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Text: Please keep in mind that our actual results could differ materially from these expectations.
All these documents are available on our website at brunswick.com.
Our businesses had a fantastic start to 2021 with a very healthy marine market, strong boating participation and outstanding operating performance, driving historic financial results.
Robust retail demand for our products continues to drive low field inventory levels, with increased production across all our facilities necessary to satisfy orders from our OEM partners and dealer network.
Our teams have performed exceptionally well in the face of supply and transportation headwinds, tighter labor conditions, and continued impact from the COVID-19 pandemic.
And we are excited about our ability to further harness the positive momentum we've generated to propel our growth and industry leadership.
Our Propulsion business continues to deliver outstanding top-line, earnings and margin growth, outperforming the market by leveraging and expanding the strongest product lineup in the industry.
Our parts and accessories businesses delivered strong top-line growth and robust operating margins as a result of increased boating participation, which drove strong aftermarket sales, together with high demand for our full range of OEM systems and services, as boat manufacturers attempt to satisfy retail demand.
Our boat business performed well, as anticipated, in the quarter, reaching double-digit adjusted operating margins for the first time in over 20 years.
Despite elevated production levels consistent with our plans for the year, the continued surge in retail demand is still driving historically low pipeline inventory levels, with 41% fewer boats in dealer inventory at the end of the first quarter, versus the same time last year.
Finally Freedom Boat Club has had an extremely busy start to the year, which I will discuss further in a couple of slides.
We have exceptional momentum as we enter the prime retail season in most markets, and as you can see from our significant guidance increase, we are confident in our ability to perform for the rest of the year and well beyond.
Before we discuss the results for the quarter, I wanted to share with you some updated insights from 2020 concerning our boat buyers and Freedom Boat Club members that reflect very favorable trends for the future of our business.
We continue to outperform the industry in attracting new, younger and more diverse boaters, positioning us for very strong growth in the years to come.
Last year, Brunswick's average boat buyer age was two years younger than the industry average and reached its lowest level in over a decade.
Additionally, Brunswick's first-time boat buyers averaged five years younger than our overall boat buyer demographic, and three years younger than the industry.
Equally encouraging was the fact that the percentage of Brunswick female boat buyers in 2020, while still a minority, equaled the highest percentage on record and first-time female boat buyers entered at double that rate, which was a notable 700 basis points higher than the industry.
In Freedom Boat Club, we saw even more promising trends with the average Freedom member being almost three years younger than our typical boat buying customer, and female Freedom members making up 35% of our member base in 2020 and 2021.
These trends are an extremely important validation of our strategy to secure a healthy future for Brunswick and are also favorable for the entire marine industry.
I also wanted to briefly update you on some very important awards and milestones for Brunswick during the first quarter, which are important in positioning Brunswick for investors and employees, and our ability to secure top new talent.
I am pleased to announce that for the second consecutive year, Brunswick has been recognized by Forbes as one of the Best Employers for Diversity.
Those recognized were chosen based on an independent survey of over 50,000 employees working for companies employing at least 1,000 people in their U.S. operations.
Diversity and inclusion are cornerstones of our culture and a source of innovation and inspiration for our Company.
We also published our 2020 Sustainability Report at the end of March which reviews the exceptional progress we have achieved against our sustainability goals, including our prioritization of the health and safety of our employees.
In 2020, we reported the lowest recordable incident rate in Company history, in the face of immense challenges resulting from the COVID-19 pandemic.
And I also wanted to share with you a snapshot of what the return to in-person boat shows looks like.
The Palm Beach International Boat Show was recently held for the first time since the Spring of 2019.
This was the first major in-person saltwater show of the 2021 season and the outcomes were very positive.
Attendance was up and our brands outperformed the broader marine industry.
Over the course of the four-day show, Sea Ray and Boston Whaler more than doubled the number of boats sold this year vs.
2019 and revenues more than tripled, driven by increased demand for the recently launched models.
Consumers were also able to see Mercury's V-12 600 horsepower Verado in person for the first time, with many eager to repower their boats with this new, game changing engine.
I'll now provide some first quarter highlights on our segments and the overall marine market.
Our Propulsion business continues to gain significant retail market share in outboard engines, especially in higher horsepower categories where we have focused higher levels of investment in recent years.
Mercury gained share in each horsepower category over 50 horsepower in the first quarter, with outsized gains in nodes in excess of 200 horsepower.
As I mentioned earlier, Mercury launched its new 600 horsepower, V-12 Verado engine in February at Lake X in Florida to much fanfare.
Many OEM partners, including Fountain, Scout, Viking and Tiara, and our own Boston Whaler and Sea Ray brands, have already designed boats with this engine in mind and are taking orders.
Many models are already sold out for 2021, with twin-, triple- or even quad-configurations being very popular with both OEMs and customers.
New or enhanced OEM relationships, along with significant investments in new technology, have also helped fuel the continued growth in Mercury's industry-leading controls, rigging and propeller businesses.
As Mercury's growth continues to accelerate, we regularly review our capacity requirements to ensure we are able to meet projected demand and fully capitalize on future growth opportunities.
In this regard, we anticipate having to pull ahead some additional capacity actions.
Our Parts and Accessories businesses also experienced significant top-line and earnings growth in the quarter as aftermarket sales remain elevated due to strong participation trends and service needs, with increased OEM orders to keep up with production resulting from the accelerating retail demand.
Our dealer network reports that their service centers are busier than ever, with the strong participation trends from 2020 continuing into 2021.
In addition, favorable weather conditions in many parts of the U.S. are enabling consumers to return to the water early and in force.
This demand drives the need for aftermarket service parts and a healthy distribution network to get dealers the products they need on a same-day or next-day basis.
The Advanced Systems Group, which has a larger OEM component to its business and also serves some non-marine segments demonstrated significant growth across all its product categories and delivered strong operating margins that were accretive to the overall segment.
Our boat segment had an outstanding quarter, with successful execution of its product plan, resulting in strong revenue and earnings growth, together with double-digit operating margins.
Given the continued retail demand surge, 95% of our production slots are now sold for the calendar year, with many Whaler, Sea Ray and other models now sold out at wholesale well into 2022.
Pipeline inventory, which Ryan will discuss in more detail in a few slides, remains at historically low levels, and we continue to hire additional workers at most facilities to ramp up production consistent with our stated plan.
We remain on track with our plans to reopen and staff the Palm Coast facility and expand our operations at Reynosa and Portugal.
However, it remains very unlikely that pipelines will be significantly rebuilt until 2023 at the earliest.
Freedom Boat Club also continues to exceed our growth expectations, now with over 40,000 memberships and 280 locations, which is more than 100 new locations since we acquired Freedom in 2019.
Freedom has been expanding both through acquisition and organic growth in 2021.
We acquired franchise operations in major boating markets including Chicago and New York, and opened our first location in the U.K. As a reminder, having company operated locations allows us to gain the full economic benefits of the territories, and allows us to increase investment to enable faster growth.
In addition, company operated locations provide the opportunity to get close to the end boating consumer and allow us to enhance our other offerings including Boateka and our F and I businesses.
The outstanding operational and financial performance I have been discussing has not been without some external challenges that our businesses continue to manage and mitigate, sometimes on a daily basis.
Our supply chain teams in particular performed exceptionally well.
Winter storms and resulting power outages in the Central and Southern United States affected oil-based product production and supply, including our third-party producers of resin and foam, while tight semiconductor supply, raw material shortages, and transportation disruption, and resulting cost increases, continue to present challenges to our businesses to varying degrees.
However, the global reach of our supply network and our unique scale in the marine industry, together with our purposeful vertical integration, have so far enabled us to mitigate these challenges and keep our production plans on track for 2021.
Finally, labor conditions remain tight in many locations in which we manufacture product, but our talent acquisition teams have been working hard and successfully to add manufacturing and other talent to our teams as we increase production.
Next, I would like to review the sales performance of our business by region on a constant currency basis.
First quarter sales increased in each region, with international sales up 42% and sales in the U.S. up 47%.
International growth was very strong across all regions, with continued strength in Europe and Asia-Pacific contributing to growth in propulsion and P&A sales.
Canada continued its trend from the back half of 2020 with significant sales growth in all three segments.
This table provides more color on the recent performance of the US marine retail market.
All boat categories reported retail gains in the first quarter, continuing the momentum from 2020.
The main powerboat segments were up 34% in the quarter, with Brunswick's unit retail performance ahead of market growth rates, especially in outboard boat categories.
Outboard engine unit registrations were up 21% in the first quarter, with Mercury significantly outperforming the market and taking market share as I discussed earlier.
As we enter the primary selling season in the U.S., lead generation, finance applications, dealer sentiment and other leading indicators all remain very positive.
In addition, similar to our comments on previous calls, at the end of March, our percentage of dealer orders received with a customer name already attached is approximately three times the percentage from the same time last year.
All these factors give us high confidence in the continuing strength of the retail market as we move through 2021.
Our first quarter results were outstanding.
Year-over-year comparisons are not particularly helpful given the significant COVID impact starting in March of last year, but our performance in the quarter stands on its own against any quarter from the last two decades.
First quarter net sales were up 48%, while operating earnings on an as adjusted basis increased by 116%.
Adjusted operating margins were 17% and adjusted earnings per share was $2.24, each being the highest mark for any quarter for which we have available records.
Sales in each segment benefited from strong global demand for marine products, with earnings positively impacted by the increased sales, favorable factory absorption from increased production, and favorable changes in foreign currency exchange rates, partially offset by higher variable compensation costs.
Finally, we had free cash flow usage of $23 million in the first quarter as we built inventory ahead of the prime retail selling season, which is very favorable versus free cash flow usages of $144 million in the first quarter of 2020 and $159 million in Q1 of 2019.
Revenue in the Propulsion business increased 47% as each product category experienced strong demand and market share gains.
All customer channels showed growth in the quarter as boat manufacturers continued to ramp up production, and increased capacity enabled continued elevated sales to the independent OEM, dealer and international channels.
Operating margins and operating earnings were up significantly in the quarter, benefiting from positive customer mix in addition to the factors positively affecting all our businesses.
In our Parts and Accessories segment, revenues increased 52% and adjusted operating earnings were up 83% versus first quarter 2020 due to strong sales growth across all product categories.
Adjusted operating margins of 21.3% were 350 basis points better than the prior year quarter, with strong sales increases, together with favorable sales mix, driving the robust increase in adjusted operating earnings.
Continuing the theme from 2020, this aftermarket-driven, annuity-based business is benefiting from more boaters on the water, which is being augmented by flexible work schedules allowing for more leisure time, with the OEM component of the business leveraging investments in technology to take advantage of strong demand from boat builders as they increase production.
In our boat segment, sales were up 44%, with 31% adjusted operating leverage resulting in 10.9% margins for the quarter.
Each brand had strong operational performances and contributed to the successful results, with Lund and Boston Whaler leading the gains in the premium brands, and Bayliner having another strong quarter as a mid-tier value brand.
Although it's only one quarter above our stated goal of double-digit margins, this is the third consecutive quarter of margins above 9%, and we believe that we can continue this trend throughout the year and beyond.
Operating earnings were also positively impacted by the increased sales and the lower retail discount levels versus 2020.
Freedom Boat Club, which Dave discussed earlier, contributed approximately two percent of the segment's revenue, at a margin profile that continues to be accretive to the segment.
Our boat production continues to ramp consistent with our plans to produce in excess of 38,000 units during the year.
Despite producing approximately 9,400 units in the quarter, which is up 16% from the 4th quarter of 2020, we only added a few hundred units to dealer inventories given the continued robust retail market.
Our boat brands ended March with just under 19 weeks of boats on hand, measured on a trailing twelve-month basis, with units in the field lower by 41% versus same time last year.
We continue to believe that our current manufacturing footprint will support the production necessary to satisfy the anticipated 2021 retail demand, but we continue to work with our brands to unlock additional near-term capacity through automation, labor and select capital initiatives, including the capacity actions announced earlier in the year related to our Palm Coast, Reynosa and Portugal facilities, which will begin providing benefits by the end of the year.
As a result of historically low product pipelines and continued very strong boating participation, including in many northern regions in recent weeks due to the early Spring, production levels remain elevated across all our businesses to both satisfy retail demand and to rebuild product pipelines.
These factors, together with our strong pipeline of new products and outstanding operational performance, continue to provide enhanced clarity on our ability to drive growth in upcoming periods, resulting in the following guidance for full-year 2021.
We anticipate U.S. Marine industry retail unit demand to grow mid-to-high single-digit percent versus 2020; net sales between $5.4 billion and $5.6 billion, adjusted operating margin growth between 130 and 170 basis points, operating expenses as a percent of sales to remain lower than 2020, free cash flow in excess of $425 million; and adjusted diluted earnings per share in the range of $7.30 to $7.60.
We're also providing directional guidance regarding the second quarter, where we anticipate revenue growth of approximately 50% over the second quarter of 2020, with adjusted operating leverage in the low-20s percent.
As we look to the second half of the year, despite extremely challenging comparisons to 2020, we still believe that we will deliver top-line and earnings growth over the second half of last year.
I will conclude with an update on certain items that will impact our P&L and cash flow for the remainder of 2021.
The only significant update relates to the working capital usage for the year.
Projected increases in accrued expenses and accounts payable are exceeding anticipated increases in accounts receivable, resulting in a lower working capital build throughout the year.
We now estimate a working capital increase of $80 million to $100 million for 2021, which together with the higher anticipated earnings, results in a stronger free cash flow projection of $425 million.
Our capital strategy assumptions, however, have been augmented in places to take advantage of our stronger, early year cash position.
We still plan to retire approximately $100 million of our long-term debt obligations, as we repaid $9 million in the first quarter and $60 million already in April.
We repurchased $16 million of shares in the quarter, and plan to continue our systematic approach throughout the year.
We anticipate spending $250 million to $270 million on capital expenditures in the year to support, and in some cases accelerate, growth initiatives throughout our organization.
This slightly increased spending will be directed to new product investments in all of our businesses, cost reduction and automation projects, and select additional capacity initiatives to support demand and future growth, primarily in the Propulsion business.
We are also raising our dividend, for the ninth straight year, to $0.335 cents a share, or a 24% increase, as our strong cash position enables us to raise our dividend earlier in the year than usual, and keep our payout ratio close to our target 20% to 25% range, and continue to provide strong returns to our shareholders.
Finally, we've had a busy start to the year with M&A activity, primarily in expanding Freedom Boat Club as Dave discussed earlier.
Completed deals to date will have an immaterial impact on 2021 results, but we remain active in several areas including P&A, Freedom and ACES and intend to close additional deals throughout the year.
As we discussed on our January call, we felt that 2021 was setting up to be an outstanding year for all of our businesses and the first quarter did not disappoint.
The combination of robust consumer demand during the quarter and solid operational execution by our businesses has us squarely on track to deliver against our operating and strategic priorities.
Our top priority for the Propulsion segment continues to be satisfying outboard engine demand from new and existing OEM customers and expanding market share, especially in the dealer, saltwater, repower and international channels.
We are continuing to invest heavily in new product introductions and industry-leading propulsion solutions that we project will enable top-line and earnings growth far into the future.
Our Parts and Accessories segment remains focused on optimizing its global operating model to leverage its distribution and position of product strength in the areas of advanced battery technology, digital systems, and connected products in support of our ACES strategy.
We will continue to focus our M&A activity in this area as we look for opportunities to further build out our technology and systems portfolio.
The Boat segment will build on its first quarter successes by continuing to focus on operational excellence, improving operating margins, launching new products, executing capacity expansion plans, and refilling pipelines in a very robust retail environment.
Lastly, we remain keenly focused on accelerating the Company's ACES strategy, building on our connectivity and shared access initiatives, but also in the areas of autonomy, where we recently announced a new partnership with Carnegie Robotics, and in marine electrification, where we plan a portfolio of new products.
We will also continue to advance our ESG and DEI strategies across the company.
As we have done with past investor days, we have gathered our business leaders to provide you with an update to our 2022 strategy that was originally presented in February of 2020 in Miami, as well as to discuss certain longer-term initiatives that will grow and differentiate Brunswick through the next decade.
We will also hold a Q&A session for investors to ask questions of our management team on Monday, May 17th at noon Central Daylight Time.
Just a reminder that while we will not be providing a full financial update during this event, Ryan will be providing an abbreviated update on our 2022 financial targets, which will include further details regarding the substantial increase of our 2022 earnings per share target to between $8.25 and $8.75 per share as announced today.
Your hard work has enabled us to seamlessly execute our strategic plan and significantly outpace our initial growth and profit expectations.

user
brunswick corp releases first quarter 2021 earnings.
oration releases first quarter 2021 earnings.
first quarter gaap diluted earnings per share of $2.15 and as adjusted diluted earnings per share of $2.24.
increasing 2021 guidance, adjusted diluted earnings per share range of $7.30 - $7.60; free cash flow in excess of $425m.
anticipate 2021 net sales between $5.4 billion and $5.6 billion.
for the q2, we anticipate revenue growth of approximately 50 percent.
believe that h2 2021 comparisons will be more challenging due to potential inflationary pressures.
brunswick - believe h2 2021 comparisons will be challenging due to less favorable factory absorption comparisons, smaller benefits from forex rate changes.
brunswick - guidance assumes revenue and earnings growth in the second-half of the year versus second-half 2020.
brunswick - increase of 2022 earnings per share target to $8.25 to $8.75 per share.

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