bcorp-20230930

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 30, 2023


☐			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 October 30, 2023 was 68,812,648.

BRUNSWICK CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

September 30, 2023

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	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	38


PART II – OTHER INFORMATION



Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 5.	Other Information	40

Item 6.	Exhibits	41

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)	Sep 30, 2023		Oct 1, 2022		Sep 30, 2023		Oct 1, 2022
Net sales	$	1,593.6	$	1,698.2	$	5,039.5	$	5,229.5
Cost of sales	1,148.9		1,199.3		3,616.9		3,710.6
Selling, general and administrative expense	187.1		186.2		613.5		586.1
Research and development expense	45.2		50.4		142.8		152.0
Restructuring, exit and impairment charges	16.3		24.6		39.7		24.6
Operating earnings	196.1		237.7		626.6		756.2
Equity (loss) earnings	(17.3)		1.3		(12.9)		2.8
Other income (expense), net	6.0		(0.1)		6.9		(1.3)
Earnings before interest and income taxes	184.8		238.9		620.6		757.7
Interest expense	(28.1)		(26.1)		(85.1)		(70.4)
Interest income	3.4		1.9		7.6		2.5
Loss on early extinguishment of debt	—		—		—		(0.1)

Earnings before income taxes	160.1		214.7		543.1		689.7
Income tax provision	46.2		46.5		181.5		148.7
Net earnings from continuing operations	113.9		168.2		361.6		541.0



Net loss from discontinued operations, net of tax	(1.4)		(4.4)		(2.1)		(5.7)
Net earnings	$	112.5	$	163.8	$	359.5	$	535.3

Earnings per common share:
Basic
Earnings from continuing operations	$	1.63	$	2.27	$	5.11	$	7.16
Loss from discontinued operations	(0.02)		(0.06)		(0.03)		(0.08)
Net earnings	$	1.61	$	2.21	$	5.08	$	7.08

Diluted
Earnings from continuing operations	$	1.63	$	2.26	$	5.10	$	7.12
Loss from discontinued operations	(0.02)		(0.06)		(0.03)		(0.08)
Net earnings	$	1.61	$	2.20	$	5.07	$	7.04

Weighted average shares used for computation of:
Basic earnings per common share	69.8		74.2		70.7		75.6
Diluted earnings per common share	70.0		74.5		70.9		76.0

Comprehensive income	$	99.2	$	158.0	$	346.9	$	527.1



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)	Sep 30, 2023		Dec 31, 2022		Oct 1, 2022
Assets
Current assets
Cash and cash equivalents, at cost, which approximates fair value	$	330.9	$	595.6	$	457.4
Restricted cash	11.1		12.9		11.7
Short-term investments in marketable securities	0.8		4.5		34.5
Total cash and short-term investments in marketable securities	342.8		613.0		503.6
Accounts and notes receivable, less allowances of $10.4, $10.2, $8.9	568.2		543.0		557.7
Inventories
Finished goods	825.4		836.1		754.4
Work-in-process	194.5		209.1		224.0
Raw materials	425.1		426.2		451.4
Net inventories	1,445.0		1,471.4		1,429.8
Prepaid expenses and other	85.3		67.8		103.9

Current assets	2,441.3		2,695.2		2,595.0

Property
Land	44.0		42.4		42.2
Buildings and improvements	609.3		564.4		547.2
Equipment	1,529.0		1,488.1		1,425.1

Total land, buildings and improvements and equipment	2,182.3		2,094.9		2,014.5
Accumulated depreciation	(1,111.0)		(1,051.4)		(1,031.0)
Net land, buildings and improvements and equipment	1,071.3		1,043.5		983.5
Unamortized product tooling costs	240.3		227.3		237.6
Net property	1,311.6		1,270.8		1,221.1

Other assets
Goodwill	1,007.6		967.6		962.2
Other intangibles, net	999.8		997.4		1,005.4
Deferred income tax asset	150.9		203.3		137.7
Operating lease assets	136.2		114.8		111.4
Equity investments	35.6		54.0		47.7
Other long-term assets	17.9		18.2		44.4

Other assets	2,348.0		2,355.3		2,308.8

Total assets	$	6,100.9	$	6,321.3	$	6,124.9

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

Table of Contents


(in millions)	Sep 30, 2023		Dec 31, 2022		Oct 1, 2022
Liabilities and shareholders' equity
Current liabilities
Short-term debt and current maturities of long-term debt	$	455.3	$	89.0	$	84.9
Accounts payable	493.4		662.6		631.6
Accrued expenses	710.5		738.3		662.8

Current liabilities	1,659.2		1,489.9		1,379.3

Long-term liabilities
Debt	1,975.7		2,420.0		2,419.1
Operating lease liabilities	117.8		97.8		95.7
Postretirement benefits	45.6		49.5		62.7
Deferred income tax liability	12.4		60.7		2.6
Other	204.4		161.1		164.5

Long-term liabilities	2,355.9		2,789.1		2,744.6

Shareholders' equity
Common stock; authorized: 200,000,000 shares, $0.75 par value; issued: 102,538,000 shares; outstanding: 68,939,000, 71,365,000 and 72,612,000 shares	76.9		76.9		76.9
Additional paid-in capital	385.2		391.3		386.0
Retained earnings	3,563.4		3,288.5		3,173.0
Treasury stock, at cost: 33,599,000, 31,173,000 and 29,926,000 shares	(1,897.6)		(1,684.9)		(1,595.2)







Accumulated other comprehensive loss	(42.1)		(29.5)		(39.7)
Shareholders' equity	2,085.8		2,042.3		2,001.0

Total liabilities and shareholders' equity	$	6,100.9	$	6,321.3	$	6,124.9

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)


	Nine Months Ended
(in millions)	Sep 30, 2023		Oct 1, 2022
Cash flows from operating activities
Net earnings	$	359.5	$	535.3
Less: net loss from discontinued operations, net of tax	(2.1)		(5.7)
Net earnings from continuing operations, net of tax	361.6		541.0
Stock compensation expense	15.0		16.8
Depreciation and amortization	201.4		167.9
Pension funding, net of expense	(1.2)		(0.5)

Asset impairment charges	6.4		19.2

Deferred income taxes	0.9		4.0
Impairment of equity method investment	19.2		—

Changes in certain current assets and current liabilities	(161.2)		(426.8)
Long-term extended warranty contracts and other deferred revenue	14.0		12.2


Income taxes	21.2		(17.0)
Other, net	(19.2)		(3.0)
Net cash provided by operating activities of continuing operations	458.1		313.8
Net cash used for operating activities of discontinued operations	(7.8)		(2.4)
Net cash provided by operating activities	450.3		311.4

Cash flows from investing activities
Capital expenditures	(233.1)		(299.3)
Purchases of marketable securities	—		(60.0)
Sales or maturities of marketable securities	3.8		26.3
Investments	(1.6)		(4.9)
Acquisition of businesses, net of cash acquired	(89.6)		(95.7)
Proceeds from the sale of property, plant and equipment	10.6		5.7
Cross currency swap settlement	—		16.7


Net cash used for investing activities	(309.9)		(411.2)

Cash flows from financing activities
Proceeds from issuances of short-term debt	2.3		127.8
Payments of short-term debt	(5.4)		(125.0)
Net proceeds from issuances of long-term debt	—		741.8
Payments of long-term debt including current maturities	(81.8)		(58.5)

Common stock repurchases	(220.0)		(360.0)
Cash dividends paid	(84.6)		(82.4)

Tax withholding associated with shares issued for share-based compensation	(13.4)		(16.4)
Other, net	—		(3.9)


Net cash (used for) provided by financing activities	(402.9)		223.4

Effect of exchange rate changes	(4.0)		(21.2)
Net (decrease) increase in Cash and cash equivalents and Restricted cash	(266.5)		102.4
Cash and cash equivalents and Restricted cash at beginning of period	608.5		366.7

Cash and cash equivalents and Restricted cash at end of period	342.0		469.1
Less: Restricted cash	11.1		11.7
Cash and cash equivalents at end of period	$	330.9	$	457.4

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, 2022	$	76.9	$	391.3	$	3,288.5	$	(1,684.9)	$	(29.5)	$	2,042.3
Net earnings	—		—		112.3		—		—		112.3
Other comprehensive income	—		—		—		—		3.6		3.6
Dividends ($0.40 per common share)	—		—		(28.5)		—		—		(28.5)
Compensation plans and other	—		(15.3)		—		8.5		—		(6.8)
Common stock repurchases	—		—		—		(60.4)		—		(60.4)
Balance at April 1, 2023	76.9		376.0		3,372.3		(1,736.8)		(25.9)		2,062.5
Net earnings	—		—		134.7		—		—		134.7
Other comprehensive loss	—		—		—		—		(2.9)		(2.9)
Dividends ($0.40 per common share)	—		—		(28.3)		—		—		(28.3)
Compensation plans and other	—		7.8		—		0.5		—		8.3
Common stock repurchases	—		—		—		(72.9)		—		(72.9)
Balance at July 1, 2023	76.9		383.8		3,478.7		(1,809.2)		(28.8)		2,101.4
Net earnings	—		—		112.5		—		—		112.5
Other comprehensive loss	—		—		—		—		(13.3)		(13.3)
Dividends ($0.40 per common share)	—		—		(27.8)		—		—		(27.8)
Compensation plans and other	—		1.4		—		0.3		—		1.7
Common stock repurchases	—		—		—		(88.7)		—		(88.7)
Balance at September 30, 2023	$	76.9	$	385.2	$	3,563.4	$	(1,897.6)	$	(42.1)	$	2,085.8


(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
Net earnings	—		—		163.8		—		—		163.8
Other comprehensive loss	—		—		—		—		(5.8)		(5.8)
Dividends ($0.365 per common share)	—		—		(27.0)		—		—		(27.0)
Compensation plans and other	—		5.2		—		0.2		—		5.4
Common stock repurchases	—		—		—		(140.0)		—		(140.0)
Balance at October 1, 2022	$	76.9	$	386.0	$	3,173.0	$	(1,595.2)	$	(39.7)	$	2,001.0

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

Basis of Presentation. Effective January 1, 2023, Brunswick Corporation ("Brunswick" or "the Company") changed its management reporting and updated its reportable segments to Propulsion, Engine Parts and Accessories ("Engine P&A"), Navico Group and Boat to align with our internal operating structure. As a result of this change, the Company has recast all segment information for all prior periods presented. For further information, refer to Note 9 – Segment Data.

Interim Financial Statements. Brunswick's unaudited interim condensed consolidated financial statements have been prepared pursuant to 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 2022 Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 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 third quarter of fiscal year 2023 ended on September 30, 2023 and the third quarter of fiscal year 2022 ended on October 1, 2022.

IT Security Incident

As previously announced on June 13, 2023, the Company experienced an IT security incident that impacted some of its systems and global facilities. The Company activated its response protocols, including pausing operations in some locations, engaging leading security experts and coordinating with relevant law enforcement agencies. Normal global business operations resumed over the course of nine days following the incident. While we were able to quickly restore our operations, the incident resulted in disruption to sales as well as non-recurring costs. We will attempt to recover a portion of the lost operating earnings from lost sales and non-recurring costs from our insurance carriers. Non-recurring costs include labor while plants were idle, IT-related costs and costs for legal, consulting and other professional services directly related to this incident. During the three and nine months ended September 30, 2023, we incurred non-recurring costs related to the IT security incident of $2.1 million and $10.2 million, respectively. A portion of the non-recurring costs are included in Cost of sales and a portion in Selling, general and administrative expense in the Condensed Consolidated Statements of Comprehensive Income. We estimate the incident resulted in lost revenue of approximately $80 million to $85 million and operating earnings of $35 million to $40 million in the nine months ended September 30, 2023.

TN-BC Holdings LLC Joint Venture Impairment

TN-BC Holdings LLC (the "Joint Venture") is a 50% owned joint venture, accounted for as an equity method investment, between the Company and TechNexus Holdings LLC formed in 2017. During the three months ended September 30, 2023, the Company recorded an impairment charge of $19.2 million due to a decline in the fair value of its investment in the Joint Venture, as a result of a reduction in value of certain of the Joint Venture's underlying investments. The impairment charge is included in Equity (loss) earnings in the Condensed Consolidated Statements of Comprehensive Income.

Table of Contents

Notes to Condensed Consolidated Financial Statements

(unaudited)

Recently Adopted Accounting Standards

Supplier Finance Programs: In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which adds disclosure requirements associated with participation in supplier finance programs. ASU 2022-04 requires the buyer in a supplier finance program to disclose qualitative and quantitative information about the program including key terms and obligations outstanding at the end of the reporting period. ASU 2022-04 is effective for financial statements for interim and annual periods beginning after December 15, 2022. The Company adopted the guidance in ASU 2022-04 on January 1, 2023.

Under our supplier finance program, the Company agrees to pay Bank of America ("the Bank") the stated amount of confirmed invoices from our suppliers on the original invoice payment due date. Our suppliers may request payment from the Bank at a date earlier than the payment due date stated on the original invoice in exchange for a fee in the form of a discounted invoice amount. Brunswick or the Bank may terminate the agreement upon at least 90 days’ notice. The supplier invoices that have been confirmed as valid under the program require payment ranging from 60 to 120 days from the invoice date, consistent with the terms of the original invoice. The Company does not pay the Bank any service fees or subscription fees under the program. In addition, the Company does not pledge any assets as security or provide other forms of guarantees for the committed payment to the Bank. As of September 30, 2023, December 31, 2022, and October 1, 2022, the Company had $13.9 million, $18.2 million and $18.1 million confirmed invoices under the supplier finance program, respectively, which were included in Accounts payable on the Condensed Consolidated Balance Sheets.

Note 2 – Revenue Recognition

The following tables present 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
	September 30, 2023
(in millions)	Propulsion		Engine P&A		Navico Group		Boat		Total
Geographic Markets
United States	$	498.2	$	248.0	$	137.4	$	345.6	$	1,229.2
Europe	88.0		30.3		48.0		28.2		194.5
Asia-Pacific	46.5		25.0		19.1		8.3		98.9
Canada	26.8		28.4		3.8		37.2		96.2
Rest-of-World	58.7		12.9		5.1		9.3		86.0
Segment Eliminations	(86.2)		(2.0)		(23.0)		—		(111.2)
Total	$	632.0	$	342.6	$	190.4	$	428.6	$	1,593.6

	Three Months Ended
	October 1, 2022
(in millions)	Propulsion		Engine P&A		Navico Group		Boat		Total
Geographic Markets
United States	$	514.1	$	257.1	$	155.1	$	397.7	$	1,324.0
Europe	75.1		28.4		48.2		39.3		191.0
Asia-Pacific	49.7		29.0		23.3		7.8		109.8
Canada	28.4		33.6		3.7		57.1		122.8
Rest-of-World	47.1		12.2		4.5		8.8		72.6
Segment Eliminations	(99.2)		(1.6)		(21.2)		—		(122.0)
Total	$	615.2	$	358.7	$	213.6	$	510.7	$	1,698.2

Table of Contents

Notes to Condensed Consolidated Financial Statements

(unaudited)


	Nine Months Ended
	September 30, 2023
(in millions)	Propulsion		Engine P&A		Navico Group		Boat		Total
Geographic Markets
United States	$	1,490.8	$	693.3	$	459.3	$	1,203.8	$	3,847.2
Europe	293.4		86.2		173.9		135.6		689.1
Asia-Pacific	154.8		76.7		56.3		23.9		311.7
Canada	75.8		69.2		13.4		173.4		331.8
Rest-of-World	158.3		36.7		15.6		27.9		238.5
Segment Eliminations	(291.3)		(5.8)		(81.3)		(0.4)		(378.8)
Total	$	1,881.8	$	956.3	$	637.2	$	1,564.2	$	5,039.5

	Nine Months Ended
	October 1, 2022
(in millions)	Propulsion		Engine P&A		Navico Group		Boat		Total
Geographic Markets
United States	$	1,450.4	$	758.3	$	541.7	$	1,189.2	$	3,939.6
Europe	306.9		97.0		188.6		140.9		733.4
Asia-Pacific	172.5		88.8		69.5		24.4		355.2
Canada	86.1		86.0		20.9		189.7		382.7
Rest-of-World	138.6		40.0		11.8		27.7		218.1
Segment Eliminations	(310.7)		(5.8)		(82.8)		(0.2)		(399.5)
Total	$	1,843.8	$	1,064.3	$	749.7	$	1,571.7	$	5,229.5

Table of Contents

Notes to Condensed Consolidated Financial Statements

(unaudited)


	Three Months Ended
	September 30, 2023
(in millions)	Propulsion		Engine P&A		Navico Group		Boat		Total
Major Product Lines
Outboard Engines	$	580.3	$	—	$	—	$	—	$	580.3
Controls, Rigging, and Propellers	99.7		—		—		—		99.7
Sterndrive Engines	38.2		—		—		—		38.2
Distribution Parts & Accessories	—		186.0		—		—		186.0
Products	—		158.6		—		—		158.6
Navico Group	—		—		213.4		—		213.4
Aluminum Freshwater Boats	—		—		—		141.3		141.3
Recreational Fiberglass Boats	—		—		—		137.0		137.0
Saltwater Fishing Boats	—		—		—		110.4		110.4
Business Acceleration	—		—		—		43.6		43.6
Boat Eliminations/Other	—		—		—		(3.7)		(3.7)
Segment Eliminations	(86.2)		(2.0)		(23.0)		—		(111.2)
Total	$	632.0	$	342.6	$	190.4	$	428.6	$	1,593.6

	Three Months Ended
	October 1, 2022
(in millions)	Propulsion		Engine P&A		Navico Group		Boat		Total
Major Product Lines
Outboard Engines	$