Brunswick Corporation Improving in a Cyclical Industry

Transcription

1 Brunswick Corporation Improving in a Cyclical Industry Dustan E. McCoy Chairman and Chief Executive Officer Brunswick Investor Meeting Chicago December 11, 2007

2 Agenda Marine industry update Factors affecting boat demand Opportunities for growth How we are positioning Brunswick for future growth December 11,

3 Improving in a Cyclical Industry Investment Thesis U.S. recreational marine market has been difficult since 4 th quarter of 2005 Brunswick is managing well through these market conditions Execution against strategic initiatives has continued to accelerate Our balance sheet and cash generation continue to strengthen our company is healthy Brunswick is the only player who can accelerate the pace of new product development; introduce platform-based engineering, design and manufacturing; improve its manufacturing footprint; take advantage of the potential created by global sourcing; create differentiated dealer relationships; and flexibly and quickly take advantage of changing market conditions As economic conditions impacting the marine industry level and improve, Brunswick will be uniquely positioned to outperform the market December 11,

4 U.S. Boat Market Retail Units Units at Historic Low 550, , , , , , , , , , , , ,000 50, E Outboard Boats Inboard/Sterndrive Boats Source: National Marine Manufacturers Association and Company estimates December 11,

5 Outboard Boat Industry Percent Change from 2004 Peak +1% -33% -27% -26% -17% +6% +2% -29% -17% -14% -30% -5% -6% -10% +8% +10% +22% -9% -1% -16% Top 20 states account for 80% of the retail market with 14 of these states showing declines from the 2004 peak Source: Statistical Surveys, Inc. (SSI) and company analysis December 11,

6 Sterndrive/Inboard Boat Industry Percent Change from 2005 Peak -2% -31% -15% -17% -22% -31% -16% -5% -22% -14% -16% -15% +18% +40% +8% +15% -3% -23% -23% -13% Top 20 states account for 75% of the retail market with 16 of these states showing declines from the 2005 peak Source: Statistical Surveys, Inc. (SSI) and company analysis December 11,

7 Unemployment Rate Boating States Rate Increases above National Average National average = +0.3 points Source: Bureau of Labor Statistics. Data represents the basis point change in the unemployment rate from October 2007 versus October December 11,

8 Average Home Values States Experiencing Softer Market than National Average -6.0% -3.7% +1.4% -6.0% +0.9% -3.6% -0.2% -2.1% National average = +1.8% Source: Office of Federal Housing Enterprise Oversights. Data represents the change in average home values from Q versus Q December 11,

9 Home Foreclosures Increasing in Boating States above National Average 152% 175% 111% 297% 137% 489% 549% 203% 101% 115% National average = 100% Source: Realtytrac.com. Data represents the percentage change in the number of home foreclosures from Q versus Q December 11,

10 Mortgage Delinquency Rate Rates Exceeding National Average National average = +0.8 points Source: Mortgage Bankers of America. Data represents the basis point change in the frequency of mortgage payments becoming delinquent (up to 90 days past due) in Q versus Q December 11,

11 It s Not All Bad Marine Opportunities Boats over 60 feet growing at greater than 10% per year Motor yachts outsell sailing yachts 10 to 1 Segment size estimated at $6 to $10 billion Correlated macro-economic factors expected to grow U.S. boat builders exports have grown dramatically Improved cost position Weak dollar Capturing product requirements Growth potential from traditionally non-boating environments Middle East Central and South America Russia December 11,

12 Strategic Platforms Get the product right Introduce the highest-quality product with the most innovative technology and styling; at a faster pace than our competitors and at the best price Get the distribution right Distribute products through a model that benefits our partners and dealers and provides world-class service to our customers Be best cost Develop and maintain low-cost manufacturing; reduce spending and improve productivity Be global Manufacture and distribute products globally with local management and regional styling Attract and retain talent Attract and retain the best and brightest people who represent and connect with our customers December 11,

13 Best Product New Products Emerging at Rapid Pace December 11,

14 Enabled Cost Improvement Strategic Bill of Material (SBOM) Develop engineering specifications for all common below deck systems Achieve sourcing savings by aggregating purchases across all brands Platform design and systems engineering Maintain brand identity and positioning Enhance quality and consistency in product performance Enable production of similar product from multiple brands on same line Platform-based manufacturing Improve operating efficiencies Provide greater flexibility to adjust production rates in response to changing market conditions December 11,

15 Strategic Bill of Material 2007E Purchased Materials Brunswick Corporation $2.7 Billion Brunswick Boat Group $1.6 Billion Key Commodities* BB&B 5% Mercury 28% Boat Group 58% External Engines 3% 18% Internal Engines 28% Other 51% Life Fitness 9% * Includes fiberglass, resins, aluminum, marine plywood and steel December 11,

16 Strategic Bill of Material Progress $41 million in savings delivered in 2006/2007 from Brunswick Boat Group efforts Full savings potential continues to grow as our work progresses Ongoing inflationary pressure on key commodities will affect savings Since 2004 Aluminum up 36% Copper up 120% Stainless steel up 69% December 11,

17 Platform Design & Systems Engineering Fuel-Handling Tankage Steering Propulsion Electrical Hull December 11,

18 Manufacturing Footprint Objectives Shrink manufacturing footprint; increase revenue per plant 12 plants closed since 2001 more to come Platform-based manufacturing Allows greater efficiencies from producing similar product from multiple brands on the same line Provides greater flexibility to adjust production rates in response to changing market conditions Add capacity for larger boats Purchased Swansboro and Navassa plants Develop centers of excellence around specific boat types Example: multiple brands of pontoons made at one location December 11,

19 Best Distribution Make benefits available to Buying Program status checking dealers employees Program Employee Benefits Cost-saving discount programs for dealerships Performance Tracking Track retail inventory Track dealer financials Dealer certification Dealer training Dealer Certification & Development Dealer Management System Improved dealer management Enhanced connectivity Wholesale Extended warranty Retail (Blue Water) Financial Services BRUNSWICK DEALER LONG-TERM PROFITABLE RELATIONSHIPS Superior Parts Service Same or next-day delivery Proprietary parts Leverage platform design Develop water access via marinas Access to Water End-to-End Warranty Eliminate hassle Track component failure Certified pre-owned boats Used Boats Boater education Reduce the intimidation factor Reduce customer churn Sea School Full Line of Products Offer all sizes of boats and engines for all uses and applications December 11,

20 Brunswick Dealer Advantage Most comprehensive offering of tools, products and services in the industry Aimed at increasing dealer profits Available to all 5,000 Brunswick boat and/or engine dealers Three-prong focus: Dealers employees Dealers operations Customers Marks the beginning of a new business model for dealer/manufacturer relationships December 11,

21 Brunswick Dealer Advantage Employee Focus Retention Operations Focus Profits Customer Focus Close More Deals December 11,

22 Brunswick Dealer Advantage Dealers Getting on Board 1,100 Number of Dealers 1, Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 December 11,

23 Best Distribution IDS Facilitates Common Portal Takes friction out of dealers operations Makes it easier to do business with Brunswick Enhances dealer/manufacturer relations Dealer Order Multiple Brands Warranty P&A Financial Services Customer Service December 11,

24 Be Global Growth in Non-U.S. Sales Target 50% of Total $2,200 40% $2,000 35% $ in Millions $1,800 $1,600 $1,400 $1,200 30% 25% 20% 15% % of Total Sales $1,000 10% $800 5% $ F $ in Millions % of Total Sales 0% December 11,

25 Be Global Most Segments Growing Non-U.S. Sales 50% 45% Fitness % Total segment sales 40% 35% 30% 25% 20% 15% Marine Engine Boat Bowling & Billiards 10% F December 11,

26 Be Global Growth in Non-U.S. Sales Regional focus with organizations in Europe, Asia/Pacific, Latin America and Middle East Global styling and features Global production Strong local management for regional brands Expanding global distribution December 11,

27 Be Global New Dealer Development Model in Mexico New dealer development model launched in Mexico Large, multiple-location dealers with marinas and service centers Powerboats Outdoor Life Locations San Carlos Monterrey Mexican government encouraging waterfront development tapping potential of 6,300 miles of coastline Market receiving boost from U.S. retirees, tourism 2007 Latin America net sales up 38 percent from 2006 Culiacán Guadalajara Powerboats Monterrey facility December 11,

28 Improving in a Cyclical Industry Investment Thesis U.S. recreational marine market has been difficult since 4 th quarter of 2005 Brunswick is managing well through these market conditions Execution against strategic initiatives has continued to accelerate Our balance sheet and cash generation continue to strengthen our company is healthy Brunswick is the only player who can accelerate the pace of new product development; introduce platform-based engineering, design and manufacturing; improve its manufacturing footprint; take advantage of the potential created by global sourcing; create differentiated dealer relationships; and flexibly and quickly take advantage of changing market conditions As economic conditions impacting the marine industry level and improve, Brunswick will be uniquely positioned to outperform the market December 11,

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