BC - Earnings call transcript Q2 2018

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Operator

Good morning, and welcome to Brunswick Corporation's 2018 Second Quarter Earnings Conference Call. All participants will be in a listen-only mode until the question-and-answer period. Today's meeting will be recorded.

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

Ryan M. Gwillim

morning. Good joining for us. you Thank

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

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

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

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

During referring information. our are certain Reconciliations accompanying to reconciliation to of the statements results. measures financial the this today's in we'll financial sections presentation, be consolidated non-GAAP of presentation and GAAP financial to provided the appendix non-GAAP

June the the in starting announcement regarding As reminder, are Ray GAAP a Sea purposes. second results of of the in XXXX, entire the Sea operations for reported business as a continuing of quarter Ray, result

exclude that noted. in adjusted, incorporate yacht as statements included changes sport this non-GAAP wound results figures outlook the all otherwise unless being Therefore, are these Sea Ray and However, operations release yacht and down.

For metrics more like and call a to see information, basis dated would as-adjusted on I these Mark. reflecting changes. GAAP to XXXX, which turn Form July now X-K XX, please the includes over the

Mark D. Schwabero

morning, Thank you, good Ryan, and everyone.

to that the half believe continue strengthen shareholder we long-term enhancements substantial will we and of and launched XXXX, strategic or marine value. During operational first increase of completed a number our portfolio

call morning. We will of throughout discuss aspects actions this these the

new healthy. grow marine and and successful of global continue businesses, market business, engines, unprecedented the for which the marine have a that will execution outlook exciting from favorable to demand accessories the remains on strategy We benefit outboard our parts to a products,

of of of the horsepower. advanced in models Our product middle production Mercury these of exceeding Consistent these and launch in began There XXX planning the Marine [XXX] to however, the second quarter, the completed products (XX:XX:XX) investments VX Shipments in in quarter half plans, XXXX, substantial engines is enabled (sic) as XXX strategy our will XX from demand in increases of company's far is total reach largest comprised VX engines quarter. production expected; its was history, prior our outboard significant as leadership products third expansions. the are run we with of by capacity for the rates by for recent expectations. full that significantly

which we on we expect executing capacity. to XXXX However, recently stabilize, Fitness, on growing top-line call. stabilizing announced the slight and to are partnerships evidenced focus digital plans market and margin increase growth that conditions Orangetheory aggressively performance with initiatives is on continue in operating first the into further plan gross is to our performance technology-enhanced consistent Apple, production acceptance Retro segment, we with discussed beginning resulted and with a Fitness quarterly our Steady will working sequential demand our the Fitness. and outpace by we In quarter against

on the increased year-over-year growth three as-adjusted with all revenue to financial X.X% by quarter in metrics segments. second Turning an basis,

on And a down revenue for versus later had business call. the items are marine more per of year-over-year, the our earnings the of business were business. up half of federal color X.X% impact were marine effective X% the marine but provide XXXX. some lower Bill Diluted share these will first of $X.XX Our earnings up rate. X% including of tax growth in in operating in Operating combined combined the up Year-to-date earnings X%, quarter. slightly

well-positioned with levels, the X% of X%. X%, comprises the which, power segments Whaler's exhibited the segment. based X% growth, solid recent continued feet segments capitalize approximately new the and retail, to for rates XX% although main pontoon in perspective rate seeing on Now, quarter leading year-to-date. premium the key SSI products fish, and Sea momentum propulsion. about again you and on data, categories. reported, I products Saltwater Weaknesses Aluminum, a fiberglass to will provide of year on for have the steady marine quarter, growth in on for reported SSI incomplete months the to market. U.S. products of transition Based preliminary when XX Boat which several persisted, data the feet with exceeded excludes year-to-date is been at upon average, fishing fully boat these engine Boston continued over to are of as XX growth leading increases states. sport cruiser outboard sterndrive products categories grew Ray growth this below transition in and Outboard second improvement,

is noted the June results. I industry data in not and several as as key this including have marine incomplete Florida, in recent been earlier, the months, Minnesota, stage SSI states, at captured Wisconsin, for season, Finally,

reporting that upwardly expected, expect we up as results to addition, results, reporting the dynamics. In industry comparable were favorably years, revised. the in results once months June past initial reflecting revised the be in will catches future Similar updated half that May first the

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

quarter, a Pro's sales Our these first boat Bass up second the by quarter and up first Similar were increased for Cabela's, brand. XXXX are X% Global X% of retail quarter channel unit the boat up for meaningful year-to-date. low the acquisition U.S. and retail our registrations influenced internal were for of over which results half X% second X% are to also unit the of XXXX. was

If in and exclude the of globally. would impact you low X% U.S. from results, these X% the year-to-date growth the be

improving been the for product low our have for the network trends actively upcoming look and in We dealer periods. and strengthening rebuilding

will many review marine against half in conditions in XXXX, marine the resulting also comments you includes poor We strong of which much was in like areas, markets. flat now in that current call. on of in retail On a basis, constant first sales our Europe selling year and to for of very more regional Europe, impact the Next, end year, boats detail a that currency discuss small on the from I the the revenue in retaliatory with my perspective XX% tariffs toward would the during a acquisitions, outlook for I reflecting weather excluding increase a shorter season. the the full imported U.S. flat are anticipate

a a As of reflecting reminder, sold Europe. in Europe a market large majority and Canada, in retail prior environment. versus our manufactured the demand are our improved boats year, In strong wholesale

XXXX strong performance we unit to end of slightly market remaining the at in summary, we slow to a the from is restocking Canada demand a serve more consistent Our than very orders tariffs. the XXXX, XXXX of the domestic full-year of share that initial Currently, from as to dealers commercial for the the that year, are half outlook up Québec-based continue half or continue to will the that within range be as On growth revenue, imported below markets. with but second markets in international by our post will benefit half this be demand sell the with range. environment market. wholesale X% substantially reduce guidance gains with boat imported boats expect to still in boats sold we In global Princecraft first U.S. the little well-positioned which remainder expect due brand, X% our the Canada to U.S. of lower balance, engine assumes from

growth will of the affected and increased year. revenue continue favorable the positively new continued market mix, share sales average the product prices, product result as Our launches outperform changes the in gains, to each by throughout

Fitness the Cybex X% which segment, to on the X% revenue our Fitness in in primarily of sales by segment product U.S. Moving the now in first lower currency the increased months, advance with sales basis. were available. new growth first X% constant six cardio of in result on of XXXX introductions, are half the down a

year. As sales the previous these having new year-to-date. a we second of with indicated the up positive in in experienced the quarter on half the products start growth X% will strong call, revenue European impact

high-teens XXXX. against the of in half is growth first Asia-Pacific very flat strong rate the

sales of on financial slightly to the of levels. the in performance. will I'll for plan for anticipates both additional comments growing remainder year for Our that And the resulting over from call the trends overall some these XXXX, turn our international Bill normalize now, XXXX

William L. Metzger

Mark. Thanks,

our sales increased segment For international as-adjusted the international regions X%. increased a Marine a combined consolidated grew basis, the sales X%, quarter, segments Fitness X%. basis, by second On X% currency while On in constant U.S. while adjusted sales X%. grew grew

in consolidated basis, a the our X% segment. sales constant marine U.S. X%. For X% adjusted increased international year, sales grew X%, sales growth On currency a regions by On grew basis, while the grew also international for with X%. as-adjusted combined Fitness segments

double-digit grew both we market sales by Engine sales in Turning engines, second in segment, outboard products. be and led in to especially by to performance Marine are propulsion higher Propulsion continues P&A X%. quarter our horsepower gains gaining share, where for the

growth expected increase especially given which acquisition grew operating this outboard Our and quarter engine will operating from which This announced P&A resulting internal Mercury's strong were financial operating point X% in XX.X%. the the again factors. in growth to due with P&A a is by with month, of weather in both registration already global in and reduction the primarily an Products consistent demonstrated unfavorable is profile of businesses. of data was closing start in conditions. year-to-date, X% slow our X% sales and to forward the quarter notable first increase distribution than more next quarter a bolster look We in products earnings registrations the Power consistent our margin business. margins solid strong number XXX-basis

were addition currency and In earnings changes favorably in exchange rates. in the by mix higher quarter, affected to sales sales foreign

smaller systems production moving favorable new which the our items the earnings in management forward. Europe, for unfavorable were XXXX, and capabilities modernizes comparison efficiencies in U.S. and Operating impacts management at plant P&A these warehouse associated distribution products reflected systems of substantially integration. also the in Earlier facilities with we anticipated new two warehouse However, launched outboard our quarter. ramp-up than

However, incurred additional seasonal during phase, costs the strong initial satisfy demand. to unexpected start-up we

X% down of constant These the Global category second this horsepower as the in increases for fiberglass led revenues comparisons. product negatively production. quarter evidencing increased increase a Year-to-date, performance Changes in Whaler, portfolio by for adding Boston quarter by were decreased content Mark reflected which selling Ray. efforts boats, spending reported the adjusted a of The both the quarter, growth in included in to freshwater channel impact half brands and development X% X% Aluminum Sea smaller X% second amount revenue year-to-date of X% and Pro's boats outboard Saltwater planned was consumers to at were also the against down posted which quarter gains revenues had as discussed while In fishing Boat similar The our increased strong top aluminum from the fishing across ongoing resulted higher business on sales, successful trend margin of and in promotion XXXX. acquisition to the increases changes production, quarter, low shipments first boats, line and for more boat X%. a earlier. in favoring benefits. growth the average declines. which segment, a included solid recreational in in grew currency distribution powered the wholesale Cabela's, U.S. pontoon migrate had we shipments gains wholesale by quarter including continue prices of Finally, businesses mix customers and – basis which with large Bass is periods. by affected engines, strong

response in In pontoons. inflation, prices addition, we have particularly raised to in

year, continued boats to on our consistent hand first are ended Our basis, anticipates season. XXXX inventories the point the retail half. marine XX quarter pipeline average that measured with XX-month at full prior-year this believe selling similar plan inventory on levels in weeks prices for in levels. Dealer We the growth appropriate trailing at of pipeline a the

of Boat the we dealers with to The inefficiencies are weeks with the Consistent year, assumption, being on boats segment's at approximately contributed inventory in due slightly unit XXXX rates assuming than hand levels, related operating this. part new are quarter the we to boat facilities earnings due outpace by tariffs. of for stocking introductions of below to QX lower at lower to be will full one For our to adjusted Canadian levels, retail planning performance. that also factor growth certain week boat wholesale were product primarily year-end XXXX this imported for U.S.

resulting sales commercial which XXXX. lower Shifting for the be the Year-to-date, and freight were around margins year business can year. at the targeted X.X%, and lower second segment, the operating of basis Fitness sales. sales points was margins up which attributed was of year-over-year launches challenges third slightly. These anticipate than operating complexities into were mid-teens to the higher of sales XX is For In half, quarter, including factors, our to X.X%, costs, products. manufacture, higher second adjusted margins warehouses, operating the mix. factors second in partly continue several for quarter. product an in and X%. continues we Cybex quarter, have X.X% due for are in performance certain reduction Global a QX adjusted cardio to cost points unfavorable with shipping our slightly from address cost stronger our which leverage of changes products higher quarter from domestic the for influenced new and Sales commercial negatively the was by of to grow shipment, of resulting mostly The exerciser growth in decreased Sales at caused than demand new increased the by to ago. benefits inefficiencies preferences. quarter were strength changing equipment, basis Adjusted by impact declines This from offering XXX well-positioned inflation increased initial Fitness sales sales moving the the as inefficiencies, and quarter cost to these related also by and challenges in partially to cardio offset contributed product. installation freight

factors XXXX. these of improve We the to expect second over half

of $XX from Our and Sea include sport recorded yacht the we've quarter to which GAAP We several impact as-adjusted yacht million, items, exit, mostly wind charges Ray results operations. down results. the in the the of related and excluded totaling integration restructuring, our

pipeline to also related We accruals business including in with this $XX inventories. discounts restructuring charges, additional sales of incurred excess to offered million losses to of for dealers assist

Products. costs to additional Fitness incurred acquisition to a including separation incurred field the announced the of an related And and Mercury campaign. product to we related Power Finally, charge business costs costs related

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

estimates Our expectations. the than favorable are year less previous full for our

estimates than that negative now than less operating favorable operating second in both on earnings the XXXX half are and of of expecting $X impacts consistent on with sales a XXXX. X% for exchange on This earnings full-year rates sales less effect and million. assume foreign We rates. implies These of remain current

with adjusted, and book $X.X share-based quarter the XX%, rate. second million in tax rate, Our was million is includes year-to-date net quarter second consistent tax resulting This as which year-to-date. benefits from $X.X of compensation the activity

continues Our due the impact tax to the tax rate mostly be reform. of lower than to previous year

also law between rate Our on based adjusted, full as change effective XX% estimated updated and to new additional of tax for as is interpretation known. date the which year, is guidance is to tax book and tax subject XX%, becomes

refund, of now is to the for a the Our expenditures tax impact reflecting tax favorable from planned in contributions. capital rate and estimated range, pension percent with along increased XXXX low-single-digit cash expected be deductions

our a cash review flow statement. of Turning to

treating as of For which well improvement XXXX, investments activities first received spending months $XX period, working new million in for includes cash was was sport usage. yacht $XXX costs the separation expansion in XXXX. flow, Sea mentioned million, operating the quarter previously cash Capital cost capital flow with $XX marine operations the the lower was will consistent provided included year. associated in first our year-to-date be for the metrics. by than in and and which down of our versus we those with cash capacity XXXX and as-adjusted Free free not products, refund greater includes half been as yacht tax earnings mostly six initiatives, up million This $XX million, and segments. the million last $XXX as have was Ray wind The first Fitness

that on So, have on the that I'd focusing impact items like conclude estimates for the cash quarter. with and certain XXXX, comments last flow since to changed P&L will our

depreciation Sea businesses. Ray other impacts Power We to projections well for amortization refine have Products our our as include the depreciation, and estimates of for revised as and

amortization expense impact of between from financing $XXX to any is reporting. for increase related and million $XX with million excluded discussed these of purchase Estimated we ex our items last expenditures almost exclude the the million now have $XX we Power Products, non-cash interest plan to as Products We accounting-related detail for in the Power entirely month. as planned net acquisition

million for which exceeding million. actions a is been end prior and guidance is versus $XXX the to Our $XXX of accelerated and and last has million guide de-risking consistent revised cash free XXXX, $XX our to of million of at $XXX increase pension estimate This now $XX with $XXX flow contributions includes million between million the to month. $XXX for announced million plan

be pension flow $XXX would Excluding $XXX the million. million and impact after-tax free cash contributions, of between

accelerating a of our the exiting contributions reminder, by $XX plans million. after-tax As lowering over into is XXXX funding costs

Moving is to forward, a million to the $XX fully up plans. requirement there exit funding pre-tax of residual

generating activities us Our increase and remain to flow, to capital the anticipated, expenditures previously year. our business investments versus cash Mercury continue of strategy. free implement expansion plan on with driving strong focused than at successfully Whaler and future Boston last capital will We growth have in higher levels capacity slightly fund units to which allow

quarter We execute million share continue in with year. our $XX to of repurchase the first against in the second completed program the half

Mark comments. our to of Power previously actions. we Products will with earlier repurchases turn back until as activities Aside quarter, outlook now to I from completed call the program associated and pause in continue XXXX acquisition amount separation the in repurchase third a already small complete the Fitness will later the we our financing discussed

Mark D. Schwabero

Thanks, Bill.

strategic growth, outstanding in another with XXXX outlook generation. flow recently targets plan our year consistent excellent revenue and remains with earnings generally cash reflects for updated three-year Our of

expect now marine demand. that our full steady – announced our acquisitions, and including of including and acquisition Fitness a We currency marine execution announced impact products, technology of in performance our market, segment, the to the strategy enhancements foreign product, M&A stimulate evidenced as benefit the global growth and X% new from recently We In changes foreign anticipate console year, of believe the line will businesses tariffs, from that introduced by new for X% exchange successful will rates. revenue we exchange the Products. benefit top we to of plan consolidated Power

pricing For to our and business in from combined marine in These improvement the margins tariffs should project anticipate enacted year, inflation, actions to In we certain products as the policy well margins. in impacts full more offset both a cost factors, new and related trade benefit for as with volume along business, gross than the other the operating continue we known leverage. we decline the as plan ongoing continue and to changes. Fitness

quarter, year-over-year our with our are comparisons in consistent last to discussions fourth However, earnings the stabilize our call. expected on

and and half second year, impact beginning from in the subsequent removes July, the comparisons in and July the of of will EPS tariffs, along sport dated negatively marine transaction. and the this exclude places referenced businesses. Products a these are to to effect And I As in the call. tariffs on which acquisition periods. X-K provided number Power accounting different Two results which a this in reminder, prior yacht all a purchase our mid-August of assume targets, of have targets went QX in against Form close Bill guidance the adjusted impacts related the results with slides, of on yacht figures the the the XX

XX% not amount dealer apply supply to engines on in along horsepower from for making China. which imported of tariff, implemented our the offset the this to base facility domestic XX will effects. sale U.S. these to sourced OEM is our P&A into part that tariff XXX even has China, products base. XX owned products with their our manufactures prices U.S. wholly the small is at X,XXX Tariffs, from to Note competitive partners though from to engines, tariff and a imported Japan First, raise of Mercury it China, those difficult over and tariffs imported subject place a Section to

request exemption, a exemption Government. tariffs the an the pay from will absent But these We U.S. successful we'll on imports.

Boat locations. the Section the the Tariffs the boats where tariff are their region than as Canadian tariffs. EU, result on XX%, into sales subject these of demand sold Sales to a boats from being significant the the is dealer. we not to resulting from impact. earnings tariffs, remaining million Retaliatory half of on and most these not that of The U.S. a on have implemented second tariff lower large a regions. in be these projected the to imports side, paid not tariff and half the engines impact. negative XX% to $XX XXX negative the of the imported products EU approximately million into Canada for half of for the engine by Canada two-thirds Sales manufactured comprises the EU boats percentage a importing earnings are within on On including anticipate meaning the imported and result is subject into the impact company for Overall, $XX with less sales second a sold is the accounting will tariffs, The with impact impacts

well and Sea account will that XXXX EPS in adjusted XXXX the guidance discussed with that into Ray other implemented This through $X.XX. This from as be thus range takes we earning of EPS full-year gone changes additional performance. as also opportunities the exchange unfavorable recent $X.XX expense business. of to connection includes cruiser tariffs projected transaction. of diluted It narrowing sport record-breaking benefits call. the Power Overall, another on also expectations this now expect in guidance still balanced earnings XXXX $X.XX. to $X.XX incurred rate are Products, risk we've foreign to boat our We by financing affect the far the and in and to I interest The the the this as incorporates just

range be in percent from the of mid-teen anticipate you quarter we and to over and exclude Looking if benefits the Products. growth range low-double-digit the low- to Power accelerate the in revenue at percent XXXX to third third quarter,

margin our approximately combined We QX expect growth each figure. compared XX% and our solid EPS for to XXXX adjusted grow operating marine to as business

to growth earnings Marine forecast includes ongoing segments, Engine our in Turning operating our revenue segment. our XXXX and

of revenue year gains for still we're with anticipate our lowering Power and still engines. the the Products, from by effects again to and for percent the revenue margin are engines, from slight Fortified segment. Power impact improvements benefiting the expected growth outboard for the second acquisition increasing target be demand levels we enacted the Products the Due new the our unprecedented margin half year and tariff tariffs, the expectations, both our the the Power range. but Products to outboard for low-teens acquisition would of Absent accretion we experiencing

investing development outstanding support to future and related the and financial capabilities call system outboard of from manufacturing our continue to to XXXX second going will demand year on aspirations. growth expand this this half. that in will We In Marine product costs that in were In achievement of segment. for performance to enhance be also abate capture we're and another start-up to to the success anticipate summary, and the Engine engines, growth the the launches investing discussed while research response substantial our

retail market to prices, in selling that demand as XXXX revised assumptions. average be the share discussed to categories. all earlier, gains, incorporates to as I target growth with targeting continued in This the revenue X%, Boat X% for the our Moving global pipeline growth now and our growth segment, well annual latest outlook we're on our

low- will market. behind We We believe Bill our operating industry's brands, succeed earnings which the the in also global the our of and to in of operating strength for anticipating performance. the the most improvement marine remain to are improved confident margins, mid-teens leadership, and We full addressed growth business year. many Boat product earlier, continue our the recognizable

Our had since outlook Fitness materially changed not call. our of the view segment last

our with revenue the fourth with low-single growth changes due percent shortly. relationship address digit XXXX quarter our in to quarter Planet performance growth Fitness, Our range which in exceeding third levels over plan projects I'll

quarter We operating while the expect year, strongest quarter, margin the was pressure discussed. comparisons last in our third fourth remain the quarter to in margins stabilizing have we gross under which as

uptake cardio console to recent expect The to as to earnings continues activity refresh capitalize we revenue as execute to retain its premium and connectible enabling product options look grow launches, attract new members help increase, of at and consoles the on the from the With improved new operators demand digital revenue a business club and benefit on sources. strategy.

have strong Planet We to of despite half their we and in continue user experiences. club and to goals the to to improved franchisees to operator with confident we are remain decision development, year, for the Fitness, partner the broader this its growth, support that a choices equipment second offer starting relationship well-positioned be and technology leading

Planet plan changed assumptions Our guidance. related to Fitness have materially not versus our quarter first

been I end to to XXXX. operational we reiterate last opened the and still come as our have more execute truly this several do I'd of first accomplish spin call. by strategic of a In to of enhancements. six like This eventful the I've months has to said with work already the complete when to against what quarter transaction to our we continue plan Finally, closing,

of strong for we that cash and believe excellence XXXX However, lost need we along sight – not result the performance, with have of operating in flow will and continued strong a earnings revenue generation. another excellent year

gains, new other to short-term expected significant moving unfavorable take executing committed of our I want that of will we to and as dedicated have in and the shareholders. these we this considerable business confident engine results Thank am XX,XXX all to delivering question Mercury to we improvements our launch remain for XXXX at demand our our you. paving momentous that, margin way introductions in growth second efforts beyond strong to and about take benefits some are but and are I'm everyone our Brunswick excited initiatives, and foreseeable and moving yield are product I success that's the for sales, the market the forward. forward. the highly that with And assure impact future. our call colleagues for implications, include questions. Our had increased value which I'll – listening strategy of continue team the to products deliver unparalleled management confident share quarter levels

Operator

now We'll our Research. from you. MacGregor begin David comes Thank the from session. question answer first And Longbow question

David S. MacGregor

I morning, taking concern question. Yes. Good for my of guess... thanks here, A lot and

Mark D. Schwabero

morning, Good David.

David S. MacGregor

bit engine creating Yeah. want that market, increase talk to inefficiencies. just within particular, you I and in outboard new just little morning. backlog those incremental Clearly, the and situation, and half around I could plant the VX second the doing velocity remedy a to you in how extremely your talk it's how capacity. through can Good well P&L? about I the you're expense – in wonder if burden the but fast products, the plants you business,

Mark D. Schwabero

we've a right up doing of part before, as plan. as we've initial a of that, ramping the of product we've as of assembly obviously, wasn't third our added part got now new – and we're those number process we're launches, Well, in which adding shift, actually – talked the incremental capacity partial also

matter, more this up. of just some a David, people ramping and of adding is and So, resources

within our we're capability, our suppliers. our ramping Some our and – facilities and into is from David. supplier capacity things But and working or capital or the on, clearly, physical that up of are it in either control

William L. Metzger

industry point teens the I'd has And I'd several out, – in thing XX last only David, years. the been that horsepower for trending the point low above the David, too, grows

second outpace half quite we Our bit. that by for had capacity planned a increases the that

half we aggressive I didn't call what – with went what in outpaced So, fairly the year capacity would of with has the second just we expansions expected. we demand and into go

David S. MacGregor

cost extra extra you on? incremental capacity? incremental or large Can putting that that associated that a day putting fill there Is shift with

Mark D. Schwabero

because... No,

David S. MacGregor

ahead. Go Sorry.

Mark D. Schwabero

No, – you train a an the not it's expense start-up as workforce. incremental it's

David S. MacGregor

Right.

Mark D. Schwabero

the beyond that, pays production and volume the But it.

David S. MacGregor

alleviation see we this do third the on some So, in quarter?

Mark D. Schwabero

Absolutely. Yes. Yes.

David S. MacGregor

Okay. Thanks very much.

Operator

next comes from our And Scott question Stember from C.L. King.

Scott L. Stember

morning. Good

Mark D. Schwabero

morning. Good

Scott L. Stember

Can maybe consumer put the you maybe as freight, the how as sensitivity through Can and the talk for – about inflation some guess. I price just there about is acceptance level? commodity talk far you increases you at

Mark D. Schwabero

out, that area. the And category. of has us in place in, the pontoon been at demand's have I are Yeah. material in would segment, that in the hit on, which which The we sold suppliers the strong have some very Many most running comment capacities. the inflation had put most

think I really demand first affected hasn't increase, price but So, market. people gulp, the like don't the on or it

Scott L. Stember

maybe And the talk retaliatory about in impacts just Canada.

nicely cut in. – or covers You the this very Are have the they're deck already or good, this some might about you pretty could again, guidance? in it what's half dealers you beyond think your that you that already concerned out flushed do start what what that in to factoring you're with of talked you about your guidance and year taking what back on accelerate in back

Mark D. Schwabero

able I we've out well. I product to in. went fairly we've weighed effect. it think tariff We had was get And think that the covered that before into

we pipeline ending. year we, think think I mentioned, taken in that the see as again, happen And we've the we've going for dialed by You'll down week there. a we is what to

Scott L. Stember

have right. all for now. I Thanks. That's All

Operator

And from question from James comes ahead. our next go Hardiman Please Wedbush.

James Hardiman

was the XX page be on Boats? guidance the sort takeaway. little I that maybe basis, morning. a ultimately thought Thanks Hey, that, on my a better call. with unchanged Engine bridge bit for bit little is a of offsetting Should your worse extremely my was core we helpful. notion from That taking taking good

guys are see to about you how wanted that. thinking Just

William L. Metzger

Yeah. that's I'd James. appropriate an conclusion, say

James Hardiman

And Okay. then...

William L. Metzger

out more a of little conclusion. from to bit so when maybe but core bit business, better a more Maybe the you that's – appropriate positive, a a start factor FX, an bit

James Hardiman

that all low telling little that revenue – at is this it Power to you've the the bit, what Boat core obviously say little single stuff basis And if high on a be but in Okay. how, guidance we've to to and double, Obviously, X% coming going that. know from Products guidance it reinclusion But core still would on the high got affects going Sea obviously just from we're Engine bit? on guidance, Sea got then sounds a into is Ray going down a I Ray, that that don't up X%. segment all, we're little is to there, dig tariff a me bit, from a going safe some to Marine single single basis you're there. is but like so high in that

Mark D. Schwabero

the engines spot part are to James. Yeah, first on, your about

the piece a Boat is that. side, the Ray boy, small piece On small, of Sea

the going year, Part things of what and at what changed factor some there the for numbers, all. parts is those as of of be is So, you we in of shouldn't on there talked to concerned view Europe's happens those revenue be the and into some James.

William L. Metzger

Europe Boat the the of and are the really Canadian two stocking number. big headline second the orders in half the in changes year

James Hardiman

Okay.

William L. Metzger

Very, Sea a Ray. of little result as very

James Hardiman

outboard guess, assume why I it at is sort concerned Maybe that wide and be the sort come X% should for X% to Typically, seems And you will of don't the what's to X% second, any we then on the the thought to Got the, below growth industry the saying of explanation in going continue I a to of X% and that? now you're it, and in it. was I of gap, is think numbers growth those like slowing see in call interesting. number. first, slow? between that there. how industry second discrepancy going maybe, shouldn't with X% industry that or the that about quarter And but

William L. Metzger

might data the are ultimately have to we SSI that James, would a SSI going in trying think Yeah, states basis get to ones the we of the looking a really some say what more little bit and that, what That's bit from reflected the where on we're state-by-state it's been time seeing outboard be, of a of that understand reported. I discrepancies momentum. fully excluded in when some spent is

James Hardiman

But you don't...

William L. Metzger

what because of I second think is the demand of is data incomplete perhaps than the more data outboard reporting. reflective SSI quarter for the

James Hardiman

you... But Okay.

Mark D. Schwabero

Cabela's mention, a us Engine coming acquisition. a I'd on piece with impact, channel just the the from acquisition add helps there's that we the Boat little – Bass on lift little a positive side James, but other but the there. little impact, actually of as low there's Pro's –

James. that's there well, So, as

James Hardiman

comfortable I'm number. underperforming, feel be that with also your assuming internal which to X% But data, seems own Okay. you

you the talked being that of about some Now, Bass Pro acquisition.

Mark D. Schwabero

Yes.

James Hardiman

But still the the would Why underperforming be is that case? – it that seems number. you're outboard like

Mark D. Schwabero

sure part. conclusion you the that little same not sure feel Well, first a Could I'm We more, comfortable at do – let that our the I'm explain numbers. are. go you about I'm James? very me to not first

James Hardiman

behind, X%. for Well, absolute SSI outboard is I I you own low-single industry that number the numbers basis mid-single just the but more on excluding... seems and an like – at have at, digits get even strong maybe internal really your the call digits it,

Mark D. Schwabero

James, I...

James Hardiman

Go Yeah. ahead.

Mark D. Schwabero

time At we're lot given more first a number we quarterly focused the season, when than James, industry. in we point I disconnects the first month-to-month, this for the the outboard just the of six-month of the kind kind where way. it at are look a the would some in on this you're quarter-to-quarter more indicative numbers probably bit X% through of half we see year data see going is of data. The historical of

James Hardiman

it. Got

Mark D. Schwabero

And think when north low what is, data we the Boats, excluding trending about are a the you number. bit of that of impact

So, we're a well we think up from very holding share perspective.

James Hardiman

maybe, hurt the if X%, the to to trade a I then don't know maybe be concerned I the at I question for with Or degree, war has that? be? growth why shouldn't guidance below And of of on or should activity to Okay. all industry about global year sort basis, X% but that a lower

Mark D. Schwabero

be when could is go that first said – we was still we probably and Well, of domestic the range. below, said the that back, within global, all,

want make I sure So, to that's clear.

going and over on of not content as be a industry, the as stay given The the Boat Princecraft all on – well. in it's over other fact brand of with Europe the And lot that, as subject the our production's examples some Canada in has our to part up is to that, and well – in side the production trade, already. domestic particularly largely Québec

what that's It us think is I in changes going going of So, up impact be. to know everything to exactly don't on. including the we yesterday. any daily think we've dialed

think as we got today. everything it dialed good we've can based I we know So, as upon

William L. Metzger

And, that are Canada sold that sold are in in U.S. James, the remember that the are the boats boats same

production time and opportunities there there's to in good very periods of So, and position. still be a shift for demand

So...

Operator

question next comes from go Baird. Craig Kennison from ahead. Please Our

Craig R. Kennison

of a remind can just XXXX? for so contribution me Thanks question. from it morning. taking my busy good Obviously, far. Hey, been earnings for Bill, you Power of the maybe rest the has Products year

William L. Metzger

I'd say look Sea comprising to way got what of contribution provided, – we've the remainder to it's it. bridge we is with we to have about in Yeah, at the earnings that the the modeled in Ray two-thirds modeled the what

Craig R. Kennison

dynamic this next your with see something community? has Mark, internally disruptive could or you. resurgence helps people your That that how that Thank been a for year, lot. And Sea that then, Ray with a is And the year? either dealer

Mark D. Schwabero

employees, how We're the some of but and us, the fall fairs. think of business very the of being general displaced in excited pretty those with we're them, by part I think models, elimination we're people Brunswick would remain in I – portions other handling because job the obviously our Corporation. of with Well, and of employment, The – that. large, stayed trying to to are appreciative that they're of have working find who

look and about going at talk I the that of get MarineMax the forward. Ray great with things as dealers all about there's we you that to do and lot if a think think reinvigorate, a dealer I staying. continues reinvention want the what's side we And partnership of it, excited have Sea with we

a if we're, we're in took in longer-term mentioned dealers the think a – the aggressive I as general, and being little short-term So, they're call, we're, take pretty move disruption their view, little again, through on inventory There's helping people system. positive. we

think we're I right the doing things.

Craig R. Kennison

Ray a you Have as of this? lost any Sea result dealers

Mark D. Schwabero

dealer not We have this lost through process. going Sea a Ray

Craig R. Kennison

you. Thank Great.

William L. Metzger

trying volume half taking product have lineup, the we're about lost focus business. to that more is lot them that XXXX. to And in resources we opportunities their well out as to around the well system, models XXXX. on for still replace in for sport the we of that very to if selling on, you certainly of I'd a only good demand very into and dealers and the should bode as moving There's into products the excited there's impact that second there of a going half lineup boats, of think, the cruiser The about new we're product have, thing second is comment sport Craig, think over

Craig R. Kennison

sense. makes you. Thank That

Mark D. Schwabero

I'd just one piece. just amplify. Craig, amplify I'd the

and I have I and focused positive more can more be think be of think those to both we're the I obviously, going results. focused, dealers think

Craig R. Kennison

Got it. Thanks.

Operator

ahead. from Please Swartz from SunTrust. go comes question next Our Michael

Michael A. Swartz

Hey, good guys. morning,

quarter. Just perspective did sticking Ray. piece the and an model, a quarter, ask our that's earnings out sport incremental cruiser around, from the that on Sea wondering so what reason us most I was second that perspective? a revenue of to quick into I'm And is the built had because clarification just sorry, in back the you Did business, break from not how the

Mark D. Schwabero

it in a there. couple wasn't are a not there. impact correct only big quarter, in our you the prior pennies so Michael, It's so Yeah. guidance,

in correct there. you're your so And assumption

Michael A. Swartz

it this Okay. pieces just help guess going that from the Power tariffs, your prior And there. of us to – operating reduction is core to maybe, and mid-double outlook understand much digits. leverage low-double year to then, I'm Bill, bridge I digits, I believe trying sorry, mid- from Products was Sea currency, that of How or, high-single gap. digits to the Ray operations? moving just versus or low-

William L. Metzger

in significantly Well, with Products projecting bit we'd new half two. coming leverage strong with you their Mercury. investment line improved between tariffs in the the our across obviously and products is well do muted first margin A lot as spending with lot do really actually of board, from of with expect at first the the operations a half A Power given a bit improved be that has has performance that out performance say big if reasonable I'd equation. positives, think is we're the And to versus more to to in manufacturing year-over-year more that as half. operating half, what accretive the profile. the back about we're But negative or is second

first the second year half from the second some into us well a our say going getting XXXX. benefits of of to the I'd effect we've talked really the really things and up starts done the perspective, in show half performance half very to So, sets product starts of then about

Michael A. Swartz

me. lot. a That's for Thanks Okay. it

Operator

question from Capital. Please from comes BMO next go ahead. our Johnson And Gerrick

Gerrick L. Johnson

Good Hey. morning.

going business your reading XX%, I dropped one, about looks yacht XX%. to and, demand? of a like because just stop the result sell really if am it? properly, and – right, So, is supporting I'm that reconciliation that weak is Or two, that it you're it Is

William L. Metzger

sale advance dropping would Gerrick, function ordering it's their a sale the and dealers in say, of I process. process activity more of the of

Gerrick L. Johnson

Okay, that makes sense.

William L. Metzger

bit it was It activity. a bit demand. to little So, was a stocking little due due dealer to

Gerrick L. Johnson

been are And released announced Bill. in And release you of and May, you. are right Thank or which products you've products Thank then the on the Okay. now? you Engines, you, with? popular? have Miami what between would – ones Which the seeing chasing the most traction ones most

Mark D. Schwabero

Well, it's range, Gerrick. the

horsepower, XXX As to from range both we're demand tell and would AMS and XXX seeing you know, literally I across versions. VX at you, the and that CMS level, the and VX

wouldn't... entire success had spectrum. that we've I So, across

Gerrick L. Johnson

Okay.

be... it would would answer the be So, –

Mark D. Schwabero

Yeah.

Gerrick L. Johnson

above. It would the be all of

Mark D. Schwabero

All of Yeah. above. the

Gerrick L. Johnson

then... And

William L. Metzger

rest of there's the actually in demand very product strong lineup the as still And well.

Mark D. Schwabero

Verados I our above as have been demand extremely to XXX, and horsepower going been don't going and strongly XXX up anyone the horsepowers well, to going has forget extremely want the well. And say, I was the just

and top So, we've getting end that there, have the we're XXXs new products very very well. seeing both lifts proud as products got of. on on been Verado But the we're them nice to

Gerrick L. Johnson

Okay.

the caused the Okay. Great. new the was And that inefficiency product then, plant segment, in Boat what talking about? you're

Mark D. Schwabero

be the products and and Lund, can the part the et typically new Harris, for on stuff going be at second model the XXX XXXX, a the had is of had Ray Princecraft, And Lowe, Sea on quarter, series in the that – then all we've cetera. that's we've just around doing just Well, things and we'd the XXX side. other cruisers launches so

all lots quarter in dealer. week and case second mean, the a collectively, that we'll had in always we're for side. will QX. It's next of stuff meetings – getting happened boat item to specific aluminum on and Lund quarter, the so the the start a happen Lowe after, that week – not just dealer I more have So, there's of ready things

Operator

Kelly Imperial next the from comes from George question And Capital.

George Arthur Kelly

Hi, guys. Thanks for taking my questions.

gives you just the that with very view pricing on how you clearly trend seeing. engines. engines, So, new Wondering you're if or that the positive first, confidence

do to to opportunity aggressive? look you you more think As an be XXXX, there's

Mark D. Schwabero

you're look most the positioned Yeah, of actions But not we it's a XXXX there's pricing the and continue probably of I when opportunity the U.S., product, we'll there, I one how any in on just it's our launching move But competition where second into to opportunities new continue for as at think I time. the there's say some that engines at through George. mean, we're probably – XXXX. outboard we Clearly, looking took and – against things think balance of some we'll could opportune the number quarter the there.

George Arthur Kelly

year? in What Okay. And have left? second this will missed in that prepared XXXX? remarks, I anticipate your your you paying be after And what's question, then, pension do may payment this but

William L. Metzger

It's up and to XXXX that be $XX would a George, payment. million,

George Arthur Kelly

Okay. Thank you.

William L. Metzger

And we're done. Yep.

George Arthur Kelly

Got you. Great.

Operator

I'll over now And session. this turn concludes question-and-answer to call our the Mark comments. final for

Mark D. Schwabero

today. everybody Yeah, I just want to thank for participating

know, strategic half been from and to look our all had to at standpoint are you the and the going benefits people shareholders. have this we all of particular puts of just it's but the a when at and going marvel provide As XXXX all this first to about accomplished been back that things transformation company in what's to really people truly of going a I long-term quarter, really speaks there's takes lots point, believe later a that on. that

XXXX a in actions intend and really we've really, has execute exciting against the The first the of you. half been Thank to taken fully time, quarter. we

Operator

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

Brunswick (BC) 26 Jul 182018 Q2 Earnings call transcript