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BRUNSWICK CORPORATION
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INDEX TO QUARTERLY REPORT ON FORM
10-Q
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April 4,
2009
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TABLE
OF CONTENTS
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Page
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PART
I – FINANCIAL INFORMATION
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Item
1.
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Consolidated
Financial Statements
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Consolidated
Statements of Operations for the three months ended April 4, 2009
(unaudited), and March 29, 2008 (unaudited)
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1
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Condensed
Consolidated Balance Sheets as of April 4, 2009 (unaudited),
December 31, 2008, and March 29, 2008 (unaudited)
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2
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Condensed
Consolidated Statements of Cash Flows for the three months ended April 4,
2009 (unaudited), and March 29, 2008 (unaudited)
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4
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Notes
to Consolidated Financial Statements (unaudited)
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5
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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25
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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38
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Item
4.
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Controls
and Procedures
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38
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PART
II – OTHER INFORMATION
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Item
1.
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Legal
Proceedings
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39
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Item
1A.
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Risk
Factors
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39
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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39
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Item
6.
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Exhibits
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39
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PART
I – FINANCIAL INFORMATION
Item
1. Consolidated Financial Statements
BRUNSWICK
CORPORATION
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Consolidated
Statements of Operations
|
(unaudited)
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|
Three
Months Ended
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(in
millions, except per share data)
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April
4,
2009
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March
29,
2008
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Net
sales
|
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$
|
734.7
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$
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1,346.8
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Cost
of sales
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643.5
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1,077.3
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Selling,
general and administrative expense
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155.2
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203.1
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Research
and development expense
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23.9
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33.9
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Restructuring,
exit and impairment charges
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39.6
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22.2
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Operating earnings
(loss)
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|
(127.5
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)
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10.3
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Equity
earnings (loss)
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(3.2
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)
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4.8
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Investment
sale gain
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–
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19.7
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Other
income (expense), net
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(1.4
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)
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1.1
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Earnings (loss) before interest
and income taxes
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(132.1
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)
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35.9
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Interest
expense
|
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|
(18.2
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)
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(11.5
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)
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Interest
income
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0.5
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1.4
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Earnings (loss) before income
taxes
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(149.8
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)
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25.8
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Income
tax provision
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34.4
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12.5
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Net
earnings (loss)
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$
|
(184.2
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)
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$
|
13.3
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Earnings
(loss) per common share:
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Basic
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$
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(2.08
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)
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$
|
0.15
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Diluted
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$
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(2.08
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)
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$
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0.15
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Weighted
average shares used for computation of:
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Basic
earnings (loss) per common share
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88.4
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88.2
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Diluted
earnings (loss) per common share
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88.4
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88.3
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The
Notes to Consolidated Financial Statements are an integral part of these
consolidated statements.
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BRUNSWICK
CORPORATION
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Condensed
Consolidated Balance Sheets
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April
4,
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December
31,
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March
29,
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(in
millions)
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2009
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2008
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2008
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(unaudited)
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(unaudited)
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Assets
|
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Current
assets
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Cash
and cash equivalents, at cost, which
approximates
market
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$
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359.1
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$
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317.5
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$
|
267.3
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Accounts
and notes receivable, less
allowances
of $39.6, $41.7 and $35.4
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381.9
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444.8
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648.8
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Inventories
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Finished
goods
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371.7
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457.7
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494.3
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Work-in-process
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232.6
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248.2
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346.0
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Raw
materials
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97.0
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105.8
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143.9
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Net
inventories
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701.3
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811.7
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984.2
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Deferred
income taxes
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13.3
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103.2
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241.9
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Prepaid
expenses and other
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48.8
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59.7
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57.5
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Current
assets
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1,504.4
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1,736.9
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2,199.7
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Property
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Land
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106.8
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107.1
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105.7
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Buildings
and improvements
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677.2
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683.8
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703.7
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Equipment
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1,137.6
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1,156.6
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1,210.7
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Total
land, buildings and improvements and
equipment
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1,921.6
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1,947.5
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2,020.1
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Accumulated
depreciation
|
|
|
(1,163.2
|
)
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|
(1,155.4
|
)
|
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|
(1,140.4
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)
|
Net
land, buildings and improvements and
equipment
|
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|
758.4
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792.1
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879.7
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Unamortized
product tooling costs
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117.4
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125.5
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154.7
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Net
property
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|
875.8
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|
917.6
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1,034.4
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Other
assets
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|
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Goodwill
|
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|
287.8
|
|
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|
290.9
|
|
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|
678.4
|
|
Other
intangibles, net
|
|
|
83.4
|
|
|
|
86.6
|
|
|
|
242.6
|
|
Investments
|
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|
70.9
|
|
|
|
75.4
|
|
|
|
118.3
|
|
Other
long-term assets
|
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|
114.3
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|
116.5
|
|
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|
138.0
|
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Other
assets
|
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|
556.4
|
|
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|
569.4
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|
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|
1,177.3
|
|
|
|
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|
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|
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Total
assets
|
|
$
|
2,936.6
|
|
|
$
|
3,223.9
|
|
|
$
|
4,411.4
|
|
|
|
|
|
|
|
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|
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The
Notes to Consolidated Financial Statements are an integral part of these
consolidated statements.
|
|
BRUNSWICK
CORPORATION
|
Condensed
Consolidated Balance Sheets
|
|
|
April
4,
|
|
|
December
31,
|
|
|
March
29,
|
|
(in
millions, except share data)
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
|
(unaudited)
|
|
|
|
|
|
(unaudited)
|
|
Liabilities
and shareholders’ equity
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Short-term
debt, including current maturities
of
long-term debt
|
|
$
|
2.4
|
|
|
$
|
3.2
|
|
|
$
|
0.9
|
|
Accounts
payable
|
|
|
238.2
|
|
|
|
301.3
|
|
|
|
488.0
|
|
Accrued
expenses
|
|
|
653.7
|
|
|
|
696.7
|
|
|
|
832.2
|
|
Current
liabilities
|
|
|
894.3
|
|
|
|
1,001.2
|
|
|
|
1,321.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
728.1
|
|
|
|
728.5
|
|
|
|
729.1
|
|
Deferred
income taxes
|
|
|
48.6
|
|
|
|
25.0
|
|
|
|
16.0
|
|
Postretirement
and postemployment benefits
|
|
|
518.7
|
|
|
|
528.3
|
|
|
|
193.6
|
|
Other
|
|
|
199.6
|
|
|
|
211.0
|
|
|
|
234.6
|
|
Long-term
liabilities
|
|
|
1,495.0
|
|
|
|
1,492.8
|
|
|
|
1,173.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock; authorized: 200,000,000 shares,
$0.75
par value; issued: 102,538,000 shares
|
|
|
76.9
|
|
|
|
76.9
|
|
|
|
76.9
|
|
Additional
paid-in capital
|
|
|
404.6
|
|
|
|
412.3
|
|
|
|
407.8
|
|
Retained
earnings
|
|
|
911.7
|
|
|
|
1,095.9
|
|
|
|
1,901.7
|
|
Treasury
stock, at cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
14,371,000;
14,793,000 and 14,956,000 shares
|
|
|
(415.1
|
)
|
|
|
(422.9
|
)
|
|
|
(426.2
|
)
|
Accumulated
other comprehensive loss, net of tax
|
|
|
(430.8
|
)
|
|
|
(432.3
|
)
|
|
|
(43.2
|
)
|
Shareholders’
equity
|
|
|
547.3
|
|
|
|
729.9
|
|
|
|
1,917.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
2,936.6
|
|
|
$
|
3,223.9
|
|
|
$
|
4,411.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Notes to Consolidated Financial Statements are an integral part of these
consolidated statements.
|
|
BRUNSWICK
CORPORATION
|
Condensed
Consolidated Statements of Cash Flows
|
(unaudited)
|
|
|
Three
Months Ended
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
$
|
(184.2
|
)
|
|
$
|
13.3
|
|
Depreciation
and amortization
|
|
|
41.6
|
|
|
|
44.3
|
|
Deferred
income taxes
|
|
|
35.0
|
|
|
|
9.4
|
|
Changes
in non-cash current assets and current liabilities
|
|
|
79.4
|
|
|
|
(136.6
|
)
|
Impairment
charges
|
|
|
4.0
|
|
|
|
8.4
|
|
Income
taxes
|
|
|
69.1
|
|
|
|
(1.2
|
)
|
Other,
net
|
|
|
5.6
|
|
|
|
(11.7
|
)
|
Net cash provided by (used for)
operating activities
|
|
|
50.5
|
|
|
|
(74.1
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(7.2
|
)
|
|
|
(28.3
|
)
|
Investments
|
|
|
(1.4
|
)
|
|
|
(4.1
|
)
|
Proceeds
from investment sale
|
|
|
–
|
|
|
|
40.4
|
|
Proceeds
from the sale of property, plant and equipment
|
|
|
0.9
|
|
|
|
1.7
|
|
Other,
net
|
|
|
(0.2
|
)
|
|
|
0.2
|
|
Net cash provided by (used for)
investing activities
|
|
|
(7.9
|
)
|
|
|
9.9
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Net
issuances (repayments) of short-term debt
|
|
|
(0.7
|
)
|
|
|
0.3
|
|
Payments
of long-term debt including current maturities
|
|
|
(0.3
|
)
|
|
|
(0.2
|
)
|
Net cash provided by (used for)
financing activities
|
|
|
(1.0
|
)
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
41.6
|
|
|
|
(64.1
|
)
|
Cash
and cash equivalents at beginning of period
|
|
|
317.5
|
|
|
|
331.4
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
359.1
|
|
|
$
|
267.3
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Notes to Consolidated Financial Statements are an integral part of these
consolidated statements.
|
|
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Note
1 – Significant Accounting Policies
Interim Financial
Statements.
The unaudited interim consolidated financial
statements of Brunswick Corporation (Brunswick or the Company) have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). 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 have been condensed or omitted. Certain previously reported amounts have
been reclassified to conform to the current period presentation.
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 2008 Annual
Report on Form 10-K (the 2008 Form 10-K). These interim results include, in the
opinion of management, all normal and recurring adjustments necessary to present
fairly the financial position of Brunswick as of April 4, 2009, December 31,
2008, and March 29, 2008, the results of operations for the three months ended
April 4, 2009, and March 29, 2008, and the cash flows for the three months ended
April 4, 2009, and March 29, 2008. 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 thirteen weeks and ending on the
Saturday closest to the end of that thirteen-week period. The first
quarter of fiscal year 2009 ended on April 4, 2009, and the first quarter of
fiscal year 2008 ended on March 29, 2008.
Recent Accounting
Pronouncements
. In December 2007, the FASB issued Statement of Financial
Accounting Standards (SFAS) No. 141(R), “Business Combinations” (SFAS 141(R)).
SFAS 141(R) establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, the goodwill acquired and any noncontrolling
interest in the acquiree. This statement also establishes disclosure
requirements to enable the evaluation of the nature and financial effect of the
business combination. SFAS 141(R) is effective for fiscal years beginning on or
after December 15, 2008. The adoption of this statement did not have
a material impact on the Company’s consolidated results of operations and
financial condition.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (SFAS 160). SFAS
160 amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. SFAS 160 is
effective for fiscal years beginning on or after December 15,
2008. The adoption of this statement did not have a material impact
on the Company’s consolidated results of operations and financial
condition.
In March
2008, the FASB issued SFAS No. 161, “Disclosures About Derivative
Instruments and Hedging Activities – an amendment of FASB Statement
No. 133” (SFAS 161). SFAS 161 is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on
an entity’s financial position, financial performance, and cash flows. SFAS 161
is effective for fiscal years beginning after November 15,
2008. The adoption of this statement resulted in the Company
expanding its disclosures relative to its derivative instruments and hedging
activity, as reflected in
Note
3 – Financial Instruments.
In
December 2008, the FASB issued FASB Staff Position (FSP) FAS 132(R)-1,
“Employers’ Disclosures about Postretirement Benefit Plan Assets” (FSP FAS
132(R)-1). FSP FAS 132(R)-1 amends SFAS No. 132 (Revised 2003), “Employers’
Disclosures about Pensions and Other Postretirement Benefits,” to provide
guidance on an employer’s disclosures about plan assets of a defined benefit
pension or other postretirement plan. FSP FAS 132(R)-1 is effective for fiscal
years ending after December 15, 2009. The Company is currently evaluating the
impact that the adoption of FSP FAS 132(R)-1 may have on the Company’s
consolidated financial statements.
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
In
June 2008, the FASB issued FSP Emerging Issues Task Force (EITF)
No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities,” (FSP EITF 03-6-1). FSP EITF 03-6-1
requires that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings
per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008 and interim periods within
those years, and requires that all prior period earnings per share data
presented be adjusted retrospectively to conform with its provisions. The
adoption of this statement did not have a material impact on the Company’s
consolidated results of operations and financial condition.
Note
2 – Restructuring Activities
In
November 2006, Brunswick announced restructuring initiatives to improve the
Company’s cost structure, better utilize overall capacity and improve general
operating efficiencies. These initiatives reflected the Company’s response to a
difficult marine market. As the marine market has continued to decline,
Brunswick expanded its restructuring activities across all business segments
during 2007, 2008 and 2009 in order to improve performance and better position
the Company for current market conditions and longer-term growth. These
initiatives have resulted in the recognition of restructuring, exit and other
impairment charges in the Statement of Operations during 2008 and
2009.
The
actions taken under these initiatives are expected to benefit future operations
by removing fixed costs of approximately $100 million from Cost of sales and
approximately $300 million from Selling, general and administrative expense in
the Consolidated Statements of Operations in 2009 compared with 2007 spending
levels. The majority of these costs are expected to be cash savings once all
restructuring initiatives are complete. The Company expects savings to be
realized through 2009.
The costs
incurred under these initiatives include:
Restructuring
Activities – These amounts primarily relate to:
●
|
|
Employee termination
and other benefits
|
●
|
|
Costs to retain and
relocate employees
|
●
|
|
Consulting
costs
|
●
|
|
Consolidation of
manufacturing footprint
|
Exit Activities – These amounts primarily relate to:
●
|
|
Employee termination
and other benefits
|
●
|
|
Lease exit
costs
|
●
|
|
Inventory
write-downs
|
●
|
|
Facility shutdown
costs
|
Asset Disposition Actions – These amounts primarily relate to sales of
assets and definite-lived asset impairments on:
●
|
|
Fixed
assets
|
●
|
|
Tooling
|
●
|
|
Patents and
proprietary technology
|
●
|
|
Dealer
networks
|
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Impairments
of definite-lived assets are recognized when, as a result of the restructuring
activities initiated, the carrying amount of the long-lived asset is not
expected to be fully recoverable, in accordance with SFAS No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets.” The impairments recognized
were equal to the difference between the carrying amount of the asset and the
fair value of the asset, which was determined using observable inputs when
available, and when observable inputs were not available, based on the Company’s
assumptions of the data that market participants would use in pricing the asset
or liability, based on the best information available in the circumstances.
Specifically, the Company used discounted cash flows to determine the fair value
of the asset when observable inputs were unavailable.
The
Company has reported restructuring and exit activities based on the specific
driver of the cost and reflected the expense in the accounting period when the
cost has been committed or incurred, in accordance with SFAS No. 146,
“Accounting for Costs Associated with Exit or Disposal Activities.” The Company
considers actions related to the sale of certain Baja boat business assets, the
closure of its bowling pin manufacturing facility, the potential sale of the
Valley-Dynamo business and the divestiture of MotoTron, a designer and supplier
of engine control and vehicle networking systems, to be exit activities. All
other actions taken are considered to be restructuring activities.
The
following table is a summary of the expense associated with the restructuring
activities for the quarters ended April 4, 2009, and March 29, 2008. The 2009
charge consists of expenses related to actions initiated in both 2009 and
2008:
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
|
|
|
|
|
|
Restructuring
activities:
|
|
|
|
|
|
|
Employee
termination and other benefits
|
|
$
|
19.4
|
|
|
$
|
2.8
|
|
Current
asset write-downs
|
|
|
2.6
|
|
|
|
0.4
|
|
Transformation
and other costs:
|
|
|
|
|
|
|
|
|
Consolidation
of manufacturing footprint
|
|
|
12.4
|
|
|
|
3.9
|
|
Retention
and relocation costs
|
|
|
0.1
|
|
|
|
0.7
|
|
Consulting
costs
|
|
|
0.3
|
|
|
|
0.4
|
|
Exit
activities:
|
|
|
|
|
|
|
|
|
Employee
termination and other benefits
|
|
|
0.1
|
|
|
|
1.6
|
|
Current
asset write-downs
|
|
|
0.6
|
|
|
|
3.1
|
|
Transformation
and other costs:
|
|
|
|
|
|
|
|
|
Consolidation
of manufacturing footprint
|
|
|
0.7
|
|
|
|
0.9
|
|
Asset
disposition actions:
|
|
|
|
|
|
|
|
|
Definite-lived
asset impairments
|
|
|
3.4
|
|
|
|
8.4
|
|
|
|
|
|
|
|
|
|
|
Total
restructuring, exit and
other
impairment charges
|
|
$
|
39.6
|
|
|
$
|
22.2
|
|
The
Company anticipates that it will incur approximately $35 million of additional
costs through the remainder of 2009 related to the 2009 and 2008
restructuring initiatives; however, more significant reductions in demand for
the Company’s products may necessitate additional restructuring or exit charges
in 2009. Net cash payments related to 2009 and 2008 restructuring activities
were $40.8 million in the first quarter of 2009.
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Actions
Initiated in 2009
During
the first quarter of 2009, the Company continued its restructuring activities by
reducing the Company’s global workforce, consolidating manufacturing operations
and disposing non-strategic assets.
The
following is a summary of the expense associated with the 2009 restructuring
activities:
(in
millions)
|
|
Total
|
|
|
|
|
|
Restructuring
activities:
|
|
|
|
Employee
termination and other benefits
|
|
$
|
12.9
|
|
Current
asset write-downs
|
|
|
0.3
|
|
Transformation
and other costs:
|
|
|
|
|
Consolidation
of manufacturing footprint
|
|
|
2.8
|
|
Retention
and relocation costs
|
|
|
0.1
|
|
Consulting
costs
|
|
|
0.3
|
|
Exit
activities:
|
|
|
|
|
Asset
disposition actions:
|
|
|
|
|
Definite-lived
asset impairments
|
|
|
1.5
|
|
|
|
|
|
|
Total
restructuring, exit and
other
impairment charges
|
|
$
|
17.9
|
|
The
restructuring charges taken during 2009, for each of the Company’s reportable
segments in the first quarter of 2009 is summarized below:
(in
millions)
|
|
Marine
Engine
|
|
|
Boat
|
|
|
Fitness
|
|
|
Bowling
& Billiards
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
terminations
and
other benefits
|
|
$
|
6.2
|
|
|
$
|
5.3
|
|
|
$
|
1.0
|
|
|
$
|
0.1
|
|
|
$
|
0.3
|
|
|
$
|
12.9
|
|
Current
asset write-downs
|
|
|
—
|
|
|
|
0.3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.3
|
|
Transformation
and
other costs
|
|
|
2.7
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.4
|
|
|
|
3.2
|
|
Asset
disposition actions
|
|
|
0.8
|
|
|
|
0.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
restructuring, exit and other
impairment
charges
|
|
$
|
9.7
|
|
|
$
|
6.4
|
|
|
$
|
1.0
|
|
|
$
|
0.1
|
|
|
$
|
0.7
|
|
|
$
|
17.9
|
|
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
The
following table summarizes the 2009 charges taken for restructuring, exit and
other impairment charges related to actions initiated in 2009 and the related
status as of April 4, 2009. The accrued amounts remaining as of April 4, 2009,
represent cash expenditures needed to satisfy remaining obligations. The
majority of the accrued costs are expected to be paid by the end of 2009 and are
included in Accrued expenses in the Condensed Consolidated Balance
Sheets.
(in
millions)
|
|
Costs
Recognized
in 2009
|
|
|
Non-cash
Charges
|
|
|
Net
Cash Payments
|
|
|
Accrued
Costs
as
of
April
4,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
termination and other benefits
|
|
$
|
12.9
|
|
|
$
|
—
|
|
|
$
|
(5.8
|
)
|
|
$
|
7.1
|
|
Current
asset write-downs
|
|
|
0.3
|
|
|
|
(0.3
|
)
|
|
|
—
|
|
|
|
—
|
|
Transformation
and other costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation
of manufacturing footprint
|
|
|
2.8
|
|
|
|
(2.7
|
)
|
|
|
(0.1
|
)
|
|
|
—
|
|
Retention
and relocation costs
|
|
|
0.1
|
|
|
|
—
|
|
|
|
(0.1
|
)
|
|
|
—
|
|
Consulting
costs
|
|
|
0.3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.3
|
|
Asset
disposition actions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Definite-lived
asset impairments
|
|
|
1.5
|
|
|
|
(1.5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
restructuring, exit and
other
impairment charges
|
|
$
|
17.9
|
|
|
$
|
(4.5
|
)
|
|
$
|
(6.0
|
)
|
|
$
|
7.4
|
|
The
Company anticipates that it will incur approximately $20 million of additional
costs related to restructuring activities that will be initiated during 2009;
however, more significant reductions in demand for the Company’s products may
necessitate additional restructuring or exit charges in 2009. The Company
expects most of these charges will be incurred in the Boat and Marine Engine
segments.
Actions
initiated in 2008
During
the first quarter of 2008, the Company continued its restructuring activities by
closing its bowling pin manufacturing facility in Antigo, Wisconsin, and
announcing that it would close its boat plant in Bucyrus, Ohio, in anticipation
of the proposed sale of certain assets relating to its Baja boat business, cease
boat manufacturing at one of its facilities in Merritt Island, Florida, and
close its Swansboro, North Carolina, boat plant.
The
Company announced additional actions in June 2008 as a result of the prolonged
downturn in the U.S. marine market. The plan was designed to improve performance
and better position the Company for market conditions and longer-term growth.
The plan is anticipated to result in significant changes in the Company’s
organizational structure, most notably by reducing the complexity of its
operations and further shrinking its North American manufacturing footprint.
Specifically, the Company announced the closure of its production facility in
Newberry, South Carolina, due to its decision to cease production of its
Bluewater Marine brands, including Sea Pro, Sea Boss, Palmetto and Laguna; its
intention to close four additional boat plants; and the write-down of certain
assets of the Valley-Dynamo business.
During
the third quarter of 2008, the Company accelerated its previously announced
efforts to resize the Company by the end of 2009 in light of extraordinary
developments within global financial markets that are affecting the recreational
marine industry. Specifically, the Company closed its production facilities in
Cumberland, Maryland; Pipestone, Minnesota; Roseburg, Oregon; and Arlington,
Washington. The Company also decided to mothball its plant in Navassa, North
Carolina. The Company completed the Arlington, Cumberland, Roseburg and Navassa
shutdowns in the fourth quarter of 2008, and the Pipestone facility shutdown in
the first quarter of 2009.
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
The
following is a summary of the total expense associated with the 2008
restructuring initiatives recognized during 2009 and 2008:
|
|
|
|
|
2008
Initiative Costs (Gains)
Recognized
in:
|
|
|
|
|
|
|
Three
months ended
|
|
|
Full
year
|
|
(in
millions)
|
|
Total
|
|
|
April
4, 2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
activities:
|
|
|
|
|
|
|
|
|
|
Employee
termination and other benefits
|
|
$
|
50.7
|
|
|
$
|
6.5
|
|
|
$
|
44.2
|
|
Current
asset write-downs
|
|
|
8.2
|
|
|
|
2.3
|
|
|
|
5.9
|
|
Transformation
and other costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation
of manufacturing footprint
|
|
|
68.4
|
|
|
|
9.6
|
|
|
|
58.8
|
|
Retention
and relocation costs
|
|
|
5.5
|
|
|
|
—
|
|
|
|
5.5
|
|
Consulting
costs
|
|
|
5.4
|
|
|
|
—
|
|
|
|
5.4
|
|
Exit
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
termination and other benefits
|
|
|
3.4
|
|
|
|
0.1
|
|
|
|
3.3
|
|
Current
asset write-downs
|
|
|
9.4
|
|
|
|
0.6
|
|
|
|
8.8
|
|
Transformation
and other costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation
of manufacturing footprint
|
|
|
5.5
|
|
|
|
0.7
|
|
|
|
4.8
|
|
Gain
on sale of non-strategic assets
|
|
|
(12.6
|
)
|
|
|
—
|
|
|
|
(12.6
|
)
|
Asset
disposition actions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Definite-lived
asset impairments
|
|
|
61.8
|
|
|
|
1.9
|
|
|
|
59.9
|
|
Gain
on sale of non-strategic assets
|
|
|
(6.7
|
)
|
|
|
—
|
|
|
|
(6.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
restructuring, exit and
other
impairment charges
|
|
$
|
199.0
|
|
|
$
|
21.7
|
|
|
$
|
177.3
|
|
The
restructuring charges related to 2008 initiatives for each of the Company’s
reportable segments in the first quarter of 2009 is summarized
below:
(in
millions)
|
|
Marine
Engine
|
|
|
Boat
|
|
|
Fitness
|
|
|
Bowling
& Billiards
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
terminations
and
other benefits
|
|
$
|
0.6
|
|
|
$
|
5.5
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
0.4
|
|
|
$
|
6.6
|
|
Current
asset write-downs
|
|
|
0.7
|
|
|
|
1.6
|
|
|
|
—
|
|
|
|
0.6
|
|
|
|
—
|
|
|
|
2.9
|
|
Transformation
and
other costs
|
|
|
0.7
|
|
|
|
9.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10.3
|
|
Asset
disposition actions
|
|
|
—
|
|
|
|
1.9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
restructuring, exit and
other
impairment charges
|
|
$
|
2.0
|
|
|
$
|
18.6
|
|
|
$
|
—
|
|
|
$
|
0.7
|
|
|
$
|
0.4
|
|
|
$
|
21.7
|
|
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
The
following table summarizes the 2009 charges taken for restructuring, exit and
other impairment charges related to actions initiated in 2008 and the related
status as of April 4, 2009. The accrued amounts remaining as of April 4, 2009,
represent cash expenditures needed to satisfy remaining obligations. The
majority of the accrued costs are expected to be paid by the end of 2009 and are
included in Accrued expenses in the Consolidated Balance Sheets.
(in
millions)
|
|
Accrued
Costs
as of
Jan.
1,
2009
|
|
|
Costs
Recognized
in
2009
|
|
|
Non-cash
Charges
|
|
|
Net
Cash Payments
|
|
|
Accrued
Costs
as of
Apr.
4,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
termination and other benefits
|
|
$
|
17.0
|
|
|
$
|
6.6
|
|
|
$
|
—
|
|
|
$
|
(14.4
|
)
|
|
$
|
9.2
|
|
Current
asset write-downs
|
|
|
—
|
|
|
|
2.9
|
|
|
|
(2.9
|
)
|
|
|
—
|
|
|
|
—
|
|
Transformation
and other costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation
of manufacturing footprint
|
|
|
5.7
|
|
|
|
10.3
|
|
|
|
—
|
|
|
|
(15.8
|
)
|
|
|
0.2
|
|
Retention
and relocation costs
|
|
|
0.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.1
|
)
|
|
|
0.7
|
|
Consulting
costs
|
|
|
4.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4.5
|
)
|
|
|
—
|
|
Asset
disposition actions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Definite-lived
asset impairments
|
|
|
—
|
|
|
|
1.9
|
|
|
|
(1.9
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
restructuring, exit and
other
impairment charges
|
|
$
|
28.0
|
|
|
$
|
21.7
|
|
|
$
|
(4.8
|
)
|
|
$
|
(34.8
|
)
|
|
$
|
10.1
|
|
The
Company anticipates that it will incur approximately $15 million of additional
costs related to the 2008 initiatives through the remainder of 2009, when the
2008 initiatives are expected to be complete. The Company expects most of these
charges will be incurred in the Boat segment.
The
restructuring charges related to 2008 initiatives for each of the Company’s
reportable segments in the first quarter of 2008 is summarized
below:
(in
millions)
|
|
Marine
Engine
|
|
|
Boat
|
|
|
Fitness
|
|
|
Bowling
& Billiards
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
terminations
and
other benefits
|
|
$
|
1.5
|
|
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
1.6
|
|
|
$
|
0.7
|
|
|
$
|
4.4
|
|
Current
asset write-downs
|
|
|
—
|
|
|
|
3.1
|
|
|
|
—
|
|
|
|
0.4
|
|
|
|
—
|
|
|
|
3.5
|
|
Transformation
and
other costs
|
|
|
—
|
|
|
|
4.4
|
|
|
|
—
|
|
|
|
0.9
|
|
|
|
0.6
|
|
|
|
5.9
|
|
Asset
disposition actions
|
|
|
—
|
|
|
|
5.7
|
|
|
|
—
|
|
|
|
2.7
|
|
|
|
—
|
|
|
|
8.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
restructuring, exit and
other
impairment charges
|
|
$
|
1.5
|
|
|
$
|
13.8
|
|
|
$
|
—
|
|
|
$
|
5.6
|
|
|
$
|
1.3
|
|
|
$
|
22.2
|
|
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Note
3 – Financial Instruments
The
Company operates globally, with manufacturing and sales facilities in various
locations around the world. Due to the Company’s global operations, the Company
engages in activities involving both financial and market risks. The Company
utilizes normal operating and financing activities, along with derivative
financial instruments to minimize these risks.
Derivative Financial Instruments.
The Company uses derivative financial instruments to manage its risks
associated with movements in foreign currency exchange rates, interest rates and
commodity prices. Derivative instruments are not used for trading or speculative
purposes. For certain derivative contracts, on the date a derivative contract is
entered into, the Company designates the derivative as a hedge of a forecasted
transaction (cash flow hedge). The Company formally documents its hedge
relationships, including identification of the hedging instruments and the
hedged items, as well as its risk management objectives and strategies for
undertaking the hedge transaction. This process includes linking derivatives
that are designated as hedges to specific forecasted transactions. The Company
also assesses, both at the inception and monthly thereafter, whether the
derivatives used in hedging transactions are highly effective in offsetting the
changes in the anticipated cash flows of the hedged item. There were no material
adjustments to the results of operations as a result of ineffectiveness for the
quarters ended April 4, 2009, and March 29, 2008. If the hedging relationship
ceases to be highly effective, or it becomes probable that a forecasted
transaction is no longer expected to occur, gains and losses on the derivative
are recorded in Other income (expense), net. The fair market value of derivative
financial instruments is determined through market-based valuations and may not
be representative of the actual gains or losses that will be recorded when these
instruments mature due to future fluctuations in the markets in which they are
traded. The effects of derivative and financial instruments are not expected to
be material to the Company’s financial position or results of operations when
considered together with the underlying exposure being hedged.
Fair Value Derivatives.
During 2009 and 2008, the Company entered into foreign currency forward
contracts to manage foreign currency exposure related to changes in the value of
assets or liabilities caused by changes in the exchange rates of foreign
currencies. The change in the fair value of the foreign currency derivative
contract and the corresponding change in the fair value of the asset or
liability of the Company are both recorded through earnings (loss), each month
as incurred.
Cash Flow Derivatives.
Certain derivative instruments qualify as cash flow hedges under the
requirements of SFAS Nos. 133,
“Accounting
for Derivative Instruments and Hedging Activities
,
” and 138,
“Accounting for Certain Derivative Instruments and Certain Hedging Activities -
an amendment of FASB Statement No. 133.” The Company executes both forward and
option contracts, based on forecasted transactions, to manage foreign exchange
exposure mainly related to inventory purchase and sales transactions. The
Company also enters into commodity swap agreements, based on anticipated
purchases of aluminum, copper and natural gas to manage exposure related to risk
from price changes. In prior periods, the Company entered into forward starting
interest rate swaps to hedge the interest rate risk associated with the
anticipated issuance of debt.
A cash
flow hedge requires that as changes in the fair value of derivatives occur, the
portion of the change deemed to be effective is recorded temporarily in
Accumulated other comprehensive loss and reclassified into earnings in the same
period or periods during which the hedged transaction affects earnings. As of
April 4, 2009, the term of derivative instruments hedging forecasted
transactions ranged from one to 32 months.
Foreign Currency.
The Company
enters into forward and option contracts to manage foreign exchange exposure
related to forecasted transactions, and assets and liabilities that are subject
to risk from foreign currency rate changes. These include product costs;
revenues and expenses; associated receivables and payables; intercompany
obligations and receivables; and other related cash flows.
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Forward
exchange contracts outstanding at April 4, 2009, and March 29, 2008, had
notional contract values of $172.2 million and $300.0 million, respectively.
Option contracts outstanding at April 4, 2009, and March 29, 2008, had notional
contract values of $71.4 million and $262.2 million, respectively. The forward
and options contracts outstanding at April 4, 2009, mature during 2009 and 2010
and primarily relate to the Euro, Mexican peso, Canadian dollar, British pound,
Japanese yen and Australian dollar. As of April 4, 2009, the Company estimates
that during the next 12 months, it will reclassify approximately $12 million in
net gains (based on current rates) from Accumulated other comprehensive loss to
Cost of sales.
Interest Rate.
The Company
has historically utilized fixed-to-floating interest rate swaps to mitigate the
interest rate risk associated with its long-term debt. There were no
fixed-to-floating interest rate swaps outstanding at April 4, 2009. As of March
28, 2008, the Company had swaps with a notional value of $50.0 million. These
instruments have been treated as fair value hedges, with the offset to the fair
market value recorded in long-term debt; see Note 14 to the consolidated
financial statements in the 2008 Form 10-K for further details.
As of
April 4, 2009 and March 29, 2008, the Company had $5.4 million and $1.1 million,
respectively, of net deferred gains associated with all forward starting
interest rate swaps included in Accumulated other comprehensive loss. These
amounts include gains deferred on $250.0 million of forward starting interest
rate swaps terminated in July 2006 and losses deferred on $150.0 million of
notional value forward starting swaps, which were terminated in August 2008.
There were no forward starting interest rate swaps outstanding at April 4, 2009.
For the three months ended April 4, 2009, the Company recognized $0.2 million of
net amortization gains related to all settled forward starting interest rate
swaps.
Commodity Price.
The Company
uses commodity swaps to hedge anticipated purchases of aluminum and natural gas.
Commodity swap contracts outstanding at April 4, 2009, and March 29, 2008, had
notional values of $34.3 million and $14.8 million, respectively. The contracts
outstanding mature from 2009 to 2011. The amount of gain or loss is reclassified
from Accumulated other comprehensive loss to Cost of sales in the same period or
periods during which the hedged transaction affects earnings. As of April 4,
2009, the Company estimates that during the next 12 months, it will reclassify
approximately $12 million in net losses (based on current prices) from
Accumulated other comprehensive loss to Cost of sales.
As of
April 4, 2009, the fair values of the Company’s derivative instruments
were:
(in
millions)
|
|
|
|
|
|
|
|
Derivative
Assets
|
|
Derivative
Liabilities
|
|
Instrument
|
|
Balance
Sheet Location
|
|
Fair
Value
|
|
Balance
Sheet Location
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
|
Prepaid
Expenses and Other
|
|
$
|
—
|
|
Accrued
Expenses
|
|
$
|
—
|
|
Foreign
exchange contracts
|
|
Prepaid
Expenses and Other
|
|
|
12.2
|
|
Accrued
Expenses
|
|
|
3.0
|
|
Commodity
contracts
|
|
Prepaid
Expenses and Other
|
|
|
0.1
|
|
Accrued
Expenses
|
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
12.3
|
|
|
|
$
|
13.1
|
|
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
As of
March 29, 2008, the fair values of the Company’s derivative instruments
were:
(in
millions)
|
|
|
|
|
|
|
|
Derivative
Assets
|
|
Derivative
Liabilities
|
|
Instrument
|
|
Balance
Sheet Location
|
|
Fair
Value
|
|
Balance
Sheet Location
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
|
Prepaid
Expenses and Other
|
|
$
|
3.9
|
|
Accrued
Expenses
|
|
$
|
11.1
|
|
Foreign
exchange contracts
|
|
Prepaid
Expenses and Other
|
|
|
4.3
|
|
Accrued
Expenses
|
|
|
10.0
|
|
Commodity
contracts
|
|
Prepaid
Expenses and Other
|
|
|
2.2
|
|
Accrued
Expenses
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
10.4
|
|
|
|
$
|
21.1
|
|
The
effect of derivative instruments on the Consolidated Statement of Operations for
the three months ended April 4, 2009, was:
(in
millions)
|
|
|
|
|
|
|
Fair
Value Hedging Instruments
|
|
Location
of Gain/(Loss)
Recognized
in Income on
Derivatives
|
|
|
Amount
of Gain/(Loss)
Recognized
in Income on
D
erivatives
|
|
|
|
|
|
|
|
|
Foreign
exchange contracts
|
|
Cost
of Sales
|
|
$
|
(0.1
|
)
|
Cash
Flow Hedge Instruments
|
|
Amount
of
Gain/(Loss)
Recognized
on
Derivatives
in
Accumulated
other
comprehensive
loss
(Effective
Portion)
|
|
Location
of Gain/(Loss)
Reclassified
from
Accumulated
other
comprehensive
loss into
Income
(Effective
Portion)
|
|
Amount
of Gain/(Loss)
Reclassified
from
Accumulated
other
comprehensive
loss into
Income
(Effective
Portion)
|
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
|
$
|
—
|
|
Interest
Income
|
|
$
|
0.2
|
|
Foreign
exchange contracts
|
|
|
2.9
|
|
Cost
of Sales
|
|
|
5.9
|
|
Commodity
contracts
|
|
|
(1.8
|
)
|
Cost
of Sales
|
|
|
(3.8
|
)
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.1
|
|
|
|
$
|
2.3
|
|
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Note
4 – Fair Value Measurements
Fair
value is defined under SFAS 157, “Fair Value Measurements,” (SFAS 157) as the
exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the
measurement date. Valuation techniques used to measure fair value
under SFAS 157 must maximize the use of observable inputs and minimize the use
of unobservable inputs. SFAS 157 established a fair value hierarchy
based on three levels of inputs, of which the first two are considered
observable and the last unobservable.
|
●
|
Level
1 - Quoted prices in active markets for identical assets or
liabilities. These are typically obtained from real-time quotes
for transactions in active exchange markets involving identical
assets.
|
|
|
|
|
●
|
Level
2 - Inputs, other than quoted prices included within Level 1, which are
observable for the asset or liability, either directly or
indirectly. These are typically obtained from readily-available
pricing sources for comparable instruments.
|
|
|
|
|
●
|
Level
3 - Unobservable inputs, where there is little or no market activity for
the asset or liability. These inputs reflect the reporting entity’s own
assumptions of the data that market participants would use in pricing the
asset or liability, based on the best information available in the
circumstances.
|
|
|
|
The
following table summarizes Brunswick’s financial assets and liabilities measured
at fair value on a recurring basis in accordance with SFAS 157 as of April
4, 2009:
(in
millions)
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Equivalents
|
|
$
|
209.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
209.6
|
|
Investments
|
|
|
3.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3.2
|
|
Derivatives
|
|
|
—
|
|
|
|
12.3
|
|
|
|
—
|
|
|
|
12.3
|
|
Total
Assets
|
|
$
|
212.8
|
|
|
$
|
12.3
|
|
|
$
|
—
|
|
|
$
|
225.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
$
|
—
|
|
|
$
|
13.1
|
|
|
$
|
—
|
|
|
$
|
13.1
|
|
Note
5 – Share-Based Compensation
Total
stock option expense, after adjusting for forfeitures, was $0.0 for the three
months ended April 4, 2009, and $1.0 million for the three months ended March
29, 2008, and resulted in a deferred tax asset for the tax benefit to be
realized in future periods. In accordance with SFAS No. 123 (revised 2004),
“Share-Based Payment,” (SFAS 123(R)), the fair value of option grants is
estimated as of the date of grant using the Black-Scholes-Merton option pricing
model. Share-based employee compensation cost is recognized as a component of
Selling, general and administrative expense in the Consolidated Statements of
Operations.
Under the
2003 Stock Incentive Plan (Plan), the Company may grant stock options, stock
appreciation rights (SARs), nonvested stock and other types of share-based
awards to executives and other management employees. Under the Plan, the Company
may issue up to 8.1 million shares, consisting of treasury shares and
authorized, but unissued shares of common stock. As of April 4, 2009,
0.6 million shares were available for grant.
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Stock
Options and SARs
Prior to
2005, the Company primarily issued share-based compensation in the form of stock
options, and had not issued any SARs. Since the beginning of 2005,
the Company has issued stock-settled SARs and has not issued any stock options.
Generally, stock options and SARs are exercisable over a period of 10 years, or
as otherwise determined by the Human Resources and Compensation Committee of the
Board of Directors, and subject to vesting periods of generally four years.
However, with respect to stock options and SARs, all grants vest immediately:
(i) in the event of a change in control; (ii) upon death or disability of the
grantee; and (iii) with respect to awards granted prior to 2008, upon the sale
or divestiture of the business unit to which the grantee is assigned. With
respect to stock option and SAR awards granted prior to 2006, grantees continue
to vest in accordance with the applicable vesting schedule even upon termination
of employment if the sum of (A) the age of the grantee and (B) the grantee’s
total number of years of service, equals 65 or more. With respect to SARs
granted in 2006 and later, grantees continue to vest in accordance with the
vesting schedule even upon termination if (A) the grantee has attained the age
of 62 and (B) the grantee’s age plus total years of service equals 70 or more.
The exercise price of stock options and SARs issued under the Plan cannot be
less than the fair market value of the underlying shares at the date of
grant.
During
the three months ended April 4, 2009, and March 29, 2008, there were 0.8 million
and 2.6 million SARs granted, respectively, which resulted in total expenses of
$0.0, after adjusting for forfeitures, and $1.0 million, respectively, due to
amortization of SARs granted. These expenses resulted in a deferred
tax asset for the tax benefit to be realized in future periods.
The
weighted average fair values of individual SARs granted were $2.16 and $5.72
during the first quarters of 2009 and 2008, respectively. The fair
value of each grant was estimated on the date of grant using the
Black-Scholes-Merton pricing model utilizing the following weighted average
assumptions for 2009 and 2008:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
3.0
|
%
|
|
|
2.9
|
%
|
Dividend
yield
|
|
|
1.9
|
%
|
|
|
2.3
|
%
|
Volatility
factor
|
|
|
73.9
|
%
|
|
|
40.1
|
%
|
Weighted
average expected life
|
|
5.7
– 6.3 years
|
|
|
5.4
–
6.2
years
|
|
Nonvested
stock awards
The
Company grants nonvested stock units and awards to key employees as determined
by the Human Resources and Compensation Committee of the Board of Directors.
Nonvested stock units and awards have vesting periods of three or four years.
Nonvested stock units and awards are eligible for dividends, subject to vesting,
which are reinvested and non-voting. All nonvested units and awards have
restrictions on the sale or transfer of such awards during the nonvested
period.
Generally,
grants of nonvested stock units and awards are forfeited if employment is
terminated prior to vesting. Nonvested stock units and awards granted in 2006
and later vest pro rata if the sum of (A) the age of the grantee and (B) the
grantee’s total number of years of service equals 70 or more.
In 2008,
the Company granted performance shares to certain members of senior management.
The number of performance shares to be issued pursuant to the 2008 grant will be
based on the Company’s performance against three key financial goals and the
Company’s relative total shareholder return versus the S&P 500 as of the end
of the performance period in 2010; provided, however, that no award will be
earned if the Company’s stock price does not meet a minimum threshold as of the
end of the performance period.
The cost
of nonvested stock awards is recognized on a straight-line basis over the
requisite service period. During the three months ended April 4, 2009, and March
29, 2008, there were 0.0 and 0.9 million stock awards granted under these plans,
respectively. As a result of reversing the amortization of certain awards, the
Company recognized income of $0.2 million in the first quarter of 2009, while
$0.7 million was charged to compensation expense under these plans in the first
quarter of 2008.
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
The
weighted average price per nonvested stock award at grant date was $15.83 for
the nonvested stock awards granted in the first quarter of 2008. As
of April 4, 2009, there was $1.2
million of total
unrecognized compensation cost related to nonvested share-based compensation
arrangements granted under the Plan. That cost is expected to be
recognized over a weighted average period of 0.9
years.
Director
Awards
The
Company issues stock awards to directors in accordance with the terms and
conditions determined by the Nominating and Corporate Governance Committee of
the Board of Directors. One-half of each director’s annual fee is
paid in Brunswick common stock, the receipt of which may be deferred until a
director retires from the Board of Directors. Each director may elect
to have the remaining one-half paid either in cash, in Brunswick common stock
distributed at the time of the award, or in deferred Brunswick common stock
units with a 20 percent premium. Each non-employee director is also
entitled to an annual grant of restricted stock units, which is deferred until
the director retires from the Board.
Note
6 – Earnings (Loss) per Common Share
The
Company calculates earnings (loss) per common share in accordance with SFAS No.
128, "Earnings per Share." Basic earnings (loss) per common share is
calculated by dividing net earnings (loss) by the weighted average number of
common shares outstanding during the period. Diluted earnings (loss) per common
share is calculated similarly, except that the calculation includes the dilutive
effect of stock options and nonvested stock awards.
Basic and
diluted earnings (loss) per common share for the three months ended April 4,
2009, and March 29, 2008, were calculated as follows:
|
|
Three
Months Ended
|
|
(in
millions, except per share data)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
$
|
(184.2
|
)
|
|
$
|
13.3
|
|
|
|
|
|
|
|
|
|
|
Weighted
average outstanding shares – basic
|
|
|
88.4
|
|
|
|
88.2
|
|
Dilutive
effect of common stock equivalents
|
|
|
—
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
Weighted
average outstanding shares – diluted
|
|
|
88.4
|
|
|
|
88.3
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per common share
|
|
$
|
(2.08
|
)
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per common share
|
|
$
|
(2.08
|
)
|
|
$
|
0.15
|
|
As of
April 4, 2009, there were 6.3 million options outstanding, of which 3.5 million
were exercisable. This compares with 6.8 million options outstanding,
of which 3.0 million were exercisable as of March 29, 2008. During
the three months ended April 4, 2009, and March 29, 2008, there were 6.3 million
and 5.1 million weighted average shares of options outstanding, respectively,
for which the exercise price, based on the average price, was greater than the
average market price of the Company’s shares for the period then
ended. During the quarter ended April 4, 2009, the Company incurred a
net loss. As common stock equivalents have an anti-dilutive effect on the net
loss, the equivalents were not included in the computation of diluted earnings
(loss) per common share for 2009.
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Note
7 – Commitments and Contingencies
Financial
Commitments
The
Company has entered into guarantees of indebtedness of third parties, primarily
in connection with customer financing programs. Under these arrangements, the
Company has guaranteed customer obligations to the financial institutions in the
event of customer default, generally subject to a maximum amount which is less
than total obligations outstanding. The Company has also guaranteed payments to
third parties that have purchased customer receivables from Brunswick and, in
certain instances, has guaranteed secured term financing of its customers.
Potential payments in connection with these customer financing arrangements
would likely extend over several years. The potential cash payments associated
with these customer financing arrangements as of April 4, 2009, and March 29,
2008, were:
|
|
Single
Year Obligation
|
|
|
Maximum
Obligation
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marine
Engine
|
|
$
|
31.2
|
|
|
$
|
48.6
|
|
|
$
|
31.2
|
|
|
$
|
48.6
|
|
|
|
|
3.2
|
|
|
|
0.9
|
|
|
|
3.2
|
|
|
|
0.9
|
|
Fitness
|
|
|
26.9
|
|
|
|
23.5
|
|
|
|
37.2
|
|
|
|
33.5
|
|
Bowling
& Billiards
|
|
|
10.5
|
|
|
|
12.3
|
|
|
|
25.3
|
|
|
|
29.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
71.8
|
|
|
$
|
85.3
|
|
|
$
|
96.9
|
|
|
$
|
112.8
|
|
In most instances, upon repurchase of
the debt obligation, the Company receives rights to the collateral securing the
financing
.
The Company’s
risk under these arrangements is mitigated by the value of the collateral that
secures the financing. The Company had $6.5 million accrued for potential losses
related to recourse exposure at April 4, 2009.
The
Company has also entered into arrangements with third-party lenders where it has
agreed, in the event of a default by the customer, to repurchase from the
third-party lender Brunswick products repossessed from the customer. These
arrangements are typically subject to a maximum repurchase amount. The amount of
collateral the Company could be required to purchase as of April 4, 2009, and
March 29, 2008, was:
|
|
Single
Year Obligation
|
|
|
Maximum
Obligation
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marine
Engine
|
|
$
|
3.7
|
|
|
$
|
4.5
|
|
|
$
|
3.7
|
|
|
$
|
4.5
|
|
|
|
|
118.4
|
|
|
|
128.7
|
|
|
|
155.2
|
|
|
|
184.7
|
|
Bowling
& Billiards
|
|
|
1.9
|
|
|
|
4.1
|
|
|
|
1.9
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
124.0
|
|
|
$
|
137.3
|
|
|
$
|
160.8
|
|
|
$
|
193.3
|
|
The
Company’s risk under these arrangements is mitigated by the value of the
products repurchased as part of the transaction. The Company had $12.1
million accrued for potential losses related to repurchase exposure at April 4,
2009.
Based on
historical experience and current facts and circumstances, and in accordance
with FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others – An Interpretation of FASB Statements No. 5, 57, and 107 and Rescission
of FASB Interpretation No. 34,” the Company has recorded the estimated net
liability associated with losses from these guarantee and repurchase obligations
on its Condensed Consolidated Balance Sheets. Historical cash requirements and
losses associated with these obligations have not been significant, but could
increase if dealer defaults increase as a result of the difficult market
conditions in the United States.
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Financial
institutions have issued standby letters of credit and surety bonds
conditionally guaranteeing obligations on behalf of the Company totaling $102.2
million as of April 4, 2009. A large portion of these standby letters of credit
and surety bonds are related to the Company’s self-insured workers’ compensation
program as required by its insurance companies and various state agencies. The
Company has recorded reserves to cover liabilities associated with these
programs. In addition, the Company has provided a letter of credit to GE
Commercial Distribution Finance Corporation (GECDF) as a guarantee of the
Company's obligations to GECDF and affiliates under various agreements. Under
certain circumstances, such as an event of default under the Company’s revolving
credit facility, or, in the case of surety bonds, a ratings downgrade below
investment grade, the Company could be required to post collateral to support
the outstanding letters of credit and surety bonds. As the Company’s current
long-term debt ratings are below investment grade, the Company has posted
letters of credit totaling $11.2 million as collateral against $13.3 million of
outstanding surety bonds.
Product
Warranties
The
Company records a liability for product warranties at the time revenue is
recognized. The liability is estimated using historical warranty
experience, projected claim rates and expected costs per claim. The
Company adjusts its liability for specific warranty matters when they become
known and the exposure can be estimated. The Company’s warranty
reserves are affected by product failure rates as well as material usage and
labor costs incurred in correcting a product failure. If these
estimated costs differ from actual costs, a revision to the warranty reserve
would be required.
The
following activity related to product warranty liabilities was recorded in
Accrued expenses and Long-term liabilities – Other during the three months ended
April 4, 2009, and March 29, 2008:
|
|
Three
Months Ended
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
$
|
145.4
|
|
|
$
|
163.9
|
|
Payments
made
|
|
|
(22.5
|
)
|
|
|
(27.1
|
)
|
Provisions/additions
for contracts issued/sold
|
|
|
19.9
|
|
|
|
29.2
|
|
Aggregate
changes for preexisting warranties
|
|
|
0.8
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Balance
at end of period
|
|
$
|
143.6
|
|
|
$
|
166.0
|
|
Additionally,
marine engine customers may purchase a contract from the Company that extends
product protection beyond the standard product warranty period. For
certain extended warranty contracts in which the Company retains the warranty
obligation, a deferred liability is recorded based on the aggregate sales price
for contracts sold. The deferred liability is reduced and revenue is
recognized over the contract period as costs are expected to be
incurred. Deferred revenue associated with contracts sold by the
Company that extend product protection beyond the standard product warranty
period, not included in the table above, was $20.8 million as of April 4,
2009.
Legal
and Environmental
The
Company accrues for litigation exposure based upon its assessment, made in
consultation with counsel, of the likely range of exposure stemming from the
claim. In light of existing reserves, the Company’s litigation
claims, when finally resolved, will not, in the opinion of management, have a
material adverse effect on the Company’s consolidated financial
position. If current estimates for the cost of resolving any claims
are later determined to be inadequate, results of operations could be adversely
affected in the period in which additional provisions are required.
There
were no significant changes to the legal and environmental commitments that were
discussed in Note 11 to the consolidated financial statements in the 2008 Form
10-K.
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Note
8 – Segment Data
Brunswick
is a manufacturer and marketer of leading consumer brands, and operates in four
reportable segments: Marine Engine, Boat, Fitness and Bowling &
Billiards. The Company’s segments are defined by management reporting
structure and operating activities.
During
the first quarter of 2009, the Company realigned the management of its marine
service, parts and accessories businesses. The Boat segment’s parts and
accessories businesses of Attwood, Land ‘N’ Sea, Benrock, Kellogg Marine and
Diversified Marine Products are now being managed by the Marine Engine segment’s
service and parts business leaders. As a result, the marine service, parts and
accessories operating results previously reported in the Boat segment are now
being reported in the Marine Engine segment. Segment results have been restated
for all periods presented to reflect the change in Brunswick’s reported
segments.
The
Company evaluates performance based on business segment operating earnings.
Operating earnings of segments do not include the expenses of corporate
administration, earnings from equity affiliates, other expenses and income of a
non-operating nature, interest expense and income or provisions for income
taxes.
Corporate/Other
results include items such as corporate staff and overhead costs. Marine
eliminations are eliminations between the Marine Engine and Boat segments for
sales transactions consummated at established arm’s length transfer
prices.
The
following table sets forth net sales and operating earnings (loss) of each of
the Company’s reportable segments for the three months ended April 4, 2009, and
March 29, 2008:
|
|
Net
Sales
|
|
|
Operating
Earnings (Loss)
|
|
|
|
Three
Months Ended
|
|
|
Three
Months Ended
|
|
(
in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marine
Engine
|
|
$
|
343.9
|
|
|
$
|
628.6
|
|
|
$
|
(50.6
|
)
|
|
$
|
33.6
|
|
Boat
|
|
|
205.3
|
|
|
|
565.6
|
|
|
|
(72.3
|
)
|
|
|
(17.4
|
)
|
Marine
eliminations
|
|
|
(33.0
|
)
|
|
|
(110.2
|
)
|
|
|
—
|
|
|
|
—
|
|
Total
Marine
|
|
|
516.2
|
|
|
|
1,084.0
|
|
|
|
(122.9
|
)
|
|
|
16.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fitness
|
|
|
118.6
|
|
|
|
149.2
|
|
|
|
0.3
|
|
|
|
8.1
|
|
Bowling
& Billiards
|
|
|
99.9
|
|
|
|
113.6
|
|
|
|
10.6
|
|
|
|
0.9
|
|
Corporate/Other
|
|
|
—
|
|
|
|
—
|
|
|
|
(15.5
|
)
|
|
|
(14.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
734.7
|
|
|
$
|
1,346.8
|
|
|
$
|
(127.5
|
)
|
|
$
|
10.3
|
|
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
The
following table sets forth total assets of each of the Company’s reportable
segments:
|
|
Total
Assets
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
Marine
Engine
|
|
$
|
800.4
|
|
|
$
|
874.0
|
|
Boat
|
|
|
719.4
|
|
|
|
794.0
|
|
Total
Marine
|
|
|
1,519.8
|
|
|
|
1,668.0
|
|
|
|
|
|
|
|
|
|
|
Fitness
|
|
|
580.3
|
|
|
|
636.3
|
|
Bowling
& Billiards
|
|
|
317.0
|
|
|
|
340.8
|
|
Corporate/Other
|
|
|
519.5
|
|
|
|
578.8
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,936.6
|
|
|
$
|
3,223.9
|
|
Note
9 – Investments
The
Company has certain unconsolidated international and domestic affiliates that
are accounted for using the equity method. See
Note 11 – Financial Services
for more details on the Company’s joint venture, Brunswick Acceptance Company,
LLC (BAC). Refer to Note 8 to the consolidated financial statements
in the 2008 Form 10-K for further detail relating to the Company’s
investments.
In March
2008, Brunswick sold its interest in its bowling joint venture in Japan for
$40.4 million gross cash proceeds, $36.9 million net of cash paid for taxes and
other costs. The sale resulted in a $19.7 million pretax gain, $9.1 million
after-tax, and was recorded in Investment sale gain in the Consolidated
Statements of Operations for the quarter ended March 29, 2008. This sale was
subject to post-closing adjustments, which were completed during 2008.
Ultimately, the Company recorded $40.4 million gross cash proceeds, $37.4
million net of cash paid for taxes and other costs, and a $20.9 million pretax
gain, $9.9 million after-tax.
Note
10 – Comprehensive Income (Loss)
The
Company reports certain changes in equity during a period in accordance with
SFAS No. 130, “Reporting Comprehensive Income.” Accumulated other
comprehensive loss includes prior service costs and net actuarial gains and
losses for defined benefit plans; foreign currency cumulative translation
adjustments; and unrealized derivative gains and losses, all net of tax; and
investment gains and losses. Components of other comprehensive income (loss) for
the three months ended April 4, 2009, and March 29, 2008, were as
follows:
|
|
Three
Months Ended
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
$
|
(184.2
|
)
|
|
$
|
13.3
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
Foreign
currency cumulative translation adjustment
|
|
|
(17.1
|
)
|
|
|
11.3
|
|
Net
change in unrealized gains (losses) on investments
|
|
|
0.2
|
|
|
|
(1.4
|
)
|
Net
change in prior service cost
|
|
|
2.0
|
|
|
|
0.5
|
|
Net
change in actuarial loss
|
|
|
17.0
|
|
|
|
0.7
|
|
Net
change in accumulated unrealized derivative gains (losses)
|
|
|
(0.6
|
)
|
|
|
(1.6
|
)
|
Total
other comprehensive income
|
|
|
1.5
|
|
|
|
9.5
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
$
|
(182.7
|
)
|
|
$
|
22.8
|
|
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Note
11 – Financial Services
The
Company, through its Brunswick Financial Services Corporation (BFS) subsidiary,
owns a 49 percent interest in a joint venture, Brunswick Acceptance Company, LLC
(BAC). CDF Ventures, LLC (CDFV), a subsidiary of GE Capital Corporation (GECC),
owns the remaining 51 percent. BAC commenced operations in 2003 and provides
secured wholesale inventory floor-plan financing to Brunswick’s boat and engine
dealers. BAC also purchases and services a portion of Mercury Marine’s domestic
accounts receivable relating to its boat builder and dealer
customers.
Through
an agreement reached in the second quarter of 2008, the term of the joint
venture was extended through June 30, 2014. The joint venture agreement contains
provisions allowing for the renewal, purchase or termination by either partner
at the end of this term. The agreement also contained provisions allowing for
CDFV to terminate the joint venture if the Company is unable to maintain
compliance with financial covenants. During the fourth quarter of 2008, the
partners reached an agreement to amend the financial covenant to conform it to
the minimum fixed charges test contained in the Company’s amended and restated
revolving credit facility. Compliance with the fixed charge test is only
required when the Company's available, unused borrowing capacity under the
revolver is below $60 million. As available, unused borrowing capacity
under the revolver was above $60 million at the end of the first quarter of
2009, the Company was not required to meet the minimum fixed charge
test.
BAC is
funded in part through a $1.0 billion secured borrowing facility from GE
Commercial Distribution Finance Corporation (GECDF), which is in place through
the term of the joint venture, and with equity contributions from both partners.
BAC also sells a portion of its receivables to a securitization facility, the GE
Dealer Floorplan Master Note Trust, which is arranged by GECC. The sales of
these receivables meet the requirements of a “true sale”
under SFAS No.
140, “Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities – a replacement of FASB Statement No. 125,” (SFAS
140), and are
therefore not retained on the financial statements of BAC. The indebtedness of
BAC is not guaranteed by the Company or any of its subsidiaries. In addition,
BAC is not responsible for any continuing servicing costs or obligations with
respect to the securitized receivables.
BFS’s
investment in BAC is accounted for by the Company under the equity method and is
recorded as a component of Investments in its Condensed Consolidated Balance
Sheets. The Company records BFS’s share of income or loss in BAC based on its
ownership percentage in the joint venture in Equity earnings (loss) in its
Consolidated Statements of Operations.
BFS and GECDF also have an
income sharing arrangement related to income generated from the receivables sold
by BAC to the securitization facility.
BFS’s
equity investment is adjusted monthly to maintain a 49 percent interest in
accordance with the capital provisions of the joint venture agreement. The
Company funds its investment in BAC through cash contributions and reinvested
earnings. BFS’s total investment in BAC at April 4, 2009, and December 31, 2008,
was $27.1 million and $26.7 million, respectively.
BFS
recorded income related to the operations of BAC of $1.1 million and $2.8
million for the three months ended April 4, 2009, and March 29, 2008,
respectively. These amounts include amounts earned by BFS under the
aforementioned income sharing agreement, but exclude the discount expense paid
by the Company on the sale of Mercury Marine’s accounts receivable to the joint
venture noted below.
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Accounts
receivable totaling $114.3 million and $209.1 million were sold to BAC in the
first quarters of 2009 and 2008, respectively. Discounts of $1.0 million and
$1.8 for the first quarters of 2009 and 2008, respectively, have been recorded
as an expense in Other income (expense), net, in the Consolidated Statements of
Operations. The outstanding balance of receivables sold to BAC was $83.7 million
as of April 4, 2009, compared with $77.4 million as of December 31, 2008.
Pursuant to the joint venture agreement, BAC reimbursed Mercury Marine $0.6
million in both the first quarter of 2009 and 2008 for the related credit,
collection and administrative costs incurred in connection with the servicing of
such receivables.
As of
April 4, 2009, and December 31, 2008, the Company had a retained interest in
$43.3 million and $41.0 million of the total outstanding accounts receivable
sold to BAC, respectively. The Company’s maximum exposure as of April
4, 2009, and December 31, 2008, related to these amounts was $25.0 million and
$28.2 million, respectively. In accordance with SFAS No. 140, the
Company treats the sale of receivables in which the Company retains an interest
as a secured obligation. Accordingly, the amount of the Company’s maximum
exposure was recorded in Accounts and notes receivable, and Accrued expenses in
the Consolidated Balance Sheets. These balances are included in the recourse
obligations table in
Note
7 – Commitments and
Contingencies.
Note
12 – Income Taxes
The
Company recognized an income tax provision for the three months ended April 4,
2009, despite losses before taxes. The provision is primarily due to uncertainty
concerning the realization of certain state and foreign net deferred tax assets,
as prescribed by SFAS No. 109, “Accounting for Income Taxes.” A valuation
allowance of $36.6 million was recorded during the first quarter of 2009 to
reduce certain state and foreign net deferred tax assets to their anticipated
realizable value. The remaining realizable value was determined by evaluating
the potential to recover the value of these assets through the utilization of
loss carrybacks. The effective tax rate, which is calculated as the income tax
provision as a percent of pretax losses, for the three months ended April 4,
2009, was (23.0) percent.
The
Company’s effective tax rate for the three months ended March 29, 2008, was 48.4
percent. The effective tax rate was higher than the statutory rate
primarily due to a higher tax rate on the $19.7 million pretax gain, $9.1
million after-tax, on the sale of the Company’s interest in its bowling joint
venture in Japan.
As of
April 4, 2009, and December 31, 2008, the Company had approximately $41.8
million and $44.2 million of gross unrecognized tax benefits, including
interest. The Company believes it is reasonably possible that the total amount
of gross unrecognized tax benefits, as of April 4, 2009, could decrease by
approximately $11.2 million in the next 12 months due to settlements with taxing
authorities. Due to the various jurisdictions in which the Company files tax
returns and the uncertainty regarding the timing of the settlement of tax
audits, it is possible that there could be other significant changes in the
amount of unrecognized tax benefits in 2009, but the amount cannot be
estimated.
The
Company recognizes interest and penalties related to unrecognized tax benefits
in income tax expense. As of April 4, 2009, and December 31, 2008, the Company
had approximately $7.0 million and $6.9 million accrued for the payment of
interest. There were no amounts accrued for penalties at April 4, 2009, or
December 31, 2008.
The Company is regularly
audited by federal, state and foreign tax authorities. The Company’s taxable
years 2004 through 2007 are currently open for IRS examination and the IRS has
completed its field examination for 2004 and 2005
. Primarily as a result
of filing amended tax returns, which were generated by the closing of federal
income tax audits, the Company is still open to state and local tax audits in
major tax jurisdictions dating back to the 1999 taxable year. With the exception
of Germany, where the Company is currently undergoing a tax audit for taxable
years 1998 through 2007, the Company is no longer subject to income tax
examinations by any other major foreign tax jurisdiction for years prior to
2003.
BRUNSWICK
CORPORATION
|
Notes
to Consolidated Financial Statements
|
(unaudited)
|
Note
13 – Pension and Other Postretirement Benefits
The
Company has defined contribution plans, qualified and nonqualified pension
plans, and other postretirement benefit plans covering substantially all of its
employees. The Company’s contributions to its defined contribution plans are
largely discretionary and 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 15 to the consolidated financial statements in the 2008 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 4, 2009, and March 29, 2008:
|
|
Pension
Benefits
|
|
|
Other
Postretirement
Benefits
|
|
|
|
Three
Months Ended
|
|
|
Three
Months Ended
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$
|
2.9
|
|
|
$
|
3.8
|
|
|
$
|
0.5
|
|
|
$
|
0.7
|
|
Interest
cost
|
|
|
16.5
|
|
|
|
16.9
|
|
|
|
1.5
|
|
|
|
1.6
|
|
Expected
return on plan assets
|
|
|
(12.5
|
)
|
|
|
(21.0
|
)
|
|
|
—
|
|
|
|
—
|
|
Amortization
of prior service costs (credits)
|
|
|
1.0
|
|
|
|
1.6
|
|
|
|
(0.3
|
)
|
|
|
(0.4
|
)
|
Amortization
of net actuarial loss
|
|
|
12.6
|
|
|
|
0.9
|
|
|
|
—
|
|
|
|
—
|
|
Curtailment
loss
|
|
|
2.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
pension and other benefit costs
|
|
$
|
23.3
|
|
|
$
|
2.2
|
|
|
$
|
1.7
|
|
|
$
|
1.9
|
|
Employer Contributions.
During the three months ended April 4, 2009, and March 29, 2008, the
Company contributed $0.8 million and $0.4 million, respectively, to fund benefit
payments to its nonqualified pension plan. The Company is evaluating the impact
of the Pension Protection Act of 2006 on 2009 contributions to the qualified
pension plans. Company contributions are subject to change based on market
conditions and Company discretion.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Certain
statements in Management’s Discussion and Analysis are based on non-GAAP
financial measures. Specifically, the discussion of the Company’s cash flows
includes an analysis of free cash flows. GAAP refers to generally accepted
accounting principles in the United States. A “non-GAAP financial measure” is a
numerical measure of a registrant’s historical or future financial performance,
financial position or cash flows that excludes amounts, or is subject to
adjustments that have the effect of excluding amounts, that are included in the
most directly comparable measure calculated and presented in accordance with
GAAP in the Statement of operations, balance sheet or statement of cash flows of
the issuer; or includes amounts, or is subject to adjustments that have the
effect of including amounts, that are excluded from the most directly comparable
measure so calculated and presented. Operating and statistical measures are not
non-GAAP financial measures.
The
Company includes non-GAAP financial measures in Management’s Discussion and
Analysis, as Brunswick’s management believes that these measures and the
information they provide are useful to investors because they permit investors
to view Brunswick’s performance using the same tools that management uses and to
better evaluate the Company’s ongoing business performance.
Certain
other statements in Management’s Discussion and Analysis are forward-looking as
defined in the Private Securities Litigation Reform Act of 1995. These
statements are based on current expectations that are subject to risks and
uncertainties. Actual results may differ materially from expectations as of the
date of this filing because of factors discussed in Item 1A – Risk Factors of
Brunswick’s 2008 Annual Report on Form 10-K (the 2008 Form 10-K).
During
the first quarter of 2009, the Company realigned the management of its marine
service, parts and accessories businesses. The Boat segment’s parts and
accessories businesses of Attwood, Land ‘N’ Sea, Benrock, Kellogg Marine and
Diversified Marine Products are now being managed by the Marine Engine segment’s
service and parts business leaders. As a result, the marine service, parts and
accessories operating results previously reported in the Boat segment are now
being reported in the Marine Engine segment. Segment results have been restated
for all periods presented to reflect the change in Brunswick’s reported
segments.
Overview
and Outlook
General
Management
believes that the Company has adequate sources of liquidity to meet the
Company’s short-term and long-term needs. Management expects that the
Company’s interim cash requirements, which have declined due to lower spending,
will be met out of existing cash balances and cash flow.
Net sales
during the first quarter of 2009 decreased 45.4 percent to $734.7 million from
$1,346.8 million in the first quarter of 2008. For the three months ended April
4, 2009, the Company reported lower global sales across all of its segments. The
overall decrease in sales was primarily due to the continued reduction in marine
industry demand and a reduction in demand for other consumer discretionary
products as a result of a weak global economy, soft U.S. housing markets, and
worldwide consumer uneasiness.
Retail
unit sales of powerboats in the United States have been declining since 2005,
with the rate of decline accelerating through the first quarter of 2009. The
weak retail demand for products resulted in lower revenues in its Marine Engine
and Boat segments. Additionally, lower equipment orders from fitness and bowling
products customers, along with lower consumer spending on discretionary items
such as fitness equipment and billiards tables, led to lower Brunswick
sales.
Quarterly
operating losses were $127.5 million with negative operating margins of 17.4
percent. These results included $39.6 million of restructuring, exit and other
impairment charges taken during the first quarter of 2009. In the three months
ended March 29, 2008, quarterly operating earnings were $10.3 million, with
operating margins of 0.8 percent, which included restructuring, exit and other
impairment charges of $22.2 million. The operating losses during the first
quarter of 2009 were primarily the result of lower sales from marine operations,
reduced fixed-cost absorption due to reduced production rates in the Company’s
marine businesses in an effort to achieve appropriate levels of dealer pipeline
inventories and higher restructuring, exit and other impairment charges. These
factors were partially offset by successful cost-reduction initiatives, as
discussed in
Note 2 –
Restructuring Activities
in the Notes to Consolidated Financial
Statements.
In March
2008, Brunswick sold its interest in its bowling joint venture in Japan for
$40.4 million gross cash proceeds, $36.9 million net of cash paid for taxes and
other costs. The sale resulted in a $19.7 million pretax gain, $9.1 million
after-tax, and was recorded in Investment sale gain in the Consolidated
Statements of Operations. This sale was subject to post-closing adjustments,
which were completed during 2008. Ultimately, the Company recorded $40.4 million
gross cash proceeds, $37.4 million net of cash paid for taxes and other costs,
and a $20.9 million pretax gain, $9.9 million after-tax.
During
the three months ended April 4, 2009, the Company recognized a tax provision of
$34.4 million despite incurring losses before income taxes. Typically, the
Company would recognize a tax benefit on losses before income taxes; however,
due to the uncertainty of the realization of certain state and foreign net
deferred tax assets, $36.6 million of special tax charges were recognized
primarily to reduce certain state and foreign net deferred tax assets to their
anticipated realizable value.
Restructuring
Activities
In
November 2006, Brunswick announced restructuring initiatives to improve the
Company’s cost structure, better utilize overall capacity and improve general
operating efficiencies. These initiatives reflected the Company’s response to a
difficult marine market. As the marine market has continued to decline,
Brunswick expanded its restructuring activities across all business segments
during 2007, 2008 and 2009 in order to improve performance and better position
the Company for current market conditions and longer-term growth.
The
Company has disaggregated its restructuring initiatives into three
classifications: exit activities; restructuring activities; and asset
disposition actions. The Company considers employee termination and other costs,
lease exit costs, inventory write-downs and facility shutdown costs related to
the sale of certain Baja boat business assets, the closure of its bowling pin
manufacturing facility, the potential sale of the Valley-Dynamo business and the
divestiture of MotoTron, a designer and supplier of engine control and vehicle
networking systems, to be exit activities. All other actions taken are
considered to be restructuring activities. Other employee termination costs,
costs to retain and relocate employees, consulting costs and costs to
consolidate the manufacturing footprint are considered restructuring activities.
Also, asset disposition actions primarily relate to sales of assets and
definite-lived impairments on fixed assets, tooling, patents and proprietary
technology, and dealer networks.
Total
restructuring, exit and other impairment charges in the first quarter of 2009
were $39.6 million. The $39.6 million consists of $11.7 million in the Marine
Engine segment, $25.0 million in the Boat segment, $1.0 million in the Fitness
segment, $0.8 million in the Bowling & Billiards segment and $1.1 million at
Corporate. Total restructuring, exit and other impairment charges during the
first three months of 2008 were $22.2 million. The $22.2 million consists of
$1.5 million in the Marine Engine segment, $13.8 million in the Boat segment,
$5.6 million in the Bowling & Billiards segment and $1.3 million at
Corporate. See
Note 2 –
Restructuring Activities
in the Notes to Consolidated Financial
Statements for further details.
The
actions taken under these initiatives are expected to benefit future operations
by removing fixed costs of approximately $100 million from Cost of sales and
approximately $300 million from Selling, general and administrative in the
Consolidated Statements of Operations by the end of 2009 compared with 2007
spending levels. The majority of these costs are expected to be cash savings
once all restructuring initiatives are complete. The Company began to see
savings related to these initiatives during 2008 and expects savings to be
realized through 2009.
Other
The
Company is continuing its efforts to achieve appropriate levels of marine dealer
inventories by reducing production of boats and marine engines in excess of the
reduced domestic retail demand for marine products and expects to continue
furloughing several of its engine and boat manufacturing facilities for periods
throughout 2009.
Operating
earnings and margins for 2009 are expected to be adversely affected by the
reduction in production and wholesale shipments, as discussed above. These
actions are expected to have an unfavorable effect on margins due to reduced
gross margins on lower sales volumes and lower fixed-cost absorption on reduced
production. These reductions in sales demand and production volumes, along with
incremental pension-related expenses of approximately $70 million pretax, the
possible resumption of variable compensation and increased dealer incentive
programs as a percentage of sales, are expected to lead to lower earnings and
margins in 2009 when compared with 2008 earnings and margins before goodwill and
trade name impairments. Partially offsetting these factors are expected to be
nearly $240 million of net cost reductions resulting from the full-year effect
of actions taken in 2008 and further cost reduction activities implemented and
planned in 2009. Also partially mitigating the impact of lower sales and
production is the effect of lower restructuring charges of approximately $100
million in 2009 versus 2008. More significant reductions in demand for the
Company’s products may necessitate additional restructuring or exit charges in
2009. Excluding the effect of any special tax items that may occur or any
changes to tax legislation, Brunswick is expecting to record a tax benefit from
carrying back 2009 losses and a tax provision on projected foreign
earnings.
Matters
Affecting Comparability
The
following events have occurred during the three months ended April 4, 2009, and
March 29, 2008, which the Company believes affect the comparability of the
results of operations:
Restructuring, exit and other
impairment charges.
Brunswick announced initiatives to improve the
Company’s cost structure, better utilize overall capacity and improve general
operating efficiencies. During the first quarter of 2009, the Company recorded a
charge of $39.6 million related to restructuring activities as compared with
$22.2 million in the first quarter of 2008. See
Note 2 – Restructuring Activities
in the Notes to Consolidated Financial Statements for further
details.
Investment sale gains.
In March
2008, Brunswick sold its interest in its bowling joint venture in Japan for
$40.4 million gross cash proceeds, $36.9 million net of cash paid for taxes and
other costs. The sale resulted in a $19.7 million pretax gain, $9.1 million
after-tax, and was recorded in Investment sale gain in the Consolidated
Statements of Operations. This sale was subject to post-closing adjustments,
which were completed during 2008. Ultimately, the Company recorded $40.4 million
gross cash proceeds, $37.4 million net of cash paid for taxes and other costs,
and a $20.9 million pretax gain, $9.9 million after-tax.
Tax Items.
The comparison of
net earnings per diluted share between 2009 and 2008 is affected by special tax
items. During the three months ended April 4, 2009, the Company recognized a tax
provision of $34.4 million despite incurring losses before income taxes.
Typically, the Company would recognize a tax benefit on losses before income
taxes; however, due to the uncertainty of the realization of certain state and
foreign net deferred tax assets, $36.6 million of special tax charges were
recognized primarily to reduce certain state and foreign net deferred tax assets
to their anticipated realizable value. The Company did not have any significant
special tax items that affected the net earnings per diluted share during the
first quarter of 2008.
Results
of Operations
Consolidated
The
following table sets forth certain amounts, ratios and relationships calculated
from the Consolidated Statements of Operations for the three months
ended:
|
|
|
|
|
2009
vs. 2008
|
|
|
|
Three
Months Ended
|
|
|
Increase/(Decrease)
|
|
(in
millions, except per share data)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
$
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
734.7
|
|
|
$
|
1,346.8
|
|
|
$
|
(612.1
|
)
|
|
|
(45.4
|
)%
|
Gross
margin
(A)
|
|
$
|
91.2
|
|
|
$
|
269.5
|
|
|
$
|
(178.3
|
)
|
|
|
(66.2
|
)%
|
Restructuring,
exit and impairment charges
|
|
$
|
39.6
|
|
|
$
|
22.2
|
|
|
$
|
17.4
|
|
|
|
78.4
|
%
|
Operating
earnings (loss)
|
|
$
|
(127.5
|
)
|
|
$
|
10.3
|
|
|
$
|
(137.8
|
)
|
|
NM
|
|
Net
earnings (loss)
|
|
$
|
(184.2
|
)
|
|
$
|
13.3
|
|
|
$
|
(197.5
|
)
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share
|
|
$
|
(2.08
|
)
|
|
$
|
0.15
|
|
|
$
|
(2.23
|
)
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expressed
as a percentage of Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
|
12.4
|
%
|
|
|
20.0
|
%
|
|
|
|
|
|
(760)bpts
|
|
Selling,
general and administrative expense
|
|
|
21.1
|
%
|
|
|
15.1
|
%
|
|
|
|
|
|
600
bpts
|
|
Research
and development expense
|
|
|
3.3
|
%
|
|
|
2.5
|
%
|
|
|
|
|
|
80
bpts
|
|
Restructuring,
exit and impairment charges
|
|
|
5.4
|
%
|
|
|
1.6
|
%
|
|
|
|
|
|
380
bpts
|
|
Operating
margin
|
|
|
(17.4
|
)%
|
|
|
0.8
|
%
|
|
|
|
|
|
NM
|
|
__________
bpts =
basis points
NM = not
meaningful
(A)
Gross
margin is defined as Net sales less Cost of sales as presented in the
Consolidated Statements of Operations.
The
decrease in net sales was primarily due to reduced global demand levels across
all segments compared with the first quarter of 2008, most notably with respect
to lower demand in the recreational marine industry. Uncertainty in the global
economy and increased credit constraints that limit customers’ purchasing power
have curtailed both retail and wholesale activity. The reduction in the Marine
Engine segment’s net sales was less than the percentage reduction in the Boat
segment’s net sales in the first quarter of 2009. The Marine Engine segment
results were benefited by less severe reductions in its marine service, parts
and accessories businesses and international sales when compared with the
Company’s Boat segment results in the first quarter of 2009.
As a
result of the prolonged decline in marine retail demand and tighter credit
markets, a large dealer filed for bankruptcy in 2008. If additional dealers file
for bankruptcy, Brunswick’s net sales and earnings from continuing operations
may be unfavorably affected through lower market coverage and the associated
decline in sales and the potential for the repurchase of Brunswick products or
recourse payments on customers’ debt obligations.
The
decrease in gross margin percentage in the first quarter of 2009 compared with
the same period last year was primarily due to lower fixed-cost absorption and
inefficiencies due to reduced production rates as a result of the Company’s
effort to achieve appropriate levels of marine customer pipeline inventories in
light of lower retail demand, as well as increased dealer incentive programs as
a percentage of sales. This decrease was partially offset by
successful cost-reduction efforts.
Selling,
general and administrative expense declined by $47.9 million to $155.2 million
in the first quarter of 2009. The decrease was primarily a result of
successful cost reduction initiatives, partially offset by increased pension
costs.
During
the first quarter of 2009, the Company continued to expand its restructuring
activities. Among the restructuring activities taken during the first quarter of
2009 were continued headcount reductions throughout the Company and additional
programs to realign the Company’s marine manufacturing footprint. These
restructuring activities led to the increase in Restructuring, exit and
impairment charges in the first quarter of 2009 compared with the first quarter
of 2008. See
Note 2 –
Restructuring Activities
in the Notes to Consolidated Financial
Statements for further details.
The
decrease in operating earnings (loss) in the first quarter of 2009 compared with
the first quarter of 2008 was mainly due to reduced sales volumes and the
unfavorable factors affecting gross margin, operating expenses and restructuring
activities discussed above.
Equity
earnings (loss) decreased $8.0 million to a loss of $3.2 million in the first
quarter of 2009. The decrease in equity earnings was mainly the result of lower
earnings from the Company’s marine joint ventures in the first quarter of 2009
compared with the first quarter of 2008.
In March
2008, Brunswick sold its interest in its bowling joint venture in Japan for
$40.4 million gross cash proceeds, $36.9 million net of cash paid for taxes and
other costs. The sale resulted in a $19.7 million pretax gain, $9.1 million
after-tax, and was recorded in Investment sale gain in the Consolidated
Statements of Operations. This sale was subject to post-closing adjustments,
which were completed during 2008. Ultimately, the Company recorded $40.4 million
gross cash proceeds, $37.4 million net of cash paid for taxes and other costs,
and a $20.9 million pretax gain, $9.9 million after-tax.
Interest
expense increased $6.7 million in the first quarter of 2009 compared with the
same period in 2008, primarily as a result of higher interest rates on
outstanding debt in 2009. Interest income decreased $0.9 million in the first
quarter of 2009 compared with the same period in 2008, primarily as a result of
a decline in interest rates on investments.
During
the first quarter of 2009, the Company recognized a tax provision of $34.4
million on a loss before income taxes of $149.8 million for an effective tax
rate of (23.0) percent. Typically, the Company would recognize a tax benefit on
losses before income taxes; however, due to the uncertainty of the realization
of certain state and foreign net deferred tax assets, a special tax provision of
$36.6 million was recognized to increase the deferred tax asset valuation
allowance. See
Note 12 – Income
Taxes
in the Notes to Consolidated Financial Statements for further
details.
In the
first quarter of 2008, the Company’s effective tax of 48.4 percent was higher
than the statutory rate primarily due to the higher tax rate applied to the gain
on the sale of the Company’s interest in its joint venture in
Japan.
Net
earnings (loss) and diluted earnings (loss) per share decreased primarily due to
the same factors discussed above in operating earnings (loss), investment sale
gain and income taxes.
Marine
Engine Segment
The
following table sets forth Marine Engine segment results for the three months
ended:
|
|
|
|
|
2009
vs. 2008
|
|
|
|
Three
Months Ended
|
|
|
Increase/(Decrease)
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
$
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
343.9
|
|
|
$
|
628.6
|
|
|
$
|
(284.7
|
)
|
|
|
(45.3
|
)%
|
Restructuring,
exit and impairment charges
|
|
$
|
11.7
|
|
|
$
|
1.5
|
|
|
$
|
10.2
|
|
|
NM
|
|
Operating
earnings (loss)
|
|
$
|
(50.6
|
)
|
|
$
|
33.6
|
|
|
$
|
(84.2
|
)
|
|
NM
|
|
Operating
margin
|
|
|
(14.7
|
)%
|
|
|
5.3
|
%
|
|
|
|
|
|
NM
|
|
Capital
expenditures
|
|
$
|
2.5
|
|
|
$
|
7.8
|
|
|
$
|
(5.3
|
)
|
|
|
(67.9
|
)%
|
__________
NM = not
meaningful
Net sales
recorded by the Marine Engine segment decreased compared with the first quarter
of 2008 primarily due to the continued reduction in marine retail demand in the
United States and the corresponding decline in wholesale shipments. An
unfavorable effect of foreign currency translation also contributed to lower
sales in the first quarter of 2009.
The
restructuring, exit and other impairment charges recognized during the first
quarter of 2009 were primarily related to severance charges and other
restructuring activities initiated in 2008 and 2009. See
Note 2 – Restructuring
Activities
in the Notes to Consolidated Financial Statements for further
details.
Marine
Engine segment operating earnings (loss) decreased in the first quarter of 2009
as a result of lower sales volumes and lower fixed-cost absorption, along with
higher incremental restructuring, exit and other impairment charges associated
with the Company’s initiatives to reduce costs across all business units.
Additionally, higher pension costs and an increased proportion of sales in
lower-margin products contributed to the decline in operating earnings. This
decrease was partially offset by the savings from successful cost-reduction
initiatives.
Capital
expenditures in the first quarters of 2009 and 2008 were primarily related to
profit-maintaining investments and were lower during 2009 as a result of
discretionary capital spending constraints.
Boat
Segment
The
following table sets forth Boat segment results for the three months
ended:
|
|
|
|
|
2009
vs. 2008
|
|
|
|
Three
Months Ended
|
|
|
Increase/(Decrease)
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
$
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
205.3
|
|
|
$
|
565.6
|
|
|
$
|
(360.3
|
)
|
|
|
(63.7
|
)%
|
Restructuring,
exit and impairment charges
|
|
$
|
25.0
|
|
|
$
|
13.8
|
|
|
$
|
11.2
|
|
|
|
81.2
|
%
|
Operating
loss
|
|
$
|
(72.3
|
)
|
|
$
|
(17.4
|
)
|
|
$
|
(54.9
|
)
|
|
NM
|
|
Operating
margin
|
|
|
(35.2
|
)%
|
|
|
(3.1
|
)%
|
|
|
|
|
|
NM
|
|
Capital
expenditures
|
|
$
|
4.0
|
|
|
$
|
9.6
|
|
|
$
|
(5.6
|
)
|
|
|
(58.3
|
)%
|
__________
NM = not
meaningful
The
decrease in Boat segment net sales during the first quarter of 2009 was largely
the result of continued reduction in marine retail demand in U.S. markets and
lower shipments to dealers in an effort to achieve appropriate levels of
pipeline inventories.
The
restructuring, exit and other impairment charges recognized during the first
quarter of 2009 were primarily related to severance charges, additional programs
to realign the Company’s marine manufacturing footprint and other restructuring
activities initiated in 2008 and 2009. See
Note 2 – Restructuring
Activities
in the Notes to Consolidated Financial Statements for further
details.
Boat
segment operating earnings decreased in the first quarter of 2009 as a result of
lower sales volumes, increased dealer incentive programs as a percentage of
sales and lower fixed-cost absorption, along with higher incremental
restructuring, exit and other impairment charges associated with the Company’s
initiatives to reduce costs across all business units. This decrease was
partially offset by the savings from successful cost-reduction
initiatives.
Capital
expenditures in the first quarters of 2009 and 2008 were largely related to
profit-maintaining investments. Capital spending was lower during 2009 as a
result of discretionary capital spending constraints.
The
following table sets forth Fitness segment results for the three months
ended:
|
|
|
|
|
2009
vs. 2008
|
|
|
|
Three
Months Ended
|
|
|
Increase/(Decrease)
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
$
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
118.6
|
|
|
$
|
149.2
|
|
|
$
|
(30.6
|
)
|
|
|
(20.5
|
)%
|
Restructuring,
exit and impairment charges
|
|
$
|
1.0
|
|
|
$
|
–
|
|
|
$
|
1.0
|
|
|
NM
|
|
Operating
earnings
|
|
$
|
0.3
|
|
|
$
|
8.1
|
|
|
$
|
(7.8
|
)
|
|
|
(96.3
|
)%
|
Operating
margin
|
|
|
0.3
|
%
|
|
|
5.4
|
%
|
|
|
|
|
|
(510)
bpts
|
|
Capital
expenditures
|
|
$
|
0.4
|
|
|
$
|
1.5
|
|
|
$
|
(1.1
|
)
|
|
|
(73.3
|
)%
|
__________
bpts =
basis points
NM = not
meaningful
The
decrease in Fitness segment net sales was largely attributable to a reduced
volume of worldwide commercial equipment sales, as gym and fitness club
operators delayed purchasing new equipment and less equipment was being sold to
new centers as many customers deferred new center building plans. Adding to the
reduction in commercial equipment sales was a decline in consumer sales, as
individuals continue to defer discretionary purchases in the current economic
environment.
The
Fitness segment operating earnings were adversely affected by lower worldwide
sales volumes in both commercial equipment and consumer equipment sales. Higher
raw materials costs, especially increases in steel costs, in the first quarter
of 2009 also added to the drop in operating earnings when compared with the
first quarter of 2008.
Capital
expenditures in the first quarters of 2009 and 2008 were limited to
profit-maintaining investments and were lower during 2009 as a result of
discretionary capital spending constraints.
Bowling
& Billiards Segment
The
following table sets forth Bowling & Billiards segment results for the three
months ended:
|
|
|
|
|
2009
vs. 2008
|
|
|
|
Three
Months Ended
|
|
|
Increase/(Decrease)
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
$
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
99.9
|
|
|
$
|
113.6
|
|
|
$
|
(13.7
|
)
|
|
|
(12.1
|
)%
|
Restructuring,
exit and impairment charges
|
|
$
|
0.8
|
|
|
$
|
5.6
|
|
|
$
|
(4.8
|
)
|
|
|
(85.7
|
)%
|
Operating
earnings
|
|
$
|
10.6
|
|
|
$
|
0.9
|
|
|
$
|
9.7
|
|
|
NM
|
|
Operating
margin
|
|
|
10.6
|
%
|
|
|
0.8
|
%
|
|
|
|
|
|
980
bpts
|
|
Capital
expenditures
|
|
$
|
0.3
|
|
|
$
|
7.5
|
|
|
$
|
(7.2
|
)
|
|
|
(96.0
|
)%
|
__________
bpts =
basis points
NM = not
meaningful
Bowling
& Billiards segment net sales were down from prior year levels primarily as
a result of lower sales from its Bowling Products and Billiards businesses.
Bowling retail sales were down slightly as the loss of sales from divested
centers and lower sales from existing centers were partially offset by sales
from Brunswick Zone XLs built in 2008.
The
increase in current quarter operating earnings was the result of savings from
successful cost-reduction initiatives as well as lower restructuring, exit and
impairment charges and lower bad debt expense during the first quarter of
2009. This increase was partially offset by lower sales in the first
quarter of 2009.
Decreased
capital expenditures in 2009 were primarily driven by reduced spending for
Brunswick Zone XL centers and constraints on discretionary capital
spending.
Cash
Flow, Liquidity and Capital Resources
The
following table sets forth an analysis of free cash flow for the three months
ended:
|
|
Three
Months Ended
|
|
(in
millions)
|
|
April
4,
2009
|
|
|
March
29,
2008
|
|
|
|
|
|
|
|
|
Net
cash (used for) provided by operating activities
|
|
$
|
50.5
|
|
|
$
|
(74.1
|
)
|
Net
cash provided by (used for):
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(7.2
|
)
|
|
|
(28.3
|
)
|
Proceeds
from the sale of property, plant and equipment
|
|
|
0.9
|
|
|
|
1.7
|
|
Proceeds
from investment sale
|
|
|
-
|
|
|
|
40.4
|
|
Other,
net
|
|
|
(0.2
|
)
|
|
|
0.2
|
|
Free
cash flow*
|
|
$
|
44.0
|
|
|
$
|
(60.1
|
)
|
__________
*
|
The
Company defines “Free cash flow” as cash flow from operating and investing
activities (excluding cash used for acquisitions and investments) and
excluding financing activities. Free cash flow is not intended
as an alternative measure of cash flow from operations, as determined in
accordance with generally accepted accounting principles (GAAP) in the
United States. The Company uses this non-GAAP financial measure
both in presenting its results to shareholders and the investment
community and in its internal evaluation and management of its businesses.
Management believes that this financial measure and the information it
provides are useful to investors because it permits investors to view
Brunswick’s performance using the same tool that management uses to gauge
progress in achieving its goals. Management believes that Free cash flow
is also useful to investors because it is an indication of cash flow that
may be available to fund further investments in future growth
initiatives.
|
Brunswick’s
major sources of funds for interim working capital requirements are cash
generated from operating activities, available cash balances and selected
borrowings. The Company evaluates potential acquisitions, divestitures and joint
ventures in the ordinary course of business.
In the
first quarter of 2009, net cash provided by operating activities totaled $50.5
million, compared with net cash used by operating activities of $74.1 million in
the same period of 2008. The increase in cash provided by operating
activities between years is the result of improved working capital trends and a
tax refund received in 2009 from the carryback of the Company's 2008 tax loss,
offset by declines in Net earnings (loss). Working capital is defined
as non-cash current assets less current liabilities.
The 2009
decrease in working capital of $79.4 million was primarily the result of
reductions in the Company's inventory and accounts receivable partially offset
by decreased accounts payable and lower accrued expenses. These
declines reflect the Company's efforts to reduce working capital in light of
reduced business volumes. In addition, the Company had minimal cash
payments related to incentive compensation plans, which normally occur in the
first quarter. In 2008, increases in working capital totaled $136.6
million, driven by declines in accrued expenses and seasonal increases in
inventory. The decline in accrued expenses during the first quarter
of 2008 relates primarily to the timing of incentive compensation payments
related to 2007. The Company recorded a Net loss of $184.2 million in
the first quarter of 2009, which included a non-cash special tax charge of $36.6
million to increase the Company's deferred tax asset valuation allowance,
compared with Net income of $13.3 million during the same period in
2008.
Cash
flows from investing activities included capital expenditures of $7.2 million in
the first quarter of 2009, which decreased from $28.3 million in the first
quarter of 2008. The majority of the capital expenditures in the
first quarter of 2009 were limited to profit-maintaining
activities.
The
Company expects investments for capital expenditures in 2009 to be below 2008
levels as discretionary capital spending constraints will require the Company to
focus primarily on investments to maintain Company operations and position it to
respond when marine markets recover.
Brunswick
did not complete any acquisitions during the first quarters of 2009 or
2008. The Company’s cash investment in Brunswick Acceptance Company,
LLC (BAC) increased $1.4 million and $4.1 million during the first quarters of
2009 and 2008, respectively, to maintain the Company’s required 49 percent
equity investment.
Cash
flows from financing activities resulted in a $1.0 million use of cash in the
first quarter of 2009, compared with cash provided by financing activities of
$0.1 million in the same period in 2008.
Cash and
cash equivalents totaled $359.1 million as of April 4, 2009, an increase of
$41.6 million from $317.5 million at December 31, 2008. Total debt as
of April 4, 2009, and December 31, 2008, was $730.5 million and $731.7 million,
respectively. Brunswick’s debt-to-capitalization ratio, calculated as the
Company’s total debt divided by the sum of the Company’s total debt and
shareholders’ equity, increased to 57.2 percent as of April 4, 2009, from 50.1
percent as of December 31, 2008.
The
Company has a $400.0 million secured, asset-based revolving credit facility
(Facility) in place with a group of banks through May 2012, as described in Note
14 to the consolidated financial statements in the 2008 Form 10-K. There were no
loan borrowings under the Facility in the first three months of 2009 or 2008.
The Company has the ability to issue up to $150.0 million in letters of credit
under the Facility. The Company pays a facility fee of 75 to 100 basis points
per annum, which is based on the daily average utilization of the
Facility.
Borrowings
under this Facility are subject to the value of the borrowing base, consisting
of certain accounts receivable, inventory, and machinery and equipment of the
Company and its domestic subsidiaries. As of April 4, 2009, the borrowing base
totaled $271.8 million and available unused borrowing capacity totaled $183.3
million, net of $88.5 million of letters of credit outstanding under the
Facility.
The
Company’s borrowing capacity is also influenced by a minimum fixed-charges
covenant. The covenant requires that the Company maintain compliance
with a minimum fixed charge ratio, as defined in the Facility, only if the
Company's available, unused borrowing capacity falls below $60 million. At the
end of the first quarter of 2009, the Company fell below the minimum fixed
charge threshold due to a decline in operating performance. This did
not result in an event of default under the Facility as the Company’s available,
unused borrowing capacity at the end of the first quarter of 2009 was in excess
of $60 million. Due to weak marine market conditions, the Company
anticipates being below the minimum fixed charges threshold for the remainder of
2009, and possibly into future periods. The Company expects to
maintain compliance with this covenant as available, unused borrowing
capacity will remain above the $60 million requirement. However, the
Company’s effective borrowing capacity under the Facility will be reduced by the
$60 million minimum available, unused borrowing capacity
requirement. In addition, the Company’s borrowing capacity will be
reduced over the remainder of the year as anticipated reductions in inventory
and receivables will lower the borrowing base. The combined impact of
the minimum available, unused borrowing requirement and the decline in the
borrowing base will likely lower the Company’s effective unused borrowing
capacity by approximately $100 million by year-end 2009.
Management
believes that the Company has adequate sources of liquidity to meet the
Company’s short-term and long-term needs. Management expects that the
Company’s interim cash requirements, which have declined due to lower spending,
will be met out of existing cash balances and cash flow, and no cash borrowings
are expected under the Facility. Under the Facility, the Company’s
$150 million, 5% notes due in May 2011 need to be retired by the end of
2010. The Company’s ability to meet this requirement will be
dependent on available cash balances, as well as access to capital
markets.
Continued
weakness in the marine marketplace can jeopardize the financial stability of the
Company’s dealers. Specifically, dealer inventory levels may be higher than
desired, inventory may be aging beyond preferred levels and dealers may
experience reduced cash flow. These factors may impair a dealer’s ability to
meet payment obligations to Brunswick or to third-party financing sources and
obtain financing for new product. If a dealer is unable to meet its obligations
to third-party financing sources, Brunswick may be required to repurchase a
portion of its own products from these third-party financing sources. See
Note 7 – Commitments and
Contingencies
in the Notes to Consolidated Financial Statements for
further details.
The
Company contributed $0.8 million and $0.4 million to fund benefit payments in
its nonqualified plan in the first quarter of 2009 and 2008, respectively, and
expects to contribute an additional $3.1 million to the plan in 2009, compared
with $2.2 million that was funded subsequent to the first quarter of 2008. The
Company did not make contributions to its qualified pension plans in the first
quarter of 2009 or 2008, as the funded status of those plans exceeded Employee
Retirement Income Security Act (ERISA) requirements. The Company is
evaluating the impact of the Pension Protection Act of 2006 on 2009
contributions to the qualified plans. Company contributions are
subject to change based on market conditions and Company discretion. See
Note 13 – Pension and Other
Postretirement Benefits
in the Notes
to Consolidated
Financial Statements and Note 15 to the consolidated financial statements in the
2008 Form 10-K for more details.
Financial
Services
See
Note 11 – Financial Services
in the Notes to Consolidated Financial Statements for a discussion on
BAC, the Company’s joint venture with CDF Ventures, LLC, a subsidiary of GE
Capital Corporation.
Off-Balance
Sheet Arrangements and Contractual Obligations
The
Company’s off-balance sheet arrangements and contractual obligations are
detailed in the 2008 Form 10-K. There have been no material changes
outside the ordinary course of business.
Legal
Refer to
Note 11 to the consolidated financial statements in the 2008 Form 10-K for
discussion of other legal and environmental matters as of December 31, 2008. The
Company believes there have been no material changes outside the ordinary course
of business.
Environmental
Regulation
In its
Marine Engine segment, Brunswick plans to continue to develop engine
technologies to reduce engine emissions to comply with current and future
emissions requirements. The costs associated with these activities may have an
adverse effect on Marine Engine segment operating margins and may affect
short-term operating results. The State of California adopted regulations that
required catalytic converters on sterndrive and inboard engines that became
effective on January 1, 2008. Other environmental regulatory bodies in the
United States and other countries may also impose higher emissions standards
than are currently in effect for those regions. The Company expects to comply
fully with these regulations, but compliance will increase the cost of these
products for the Company and the industry. The Boat segment continues to pursue
fiberglass boat manufacturing technologies and techniques to reduce air
emissions at its boat manufacturing facilities. The Company does not believe
that compliance with federal, state and local environmental laws will have a
material adverse effect on Brunswick’s competitive position.
Critical
Accounting Policies
As
discussed in the 2008 Form 10-K, the preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make certain estimates and assumptions that
affect the amount of reported assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and revenues and expenses during the periods
reported. Actual results may differ from those
estimates.
There
were no material changes in the Company’s critical accounting policies since the
filing of its 2008 Form 10-K.
Recent
Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (SFAS
141(R)). SFAS 141(R) establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, the goodwill acquired and any noncontrolling
interest in the acquiree. This statement also establishes disclosure
requirements to enable the evaluation of the nature and financial effect of the
business combination. SFAS 141(R) is effective for fiscal years beginning on or
after December 15, 2008. The adoption of this statement did not have
a material impact on the Company’s consolidated results of operations and
financial condition.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (SFAS 160). SFAS
160 amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. SFAS 160 is
effective for fiscal years beginning on or after December 15,
2008. The adoption of this statement did not have a material impact
on the Company’s consolidated results of operations and financial
condition.
In March
2008, the FASB issued SFAS No. 161, “Disclosures About Derivative
Instruments and Hedging Activities – an amendment of FASB Statement
No. 133” (SFAS 161). SFAS 161 is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on
an entity’s financial position, financial performance, and cash flows. SFAS 161
is effective for fiscal years beginning after November 15,
2008. The adoption of this statement resulted in the Company
expanding its disclosures relative to its derivative instruments and hedging
activity, as reflected in
Note
3 – Financial Instruments
in the Notes to Consolidated Financial
Statements.
In
December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about
Postretirement Benefit Plan Assets” (FSP FAS 132(R)-1). FSP FAS 132(R)-1 amends
SFAS No. 132 (Revised 2003), “Employers’ Disclosures about Pensions and
Other Postretirement Benefits,” to provide guidance on an employer’s disclosures
about plan assets of a defined benefit pension or other postretirement plan. FSP
FAS 132(R)-1 is effective for fiscal years ending after December 15, 2009. The
Company is currently evaluating the impact that the adoption of FSP FAS 132(R)-1
may have on the Company’s consolidated financial statements.
In
June 2008, the FASB issued FSP Emerging Issues Task Force (EITF)
No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities,” (FSP EITF 03-6-1). FSP EITF 03-6-1
requires that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings
per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008 and interim periods within
those years, and requires that all prior period earnings per share data
presented be adjusted retrospectively to conform with its provisions. The
adoption of this statement did not have a material impact on the Company’s
consolidated results of operations and financial condition.
Forward-Looking
Statements
Certain
statements in this Quarterly Report on Form 10-Q are forward-looking as defined
in the Private Securities Litigation Reform Act of 1995. These statements
involve certain risks and uncertainties that may cause actual results to differ
materially from expectations as of the date of this filing. These risks include,
but are not limited to: the effect of (i) the amount of disposable income and
credit available to consumers for discretionary purchases, and (ii) the level of
consumer confidence on the demand for marine, fitness, billiards and bowling
equipment, products and services; the ability to successfully complete
restructuring efforts within the timeframe and cost anticipated; the ability to
successfully complete the disposition of non-core assets; the ability to access
short-term borrowing sources; the ability to comply with credit covenants;
Brunswick’s reliance on third party suppliers for the raw materials, parts and
components necessary to assemble Brunswick’s products; the effect of higher
product prices due to technology changes and added product features and
components on consumer demand; the effect of competition from other leisure
pursuits on the level of participation in boating, fitness, bowling and
billiards activities; the effect of interest rates and fuel prices on demand for
marine products; the ability to successfully manage pipeline inventories; the
financial strength and access to capital of dealers, distributors and
independent boat builders; the ability to maintain mutually beneficial
relationships with dealers, distributors and independent boat builders; the
ability to maintain effective distribution and to develop alternative
distribution channels without disrupting incumbent distribution partners; the
ability to maintain market share, particularly in high-margin products; the
success of new product introductions; the ability to maintain product quality
and service standards expected by customers; competitive pricing pressures; the
ability to develop cost-effective product technologies that comply with
regulatory requirements; the ability to transition and ramp up certain
manufacturing operations within time and budgets allowed; the ability to
successfully develop and distribute products differentiated for the global
marketplace; fluctuations in pension funding expenses; shifts in currency
exchange rates; adverse foreign economic conditions; the success of global
sourcing and supply chain initiatives; the ability to obtain components and raw
materials from suppliers; increased competition from Asian competitors;
competition from new technologies; the ability to complete environmental
remediation efforts and resolve claims and litigation at the cost estimated; and
the effect of weather conditions on demand for marine products and retail
bowling center revenues. Additional factors are included in the Company's Annual
Report on Form 10-K for 2008 and elsewhere in this report.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
Brunswick
is exposed to market risk from changes in foreign currency exchange rates,
interest rates and commodity prices. The Company enters into various
hedging transactions to mitigate these risks in accordance with guidelines
established by the Company’s management. The Company does not use
financial instruments for trading or speculative purposes. The
Company’s risk management objectives are described in
Note 3 – Financial
Instruments
in the Notes to Consolidated Financial Statements
and Notes 1 and 12 to the consolidated financial statements in the 2008 Form
10-K.
Item
4. Controls and Procedures
The Chief
Executive Officer and the Chief Financial Officer of the Company (its principal
executive officer and principal financial officer, respectively) have evaluated
the Company’s disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
quarterly report. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that the Company's disclosure
controls and procedures are effective. There were no changes in the
Company’s internal control over financial reporting during the first three
months of 2009 that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
PART II
– OTHER INFORMATION
The
Company was not required to report the information pursuant to Items 1 through 6
of Part II of Form 10-Q for the three months ended April 4, 2009, except as
follows:
Item
1. Legal Proceedings
The
Company accrues for litigation exposure based upon its assessment, made in
consultation with counsel, of the likely range of exposure stemming from the
claim. In light of existing reserves, the Company’s litigation
claims, when finally resolved, will not, in the opinion of management, have a
material adverse effect on Brunswick’s consolidated financial
statements. If current estimates for the cost of resolving any claims
are later determined to be inadequate, results of operations could be adversely
affected in the period in which additional provisions are required.
Refer to
Note 11 to the consolidated financial statements in the 2008 Form 10-K for
discussion of other legal and environmental matters as of December 31,
2008.
Item
1A. Risk Factors
There
have been no material changes from the Company’s risk factors as disclosed in
the 2008 Form 10-K.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
On May 4,
2005, Brunswick’s Board of Directors authorized a $200.0 million share
repurchase program to be funded with available cash. On April 27,
2006, the Board of Directors increased the Company’s remaining share repurchase
authorization of $62.2 million to $500.0 million. As of April 4,
2009, the Company’s remaining share repurchase authorization for the program was
$240.4 million. The plan has been suspended as the Company intends to
retain cash to enhance its liquidity rather than to repurchase
shares. There were no share repurchases during the three months ended
April 4, 2009.
Item
6. Exhibits
10.1
|
2009
Brunswick Performance Plan
|
10.2
|
February
2009 Stock-Settled Stock Appreciation Right Grant Terms and Conditions
Pursuant to the Brunswick Corporation 2003 Stock Incentive
Plan
|
10.3
|
2009
Restricted Stock Unit Grant Terms and Conditions Pursuant to the Brunswick
Corporation 2003 Stock Incentive
Plan
|
31.1
|
Certification
of CEO Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of
2002
|
31.2
|
Certification
of CFO Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of
2002
|
32.1
|
Certification
of CEO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
32.2
|
Certification
of CFO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
BRUNSWICK
CORPORATION
|
|
|
|
|
|
Date:
May 7, 2009
|
By:
|
/s/ ALAN
L. LOWE
|
|
|
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Alan
L. Lowe
|
|
|
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Vice
President and Controller
|
|
|
|
|
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*Mr. Lowe
is signing this report both as a duly authorized officer and as the principal
accounting officer.