Brunswick(US:BC)2021-01-28 22:29Financial Data and Key Metrics Changes - For the full year 2020, net sales increased by 6% and adjusted operating earnings rose by 9% with adjusted operating margins finishing at 13.3%, which is 40 basis points higher than 2019 [17] - In Q4 2020, net sales were up 27%, while operating earnings on an adjusted basis increased by 59%, resulting in an adjusted EPS of $1.32, up 61% from the prior year [18] Business Line Data and Key Metrics Changes - The Propulsion segment saw revenue increase by 33% in Q4 2020, with strong demand across all product categories, particularly in controls and higher horsepower outboard engines [19] - The Parts and Accessories segment's revenues increased by 27% in Q4 2020, with adjusted operating margins of 15.6%, up 280 basis points compared to the prior year [20] - The Boat segment's revenues were higher by 20% in Q4 2020, with operating margins increasing to 9.2%, a 190 basis point increase compared to Q4 2019 [20] Market Data and Key Metrics Changes - Full-year sales increased in most regions, with international sales up 10% and U.S. sales up 4% [13] - Canadian sales grew by 19% in Q4 2020, with anticipated growth in 2021, while Europe delivered strong propulsion growth [14] Company Strategy and Development Direction - The company aims to satisfy outboard engine demand and expand market share through new product introductions and increased production capacity [32] - The Parts and Accessories segment is focused on aftermarket sales, with expectations for mid single-digit organic net sales growth in 2021 [33] - The Boat segment is expected to see top line growth of more than 30% in 2021, with a focus on improving operational performance and refilling pipelines [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing the strategy and delivering strong shareholder returns in 2021 despite uncertainties in the operating environment [8] - The company anticipates U.S. marine industry retail demand to increase by low to mid single-digit percent in 2021, with revenues projected between $4.75 billion and $5 billion [25] Other Important Information - The company generated record free cash flow of $629 million in 2020 and ended the year with $587 million in cash [24] - The company plans to continue share repurchases and is targeting $300 million in free cash flow for 2021 [30] Q&A Session Summary Question: Retail market expectations for 2021 - Management noted leading indicators show elevated retail demand, with financing applications up significantly, suggesting a strong start to 2021 [45] Question: Wholesale production expectations - The company expects to produce around 39,000 units in 2021, matching retail demand, with potential increases in subsequent years [46] Question: Impact of new OEM contracts - Management indicated that the full impact of new OEM contracts would not be realized until the 2022 model year [49] Question: Supply chain tightness - Management acknowledged some supply chain risks but stated that these have not materially affected operations at this time [52] Question: Capacity expansion impact on other segments - Adding boat capacity will have a material impact on the engine and parts and accessories businesses, but no significant new investments are needed for Mercury [54][57] Question: Cash flow and M&A opportunities - The company plans to allocate around $100 million for M&A in the coming years, with a focus on strategic acquisitions [71]