Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-01043

____________

Brunswick Corporation

(Exact name of registrant as specified in its charter)



Delaware		36-0848180
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

26125 N. Riverwoods Blvd., Suite 500, Mettawa, IL 60045-3420

(Address of principal executive offices, including zip code)

(847) 735-4700

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large Accelerated Filer	☒	Accelerated Filer	☐

Non-accelerated Filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common stock, par value $0.75 per share	BC	New York Stock Exchange
6.500% Senior Notes due 2048	BC-A	New York Stock Exchange
6.625% Senior Notes due 2049	BC-B	New York Stock Exchange
6.375% Senior Notes due 2049	BC-C	New York Stock Exchange

The number of shares of Common Stock ($0.75 par value) of the registrant outstanding as of October 28, 2019 was 81,573,656.

BRUNSWICK CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

September 28, 2019

TABLE OF CONTENTS



PART I – FINANCIAL INFORMATION		Page

Item 1.	Condensed Consolidated Financial Statements (unaudited)

	Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended September 28, 2019 and September 29, 2018	3

	Condensed Consolidated Balance Sheets as of September 28, 2019, December 31, 2018 and September 29, 2018	4

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 28, 2019 and September 29, 2018	6

	Condensed Consolidated Statements of Shareholders' Equity for the three months and nine months ended September 28, 2019 and September 29, 2018	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	46


PART II – OTHER INFORMATION

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 6.	Exhibits	48

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

BRUNSWICK CORPORATION Condensed Consolidated Statements of Comprehensive Income (unaudited)

	Three Months Ended						Nine Months Ended
(in millions, except per share data)	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Net sales	$	976.6		$	1,044.1		$	3,190.8		$	3,159.8
Cost of sales	699.7			765.8			2,306.4			2,357.2
Selling, general and administrative expense	120.1			141.3			380.0			378.9
Research and development expense	29.7			29.4			91.9			91.7
Restructuring, exit and impairment charges	7.4			9.4			16.0			46.2
Operating earnings	119.7			98.2			396.5			285.8
Equity earnings	1.9			1.6			5.4			4.0
Pension settlement charge	(294.1		)	—			(294.1		)	—
Other income (expense), net	0.1			(0.7		)	(1.6		)	(3.5		)
Earnings (loss) before interest and income taxes	(172.4		)	99.1			106.2			286.3
Interest expense	(18.8		)	(13.1		)	(59.4		)	(28.0		)
Interest income	1.6			1.0			2.4			2.3
Transaction financing charges	—			(5.1		)	—			(5.1		)
Earnings (loss) before income taxes	(189.6		)	81.9			49.2			255.5
Income tax provision	43.3			6.7			93.8			48.4
Net earnings (loss) from continuing operations	(232.9		)	75.2			(44.6		)	207.1

Discontinued operations:
Earnings (loss) from discontinued operations, net of tax	(2.9		)	(5.2		)	(108.5		)	14.8
Loss on disposal of discontinued operations, net of tax	(3.5		)	—			(45.0		)	—
Net earnings (loss) from discontinued operations, net of tax	(6.4		)	(5.2		)	(153.5		)	14.8
Net earnings (loss)	$	(239.3	)	$	70.0		$	(198.1	)	$	221.9

Earnings (loss) per common share:
Basic
Earnings (loss) from continuing operations	$	(2.74	)	$	0.86		$	(0.52	)	$	2.36
Earnings (loss) from discontinued operations	(0.08		)	(0.06		)	(1.77		)	0.17
Net earnings (loss)	$	(2.82	)	$	0.80		$	(2.29	)	$	2.53

Diluted
Earnings (loss) from continuing operations	$	(2.74	)	$	0.86		$	(0.52	)	$	2.35
Earnings (loss) from discontinued operations	(0.08		)	(0.06		)	(1.77		)	0.16
Net earnings (loss)	$	(2.82	)	$	0.80		$	(2.29	)	$	2.51

Weighted average shares used for computation of:
Basic earnings (loss) per common share	85.0			87.3			86.5			87.7
Diluted earnings (loss) per common share	85.0			87.9			86.5			88.3

Comprehensive income	$	53.9		$	72.5		$	111.7		$	225.0

The Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated statements.

Table of Contents

BRUNSWICK CORPORATION Condensed Consolidated Balance Sheets (unaudited)

(in millions)	September 28, 2019			December 31, 2018			September 29, 2018
Assets
Current assets
Cash and cash equivalents, at cost, which approximates fair value	$	366.2		$	294.4		$	302.4
Restricted cash	11.6			9.0			9.5
Short-term investments in marketable securities	0.8			0.8			0.8
Total cash and short-term investments in marketable securities	378.6			304.2			312.7
Accounts and notes receivable, less allowances of $8.4, $8.7 and $7.4	414.7			351.8			392.5
Inventories
Finished goods	532.3			490.8			441.8
Work-in-process	102.4			94.1			102.3
Raw materials	175.5			189.1			180.5
Net inventories	810.2			774.0			724.6
Prepaid expenses and other	90.1			72.9			66.4
Current assets held for sale	—			377.2			370.0
Current assets	1,693.6			1,880.1			1,866.2

Property
Land	17.8			16.5			16.5
Buildings and improvements	403.9			359.8			335.2
Equipment	1,061.7			983.0			935.4
Total land, buildings and improvements and equipment	1,483.4			1,359.3			1,287.1
Accumulated depreciation	(849.4		)	(791.9		)	(794.2		)
Net land, buildings and improvements and equipment	634.0			567.4			492.9
Unamortized product tooling costs	129.7			127.1			123.0
Net property	763.7			694.5			615.9

Other assets
Goodwill	414.0			377.3			377.7
Other intangibles, net	591.0			585.8			594.0
Operating lease assets	82.4			—			—
Deferred income tax asset	67.4			97.8			107.1
Equity investments	27.8			32.6			26.4
Other long-term assets	14.5			13.1			11.7
Long-term assets held for sale	—			610.3			623.0
Other assets	1,197.1			1,716.9			1,739.9

Total assets	$	3,654.4		$	4,291.5		$	4,222.0

The Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated statements.

Table of Contents

BRUNSWICK CORPORATION Condensed Consolidated Balance Sheets (unaudited)

(in millions)	September 28, 2019			December 31, 2018			September 29, 2018
Liabilities and shareholders’ equity
Current liabilities
Short-term debt and current maturities of long-term debt	$	48.5		$	41.3		$	338.8
Accounts payable	347.6			458.2			415.2
Accrued expenses	507.9			502.1			485.5
Current liabilities held for sale	—			255.0			245.1
Current liabilities	904.0			1,256.6			1,484.6

Long-term liabilities
Debt	1,083.0			1,179.5			891.0
Operating lease liabilities	69.7			—			—
Postretirement benefits	68.1			71.6			75.5
Other	111.4			101.6			116.7
Long-term liabilities held for sale	—			99.6			96.1
Long-term liabilities	1,332.2			1,452.3			1,179.3

Shareholders’ equity
Common stock; authorized: 200,000,000 shares, $0.75 par value; issued: 102,538,000 shares; outstanding: 82,406,000, 86,757,000 and 86,740,000 shares	76.9			76.9			76.9
Additional paid-in capital	367.3			371.1			365.9
Retained earnings	1,883.5			2,135.7			2,110.5
Treasury stock, at cost: 20,132,000, 15,781,000 and 15,798,000 shares	(856.2		)	(638.0		)	(638.5		)
Accumulated other comprehensive loss	(53.3		)	(363.1		)	(356.7		)
Shareholders’ equity	1,418.2			1,582.6			1,558.1

Total liabilities and shareholders’ equity	$	3,654.4		$	4,291.5		$	4,222.0

The Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated statements.

Table of Contents

BRUNSWICK CORPORATION Condensed Consolidated Statements of Cash Flows (unaudited)

	Nine Months Ended
(in millions)	September 28, 2019			September 29, 2018
Cash flows from operating activities
Net earnings (loss)	$	(198.1	)	$	221.9
Less: net earnings (loss) from discontinued operations, net of tax	(153.5		)	14.8
Net earnings (loss) from continuing operations	(44.6		)	207.1
Stock compensation expense	12.2			11.5
Depreciation and amortization	101.5			85.5
Pension expense, net of (funding)	291.6			(157.0		)
Asset impairment charges	2.9			31.7
Deferred income taxes	(12.1		)	33.8
Changes in certain current assets and current liabilities	(197.2		)	(46.1		)
Long-term extended warranty contracts and other deferred revenue	8.6			8.4
Income taxes	87.2			9.3
Other, net	4.1			5.8
Net cash provided by operating activities of continuing operations	254.2			190.0
Net cash (used for) provided by operating activities of discontinued operations	(37.9		)	44.0
Net cash provided by operating activities	216.3			234.0

Cash flows from investing activities
Capital expenditures	(178.4		)	(113.3		)
Investments	4.7			(2.2		)
Acquisition of businesses, net of cash acquired	(64.1		)	(910.0		)
Proceeds from the sale of property, plant and equipment	6.4			0.2
Other, net	—			(0.2		)
Net cash used for investing activities of continuing operations	(231.4		)	(1,025.5		)
Net cash provided by (used for) investing activities of discontinued operations	481.9			(5.2		)
Net cash provided by (used for) investing activities	250.5			(1,030.7		)

Cash flows from financing activities
Proceeds from issuances of short-term debt	655.0			298.9
Payments of short-term debt	(655.0		)	—
Net proceeds from issuances of long-term debt	223.4			497.7
Payments of long-term debt including current maturities	(318.3		)	(0.7		)
Common stock repurchases	(231.1		)	(75.0		)
Cash dividends paid	(54.1		)	(49.6		)
Proceeds from share-based compensation activity	0.9			1.4
Tax withholding associated with shares issued for share-based compensation	(9.8		)	(12.5		)
Other, net	(0.2		)	(6.2		)
Net cash (used for) provided by financing activities	(389.2		)	654.0

Effect of exchange rate changes	(3.2		)	(3.6		)
Net increase (decrease) in Cash and cash equivalents and Restricted cash	74.4			(146.3		)
Cash and cash equivalents and Restricted cash at beginning of period	303.4			458.2

Cash and cash equivalents and Restricted cash at end of period	377.8			311.9
Less: Restricted cash	11.6			9.5
Cash and cash equivalents at end of period	$	366.2		$	302.4

The Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated statements.

Table of Contents

Brunswick Corporation Condensed Consolidated Statements of Shareholders' Equity (unaudited)

(in millions, except per share data)	Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2018	$	76.9	$	371.1		$	2,135.7		$	(638.0	)	$	(363.1	)	$	1,582.6
Net loss	—		—			(36.3		)	—			—			(36.3		)
Other comprehensive income	—		—			—			—			1.0			1.0
Dividends ($0.21 per common share)	—		—			(18.3		)	—			—			(18.3		)
Compensation plans and other	—		(11.2		)	—			9.1			—			(2.1		)
Balance at March 30, 2019	76.9		359.9			2,081.1			(628.9		)	(362.1		)	1,526.9
Net earnings	—		—			77.5			—			—			77.5
Other comprehensive income	—		—			—			—			15.6			15.6
Dividends ($0.21 per common share)	—		—			(18.1		)	—			—			(18.1		)
Compensation plans and other	—		3.1			—			2.1			—			5.2
Common stock repurchases	—		—			—			(69.8		)	—			(69.8		)
Balance at June 29, 2019	76.9		363.0			2,140.5			(696.6		)	(346.5		)	1,537.3
Net loss	—		—			(239.3		)	—			—			(239.3		)
Other comprehensive income	—		—			—			—			293.2			293.2
Dividends ($0.21 per common share)	—		—			(17.7		)	—			—			(17.7		)
Compensation plans and other	—		4.3			—			1.7			—			6.0
Common stock repurchases	—		—			—			(161.3		)	—			(161.3		)
Balance at September 28, 2019	$	76.9	$	367.3		$	1,883.5		$	(856.2	)	$	(53.3	)	$	1,418.2



(in millions, except per share data)	Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2017	$	76.9	$	374.4		$	1,966.8		$	(575.4	)	$	(359.8	)	$	1,482.9
Net earnings	—		—			72.9			—			—			72.9
Other comprehensive income	—		—			—			—			11.0			11.0
Dividends ($0.19 per common share)	—		—			(16.6		)	—			—			(16.6		)
Compensation plans and other	—		(17.0		)	—			11.3			—			(5.7		)
Common stock repurchases	—		—			—			(35.0		)	—			(35.0		)
ASU No. 2014-09 adoption	—		—			(28.7		)	—			—			(28.7		)
Balance at March 31, 2018	76.9		357.4			1,994.4			(599.1		)	(348.8		)	1,480.8
Net earnings	—		—			79.0			—			—			79.0
Other comprehensive loss	—		—			—			—			(10.4		)	(10.4		)
Dividends ($0.19 per common share)	—		—			(16.5		)	—			—