Slide 1: Earnings Conference Call Q4, 2018
Earnings Conference Call Q4, 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: Presentation of Sea Ray Sport Yacht and Yacht Results
Brunswick Corporation – Earnings Release Presentation of Sea Ray Sport Yacht and Yacht Results As a result of the June 25, 2018 announcement regarding Sea Ray, the results of the entire Sea Ray business are again being reported in continuing operations for GAAP purposes. However, as adjusted, non-GA
Slide 5: Business Overview
BUSINESS OVERVIEW Dave Foulkes – CEO |5
Slide 6: Overview of 2018
Brunswick Corporation – Earnings Release Overview of 2018 Record earnings Global marine Strong financial Successful Fitness business and ninth market remains performance reflecting execution of preparing for consecutive year steady successful execution capital strategy separation from of adjusted EP
Slide 7: Marine Engine Segment – Q4 and 2018 Overview
Brunswick Corporation – Earnings Release Marine Engine Segment – Q4 and 2018 Overview1 Q4: Top line growth of 19%, adjusted operating margin improvement of 360 bps • Record sales and earnings • Robust demand for outboard engines, especially the new 175 to 300 horsepower platform introduced in 2018 •
Slide 8: Boat Segment – Q4 and 2018 Overview
Brunswick Corporation – Earnings Release Boat Segment – Q4 and 2018 Overview1 Q4: Adjusted top line growth of 7%, adjusted operating margin improvement of 90 bps • Solid sales growth, with contributions across the product lineup • Adjusted full-year operating margin of 7 percent, up 60 bps • Boston
Slide 9: FY Revenue Growth Rates By Region – Marine segments
Brunswick Corporation – Earnings Release FY Revenue Growth Rates By Region1 – Marine segments Region Engines Boats Total 2018 Mix2 Global revenue in U.S. 11% 9% 11% 71% our combined Europe 7% (2)% 4% 11% marine segments Canada 9% 0% 4% 7% grew by 12 Asia-Pacific 4% 8% 4% 7% percent, with 8 Rest-of-
Slide 10: U.S. Powerboat Industry – Percentage Change in Retail Units
Brunswick Corporation – Earnings Release U.S. Powerboat Industry – Percentage Change in Retail Units Category Q3-YTD Q4 FY-18 FY-17 Outboard Boats 5% (6)% 4% 6% Fiberglass SD/IB (5)% (12)% (5)% (5)% 2018 industry unit Boats volume for the Main Powerboat Segments 4% (6)% 3% 5% main powerboat Total In
Slide 11: 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) FY retail unit Growth Rates growth rates were U.S. Global 3 percent for the 2018 1% (3)% U.S. and 2 percent 2018 ex-Lowe2 10% 2% globally, 2017 14% 10% excluding the results of Lo
Slide 12: Fitness Segment – Q4 and 2018 Overview
Brunswick Corporation – Earnings Release Fitness Segment – Q4 and 2018 Overview1 Q4: Performance as anticipated with top line down and adjusted gross margins consistent with YTD levels • Separation process on track • Revenue steady vs. 2017 • Gross margin stabilization throughout 2018, year-over-yea
Slide 13: Financial Overview
FINANCIAL OVERVIEW Bill Metzger – CFO | 13
Slide 14: Overview of Fourth Quarter 2018
Brunswick Corporation – Earnings Release Overview of Fourth Quarter 20181 On an adjusted basis vs. Q4 2017: Marine segments Diluted EPS of $0.98, Marine segments operating margin of 13.0 up 32 percent revenue up 14 percent percent, up 300 bps Marine segments Effective tax rate of operating earnings
Slide 15: Overview of Full-Year 2018
Brunswick Corporation – Earnings Release Overview of Full-Year 20181 On an adjusted basis vs. 2017: Marine segments Diluted EPS of $4.77, Marine segments operating margin of 14.5 up 19 percent revenue up 12 percent percent, up 90 bps Marine segments Effective tax rate of operating earnings 20.7 perc
Slide 16: Marine Engine segment – Q4 Performance
Brunswick Corporation – Earnings Release Marine Engine segment – Q4 Performance1 Product Category Q4-2018 Sales ($M) % Change Propulsion $351.7 15% P&A Businesses 317.8 23% Total $669.5 19%2 Operating Margin Operating Earnings - Adjusted @ 14.1 percent, up 360 bps - Adjusted of $94.1M, up 59 percent
Slide 17: Boat segment – Q4 Performance
Brunswick Corporation – Earnings Release Boat segment – Q4 Performance1 % Change in Product Category Q4-2018 Sales ($M) Adjusted Net Sales Aluminum Freshwater $157.4 3% Recreational Fiberglass 113.4 8% Saltwater Fishing 105.6 15% Total $377.3 7% Operating Earnings Operating Margin - Adjusted of $29.
Slide 18: Review of Brunswick Boat segment pipeline metrics
Brunswick Corporation – Earnings Release Review of Brunswick Boat segment pipeline metrics Ending Change % Change in Pipeline Weeks on Versus Prior Wholesale % Change in Pipelines are Levels Retail Units Hand Year Units well-positioned at this point in 18 36 No change (4)% 0% the year, leading into
Slide 19: Fitness segment – Q4 Performance
Brunswick Corporation – Earnings Release Fitness segment – Q4 Performance1 Product Category Q4-2018 Sales ($M) % Change Commercial Cardio $158.2 (13)% Commercial Strength 106.2 8% Consumer Fitness 23.3 (5)% Total $287.7 (6)% Gross Margin Operating Earnings - Adjusted @ 26.3 percent, down - Adjusted
Slide 20: Other factors affecting GAAP operating earnings
Brunswick Corporation – Earnings Release Other factors affecting GAAP operating earnings1 Q4 Full-Year $ in Millions 2018 2017 2018 2017 Restructuring, exit, integration and impairment charges $24.6 $53.6 $80.9 $81.3 Purchase accounting amortization 11.8 - 21.2 - Sport Yacht & Yacht operations 11.0
Slide 21: 2019 Marine Business Guidance
2019 Marine Business Guidance1 Diluted EPS, as adjusted, range of $4.50 - $4.70 (vs. $4.13 in 2018 on a comparable basis) Revenue growth between 9 and 11 percent Strong improvement in gross and operating margins Operating earnings growth of high-teens percent Q1 – Revenue slightly above full-year ra
Slide 22: 2019 Outlook – Fitness Business Impact
Brunswick Corporation – Earnings Release 2019 Outlook – Fitness Business Impact 20181 2019 Estimates Marine adjusted EPS $4.13 $4.50 - $4.70 Life Fitness adjusted EPS $0.64 $0.30 - $0.35 Brunswick adjusted EPS $4.77 $4.80 - $5.05 1See the Appendix to this presentation and today's Form 8-K for reconc
Slide 23: Tariff Update
Brunswick Corporation – Earnings Release Tariff Update The marine 2019 estimates incorporate exclusion granted on 40 to 60 business horsepower engines anticipates an impact to 2019 Assumes Wave 3 increase to 25% rate after March 2, does not assume any impact for Wave 4 (minimal to marine) pre-tax ea
Slide 24: 2019 Outlook – Marine Business P&L and Cash Flow
Brunswick Corporation – Earnings Release 2019 Outlook – Marine Business P&L and Cash Flow1 2019 Estimates Free cash flow2 In excess of $300 million Working capital usage ~$10 - $30 million Depreciation and amortization3 ~$100 - $110 million Acquisition intangible amortization ~$25 - $30 million Comb
Slide 25: 2019 Outlook – Marine Business Capital Strategy Assumptions
Brunswick Corporation – Earnings Release 2019 Outlook – Marine Business Capital Strategy Assumptions1 2019 Estimates Debt reduction ~$150 - $200 million Capital expenditures ~$240 - $260 million Share repurchases TBD pending Fitness separation Quarterly dividends $0.21 per share Net interest expense
Slide 26: 2019 Outlook
2019 OUTLOOK Dave Foulkes – CEO | 26
Slide 27: Marine Engine Segment
Marine Engine Segment Strong Revenue Growth and Margin Improvement Operating and Strategic Priorities Continue growing Capacity initiatives market share in to enable growth outboard engines Integration of Power New product Products and pipeline organic P&A growth 2019 Segment Financial Target Net Sa
Slide 28: Boat Group Segment
Boat Group Segment Solid Revenue Growth and Margin Improvement Operating and Strategic Priorities Operational Sea Ray efficiency revitalization improvements Technology Consumer enhancements engagement activities 2019 Segment Financial Target U.S. - Mid-single digit percent Net Sales Growth Int’l - F
Slide 29: Fitness Segment
Fitness Segment Complete Separation and Execute Plan to Improve Operating Performance Operating and Strategic Focus Prepare for Cost reduction and separation efficiency initiatives Product Information development technology and digital 2019 Segment Financial Target Net Sales Decline Mid-single digit
Slide 30: Brunswick
Slide 31: Appendix
Appendix | 31
Slide 32: GAAP to Non-GAAP Reconciliations
Brunswick Corporation – Earnings Release GAAP to Non-GAAP Reconciliations | 32 ©2019 Brunswick Co. Confidential and all rights reserved.
Slide 33: GAAP to Non-GAAP Reconciliations (continued)
Brunswick Corporation – Earnings Release GAAP to Non-GAAP Reconciliations (continued) | 33 ©2019 Brunswick Co. Confidential and all rights reserved.
Slide 34: Q4 Adjusted Net Sales increased by $99.7 million, or 8.7%
Brunswick Corporation – Earnings Release Q4 Adjusted Net Sales increased by $99.7 million, or 8.7% Net Sales - GAAP Net Sales - As Adjusted 1 Segments (in millions) Q4 2018 Q4 2017 % Change Q4 2018 Q4 2017 % Change Marine Engine $ 669.5 $ 564.6 18.6% $ 669.5 $ 564.6 18.6% Boat 377.3 386.5 (2.4)% 371
Slide 35: FY Adjusted Net Sales increased by $425.5 million or 9.1%
Brunswick Corporation – Earnings Release FY Adjusted1 Net Sales increased by $425.5 million or 9.1% | 35 1 Excludes net sales related to the Sea Ray Sport Yacht and Yacht operations. ©2019 Brunswick Co. Confidential and all rights reserved.
Slide 36: Q4 Adjusted Net Sales
Brunswick Corporation – Earnings Release Q4 Adjusted1 Net Sales Fourth Quarter 2018 vs. Fourth Quarter 2017 Sales Growth Drivers Engine Boat Marine Fitness Brunswick Organic (constant currency) 11% 7% 9% (5)% 5% Acquisitions 9% — 6% — 4% Currency (1)% (0)% (1)% (1)% (0)% 2018 Adjusted Net Sales 19%
Slide 37: FY Adjusted Net Sales
Brunswick Corporation – Earnings Release FY Adjusted1 Net Sales FY 2018 vs. FY 2017 Sales Growth Drivers Engine Boat Marine Fitness Brunswick Organic (constant currency) 10% 6% 8% 0% 7% Acquisitions 4% — 3% — 2% Currency 0% 0% 1% 0% 0% 2018 Adjusted Net Sales 14% 6% 12% 0% 9% Sales Growth by Region
Slide 38: FY Revenue Growth Rates By Region – Fitness segment
Brunswick Corporation – Earnings Release FY Revenue Growth Rates By Region – Fitness segment 2018 vs. 2017 Region 2018 Mix2 Growth Rates1 U.S. (4)% 51% Europe 3% 19% 2018 global revenue in our Asia-Pacific 12% 17% Fitness segment Canada (7)% 3% was flat Rest-of-World 1% 10% Total 0% 100% 1On a const
Slide 39: Marine Segments Adjusted Gross Margins Improving
Brunswick Corporation – Earnings Release Marine Segments Adjusted Gross Margins1 Improving Adjusted Gross Margin Percentage Q4 2018 Q4 2017 FY 2018 FY 2017 Marine segments adjusted gross Marine Segments 26.5% 23.8% 26.9% 26.3% margin percentage expanded by 60 Fitness 26.3% 30.0% 26.9% 31.1% basis po
Slide 40: Tax Provision
Brunswick Corporation – Earnings Release Tax Provision Estimated 2019 Q4 Full-Year effective book tax 2018 2017 2018 2017 rate, as adjusted Effective tax rate - GAAP 16.3% NM 18.3% 47.9% is between 23 to Effective tax rate, as adjusted (1) 19.7% 29.6% 20.7% 28.4% 24 percent based on tax guidance iss
Slide 41: Review of Foreign Currency Impact
Brunswick Corporation – Earnings Release Review of Foreign Currency Impact1 Q4 2018: • Unfavorable impact on sales of approximately 1 LA/Other percent • Unfavorable impact on operating earnings of Canada approximately $3 million Outlook for Full-Year 2019: Asia Pacific • Favorable impact on consolid
Slide 42: Free Cash Flow
Brunswick Corporation – Earnings Release Free Cash Flow Full Year (#039;s in millions) 2018 2017 Net cash provided by operating activities from continuing operations $ 337.0 $ 401.6 Net cash provided by (used for): Plus: Capital expenditures (193.4) (203.2) Plus: Proceeds from sale of property, plant a