Slide 1: Brunswick Earnings Conference Call Q4, 2014
Brunswick Earnings Conference Call Q4, 2014 January 29, 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
Brunswick Corporation – Earnings Release Use of Non-GAAP Financial Information 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 cash flows that exclude amounts, o
Slide 4: Discontinued Operations
Brunswick Corporation – Earnings Release Discontinued Operations On July 17, 2014, the Company announced: 1) the signing of an agreement to sell its Retail Bowling business, and 2) its intention to sell its Bowling Products business. On Sept. 18, 2014, the sale of the Retail Bowling business was com
Slide 5: Overview of 2014
Brunswick Corporation – Earnings Release Overview of 2014 • Revenue increased 7 percent as growth in outboard boats and engines, marine parts and accessories, fitness equipment and fiberglass sterndrive/inboard boats was partially offset by a decline in sterndrive engines • Gross margin of 27.0 perc
Slide 6: Net Sales increased by $239.0 million, or 7%
Brunswick Corporation – Earnings Release Net Sales increased by $239.0 million, or 7% Net Sales Twelve Months Ended December 31, December 31, Segment (#039;s in millions) 2014 2013 % Change Marine Engine $ 2,189.4 $ 2,088.1 5% Boat 1,135.8 1,032.0 10 % Marine eliminations (255.8) (236.4) Total Marine 3
Slide 7: Adjusted Operating Earnings increased by $62.3 million, or 21%
Brunswick Corporation – Earnings Release Adjusted Operating Earnings increased by $62.3 million, or 21% Operating Earnings - Excluding Charges Twelve Months Ended December 31, December 31, Segment (#039;s in millions) 2014 2013 Change Marine Engine $ 309.1 $ 284.2 $ 24.9 Boat 18.7 (6.0) 24.7 Total Mari
Slide 8: Adjusted Pretax Earnings increased by $82.1 million
Brunswick Corporation – Earnings Release Adjusted Pretax Earnings increased by $82.1 million, or 32% Adjusted Pretax Earnings Twelve Months Ended December 31, December 31, Change (#039;s in millions) 2014 2013 Adjusted operating earnings $ 360.6 $ 298.3 $ 62.3 Net interest expense (28.6) (40.4) 11.8 Ot
Slide 9: Diluted EPS, as adjusted, decreased by $0.05
Brunswick Corporation – Earnings Release Diluted EPS, as adjusted, decreased by $0.05 Earnings Per Share Twelve Months Ended December 31, December 31, 2014 2013 Diluted EPS from continuing operations $ 2.05 $ 8.07 Pension - settlement charge related to completed lump sum payouts 0.19 - Restructuring
Slide 10: Q4 Net Sales increased by $111.8 million, or 14%
Brunswick Corporation – Earnings Release Q4 Net Sales increased by $111.8 million, or 14% Net Sales Three Months Ended December 31, December 31, Segment (#039;s in millions) 2014 2013 % Change Marine Engine $ 465.0 $ 423.5 10 % Boat 294.3 239.7 23 % Marine eliminations (55.7) (53.6) Total Marine 703.6
Slide 11: Q4 Adjusted Operating Earnings increased by $28.8 million
Brunswick Corporation – Earnings Release Q4 Adjusted Operating Earnings increased by $28.8 million Operating Earnings - Excluding Charges Three Months Ended December 31, December 31, Segment (#039;s in millions) 2014 2013 Change Marine Engine $ 31.6 $ 18.1 $ 13.5 Boat (3.9) (16.1) 12.2 Total Marine 27.
Slide 12: Q4 Diluted EPS, as adjusted, increased by $0.26
Brunswick Corporation – Earnings Release Q4 Diluted EPS, as adjusted, increased by $0.26 Earnings Per Share Three Months Ended December 31, December 31, 2014 2013 Diluted EPS from continuing operations $ (0.03) $ 6.13 Pension - settlement charge related to completed lump sum payouts 0.19 - Restructu
Slide 13: U.S. Powerboat Industry - December, 2014 (Preliminary Results)
Brunswick Corporation – Earnings Release U.S. Powerboat Industry - December, 2014 (Preliminary Results) 2014 vs. 2013 – YoY Growth % Q1 Q2 Q3 Q4 FY 16-> All Aluminum Aluminum Fish 2.5% 6.1% 5.6% 8.7% 5.4% Pontoon 4.0% 5.0% 4.8% 8.2% 5.0% 11-40 ft* OB Fiberglass All (Inshore/Offshore) 5.9% 9.7% 11.8%
Slide 14: 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% 1Engine segment sales exclude sales to the Boat segment 14 January 29, 2015
Slide 15: Marine Engine segment – Q4 sales by region
Brunswick Corporation – Earnings Release Marine Engine segment – Q4 sales by region Q4 - 2014 Change vs. Region % of Sales* Prior Year United States 61% 13 % Europe 13% 31 % Rest-of-World 26% (1)% Total 100% 10 % • U.S. sales increased in outboard engines and parts and accessories, partially offset
Slide 16: Q4 Outboard and Sterndrive engines
Brunswick Corporation – Earnings Release Q4 Outboard and Sterndrive engines Outboard • Favorable retail demand environment continues in overall U.S. outboard boat categories, including recently launched products • Growth in Europe, partially offset by declines in Rest-of-World Sterndrive • Unfavorab
Slide 17: Q4 Marine Engine segment’s Parts & Accessories
Brunswick Corporation – Earnings Release Q4 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 1
Slide 18: Factors affecting Marine Engine segment’s Q4 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Marine Engine segment’s Q4 operating earnings Key Factors • Higher sales • Benefits from recently launched outboard products • Favorable warranty experience Q4 operating margin at 6.8%; FY-14 operating margin at 14.1% 18 January 29, 2015
Slide 19: Boat segment – Q4 sales by region
Brunswick Corporation – Earnings Release Boat segment – Q4 sales by region Q4 - 2014 Change vs. Region % of Sales Prior Year United States 67% 37% Europe 7% 31% Rest-of-World 26% (5)% Total 100% 23% • U.S. sales continue to benefit from overall retail growth in outboard boat categories; fiberglass s
Slide 20: Review of Brunswick Boat segment metrics
Brunswick Corporation – Earnings Release Review of Brunswick Boat segment metrics Wholesale and Retail Metrics • In the fourth quarter, Brunswick’s global retail unit sales increased by 14 percent compared to prior year; global wholesale unit shipments increased by 6 percent • For the full-year, glo
Slide 21: Factors affecting Boat segment’s Q4 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Boat segment’s Q4 operating earnings Key Factors • Higher sales, including several new product introductions • Increasing costs associated with new product integrations, capacity expansions and production ramp-up • Absence of costs related t
Slide 22: Fitness segment – Q4 sales by region
Brunswick Corporation – Earnings Release Fitness segment – Q4 sales by region Q4 - 2014 Change vs. Region % of Sales Prior Year United States 53% 6% Europe 24% 22% Rest-of-World 23% 1% Total 100% 8% • Growth in sales reflects gains in the U.S. to health clubs, hospitality, education and local and fe
Slide 23: Factors affecting Life Fitness segment’s Q4 operating earnings
Brunswick Corporation – Earnings Release Factors affecting Life Fitness segment’s Q4 operating earnings Key Factors • Higher sales • Increase in growth investments Q4 operating margin at 17.4%; FY-14 operating margin at 15.0% 23 January 29, 2015
Slide 24: Review of foreign currency impact
Brunswick Corporation – Earnings Release Review of foreign currency impact* 40% 35% Full-year 2014: • Minimal impact on sales and 30% operating earnings; unfavorable impact in Q4 25% International sales % of Total Sales Outlook 2015: International sales 20% • Unfavorable effect of currency on 15% sa
Slide 25: Other factors affecting GAAP pre-tax earnings
Brunswick Corporation – Earnings Release Other factors affecting GAAP pre-tax earnings $ in millions GAAP 2014 2013 Q4 pension settlement charge $ 27.9 $ - Q4 impairment charge - equity method investment 20.2 - Restructuring charges 4.2 16.5 Early debt extinguishment charges 0.1 32.8 25 January 29,
Slide 26: Tax provision
Brunswick Corporation – Earnings Release Tax provision Q4 Full-year (#039;s in millions) 2014 2013 2014 2013 Effective tax rate - GAAP 71.3% NM 32.3% NM Effective tax rate, as adjusted* 22.3% 7.3% 32.5% 10.2% Estimated full-year 2015: Effective Book Tax Rate, as adjusted, is approximately 34 percent; E
Slide 27: Cash Flow
Brunswick Corporation – Earnings Release Cash Flow (#039;s in millions) 2014 2013 Net earnings from continuing operations $ 194.9 $ 756.8 Depreciation and amortization 81.2 71.4 Pension funding, net of expense (31.1) (35.3) Excess tax benefits from share-based compensation (8.4) (37.2) Deferred income
Slide 28: Pension Plan Update
Pension Plan Update Percent Funded* • Benefits frozen 79% 80% 76% • Investment policy: 70% 67% – Transitioning asset allocation to 100 percent 62% fixed income 60% – Current allocation is 80 percent fixed income 50% and 20 percent equity • First of two lump sum actions completed 40% in Q4, 2014, sec
Slide 29: Free Cash Flow
Brunswick Corporation – Earnings Release Free Cash Flow (#039;s in millions) 2014 2013 Net cash provided by operating activities of continuing operations $ 235.3 $ 168.0 Net cash provided by (used for): Capital expenditures (124.8) (126.5) Proceeds from sale of property, plant and equipment 5.8 16.9 To
Slide 30: Cash and Marketable Securities
Brunswick Corporation – Earnings Release Cash and Marketable Securities Main factors affecting cash balances $636 • Discontinued operations cash flow (net) of $262 million $369 • Free cash flow of $116 million $’s in millions • Acquisitions of ($42) million • Dividends paid of ($42) million • Share
Slide 31: 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 $13 million, a decrease of $2 million • Net interest expense of approximately $26 million • Combined equity earnings and o
Slide 32: 2015 Outlook: Cash Flow Assumptions
Brunswick Corporation – Earnings Release 2015 Outlook: Cash Flow Assumptions • Pension cash contributions of approximately $70 million to $75 million • Current plan anticipates working capital changes to result in a modest usage of cash of $30 million to $50 million • Capital expenditure levels of a
Slide 33: 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 • Adjusted pretax earnings growth of 15 percent to 20 percent • Diluted EPS,
Slide 34: 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 35: 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 repeated product feature • Revenue CAGR in mid-single to innovation on key consumer values high-single digit range • Leveraging
Slide 36: 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 37: Capital Strategy - 2015 to 2016
Capital Strategy - 2015 to 2016 2015 to 2016 Plan • Maintain strong cash and liquidity positions and regain investment grade credit rating • Strengthen Marine and Fitness segments: • Investing in growth is first priority • Pursue acquisition opportunities with initial focus on Mercury parts and acce
Slide 38: Earnings Conference Call Q4, 2014
Brunswick Earnings Conference Call Q4, 2014 Helping Active People Live Active Lives
Slide 39: Appendix
Appendix Helping Active People Live Active Lives
Slide 40: U.S. Powerboat Industry - December, 2014 (Preliminary Results)
Brunswick Corporation – Earnings Release U.S. Powerboat Industry - December, 2014 (Preliminary Results) 2014 - Units Q1 Q2 Q3 Q4 YTD 16-> All Aluminum Aluminum Fish 8,500 17,802 9,783 3,297 39,382 Pontoon 4,781 21,518 11.014 1,851 39,164 11-40 ft* OB Fiberglass All (Inshore/Offshore) 8,385 16,052 11
Slide 41: Consolidated Statements of Operations, as adjusted
Brunswick Corporation – Earnings Release 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 28.4 28
Slide 42: Consolidated Statements of Operations, GAAP
Brunswick Corporation – Earnings Release 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 29.7