BC - Earnings call transcript Q3 2017

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Operator

Good morning, and welcome to Brunswick Corporation's 2017 Third Quarter Earnings Conference Call. [Operator Instructions]. Today's meeting will be recorded.

If you have any objections, you may disconnect at this time. I would now like to introduce Ryan Gwillim, Vice President, Investor Relations.

Ryan Gwillim

you us. thank and morning, for joining Good

On Chairman CFO. and this morning Schwabero, Brunswick's are Mark CEO; the call and Bill Metzger,

we that this expectations. prepared remind our about from future include begin these would keep statements results Before to in could Please like materially mind certain remarks, forward-looking everyone actual our call, I during results. comments our will that with differ

consider, please and For refer our factors the details filings release. on recent today's to press the SEC to

are our on documents brunswick.com. at these of All available website

During we over information. I the results. financial presentation, Mark. to are non-GAAP will our consolidated certain be today's call in non-GAAP Reconciliations financial would referring now financial reconciliation provided to the accompanying to sections like of of to GAAP statements the measures turn

Mark Schwabero

Today, markets. as into provide on to XXXX will segments third focus well outlook preliminary morning, up financial Ryan, remarks my performance, I'll good the flow Fitness our our wrap insights on XXXX. our well as view P&L a including Thank you, and quarter of as remainder Bill and and as with Marine on I then will results elaborate our expectations. cash and pertaining comments global everyone. the our on

with ability demand Marine Marine remains result market XX% and XXXX execute look strong seen U.S. we the second perform that facing our complete, with also cash consistent opportunities challenges are Marine in have we of half we excellent flow generation. year and believe of assess in markets this another and our will With of in the about As earnings to fourth revenue strong. and to along in Overall quarter performance, confident the international the expectations. largely season business environment our risks, despite in the year,

leadership product us to on position continues on the Marine growing to market. emphasis capitalize Our

all leverage through Marine, brands, of continues operating excellence. largest Mercury into Lund, Whaler almost gains and to share to results. And overall performance including continued and Boston strong this resulting growth Our our market business, report outstanding boat

not led and faced in we're to overall the certain challenges third quarter, disappointed which results. We are without our with However, a decline certain earnings. boat headwinds in quarter

As discussed quarters. reduced production our significantly levels from sterndrive/inboard in second boat in we fiberglass large call, quarter as lowered second we category on the pipelines weak over the response previously several last the meaningfully quarter demand to

moment. during our Florida-based affects addition, manufacturing In Irma In a we our a leadership, trailed continue as emphasis our and to our challenging will in which which successful volume market Despite more in development, are Hurricane disrupted segment, we solid. excellence And our and product these Fitness I'll this discuss evolving long-term in greater challenges, that marketplace. Fitness sales believe fundamentals our market expectations operational be operations. technology given environment, margins, global detail we remain September, results experienced both confident the that we Fitness on

outboard Third as by while and its where many business particularly a horsepower markets. retail environment, to market the favorable XX.X%. with $X.XX third earnings adjusted quarter engine leading demand outperform were margins quarter in to X.X%, revenue higher gains of to was gross quarter continues Marine engines, Mercury in increased share by continues XXXX. decreased for of the pretax diluted X.X%, leverage our Adjusted consistent EPS for XXXX

successfully for strategy throughout to we the steady are provide executing addition, continues growth our these the In businesses. and business and nature and the of year, recurring accessory growth revenue parts earnings

introductions, together strong boat aluminum a resulting business Finally, new market, growing performance. in product also of is with the advantage taking outboard is which

quarter we increased to in fourth for our execute repurchases to the quarter. to the continue accelerating valuation on our strategy million, response repurchases in third capital attractive $XX an planned the We quarter. In share opportunity,

these actions confidence XX% by this our Both in of strategy. increased we our to per In reiterate month, dividend our quarterly addition, share. earlier $X.XX

a industry Now X%. our increasing data in boat several at that period to X% are On registrations, half we outboard propulsion. previous in specific line to completed SSI year-to-date this with upwards which the relatively consistent more our the quarter, XX-foot boats in upon which the approximately revised with The engine of would I'll on industry anticipated approximately plan unit down and market demand sterndriveinboard declined with to remains expectations. outboard is points, which preliminary units SSI third year-to-date category year-to-date, our sterndriveinboard fiberglass provide the based activity year-to-date rate outboard second by On leading this call, engine of data including X% We retail, Marine segments, our perspective the grew Based are performing and as Fiberglass growth X% products of did lending for which performance is view outboard about first U.S. retail healthy, view quarter category by for states year, reporting, year their demand consistent XX% floor is calls. as be the X%, on volumes the the up trends. now in consistent the occur. while which XX-foot with shift on market, the our our other average range comprises X%.

September through boats potentially total the following for in to with reactions the a in related sales of the months, slight year. Consistent four we retail move rest of hurricanes, a to sales we of activity not impact U.S. trends. the indicate year. positive from an this While to market hurricanes retail XX% reporting quarter, is of approximately likely the through those expect market the and by as about the areas was take damaged the months with constituting in negatively believe result the resulting U.S. the The year XX in previous tailwind third timing retail replacement the end August up change was The of represent XXXX. for affected the market and September will and of also start have SSI affected does a we data XX%

share like Next, would our pipeline based retail I activity. data perspectives Boats on for to upon our inventory some

markets for improved the quarter feel very We've moving sales year. our comfortable in growth year-to-date. are noted X% X%-unit new slightly This trends. but performing comments we Brunswick. our up below is curtailed International second retail in quarter growth with target. when satisfy against third and headwind the shipments the with our the X% in the several than with retail We believe the in favorably consistent contributed The trend, SSI for model market and Our year-to-date a growth our that boats Global boat ability performance consistent pontoon better affected industry many X% our growth to boat annual for is capabilities trend, our date. is is production retail reflected being the and production in behind rate and pontoon XXXX, to of grew in industry quarter the consistent call with to were reported activity. to and constraints data the on in demand quarter performance overall we that X% with years the results the categories unit the our trailing retail's have performance years. X% internal prior after registrations into year-to-date This U.S.

our perspectives market reflected nine in a months rates. like exceeded and the to Marine favorable Next, Europe regional current first the in review I market XXXX, of performance markets. our growth environment would growth on Revenue

improved conditions the plan months unit to full the relatively Canada, Our nine boat year market year versus we first in exchange reflects anticipated growth a retail In environment. and favorable at stable wholesale for economic similar year-to-date retail rate prior as European demand in rates more period. the the and the

markets unit signs our be Our pursue regions, targeted East and solid engine will to positive while recover. has Latin with markets commercial Africa has to share full engines. Latin initial continues markets enhancing also of expanded American our and Sea branded presence capitalizing recovery, Pro to Pacific demand and distribution that demand remains market the the year continue and and XXXX international and Asia in gains assumes in the continue Overall, outlook market, the business America through In stable. remaining absent growth service Middle its Caribbean the expectations. challenged, environment been are which Asia Marine exceeded showing on

growth market as rates, benefits growth unit improvements as in overall reflecting dollars Marine well mix the in acquisitions. will exceed from Our recently completed

X% to revenue by increased excluding Moving currency on year-to-date constant a Fitness our acquisitions. basis, segment,

in quarter Our revenue comparable performance the was on basis. flat a

been invest, while the year, Value-oriented the traditional North clubs clubs to to have vertical markets and sales For markets and and American certain franchise grow commercial Fitness equipment declined. continue European have flat.

that to are believe traditional evaluate a change the they in to We as alternatives slowing investments clubs in exercise preferences. response continue

dynamics, competitive pricing, has products. been influencing Europe cardio also by in particularly performance Our which on are affected

benefit was quarter. end the revenue the at quarter the growth revenue of affected fourth in which third quarter, addition, In of deliveries the will timing the by

and Latin currencies the leading Asia Pacific improve has way. recover Brazil, particularly seen and strong growth, Japan, Australia China American economies The starting stabilize. as are to markets, with

introductions product new volume improve will margin Our and pressures. help

technology Our beginning third should future benefit differentiate in customer-solution year-over-year the quarters, to and sales introduced fourth comparisons, product improved earnings segment's new cardio portfolio and products, in the and quarters. with products Fitness

and price into the expanding across branded all product will points. introductions will overall major categories XXXX product increase Fitness continue Life Cybex and by refreshed growth the and opportunities New base and

comments on to some performance. the Now additional over turn I'll call Bill for our financial

Bill Metzger

Mark. Thanks,

X% perspective, Marine increased both sales and Year-to-date, X%, and From basis currency our combined X%, while XX%. Fitness X% segments outside X% up constant on X%, and the U.S. U.S. By X%. Rest From in Europe constant sales sales XX%, perspective, a Marine a sales X% X%. World region, third a on by the the Rest combined U.S. constant increased consolidated of outside our consolidated a on on by respectively. increased For the by in segment were respectively. X%, U.S. region, basis. increased currency sales were sales by increased and a Fitness by sales Europe By increased currency a of in the while and segments World sales basis sales up constant segment increased basis geographic quarter, while sales by geographic by in currency by increased

increases and reflecting commercial and Asia to engine benefits by the currency the favorable in on segment, in to from retail were of sales a sales benefits On geographic X%. increased, acquisitions. the the continued Marine outboard from for World category Rest compared horsepower Canada. basis, performance higher a in reflects strong increased accessories. Europe sales This engines business constant Turning engines a sales excluding and repower third XX% growth a Engine growth quarter. driven products. particularly Pacific reported markets, in launched gains saltwater, product targeted basis, share outboard environment, recently primarily and and parts demand Growth XX% was U.S. reflecting perspective, year quarter prior with our up by in From and

sterndrive quarter sales the affected unfavorable Third the by demand trends. to be environment as shift slightly continues engine retail outboards declined to and demand global

expanded sales increase we Netherlands this some strong continues opportunity. to markets, delivered capitalize of growth our distribution outboard a in service our to growth As and accessories The successful of believe propulsion, the outboard a this strategy, capabilities quarter, business are the channels including and portfolio, well of engine execution positioned recent Taselar, with international market Lankhorst international on parts in transition businesses Mercury's to solid and acquisition Germany. during reflecting distribution based the that

points introductions. was launches, product businesses. prior-year favorable by growth quarter. X%, to down margins advance foreign control growth-related operating engine efficiencies the earnings and with investments sales, exchange decline in in of operating basis were of benefits cost technologies, the adoption reflected new add in increases along The which higher and margins by earnings driven slight impacts. planned operating Mercury's in product to XX increased growing improvement continues New at from these of The new was versus XX.X%, a operating

pontoon comparisons earlier currency XXXX. nine reflect migration production sales segment, were For increased hurricane in impacts than boat comparisons aluminum comparisons Boat with boat basis. and offset segment, the also selling XX higher margins in the basis the These by are year-to-date. basis, quarter by international in revenues periods fiberglass a increases. quarter Mark by X%, decline impacts decrease the U.S., top represented wholesale and in X% increased for the aluminum market XX% outboard which X% by previously third quarter with a XX%. products. strong price affected levels of and constant include which benefited In XX%, continued X%. year-to-date mentioned normal and higher the customer In on than referenced outboard with Sales the strong X% combined fiberglass effect shipments boats. the sales over X% revenues up call, which adding was up sterndrive/inboard large and of up growth growth which This to the business, higher decreased grew year-to-date. of include by Europe from operating more XX% is and solid solid on over Changes sales which boats of the growth points sales in our months, benefits boat sales the large the prices planned benefits engines, the horsepower third Global also Both decreased of average mix are declines content sterndrive/inboard and above more to line from

the trailing past anticipates XX average pipeline year-to-date weeks basis, boats of above slightly retail in inventories relatively on Our years. hand, prices growth quarter full XX-month at trends. selling is plan the three Dealer which measured on with a year consistent ended

volume, which in pipeline are sterndrive/inboard believe dealer very appropriate markets for given as our small shape unit year. excellent remainder comprises of exception of the of a various in boat business, our that the the as fiberglass overall amount sentiment and the growth well expectations the categories outlook we and With large and levels

inventory with For for are on XXXX, we prior be to the levels. year-end consistent hand weeks of planning

appropriately is with the a units the observation will implies full to for This that year, year-to-date this very clean the third done that to slightly very expected slightly rates growth end the growth. below the A an be excellent with years, to completion key each from growth than rates. growth provides units of outpace higher historical is aging. addition, wholesale chart with quarter. the model in five slightly year-to-date This past data expected quarter, unit inventories year in for close look wholesale be retail In have at sized retail the over next performance job ending we which at pipelines the is and the growth of year,

as to are into million consistent including when finish the very The Boat be decreased compared the sales mostly by mix, to to positioned the earnings selling in expecting unfavorable and year $X.X expect We well quarter in discussed associated resulted third this previous sales segment's impacting change with the comparisons operating well factors moving previously X prior year. hurricane. XXXX season. with an Show The Boat as resulting inefficiencies, years and decrease cost earnings the from from operating manufacturing

offset than also is acquisition clubs months, For in overall where ICG were X%. challenging the more segment, reflecting demand more margins, margins growth the sales prior-year flat than margins basis increased as-adjusted cost-reduction dynamics from from other to XX.X%, in basis, year-to-date operating benefits reflected points to completed our adjusted million, lower operating markets mostly in XX earnings XXXX. in by Shifting softness Sales operating at to changes XXX from was which XXXX. were an X value-oriented which resulted vertical by clubs decreased and being operating than unfavorable by mix, and comparisons sales competitive Fitness global as basis and sales and lower the efforts. traditional certain sales Revenue which On X.X%, $X.X resulted in points The with earnings markets. international lower offset decline acquisitions market quarter. in gains

For the last as were margins XXX lower X operating X.X%, basis months, adjusted than points year.

affected less In million, operating than will that by impact is affected sales discuss plan. comparisons I X% lower having which our approximately positively foreign was on performance. were positively by were the quarter, earnings third slightly our the $X than comparisons Next, currency and

foreign earnings, the remain sales for remainder estimates current of year These comparisons impact exchange assume Moving for that rates consistent fourth are the XXXX on year. with a rates expecting favorable to XXXX, for slightly the and operating we including full favorable quarter.

adjusted effective This first Our XXXX. compensation of of book the as tax rate which net all resulting benefits substantially was million, from tax share-based XX.X%. includes half year-to-date activity $X.X of in occurred

Excluding these XX%. rate just the effective for year-to-date tax benefits, was our as-adjusted period under

which reflected Including tax effective approximately XX%. months, rate the the compensation full the tax fourth expected for X effective For benefits share-based guidance. recorded to first in planning be of tax an XX.X%, we is rate is quarter, are XX% in our to approximately year the

to benefits function result a amount, drop-in is tax not rate our the year does the full tax credits of previous in of does effective to tax any not lower remained note EPS full EPS would The that include I Our incremental year additional remainder and for pretax tax constant. earnings items year. like improvement excess in the rate benefits excess also like guidance. the the relatively guidance benefits while

Finally, we cash to rate are our projecting range. percent to be mid-teens low the tax in

inventory result which than operating our seasonal cash higher as was increases offset included increase of in to an by an expansions initiatives. accounts new first receivable flow product-related payments and weighted and million, of of the from nine Fitness products were and $XX by is million. $XXX used Cash million flow earnings and the payable XXXX capital the million. Year-to-date, balances more spending primarily are increases usage. continuing XXXX in capital $XXX in of statement. primary changes million $XX reflects accounts of activities investments accounts generated and biggest accrued as the prior benefits lower offset certain segments. our totaled $XX spending payable for prior were review Net by million accounts by of free a in capacity in Capital accounts versus Turning nine The months, of in to capital an more in higher heavily related impacts increase inventory $XXX in working million. and $XXX against the months as partially these accrued well an receivable prior year, in Capital increased higher year working included of increase year the changes The was capacity cash a The and business partially of expenses slightly $XX Marine expenses. which million. as offset million the first notes timing our $XX than increase working was $XX by million,

with that will XXXX. I our notable items. some conclude certain focus more items the and for will P&L me comments -- impact Let flow cash on on some of

approximately reflects approximately the reflects the year full million for outstanding in activity XXXX, $XX the plan of of for repurchase shares which quarter. and million fourth diluted higher-than-expected third share quarter Our $XX.X

which slightly addition, I In rate, earlier. a anticipate tax book lower discussed we now effective

continue $XXX listed assumptions flow of largely Also from are key greater which XXXX flow million. cash are than flow unchanged here some Our the free be to to project cash call. in the cash July metrics,

execute continue We program against repurchases our and the year-to-date. in repurchase with quarter $XXX $XX to third share of million million

not any plan share we as repurchases While repurchases attractive balance does against in of XXXX, our capital will additional to additional contemplate an investment use view continue other opportunities. repurchases and

our strategy the as improve reflects back continue and XX% will action quarterly increased earlier turn month. also now is I of to $X.XX and capital consistent increasing objective to our comments. confidence flow with our ongoing the to outlook business. We our cash of dividend share performance a our This call this Mark dividends earnings in

Mark Schwabero

with Starting rate consolidated is our growth year, revenue, slightly fourth which XXXX Bill. the X% quarter. Thanks, rates of in plan for the reflects approximately growth in lower

our perform we generate continue collective as Our Engine year. solid anticipated, continues businesses remainder segment line the over of expect Marine the to to growth Marine top to and

the not the to year, but with Gross same Operating the modestly growth. leverage margins be decrease percentage consistent degree mid- to the for as third down fourth with percentage for to year-to-date high-single-digit operating range. also anticipated growth, sales report our quarter margin Fitness segment We in to our quarter plan are comparisons. will

continue to Despite businesses boat sterndrive/inboard impact This along fiberglass year strong year to be $X.XX. the quarter. performance, reflects our our expected our and third cash certain the another guidance excellent are in We adjustment in headwinds, XXXX Fitness of market and our these and faced lowering flow quarter large the headwinds view $X.XX quarter that earnings third fourth will generation. to for results with is revenue to

of the we're repurchase to any challenges decrease EPS a earnings Looking of plan, This M&A affect full facing fiberglass three-year additional part segment target target large businesses. revised as our EPS these growth $X.XX continuation the a as XXXX to to but will does communicated XXXX pretax Consequently, mid- adjusting to plan. not $X.XX, market diluted represents to XXXX, our boats anticipate activity. from share adjusted of sterndrive/inboard continue and we Fitness our expectations the activity, year consistent the the reflects high-teens with to reflect XXXX and

Investor We're additional We will to we plans and call. and range executing our commentary we're against on shareholder strong have expectations ensure to targeted or month's returns. January and below are these on Day to disappointed developing next exceed deliver our 'XX at continue very meet initial earnings that that and adjusted

Engine Turning to earnings our growth continued our segments, and the XXXX revenue segment. plan reflects operating Marine in

for growth planning to for X% in we're be to X% the range. Specifically, revenue the year

as engine and continue to sales is and growth. upgrade deliver expected invest continue in we drive segment to our distribution that capabilities exceeds growth Our expand to to and market products the manufacturing new future

initial We to outpace that our planning this long-term margin business improvements operating anticipate for estimates. continue

on product expansion. us strong with and continued and will operating along to incremental margin drive businesses, enable parts Our cost accessory improving emphasis development new our efficiencies,

now Moving outboard in sterndrive/inboard continued year-to-date margins and outboard reflects and the boat reflects growth businesses, to fiberglass large will annual performance segment, decline in fiberglass year, the in that the quarter the our revenue category. the boat anticipating to operating fourth X% our for the for X%, XXXX quarter. year-over-year which decline to growth aluminum We're strong along which improvement the an modest fourth targeting we're be with Boat

improve, environment the operating boat reductions into to will large continue to not Consequently, associated retail large and hurricane headwinds impacts. ability business we goals margin has weak the to our for likely impeded product pipeline demand fiberglass the sterndrive/inboard our sterndrive/inboard the related fiberglass the expect segment. In materially do meet partially short large due of XXXX. the for to term, performance Our boat

revenue XXXX projecting be lower not anticipate certain X% reminder, repeated, quarter -- year be demand we adjustments of this our of the segment previously Cybex in will line 'XX and as products do to segment, due and business performance this Fitness manufacturing excuse performance the range will recorded strong benefit improve this fourth will improve launches. me, the growth improvement shut first half slightly realized. we're efficiencies improved we benefits the as efforts to also our product from anticipate And will from Sales with warranty Boat for product results, be for margins Brazilian growth. weak in manufacturing the the in new in X% third fourth new of benefits with from a of down performance quarter as do the in down, quarter along comparison improve traditional declines the not international announced timing versus of cost-reduction will warranty In are operations. reflecting the with year-to-date. decision -- year-over-year products Operating to the to are year of earnings the However, quarter in the the however, fourth business with

certain expectations several due For mix our weaker-than-expected XXXX, and condition have markets. margins meaningfully including sales a in factors, challenging competitive more to trailed in international shifts demand,

As it for this will that short-term adjust growth prudent believe into factors business. these we XXXX, expectations remains our persist to

tailwinds conditions which both the anticipates performance. products or market benefiting our of technologies, the improving However, provide would business in regions long-term segment's from segments certain outlook new and to and

taken actions $X including segment's headcount of in which a result million. annual fourth an the the savings in reductions As performance cost in in XXXX the quarter certain XXXX, from April, reminder, will announced Fitness and benefit

ongoing cost our that throughout organization. benefits additional be Additional manufacturing including as Lean from new Six the products from capacity initiatives also savings and will are introduced projects Sigma realized, benefits our

opportunities business, to as for long-term of the believe prospects by particularly the embrace technology. growth the We continue evolution this in clubs enabled

long-term our with believe is delivering on overcome I will both challenges, stabilize in this and to growth XX,XXX market to opportunities. are order margins, a deliver the comments to to margin Our us I'm believe a and then of a growth new the Presented a we domestic on close successfully and and with with we in will challenges, and performing continue confident of Fitness of executing few I capitalizing that With XXXX advantage the expansion such our would the grow strategy its the the while international beyond. and our strategy good streamline leadership expectations strategy made business profit adjust objective opportunities like us, and have Marine we dedicated marketplace. to capitalize colleagues Marine markets that season will product its that line behind portion reminder opening. in team are strategy the our management achieve in and long-term Brunswick our goals. and committed that in

be to next record expect plan, through for investment We your discuss will questions. our covering will increased happy take to we'll exciting York, allowing our hear hope finish we to that, join XXXX and opportunity to business And three-year in the plan positive with continuing XXXX, strategic communicate In Investor able the well from New more offer positioned on deliver leaders us be momentum, to community with and I through on be how to XXXX learn X, you they beyond. closing, earnings excellence. our initiatives and and where XXXX value Day Tuesday, operating the the more November shareholder

Operator

first comes [Operator Instructions] Tim Wells And our question Fargo. from from Conder

Tim Conder

itself Mark we the I of seeing that, large or that QX, any that doesn't in year? to appear your repeat sluggishness? the from you outside that into therefore, that in bit. not could But that next that wanted anticipate then, would would a boats, slowing the of It to And this, here any business manufacturing large any ongoing looking break what's is are of the disruptions but just if question. that impact a Bill, can parse should you your boat way there take versus be from whoever QX boat -- wants down And been way ask impact you a little directly. brands in guess

Bill Metzger

Tim, I'll take the questions.

Outside first by businesses, The of time. the outside where seeing we're the and in trends all business, last I strong boat fiberglass our -- the would say, one happy others. of we're still the activity led Whaler, take first. the I'll pretty business with of outboard-based very at boat market present large -- Lund are

to versus the Boat for you Just being reductions. of hurricanes by impact boat on other a about XX%, to thirds the two the of impact was quarter boats third size affected large metric impact that if we was trying the segment hurricanes, remarks our and of the for you gave prepared comparisons due third -- in the the the big

Tim Conder

okay. Okay,

Bill Metzger

were would some impact loop the I Does that -- about responsible the around expectations of we size shortfall about performance a sit was for of expectations volume of quarter, help the where say, little of just portion the hurricanes, and the and versus our on and kind the shortfall. against hurricane Tim, think half under as our of other to the the was close for Fitness

Tim Conder

Okay.

a here back you get that as that say So, -- guess, then you I on get business that would forward to forth and look replacement retail and basis, so we was should the going here, normalized in -- boats period, postponed with boats. August, hurricane else and of the outside there's really see on really and both large the impact September we nothing maybe

fair a the basis, concerns. that characterization? continuing large just a on So, it's Is boat

Mark Schwabero

that's fair Tim. Yes, a characterization,

Tim Conder

Okay.

done needed Fitness here. seeing took guess Cybex you So her that integrating brings in everything charges, market and after was competitive then, you were what to situation, restructuring there. and you core Obviously, the I us even club then, further which

what to here seeing within be you're that. you through are shift market? club from us pivot a that core how in walk maybe then what secular And So could looking

Mark Schwabero

part the kind the think of let the I latter question me go -- forward. Well, of from

things particular, has get see you has As flip we've really a when volume that into nicely, up side business, the good leading gross but or pretty demand. Europe, but global margins business on the anticipated I about. The more are said, shortfall down. that's we Asia to flat in the mean, impacting largely is without the just been the the less fundamentally, we talked getting, been Bill

technology, the really it and elements operating things the to restructuring going about cardio been new the under new that'll resources But about the and kinds first and So fourth excited we're quarter of the into the things deal around with of new excellence. products been on and really the Cybex we've really what great One, of and we're doing and we've products part in out other on quarter there? reallocate we've products of midst getting has around feedback things brand. bringing happen this, line cost been of trying the in are and the been then and --

to So, is the I things and are and stimulate and clubs other we that that products of the going into or some have that of are cost capable traditional value sure sure other new think a refreshers see line, it's and get help really really combination some are but mark bringing technologies the in the have the doing to making things others, going relative of hitting part to upgrades. them out products replacements our we're making to they're

Bill Metzger

which you made And of Tim, the the InMovement third completing and on quarter Massachusetts that we're charge. -- to transitioning that just we've your process in the Medway, there question facility, were of here if associated from to quite to that's some announcement The out are discontinue related in follow and took bit the of the now we of business, then up get charges up. restructuring majority manufacturing that. got with our remember, charges a the we going

doing So, manufacturing charges decision costs with InMovement. we've got the footprint. took got of with ongoing connection get out and that some we've Plus, some with in of to kind our we transition associated residual what we're

Tim Conder

does potentially that type Fitness you government, question, product on in are hospitality, current help can If the how going that portfolio do that that can you core And that to back things Okay. you hospital in your take what market? clubs shift the to growth new you development of new getting here or the original participated? then if now with in occur, And rehab we business? apparently permanent last there a forward see then. down the going to normal a seeing, are related have think maybe it's you Or broad adjusted

Mark Schwabero

we're Tim, to think normal. a adjusting, don't new I

dips we've the out to equipment I will this that technology changing of think as products the and side, our than and market. pieces take if of out a technology think with the is we thousands the resources there, been really that of bit change, of we're within that get fair adapt a product And the hundreds a that comfortable. and much you going to of solution there get from new got the term, positioning ourselves we're changes and can a we're just more And within to products if allocating share reality environment. new we're people And that on longer things relative there's look -- the you I always market.

is, things just is thing the multi-family I'd bulk general, what out the majority that hospitality, are education, club. is traditional said and flatness fine. with point the In other of dealing we've really markets housing, those the The like

Operator

King. from Our comes Stember question Scott ahead. CL from go Please next

Scott Stember

-- further make I out the impact hurricane. I the the sure just understood from want parsing to this. Just

that other related saying of here were of hurricanes your least the half were ongoing at guess, just the or cutting what for just production. for the to, you or just for I that weakness miss about to that costs You we cutting of piece third expectations you're versus the where boat was of XX% one half the talking compared two the third business, the that said looking and

Bill Metzger

Correct.

under -- half impact expectations a about and between of the was. EPS the So, it's our hurricane little was reported where gap

hurricane. that two it, on in correct if to just that it's one that the impact And sales, was about the you're segment gap, with question. XX% it's of about I both call of the revenue related direct to, XX%, So, $X.XX cited the on $X.XX the that I range, guess, be third a third then

Scott Stember

guess, really that of out, said I were assuming is I in breaking just that, than is this Florida else, then guess, this anything And correct? your impacted. further Irma Hurricane more XX% you so that sales

Bill Metzger

separate you've I'd No. pieces. this, to got say Scott, into two

First part by the market months we the is were last The year four over the with were has do is retail affected going the and retail of ship to our and manufacturing by to comment of operations the what produce more hurricane. affected hurricane. what able to be

the to they're is Part -- But to who right the you and of had thing. think about XX% of to retail the had of to or last the what think it four XX% our back two year to the come get that impact the over strength. months way inability the kind day produce to So it. that's year, sort then be start operations as two of full about might product separate on evacuate, a a remaining very of people up because it of we was took us

talking here. we're what really that's So about

Scott Stember

you did you up will then be? caught be to you mention where And all when with production, need

Mark Schwabero

We is essentially, quarter say our and for production comment that didn't when. But running schedule. were expectations we the the and had

Scott. catchup's the going fourth from 'XX, a into clearly, So little bit quarter carry to

Bill Metzger

Although position Boston get the the add where of the outboard probably can that, businesses where I'd caught that just most on fiberglass year. up were in affected. end largely our place they to by Whaler They're the a

'XX. the get other operations up tied not get yacht probably caught to going flows The two anything sport into not -- were with. we're business. We're to going to that's That

Scott Stember

business XXX% taken assume constraints that quarter back up? sales had your in the obviously, the it Is part it. picking reflective fourth quarter up, of? clearing fair you Got is pontoon with in that, be cared to supplier that that the the of in retail guess And should of I

Mark Schwabero

Yes.

pontoon As behind we're us. in little think we share comments, only place we down the been That's Scott, a said has in probably area. our in the

the of with on business. growth So market other exceeding our essentially, the continue we'll areas rates the

Operator

question David next Please comes ahead. MacGregor go from Longbow from Our Research.

Brandon Rolle

for This MacGregor. on David is Rolle Brandon

could Northeast, First about growth, growth strong. the all talk be on knew other sales the maybe and you impacted had regions some just there, of you some But hurricanes. the of like saw markets? and by question very to We Florida I retail was was rates coastal the going the the in

Mark Schwabero

And be fundamentally, the of going particular this strength we've hurricane we that upper better line The and reporting know all comment rest a SSI tell to date. start we've doing of laid My rest the Texas, still talked would statement caveat. prior what's in the Midwest. rest in you But how are probably hear, and give I'm it's And the the much market the a were the Midwest we're to this behaved reported particularly year and I of on of with we've you year, about more talked would lagging. around there's expected. in believe much in broad out performed I the about Florida, we little pretty side. as the really -- but calls. a got that upper From been we've lag as than talk pretty the Louisiana comments, specifically, regions to the how we

Brandon Rolle

where business, And may touch a I had want not the product Okay. introductions. as maybe for would more with to know on is on new well? the out investing maybe also, a you but in just engine XXX engine include you refresh, product those talked coming this, horsepower, introductions Yamaha about new

Mark Schwabero

Bill about through But there. at yet. and talk talk But it's our we're I we And it get we're significantly secret, we'll 'XX. no, I get no plans opportunity the in can't product excited investing when about -- program. product really together the Well, about a more 'XX really

Bill Metzger

we to want can't talk it. talk about We about but it,

Operator

James next go Our Please from comes from ahead. Hardiman question Securities. Wedbush

James Hardiman

all down great I a the want but did don't horse beat job I dead the Certainly, third had, like impact you coming about are $X.XX down boat question, the no as coming or little it think So, is what with for about result you Fitness we But versus then the the $X.XX that? look think similar the down, XXXX. I maybe talk it. thought you'd hurricane, I'm than about quarter. as segments. of there's seems is previously some of guess, previously the you bit there still as previously And outlook to fourth a guess, boat also a assuming impact good to all hurricane Is Clearly, quantifying as way XXXX quarter result Or I'm assumed. a we engines impact sort in issues? versus assuming other better to the Fitness that new coming and, there? is I a hurricane -- there's

Bill Metzger

XXXX sport the conservative boat view fourth third equal a sort the in a say, those, in there business of environment, amount in the market into are see that's fourth probably period if to -- to retail. probably a into starts is to to of to and back market that little we're on stuff going -- what talk not it challenged. little sort with And we're of preliminary comment, we our on But equal QX. what effect view continuing seeing our where business quarter the yachts probably bit some is boat might more the prudent be going your -- that at view the of the a the And what about biggest of some more little view, revenue that also I'd I business Yes, little margins we're at going James, boat favorably, a where our shipping an XXXX. an here to stabilize one until but be gap little production the And sort below better. think there's view more we to had of that some 'XX. is to of the that today going retail call. wholesale on bit to and levels Fitness the contributor you of of perhaps for In 'XX growth Fitness bit the say, view view bit quarter of of -- And market's that's But on shortfall to when a the come operating there we're -- reset change of the a wholesale for this doing. planned kind be see be seeing do yachts, in to bit other an time below really large we're initially levels less and to, James, operate behaving of that going in little in a XXXX we July at bit we're is big -- the and probably continue would that's

hurricanes driven our part just back. have that by that things and is we not seen of fact come view of So, the

Mark Schwabero

that a view want the but 'XX clear to said, James, And that is, it's comment $X.XX other I'd strategic the acquisitions we we is you one I view. was $X.XX to talk that yet have -- next number, to of strategic year's add any our completed. never everyone when that and want not into about the make sure When we we to I about -- remind talk XXXX, we

it. done. when would because I $X.XX, beyond it we've have talk $X.XX we So, $X.XX, about as to number, that acquisitions would some clearly, in strategic The have want acquisitions nothing a already that's out $X.XX, some to -- it's well. point

James Hardiman

I'm assuming are if still we to is still But I'm -- just include meaningfully it's at were we so that? acquisitions, the $X.XX Or clear, less something it than to $X.XX?

Bill Metzger

No. bolt-on normal would I against to you mean, to we're wouldn't if activity, necessarily just executing James, $X.XX. $X.XX but it improve it get number, incrementally the

Mark Schwabero

correct. That's

James Hardiman

beneath And to being when Is it's the wholesale I want you then just that big clarify, it. in I'm right? retail, about big talk boats, boat assuming. side, on the Got the just

Bill Metzger

correct. That's

James Hardiman

Three more... Okay. months

Bill Metzger

very, dollar very on we've some fraction do very, what of right. to and It's on a we've is with tried boat -- wholesale what small retail are thing pipeline comments tried units. with not a the is The a our sorry, our units to of unit issue, what this Yes, issue. do in goes big reported

So, at them you really look to separately. need

James Hardiman

it. Got

few new that that's a turn maybe, why think about -- this? months theories that that, all digest big maybe more And issue, I we've theories consumer another away, happening. new X making months help? tax any boat as to the got reform about as to what's we to could as So, ultra-wealthy you've think had Any

Mark Schwabero

going we're the going I to give just who XX. sure to XX that's don't ultra-wealthy is two I'm there. One, category of to But the not think answers. buyer I'm clarification. James, from there's a mean, talking I the Well, be...

James Hardiman

taken. point but ultra-wealthy, as it see I

Mark Schwabero

yes. Yes,

James Hardiman

than me. about that? than Wealthier A me, how lot wealthier

Mark Schwabero

to I taking -- in I'm don't for it's about -- could things -- there, but of could feedback deals. close the so knows just impact, be longer think And not The dealers from any more be some and but it that out it's environment things more anybody around could number segment, sure. Washington longer it's it's have that not customer trades, not sure there's around that it's are that a is in

Bill Metzger

of end James, market's next of clearer where of a quarter Sea selling to real Ray November, view important live a point where that's for the the two we'll get Show. out I -- towards their I little the mean, the fourth type. that boats will weeks, us yacht this is here Fort and some that will the within there consumer input bit fairly the give That's going in Lauderdale expo going. should generally we're hold obviously Boat show have

Mark Schwabero

now dial 'XX was Investor And be and talking the it in. call, to really going in we'd mean, there important out thought that's advance about but of the typically, January get us it on I we to Day. let number the

Operator

next Michael question our comes Swartz from from And SunTrust.

Michael Swartz

Just quickly, booked quarter wanted -- have the some engine of ask the of their issues terms in the as well to have the the business revenue? corresponding when but some on I hurricane. in had boat on would with we of Did that any they impact

Mark Schwabero

count a an guys Well, sold yes. to -- be I the sale. boat engine for mean, the got sales, for a it as engine it's boat intercompany to

environments the were total, and other impacted. So, and that equation places things only impact, again, mostly the it's is less portion in of other small a in -- part goes weren't markets some than of business then there's and XX% Brunswick, that engine of minor all but to

will Whaler up don't really hurricane. the have the So them Mercury and engines engine had as business boats some very catch little [to have stuff, from big impact we've in yet]. But the it said,

Bill Metzger

did -- a we've or little because deferred bit and that either some so. area we felt have the was P&A in operations lost Florida we Although probably business Houston distribution it, that of got

Michael Swartz

the year had a the Okay. side, back quarter the or typically second was to you the you just good of sense Fitness it visibility quarter. pretty that assumption half in I and saw happened happen kind I'm by Because time July, And under late you then trying got of of the give to guidance. on what maybe when just typically, the get during

changed what better So really understand it changed. when and to just trying

Mark Schwabero

clarification, XX visibility days get Yes. the on a business That's all said what about to visibility. is we've that The orders. we we in maybe terms XX have of

horizon. to Now we Y. shorter or get say, in actual some plan a orders, will X refresh open strategic But view that of it's terms they somebody

live, that's on. really areas. and the third would being at didn't the that geographic I July that you point really quarter degree -- at visibility. being we But of maybe So, was when were seeing, piece the that's early be. we those But started where when really the deals point one and was of in impacted in happening from literally, specific the we orders the really call, -- thought we going have third September of But terms of you're to market, in to we competitive as it tell that's a visibility they stuff it's conducted, looking going margin I started terms we were that the a equation, price not probably are seeing And in were mean, quarter.

Bill Metzger

would a I of August There's September when change is July, only marked sales that the out the levels. Mike, business thing And really ramps the September the year. end point is then pretty between up the and for

expected. side, the just decline occurred. we So But our we to that's It And year. of a some got the already guidance say, stabilize. more originally the had challenging than into margin environment bit this, sales hadn't when we the plan -- incorporated lot a little had on I of for maybe expected and would really margin

Michael Swartz

had that just to Fitness like you've on you final shift sales. fourth revenue just quarter clarification third think the way third then the And comments some Are quarter about Okay. of and of said from of a timing around talking any And the some question, would made organic then, growth to to quarter, It the sounds the for look similar X%? I Fitness fourth all-in quantify that? you growth year-over-year in business Mark, you quarter. or the growth

Mark Schwabero

talking I growth. was organic about No, the

Bill Metzger

We really in so acquisition Michael, QX, any don't organic. have it's impact all

Michael Swartz

shift? clarification on any then the And

Bill Metzger

the of isolated Europe for If to X% get point down would And points portion growth our a you a It to Europe. look, year-to-date. business. two it to a comments of reason was the we why was take

Operator

go Our from comes Joe James. from Raymond next ahead. Please question Altobello

Joe Altobello

it there to we're there. growth since I Fitness, changed impacted high for this maybe start I change But that in the of Is sound the like long-term business? I'll XX-ish your landscape competitive about outlook change digit clarify doesn't talking quarter. and single here. that margins long-term just want Obviously, Europe any guess, outlook. in it's to percent

Mark Schwabero

view don't don't of I I changed be it's Joe, -- margins -- think nor of I where our our long-term where can would think the we expectations think it business to. get

come spend view help. pushed that as that meeting. part all has the it and I'd going this to time it that a think I in laying perspective, technology we'll it's still same out little from lot here more a But than less to of think we the don't fundamentals. is the bit. longer-term believe are kind happen strategically, fact encourage I fundamentals on we believe two things working of exact in frame. the around a Day we're out the Investor will the weeks, right you business part the other But And to time

Joe Altobello

the is was the since predominantly sync you in guys which It price sounds you cardio, pressure did on just like that saw cardio refresh.

a that curious was I of was all? launch success at that reflection if the on So,

Mark Schwabero

No.

Let's be real clear.

You're was production, cardio, anything not on was it current all new really correct, with products. on to do but it

new around were has out existing that while product been for not In was and a more feeling we that fact, on, product. it there pressure

Joe Altobello

comes flow your seasonally. is understand fairly a And big cash that in implies the change just It us fourth from. no there. quarter, where free guide, lastly, unusual Help pretty which number

Bill Metzger

bit a number. there. some improvement Yes, things earnings in fourth quarter timed is it's and the get got, embedded of obviously, CapEx a you will some working better three Build you've little to reverses differently and capital. Those

Operator

comes question Please Greg Citi. go Badishkanian from from next Our ahead.

Greg Badishkanian

-- pressured margins the talked terms that on how environment that year? of about, could challenging you've of say, since, the the that changed beginning global has in Just side, sales the just and Fitness let's you

Mark Schwabero

shifts have the of Well, some customer there. buying terms year, that things. in in between -- that's earlier I well as competitive It's of market, the both in product we're the dynamics I product the we've some changed became think saw but year. makeup the operating a as on the year, the the mix through prominent Europe gone over we side, of going of Greg, we environment couple some the that as went in through as mean, there more

Operator

Our next Research. Please Northcoast from Woolf from go question ahead. Seth comes

Seth Woolf

belabor flat. see was drive the the it business. I new about how the to would at beginning ask in we point, acceleration. want the but don't wanted to Fitness the ex year, the business of products I acquisition, And was narrative you the Fitness

additional Now we're about talking challenges.

not for softer? of kind not bit does market? then that digging you this the So, having new are if products then is impact it envisioned it function that the business mean have that through a still Or further, the did would And or the an even new little the a wasn't impact? be products just weaker of

Bill Metzger

probably in of QX new in the QX early launch. QX. was a year, And the say, the more it's ramping product ramp-up in into going heavier up a I'd little on timing probably and Well,

of probably getting. the and year, It's in nothing slightly we're perspective. there's from the feedback success a So, shifted about early probably it's new product the from ramp-up the

about the when now quarter, going new we'll So, through building That complete talking it ramp-down I first to not the pretty of of the not through much by remind still new. the everybody from what the you ramp-up be And existing pudding. will you the going right of through you and And is we're frame happen time end we're product. an the product. -- going, then start instant really people to to that's announce of get the want it

in reflection a we're things about seeing market in what So, a of It's isn't just new the reflection our talking the we're of marketplace. product.

expect earlier, new the stimulus I the we to that potentially again, wanting would have something seen to that product remains stimulate said be in some And market. But to, demand yet. a would little

Seth Woolf

quick, Okay. picture business. just on I real guess, the bigger question Fitness

commentary historical square but of in high a seeing, market With this used seeing single grown the be of pressure, do -- the we that more with to mid-single, business, margins to accustomed some it not we've digit the margins how business. the we're

robust And a the me. led that longer saw we've feel just the term? remind growth the you improvement; drivers help You lot can it for you -- just of mid-teens in think to then margins of some us that target about about us seen? why still that's good And

Mark Schwabero

Yes, got I -- normal we're want but to digits used operated. go business has where be It historically clearly, calibrated business XXs, back, Seth, is low that into, and sure teens, our is make said properly. some products, I and it to high we've that we're the And operating. rate before, help that have to a the have low some cardio. a at say, place strength has that XXs in business than mean, and that obviously, we'll the margin double I'll growing wasn't in up of lower the single was new fundamentally, this strength cardio there. But things changed, business what faster

low you're are as some where historically. and see you as has from historical I on well. think mixing been versus and doubles to that some of some look it, was a it Customers back has Seth, the impact perspective. that single That business has -- So, getting high at go But to bigger. going in down impact

Bill Metzger

faster dynamic be well Day, hear where mix, desire about product customers Seth, forward, think embedded referenced the there. part with larger our Mark of add to markets our listen and etcetera, on that only there. are might continue positioned extremely competitive to about And you that I be you the thinking look I'll is as what that as to think a growing you've is very think side. start I prepared thing is, things also the the plan in operationally cost is to there's -- comments got But -- than Investor customer And we we everybody on within I else. to a

Operator

some turn to call this time, we back concluding would like At for remarks. the to Mark

Mark Schwabero

to going couple just a I'm things. Yes. of echo

time us and for attention everyone in thank the today. First, joining

the to to want The laid fundamentally, but -- going year make back of disappointing full this for record another the put people that be direction we year a what it's us quarter out into second point will I people is, sure and understand, view as earnings. we've remind

really we the together November So, business. still are right XX and is speak that think strategy from about days our it's forward when look really we're will And on on play flows this. X the more to some strong think now this I -- strategy, I about all to cash out

So, thank time today. you your for

Operator

This ladies concludes participating, you disconnect. may and Thank you, gentlemen. conference. you today's for and Thank now

Brunswick (BC) 28 Oct 172017 Q3 Earnings call transcript