Slide 1: Brunswick Earnings Conference Call Q2, 2014
Brunswick Earnings Conference Call Q2, 2014 July 24, 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. Beginning with the third quarter of 2014, Brunswick will report th
Slide 5: Overview of Second Quarter, 2014
Brunswick Corporation – Earnings Release Overview of Second Quarter, 2014 • Revenue increased 4 percent as growth in outboard boats and engines, parts and accessories, fitness equipment and bowling products was partially offset by revenue declines in fiberglass sterndrive boats and engines, as well
Slide 6: Q2 Net Sales increased by $41.5 million, or 4%
Brunswick Corporation – Earnings Release Q2 Net Sales increased by $41.5 million, or 4% Net Sales Three Months Ended June 28, June 29, Segment (#039;s in millions) 2014 2013 % Change Marine Engine $ 652.4 $ 631.7 3% Boat 324.1 310.9 4% Marine eliminations (68.5) (66.1) Total Marine 908.0 876.5 4% Fitne
Slide 7: First half Net Sales increased by $15.4 million, or 1%
Brunswick Corporation – Earnings Release First half Net Sales increased by $15.4 million, or 1% Net Sales Six Months Ended June 28, June 29, Segment (#039;s in millions) 2014 2013 % Change Marine Engine $ 1,157.5 $ 1,153.5 0% Boat 606.9 600.6 1% Marine eliminations (141.6) (133.7) Total Marine 1,622.8
Slide 8: Q2 Adjusted Operating Earnings increased by $3.7 million
Brunswick Corporation – Earnings Release Q2 Adjusted Operating Earnings increased by $3.7 million Operating Earnings - Excluding Charges Three Months Ended June 28, June 29, Segment (#039;s in millions) 2014 2013 Change Marine Engine $ 122.5 $ 119.4 $ 3.1 Boat 20.3 17.1 3.2 Total Marine 142.8 136.5 6.3
Slide 9: First half Adjusted Operating Earnings increased by $2.9 million
Brunswick Corporation – Earnings Release First half Adjusted Operating Earnings increased by $2.9 million Operating Earnings - Excluding Charges Six Months Ended June 28, June 29, Segment (#039;s in millions) 2014 2013 Change Marine Engine $ 184.2 $ 190.9 $ (6.7) Boat 28.7 24.4 4.3 Total Marine 212.9 2
Slide 10: Q2 Adjusted Pretax Earnings increased by $9.9 million
Brunswick Corporation – Earnings Release Q2 Adjusted Pretax Earnings increased by $9.9 million Adjusted Pretax Earnings Three Months Ended June 28, June 29, Change (#039;s in millions) 2014 2013 Adjusted operating earnings $ 144.4 $ 140.7 $ 3.7 Net interest expense (8.2) (12.3) 4.1 Other income (expens
Slide 11: First half Adjusted Pretax Earnings increased by $14.8 million
Brunswick Corporation – Earnings Release First half Adjusted Pretax Earnings increased by $14.8 million Adjusted Pretax Earnings Six Months Ended June 28, June 29, Change (#039;s in millions) 2014 2013 Adjusted operating earnings $ 239.1 $ 236.2 $ 2.9 Net interest expense (16.5) (26.3) 9.8 Other income
Slide 12: Q2 Diluted EPS, as adjusted, decreased by $0.28
Brunswick Corporation – Earnings Release Q2 Diluted EPS, as adjusted, decreased by $0.28 Earnings Per Share Three Months Ended June 28, June 29, 2014 2013 Diluted EPS from continuing operations $ 0.93 $ 0.85 Restructuring, exit and impairment charges 0.02 0.04 Loss on early extinguishment of debt -
Slide 13: First half Diluted EPS, as adjusted, decreased by $0.43
Brunswick Corporation – Earnings Release First half Diluted EPS, as adjusted, decreased by $0.43 Earnings Per Share Six Months Ended June 28, June 29, 2014 2013 Diluted EPS from continuing operations $ 1.53 $ 1.43 Restructuring, exit and impairment charges 0.02 0.10 Loss on early extinguishment of d
Slide 14: U.S. Powerboat Industry - June, 2014 (Preliminary Results)
Brunswick Corporation – Earnings Release U.S. Powerboat Industry - June, 2014 (Preliminary Results) 2014 vs. 2013 - YoY Growth % Q1 Q2 YTD 16-> All Aluminum Aluminum Fish 2.1% 4.2% 3.4% Pontoon 0.4% 3.6% 2.9% 11-40 ft* OB Fiberglass All (Inshore/Offshore) 4.6% 9.0% 7.2% 14-30 ft IB/IO Fiberglass All
Slide 15: Marine Engine segment – sales by region
Brunswick Corporation – Earnings Release Marine Engine segment – sales by region Q2 - 2014 Change vs. Region % of Sales* Prior Year United States 67% 3% Europe 14% 5% Rest-of-World 19% 1% Total 100% 3% • U.S. sales increased in outboard engines and parts and accessories, partially offset by lower st
Slide 16: Q2 Outboard and Sterndrive engines
Brunswick Corporation – Earnings Release Q2 Outboard and Sterndrive engines Outboard • Favorable retail demand environment continues in overall U.S. outboard boat categories - - demand trends strenghtened in Q2 • International markets down slightly Sterndrive • Unfavorable global retail demand trend
Slide 17: Q2 Marine Engine segment’s Parts & Accessories
Brunswick Corporation – Earnings Release Q2 Marine Engine segment’s Parts & Accessories Service Parts Boating Accessories Propellers • Growth in U.S. and European sales, partially offset by declines in Rest-of-World • Revenue benefited from new product launches and market share gains Oil & Lubes Tro
Slide 18: Factors affecting Marine Engine segment’s Q2 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Marine Engine segment’s Q2 operating earnings Key Factors • Higher sales • Absence of favorable insurance settlements in Q2, 2013 • Investments in growth initiatives Q2 operating margin at 18.8% 18 July 24, 2014
Slide 19: Boat segment – sales by region
Brunswick Corporation – Earnings Release Boat segment – sales by region Q2 - 2014 Change vs. Region % of Sales Prior Year United States 65% 7% Europe 11% 27% Rest-of-World 24% (9)% Total 100% 4% • U.S. sales continue to benefit from overall retail growth in outboard boat categories; fiberglass stern
Slide 20: Review of Brunswick Boat segment metrics
Brunswick Corporation – Earnings Release Review of Brunswick Boat segment metrics Wholesale and Retail Metrics • In the second quarter, Brunswick’s global retail unit sales decreased by 2 percent compared to prior year; global wholesale unit shipments decreased by 2 percent • Wholesale unit growth r
Slide 21: Factors affecting Boat segment’s Q2 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Boat segment’s Q2 operating earnings Key Factors • Higher sales • Cost reduction activities and improved net operating efficiencies Q2 operating margin, excluding charges, at 6.3%; on a GAAP basis at 6.1% 21 July 24, 2014
Slide 22: Fitness segment - sales by region
Brunswick Corporation – Earnings Release Fitness segment - sales by region Q2 - 2014 Change vs. Region % of Sales Prior Year United States 49% 9% Europe 20% (3)% Rest-of-World 31% 8% Total 100% 6% • Solid growth in sales reflects gains in the U.S. to health clubs • Modest net sales growth experience
Slide 23: Factors affecting Life Fitness segment’s Q2 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Life Fitness segment’s Q2 operating earnings Key Factors • Higher sales • Increased investment in growth initiatives Q2 operating margin at 11.7% 23 July 24, 2014
Slide 24: Bowling & Billiards segment sales and operating earnings
Brunswick Corporation – Earnings Release Bowling & Billiards segment sales and operating earnings Q2 - 2014 Change vs. Region % of Sales Prior Year United States 85% 8% Europe 7% (34)% Rest-of-World 8% (17)% Total 100% 2% • Gains in bowling products, as well as in equivalent retail center sales, inc
Slide 25: Foreign currency impact
Brunswick Corporation – Earnings Release Foreign currency impact* Second quarter 2014: • Slight net unfavorable impact on consolidated sales and operating earnings Full-year 2014: • Slight net unfavorable impact on consolidated sales and minimal impact on operating earnings * Includes the impact of
Slide 26: 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 Q2 First half (#039;s in millions) 2014 2013 2014 2013 Effective tax rate - GAAP 34.0% 13.0% 34.3% 20.1% Effective tax rate, as adjusted* 34.0% 9
Slide 27: Cash Flow
Brunswick Corporation – Earnings Release Cash Flow Six Months Ended June 28, June 29, (#039;s in millions) 2014 2013 Net earnings from continuing operations $ 145.6 $ 134.2 Depreciation and amortization 45.3 43.1 Pension funding, net of expense (11.5) (3.0) Excess tax benefits from share-based compensa
Slide 28: Free Cash Flow – Continuing Operations
Brunswick Corporation – Earnings Release Free Cash Flow – Continuing Operations Six Months Ended June 28, June 29, (#039;s in millions) 2014 2013 Net cash provided by operating activities of continuing operations $ 77.0 $ 107.0 Net cash provided by (used for): Capital expenditures (52.9) (61.3) Proceed
Slide 29: Cash and Marketable Securities
Brunswick Corporation – Earnings Release Cash and Marketable Securities Main factors affecting cash balances $369 $335 • Free cash flow of $27 million $’s in millions • Dividends paid of $19 million • Acquisition of $29 million 12/31/2013 6/28/2014 29 July 24, 2014
Slide 30: 2014 Outlook – P&L – Adjusted for Divestitures
Brunswick Corporation – Earnings Release 2014 Outlook – P&L – Adjusted for Divestitures • Depreciation and amortization estimate of approximately $80 million to $85 million • Pension expense of approximately $15 million, a decrease of $4 million • Net interest expense of approximately $28 million to
Slide 31: 2014 Outlook: Cash Flow Assumptions – Adjusted for Bowling Divestitures
Brunswick Corporation – Earnings Release 2014 Outlook: Cash Flow Assumptions – Adjusted for Bowling Divestitures • Pension cash contributions of approximately $75 million to $80 million • Current plan anticipates working capital changes to result in a modest usage of cash • Capital expenditure level
Slide 32: Outlook for Brunswick 2014
Outlook for Brunswick 2014 Adjusted for Bowling Divestitures 2014 Financial Targets • Revenue growth at 5 percent to 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 24 percent to 30 per
Slide 33: Outlook for Brunswick 2014 - Second half
Outlook for Brunswick 2014 Adjusted for Bowling Divestitures Second half - 2014 Outlook • Revenue growth to approximate 10 percent to 12 percent • Solid improvement in gross margin levels • Operating expenses, as a percent of sales, to be lower than prior year - - Q3 growth rate comparable to Q2 • I
Slide 34: New Mercury Products in 2014
New Mercury Products in 2014 34 July 24, 2014
Slide 35: 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 36: 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 37: Life Fitness Segment
Life 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
Slide 38: Brunswick Earnings Conference Call Q2, 2014
Brunswick Earnings Conference Call Q2, 2014 Helping Active People Live Active Lives