Slide 1: Brunswick Earnings Conference Call Q2, 2015
Brunswick Earnings Conference Call Q2, 2015 July 30, 2015 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 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: McCoy, Schwabero, Metzger
Brunswick Corporation – Earnings Release Dusty McCoy – Chairman and Chief Executive Officer Mark Schwabero – President and Chief Operating Officer Bill Metzger – Chief Financial Officer 4 July 30, 2015
Slide 5: Overview of Second Quarter 2015
Brunswick Corporation – Earnings Release Overview of Second Quarter 2015 • Revenue increased 6 percent -- on a constant currency* basis, sales increased by 11 percent. Growth in marine parts and accessories, fiberglass sterndrive/inboard and fiberglass outboard boats, fitness equipment and outboard
Slide 6: Q2 Net Sales increased by $68.9 million, or 6%
Brunswick Corporation – Earnings Release Q2 Net Sales increased by $68.9 million, or 6% Net Sales Three Months Ended July 4, June 28, % Change 1 Segment (#039;s in millions) 2015 2014 GAAP Constant Currency Marine Engine $ 689.2 $ 652.4 6% 11 % Boat 349.3 324.1 8% 11 % Marine eliminations (70.3) (68.6)
Slide 7: First half Net Sales increased by $159.7 million, or 8%
Brunswick Corporation – Earnings Release First half Net Sales increased by $159.7 million, or 8% Net Sales Six Months Ended July 4, June 28, % Change 1 Segment (#039;s in millions) 2015 2014 GAAP Constant Currency Marine Engine $ 1,251.4 $ 1,157.5 8% 13 % Boat 667.3 606.9 10 % 13 % Marine eliminations
Slide 8: Q2 Adjusted Operating Earnings increased by $12.8 million, or 9%
Brunswick Corporation – Earnings Release Q2 Adjusted Operating Earnings increased by $12.8 million, or 9% Operating Earnings - Excluding Charges Three Months Ended July 4, June 28, Segment (#039;s in millions) 2015 2014 Change Marine Engine $ 131.8 $ 122.5 $ 9.3 Boat 20.9 20.3 0.6 Total Marine 152.7 14
Slide 9: First half Adjusted Operating Earnings increased by $19.6 million, or 9%
Brunswick Corporation – Earnings Release First half Adjusted Operating Earnings increased by $19.6 million, or 9% Operating Earnings - Excluding Charges Six Months Ended July 4, June 28, Segment (#039;s in millions) 2015 2014 Change Marine Engine $ 206.0 $ 184.2 $ 21.8 Boat 28.6 28.7 (0.1) Total Marine
Slide 10: Q2 Adjusted Pretax Earnings increased by $15.2 million, or 11%
Brunswick Corporation – Earnings Release Q2 Adjusted Pretax Earnings increased by $15.2 million, or 11% Adjusted Pretax Earnings Three Months Ended July 4, June 28, (#039;s in millions) 2015 2014 Change Adjusted operating earnings $ 154.2 $ 141.4 $ 12.8 Net interest expense (6.5) (7.6) 1.1 Other income
Slide 11: First half Adjusted Pretax Earnings increased by $25.0 million, or 12%
Brunswick Corporation – Earnings Release First half Adjusted Pretax Earnings increased by $25.0 million, or 12% Adjusted Pretax Earnings Six Months Ended July 4, June 28, (#039;s in millions) 2015 2014 Change Adjusted operating earnings $ 242.9 $ 223.3 $ 19.6 Net interest expense (13.0) (15.3) 2.3 Othe
Slide 12: Q2 Diluted EPS, as adjusted, increased by $0.11, or 12%
Brunswick Corporation – Earnings Release Q2 Diluted EPS, as adjusted, increased by $0.11, or 12% Earnings Per Share Three Months Ended July 4, June 28, 2015 2014 Diluted EPS from continuing operations $ 1.14 $ 0.92 Restructuring, exit and impairment charges - 0.02 Special tax items (0.09) 0.00 Dilut
Slide 13: First half Diluted EPS, as adjusted, increased by $0.18, or 12%
Brunswick Corporation – Earnings Release First half Diluted EPS, as adjusted, increased by $0.18, or 12% Earnings Per Share Six Months Ended July 4, June 28, 2015 2014 Diluted EPS from continuing operations $ 1.73 $ 1.43 Restructuring, exit and impairment charges - 0.02 Special tax items (0.09) 0.01
Slide 14: U.S. Powerboat Industry – Percentage Change in Units
Brunswick Corporation – Earnings Release U.S. Powerboat Industry – Percentage Change in Units Q1-15 Q2-15 1H-15 1H-14 AL – Fish 9.9% 4.3% 6.4% 6.0% AL - Pontoon 8.7% 5.2% 6.0% 6.2% FG - Outboard 7.2% 9.3% 8.5% 8.8% Outboard Boats 8.6% 6.2% 7.0% 7.0% FG – SD/IB (14-30 ft.) -10.2% -10.6% -10.5% -6.7%
Slide 15: 2014 Revenue By Region – Marine Segments Only
Brunswick Corporation – Earnings Release 2014 Revenue By Region – Marine Segments Only Latin America 5% Africa & Middle East 2% Asia Pacific 7% Canada 9% Europe 12% U.S. 65% International sales 35% 15 July 30, 2015
Slide 16: Presenters: McCoy, Schwabero, Metzger
Brunswick Corporation – Earnings Release Dusty McCoy – Chairman and Chief Executive Officer Mark Schwabero – President and Chief Operating Officer Bill Metzger – Chief Financial Officer 16 July 30, 2015
Slide 17: Marine Engine segment – Q2 sales by region
Brunswick Corporation – Earnings Release Marine Engine segment – Q2 sales by region Q2 - 2015 % Change Region % of Sales* GAAP Constant Currency United States 70% 11 % 11 % Europe 13% (4)% 16 % Rest-of-World 17% (3)% 7% Total 100% 6% 11 % Based on Constant Currency • U.S. sales increased in parts an
Slide 18: 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 and engine categories, including recently launched products • Market share gain benefits, including in targeted saltwater, re-power and c
Slide 19: 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 most major markets • Revenue benefited from recent acquisitions, new product launches and market share gains Oil & Lubes Trolling Motors Controls/Rigging •
Slide 20: 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 • Favorable product mix benefit from recently launched outboard products and P&A growth • Foreign exchange had an unfavorable impact • Increase in investment spending Q
Slide 21: Boat segment – Q2 sales by region
Brunswick Corporation – Earnings Release Boat segment – Q2 sales by region Q2 - 2015 % Change Region % of Sales GAAP Constant Currency United States 70% 16% 16% Europe 9% (11)% 9% Rest-of-World 21% (6)% (1)% Total 100% 8% 11% Based on Constant Currency • U.S. sales continue to benefit from recently
Slide 22: 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 increased by 5 percent compared to prior year; global wholesale unit shipments decreased by one percent • For the six months, g
Slide 23: Factors affecting Boat segment’s Q2 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Boat segment’s Q2 operating earnings Key Factors • Higher sales, including several new product introductions • Increasing costs associated with new product integrations, capacity expansions and production ramp-up • Foreign exchange had an un
Slide 24: Fitness segment – Q2 sales by region
Brunswick Corporation – Earnings Release Fitness segment – Q2 sales by region Q2 - 2015 % Change Region % of Sales GAAP Constant Currency United States 50% 6% 6% Europe 21% 8% 23% Rest-of-World 29% 2% 8% Total 100% 5% 10% Based on Constant Currency • Growth in sales reflects gains in the U.S. at hea
Slide 25: 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 • Unfavorable foreign exchange impact • Costs associated with planned capacity expansion and new product integrations Q2 operating margin at 13.3% 25 July 30, 2015
Slide 26: Presenters: McCoy, Schwabero, Metzger
Brunswick Corporation – Earnings Release Dusty McCoy – Chairman and Chief Executive Officer Mark Schwabero – President and Chief Operating Officer Bill Metzger – Chief Financial Officer 26 July 30, 2015
Slide 27: Review of foreign currency impact
Brunswick Corporation – Earnings Release Review of foreign currency impact1 40% Second Quarter 2015: 35% LA/Other • Unfavorable impact on sales of approximately $46 million or 30% 4.3 percent and operating earnings of approximately $8 million Pacific Asia 25% International Sales % of Total Sales Out
Slide 28: Tax provision
Brunswick Corporation – Earnings Release Tax provision Q2 First Half 2015 2014 2015 2014 Effective tax rate - GAAP 28.4% 34.0% 30.2% 34.2% Effective tax rate, as adjusted* 34.0% 33.9% 34.0% 34.0% Effective tax rates for 2014 and 2015, exclude any potential benefit from extension of U.S. R&D tax cred
Slide 29: Cash Flow – Continuing Operations
Brunswick Corporation – Earnings Release Cash Flow – Continuing Operations Six Months Ended July 4, June 28, (#039;s in millions) 2015 2014 Net earnings* $ 164.2 $ 136.2 Depreciation and amortization 43.8 37.5 Pension funding, net of expense (65.9) (11.5) Changes in certain current assets and current l
Slide 30: Free Cash Flow – Continuing Operations
Brunswick Corporation – Earnings Release Free Cash Flow – Continuing Operations Six Months Ended July 4, June 28, (#039;s in millions) 2015 2014 Net cash provided by operating activities* $ 108.8 $ 63.6 Net cash provided by (used for): Capital expenditures (64.7) (50.4) Proceeds from sale of property,
Slide 31: Cash and Marketable Securities
Brunswick Corporation – Earnings Release Cash and Marketable Securities Main factors affecting changes in YTD cash balances $636 $609 • Free cash flow of $37 million • Share repurchases of $60 million (approximately 1.15 million shares) $’s in millions • Dividends paid of $23 million • Discontinued
Slide 32: 2015 Outlook – P&L, as adjusted
Brunswick Corporation – Earnings Release 2015 Outlook – P&L, as adjusted • Depreciation and amortization estimate of approximately $90 million • Pension expense of approximately $12 million, a decrease of $3 million • Net interest expense of approximately $26 million • Combined equity earnings and o
Slide 33: 2015 Outlook: Cash Flow Assumptions
Brunswick Corporation – Earnings Release 2015 Outlook: Cash Flow Assumptions • Pension cash contributions of approximately $75 million • Current plan anticipates working capital changes to result in a modest usage of cash of $10 million to $30 million • Capital expenditure levels of approximately 4
Slide 34: Presenters: McCoy, Schwabero, Metzger
Brunswick Corporation – Earnings Release Dusty McCoy – Chairman and Chief Executive Officer Mark Schwabero – President and Chief Operating Officer Bill Metzger – Chief Financial Officer 34 July 30, 2015
Slide 35: Outlook for Brunswick 2015
Outlook for Brunswick 2015 2015 Financial Targets • Revenue growth of approximately 6 percent to 8 percent • Slight improvement in gross margin levels • Operating expenses, as a percent of sales, to be lower than prior year • Solid gains in operating margins • Adjusted pretax earnings growth of 15 p
Slide 36: Outlook for Brunswick 2015: Third Quarter Early Forecast
Outlook for Brunswick 2015 Third Quarter – Early Forecast • Revenue growth in the 6 to 8 percent range • Consolidated operating earnings to reflect incremental operating leverage in the low-20 percent range 36 July 30, 2015
Slide 37: Marine Engine Segment
Marine Engine Segment Continued Revenue and Operating Earnings Growth Summary of Growth Strategy Financial Targets • Drive consistent, profitable growth • 2014 to 2016 Targets • Product leadership • Be the best partner • Revenue CAGR in mid-single • Enhance the winning culture digit percent range •
Slide 38: 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 continunous product feature • Revenue CAGR in mid-single to innovation on key consumer values high-single digit range • Leverag
Slide 39: Fitness Segment
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 compl
Slide 40: Brunswick Earnings Conference Call Q2, 2015
Brunswick Earnings Conference Call Q2, 2015 Helping Active People Live Active Lives
Slide 41: Appendix
Appendix Helping Active People Live Active Lives
Slide 42: 2014 Consolidated Statements of Operations, as adjusted
Brunswick Corporation – Earnings Release 2014 Consolidated Statements of Operations, as adjusted* 2014 Q1 Q2 Q3 Q4 Net Sales $ 894.9 $ 1,073.1 $ 932.1 $ 938.6 Cost of sales 651.6 768.8 672.9 708.6 Selling, general and administrative expense 133.0 134.9 134.9 153.8 Research and development expense 28
Slide 43: 2014 Consolidated Statements of Operations, GAAP
Brunswick Corporation – Earnings Release 2014 Consolidated Statements of Operations, GAAP 2014 Q1 Q2 Q3 Q4 Net Sales $ 894.9 $ 1,073.1 $ 932.1 $ 938.6 Cost of sales 651.6 768.8 672.9 708.6 Selling, general and administrative expense 133.0 134.9 134.9 153.8 Research and development expense 28.4 28.0