bcorp-20200926

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 26, 2020


☐			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 November 2, 2020 was 78,342,606.

BRUNSWICK CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

September 26, 2020

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 and nine months ended September 26, 2020 and September 28, 2019	3



	Condensed Consolidated Balance Sheets (unaudited) as of September 26, 2020, December 31, 2019 and September 28, 2019	4

	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 26,2020 and September 28,2019	6

	Condensed Consolidated Statements of Shareholders' Equity (unaudited) for the three months and nine months ended September 26, 2020 and September 28, 2019	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	44


PART II – OTHER INFORMATION



Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45



Item 6.	Exhibits	46

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 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Net sales	$	1,233.1	$	976.6	$	3,186.4	$	3,190.8
Cost of sales	856.2		699.7		2,309.7		2,306.4
Selling, general and administrative expense	151.3		120.1		381.8		380.0
Research and development expense	31.2		29.7		87.8		91.9
Restructuring, exit and impairment charges	1.8		7.4		4.3		16.0
Operating earnings	192.6		119.7		402.8		396.5
Equity earnings	0.6		1.9		3.5		5.4
Pension settlement (charge) benefit	(0.2)		(294.1)		1.1		(294.1)
Other (expense) income, net	(1.2)		0.1		(2.7)		(1.6)
Earnings (loss) before interest and income taxes	191.8		(172.4)		404.7		106.2
Interest expense	(16.4)		(18.8)		(52.0)		(59.4)
Interest income	0.3		1.6		0.9		2.4

Earnings (loss) before income taxes	175.7		(189.6)		353.6		49.2
Income tax provision	38.9		43.3		74.9		93.8
Net earnings (loss) from continuing operations	136.8		(232.9)		278.7		(44.6)

Discontinued operations:
Earnings (loss) from discontinued operations, net of tax	1.5		(2.9)		0.4		(108.5)
Loss on disposal of discontinued operations, net of tax	(0.4)		(3.5)		(1.5)		(45.0)
Net earnings (loss) from discontinued operations, net of tax	1.1		(6.4)		(1.1)		(153.5)
Net earnings (loss)	$	137.9	$	(239.3)	$	277.6	$	(198.1)

Earnings (loss) per common share:
Basic
Earnings (loss) from continuing operations	$	1.72	$	(2.74)	$	3.51	$	(0.52)
Earnings (loss) from discontinued operations	0.02		(0.08)		(0.02)		(1.77)
Net earnings (loss)	$	1.74	$	(2.82)	$	3.49	$	(2.29)

Diluted
Earnings (loss) from continuing operations	$	1.71	$	(2.74)	$	3.49	$	(0.52)
Earnings (loss) from discontinued operations	0.02		(0.08)		(0.02)		(1.77)
Net earnings (loss)	$	1.73	$	(2.82)	$	3.47	$	(2.29)

Weighted average shares used for computation of:
Basic earnings (loss) per common share	79.4		85.0		79.4		86.5
Diluted earnings (loss) per common share	79.8		85.0		79.9		86.5

Comprehensive income	$	146.6	$	53.9	$	279.1	$	111.7



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)	September 26, 2020		December 31, 2019		September 28, 2019
Assets
Current assets
Cash and cash equivalents, at cost, which approximates fair value	$	650.4	$	320.3	$	366.2
Restricted cash	9.1		11.6		11.6
Short-term investments in marketable securities	0.8		0.8		0.8
Total cash and short-term investments in marketable securities	660.3		332.7		378.6
Accounts and notes receivable, less allowances of $11.1, $8.5 and $8.4	398.8		331.8		414.7
Inventories
Finished goods	347.6		554.3		532.3
Work-in-process	91.6		101.3		102.4
Raw materials	150.2		168.9		175.5
Net inventories	589.4		824.5		810.2
Prepaid expenses and other	32.7		36.8		90.1

Current assets	1,681.2		1,525.8		1,693.6

Property
Land	17.6		17.8		17.8
Buildings and improvements	426.4		415.4		403.9
Equipment	1,141.4		1,090.1		1,061.7

Total land, buildings and improvements and equipment	1,585.4		1,523.3		1,483.4
Accumulated depreciation	(912.9)		(863.8)		(849.4)
Net land, buildings and improvements and equipment	672.5		659.5		634.0
Unamortized product tooling costs	146.6		136.9		129.7
Net property	819.1		796.4		763.7

Other assets
Goodwill	416.3		415.0		414.0
Other intangibles, net	559.6		583.5		591.0
Operating lease assets	82.0		83.2		82.4
Deferred income tax asset	93.7		118.7		67.4
Equity investments	25.5		29.5		27.8
Other long-term assets	13.4		12.3		14.5

Other assets	1,190.5		1,242.2		1,197.1

Total assets	$	3,690.8	$	3,564.4	$	3,654.4

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)	September 26, 2020		December 31, 2019		September 28, 2019
Liabilities and shareholders’ equity
Current liabilities
Short-term debt and current maturities of long-term debt	$	48.4	$	41.3	$	48.5
Accounts payable	392.9		393.5		347.6
Accrued expenses	508.3		509.6		507.9

Current liabilities	949.6		944.4		904.0

Long-term liabilities
Debt	1,013.2		1,068.0		1,083.0
Operating lease liabilities	69.3		70.1		69.7
Postretirement benefits	71.9		73.6		68.1
Other	128.6		107.4		111.4

Long-term liabilities	1,283.0		1,319.1		1,332.2

Shareholders’ equity
Common stock; authorized: 200,000,000 shares, $0.75 par value; issued: 102,538,000 shares; outstanding: 78,421,000, 79,569,000 and 82,406,000 shares	76.9		76.9		76.9
Additional paid-in capital	377.0		369.2		367.3
Retained earnings	2,151.7		1,931.3		1,883.5
Treasury stock, at cost: 24,117,000, 22,969,000 and 20,132,000 shares	(1,095.5)		(1,023.1)		(856.2)






Accumulated other comprehensive loss	(51.9)		(53.4)		(53.3)
Shareholders’ equity	1,458.2		1,300.9		1,418.2

Total liabilities and shareholders’ equity	$	3,690.8	$	3,564.4	$	3,654.4

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 Cash Flows (unaudited)
	Nine Months Ended
(in millions)	September 26, 2020		September 28, 2019
Cash flows from operating activities
Earnings (loss)	$	277.6	$	(198.1)
Less: net loss from discontinued operations, net of tax	(1.1)		(153.5)
Net earnings (loss) from continuing operations, net of tax	278.7		(44.6)
Stock compensation expense	19.6		12.2
Depreciation and amortization	110.5		101.5
Pension expense, net of (funding)	(2.8)		291.6

Asset impairment charges	0.7		2.9

Deferred income taxes	26.5		(12.1)

Changes in certain current assets and current liabilities	166.0		(197.2)
Extended warranty contracts and other deferred revenue	10.9		8.6


Income taxes	8.8		87.2
Other, net	18.5		4.1
Net cash provided by operating activities of continuing operations	637.4		254.2
Net cash provided by (used for) operating activities of discontinued operations	3.5		(37.9)
Net cash provided by operating activities	640.9		216.3

Cash flows from investing activities
Capital expenditures	(120.6)		(178.4)


Investments	2.5		4.7
Acquisition of businesses, net of cash acquired	—		(64.1)
Proceeds from the sale of property, plant and equipment	2.0		6.4

Net cash used for investing activities of continuing operations	(116.1)		(231.4)
Net cash (used for) provided by investing activities of discontinued operations	(7.5)		481.9
Net cash (used for) provided by investing activities	(123.6)		250.5

Cash flows from financing activities
Proceeds from issuances of short-term debt	610.0		655.0
Payments of short-term debt	(610.0)		(655.0)
Net proceeds from issuances of long-term debt	—		223.4
Payments of long-term debt including current maturities	(48.4)		(318.3)

Common stock repurchases	(79.1)		(231.1)
Cash dividends paid	(57.2)		(54.1)
Proceeds from share-based compensation activity	1.1		0.9
Tax withholding associated with shares issued for share-based compensation	(7.3)		(9.8)
Other, net	—		(0.2)


Net cash used for financing activities	(190.9)		(389.2)

Effect of exchange rate changes	1.2		(3.2)
Net increase in Cash and cash equivalents and Restricted cash	327.6		74.4
Cash and cash equivalents and Restricted cash at beginning of period	331.9		303.4

Cash and cash equivalents and Restricted cash at end of period	659.5		377.8
Less: Restricted cash	9.1		11.6
Cash and cash equivalents at end of period	$	650.4	$	366.2

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, 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
Net earnings	—		—		70.7		—		—		70.7
Other comprehensive income	—		—		—		—		0.7		0.7
Dividends ($0.24 per common share)	—		—		(19.0)		—		—		(19.0)
Compensation plans and other	—		7.7		—		0.6		—		8.3


Balance at June 27, 2020	76.9		366.5		2,032.8		(1,051.2)		(60.6)		1,364.4
Net earnings	—		—		137.9		—		—		137.9
Other comprehensive income	—		—		—		—		8.7		8.7
Dividends ($0.24 per common share)	—		—		(19.0)		—		—		(19.0)
Compensation plans and other	—		10.5		—		0.7		—		11.2
Common stock repurchases	—		—		—		(45.0)		—		(45.0)

Balance at September 26, 2020	$	76.9	$	377.0	$	2,151.7	$	(1,095.5)	$	(51.9)	$	1,458.2


(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, 2018	$	76.9	$	371.1	$	2,135.7	$	(638.0)	$	(363.1)	$	1,582.6