Slide 1: Brunswick Earnings Conference Call Q2, 2016
Brunswick Earnings Conference Call Q2, 2016 July 28, 2016
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 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: Presenters: Mark Schwabero and Bill Metzger
Brunswick Corporation – Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer July 28, 2016 4
Slide 5: Overview of Second Quarter 2016
Brunswick Corporation – Earnings Release Overview of Second Quarter 2016 • Revenue increased 8.8 percent -- on a constant currency basis1, sales increased by 9.1 percent. Strong growth in fitness, fiberglass outboard and aluminum boats; solid growth rates in marine parts & accessories and outboard e
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 1H-16 1H-15 AL – Fish 9% 2% 4% 7% AL - Pontoon 17% 9% 11% 7% FG - Outboard 9% 5% 6% 9% Outboard Boats 11% 5% 7% 8% FG – SD/IB (14-30 ft.) 4% -6% -3% -10% FG – SD/IB (31-40 ft.) -3% 5% 2% 3% FG –
Slide 7: Favorable U.S. Powerboat Demand Dynamics
Brunswick Corporation – Earnings Release Favorable U.S. Powerboat Demand Dynamics U.S. Boat Registrations Stable 2011 - 2015 12 • U.S. powerboat market in its 6th consecutive year of solid growth 9.926 9.848 9.829 9.805 10 9.674 – Retail unit growth of 5.2% CAGR (2016 slightly above this rate) 8 – R
Slide 8: Year-to-Date Revenue By Region – Marine Segments Only
Brunswick Corporation – Earnings Release Year-to-Date Revenue By Region – Marine Segments Only Region 2016 vs. 2015 2015 Growth Rates* Mix** U.S. +7% 67% Europe +13% 12% Canada -6% 8% Asia Pacific +2% 7% Latin America -16% 4% Africa & Middle East -20% 2% Total +5% 100% Revenue* in our combined marin
Slide 9: Year-to-Date Revenue By Region – Fitness Segment
Brunswick Corporation – Earnings Release Year-to-Date Revenue By Region – Fitness Segment Region 2016 vs. 2015 2015 Growth Rates* Mix** U.S. +7% 52% Europe +6% 21% Asia Pacific +22% 12% Latin America -2% 7% Africa & Middle East -23% 4% Canada +3% 4% Total +6% 100% Revenue* in our fitness segments ex
Slide 10: Presenters: Mark Schwabero and Bill Metzger
Brunswick Corporation – Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer July 28, 2016 10
Slide 11: Q2 Net Sales increased by $100.2 million, or 9%
Brunswick Corporation – Earnings Release Q2 Net Sales increased by $100.2 million, or 9% Net Sales Three Months Ended July 2, July 4, % Change Acquisition Segment (#039;s in millions) 2016 2015 GAAP1 Constant Currency Contribution Marine Engine $ 719.7 $ 689.2 4% 4% 1% Boat 368.1 349.3 5% 6% 0% Marine
Slide 12: First-half Net Sales increased by $184.8 million, or 9%
Brunswick Corporation – Earnings Release First-half Net Sales increased by $184.8 million, or 9% Net Sales Six Months Ended July 2, July 4, % Change Acquisition 1 Segment (#039;s in millions) 2016 2015 GAAP Constant Currency Contribution Marine Engine $ 1,315.2 $ 1,251.4 5% 6% 1% Boat 704.9 667.3 6% 6%
Slide 13: Marine Engine segment – Q2 sales by region
Brunswick Corporation – Earnings Release Marine Engine segment – Q2 sales by region Q2 - 2016 % Change Region Sales* GAAP Constant Currency United States 71% 5% 5% Europe 13% 11 % 10 % Rest-of-World 16% (4)% 0% Total 100% 4% 4% Based on Constant Currency • U.S. sales increased in outboard engine and
Slide 14: Q2 Outboard and Sterndrive engines
Brunswick Corporation – Earnings Release Q2 Outboard and Sterndrive engines Outboard • Favorable retail demand environment continues in overall U.S. and European outboard boat and engine categories • Market share gain benefits in targeted saltwater, repower and commercial markets reflecting recently
Slide 15: Q2 Marine Engine segment's Parts & Accessories
Brunswick Corporation – Earnings Release Q2 Marine Engine segment’s Parts & Accessories Service Parts Boating Accessories Propellers • Revenue benefited from recent acquisitions, along with new product launches and market share gains • Lower fuel costs a positive factor Oil & Lubes Trolling Motors C
Slide 16: 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 • Cost reductions, including benefits from lower commodity costs and savings related to sourcing initiatives • Foreign exchange had an unfavorable impact • Increases in
Slide 17: Boat segment – Q2 sales by region
Brunswick Corporation – Earnings Release Boat segment – Q2 sales by region Q2 - 2016 % Change Region % of Sales GAAP Constant Currency United States 73% 10% 10% Europe 11% 21% 21% Rest-of-World 16% (17)% (16)% Total 100% 5% 6% Based on Constant Currency • U.S. sales continue to benefit from recently
Slide 18: Review of Brunswick Boat segment metrics
Brunswick Corporation – Earnings Release Review of Brunswick Boat segment metrics Second Quarter YTD Global U.S. Global U.S. Wholesale 3% 6% -1% 3% Retail 4% 9% 6% 11% Pipeline Metrics • Q2, 2016 ended with 29 weeks of product-on-hand, compared to 31 weeks at the end of Q2, 2015; units down modestly
Slide 19: Factors affecting Boat segment's Q2 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Boat segment’s Q2 operating earnings Key Factors • Higher sales • Lower commodity cost and savings from sourcing initiatives • Impact of lower sales of large fiberglass sterndrive/inboard boats Q2 operating margin at 6.2% July 28, 2016 19
Slide 20: Fitness segment – Q2 sales by region
Brunswick Corporation – Earnings Release Fitness segment – Q2 sales by region Q2 - 2016 % Change Region % of Sales GAAP Constant Currency United States 56% 46% 46% Europe 17% 13% 15% Rest-of-World 27% 23% 22% Total 100% 32% 33% Based on Constant Currency, Excluding Acquisitions • U.S. sales increase
Slide 21: 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 • Modest contribution from Cybex acquisition • Increased investment in growth initiatives • Unfavorable impact of sales mix Q2 adjusted operating margin at 11.6%; On a
Slide 22: International Sales: Review of foreign currency impact
Brunswick Corporation – Earnings Release Review of foreign currency impact1 40% Q2, 2016: 35% • Slight unfavorable impact on sales • Unfavorable impact on operating 30% LA/Other earnings of approximately $5 million 25% International Sales Outlook 2016: % of Total Sales Asia Pacific • Unfavorable imp
Slide 23: Tax provision
Brunswick Corporation – Earnings Release Tax provision Q2 First Half 2016 2015 2016 2015 Effective tax rate - GAAP 30.8% 28.4% 30.8% 30.2% Effective tax rate, as adjusted* 30.9% 34.0% 30.9% 34.0% Change in effective tax rate, as adjusted, between years reflects impact of R&D tax credit and benefits
Slide 24: Cash Flow – Continuing Operations
Brunswick Corporation – Earnings Release Cash Flow – Continuing Operations Six Months Ended (#039;s in millions) 2016 2015 Net earnings* $ 171.3 $ 164.2 Depreciation and amortization 50.6 43.8 Pension funding, net of expense (29.5) (65.9) Changes in certain current assets and current liabilities (36.7)
Slide 25: Free Cash Flow – Continuing Operations
Brunswick Corporation – Earnings Release Free Cash Flow – Continuing Operations Six Months Ended (#039;s in millions) 2016 2015 Net cash provided by operating activities* $ 213.1 $ 108.8 Net cash provided by (used for): Capital expenditures (90.0) (64.7) Proceeds from sale of property, plant and equipm
Slide 26: 2016 Outlook – P&L
Brunswick Corporation – Earnings Release 2016 Outlook – P&L • Depreciation and amortization estimate of approximately $110 million - no change • Pension expense of approximately $15 million – no change • Net interest expense of approximately $26 million – no change • Combined equity earnings and oth
Slide 27: 2016 Outlook: Cash Flow Assumptions
Brunswick Corporation – Earnings Release 2016 Outlook: Cash Flow Assumptions • Current plan anticipates working capital changes to result in a usage of cash of $40 million to $60 million - updated • Capital expenditure levels of approximately 4 percent to 4.5 percent of sales – no change • Pension c
Slide 28: Presenters: Mark Schwabero and Bill Metzger
Brunswick Corporation – Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer July 28, 2016 28
Slide 29: Outlook for Brunswick 2016
Outlook for Brunswick 2016 2016 Financial Targets • Revenue growth of approximately 10 percent to 11 percent • Slight improvement in gross margin levels • Operating expenses, as a percent of sales, to be slightly lower than prior year • Slight gains in operating margins • Diluted EPS, as adjusted, o
Slide 30: Outlook for Brunswick Q3 2016
Outlook for Brunswick Q3 2016 Q3 2016 Financial Targets • Revenue growth at approximately 12 percent • Operating margins decline approximately 30 basis points due to increased investments to support growth July 28, 2016 30
Slide 31: Marine Engine Segment: Strong Revenue and Strong Margins
Marine Engine Segment Strong Revenue and Strong Margins 2016 Financial Targets • Revenue growth in the mid-to-high-single digit percent range • Solid improvement in operating margin • Increased investments to support growth July 28, 2016 31
Slide 32: Boat Group Segment: Strong Revenue Growth with Improved Profitability
Boat Group Segment Strong Revenue Growth with Improved Profitability 2016 Financial Targets • Revenue growth in the high-single digit percent range • Improvement in operating margin of approximately 100 to 120 basis points July 28, 2016 32
Slide 33: Fitness Segment: Strong Revenue Growth with Strong Margins
Fitness Segment Strong Revenue Growth with Strong Margins 2016 Financial Targets • Revenue growth in the mid-to-high-twenty percent range, including announced acquisitions • Plan reflects operating margins, as adjusted, to be lower due to the impact of the Cybex acquisition, including purchase accou
Slide 34: Indoor Cycling Group Acquisition - Company Profile
Brunswick Corporation – Earnings Release Indoor Cycling Group Acquisition - Company Profile • 2015 revenue was approximately $41 million • Founded in 1995; based in Nuremberg, Germany • Focused on the design, distribution and programming of indoor cycling products • Offers the strongest portfolio of
Slide 35: ICG Acquisition Timing and Financial Considerations
Brunswick Corporation – Earnings Release ICG Acquisition Timing and Financial Considerations • Acquisition is subject to regulatory approval (German competition authority) resulting in a two-step sign and close process; expected to close late in Q3 • Funding from cash on balance sheet; no anticipate
Slide 36: Brunswick Earnings Conference Call Q2, 2016
Brunswick Earnings Conference Call Q2, 2016
Slide 37: Appendix
BRUNSWICK Appendix
Slide 38: Q2 Diluted EPS, as adjusted, increased by $0.14, or 13%
Brunswick Corporation – Earnings Release Q2 Diluted EPS, as adjusted, increased by $0.14, or 13% Earnings Per Share Three Months Ended July 2, July 4, 2016 2015 Diluted EPS from continuing operations $ 1.17 $ 1.14 Restructuring and integration charges 0.02 - Special tax items - (0.09) Diluted EPS fr
Slide 39: Q2 Adjusted Pretax Earnings increased by $8.6 million, or 6%
Brunswick Corporation – Earnings Release Q2 Adjusted Pretax Earnings increased by $8.6 million, or 6% Adjusted Pretax Earnings Three Months Ended July 2, July 4, (#039;s in millions) 2016 2015 Change Adjusted operating earnings $ 164.5 $ 154.2 $ 12.3 Net interest expense (6.6) (6.5) (0.1) Other income
Slide 40: First half Adjusted Pretax Earnings increased by $18.9 million, or 8%
Brunswick Corporation – Earnings Release First half Adjusted Pretax Earnings increased by $18.9 million, or 8% Adjusted Pretax Earnings Six Months Ended July 2, July 4, (#039;s in millions) 2016 2015 Change Adjusted operating earnings $ 264.3 $ 242.9 $ 21.4 Net interest expense (13.0) (13.0) 0.0 Other
Slide 41: First half Diluted EPS, as adjusted, increased by $0.25, or 15%
Brunswick Corporation – Earnings Release First half Diluted EPS, as adjusted, increased by $0.25, or 15% Earnings Per Share Six Months Ended July 2, July 4, 2016 2015 Diluted EPS from continuing operations $ 1.85 $ 1.73 Restructuring, exit and impairment charges 0.04 - Special tax items - (0.09) Dil
Slide 42: Q2 Adjusted Operating Earnings increased by $10.3 million, or 7%
Brunswick Corporation – Earnings Release Q2 Adjusted Operating Earnings increased by $10.3 million, or 7% Operating Earnings - Excluding Charges Three Months Ended July 2, July 4, Segment (#039;s in millions) 2016 2015 Change Marine Engine $ 139.0 $ 131.8 $ 7.2 Boat 22.7 20.9 1.8 Total Marine 161.7 152
Slide 43: First-half Adjusted Operating Earnings increased by $21.4 million, or 9%
Brunswick Corporation – Earnings Release First-half Adjusted Operating Earnings increased by $21.4 million, or 9% Operating Earnings - Excluding Charges Six Months Ended July 2, July 4, Segment (#039;s in millions) 2016 2015 Change Marine Engine $ 217.3 $ 206.0 $ 11.3 Boat 39.1 28.6 10.5 Total Marine 2
Slide 44: Cash and Marketable Securities
Brunswick Corporation – Earnings Release Cash and Marketable Securities Main Factors Affecting Changes in $669 Cash Balances • Free cash flow of $130 million $493 • Share repurchases of $60 million (approximately 1.4 million shares) $’s in millions • Dividends paid of $27 million • Acquisition expen