Brunswick : Q1 2019 Earnings Release

Brunswick Corporation 26125 N. Riverwoods Blvd., Suite 500, Mettawa, IL 60045

Telephone [phone] Facsimile 847.735.4750

Release:	IMMEDIATE
Contact:	Ryan Gwillim
	Vice President - Investor Relations
Phone:	847-735-4926
Contact:	Daniel Kubera
	Director - Media Relations and Corporate Communications
Phone:	847-735-4617
Email:	[e-mail]

Brunswick Reports First Quarter Results

Marine Business Delivers Strong Top-Line Growth and Margin Expansion

Consolidated First Quarter GAAP Diluted EPS of $(0.42)1 and As Adjusted Diluted EPS of $0.99

2019 Full-Year Marine Business EPS Guidance Remains Unchanged

METTAWA, Ill., April 25, 2019 -- Brunswick Corporation (NYSE: BC) today reported results for the first quarter of 2019:

First Quarter 2019 Highlights:

					Q1 2019
$ millions (except per share data)			GAAP		Increase/		As Adjusted		Increase/
					(Decrease)				(Decrease)
Marine Business Net Sales	$		1,050.7		8.7 %	$		1,050.7	10.4	%
Marine Business Operating Earnings	$		114.1		20.7 %	$		124.5	18.3	%
Marine Business Operating Margin			10.9	%	110 bps			11.8 %	80 bps
Marine Business Operating Leverage			23	%				20 %
Marine Business Diluted EPS		$	0.87				$	0.94
Consolidated Net Sales	$		1,275.9		5.3 %	$		1,275.9	6.7	%
Consolidated Operating Margin			(2.2) %		NM			10.0 %	10 bps
Diluted EPS	$		(0.42)		NM	$		0.99	(2) %
bps = basis points NM = not meaningful

1GAAP Diluted EPS includes an after-tax charge of $103.0 million related to a goodwill impairment in the Fitness segment; please see page 5 of this release and the tables in the Appendix for more information and reconciliations.

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Brunswick Corporation

April 25, 2019

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"As anticipated, our marine business delivered strong results in the first quarter," said Brunswick Chief Executive Officer David Foulkes. "These results reflect the continued successful execution of our marine strategy, focusing on product and technology leadership, growth initiatives, and operational excellence.

"Our Marine Engine segment continued to post strong top-line growth, led by benefits from the Power Products acquisition and healthy demand for recently introduced higher horsepower outboard products. These sales gains, along with impressive operating leverage and margin accretion, led to robust earnings growth in this segment. The boat business reported modest sales growth led by gains in premium offerings, including Sea Ray Sport Boats and Cruisers, while earnings declined slightly. Finally, our Fitness business made significant progress toward separation, and reported top-line and margin results mostly consistent with our expectations for the quarter.

"After a slower than expected start to the marine selling season, due in part to more challenging weather conditions in much of the U.S., we believe that global unit market demand for the year will reflect modest growth. As a result, we will continue to execute against our plans and our overall marine strategy and believe that 2019 will be another year of solid earnings growth further enhancing shareholder value," Foulkes continued.

Marine Business Definition

With the pending separation of the Fitness business, we are again providing additional results, commentary, and guidance for the Company exclusive of the Fitness segment results. This presentation provides increased visibility into the performance and expectations of the marine operations and will minimize adjustments to guidance when the separation is complete. Therefore, when used, the term "marine business" means the consolidated Brunswick enterprise, excluding the impact or results of the Fitness segment as though it were reported as a discontinued operation.

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Brunswick Corporation

April 25, 2019

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2019 First Quarter Results

For the first quarter of 2019, Brunswick reported consolidated net sales of $1,275.9 million, up from $1,211.4 million a year earlier, with $15.1 million of sales related to Sport Yacht and Yacht operations in the first quarter of 2018. As a reminder, these operations were wound down in the third quarter of 2018.

Diluted EPS for the quarter was $(0.42) on a GAAP basis versus $0.99 on an as adjusted basis. Comparative first quarter earnings results, including reconciliations of GAAP to as adjusted amounts, are shown below:

						Quarter Ended
		Operating Earnings (Loss)						Diluted Earnings (Loss) Per
									Share
$ millions (except per share data)			Q1 2019			Q1 2018			Q1 2019			Q1 2018
GAAP		$	(28.6)	$		105.1	$		(0.42)		$	0.82
Restructuring, exit, integration and impairment charges			141.5			3.8			1.29			0.03
Separation costs			7.8			1.7			0.07			0.01
Purchase accounting amortization			7.2			-			0.06			-
Sport Yacht & Yacht operations			-			8.1			-			0.07
Special Tax Items			-			-			(0.01)			0.08
As Adjusted		$	127.9	$		118.7	$		0.99		$	1.01
Percent Increase (Decrease)
			8 %						(2)%
GAAP Operating Margin			(2.2)%			8.7%			NM
Adjusted Operating Margin			10.0 %			9.9%			10 bps

bps = basis points NM = not meaningful

Review of Cash Flow and Balance Sheet

Cash and marketable securities totaled $171.4 million at the end of the first quarter, down $132.8 million from year-end 2018 levels. This reflects seasonal reductions resulting from cash used by operating activities during the first three months of the year of $79.4 million, which increased by $12.3 million versus the prior year, primarily as a result of a tax refund received in the first quarter of 2018.

In addition, investing and financing activities resulted in a net cash usage of $53.7 million during the first quarter, which lowered cash and marketable securities balances. Investing and financing activities during the year-to-date period included

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Brunswick Corporation

April 25, 2019

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$88.1 million of capital expenditures, $63.0 million of net proceeds from issuances and retirements of debt, and $18.3 million of dividend payments.

Marine Engine Segment

The Marine Engine segment, which manufactures and distributes marine propulsion systems and related parts and accessories, reported net sales of $766.0 million in the first quarter of 2019, up 11.5 percent from $687.1 million in the first quarter of 2018. The Power Products acquisition contributed approximately 8 percent to the growth rate in the quarter. International sales, which represented 32 percent of total segment sales in the quarter, were up 15 percent compared to the prior year period. For the quarter, the Marine Engine segment reported operating earnings of $112.9 million, which included $7.2 million of purchase accounting amortization related to the Power Products acquisition. This compares with $95.7 million of operating earnings in the first quarter of 2018.

The addition of Power Products and strong gains in outboard engines drove sales increases in the quarter. Operating earnings growth was positively affected by these sales increases, as well as by favorable impacts from changes in sales mix.

Boat Segment

The Boat segment, which manufactures and distributes recreational boats, reported net sales of $373.3 million for the first quarter of 2019, a decrease from $376.5 million in the first quarter of 2018. Net sales in the first quarter of 2018 included $15.1 million of Sport Yacht and Yacht sales. International sales, which represented 27 percent of total segment sales in the quarter, decreased by 2 percent compared to the prior year. For the first quarter of 2019, the Boat segment reported operating earnings of $22.0 million, which included $2.0 million of restructuring, exit, integration, and impairment charges. This compares to operating earnings of $14.4 million in the first quarter of 2018 which included $8.1 million of Sport Yacht and Yacht operating losses and $2.6 million of restructuring, exit, integration, and impairment charges.

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Brunswick Corporation

April 25, 2019

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Sales and operating earnings comparisons were both affected by the absence of activity related to the Sport Yacht and Yacht business. Excluding this factor, sales increased, including benefits from strong gains in premium categories. Despite positive mix benefits, operating earnings declined as margins were temporarily influenced by less favorable plant efficiencies at certain of its boat facilities, due in part to new product integrations and related complexities. In addition, the boat business had elevated spending on profit improvement initiatives in the quarter.

Fitness Segment

The Fitness segment, which manufactures and distributes cardiovascular and strength fitness equipment and active recreation products, reported net sales in the first quarter of 2019 of $225.2 million, a decrease from $244.4 million in the first quarter of 2018. International sales, which represented 49 percent of total segment sales in the quarter, decreased 10 percent when compared to the first quarter of 2018. For the quarter, the Fitness segment reported operating losses of $139.1 million, which included $138.3 million of restructuring, exit, integration, and impairment charges, mostly related to an impairment of goodwill resulting from a re-evaluation of the fair value of the Fitness reporting unit, which was informed by significant progress made on the sale process, and $1.7 million of separation costs. This compares with operating earnings of $11.0 million in the first quarter of 2018, which included $1.2 million of restructuring, exit, integration, and impairment charges.

As anticipated, the Fitness segment's revenue comparisons reflected lower sales to value-oriented health clubs, along with softness in certain international markets. The decline in operating earnings resulted from the goodwill impairment, costs related to investments in product and systems ahead of the separation, other cost inflation and inefficiencies, and lower sales.

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