BC - Earnings call transcript Q4 2018

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Operator

Good morning, and welcome to the Brunswick Corporation's Fourth Quarter and Full Year 2018 Earnings Conference Call. All participants will be in a listen-only mode until the question-and-answer session. 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 Gwillim

morning. Good joining for us. you Thank

the morning CEO; Dave Brunswick's this Bill On Metzger, are and CFO. Foulkes, call

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

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

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

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

in reminder, of As the continuing Ray the for results business GAAP Sea purposes. being a entire operations reported are again

non-GAAP and exclude and noted. unless incorporate Therefore, over for otherwise Ray sport adjusted, turn the that been this as to in outlook now I figures presented call Dave. would Sea results presentation, wound yacht have the all statements all down. like operations to yacht changes However, these periods

Dave Foulkes

Thank morning, and good everyone. you, Ryan,

was shareholders. quarter a year Our our adjusted consecutive very to record earnings a which performance fitting and ninth end strong of growth EPS ambitious fourth XXXX our to delivered

Our market successful financial steady results continues execution strategy. succeed reflecting of global Marine business with in a the to marine our outstanding our Marine

acquisition. the Products support and leveraging growth Power investments our organic strategy sheet capital to funding balance to included Our fund important accomplishments strong

increased our year dividend seventh We plans also for funded our and as a to pension legacy our row. in remaining prepare obligations in XXXX we exit the

and the to segments The in both the some XXXX parts strong business planned. propulsion from the like perspectives on from and sales had for market. with accessories. earnings prepare to process the share we Finally, and of separation marine segment record I’d Fitness the as with contributions a progressing Engine our and portfolio continue

growth improvements. in performance introduced engine the by platform propulsion expansion horsepower both new this earlier and accelerated XXX Along was continues outboard XXX outboard migrated The with XX% to business XXXX. top-line The to products VX second which due sales with to led in by of capacity half margin and year. for expansions, be increased demand growth boats in other the more over in high content. as plant high engine horsepower Enabled customers larger VX to

will portfolio opportunity year late an Additional leverage and in XXXX. capital XX to in relationships outstanding the underway to formidable achievements. product even Accessories market our portfolios. of Products, to increases projects XXXX with addition resulting in strengthened sales already leading solid starting growth Power result are XX% of margins basis to The its enhance production also Mercury from which The contributions full engine growing Parts offering. and capabilities by accretion performed its XX%, business boat operating broader leverage, points, The provides business OEMs net with purchasing which aftermarket position and further operating in segment margin operating well all is Boat revenue across provide

recent very our to reached market-leading results year to at fishing led forward margins encouraging Cruiser range. the well Boat the operating since which continues our performed it brands with XXXX for business the be is bottom-end Whaler, Sea from from is revitalized which boat has profitability its improvement XXXX, that looking to while it the of in aspirational Boat in this overall and the Ray’s reported brand billion performance. important XXXX segment including the favorable steady the pontoons note each $X.X $XXX Boat With delivered operating occurred last it’s million think segment earnings of to contributing portfolio the augmented brands X% the Lund, segment, in by already Sea keep Sport and and is momentum ways shows. Ray, premium there with Boston for Harris in I The when of of group revenues. target segment’s

programs by from growth revenue was Engine revenue combined in Looking solid Revenue global half Europe, with constraints year the and from delivered supply in the propulsion recorded factors. XX% colder our the in segment Boat limited down but season, gains. sales on reduction each around in basis. influenced across X% the were segments, P&A. of regions products also In In was manufacturing segment affected early a achieved start strong U.S. regional and on tariff weather fishing currency tariffs Marine dealers the to resulting globe annual The comprise capacity as performed market growth The sales orders announced at of off-season results by second with all the with U.S. XXXX. business by book and overall The strongest against growth performance. grew a that Canada, a well also ex a a was fourth acquisitions goal season. both imported growth was growth constant the less in represents with portion industry a tariffs certain contract arrangement. selling U.S. as and XXXX Boat of our Note performed in line of in due strong the X%. retail quarter of for orders to of in pontoons earlier engines retaliatory than growth Outboard on softer of outpacing increases XX% half from shows in dealer the in and sales unit retail impacts with which imported U.S. selling boat expectations industry prompting boats very XXXX, we the continue of industry products cover than which more that aluminum and wholesale boats with Marine the QX Canada. time The

market above. engine in horsepower share category, with continue grow picking up all outboard XX to and the Mercury Although

U.S. while our internal fourth X% fourth XXXX. strong inventory up declined boat at unit pipeline Looking sales on based data for by versus quarter retail a in of registrations were the X% boats, global activity, retail quarter very our

as which discussed of the throughout brand results, on registrations of retail XX% U.S. and If year continues the for the in these quarter. to were globally Bass acquisition by Lowe influenced this you we’ve exclude Cabela’s, up X% be the Pro’s impact

in impact X% globally. the our increased registrations the are Lowe, by in for by X% For year, generally line initial of and rates and the expectations excluding growth These figures XXXX. U.S. industry with full

in categories by bottom and pontoons. Global steady influenced trend Boston and line international supportive from range. value is to shows feedback remain XXXX, our and Whaler Marine premium trade performing growth, as Sea Ray growth growth of will has products in which of lower ahead anticipate we demand XXXX boat and the with X% confident the with U.S. to markets Looking than Early policies. including retail X% better view was unit towards market been targeted of tariffs growth our in

involving comparability transitioning aluminum year-over-year re-establishing brand unit Our XXXX recently growth new longer from will competing been actively boat acquired be Cabela’s, from affected engine has by Lowe Lowe as no an by manufacturer. distribution. many is a dealers, also figures the issues signing benefiting

Fitness’s options with quarter with work separation in including business with by maximizing as on Fitness end to the spin Turning segment, a to first business. the of expectations. the for or fourth portfolio completing consistent is November quarter other as advisors the our of was shareholders. of The attention while continue practicable on our this thereafter firmly we value the track evaluate from the remains to an our filed mostly promptly and outright our sales XX Form process

flat Sales as the the Planet remained fourth success. and freight launch gross including oversight to the comparisons business the from long-term strong cardio declined year with challenged the strategy leadership continued executing position For projected throughout due the new the refocused previous discussed year versus although year, to is our steady of Boat against we and products. XXXX. and factors to dedicated revenue Committee Fitness was The margins in against team sequentially, with this be the new quarter to

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

William Metzger

basis, business XX%. points with had $X.XX, the fourth Marine EPS was with close as on combined up to quarter up fourth an The operating operating was Starting and Marine Thanks, quarter, XX%. almost in margins of adjusted versus X% of basis increase XXX increases XX% XXXX. earnings Revenue a Dave. segments diluted

the the grew quarter impacts increases fourth with adding at outpacing Marine continuing Ray. basis adjusted sales For functionality company X% adjusted of solid the adjusted Adjusted improvement and our segment Fitness well margins new in XX led XXX segments. and X% a the the engines on demand into horse upon with a business. segment favorable Whaler, XX% pace while the in up boats point exhibiting a The the for full operating more as consolidated very growth in brands both XX%. XX steady segment, organic product versus consistent down as XX% up the increased continuing were the quarter. for a quarter XX% and operating rate. the add gaining margins almost strength against as power XXXX value operating X% point from at due Boston continued Mercury’s their as basis a by leverage P&A group’s XX% prices to basis customers basis the Power rigging versus Boat adjusted of horsepower with increased in changes Harris to engines, segment and the outboard The content XX% increases higher These sales mix Marine adjusted grew Engine of confidence higher in points sales lines. boats. quarter a reflect separation in over quarter Pontoons The XXXX giving well growth Wholesale Revenue migrate to XX% X% of operating and diluted The led on customers the Marine from for a outlook In just leverage Products content quarter. in Marine the the grow sales were to for margins as XX% us more performance premium adjusted Boat earnings up increased robust for and XX% controls of earnings was to the average in operating a increase XXXX continues by Sea by to by unit increased contributed products in third as business the by an full revenue year the increase revenue leverage strong sales XX%. ASPs fourth increase and sales with to operating Adjusted with acceptance increase had which and the in operating earnings operating basis, and trend fourth portfolio Marine the year. $X.XX, year, with of also XXXX. in EPS was

pipelines hand measured on cost boats trailing weeks basis, In raised ended we months of the year prices response which on have addition, retail to discipline over that our prepare increases. management. in is at consistent as a ongoing XX for our with dealers Dealer selling retail demonstrates year pipeline We boat prior are appropriate XXXX levels shows and upcoming season. pipeline levels twelve believe the and

For we XXXX hand for of lower inventory year on at levels. planning end are end to year weeks be than XXXX, slightly

a basis consistent operating XXXX X% of along lower result As margins branded including primarily costs and segment Commercial related transitions, due expected, inventory down freight Fitness was on sequential sales to in improved inefficiencies. factors products. were and for mix, availability. net declined inflation increased declines other cardio the to to cost sales which several to Cybex sales with due the changes strength versus Fitness mostly product revenue adjustments, but product by Gross Planet increased in relatively

by fell earnings $XX million operating result, XXXX. versus a As

trade reflect also $XX results further a GAAP charges million. recorded have from of adjusted excluded integration items million, been results. which quarter We in included exit fourth as impact name quarter of $XX.X and totaling impairment restructuring, which the our several Cybex of Our the the

connection We wind Yacht also million $XX operations. operating to of Products $XX.X recorded Yacht down restructuring in with of million and Power of charges purchase we related and the recorded acquisition, accounting cost In losses the the amortization. of exit and $X.X million Sport

charges related incurred Finally, to business Fitness we to separation other non-recurring in cost. addition

visibility greater in are to of comments providing the we outlook will business. adjustments and the presentation the at guidance Fitness Moving separation outlook excluding pending to Fitness minimize the segment, into with This and the Marine separation. operation our performance provides XXXX,

declining significant the However, continuing sales a from plan reported growth completed of changes global rates of margins X% in absent basis, climate, a macroeconomic until in strong anticipate operating gross XX% basis both operations operating approximate of percent. expenses and benefit an our XXXX XXXX improvement Fitness. include completed, and acquisitions. overall results on in high operating including in versus teens GAAP revenue will We earnings with slightly growth percentage On range X% reflects the our to this new

XXXX $X.XX for of share. guidance reflects excluding our Fitness the in business on per an to Finally, range as basis adjusted $X.XX the

ago. will the during we at Fitness for view the XX horsepower business not guidance expect outboard higher XXXX the few the to year received Marine tariffs is within the anticipated provide Dave since has the a first to of our at after weeks full than outlook Incorporated growth quarter, on look into growth project changed Fitness to expectations for consolidated slightly guidance basis, the share. year the adjusted provided per operating XX guidance year $X.XX engines the to Marine be section be we details the for more would EPS If the the and the which earnings $X.XX business, business end impact revenue our his business of call. we XXXX For XXXX full of the a we range. results for of exclusion on update on range including

dealers business agreement Marine of reach been Marine EU the and of wave earlier. on assumes tariffs million Canada to with XXX% tariffs the The of four on to an the have million plan of the $XX XXXX million business. million wave retaliatory X, to for impact previously rise no over including announced exports impact tariffs and assumes U.S. China March from impact our the XX% discussed an minimal into or Dave a assistance which have to absent program pretax would incremental China This $XX administration still potential incorporated three related estimate that boat on impact of that Canadian will tariffs $XX Our earnings anticipates or $XX XXXX.

estimated $XX million it XXXX. million impact business, relates Finally, as the China $X four to potential the pretax an would of earnings Fitness negative wave to have on tariffs in

Yacht the of cash certain accrued with We will in more and We the $XXX our amounts comments run-off excludes and notable Let me reflecting between Yacht and includes amortization at amortization flow operations the segment estimate P&L which of the a Power impact in that for or and separation with $XXX related Fitness XXXX focus anticipate This $XXX results any conclude costs. free and estimate excess strategies. XXXX million of Sport million execution successful items of our some Products excludes to acquisition. intangible with year depreciation end were flow operating items. on on million associated which cash

for book tax is Fitness XXXX the Finally, and between excluding XX% year, due our for foreign the to estimated XX% up primarily the versus effective business. impact XXXX benefits and lower rate due of tax credit

our recent As primarily we million expected $XXX for million actions no in occurring $XX have in of our and the reduction expense second net refinancing by XXXX year. is debt between $XXX with on plans continue we far. interest year and the reducing the to million to deviations $XX estimated our the be We half discussed debt to with million thus least execute against and on material debt at plan strategy calls, capital

the as payments expenditures expected $XXX new with to capacity between We including continue invest in capital relate and cash growth to in year million certain $XXX for million in be and this XXXX as activities. which to products, investments accelerated well that to year. complete $XX pension the funding $XX left plant with we we between in exit XXXX fully are XXXX, to a requirement contributions the million of intend residual million After and will pretax

retirement not net our Finally, proceeds we plan incorporate the revisit Upon for repurchase receive in the we connection any share will our program. will that separation. completion, does Fitness capital objectives XXXX utilization and with debt of

to to I to turn Dave to the remains grow comments. dividends. continue outlook unchanged Finally, will we back will our opportunities policy and call our evaluate now continue debt dividend

Dave Foulkes

Thanks, Bill.

to our look plans the generated our built for business XXXX. the on of we half strong momentum Marine XXXX, As in second

demand products. in Marine the outboard Engine segment, especially XXX the greater categories necessary this completing meet the For for entails initiatives additional strong and horsepower share these market growing in to engines than capacity

Power business drive acquisition. P&A from We will and Products complete strong of synergies into the resulting the integration the business our

and Products While for propulsion, also control a of provides systems systems business, strengthening fully integrated complement systems boat existing steering aftermarket the that Power manufacturers. electrical other Mercury’s offering backbone the provided

I and momentum. Mercury will and group slow net by year led sales teens rationalization segment growth which make government be retaliatory another XXXX the XXXX of factors of our U.S. in to flat will business, the continued extend will a minimal growth its its We sales mid percentage anticipated Sales forward aggressive other intend to margins. and development earnings. of factors of tariffs strong accessible more The European percent a including the for initiatives. to a P&A products pace margins are activities these International facilities at in look in versus earlier. the low to and down operational the supply Boat range But growth number to to brands. segment results commercial Similarly, discussed expected as not propulsion top-line through cost to the grow releasing premium our efficiency constraints mid-single-digit grow will and these products with Finally, have are improvement improvements operating XXXX look in new and exciting in product continue impact impact boating of is estimated on enjoyable.

the systems business the Sport Boats also several work by the the additional enhancements The platforms to continue end Nauticon, significant control advanced content will for of growth future and drive ground Sea technology including We products and marine revitalized boats. of on value for lay platform will providing a business’s launching year. towards is which high new other Cruiser Ray several

engagement Meeting growth Investor in you business catalyst demanding in weeks focused will content couple about will boats on Boat more technology hear on our are ease consumers the Miami, as connectivity more a a and more consumer of use. as and be Finally, of activities at for in

Moving clubs demand. to the flat anticipates margins by remain health business, market declining mid-single-digit expected plan sales a Fitness to and percent consistent the Gross XXXX to lower sales levels. XXXX with net value-oriented reflecting are

As of against the place by continue new continuation sales including investment its strategies. in products the Fitness’s plan strategic modernization technology the and reorganized information increased continues, leverage of online the platform in execute content process and to Fitness team. new will put plan and separation This digital management the will

to freight result opportunities Finally, accretive the opportunities the the in growth to looks Mercury Marine as and reduction actions the success am XX business year leading Overall, evidenced even to business success. Marine costs. marine to efficiencies and was looking Mercury will dilution reflecting showcase business years. in our developments the anniversary will a business further our celebrating operating in These for everyone these including past operating over such sales Mercury I will forward on during of process a industry. growth its strong on celebrating and is XXXX made will its reduce and engage and XXXX our its but and execution technology forward with employees be future dedicated actions leadership company greater beyond. focus cost to product XXXX and in of capital in the heritage and and years several There has certain initiatives who significantly in throughout XXXX by XXth manufacturing to of our earnings XX,XXX to improve and for robust finer year continued strategies, company. Marine be innovation

upcoming February lunch events Show XX:XX. Miami Mandarin and at starting Thursday, Oriental the our at Miami Finally, in investor some Hotel at on presentations at calendars which XXth market Boat be XX:XX we with the held will Downtown show the for

open event I of the to for be webcast hope now to many in will line Although able those we the in for will questions. Miami, see attend person. not you

Operator

of question Instructions] [Operator from Michael SunTrust. Swartz line first of Our the comes

Your line is open.

Michael Swartz

everyone. good morning Hey,

the wanted touch XX% for of in said in year doing guess, I are of you XX%, came incremental following year I Just business looks XX% guidance maybe low which incremental and out you to like the you on, in ahead. and a XX%. the year the think the Engine did, you margins XXs, It assuming

are So we a want about how sense to forward some I first, and incremental my we of beyond? then, maybe, numbers going XXXX about get And investment of think just correct? the – think as

William Metzger

I mid-year characterize well that back products. as very some from capacity it’s you way. relative the relative of Good bringing going margin if launch the in it as the new and introduced online some kind in we dial got incremental would a morning. challenges, strong XXXX to We’ve had an perspective Michael, on clock And very, our of both into we wins product Bill. XXXX still demand the at this XXXX, back perspective. of to kind new

business mostly those little up intensified we P&A We that where the for comfortable business. to started of in forward. be. the will wants were think perspective. our engines Both very, got business. and expectations I are also in an When it’s with of this that what’s and in could the time where place But headwind very result. tariffs be set point would moving absolutely XXXX. a factor point to the factors there stuff not XXXX a moving sit I currency is given more of which year, of There certainly a system at a bit where all new versus leverage together I of that into out the XXXX, accomplish, better blend are that kind right produce we from feel we you we product investment

Michael Swartz

Dave provided us then, color, Okay. question, I Thanks, some think second a you’ve had out And retail the maybe, seen. little provide you Boat you on or shows That’s commentary Maybe early I helpful. positive that more you mentioned that topic? that just mean, can in color some Bill.

Dave Foulkes

Yes, certainly.

very Show shows our year, in are position and strong a mean, take our ebb a things I also we as Boat of in start fortunate fairly U.S. Shows breadth Boston balanced. supportive flow segments. advantage between the in the in different of growth segments of the one think had results that the early say I Dusseldorf large the and particularly and and projections the So, fact always with in I more across Boat would portfolio say Whaler Sea can in this Ray year, we Europe. the or

would say, last I but year. softer to more and we’ve So, are pontoons brands strong fiberglass our aluminum in among a value feel premium we seen that the somewhat it’s off start, in performance

think of constructive a supportive So, balance and XXXX. somewhat XXXX overall, different between early I and

Michael Swartz

Okay, it me. great. That’s for

Operator

you. Thank

Our next question comes Hardiman Wedbush from the of Securities. James line of

open. is line Your

James Hardiman

Hi, morning. Thanks questions. for my taking

So, guess, last X% year. a incremental U.S. XXXX bit deceleration down what a I that industry beginning growth isn’t into of in this year. the you That’s trend. the confidence gives little an and step versus broader that we down XXXX won’t the see

Dave Foulkes

from think we I Well, a a perspective, quarter. fourth Brunswick had good

QX think last people in percentage although some are pickup reporting dealer on was a are there of early that reports think range. the in I shows, all confidence, on constructive towards that there reports early softness is And I a year XXXX. number of three

Although in the this year. potentially different slightly last with mix

are to But the from brands of premium and XXXX are very at it’s on perspective, the that material a are Brunswick’s our set somewhat performance initial from strongly positioned. I about excited think think or scenario. different moment very suggests to X% whether in capitalize we that, we to nothing we think I market I deviation market the

James Hardiman

I and of or for trading, half Fitness about may was question math this may think scribing are the I then, you But year where seems business, do XXXX. guess, one. the business? cut number peak? like what value obviously guess, two, to fair zero very be if not that as in that I the number the anticipated $X Fitness is potential are do Okay, $X.XX, XXXX right, if earnings you north stock Question XXXX business? it ask people of your Fitness helpful. power what And to doing the initial did getting If Fitness think business. earnings number almost where think this tough it’s guess, but the guidance setting is I for price of I it’s ultimately another the am question,

Dave Foulkes

relationship, differently you sure into I of am decide not businesses get to am relative what will what I I and is, some on the objective James, and going warranty, to in should product we certainly some plan but the the point integrity little thought at also line new to their the just where ultimately little we being landed supply of ended try would lot A, and implications XXXX. inefficiency going freight about up install, cost to. the we outcome are I perspectives thought give long-term but how lion Fitness think business of the the that launched different value a a really to share end the starts what with at production the a out than delta be. be bit it than we’d of of completely bit et be where say, turned a was of just cetera, XXXX tied including

I in additional they XXXX, an better to demand some substantially execution through has where are some to think to trough fairly product there stimulate is think business opportunities the I through margins from opportunity, improve to them start say I’d forward, A. Looking investments. for going

to of different will operate on or the bit simplification perhaps little tomorrow cost are a the than them investments some I have think IT allow side today side they and in today. structure, they planned

XXXX are operating on that’s have benefits to of of team still than XXXX have that the of period really where they back operate in margin those show. all more put that’s a think business. of the margins a longer-term bit I will it’s a focused when of in it’s has an getting perspective. back to But of the sort from higher the range. short work to substantially a done business of XXXX today time plan thing, fairly would been there implications lot start to not business a a that’s together It’s of to XXXX should earnings that the a not XXXX, pre where kind The they

James Hardiman

guys. Helpful. Thanks

Dave Foulkes

help? that Did

James Hardiman

Yes, it does.

Operator

you. Thank

next is of the Our Stember question Scott of line from C.L. King.

open. is line Your

Scott Stember

Good morning guys.

Dave Foulkes

Good morning.

William Metzger

Good morning.

Scott Stember

of Could for price why stuff. the factor you you maybe Maybe we more the into lagging seeing are explanation give just us some can comments the aluminum And are across an maybe fish, speaking echoing just what some board we pontoons and expectations are entry-level lower of does if your of talk of hearing expenses about how your broadly just that think there? weakness just, XXXX? you stuff

Dave Foulkes

Well, my do certainly, best. I’ll

primary focused I in premium we to Whaler, improve very, continuing Ray. margins business our revitalized and is and Boat Boston our focus are boat brands think narrow very aspirational Lund heavily on our on Sea particularly our

be in mentioned some extend capacity the well. premium seem was our XXXX. to I constrained As brand is which earlier, be brand doing pontoon to it through and will fiberglass Harris XXXX

even the be which softness some would in feel Lund some premium brand to So still brand our we’ve brand. the does though that softness I might about pontoons, extend in value market is fish brand. seen the Harris there that say aluminum not we confident

So, Midwest are Certainly, affected a that, of weather we some of on. in the difficult time in the are a and think year. marketplace. There of It’s watching lot weather I the going shows early effects Canada.

brands was acquisition from Lowe away the the about last of brand. recovering that, from benefiting but from So, year. value well with and the though, really of that I although weakness. aluminum wait best I perspective, this I our is margins unit some from it say of we next no you Pro’s perspective would premium very to that other develops. affect say subject dealers are Bass with so will as know comment from performing our Lowe disruption volumes, Cabela’s see is weeks made Brunswick’s how few migration or the indications would might brands over

a will as of would year us that the And this to of interesting effects with through get in know some and lower be of weather or and so, balance associated for year. how volumes a during plays it out all course month so time the we we see more

Scott Stember

guess, we scenarios as questions. within whether to earnings it. guidance it’s couple thanks Obviously, Can XX% administration tariffs. maybe a get for you to flavor But and we give last us into indication are question Got give back some in XXXX? And my you little goes a of decision away on because us not. obviously difficult getting of to from what the know moving far I a if pieces a give just at on Maybe commodities you list point, that go it’s would I taking outright the XX% XX% opt clogged if and three. do for just closer as maybe just here. the different us an to rate what we expect there have

Dave Foulkes

focus the of that included would I implications China. think would that number tailwinds million what against to I to the the script Scott, in $XX included in done away, we I share probably $XX a group, related be. to good the situation the $XX If think where of would for got it that kind we’ve as is think kind to There the of million go revenue is up what but results that laying I some other is you job million XXXX in million $XX on balance tariff number the characterize, the lion the out within I probably when of aren’t that tariffs. headwinds, number to pretty

Scott Stember

Got it. Thanks again.

Operator

Thank you.

from line the question is Baird. of of Kennison next Craig Our

Your open. is line

Craig Kennison

Good give you delay recent considered wanted given in spin for a given questions. business the am that my to sale I quickly if you maybe or start how sorry, show morning. the desire Fitness. I with to as see – to do a team that to maybe you time as Have the and want of the better that on taking some And performance you possible? move Thank that results? so, against time weigh give shareholders

Dave Foulkes

firmly to on are plan We the business. separate

that always think potential in firmly spin two sales. and business separating there could that parallel worse. with along the might are we flight or know you the get in think better about paths, I are we and as working process you things said But that

the is be the and plan to plan. that continues So

Craig Kennison

Power Thank And that note maybe acquired a on then about What for synergy? opportunity where since you. about are it? different Products, you’ve you just opportunity talk seeing surprised you

Dave Foulkes

wonderful Well, acquisition I us. think Power Products for was a

Mercury ability Brunswick to If think synergies propulsion tremendous the unparalleled think, and and a is Marine I to a generate is industry value system. we whole, you operate generate also with have the could platform that about and as – whole wonderful marine

business whole So digital of But seats and boat. has whole to of range the backbone Products to gives us electrical other Power P&A getting a the backbone from our lighting things. everything a

to is differentiate of management, use kind solution their come their haul, to solution. case, an a now to for with essentially can the can a the integrated industry focus we so, Nobody water allowing want things. the where propulsion, boat which product boat OEM is OEM fully them steering, focus offer and And offer control, digital they integrated system both which electrical, how to the the typically of those kind interior, else that in marine

we a got soon with on interest built And integrated Products, we’ve so, already team is as out of offering which that and OEMs service have as it. lot that we Power

lot I on net about P&A the the us Products offer Power industry not think, about excited excited I we Power have the imagined, better filling incredibly we the but We anything play in like I portfolio you now out excited plan, and nobody am have is has are. to not the I Products. our are else acquisition. the team perfect hurdle a finishing about marine of something – way tremendously what could than know gives was as So, It a acquisition. that acquisition I think out mean, is of can It whole that They industry. could we team but

Craig Kennison

you. Thank

Operator

Thank you. of comes Fargo Securities. next And of line our the Conder Tim question Wells from

line Your open. is

Tim Conder

Thank you. official And, to first welcome David your here. call

Dave Foulkes

Thank you.

Tim Conder

just alluded early margin and – you in the year-over-year Look seeing again, in the it’s the also how to are the question a the the much of aluminum Miami. follow-up Canada addition of impacts, – couple Princecraft asked weather seeing harder you things, forward sales to the close dealers on in How to here, of any that earlier. again consumer the also was and larger any A from season weather, some gentlemen products? to is maybe feedback maybe relative that on with much

Dave Foulkes

question. Good

think, is subject manufacturer tariffs. as Canadian-based Show show positioned to softness aluminum. a in the did pretty and not Princecraft Toronto Boat I uniquely

really though time affected that volumes is economy buyer that prospects dynamic perhaps Canadian show the question the So and and is much a low of there other the not I into potentially attendance business. weather in I no show would affecting and are very the would about too But that say the things we by first with things behavior. that are excited significantly the and factors. would combination, year on the other other read tariffs

So, doing brands I think brand. the good news the our out a aluminum brand are of Lund that including is well all which this fish premium premium is

will it. value any and monitoring in the say there softness, if keep it’s very would So, And is I early we area. it’s

we in I factors favor Lowe’s some mentioned of to somewhat Now different going have is earlier as last competitive in our terms which position year.

can. hard So, that as we to as we will possibly after continue go

Tim Conder

an okay. you And the of would filing part Okay, like, on you from of here the – commentary? then, sounds perspective a again, bit of from Fitness Dave, business? I for F-XX do here sort think was and it more the the And sale in early of spin what it a anticipate heard little that part QX. Is side, expect then, we or your updated, that early

Dave Foulkes

the Bill talk let F-XX. I’ll about

Tim Conder

Okay.

Dave Foulkes

update. Form-XX The

William Metzger

gone Tim Form-XX, the obviously is, through SEC. initial, the the process Yes, the filed we’ve with review we

as, the first weren’t information forward some there an more as financial Form-XX. in bring statements well items You other be update would to current that to in filing to included fill expect that

the expect Form-XX I would That relative relatively should comment the you the So, to, actually, question? to shortly say. second an to see second update what was

Dave Foulkes

with associated really the was It timing.

diligently paths paths, is them. have I we that are to we that and But that and we slightly think the the hard possibly - two plan to can both different sales opposition progressing because to working we So declared. the as are execute as

Tim Conder

just additional half said you ramping much How business I that the be ramp was cost? bit Okay. adding And the roughly expanded a is to second then, And expect more weighted. little timing engine startup that on the XXXX? based in from think, of you type of that more are obviously a existing capacity what footprint just on weighing you the of that up

Dave Foulkes

they I figurative machine as So, the Fond from up du team is news think usual the Mercury Lac, little good there. are

will cases So every increase can for new in capacity be thought in we – this the the they would be. where capacity and Lac are exceeding a new Fond capacitization next capacity more walls adding supply Unlike of are machines any not current platform, they essentially kind big say the anywhere tranche lot unit really wouldn’t and also base. of we QX squeezing are building du original from last the in to But we inside XXXX. tactical, online is but some of I next adding out the they

several the dealer so initial are capacity news a capacity t not hat than execution that, which at that for confident have margin margin channel higher we demand is able because of some to our the years. satisfied adequate next we higher meet capacity, in are the us. additional demand a been give of satisfy channel we for a and in far, channels comes about good believe particularly fully that lot So will that us of that the The to that is

for significant XXXX. the end of in So the we capacity the there range adding constrained But is balance that not be product of will of future the effect beyond compounding is capacity that the of some there. plan our

Operator

Eric question Thank B. of comes you. Riley. next from of And our Wold the line

is open. Your line

Eric Wold

going previously. questions. back of topics to One, Thank the of kind you. couple Couple

driving softness, is product confidence versus terms what are value in value that getting are from Is the cash a burden? it you I On that dealers from any they issue? product given it hearing financing the consumers that? is the more feedback of financed that

Dave Foulkes

I would have that. of extraordinary honestly don’t level on say, I detail

potential but softness unit effect really kind feedback here, impact are product value I minimal We shows a say is specifically on on minimal, from dealer a though basically our mean, know this, know you getting initial the our this not and demand really of would I of earnings. from I commentary.

share. very improve we So, to working will and our hard maintain be very,

would that what’s earnings this – be in do – is We effect XXXX. that make on sure but necessary want say, I just that will a various market is could the our that relatively understood I it’s minimal in conditions, to

Eric Wold

kind of Perfect. impacts the versus And tariffs an on year to to then, the I the the XX horsepower that going this tariffs, with apples-to-apples basis of million make reimbursement $XX understand last the million last sure is year, XX, back to year? from incremental $XX

William Metzger

correct. That’s

Eric Wold

back is it on $X the half and Okay. the indicates based XX% million is that impacts – just thinking is I rise and guess, was double that too the too about kind And on it year XX% then, or simple? simple before simple impact XXXX mostly it, so for that to to about that last of not

William Metzger

half more of going first not the online. tariffs It’s be quite linear think probably might and the you It’s a timing year throughout bit because weighted, weighted of half as when but. to as second came

Eric Wold

past from the bring just on that’s on or to sale driving to that separation. potential decision final versus first Form-XX, valuation to – a environment. sale interest in from post-spin have from going through question when note, end level spin doing getting all think I transpire anyway the to that seen the the frame spin over a the now you of expectations you the given a through buyers versus would what you’ve guess, is then, what factor kind to announced Fitness And biggest I Okay. of it you could up year?

William Metzger

to folks a an the did that go asset something this to attractive number should expect more be we through have to a in formal have of What and own are it. interested on it this asset. as process that that frame of we way, received be we the inbound kind process Eric somebody enquiries we would for I would deem

to we buyers kind to of are an be that’s characterize going others don’t who that’s it. consider this way something I potentially the interest financial not level what So have appropriate and of from

Operator

Thank you.

Altobello Our the from James. next of of Joe question line Raymond comes

Your line is open.

Joe Altobello

somewhere Hopefully, think it. congratulations on Dave your Chicago earnings market suppose. Good as Appreciate to Great. the want although it’s for warmer I in. morning. well, hard call. squeezing me guess I was extend than first probably guys. my Thanks warm, today Thanks to I I

I guess.. So,

Dave Foulkes

that. Thank you for

Joe Altobello

problem. No

strategy all? the broadly speaking, first your all, place with been what’s differ how years at does of First in if last few over

Dave Foulkes

me, capturing Well, Pfeifer, I Metzger at tremendous continuity Mark all, role, Brunswick. together we’ve would with next but to first People of products, John been team CEO pieces a And around obviously in no on am great the for with market years firing on number are Boat say the we’ve I that the put Bill with Marine share, side, strategy. I a longer Huw as on is of margin think, the new right we all have is we’ve side, we with had really really within the cylinders - expansion. Bower crafted of and

as us that. So – combination the runway full we you of will has in the marine of current in there a advantage see taking We it think refer to the Nobody is plenty platform. else portfolio in industry we the kind we close anything of P&A have Boat is tremendous a a industry. of has that which propulsion, cycle-resistant of platform that are now business and really to that nobody deep

new of excellence attention along is which quality. a So operating to we on intend that developments, to new that some growth categories rigorous initiatives potentially and product and combination with a includes fully capitalize

as I but that in think access large see, what you the that models, in talking all we Miami of but market in the even other in appearing not only will number platform. number meaningful a marine, in addressable marine if are Miami, that we of well amount through the you like as potential shared different you see also in things areas a as about the are of verticals autonomy, connectivity, will of vertical, extensions be if

in innovator noted mean operating now development does business. are that I So, I our that not product excellence we think way would focus the But any you core the and will tell become marine and in lose marketplace. in that we’ve to be on

Joe Altobello

I That’s on helpful. And guess, that. to it. follow-up just very Got

was for cyclicality of One of portfolio entering sort of and derisk the rationale out the take business. of the the the Fitness some

to is going down now the are that marine unwinding play be Now is to you thought additional the or any that, going pure plan there a road company? expansion forward just

Dave Foulkes

runway our extend marine. far product is that strategic focus entire have business. tremendous focus. do by we that beyond businesses primary We we on is have marine. marine, I as Products the in honestly some that believe have platform A have But I of solidly Power our couple in categories and like that now marine our said with

only acquisition. the Products begun really, have exploit to We Power just

slowing of exactly that products after. We saw to followed you this Mercury at the but mean, will you is year run. be same and down are thing by exciting not are launches year, and new have see engine all, room next to XXXX the year which going plenty I in the

our contributors profitability, single contributors I a But Our exciting a time, Round Boat Boston that – large excitement have markets, is in to we introduce portfolio about lot products to Boat in have profitability. balanced Boat now and more over that, there we of introduced now like about product. business multiple win the ability business is space think really portfolio hybrid product of what’s new white kind Whaler new is much which our been to the

we attracting into about millennials the Now have business. excitement

So, we and have just and are very a excited very, runway dedicated tremendous team.

Operator

from line you. Thank Johnson And with BMO our the of question next is Gerrick Markets. Capital

Your line is open.

Gerrick Johnson

still Hi, good morning, yes, it’s good morning.

quarter, you removed third demand retaliatory On mentioned Mark to the in would sometime XXXX. be that tariffs return normal wholesale would expect

that case? is the longer So, no

Dave Foulkes

tariffs. been back would are would of be Gerrick, in some retaliatory effect is I that bit a result the as that say to conservative more now our have third level there we of We quarter. probably a going than demand assumption is

Gerrick Johnson

Okay. And on your guidance…

William Metzger

a mover. time, fairly dramatic to taken second demand. half to the in the at in a the relative an of here Again seem Canadian I there be it’s At Remember, margin, quite we’ve that needle the am big impact. sure year not point of decline

to of that a anticipating going are XXXX into stable that’s without lot recovery. more We moving

Gerrick Johnson

Okay.

retaliatory as I in sales assumes stay international And guidance flat, that assume place. then, And being boat for tariffs that so, your next… should those my

William Metzger

That correct. is

Gerrick Johnson

if today. boat let’s Okay. away international be went retaliatory those went guidance tariffs And say your would away today? What

William Metzger

the to best a and especially really market, the aluminum very back environment. interest pricing the it’s different expect difficult a where understand to in conditions. Gerrick, go market Canadian consumer market to guess, product pontoons. normal magnitude-wise, I strong is would would still That answer more for be improve, is I

Dave Foulkes

manufacture of Uttern in often in our in in we facilities we do we make that up have about talk the the have I that would but couple of don’t Europe it, produce of – in say, Europe, sell and Portugal. our that a product much majority over and Poland Europe, a terms We Quicksilver of lot do we there, brands we volume.

tends higher margin volume is about exported what product we the talking are to for really be us. So that

that And reaching the an to certainly would out give in so us Europe. opportunity mix

think today. it don’t I Although could I quantify

Operator

to at and remarks. we Mr. call would this Dave to you Thank the turn like for some closing back time,

Dave Foulkes

XXXX. good the thanks call about Miami. us. on everybody to I to your wishes. great do see we for in for I be excited what a very we Well, be did all could show more going It’s am XXXX what not plan to and both in you very, excited in

and We be strategy think that I our excitement a we side are that that excited convey talk unbelievable the to to more the lot feel in about will marine detail on able and venue. momentum we at

Miami. we’ll excited. excited to and am I look in know, forward you So, you I seeing get all

Operator

conference. your This program. for you the today’s in thank conclude participation gentlemen, and does Ladies

You disconnect. day. may great now Everyone a have

Brunswick (BC) 31 Jan 192018 Q4 Earnings call transcript