bcorp-20220702

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 July 02, 2022


☐			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

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 July 28, 2022 was 74,369,399.

BRUNSWICK CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

July 2, 2022

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION		Page

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3













Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36


PART II – OTHER INFORMATION



Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37



Item 6.	Exhibits	38

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				Six Months Ended
(in millions, except per share data)	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Net sales	$	1,835.6	$	1,554.8	$	3,531.3	$	2,988.0
Cost of sales	1,299.2		1,093.3		2,511.3		2,109.2
Selling, general and administrative expense	207.2		173.6		399.9		324.4
Research and development expense	50.2		37.5		101.6		71.6
Restructuring, exit and impairment charges	—		0.2		—		0.7
Operating earnings	279.0		250.2		518.5		482.1
Equity earnings	0.7		0.4		1.5		1.2

Other income (expense), net	0.3		(1.5)		(1.2)		(2.8)
Earnings before interest and income taxes	280.0		249.1		518.8		480.5
Interest expense	(25.9)		(15.4)		(44.3)		(30.2)
Interest income	0.5		0.9		0.6		1.1

Loss on early extinguishment of debt	—		—		(0.1)		—
Earnings before income taxes	254.6		234.6		475.0		451.4
Income tax provision	55.8		55.2		102.2		102.6
Net earnings from continuing operations	198.8		179.4		372.8		348.8




Net loss from discontinued operations, net of tax	(1.5)		—		(1.3)		(0.1)
Net earnings	$	197.3	$	179.4	$	371.5	$	348.7

Earnings per common share:
Basic
Earnings from continuing operations	$	2.63	$	2.30	$	4.89	$	4.47
Loss from discontinued operations	(0.02)		—		(0.02)		—
Net earnings	$	2.61	$	2.30	$	4.87	$	4.47

Diluted
Earnings from continuing operations	$	2.61	$	2.29	$	4.86	$	4.44
Loss from discontinued operations	(0.02)		—		(0.02)		—
Net earnings	$	2.59	$	2.29	$	4.84	$	4.44

Weighted average shares used for computation of:
Basic earnings per common share	75.7		78.0		76.3		78.0
Diluted earnings per common share	76.1		78.5		76.7		78.6

Comprehensive income	$	185.0	$	184.0	$	369.1	$	358.9



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

Table of Contents

BRUNSWICK CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)


(in millions)	July 2, 2022		December 31, 2021		July 3, 2021
Assets
Current assets
Cash and cash equivalents, at cost, which approximates fair value	$	566.7	$	354.5	$	590.2
Restricted cash	11.9		12.2		9.7
Short-term investments in marketable securities	37.0		0.8		0.8
Total cash and short-term investments in marketable securities	615.6		367.5		600.7
Accounts and notes receivable, less allowances of $9.3, $9.7, $10.3	611.0		485.3		503.3
Inventories
Finished goods	746.0		685.5		468.6
Work-in-process	201.4		176.8		147.6
Raw materials	425.0		345.7		218.9
Net inventories	1,372.4		1,208.0		835.1
Prepaid expenses and other	86.4		63.8		48.9

Current assets	2,685.4		2,124.6		1,988.0

Property
Land	37.1		34.7		17.6
Buildings and improvements	520.0		479.3		446.8
Equipment	1,420.8		1,332.4		1,244.4

Total land, buildings and improvements and equipment	1,977.9		1,846.4		1,708.8
Accumulated depreciation	(1,016.1)		(989.6)		(964.5)
Net land, buildings and improvements and equipment	961.8		856.8		744.3
Unamortized product tooling costs	202.6		190.1		167.7
Net property	1,164.4		1,046.9		912.0

Other assets
Goodwill	966.7		888.4		434.3
Other intangibles, net	1,038.2		1,052.1		536.3
Deferred income tax asset	128.6		146.0		117.2
Operating lease assets	103.0		92.8		85.9
Equity investments	48.0		43.8		41.4
Other long-term assets	32.2		30.4		23.4

Other assets	2,316.7		2,253.5		1,238.5

Total assets	$	6,166.5	$	5,425.0	$	4,138.5

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

Table of Contents


(in millions)	July 2, 2022		December 31, 2021		July 3, 2021
Liabilities and shareholders' equity
Current liabilities
Short-term debt and current maturities of long-term debt	$	3.0	$	37.4	$	43.5
Accounts payable	644.0		693.5		588.2
Accrued expenses	700.7		711.3		619.6

Current liabilities	1,347.7		1,442.2		1,251.3

Long-term liabilities
Debt	2,499.0		1,779.0		832.0
Postretirement benefits	64.0		66.5		71.9
Operating lease liabilities	86.1		75.5		69.5
Other	165.1		147.6		144.3

Long-term liabilities	2,814.2		2,068.6		1,117.7

Shareholders' equity
Common stock; authorized: 200,000,000 shares, $0.75 par value; issued: 102,538,000 shares; outstanding: 74,472,000, 76,933,000 and 77,554,000 shares	76.9		76.9		76.9
Additional paid-in capital	380.8		394.5		380.1
Retained earnings	3,036.2		2,720.1		2,527.2
Treasury stock, at cost: 28,066,000, 25,605,000 and 24,984,000 shares	(1,455.4)		(1,245.8)		(1,182.2)







Accumulated other comprehensive loss	(33.9)		(31.5)		(32.5)
Shareholders' equity	2,004.6		1,914.2		1,769.5

Total liabilities and shareholders' equity	$	6,166.5	$	5,425.0	$	4,138.5

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

Table of Contents

BRUNSWICK CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended
(in millions)	July 2, 2022		July 3, 2021
Cash flows from operating activities
Net earnings	$	371.5	$	348.7
Less: net loss from discontinued operations, net of tax	(1.3)		(0.1)
Net earnings from continuing operations, net of tax	372.8		348.8
Stock compensation expense	12.0		14.8
Depreciation and amortization	106.1		84.6
Pension funding, net of expense	(0.3)		(1.3)

Asset impairment charges	1.5		0.8

Deferred income taxes	10.8		12.3

Changes in certain current assets and current liabilities	(338.6)		(136.5)
Long-term extended warranty contracts and other deferred revenue	8.8		9.0


Income taxes	(5.9)		10.0
Other, net	(17.8)		8.0
Net cash provided by operating activities of continuing operations	149.4		350.5
Net cash used for operating activities of discontinued operations	(2.5)		(9.1)
Net cash provided by operating activities	146.9		341.4

Cash flows from investing activities
Capital expenditures	(196.5)		(110.3)
Purchases of marketable securities	(36.2)		—
Sales or maturities of marketable securities	—		55.9
Investments	(4.0)		(9.1)
Acquisition of businesses, net of cash acquired	(95.7)		(16.7)
Proceeds from the sale of property, plant and equipment	3.0		4.6
Cross currency swap settlement	16.7		—


Net cash used for investing activities	(312.7)		(75.6)

Cash flows from financing activities
Proceeds from issuances of short-term debt	125.9		—
Payments of short-term debt	(125.0)		—
Net proceeds from issuances of long-term debt	741.8		1.9
Payments of long-term debt including current maturities	(58.0)		(78.5)

Common stock repurchases	(220.0)		(55.9)
Cash dividends paid	(55.4)		(47.2)
Proceeds from share-based compensation activity	—		0.5
Tax withholding associated with shares issued for share-based compensation	(16.4)		(12.8)
Other, net	(4.0)		(3.7)


Net cash provided by (used for) financing activities	388.9		(195.7)

Effect of exchange rate changes	(11.2)		(0.5)
Net increase in Cash and cash equivalents and Restricted cash	211.9		69.6
Cash and cash equivalents and Restricted cash at beginning of period	366.7		530.3

Cash and cash equivalents and Restricted cash at end of period	578.6		599.9
Less: Restricted cash	11.9		9.7
Cash and cash equivalents at end of period	$	566.7	$	590.2

The Notes to Condensed Consolidated Financial Statements are an integral part of these condensed 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, 2021	$	76.9	$	394.5	$	2,720.1	$	(1,245.8)	$	(31.5)	$	1,914.2
Net earnings	—		—		174.2		—		—		174.2
Other comprehensive income	—		—		—		—		9.9		9.9
Dividends ($0.365 per common share)	—		—		(28.0)		—		—		(28.0)
Compensation plans and other	—		(20.0)		—		9.4		—		(10.6)
Common stock repurchases	—		—		—		(79.8)		—		(79.8)

Balance at April 2, 2022	76.9		374.5		2,866.3		(1,316.2)		(21.6)		1,979.9
Net earnings	—		—		197.3		—		—		197.3
Other comprehensive loss	—		—		—		—		(12.3)		(12.3)
Dividends ($0.365 per common share)	—		—		(27.4)		—		—		(27.4)
Compensation plans and other	—		6.3		—		1.0		—		7.3
Common stock repurchases	—		—		—		(140.2)		—		(140.2)
Balance at July 2, 2022	$	76.9	$	380.8	$	3,036.2	$	(1,455.4)	$	(33.9)	$	2,004.6


(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, 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
Net earnings	—		—		179.4		—		—		179.4
Other comprehensive income	—		—		—		—		4.6		4.6
Dividends ($0.335 per common share)	—		—		(26.2)		—		—		(26.2)
Compensation plans and other	—		8.9		—		0.2		—		9.1
Common stock repurchases	—		—		—		(40.0)		—		(40.0)
Balance at July 3, 2021	$	76.9	$	380.1	$	2,527.2	$	(1,182.2)	$	(32.5)	$	1,769.5

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

Table of Contents

BRUNSWICK CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Significant Accounting Policies

Interim Financial Statements. Brunswick's ("Brunswick" or "the Company") 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 2021 Annual Report on Form 10-K for the year ended December 31, 2021 ("the 2021 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 second quarter of fiscal year 2022 ended on July 2, 2022 and the second quarter of fiscal year 2021 ended on July 3, 2021.

Recently Adopted Accounting Standards

Revenue Contracts Acquired in Business Combinations: In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-08, Accounting for Contract Assets and Contract Liabilities From Contracts With Customers, which amended the guidance in Accounting Standards Codification ("ASC") 805 to require that the acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. The Company early adopted the guidance in ASU 2021-08 on July 2, 2022. The adoption of this standard did not have a material impact on the consolidated financial statements.

Recently Issued Accounting Standards

Fair Value Hedge Accounting: In March 2022, the FASB issued ASU 2022-01, Fair Value Hedging — Portfolio Layer Method, which clarifies the guidance in ASC 815 on fair value hedge accounting of interest-rate risk for portfolios of financial assets. ASU 2022-01 amends the guidance that established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible. The amendment is effective for financial statements for interim and annual periods beginning after December 15, 2022. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

Table of Contents

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 2 – Revenue Recognition

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

Three Months Ended

July 2, 2022

July 3, 2021

(in millions)

Propulsion