • Continue to evaluate estimated net impact and additional mitigation options • Retaliator
Slide 35: Marine Engine Segment
Marine Engine Segment Strong Revenue Growth and Solid Margin Improvement 2018 Financial Targets • Revenue growth of approximately 14 percent, with acquisitions contributing 4 percent to the growth rate • 30-50 bps improvement in operating margins October 25, 2018 34
Slide 36: Boat Group Segment
Boat Group Segment Solid Revenue Growth and Margin Improvement 2018 Financial Targets • Revenue growth slightly below YTD rates • Solid improvement in operating margins October 25, 2018 35
Slide 37: Fitness Segment
Fitness Segment Stable Revenue with Consistent Gross Margins 2018 Financial Targets • Revenue consistent with 2017 levels • Gross margin percentage consistent with YTD performance October 25, 2018 36
Slide 38: Fitness Segment - Separation Update
Fitness Segment - Separation Update Recent Initiatives/Updates • Reaffirm commitment to separate Fitness business from portfolio in timely fashion • Creation of Management Board consisting of two Brunswick directors to directly oversee Fitness management team and completion of separation • Evaluatin
Slide 39: Earnings Conference Call Q3, 2018
Brunswick Earnings Conference Call Q3, 2018
Slide 40: Appendix
BRUNSWICK Appendix
Slide 41: GAAP to Non-GAAP Reconciliations
Brunswick Corporation - Earnings Release GAAP to Non-GAAP Reconciliations QTD YTD (in millions, except per share data) Q3 2018 Q3 2017 Q3 2018 Q3 2017 Net sales $ 1,298.0 $ 1,141.5 $ 3,910.3 $ 3,653.8 Sport Yacht & Yacht operations (9.0) (21.3) (44.0) (113.3) Net sales, as adjusted $ 1,289.0 $ 1,120
Slide 42: GAAP to Non-GAAP Reconciliations (continued)
Brunswick Corporation - Earnings Release GAAP to Non-GAAP Reconciliations (continued) QTD YTD (in millions, except per share data) Q3 2018 Q3 2017 Q3 2018 Q3 2017 Earnings before income taxes $ 74.9 $ 109.0 $ 273.0 $ 362.4 Restructuring, exit, integration and impairment charges 17.7 6.8 56.3 27.7 Ac
Slide 43: Q3 Adjusted Net Sales increased by $168.8 million, or 15.1%
Brunswick Corporation - Earnings Release Q3 Adjusted1 Net Sales increased by $168.8 million, or 15.1% Net Sales - GAAP Net Sales - As Adjusted 1 Segments (in millions) Q3 2018 Q3 2017 % Change Q3 2018 Q3 2017 % Change Marine Engine $ 802.7 $ 669.2 19.9% $ 802.7 $ 669.2 19.9% Boat 322.6 309.3 4.3% 31
Slide 44: YTD Adjusted Net Sales increased by $325.8 million, or 9.2%
Brunswick Corporation - Earnings Release YTD Adjusted1 Net Sales increased by $325.8 million, or 9.2% Net Sales - GAAP Net Sales - As Adjusted 1 Segments (in millions) Q3 2018 YTD Q3 2017 YTD % Change Q3 2018 YTD Q3 2017 YTD % Change Marine Engine $ 2,324.1 $ 2,067.2 12.4% $ 2,324.1 $ 2,067.2 12.4%