Slide 1: Brunswick Earnings Conference Call Q2, 2018
Brunswick Earnings Conference Call Q2, 2018 July 26, 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, starting in the second quarter of 2018, the results of the entire Sea Ray business are reported in continuing operations for GAAP purposes
Slide 5: Mark Schwabero and Bill Metzger
Brunswick Corporation - Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer July 26, 2018 4
Slide 6: Overview of Second Quarter 2018
Brunswick Corporation - Earnings Release Overview of Second Quarter 2018 • Continued execution of strategic and operational enhancements – Significant product launches across all businesses, including largest outboard engine launch in Mercury's history – Portfolio actions – Successful execution of c
Slide 7: Overview of Second Quarter 2018 (As Adjusted)
Brunswick Corporation - Earnings Release Overview of Second Quarter 2018 On an as adjusted1 basis: • Revenue increased 6.3 percent over Q2 2017 – Marine business revenue increased by 7.7 percent • Gross margin of 27.1 percent • Operating earnings down 3 percent – Q2 Marine business operating earning
Slide 8: U.S. Powerboat Industry - Percentage Change in Retail Units
Brunswick Corporation - Earnings Release U.S. Powerboat Industry - Percentage Change in Retail Units FY 2017 Q1-17 Q2-17 1H-17 Q1-18 Q2-18 1H-18 AL – Fish 4% 4% 4% 4% 1% 7% 4% AL - Pontoon 8% 6% 10% 9% 2% 1% 1% FG - Saltwater (<23 ft) 0% 9% 3% 5% (9)% (3)% (5)% FG - Saltwater (>23 ft) 13% 15% 15% 15
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 Q2 2018 1% 3% Q2 2017 (1)% 1% YTD 2018 2% 2% YTD 2017 3% 5% FY 2017 6% 5% FY 2016 8% 3% Brunswick's internal boat registrations continue to show year-over
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. 7% 70% Europe 0% 12% Canada 11% 7% Asia-Pacific (2)% 7% Rest-of-World (0)% 4% Total 5% 100% YTD global revenue in our combined marine segments grew 8 perc
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. (2)% 54% Europe 8% 18% Asia-Pacific 0% 15% Canada 1% 3% Rest-of-World 3% 10% Total 1% 100% YTD global revenue in our Fitness segment grew by 2 percent, wi
Slide 12: Mark Schwabero and Bill Metzger
Brunswick Corporation - Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer July 26, 2018 11
Slide 13: Q2 Adjusted Net Sales increased by $82.1 million, or 6%
Brunswick Corporation - Earnings Release Q2 Adjusted1 Net Sales increased by $82.1 million, or 6% Net Sales - GAAP Net Sales - As Adjusted 1 Segments (in millions) Q2 2018 Q2 2017 % Change Q2 2018 Q2 2017 % Change Marine Engine $ 834.3 $ 766.2 8.9% $ 834.3 $ 766.2 8.9% Boat 394.9 412.1 (4.2)% 375.0
Slide 14: Year-to-date Adjusted Net Sales increased by $157.0 million, or 6%
Brunswick Corporation - Earnings Release Year-to-date Adjusted1 Net Sales increased by $157.0 million, or 6% Net Sales - GAAP Net Sales - As Adjusted 1 Segments (in millions) Q2 2018 YTD Q2 2017 YTD % Change Q2 2018 YTD Q2 2017 YTD % Change Marine Engine $ 1,521.4 $ 1,398.0 8.8% $ 1,521.4 $ 1,398.0
Slide 15: Marine Engine segment - Q2 sales
Brunswick Corporation - Earnings Release Marine Engine segment - Q2 sales Q2 - 2018 Product Category % of Sales % Change Propulsion 51% 9% P&A Businesses 49% 9% Total 100% 9% • Strong growth in both propulsion, driven by outboard engines, and the parts and accessories businesses Q2 2018 revenue by r
Slide 16: Factors affecting Marine Engine segment's Q2 operating earnings
Brunswick Corporation - Earnings Release Factors affecting Marine Engine segment's Q2 operating earnings1 Key Factors • Higher sales • Favorable impact from changes in sales mix and foreign currency exchange rates, although smaller than anticipated • Unfavorable plant efficiencies associated with pr
Slide 17: Boat segment - Q2 adjusted sales
Brunswick Corporation - Earnings Release Boat segment - Q2 adjusted1 sales Q2 - 2018 Product Category % of Sales % Change Aluminum Freshwater 45% 7% Recreational Fiberglass 32% 4% Saltwater Fishing 23% (0)% Total 100% 4% • Solid sales growth in the aluminum Q2 2018 revenue by region: U.S. 71%, Canad
Slide 18: Review of Brunswick Boat segment sales metrics versus prior year
Brunswick Corporation - Earnings Release Review of Brunswick Boat segment sales metrics versus prior year Q2 181 YTD 2018 Global U.S. Global U.S. Wholesale (units) (2)% (5)% (3)% (5)% Net Sales (dollars) 3% 3% 3% 3% Q2 17 YTD 2017 Global U.S. Global U.S. Wholesale (units) 2% 3% 7% 8% Increases in av
Slide 19: 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 30.9 -2.7 weeks 1% 7% YTD 16 29.1 -1.8 weeks (2)% 6% YTD 17 30.4 +1.3 weeks 8% 5% YTD 1
Slide 20: Factors affecting Boat segment's Q2 operating earnings
Brunswick Corporation - Earnings Release Factors affecting Boat segment's Q2 operating earnings1 Key Factors • Higher sales • Less favorable plant efficiencies Q2 adjusted operating margin of 7.7 percent; on GAAP basis, (8.2) percent 1 As adjusted, excluding restructuring, exit, integration, and imp
Slide 21: Fitness segment - Q2 sales
Brunswick Corporation - Earnings Release Fitness segment - Q2 sales Q2 - 2018 Product Category % of Sales % Change Commercial Cardio 56% (3)% Commercial Strength 36% 7% Consumer Fitness 8% 3% Total 100% 1% • Continued strong sales growth in global commercial strength category • Slight decline in com
Slide 22: Factors affecting Fitness segment's Q2 operating earnings
Brunswick Corporation - Earnings Release Factors affecting Fitness segment's Q2 operating earnings1 Key Factors • Higher sales • Lower margins reflecting several factors including: – Higher freight costs – Cost inflation and inefficiencies – Unfavorable impact from changes in sales mix Q2 adjusted o
Slide 23: Other factors affecting GAAP pre-tax earnings
Brunswick Corporation - Earnings Release Other factors affecting GAAP pre-tax earnings Q2 Year-to-date $ in millions 2018 2017 2018 2017 Restructuring, exit, integration and impairment charges $ 34.8 $ 5.7 $ 38.6 $ 20.9 Sport yacht and yacht operations 27.4 3.4 35.5 $ 11.4 Fitness business separatio
Slide 24: Review of foreign currency impact
Brunswick Corporation - Earnings Release Review of foreign currency impact1 40% Q2 2018: • Favorable impact on sales of 35% approximately 1 percent • Favorable impact on operating earnings 30% LA/Other of approximately $5 million 25% Canada Outlook for Full-Year 2018: % of Total Sales International
Slide 25: Tax Provision
Brunswick Corporation - Earnings Release Tax Provision Q2 Year-to-date 2018 2017 2018 2017 Effective tax rate - GAAP 19.4% 28.3% 23.3% 27.3% Effective tax rate, as adjusted (1) 21.0% 28.6% 20.9% 27.3% Estimated full-year 2018 effective book tax rate, as adjusted, is between 21 and 22 percent based o
Slide 26: Free Cash Flow
Brunswick Corporation - Earnings Release Free Cash Flow Six Months Ended (#039;s in millions) 2018 2017 Net cash provided by operating activities $ 200.9 $ 171.8 Net cash provided by (used for): Plus: Capital expenditures (90.3) (107.9) Plus: Proceeds from sale of property, plant and equipment 0.2 7.8
Slide 27: 2018 Outlook - P&L
Brunswick Corporation - Earnings Release 2018 Outlook - P&L Change from Prior 2018 Estimate Conference Call Depreciation and amortization1 ~$115 - $120 million Higher Combined equity earnings and other ~$5 - $10 million No Change income (excluding pension expense) Pension expense ~$8 million No Chan
Slide 28: 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 ~$200 - $220 million Lower Free cash flow ex-pensions2 ~$300 - $320 million Higher Capital expenditures ~$220 - $230 million Slightly Higher Working c
Slide 29: Mark Schwabero and Bill Metzger
Brunswick Corporation - Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer July 26, 2018 28
Slide 30: Outlook for Brunswick - Full-Year 2018
Outlook for Brunswick - Full-Year 2018 2018 Financial Targets1 • Revenue growth of 8 percent to 9 percent • Marine business gross margins and operating margins to be improved from 2017 levels • Operating expenses, as a percentage of sales, to be consistent with 2017 levels • Operating leverage – Mar
Slide 31: Outlook for Brunswick - Tariffs
Outlook for Brunswick - Tariffs 2018 Brunswick Tariff Impact1 – Section 301 tariff ◦ 25% tariff on engines and P&A manufactured at wholly-owned facility in China and imported into U.S. ◦ Exemption will be requested – Section 232 tariff ◦ 10% or 25% retaliatory tariff on boats (not engines) imported
Slide 32: Outlook for Brunswick - Full-Year 2018
Outlook for Brunswick - Full-Year 2018 • 2018 diluted EPS, as adjusted, narrowed to $4.55 - $4.651 $4.55 - $4.65 $4.50 - $4.65 1 Includes Power Products acquisition, assumes mid-August transaction close, and excludes impact of purchase accounting for the transaction; excludes Sea Ray Sport Yacht and
Slide 33: Outlook for Brunswick - Third Quarter 2018
Outlook for Brunswick - Third Quarter 2018 Q3 2018 Financial Targets1 • Revenue growth, including the Power Products acquisition, of low-to-mid teens percent range • Revenue growth of low-double digit percent range ex- acquisitions • Solid growth in marine business adjusted operating margin • EPS, o
Slide 34: Marine Engine Segment
Marine Engine Segment Strong Revenue Growth with Margin Improvement 2018 Financial Targets • Revenue growth in the low-teens percent range, including the Power Products acquisition • Slight improvement in operating margins July 26, 2018 33
Slide 35: Boat Group Segment
Boat Group Segment Solid Revenue Growth with Margin Improvement 2018 Financial Targets • Revenue growth of 5 to 6 percent • Solid improvement in operating margins July 26, 2018 34
Slide 36: Fitness Segment
Fitness Segment Modest Revenue Growth with Stabilizing Margins 2018 Financial Targets • Revenue growth in the low-single digits • Operating margins decline, but year-over-year comparisons stabilize in the fourth quarter July 26, 2018 35
Slide 37: Earnings Conference Call Q2, 2018
Brunswick Earnings Conference Call Q2, 2018
Slide 38: Appendix
BRUNSWICK Appendix
Slide 39: GAAP to Non-GAAP Reconciliations
Brunswick Corporation - Earnings Release GAAP to Non-GAAP Reconciliations QTD YTD June 30, July 1, June 30, July 1, (in millions, except per share data) 2018 2017 2018 2017 Net sales $ 1,400.9 $ 1,352.0 $ 2,612.3 $ 2,512.3 Sport yacht & yacht operations (19.9) (53.1) (35.0) (92.0) Net sales, as adju