Brunswick Earnings Conference Call Q3, 2015 October 29, 2015 Helping Active People Live Active Lives 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. Forward-looking statements by their nature address matters that are, to different degrees, uncertain and often contain words such as “may”, “could”, “expect”, “intend”, “target”, “plan”, “seek”, “estimate”, “believe”, “predict”, “potential” or “continue”. These statements are not guarantees of future performance and involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this presentation. These risks include, but are not limited to: the effect of adverse general economic conditions, including the amount of disposable income available to consumers for discretionary purchases, tight consumer credit markets, and the level of consumer confidence on the demand for the Company’s products and services; the ability of dealers and customers to secure adequate access to financing and the Company’s ability to access capital and credit markets; the ability to maintain strong relationships with dealers, distributors and independent boat builders; the ability to maintain effective distribution and develop alternative distribution channels without disrupting incumbent distribution partners; negative currency trends, including shifts in exchange rates; the ability to successfully manage pipeline inventories and respond to any excess supply of repossessed and aged boats in the market; credit and collections risks, including the potential obligation to repurchase dealer inventory; the risk of losing a key customer or a critical supplier; the strength and protection of the Company’s brands and other intellectual property; the ability to absorb fixed costs and manage production facilities while expanding capacity and enhancing product offerings; the ability to successfully manage the expansion of the Company’s manufacturing footprint; the ability of the Company to successfully implement its strategic plan and growth initiatives; the ability to obtain components, parts and raw materials from suppliers in a timely manner and for a reasonable price; the need to meet pension funding obligations; the effect of higher energy and logistics costs, interest rates and fuel prices on the Company’s results; competitive pricing pressures, including the impact of inflation and increased competition from international competitors; the ability to develop new and innovative products in response to changing retail demands and expectations that are differentiated for the global marketplace at a competitive price and in compliance with applicable laws; the effect of competition from other leisure pursuits on the level of participation in boating and fitness activities; the risk of product liability, warranty and other claims in connection with the manufacture and sale of products; the ability to respond to and minimize the negative financial impact of legislative and regulatory developments, including those related to environmental restrictions, climate change, healthcare costs, taxes and employee benefits; the ability to complete environmental remediation efforts and resolve claims and litigation at the cost estimated; the ability to maintain market share, particularly in high-margin products; the ability to maintain product quality and service standards expected by customers; the ability to protect the Company’s intellectual property; competition from new technologies; the uncertainty and risks of doing business in international locations, including international political instability, civil unrest and other risks associated with operations in emerging markets; the risk of having to record an impairment to the value of goodwill and other assets; the effect that catastrophic events may have on consumer demand and the ability to manufacture products, including hurricanes, floods, earthquakes, and environmental spills; the effect of weather conditions on demand for marine products; the inability to attract and retain individuals who could be key contributors to the organization; and risks associated with the Company’s information technology systems, including the continued use of legacy systems and the risk of a failure of or attacks on the Company’s information systems, which could result in data security breaches, lost or stolen assets or information, and associated remediation costs. Additional risk factors are included in the Company’s Annual Report on Form 10-K for 2014. Such forward-looking statements speak only as of the date on which they are made and Brunswick does not undertake any obligation to update any forward-looking statements to reflect events or circumstances after the date of this presentation or for changes made to this document by wire services or Internet service providers. Bruce J. Byots, Vice President - Investor Relations Brunswick Corporation, 1 N. Field Court, Lake Forest, IL 60045-4811 Phone: +1-847-735-4612 Fax: +1-847-735-4750 email: bruce.byots@brunswick.com 2 October 29, 2015 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 cash flows that exclude amounts, or are subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations, balance sheets or statements of cash flows of the registrant; or include amounts, or are subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Brunswick has used certain non-GAAP financial measures that are included in this presentation for several years, both in presenting its results to shareholders and the investment community and in its internal evaluation and management of its businesses. Brunswick’s management believes that these measures (including those that are non-GAAP financial measures) and the information they provide are useful to investors because they permit investors to view Brunswick’s performance using the same tools that Brunswick uses and to better evaluate Brunswick’s ongoing business performance. For additional information, please see Brunswick's Current Report on Form 8-K issued on October 29, 2015, which is available at www.brunswick.com. For purposes of comparison, 2015 net sales growth is also shown using 2014 exchange rates for the comparative period to enhance the visibility of the underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations. 3 October 29, 2015 Brunswick Corporation – Earnings Release Dusty McCoy – Chairman and Chief Executive Officer Mark Schwabero – President and Chief Operating Officer Bill Metzger – Chief Financial Officer 4 October 29, 2015 Brunswick Corporation – Earnings Release Overview of Third Quarter 2015 • Revenue increased 6 percent -- on a constant currency* basis, sales increased by 11 percent. Growth in outboard boats and engines, marine parts and accessories, fiberglass sterndrive/inboard boats and fitness equipment • Gross margin of 28.4 percent, an increase of 60 basis points • Operating expenses increased by one percent • Adjusted operating earnings increased by 22 percent compared to prior year, with operating margins up 160 basis points • Adjusted pretax earnings increased by 25 percent • Diluted EPS, as adjusted, of $0.77, up $0.14, or 22 percent • Year-to-date free cash flow increased by $82 million *For purposes of comparison, 2015 net sales growth is also shown using 2014 exchange rates for the comparative period to enhance the visibility of the underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations. 5 October 29, 2015 Brunswick Corporation – Earnings Release Q3 Net Sales increased by $59.8 million, or 6% October 3, Segment ($'s in millions) Marine Engine Boat Marine eliminations Total Marine Fitness Total Net Sales Three Months Ended September 27, 2015 $ $ 2014 588.2 271.3 (65.1) 794.4 197.5 991.9 $ $ GAAP 1 % Change Constant Currency 566.9 234.6 (58.4) 743.1 4% 16 % 8% 19 % 7% 11 % 189.0 932.1 4% 6% 9% 11 % Excluding impact of foreign currency translation, Q3 net sales increased by 11 percent 1Consolidated GAAP net sales reflected a 14% increase in the U.S., and a decrease of 7% in Europe and Rest-of-World combined versus prior year. 6 October 29, 2015 Brunswick Corporation – Earnings Release Q3 Adjusted Operating Earnings increased by $21.2 million, or 22% Operating Earnings - Excluding Charges Three Months Ended October 3, September 27, 2015 2014 Change Segment ($'s in millions) Marine Engine Boat Total Marine Fitness Pension - non-service costs Corp/Other Adjusted operating earnings Restructuring Charges GAAP operating earnings Operating margin - excluding charges Operating margin - including charges 7 October 29, 2015 $ $ 102.5 6.4 108.9 27.6 (2.7) (18.0) 115.8 115.8 11.7% 11.7% $ $ 93.3 (6.1) 87.2 25.8 (3.7) (14.7) 94.6 (0.9) 93.7 10.1% 10.1% $ $ 9.2 12.5 21.7 1.8 1.0 (3.3) 21.2 0.9 22.1 +160 bps +160 bps Brunswick Corporation – Earnings Release U.S. Powerboat Industry – Percentage Change in Units Q1-15 Q2-15 Q3-15 YTD-15 YTD-14 AL – Fish 12.5% 3.2% 6.5% 6.3% 6.0% AL - Pontoon 13.5% 5.2% 7.1% 6.8% 5.6% FG - Outboard 9.5% 8.5% 7.2% 8.3% 9.7% 11.6% 5.5% 7.0% 7.1% 7.0% FG – SD/IB (14-30 ft.) -8.4% -10.9% -3.7% -8.4% -9.3% FG – SD/IB (31-40 ft.) 12.0% 1.1% -8.6% 0.7% 8.7% FG – SD/IB (41-62 ft.) 18.8% 20.3% 12.1% 17.8% -5.2% -4.5% -8.6% -3.4% -6.4% -7.8% Main Powerboat Segments 10.0% 3.9% 5.7% 5.6% 5.1% Total Industry (NMMA) 9.2% 4.1% 4.8% 5.3% 5.1% Outboard Boats FG SD/IB Boats First nine months, preliminary U.S. total industry (NMMA) shipments increased 5.3% versus 2014 Source: Statistical Surveys, Inc.: 2015 preliminary data is based on 97% of Q1 and Q2 and 87% of July, 81% of August and 63% of September market reporting; Coast Guard data updated through 8/2015. (Incomplete for September). Note: Total Industry (NMMA) also includes the fiberglass and aluminum lengths outside the ranges stated above, as well as ski boats, but excludes house and jet boats. 8 October 29, 2015 Brunswick Corporation – Earnings Release 2014 Revenue By Region – Marine Segments Only Latin America 5% Africa & Middle East 2% Asia Pacific 7% Canada 9% U.S. 65% Europe 12% U.S. and Europe experiencing solid growth; Rest-of-World markets are down 9 October 29, 2015 Brunswick Corporation – Earnings Release Dusty McCoy – Chairman and Chief Executive Officer Mark Schwabero – President and Chief Operating Officer Bill Metzger – Chief Financial Officer 10 October 29, 2015 Brunswick Corporation – Earnings Release Marine Engine segment – Q3 sales by region Q3 - 2015 Region % of Sales* % Change GAAP Constant Currency United States 68% 7% 7% Europe 10% (15)% 0% 22% 2% 4% 16 % 8% Rest-of-World Total 100% Based on Constant Currency • U.S. sales increased in all major product categories • European sales were flat - - modest sales growth was offset by weakness in Russia 2014 FY revenue by region*: U.S. 65%, Europe 14%, Asia Pacific 8%, Latin America 6%, Canada 4%, Africa & Middle East 3% *Excluding 11 sales to the Boat segment. October 29, 2015 • Rest-of-World revenue gains in parts and accessories, including BLA acquisition, partially offset by market weakness in Brazil Excluding impact of foreign currency translation, Q3 net sales increased by 8 percent; acquisitions contributed 2 percent to the segment’s year-overyear growth Brunswick Corporation – Earnings Release Q3 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, repower and commercial markets Sterndrive • Unfavorable global retail demand trends continue • Market share stable 12 October 29, 2015 Brunswick Corporation – Earnings Release Q3 Marine Engine segment’s Parts & Accessories Boating Accessories Oil & Lubes Service Parts Trolling Motors Propellers Controls/Rigging • Growth in most major markets • Revenue benefited from recent acquisitions, new product launches and market share gains • Lower fuel costs a positive demand factor, offset to some degree by weather related boating restrictions in some regions 13 October 29, 2015 Brunswick Corporation – Earnings Release Factors affecting Marine Engine segment’s Q3 operating earnings Key Factors • • • • Higher sales Favorable product mix benefit from recently launched outboard products and P&A growth Cost reductions and savings related to sourcing initiatives Foreign exchange had an unfavorable impact Q3 operating margin at 17.4% 14 October 29, 2015 Brunswick Corporation – Earnings Release Boat segment – Q3 sales by region Q3 - 2015 Region % Change % of Sales GAAP Constant Currency United States 79% 29% 29% Europe 6% 7% 28% 15% (23)% (17)% 100% 16% 19% Rest-of-World Total Based on Constant Currency • U.S. sales continue to benefit from recently introduced new products and continued overall retail growth in outboard boat categories 2014 FY revenue by region: U.S. 67%, Canada 16%, Europe 9%, Latin America 4%, Asia Pacific 3%, Africa & Middle East 1% 15 October 29, 2015 • Sales growth in Europe resulted from new product introductions • Rest-of-World sales decreased, reflecting weaker demand in Asia Pacific, Canada and Brazil Brunswick Corporation – Earnings Release Review of Brunswick Boat segment metrics Wholesale and Retail Metrics • In the third quarter, Brunswick’s global retail unit sales decreased by one percent compared to prior year. U.S. retail units increased by 6 percent; global wholesale unit shipments increased by 11 percent • For the nine months, global retail unit sales increased by 4 percent, compared to prior year. U.S. retail units increased by 8 percent; global wholesale unit shipments were up 4 percent • Wholesale unit growth rate should approximate retail unit growth rate for the full-year Pipeline Metrics • Q3, 2015 ended with 27 weeks of product-on-hand, compared to 27 weeks at the end of Q3, 2014 • Pipelines in units for aluminum products are up modestly compared to last year; total fiberglass unit pipelines are down versus the prior year 16 October 29, 2015 Brunswick Corporation – Earnings Release Factors affecting Boat segment’s Q3 operating earnings Key Factors • Higher sales • Favorable product mix • Savings related to sourcing initiatives and cost reductions Q3 operating margin at 2.4% 17 October 29, 2015 Brunswick Corporation – Earnings Release Fitness segment – Q3 sales by region Region United States Europe Rest-of-World Total Q3 - 2015 % of Sales 53% 19% 28% 100% GAAP 14% (3)% (5)% 4% % Change Constant Currency 14% 9% 1% 9% Based on Constant Currency • Growth in sales reflects gains in the U.S. at health clubs and local and federal governments • Net sales growth experienced in international markets, particularly in Europe and Asia Pacific 2014 FY revenue by region: U.S. 51%, Europe 22%, Asia Pacific 11%, Latin America 8%, Africa & Middle East 4%, Canada 4% • All regions benefited from new product introductions Excluding impact of foreign currency translation, Q3 net sales increased by 9 percent; an acquisition contributed 3 percent to the segment’s year-overyear growth 18 October 29, 2015 Brunswick Corporation – Earnings Release Factors affecting Life Fitness segment’s Q3 operating earnings Key Factors • Higher sales • Cost reductions and savings related to sourcing initiatives • Unfavorable foreign exchange impact Q3 operating margin at 14.0% 19 October 29, 2015 Brunswick Corporation – Earnings Release Dusty McCoy – Chairman and Chief Executive Officer Mark Schwabero – President and Chief Operating Officer Bill Metzger – Chief Financial Officer 20 October 29, 2015 Brunswick Corporation – Earnings Release Review of foreign currency impact1 40% Third Quarter 2015: 35% • Net FX transactions 5% • Sales in foreign currency Europe 10% Outlook 2015: Costs in local currency 15% International Sales 20% Sales in foreign currency International sales % of Total Sales 25% Canada 30% Asia Pacific LA/Other • Unfavorable impact on sales of approximately $38 million or 4.1 percent and operating earnings of approximately $6 million Unfavorable effect of currency on sales is approximately 4 percent2 Unfavorable impact on operating earnings comparisons of approximately $30 million or 8 percent (includes the impact of hedging activity)2 0% Net exposure is about 10 percent of sales 1Includes the impact of hedging activity 2Estimates 21 for the full-year assume that rates remain consistent with current rates for the remainder of the year October 29, 2015 Brunswick Corporation – Earnings Release Tax provision Q3 2015 Effective tax rate - GAAP Effective tax rate, as adjusted* 35.5% 34.9% 2014 31.4% 33.6% First Nine Months 2015 2014 31.9% 34.3% 33.4% 33.9% Effective tax rates for 2014 and 2015, exclude any potential benefit from extension of U.S. R&D tax credit Estimated full-year 2015: Effective Book Tax Rate, as adjusted*, is approximately 34 percent; Cash Tax Rate to approximate low-teen percent levels. *Tax provision, as adjusted, excludes $0.8 million net charge and $2.1 million of net benefits for special tax items for Q3 2015 and Q3 2014, respectively. Tax provision, as adjusted, excludes $8.4 million and $1.6 million of net benefits for special tax items for first nine months of 2015 and 2014, respectively. 22 October 29, 2015 Brunswick Corporation – Earnings Release Cash Flow – Continuing Operations ($'s in millions) Net earnings* Depreciation and amortization Pension funding, net of expense Changes in certain current assets and current liabilities** Income taxes Other, net Net cash provided by operating activities* Nine Months Ended October 3, September 27, 2015 2014 $ 236.4 $ 197.2 66.3 58.4 (63.9) (61.5) (82.2) (150.6) 91.2 79.5 (7.1) 4.4 $ 240.7 $ 127.4 Net cash provided by operating activities* increased by $113.3 million *Continuing operations only **Excluding acquisitions 23 October 29, 2015 Brunswick Corporation – Earnings Release Free Cash Flow – Continuing Operations Nine Months Ended October 3, September 27, 2015 2014 ($'s in millions) Net cash provided by operating activities* Net cash provided by (used for): Capital expenditures Proceeds from sale of property, plant and equipment Effect of exchange rate changes on cash balances Total free cash flow $ 240.7 $ (98.5) 2.1 (13.3) 131.0 Free cash flow higher by $82.3 million * Continuing operations only 24 October 29, 2015 $ 127.4 $ (79.6) 5.6 (4.7) 48.7 Brunswick Corporation – Earnings Release Cash and Marketable Securities $636 $654 Main factors affecting changes in YTD cash balances • Free cash flow of $131 million $’s in millions • Share repurchases of $100 million (approximately 1.95 million shares) • Dividends paid of $35 million • Acquisitions of $19 million • Discontinued operations cash inflow of $36 million 12/31/2014 25 October 29, 2015 10/3/2015 Brunswick Corporation – Earnings Release 2015 Outlook – P&L • Depreciation and amortization estimate of approximately $90 million • Pension expense of approximately $12 million* • Net interest expense of approximately $26 million • Combined equity earnings and other income comparable to 2014 • Effective book tax rate, as adjusted, of approximately 34 percent • Average diluted shares outstanding of approximately 94.3 million *Any pension related charges associated with actions to settle obligations with plan participants expected to be completed in Q4, are excluded from our estimate of pension expense and adjusted EPS guidance. 26 October 29, 2015 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 percent of sales • Positive free cash flow to exceed $200 million 27 October 29, 2015 Brunswick Corporation – Earnings Release Dusty McCoy – Chairman and Chief Executive Officer Mark Schwabero – President and Chief Operating Officer Bill Metzger – Chief Financial Officer 28 October 29, 2015 Outlook for Brunswick 2015 2015 Financial Targets • Revenue growth of approximately 7 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 • Diluted EPS, as adjusted, of $2.80 to $2.85 • Free cash flow to exceed $200 million Earnings to benefit from managing costs through initiatives such as Lean Six Sigma, and by implementing programs to improve sourcing, supply chain and manufacturing efficiencies 29 October 29, 2015 Marine Engine Segment Continued Revenue and Operating Earnings Growth 2015 Financial Targets 30 • Revenue growth at the high-end of the mid-single digit percent range • Solid improvement in operating margins • Currency headwinds October 29, 2015 Mercury Marine Boat Group Segment Gain Market Share and Improve Profitability 2015 Financial Targets 31 • Revenue growth in low double-digit range • Operating margin to be up - approaching 3.0 percent for the full-year • Currency headwinds October 29, 2015 Brunswick Boat Group Fitness Segment Continued Revenue Growth with Strong Margins 2015 Financial Targets 32 • Revenue growth in the mid-single digit range • Slight increase in operating margin • Currency headwinds • Absence of Q1, 2014 favorable warranty adjustments October 29, 2015 Life Fitness Brunswick Corporation – Earnings Release November 10, 2015 Investor Day • New York - NYSE • Financial targets for the period ending 2018 • Contact Bruce.Byots@brunswick.com for more information regarding this event 33 October 29, 2015 Brunswick Earnings Conference Call Q3, 2015 I Helping Active People Live Active Lives 2 0 Im?io >ozoz