Slide 1: Brunswick Earnings Conference Call Q3, 2016
Brunswick Earnings Conference Call Q3, 2016 October 27, 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 October 27, 2016 4
Slide 5: Overview of Third Quarter 2016
Brunswick Corporation – Earnings Release Overview of Third Quarter 2016 • Revenue increased 10 percent -- on a constant currency basis1, sales increased by 10 percent. Strong growth in fitness, all three of our primary boat categories and marine parts & accessories as well as solid growth in outboar
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 Q3 - 16 YTD -16 YTD -15 AL – Fish 11% 0% -1% 3% 7% AL - Pontoon 23% 8% 3% 8% 7% FG - Outboard 11% 3% 2% 5% 9% Outboard Boats 14% 4% 1% 5% 8% FG – SD/IB (14-30 ft.) 5% -3% -11% -4% -9% FG – SD/IB
Slide 7: 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. +8% 67% Europe +12% 12% Canada +1% 8% Asia Pacific +4% 7% Latin America -21% 4% Africa & Middle East -26% 2% Total +6% 100% Revenue* in our combined marin
Slide 8: 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. +4% 52% Europe +10% 21% Asia Pacific +15% 12% Latin America -6% 7% Africa & Middle East -11% 4% Canada +8% 4% Total +5% 100% Revenue* in our fitness segments e
Slide 9: Presenters: Mark Schwabero and Bill Metzger
Brunswick Corporation – Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer October 27, 2016 9
Slide 10: Q3 Net Sales increased by $101.1 million, or 10%
Brunswick Corporation – Earnings Release Q3 Net Sales increased by $101.1 million, or 10% Net Sales Three Months Ended October 1, October 3, % Change Acquisition Segment (#039;s in millions) 2016 2015 GAAP1 Constant Currency Contribution Marine Engine $ 625.7 $ 588.2 6% 5% 1% Boat 307.0 271.3 13 % 13 %
Slide 11: First Nine Months Net Sales increased by $285.9 million, or 9%
Brunswick Corporation – Earnings Release First Nine Months Net Sales increased by $285.9 million, or 9% Net Sales Nine Months Ended October 1, October 3, % Change Acquisition 1 Segment (#039;s in millions) 2016 2015 GAAP Constant Currency Contribution Marine Engine $ 1,940.9 $ 1,839.6 6% 6% 1% Boat 1,0
Slide 12: Marine Engine segment – Q3 sales by region
Brunswick Corporation – Earnings Release Marine Engine segment – Q3 sales by region Q3 - 2016 % Change Region Sales* GAAP* Constant Currency* United States 69% 7% 7% Europe 11% 7% 7% Rest-of-World 20% (2)% (3)% Total 100% 5% 5% Based on Constant Currency • U.S. sales increased in outboard engine and
Slide 13: Q3 Outboard and Sterndrive Engines
Brunswick Corporation – Earnings Release Q3 Outboard and Sterndrive Engines Outboard • Favorable retail demand environment continues in overall U.S. and European outboard boat and four-stroke engine categories • Market share gain benefits in targeted saltwater, repower and commercial markets reflect
Slide 14: Q3 Marine Engine segment's Parts & Accessories
Brunswick Corporation – Earnings Release Q3 Marine Engine segment’s Parts & Accessories Service Parts Boating Accessories Propellers • Revenue benefited from market share gains, recent acquisitions and new product launches • Lower fuel costs a positive factor Oil & Lubes Trolling Motors Controls/Rig
Slide 15: Factors affecting Marine Engine segment's Q3 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Marine Engine segment’s Q3 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 16: Boat segment – Q3 sales by region
Brunswick Corporation – Earnings Release Boat segment – Q3 sales by region Q3 - 2016 % Change Region % of Sales GAAP Constant Currency United States 79% 14% 14% Europe 6% 13% 13% Rest-of-World 15% 10% 8% Total 100% 13% 13% Based on Constant Currency • In addition to favorable retail demand for the y
Slide 17: Review of Brunswick Boat segment sales metrics versus prior year
Brunswick Corporation – Earnings Release Review of Brunswick Boat segment sales metrics versus prior year U.S Global Q3 YTD Q3 YTD Retail (units) 5% 9% 1% 4% Wholesale (units) 10% 5% 12% 2% Net Sales (dollars)* 14% 12% 13% 8% Wholesale unit growth rate anticipated to be more in balance with retail u
Slide 18: Review of Brunswick Boat pipeline metrics
Brunswick Corporation – Earnings Release Review of Brunswick Boat pipeline metrics Ending Change % Change in Pipeline % Change in Weeks on Versus Wholesale Levels Retail Units Hand Prior Year Units FY 14 35 +1 week 1% 2% FY 15 35 Flat 2% 4% Q1 16 38 -2 weeks (6)% 10% Retail exceeded wholesale in Q2
Slide 19: Factors affecting Boat segment's Q3 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Boat segment’s Q3 operating earnings Key Factors • Higher sales • Impact of lower sales of large fiberglass sterndrive/inboard boats • Increase in revenue and profit enhancing investments Q3 operating margin at 2.2% October 27, 2016 19
Slide 20: Fitness segment – Q3 sales by region
Brunswick Corporation – Earnings Release Fitness segment – Q3 sales by region % Change Q3 - 2016% Constant Ex. Region of Sales GAAP Currency Acquisition United States 52% 18% 18% 0% Europe 19% 20% 26% 5% Rest-of-World 29% 25% 22% 10% Total 100% 20% 21% 4% Based on Constant Currency, Excluding Acquis
Slide 21: Factors affecting Life Fitness segment's Q3 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Life Fitness segment’s Q3 operating earnings* Key Factors • Higher sales • Modest contribution from Cybex acquisition • Unfavorable impact of change in sales mix • Increased investment in growth initiatives Q3 adjusted operating margin at 13
Slide 22: International Sales – Review of foreign currency impact
Brunswick Corporation – Earnings Release Review of foreign currency impact1 40% Q3, 2016: 35% • Slight favorable impact on sales • Unfavorable impact on operating 30% LA/Other earnings of approximately $2 million 25% International Sales Outlook 2016: % of Total Sales Asia Pacific • Unfavorable impac
Slide 23: Tax provision
Brunswick Corporation – Earnings Release Tax provision Q3 First Nine Months 2016 2015 2016 2015 Effective tax rate - GAAP 27.8% 35.5% 29.8% 31.9% Effective tax rate, as adjusted* 30.5% 34.9% 30.8% 34.3% Change in effective tax rate, as adjusted, between years reflects impact of R&D tax credit and be
Slide 24: Cash Flow – Continuing Operations
Brunswick Corporation – Earnings Release Cash Flow – Continuing Operations Nine Months Ended (#039;s in millions) 2016 2015 Net earnings* $ 256.6 $ 236.4 Depreciation and amortization 77.0 66.3 Pension funding, net of expense (61.7) (63.9) Changes in certain current assets and current liabilities (66.5
Slide 25: Free Cash Flow – Continuing Operations
Brunswick Corporation – Earnings Release Free Cash Flow – Continuing Operations Nine Months Ended (#039;s in millions) 2016 2015 Net cash provided by operating activities* $ 282.1 $ 240.7 Net cash provided by (used for): Capital expenditures (131.9) (98.5) Proceeds from sale of property, plant and equi
Slide 26: 2016 Outlook – P&L
Brunswick Corporation – Earnings Release 2016 Outlook – P&L • Depreciation and amortization estimate of $105 - updated • Pension expense of approximately $15 million – no change* • Net interest expense of approximately $26 million – no change • Combined equity earnings and other income slightly less
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 – no change • Capital expenditure levels of approximately 4 percent to 4.5 percent of sales – no change • Pension
Slide 28: Presenters: Mark Schwabero and Bill Metzger
Brunswick Corporation – Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer October 27, 2016 28
Slide 29: Outlook for Brunswick 2016
Outlook for Brunswick 2016 2016 Financial Targets • Revenue growth of approximately 10 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, of $3.45 to $3.
Slide 30: Marine Engine Segment: Strong Revenue and Strong Margins
Marine Engine Segment Strong Revenue and Strong Margins 2016 Financial Targets • Revenue growth consistent with year-to-date levels • Solid improvement in operating margin • Increased investments to support growth October 27, 2016 30
Slide 31: 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 80 - 100 basis points October 27, 2016 31
Slide 32: Fitness Segment: Strong Revenue Growth with Strong Margins
Fitness Segment Strong Revenue Growth with Strong Margins 2016 Financial Targets • Revenue growth consistent with year-to-date growth rates • Plan reflects operating margins, as adjusted, to be lower due to the impact of the Cybex acquisition, including purchase accounting adjustments • Fourth quart
Slide 33: Earnings Conference Call Q3, 2016
Brunswick Earnings Conference Call Q3, 2016
Slide 34: Appendix
BRUNSWICK Appendix
Slide 35: Q3 Diluted EPS, as adjusted, increased by $0.14, or 18%
Brunswick Corporation – Earnings Release Q3 Diluted EPS, as adjusted, increased by $0.14, or 18% Earnings Per Share Three Months Ended October 1 October 3, 2016 2015 Diluted EPS from continuing operations $ 0.93 $ 0.77 Restructuring and integration charges 0.02 - Special tax items (0.04) 0.00 Dilute
Slide 36: Q3 Adjusted Pretax Earnings increased by $8.6 million, or 8%
Brunswick Corporation – Earnings Release Q3 Adjusted Pretax Earnings increased by $8.6 million, or 8% Adjusted Pretax Earnings Three Months Ended October 1, October 3, (#039;s in millions) 2016 2015 Change Adjusted operating earnings $ 124.9 $ 115.8 $ 9.1 Net interest expense (6.6) (6.3) (0.3) Other in
Slide 37: First Nine Months Adjusted Pretax Earnings increased by $27.5 million, or 8%
Brunswick Corporation – Earnings Release First Nine Months Adjusted Pretax Earnings increased by $27.5 million, or 8% Adjusted Pretax Earnings Nine Months Ended October 1, October 3, (#039;s in millions) 2016 2015 Change Adjusted operating earnings $ 389.2 $ 358.7 $ 30.5 Net interest expense (19.6) (19
Slide 38: First Nine Months Diluted EPS, as adjusted, increased by $0.39, or 16%
Brunswick Corporation – Earnings Release First Nine Months Diluted EPS, as adjusted, increased by $0.39, or 16% Earnings Per Share Nine Months Ended October 1, October 3, 2016 2015 Diluted EPS from continuing operations $ 2.78 $ 2.50 Restructuring, exit and impairment charges 0.06 - Special tax item
Slide 39: Q3 Adjusted Operating Earnings increased by $9.1 million, or 8%
Brunswick Corporation – Earnings Release Q3 Adjusted Operating Earnings increased by $9.1 million, or 8% Operating Earnings - Excluding Charges Three Months Ended October 1, October 3, Segment (#039;s in millions) 2016 2015 Change Marine Engine $ 109.5 $ 102.5 $ 7.0 Boat 6.8 6.4 0.4 Total Marine 116.3
Slide 40: First Nine Months Adjusted Operating Earnings increased by $30.5 million, or 9%
Brunswick Corporation – Earnings Release First Nine Months Adjusted Operating Earnings increased by $30.5 million, or 9% Operating Earnings - Excluding Charges Nine Months Ended October 1, October 3, Segment (#039;s in millions) 2016 2015 Change Marine Engine $ 326.8 $ 308.5 $ 18.3 Boat 45.9 35.0 10.9
Slide 41: Cash and Marketable Securities
Brunswick Corporation – Earnings Release Cash and Marketable Securities Main Factors Affecting Changes in $669 Cash Balances • Free cash flow of $158 million $438 • Share repurchases of $90 million (approximately 2.0 million shares) $’s in millions • Dividends paid of $41 million • Acquisition expen