Slide 1: Brunswick Earnings Conference Call Q1, 2018
Brunswick Earnings Conference Call Q1, 2018 April 26, 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 April 26, 2018 5
Slide 6: Overview of First Quarter 2018
Brunswick Corporation - Earnings Release Overview of First Quarter 2018 • First quarter performance was an excellent start to 2018 • Marine businesses had revenue growth of 8 percent in the quarter, with a very strong increase in operating earnings versus first quarter 2017 • Our current outlook on
Slide 7: Overview of First Quarter 2018
Brunswick Corporation - Earnings Release Overview of First Quarter 2018 • Revenue increased 6.8 percent over Q1 2017 • Gross margin of 26.6 percent – Marine businesses' gross margin increased 60 bps over Q1 2017 • Adjusted1 operating earnings up 6 percent • Adjusted1 effective tax rate of 20.9% vs.
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 Q1-18 AL – Fish 4% 4% 4% 6% 4% (0)% AL - Pontoon 6% 10% 4% 14% 8% 1% FG - Saltwater (<23 ft) 9% 3% (9)% 0% 0% (9)% FG - Saltwater (>23 ft) 15% 15% 8% 12% 13% 12% FG - Fre
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 Q1 2018 3% (1)% Q1 2017 12% 13% FY 2017 6% 5% FY 2016 10% 4% FY 2015 9% 3% Brunswick's internal boat registrations continue to show year-over-year retail
Slide 10: Q1 2018 Revenue By Region - Marine segments
Brunswick Corporation - Earnings Release Q1 2018 Revenue By Region - Marine segments 2018 vs. 2017 Region Growth Rates 1 2017 Mix 2 U.S. 6% 70% Europe (1)% 12% Canada 8% 7% Asia-Pacific 3% 7% Rest-of-World (2)% 4% Total 5% 100% Global revenue in our combined marine segments grew 8 percent, with 5 pe
Slide 11: Q1 2018 Revenue By Region - Fitness segment
Brunswick Corporation - Earnings Release Q1 2018 Revenue By Region - Fitness segment 2018 vs. 2017 Region Growth Rates 1 2017 Mix 2 U.S. (5)% 54% Europe 17% 18% Asia-Pacific 14% 15% Canada 25% 3% Rest-of-World (16)% 10% Total 1% 100% Global revenue in our Fitness segment grew by 4 percent, with 1 pe
Slide 12: Mark Schwabero and Bill Metzger
Brunswick Corporation - Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer April 26, 2018 12
Slide 13: Q1 Net Sales increased by $73.3 million, or 7%
Brunswick Corporation - Earnings Release Q1 Net Sales increased by $73.3 million, or 7% Net Sales Three Months Ended Mar 31, Apr 1, % Change Segments (#039;s in millions) 2018 2017 GAAP Marine Engine $ 687.1 $ 631.8 8.8% Boat 304.0 284.9 6.7% Marine eliminations (80.1) (70.2) Total Marine 911.0 846.5 7
Slide 14: Q1 Adjusted Operating Earnings increased by $6.6 million, or 6%
Brunswick Corporation - Earnings Release Q1 Adjusted Operating Earnings increased by $6.6 million, or 6% Operating Earnings Three Months Ended March 31, April 1, Segment (#039;s in millions) 2018 2017 Change Marine Engine $ 95.7 $ 87.7 $ 8.0 Boat 24.7 19.7 5.0 Total Marine 120.4 107.4 13.0 Fitness 12.2
Slide 15: Marine Engine segment - Q1 sales
Brunswick Corporation - Earnings Release Marine Engine segment - Q1 sales Q1 - 2018 Product Category % of Sales % Change Propulsion 55% 11% P&A Businesses 45% 6% Total 100% 9% • Strong growth in propulsion, driven by outboard engines, along with solid growth in parts and accessories businesses Q1 20
Slide 16: Factors affecting Marine Engine segment's Q1 operating earnings
Brunswick Corporation - Earnings Release Factors affecting Marine Engine segment's Q1 operating earnings Key Factors • Higher sales • Favorable movements in foreign exchange rates • Unfavorable impact from planned spending increases stemming from new product introductions, capacity expansion, and pr
Slide 17: Boat segment - Q1 sales
Brunswick Corporation - Earnings Release Boat segment - Q1 sales Q1 - 2018 Product Category % of Sales % Change Aluminum Freshwater 53% 6% Fiberglass Freshwater 19% 20% Fiberglass Saltwater 28% 0% Total 100% 7% • Strong sales growth in the fiberglass Q1 2018 revenue by region: U.S. 73%, Canada fresh
Slide 18: Review of Brunswick Boat segment sales metrics versus prior year
Brunswick Corporation - Earnings Release Review of Brunswick Boat segment sales metrics versus prior year Q1 18 Q1 17 Global U.S. Global U.S. Wholesale (units) (2)% (5)% 13% 13% Net Sales (dollars)1 5% 4% 18% 19% Gains in average selling prices contributed to sales increases in Q1 1 Growth in consta
Slide 19: 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 1% 3% FY 16 35.2 +0.1 weeks 3% 4% FY 17 35.5 +0.3 weeks 8% 5% Q1 17 37.7
Slide 20: Factors affecting Boat segment's Q1 operating earnings
Brunswick Corporation - Earnings Release Factors affecting Boat segment's Q1 operating earnings Key Factors • Higher sales • Timing benefits from adoption and implementation of new revenue recognition standard Q1 operating margin of 8.1 percent April 26, 2018 20
Slide 21: Fitness segment - Q1 sales
Brunswick Corporation - Earnings Release Fitness segment - Q1 sales Q1 - 2018 Product Category % of Sales % Change Commercial Cardio 54% (3)% Commercial Strength 37% 17% Consumer Fitness 9% 0% Total 100% 4% • The slight decrease in commercial cardio revenue reflects strong sales to health clubs, mor
Slide 22: Factors affecting Fitness segment's Q1 operating earnings
Brunswick Corporation - Earnings Release Factors affecting Fitness segment's Q1 operating earnings1 Key Factors • Higher sales • Lower margins reflecting several factors including: – Higher freight costs – Challenging pricing dynamics in certain international markets – Unfavorable changes in product
Slide 23: International Sales: Review of foreign currency impact
Brunswick Corporation - Earnings Release Review of foreign currency impact1 40% Q1 2018: • Favorable impact on sales of 35% LA/Other approximately 2 percent • Favorable impact on operating earnings 30% of $3 million Canada 25% Outlook 2018: % of Total Sales International Sales Asia • Favorable impac
Slide 24: Tax Provision
Brunswick Corporation - Earnings Release Tax Provision Q1 2018 2017 Effective tax rate - GAAP 27.0% 24.6% Effective tax rate, as adjusted (1) (2) 20.9% 25.2% Estimated 2018 effective book tax rate, as adjusted, is approximately 22 to 23 percent based on tax guidance issued to date; cash tax rate to
Slide 25: Free Cash Flow - Continuing Operations
Brunswick Corporation - Earnings Release Free Cash Flow - Continuing Operations Year Ended (#039;s in millions) 2018 2017 Net cash used for operating activities $ (43.1) $ (66.3) Net cash provided by (used for): Capital expenditures (34.5) (56.6) Proceeds from sale of property, plant and equipment 0.1
Slide 26: 2018 Outlook - P&L
Brunswick Corporation - Earnings Release 2018 Outlook - P&L Change from Prior 2018 Estimate Conference Call Depreciation and amortization ~$105 - $115 million Slightly Higher Pension expense ~$8 million No Change Net interest expense ~$25 million No Change Combined equity earnings and other ~$5 - $1
Slide 27: 2018 Outlook: Cash Flow Assumptions
Brunswick Corporation - Earnings Release 2018 Outlook: Cash Flow Assumptions Change from Prior 2018 Estimate Conference Call Estimate Free cash flow Exceeding $275 million No Change Capital expenditures ~$215 - $225 million No Change Working capital usage ~$20 - $40 million No Change Pension cash co
Slide 28: Mark Schwabero and Bill Metzger
Brunswick Corporation - Earnings Release Mark Schwabero – Chairman and Chief Executive Officer Bill Metzger – Chief Financial Officer April 26, 2018 28
Slide 29: Outlook for Brunswick - Full-Year 2018
Outlook for Brunswick - Full-Year 2018 2018 Financial Targets • Revenue growth of 6 percent to 7 percent • Improvements in gross margins and operating margins • Operating expenses, as a percentage of sales, to be consistent with 2017 levels • Operating leverage – Marine businesses - high-teens perce
Slide 30: Outlook for Brunswick - Second Quarter 2018
Outlook for Brunswick - Second Quarter 2018 Q2 2018 Financial Targets • Revenue growth at the top end of the annual guidance range • Higher spending levels on new product introductions and product development • Adjusted EPS for Q2 2018 increases by mid-teens percent over Q2 2017 April 26, 2018 30
Slide 31: Marine Engine Segment
Marine Engine Segment Strong Revenue Growth with Solid Margin Improvement 2018 Financial Targets • Revenue growth in the high-single digits • Solid improvement in operating margins April 26, 2018 31
Slide 32: 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 margins April 26, 2018 32
Slide 33: Fitness Segment
Fitness Segment Modest Revenue Growth with Stabilizing Margins 2018 Financial Targets • Revenue growth in the low-single digits • Operating margins decline but year-over-year comparisons stabilize towards the end of 2018 April 26, 2018 33
Slide 34: Earnings Conference Call Q1, 2018
Brunswick Earnings Conference Call Q1, 2018
Slide 35: Appendix
BRUNSWICK Appendix
Slide 36: Q1 Diluted EPS, as adjusted, increased 15%
Brunswick Corporation – Earnings Release Q1 Diluted EPS, as adjusted, increased 15% Earnings Per Share Three Months Ended March 31, April 1, 2018 2017 Diluted EPS from continuing operations $ 0.91 $ 0.81 Restructuring, exit, integration and impairment charges 0.01 0.07 Separation costs 0.01 — Specia