Brunswick Corporation · NYSE:BC
Brunswick — Q4 2017 Earnings Presentation
48 slides from Brunswick's earnings presentation, Feb 1, 2018
Slide 1: Brunswick Earnings Conference Call Q4, 2017
Brunswick Earnings Conference Call Q4, 2017 February 1, 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: Discontinued Operations
Brunswick Corporation - Earnings Release Discontinued Operations • On December 5, 2017, Brunswick announced its intention to sell its Sea Ray businesses, including the Meridian brand. Starting with the fourth quarter of 2017, Brunswick is reporting the historical and future results of these business
Slide 5: Mark Schwabero and Bill Metzger
Brunswick Corporation - Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer February 1, 2018 5
Slide 6: Overview of 2017
Brunswick Corporation - Earnings Release Overview of 2017 • Eighth consecutive year of adjusted EPS growth • Global marine market is healthy and performing in line with our expectations • Marine businesses posted strong performance – Total marine revenue and operating earnings up 10 percent • Sea Ra
Slide 7: Overview of 2017
Brunswick Corporation - Earnings Release Overview of 2017 • Revenue increased 9 percent over 2016 • Gross margin of 27.6 percent • Adjusted operating earnings1 up 5 percent • Diluted EPS, as adjusted1, of $3.89, an increase of $0.43, or 12 percent over 2016 • Full-year free cash flow of $243 million
Slide 8: U.S. Powerboat Industry - Percentage Change in Retail Units
Brunswick Corporation - Earnings Release U.S. Powerboat Industry - Percentage Change in Retail Units Q1-17 Q2-17 Q3-17 Q4-17 2017 2016 AL – Fish 4% 4% 4% 7% 4% 4% AL - Pontoon 5% 10% 3% 12% 7% 9% FG - Outboard 9% 7% 1% 5% 5% 6% (1) Outboard Boats 6% 7% 2% 7% 6% 6% FG – SD/IB (14-30 ft.) (6)% (4)% (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 Rates1 U.S. Global Q4 2017 15% 11% FY 2017 6% 5% FY 2016 10% 4% FY 2015 9% 3% Brunswick's internal boat registrations continue to show year-over-year retail growth in the U
Slide 10: 2017 Revenue By Region - Marine Segments
Brunswick Corporation - Earnings Release 2017 Revenue By Region - Marine Segments 2017 vs. 2016 Region Growth Rates 1 2017 Mix 2 U.S. 9% 70% Europe 6% 12% Canada 6% 7% Asia-Pacific 9% 7% Latin America 8% 3% Africa & Middle East 13% 1% Total 8% 100% Global revenue in our combined marine segments expe
Slide 11: 2017 Revenue By Region - Fitness Segment
Brunswick Corporation - Earnings Release 2017 Revenue By Region - Fitness Segment 2017 vs. 2016 Region Growth Rates 1 2017 Mix 2 U.S. (0)% 54% Europe 0% 18% Asia-Pacific 15% 15% Latin America 5% 5% Africa & Middle East 6% 5% Canada (6)% 3% Total 2% 100% Global revenue in our Fitness segment experien
Slide 12: Mark Schwabero and Bill Metzger
Brunswick Corporation - Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer February 1, 2018 12
Slide 13: Full-Year Net Sales increased by $356.1 million, or 9%
Brunswick Corporation - Earnings Release Full-Year Net Sales increased by $356.1 million, or 9% Net Sales Year Ended Dec 31, Dec 31, % Change Segments ($'s in millions) 2017 2016 GAAP Marine Engine $ 2,631.8 $ 2,441.1 7.8% Boat 1,103.0 963.7 14.5% Marine eliminations (258.5) (231.3) Total Marine 3,4
Slide 14: Full-Year Adjusted Operating Earnings increased by $24.4 million, or 5%
Brunswick Corporation - Earnings Release Full-Year Adjusted Operating Earnings1 increased by $24.4 million, or 5% Operating Earnings - Excluding Charges Year Ended December 31, December 31, Segment ($'s in millions) 2017 2016 Change Marine Engine $ 407.0 $ 377.1 $ 29.9 Boat 74.9 59.6 15.3 Total Mari
Slide 15: Q4 Net Sales increased by $104.6 million, or 11%
Brunswick Corporation - Earnings Release Q4 Net Sales increased by $104.6 million, or 11% Net Sales Three Months Ended Dec 31, Dec 31, % Change Segments ($'s in millions) 2017 2016 GAAP1 Marine Engine $ 564.6 $ 500.2 12.9% Boat 283.2 245.3 15.5% Marine eliminations (61.7) (53.9) Total Marine 786.1 6
Slide 16: Q4 Adjusted Operating Earnings increased by $5.0 million, or 6%
Brunswick Corporation - Earnings Release Q4 Adjusted Operating Earnings1 increased by $5.0 million, or 6% Operating Earnings - Excluding Charges Three Months Ended December 31, December 31, Segment ($'s in millions) 2017 2016 Change Marine Engine $ 57.5 $ 51.0 $ 6.5 Boat 21.9 13.3 8.6 Total Marine 7
Slide 17: Full-Year Diluted EPS, as adjusted, increased by $0.43, or 12%
Brunswick Corporation – Earnings Release Full-Year Diluted EPS, as adjusted, increased by $0.43, or 12% Earnings Per Share Year Ended December 31, December 31, 2017 2016 Diluted EPS from continuing operations $ 2.08 $ 2.96 Pension settlement charge 0.69 0.38 Restructuring, exit, integration, and imp
Slide 18: Marine Engine segment - Q4 sales by region
Brunswick Corporation - Earnings Release Marine Engine segment - Q4 sales by region Q4 - 2017 % Change Region % of Sales GAAP Constant Currency United States 69% 16% 16% Europe 10% 8% 2% Rest-of-World 21% 5% 4% Total 100% 13% 12% • Strong growth in the U.S. driven by outboard engines and parts and a
Slide 19: Q4 Marine Engine Products
Brunswick Corporation - Earnings Release Q4 Marine Engine Products Outboard Engines • Favorable retail demand, particularly in higher horsepower categories • Benefits from market share gains in targeted saltwater, repower and commercial markets reflecting recently launched products • Continued focus
Slide 20: 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 • Favorable changes in product mix • Increases in growth-related investments in advance of new product introductions • Unfavorable adjustments primarily related to prod
Slide 21: Boat segment - Q4 sales by region
Brunswick Corporation - Earnings Release Boat segment - Q4 sales by region Q4 - 2017 % Change Region % of Sales GAAP Constant Currency United States 73% 16% 16% Europe 7% 10% 3% Rest-of-World 20% 16% 15% Total 100% 15% 15% • Strong sales growth in aluminum and fiberglass outboard boat categories • S
Slide 22: Review of Brunswick Boat segment sales metrics versus prior year
Brunswick Corporation - Earnings Release Review of Brunswick Boat segment sales metrics versus prior year Fourth Quarter 2017 Global U.S. Global U.S. Wholesale (units) 6% 7% 8% 8% Net Sales (dollars)1 15% 16% 14% 15% Average selling prices contributed to sales increases in Q4 and FY 2017 1 Growth in
Slide 23: 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 15 35.1 +0.2 weeks 2% 4% FY 16 35.2 +0.1 weeks 2% 3% FY 17 35.5 +0.3 weeks 8% 5% Q1 17 37.7
Slide 24: Factors affecting Boat segment's Q4 operating earnings
Brunswick Corporation - Earnings Release Factors affecting Boat segment's Q4 operating earnings1 Key Factors • Higher sales • Improved operating efficiencies Q4 GAAP and adjusted operating margin at 7.7%; FY adjusted operating margin at 6.8%; on GAAP basis at 6.4% 1 As adjusted, excluding restructur
Slide 25: Fitness segment - Q4 sales by region
Brunswick Corporation - Earnings Release Fitness segment - Q4 sales by region % Change Q4 - 2017 Constant Region % of Sales GAAP Currency United States 55% (2)% (2)% Europe 19% 20% 14% Rest-of-World 26% 5% 6% Total 100% 3% 3% • Revenue reflected overall growth in international markets, offset by sli
Slide 26: Factors affecting Fitness segment's Q4 operating earnings
Brunswick Corporation - Earnings Release Factors affecting Fitness segment's Q4 operating earnings1 Key Factors • Higher sales and cost reduction initiatives • Lower margins reflecting several factors including higher freight costs, challenging competitive dynamics in certain international markets a
Slide 27: Review of foreign currency impact
Brunswick Corporation - Earnings Release Review of foreign currency impact1 40% FY 2017: • Favorable impact on sales of less than 35% one percent • Slight favorable impact on operating 30% LA/Other earnings 25% Canada Outlook 2018: % of Total Sales International Sales • Favorable impact on consolida
Slide 28: Pension Plan Update
Brunswick Corporation - Earnings Release Pension Plan Update 80% 78% 76% • De-risking plan continues Funded Percentage • Pension expense in 2018 is expected to 74% be lower due to de-risking actions • Goal to achieve full-funding by 2020; contributions over planning period of $70 million per year (p
Slide 29: Tax Provision
Brunswick Corporation - Earnings Release Tax Provision Q4 Full-Year 2017 2016 2017 2016 Effective tax rate - GAAP NM 26.4% 45.4% 29.9% Effective tax rate, as adjusted (1) (2) 29.9% 29.1% 28.4% 30.8% Effective tax rate, ex. share-based comp. tax 30.4% 29.1% 30.0% 30.8% benefits (1) (2) Estimated 2018
Slide 30: Cash Flow - Continuing Operations
Brunswick Corporation - Earnings Release Cash Flow - Continuing Operations Year Ended ($'s in millions) 2017 2016 Net earnings1 $ 187.3 $ 272.6 Depreciation and amortization 98.2 91.0 Pension expense, net of funding2 32.2 (4.8) Changes in certain current assets and current liabilities (52.0) (27.6)
Slide 31: Free Cash Flow - Continuing Operations
Brunswick Corporation - Earnings Release Free Cash Flow - Continuing Operations Year Ended ($'s in millions) 2017 2016 Net cash provided by operating activities1 $ 417.2 $ 423.5 Net cash provided by (used for): Capital expenditures (189.3) (172.5) Proceeds from sale of property, plant and equipment
Slide 32: 2018 Outlook - P&L
Brunswick Corporation - Earnings Release 2018 Outlook - P&L 2018 Estimate Depreciation and amortization ~$100 - $110 million Pension expense ~$8 million Net interest expense ~$25 million Combined equity earnings and other Consistent with 2017 income Effective book tax rate1 23.0 - 24.0 percent Avera
Slide 33: 2018 Outlook: Cash Flow Assumptions
Brunswick Corporation - Earnings Release 2018 Outlook: Cash Flow Assumptions 2018 Estimate Free cash flow Exceeding $275 million Capital Expenditures ~$215 - $225 million Working capital usage ~$20 - $40 million Pension cash contributions ~$70 - $75 million High-single digit Cash taxes percentage Sh
Slide 34: Mark Schwabero and Bill Metzger
Brunswick Corporation - Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer February 1, 2018 34
Slide 35: Outlook for Brunswick 2018
Outlook for Brunswick 2018 2018 Financial Targets • Revenue growth of between 5 and 7 percent • Improvements in gross margins and operating margins • Operating expenses, as a percentage of sales, to be slightly lower than 2017 levels • Operating leverage of mid-to-high-teens percentage February 1, 2
Slide 36: Outlook for Brunswick 2018
Outlook for Brunswick 2018 2018 Financial Targets • 2018 diluted EPS, as adjusted, increased to $4.45 - $4.65 • Q1 operating margin consistent with Q1 2017 February 1, 2018 36
Slide 37: Marine Engine Segment
Marine Engine Segment 2018 Operating and Strategic Focus • Successful launch of new outboard engine products • Market share gains in saltwater, repower, and commercial markets • Continued manufacturing efficiency and input cost control • Expansion of parts and accessories businesses • Focus on engin
Slide 38: Marine Engine Segment
Marine Engine Segment Solid Revenue Growth and Continued Strong Margins 2018 Financial Targets • Revenue growth in the mid-to-high-single digits • Solid improvement in operating margin February 1, 2018 38
Slide 39: Boat Group Segment
Boat Group Segment 2018 Operating and Strategic Focus • Product leadership • Improvement in operating and cost efficiency • Completion of Sea Ray divestiture February 1, 2018 39
Slide 40: Boat Group Segment
Boat Group Segment Strong Revenue Growth with Margin Improvement 2018 Financial Targets • Revenue growth in the high-single digits • Modest increase in operating margin February 1, 2018 40
Slide 41: Fitness Segment
Fitness Segment 2018 Operating and Strategic Focus • Successful launch of new products • Advance our digital strategy • Margin stabilization resulting from improved operating efficiencies, cost reduction activities, and product mix • Strengthen key customer relationships February 1, 2018 41
Slide 42: Fitness Segment
Fitness Segment Modest Revenue Growth with Consistent Margins 2018 Financial Targets • Revenue growth in low-single digits • Operating margins consistent with 2017 levels February 1, 2018 42
Slide 43: Outlook for Brunswick 2020
Outlook for Brunswick 2020 2020 Financial Targets • 2020 EPS target increased to $5.60 - $6.10 • Estimated effective tax rate lowered to 23 - 24% February 1, 2018 43
Slide 44: Earnings Conference Call Q4, 2017
Brunswick Earnings Conference Call Q4, 2017
Slide 45: Appendix
BRUNSWICK Appendix
Slide 46: Reconciliation - Full-Year 2017 Adjusted Operating Earnings
Brunswick Corporation – Earnings Release Reconciliation - Full-Year 2017 Adjusted Operating Earnings Operating Earnings - Excluding Charges Year Ended December 31, December 31, $'s in millions) 2017 2016 Change Adjusted operating earnings $ 501.6 $ 477.2 $ 24.4 Restructuring, exit, integration and i
Slide 47: Reconciliation - Q4 2017 Adjusted Operating Earnings
Brunswick Corporation – Earnings Release Reconciliation - Q4 2017 Adjusted Operating Earnings Operating Earnings - Excluding Charges Three Months Ended December 31, December 31, ($'s in millions) 2017 2016 Change Adjusted operating earnings $ 93.4 $ 88.4 $ 5.0 Restructuring, exit, integration and im
Slide 48: Sea Ray Reconciliation
Brunswick Corporation – Earnings Release Sea Ray Reconciliation Adjusted Operating Earnings ($'s in millions) Q4 2017 FY 2017 As reported in Discontinued Operations $ (44.1) $ (63.1) Impairment Charge (36.0) (36.0) Brazil Exit Costs - (7.0) Transaction Related (0.8) (0.8) Other (1.4) (2.1) As Adjust