000001493012/3177,897,7712021Q1FALSE9.810.712.0200,000,000200,000,000200,000,000200,000,000200,000,0000.750.750.750.750.75102,538,000102,538,000102,538,000102,538,000102,538,00077,941,00077,875,00079,114,00024,597,00024,663,00023,424,000—0.240.240.240.2411—————P1Y8M12DP1Y9M18DP2Y10M24DP2Y10M24DP1Y6M0DP1Y6M0D78.280.078.880.3———P13Y3M18DP11Y8M12D000Postretirement Benefits

The Company has defined contribution plans, nonqualified defined benefit pension plans, and other postretirement benefit plans covering substantially all of its employees. The Company's contributions to its defined contribution plans include matching and annual discretionary contributions which are based on various percentages of compensation, and in some instances are based on the amount of the employees' contributions to the plans. See Note 17 in the Notes to Consolidated Financial Statements in the 2020 Form 10-K for further details regarding these plans.

Pension and other postretirement benefit costs included the following components for the three months ended April 3, 2021 and March 28, 2020:

Pension Benefits

Other Postretirement Benefits

(in millions)

April 3, 2021

March 28, 2020

April 3, 2021

March 28, 2020

Pension and other postretirement benefit costs included the following components for the three months ended April 3, 2021 and March 28, 2020:

Pension Benefits

Other Postretirement Benefits

(in millions)

April 3, 2021

March 28, 2020

April 3, 2021

March 28, 2020

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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 April 03, 2021

☐			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) (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, a 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.

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

Chicago 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 May 6, 2021 was 77,897,771.

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BRUNSWICK CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

April 3, 2021

 

 

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION						Page
Item 1.			Condensed Consolidated Financial Statements
			Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three months ended April 3, 2021 and March 28, 2020			4
			Condensed Consolidated Balance Sheets (unaudited) as of April 3, 2021, December 31, 2020 and March 28, 2020			5
			Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended April 3, 2021 and March 28, 2020			7
			Condensed Consolidated Statements of Shareholders' Equity (unaudited) for the three months ended April 3, 2021 and March 28, 2020			8
			Notes to Condensed Consolidated Financial Statements (unaudited)			9
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			32
Item 4.			Controls and Procedures			32
PART II – OTHER INFORMATION
Item 1A.			Risk Factors			33
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 5.			Other Information			34
Item 6.			Exhibits			35

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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
(in millions, except per share data)			April 3, 2021						March 28, 2020
Net sales			$	1,433.2					$	965.5
Cost of sales			1,015.9						721.7
Selling, general and administrative expense			150.8						111.3
Research and development expense			34.1						28.9
Restructuring, exit and impairment charges			0.5						0.4
Operating earnings			231.9						103.2
Equity earnings			0.8						1.8
Other (expense) income, net			(1.3)						0.7
Earnings before interest and income taxes			231.4						105.7
Interest expense			(14.8)						(16.9)
Interest income			0.2						0.3
Earnings before income taxes			216.8						89.1
Income tax provision			47.4						18.4
Net earnings from continuing operations			169.4						70.7
Discontinued operations:
Loss from discontinued operations, net of tax			(0.1)						(0.6)
Loss on disposal of discontinued operations, net of tax			—						(1.1)
Net loss from discontinued operations, net of tax			(0.1)						(1.7)
Net earnings			$	169.3					$	69.0
Earnings per common share:
Basic
Earnings from continuing operations			$	2.17					$	0.88
Loss from discontinued operations			(0.00)						(0.02)
Net earnings			$	2.17					$	0.86
Diluted
Earnings from continuing operations			$	2.15					$	0.88
Loss from discontinued operations			(0.00)						(0.02)
Net earnings			$	2.15					$	0.86
Weighted average shares used for computation of:
Basic earnings per common share			78.2						80.0
Diluted earnings per common share			78.8						80.3
Comprehensive income			$	174.9					$	61.1
The Notes to Condensed Consolidated Financial Statements are an integral part of these condensed consolidated statements.

3

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Table of Contents

BRUNSWICK CORPORATION

Condensed Consolidated Balance Sheets

(unaudited)

(in millions)			April 3, 2021						December 31, 2020						March 28, 2020
Assets
Current assets
Cash and cash equivalents, at cost, which approximates fair value			$	471.9					$	519.6					$	502.9
Restricted cash			9.7						10.7						11.6
Short-term investments in marketable securities			7.3						56.7						0.8
Total cash and short-term investments in marketable securities			488.9						587.0						515.3
Accounts and notes receivable, less allowances of $9.8, $10.7, $12.0			539.1						337.6						465.4
Inventories
Finished goods			463.7						446.8						549.3
Work-in-process			125.4						94.0						108.3
Raw materials			176.5						171.0						182.5
Net inventories			765.6						711.8						840.1
Prepaid expenses and other			42.1						34.1						49.0
Current assets			1,835.7						1,670.5						1,869.8
Property
Land			17.6						17.7						17.8
Buildings and improvements			440.3						435.5						419.7
Equipment			1,198.2						1,184.9						1,107.3
Total land, buildings and improvements and equipment			1,656.1						1,638.1						1,544.8
Accumulated depreciation			(944.9)						(929.8)						(877.3)
Net land, buildings and improvements and equipment			711.2						708.3						667.5
Unamortized product tooling costs			161.2						155.3						143.1
Net property			872.4						863.6						810.6
Other assets
Goodwill			422.7						417.7						414.0
Other intangibles, net			544.3						552.3						575.0
Deferred income tax asset			126.4						136.6						109.7
Operating lease assets			80.7						83.0						82.3
Equity investments			36.3						32.5						31.3
Other long-term assets			24.7						14.4						11.9
Other assets			1,235.1						1,236.5						1,224.2
Total assets			$	3,943.2					$	3,770.6					$	3,904.6
The Notes to Condensed Consolidated Financial Statements are an integral part of these condensed consolidated statements.

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(in millions)			April 3, 2021						December 31, 2020						March 28, 2020
Liabilities and shareholders' equity
Current liabilities
Short-term debt and current maturities of long-term debt			$	43.8					$	43.1					$	425.7
Accounts payable			532.4						457.6						366.8
Accrued expenses			552.8						578.5						493.7
Current liabilities			1,129.0						1,079.2						1,286.2
Long-term liabilities
Debt			900.9						908.3						1,069.0
Postretirement benefits			72.3						74.7						72.1
Operating lease liabilities			64.9						69.8						69.6
Other			133.5						128.6						104.0
Long-term liabilities			1,171.6						1,181.4						1,314.7
Shareholders' equity
Common stock; authorized: 200,000,000 shares, $0.75 par value; issued: 102,538,000 shares; outstanding: 77,941,000, 77,875,000 and 79,114,000 shares			76.9						76.9						76.9
Additional paid-in capital			371.2						383.8						358.8
Retained earnings			2,374.0						2,225.7						1,981.1
Treasury stock, at cost: 24,597,000, 24,663,000 and 23,424,000 shares			(1,142.4)						(1,133.7)						(1,051.8)
Accumulated other comprehensive loss			(37.1)						(42.7)						(61.3)
Shareholders' equity			1,642.6						1,510.0						1,303.7
Total liabilities and shareholders' equity			$	3,943.2					$	3,770.6					$	3,904.6
The Notes to Condensed Consolidated Financial Statements are an integral part of these condensed consolidated statements.

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BRUNSWICK CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited)

			Three Months Ended
(in millions)			April 3, 2021						March 28, 2020
Cash flows from operating activities
Net earnings			$	169.3					$	69.0
Less: net loss from discontinued operations, net of tax			(0.1)						(1.7)
Net earnings from continuing operations, net of tax			169.4						70.7
Stock compensation expense			6.1						(0.1)
Depreciation and amortization			41.6						35.2
Pension funding, net of expense			(0.8)						(0.6)
Deferred income taxes			7.9						10.6
Changes in certain current assets and current liabilities			(236.2)						(196.9)
Long-term extended warranty contracts and other deferred revenue			2.4						1.0
Income taxes			29.6						(2.5)
Other, net			(2.7)						(1.3)
Net cash provided by (used for) operating activities of continuing operations			17.3						(83.9)
Net cash (used for) provided by operating activities of discontinued operations			(9.0)						4.8
Net cash provided by (used for) operating activities			8.3						(79.1)
Cash flows from investing activities
Capital expenditures			(42.9)						(55.9)
Sales or maturities of marketable securities			49.4						—
Investments			(3.9)						(3.6)
Acquisition of businesses, net of cash acquired			(5.3)						—
Proceeds from the sale of property, plant and equipment			4.2						0.4
Net cash provided by (used for) investing activities			1.5						(59.1)
Cash flows from financing activities
Proceeds from issuances of short-term debt			—						610.0
Payments of short-term debt			—						(225.0)
Net proceeds from issuances of long-term debt			1.9						—
Payments of long-term debt including current maturities			(9.2)						(0.3)
Common stock repurchases			(15.9)						(34.1)
Cash dividends paid			(21.0)						(19.2)
Proceeds from share-based compensation activity			0.5						0.4
Tax withholding associated with shares issued for share-based compensation			(12.7)						(6.5)
Other, net			(0.1)						(0.1)
Net cash (used for) provided by financing activities			(56.5)						325.2
Effect of exchange rate changes			(2.0)						(4.4)
Net (decrease) increase in Cash and cash equivalents and Restricted cash			(48.7)						182.6
Cash and cash equivalents and Restricted cash at beginning of period			530.3						331.9
Cash and cash equivalents and Restricted cash at end of period			481.6						514.5
Less: Restricted cash			9.7						11.6
Cash and cash equivalents at end of period			$	471.9					$	502.9
The Notes to Condensed Consolidated Financial Statements are an integral part of these condensed consolidated statements.

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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, 2020			$	76.9					$	383.8					$	2,225.7					$	(1,133.7)					$	(42.7)					$	1,510.0
Net earnings			—						—						169.3						—						—						169.3
Other comprehensive income			—						—						—						—						5.6						5.6
Dividends ($0.27 per common share)			—						—						(21.0)						—						—						(21.0)
Compensation plans and other			—						(12.6)						—						7.2						—						(5.4)
Common stock repurchases			—						—						—						(15.9)						—						(15.9)
Balance at April 3, 2021			$	76.9					$	371.2					$	2,374.0					$	(1,142.4)					$	(37.1)					$	1,642.6

(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, 2019			$	76.9					$	369.2					$	1,931.3					$	(1,023.1)					$	(53.4)					$	1,300.9
Net earnings			—						—						69.0						—						—						69.0
Other comprehensive loss			—						—						—						—						(7.9)						(7.9)
Dividends ($0.24 per common share)			—						—						(19.2)						—						—						(19.2)
Compensation plans and other			—						(10.4)						—						5.4						—						(5.0)
Common stock repurchases			—						—						—						(34.1)						—						(34.1)
Balance at March 28, 2020			$	76.9					$	358.8					$	1,981.1					$	(1,051.8)					$	(61.3)					$	1,303.7

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

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BRUNSWICK CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

Note 1 – Significant Accounting Policies

Interim Financial Statements. Brunswick's unaudited interim condensed consolidated financial statements have been prepared pursuant to Securities and Exchange Commission (SEC) rules and regulations. Therefore, certain information and disclosures normally included in financial statements and related notes prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted.

These financial statements should be read in conjunction with, and have been prepared in conformity with, the accounting principles reflected in the consolidated financial statements and related notes included in Brunswick's 2020 Annual Report on Form 10-K for the year ended December 31, 2020 (the 2020 Form 10-K). These results include, in management's opinion, all normal and recurring adjustments necessary to present fairly Brunswick's financial position, results of operations and cash flows. Due to the seasonality of Brunswick's businesses, the interim results are not necessarily indicative of the results that may be expected for the remainder of the year.

The Company maintains its financial records on the basis of a fiscal year ending on December 31, with the fiscal quarters spanning approximately thirteen weeks. The first quarter ends on the Saturday closest to the end of the first thirteen-week period. The second and third quarters are thirteen weeks in duration and the fourth quarter is the remainder of the year. The first quarter of fiscal year 2021 ended on April 3, 2021 and the first quarter of fiscal year 2020 ended on March 28, 2020.

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Notes to Condensed Consolidated Financial Statements

(unaudited)

    

Note 2 – Revenue Recognition

The following table presents the Company's revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors:

			Three Months Ended
			April 3, 2021
(in millions)			Propulsion						Parts & Accessories						Boat						Total
Geographic Markets
United States			$	421.3					$	312.3					$	312.6					$	1,046.2
Europe			109.0						63.5						41.6						214.1
Asia-Pacific			65.7						42.5						6.7						114.9
Canada			25.2						25.4						48.4						99.0
Rest-of-World			36.6						15.9						10.2						62.7
Segment Eliminations			(94.9)						(8.8)						—						(103.7)
Total			$	562.9					$	450.8					$	419.5					$	1,433.2
			Three Months Ended
			March 28, 2020
			Propulsion						Parts & Accessories						Boat						Total
Geographic Markets
United States			$	290.9					$	210.9					$	215.5					$	717.3
Europe			69.6						42.8						35.1						147.5
Asia-Pacific			49.3						24.7						5.6						79.6
Canada			14.1						13.7						31.8						59.6
Rest-of-World			24.7						9.5						3.5						37.7
Segment Eliminations			(69.1)						(7.1)						—						(76.2)
Total			$	379.5					$	294.5					$	291.5					$	965.5

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Notes to Condensed Consolidated Financial Statements

(unaudited)

    

			Three Months Ended
			April 3, 2021
(in millions)			Propulsion						Parts & Accessories						Boat						Total
Major Product Lines
Outboard Engines			$	504.5					$	—					$	—					$	504.5
Controls, Rigging, and Propellers			94.9						—						—						94.9
Sterndrive Engines			58.4						—						—						58.4
Distribution Parts and Accessories			—						200.6						—						200.6
Advanced Systems Group			—						134.8						—						134.8
Engine Parts and Accessories			—						124.2						—						124.2
Aluminum Freshwater Boats			—						—						177.8						177.8
Recreational Fiberglass Boats			—						—						135.4						135.4
Saltwater Fishing Boats			—						—						96.8						96.8
Business Acceleration			—						—						12.7						12.7
Boat Eliminations/Other			—						—						(3.2)						(3.2)
Segment Eliminations			(94.9)						(8.8)						—						(103.7)
Total			$	562.9					$	450.8					$	419.5					$	1,433.2
			Three Months Ended
			March 28, 2020
			Propulsion						Parts & Accessories						Boat						Total
Major Product Lines
Outboard Engines			$	353.8					$	—					$	—					$	353.8
Controls, Rigging, and Propellers			57.5						—						—						57.5
Sterndrive Engines			37.3						—						—						37.3
Distribution Parts and Accessories			—						121.3						—						121.3
Advanced Systems Group			—						103.1						—						103.1
Engine Parts and Accessories			—						77.2						—						77.2
Aluminum Freshwater Boats			—						—						120.5						120.5
Recreational Fiberglass Boats			—						—						101.8						101.8
Saltwater Fishing Boats			—						—						59.8						59.8
Business Acceleration			—						—						10.0						10.0
Boat Eliminations/Other			—						—						(0.6)						(0.6)
Segment Eliminations			(69.1)						(7.1)						—						(76.2)
Total			$	379.5					$	294.5					$	291.5					$	965.5

As of December 31, 2020, $113.0 million of contract liabilities associated with extended warranties and customer deposits were reported in Accrued expenses and Other Long-term liabilities, of which $11.6 million was recognized as revenue during the three months ended April 3, 2021. As of April 3, 2021, total contract liabilities were $121.0 million. The total amount of the transaction price allocated to unsatisfied performance obligations as of April 3, 2021 was $112.3 million for contracts greater than one year, which primarily relates to extended warranties. The Company expects to recognize $24.9 million of this amount in 2021, $25.9 million in 2022, and $61.5 million thereafter.

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Notes to Condensed Consolidated Financial Statements

(unaudited)

    

Note 3 – Discontinued Operations

On June 27, 2019, the Company completed the sale of its Fitness business to KPS Capital Partners, LP. As a result, this business, which was previously reported in the Company's Fitness segment, is being reported as discontinued operations in the Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flows for all periods presented. Refer to Note 3 in the 2020 Form 10-K for further information.

In connection with the sale of its Fitness business, the Company retained assets of $26.4 million primarily related to VAT receivables, and retained liabilities of $45.1 million primarily related to VAT payables, product warranty liabilities and certain employee benefits. As of April 3, 2021, retained assets and liabilities were $4.1 million and $2.2 million, respectively. As of March 28, 2020, retained assets and liabilities were $11.1 million and $30.4 million, respectively.

Note 4 – Restructuring, Exit and Impairment Activities

The Company recorded restructuring, exit and impairment charges in the Condensed Consolidated Statements of Comprehensive Income in 2021 and 2020.

The following table is a summary of those expenses for the three months ended April 3, 2021 and March 28, 2020:

			April 3, 2021																								March 28, 2020
(in millions)			Parts & Accessories												Boat						Corporate						Total						Parts & Accessories						Boat						Corporate						Total
Restructuring and exit activities:
Employee termination and other benefits			$	0.5											$	(0.0)					$	—					$	0.5					$	0.3					$	(0.0)					$	0.1					$	0.4
Other			—												0.0						—						—						—						—						—						—
Total restructuring, exit and impairm