Back to GetFilings.com
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
Annual report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1993
Commission file number 1-1043
Brunswick Corporation
(Exact name of registrant in its charter)
Delaware 36-0848180
(State of Incorporation) (I.R.S. Employer Identification No.)
1 N. Field Ct. 60045-4811
Lake Forest, Illinois (zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (708) 735-4700
Securities Registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock ($.75 par value) New York, Chicago, Pacific, Tokyo
and London Stock Exchanges
Securities Registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
the registrant was required to file such reports) and (2) has been subject to
such filing requirements the past 90 days.
Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of March 21, 1994, the aggregate market value of the voting stock
of the registrant held by non-affiliates of the registrant was $2,210,256,968.
Such number excludes stock beneficially owned by officers and directors.
This does not constitute an admission that they are affiliates.
The number of shares of Common Stock($.75 par value) of the registrant
outstanding as of March 21, 1994, was 95,378,080.
Documents Incorporated by Reference
Part III of this Report on Form 10-K incorporates by reference certain
information from the Company's definitive Proxy Statement for the Annual Meeting
of Stockholders scheduled to be held on April 27, 1994.
Part I
Item 1. Business
Brunswick Corporation (the "Company") is organized into seven
divisions with operations in two industry segments: Marine and
Recreation. Segment information is contained in Note 8 on page 32.
Marine
The Marine industry segment consists of the Mercury Marine
Division, which manufactures and sells marine propulsion systems,
and the US Marine, Sea Ray and Fishing Boat Divisions, which
manufacture and sell pleasure and fishing boats. The Company
believes it has the largest dollar volume of sales of recreational
marine engines and pleasure boats in the world.
The Mercury Marine Division manufactures and sells Mercury, Mariner
and Force outboard motors, MerCruiser gasoline and diesel inboard
and stern drive engines, and the Sport-Jet 90 water-jet system.
Outboard motors are sold through marine dealers for pleasure craft
and commercial use and to the Company's US Marine, Sea Ray and
Fishing Boat Divisions. The MerCruiser engines and the water-jet
systems are sold principally to boatbuilders, including the
Company's US Marine, Sea Ray and Fishing Boat Divisions.
The Mercury Marine Division also manufactures and sells replacement
parts for engines and outboard motors and marine accessories,
including steering systems, instruments, controls, propellers,
service aids and marine lubricants. These products are marketed
through marinas, dealers and boatbuilders under the Quicksilver
brand name.
Mercury Marine products are manufactured in North America and
Europe for global distribution. International assembly facilities
are located in Belgium and Mexico, and offshore distribution
centers are in Belgium, Japan and Australia. Trademarks for
Mercury Marine products include MerCruiser, Mercury, Mariner, Force
and Quicksilver.
The US Marine Division builds and sells several brands of
fiberglass pleasure and fishing boats, ranging in size from 14 to
47 feet. Bayliner is the Division's oldest and most well known
brand, with offerings that include jet powered boats, family
runabouts, cabin cruisers, sport fishing boats and luxury motor
yachts. Other brands include Maxum (runabouts and cabin cruisers)
and Robalo (sport fishing boats).
The US Marine Division is vertically integrated, producing many of
the parts and accessories which make up the boats. Escort boat
trailers are also produced by the Division and sold with smaller
boats as part of boat-motor-trailer packages. Outboard motors and
stern drive and inboard engines are purchased from the Mercury
Marine Division.
The US Marine Division's boats, Escort boat trailers, and parts and
accessories are sold through dealers. Trademarks for US Marine
products include Bayliner, Maxum, Cobra, Quantum, Robalo, Ciera,
Trophy, Jazz, Escort and US Marine.
The Sea Ray Division builds and sells Sea Ray fiberglass boats from
13 to 65 feet in length, including luxury motor yachts, cabin
cruisers, sport fishing boats, sport boats, runabouts, water skiing
boats, and jet powered boats. Sea Ray boats use and are sold with
outboard motors, stern drive engines and gasoline or diesel inboard
engines. The Division purchases its outboard motors and most of
its stern drive and gasoline inboard engines from the Mercury
Marine Division.
Sea Ray boats are sold through dealers under the Sea Ray, Laguna,
Ski Ray and Sea Rayder trademarks.
The Fishing Boat Division manufactures and sells fiberglass and
aluminum boats for the sport fishing and recreational boating
markets. Some of these boats are equipped with Mercury, Mariner or
Force outboard motors at the factory and are sold in
boat-motor-trailer packages by marine dealers. The Fishing Boat
Division's boats are sold through dealers under the Astro, Fisher,
MonArk, Procraft, Starcraft, and Spectrum trademarks.
The Company has an interest in Tracker Marine, L.P., a limited
partnership, which manufactures and markets boats, motors, trailers
and accessories. The Company has various agreements with Tracker
Marine, L.P., including contracts to supply outboard motors,
trolling motors and various other Brunswick products for Tracker
Marine boats.
The Company's Marine segment sales to unaffiliated customers
include sales of the following principal products for the three
years ended December 31, 1993, 1992, and 1991:
(in millions, unaudited)
1993 1992 1991
Boats $ 754.5 $ 751.0 $ 685.1
Engines 816.7 765.1 683.2
$1,571.2 $1,516.1 $1,368.3
Boat sales include the value of engines when such engines are sold
as a component of a finished boat. Engine sales include sales to
boat manufacturers which are not Company-owned, marine dealers and
others, when the engine is not sold with a Company-manufactured
boat.
Recreation
There are three divisions in the Recreation industry segment:
Zebco, Brunswick, and Brunswick Recreation Centers.
The Zebco Division manufactures, assembles, purchases and sells
fishing reels, rods, reel/rod combinations, and accessories. The
Division also manufactures and sells electric trolling motors for
fishermen and for use by boat manufacturers, including Marine
segment operations.
The Brunswick Division manufactures and sells products for the
bowling industry, including bowling lanes, automatic pinsetters,
ball returns, computerized scoring equipment and business systems,
and BowlerVision, a computer software bowling system which allows
pins to be set up in a variety of configurations, creating new
games for bowlers to play. BowlerVision also is able to analyze
and display ball path, ball speed and entry angle. In addition,
the Division manufactures and sells seating and locker units for
bowling centers; bowling pins, lane finishes and supplies; and
bowling balls and bags.
The Brunswick Division also manufactures and sells golf club shafts
and golf bags and sells billiards tables which are manufactured for
the Company to its specifications.
The Brunswick Division has a 50% interest in Nippon Brunswick
K. K., which sells bowling equipment and operates bowling centers
in Japan. In 1993, the Division entered into a joint venture to
build, own and operate bowling centers in Brazil and a joint
venture to build, own and operate bowling centers and to sell
bowling equipment in Thailand. The Division also entered into a
joint venture to build, own and operate recreation centers
containing the Q-Zar laser tag game and to sell Q-Zar laser tag
equipment in Brazil and Mexico. The Division also has the rights
to sell Q-Zar laser game equipment in Korea.
The Brunswick Recreation Centers Division operates 126 recreation
centers worldwide. Recreation centers are bowling centers which
offer, in varying degrees depending on size and location, the
following additional activities and services: billiards and other
family games, children's playrooms, restaurants and cocktail
lounges. The Company owns most of its recreation centers.
In 1993, the Division also opened three Circus World Pizza
facilities which contain children's play and entertainment areas
and restaurants which serve pizza. The Company intends to open
seven Circus World Pizza facilities in 1994.
Among the Company's trademarks in the recreation field are Zebco,
Quantum, Pro Staff, Classic and Martin fishing equipment,
MotorGuide, Stealth and Thruster electric trolling motors,
Brunswick Recreation Centers, Circus World Pizza, Leiserv,
Brunswick, AS-90, Armor Plate 3000, Anvilane, BallWall, Guardian,
Perry-Austen, Rhino, GS-10, Systems 2000, BowlerVision and
Colorvision bowling equipment, and Brunswick Golf and Precision FM
golf club shafts. Browning S.A. has licensed the Zebco Division to
manufacture and sell Browning fishing equipment. Recreation
products are distributed, mainly under these trademarks, to mass
merchants, distributors, dealers, bowling centers, and retailers
by the Company's salesmen and manufacturers' representatives and to
the recreation centers operated by the Company. Recreation
products are distributed worldwide from regional warehouses, sales
offices and factory stocks of merchandise.
Discontinued operations
The Company has announced its intention to divest its Technical
Group, and the businesses in the Technical Group are considered and
have been accounted for as discontinued operations.
The Technical Group manufactures and sells composite structures for
aircraft, helicopters, spacecraft, propulsion systems, missiles,
ships, automobiles, trucks, buses, oil and gas wells and offshore
platforms; radomes; space qualified products including fire
detection systems, filters and extendable robotic arms; camouflage;
infrared optical surveillance systems; tactical weapons; flight
decoys and target training systems; relocatable and mobile shelter
systems; and chemical protective detectors/alarms. These products
are sold to the U.S. Department of Defense; major defense prime
contractors; electronics, aerospace and commercial aircraft
manufacturers; and machinery, automotive and oil and gas
manufacturers and distributors.
Raw materials
Many different raw materials are purchased from various sources.
At the present time, no critical raw material shortages are
anticipated in either of the Company's industry segments. General
Motors Corporation is a significant supplier of the gasoline
engines used to manufacture the Company's gasoline stern drives.
Patents, trademarks and licenses
The Company has and continues to obtain patent rights, consisting
of patents and patent licenses, covering certain features of the
Company's products and processes. The Company's patents, by law,
have a limited life, and rights expire periodically.
In the Marine segment, patent rights principally relate to boats
and features of outboard motors and inboard-outboard drives
including die-cast powerheads, cooling and exhaust systems, drive
train, clutch and gearshift mechanisms, boat/engine mountings,
shock absorbing tilt mechanisms, ignition systems, propellers,
spark plugs, and fuel and oil injection systems.
In the Recreation segment, patent rights principally relate to
computerized bowling scorers and business systems, bowling lanes
and related equipment, lightweight golf club shafts, game tables,
fishing reels and electric trolling motors.
Although the Company has important patent and patent license
positions, the Company believes that its performance is mainly
dependent upon its engineering, manufacturing, and marketing
capabilities.
The Company has many trademarks associated with its various
divisions and applied to its products. Many of these trademarks
are well known to the public and are considered valuable assets of
the Company. Significant trademarks are listed on pages 1-4
herein.
Seasonality of business
The Company's overall business is not seasonal. Demand in the
marine business is typically strongest in the first half of the
year, when for the past several years between 50 and 60 percent of
that segment's annual sales have been recorded. In the recreation
segment, slightly more than 50 percent of the segment's annual
sales are recorded in the second half of the year.
Order backlog
Order backlog is not considered to be a significant factor in the
businesses of the Company, except for bowling capital equipment.
The backlog of bowling capital equipment at December 31, 1993 was
$47 million, and the Company expects to fill all of such orders
during 1994. The backlog of bowling capital equipment at December
31, 1992 was $61 million.
Competitive conditions and position
The Company believes that it has a reputation for quality in its
highly competitive lines of business. The Company competes in its
various markets by utilizing efficient production techniques and
innovative marketing, advertising and sales efforts, and by
providing high quality products at competitive prices.
Strong competition exists with respect to each of the Company's
product groups, but no single manufacturer competes with the
Company in all product groups. In each product area, competitors
range in size from large, highly diversified companies to small
producers. The following paragraphs summarize what the Company
believes its position is in each area.
Marine. The Company believes it has the largest dollar volume of
sales of recreational marine engines and of pleasure boats in the
world. The domestic marine engine market includes relatively few
major competitors. There are 10-12 competitors in outboard engine
markets worldwide, and foreign competition continues in the
domestic marine engine market. The marine engine markets are
experiencing pricing pressures. The marine accessories business is
highly competitive.
There are many manufacturers of pleasure and fishing boats, and
consequently, this business is highly competitive. The Company
competes on the basis of quality, value, performance, durability,
styling and price. Demand for pleasure and fishing boats and
marine engines is dependent on a number of factors, including
economic conditions, the availability of fuel and marine dockage
and, to some extent, prevailing interest rates and consumer
confidence in spending discretionary dollars.
Recreation. The Company competes directly with many manufacturers
of recreation products. In view of the diversity of its recreation
products, the Company cannot identify the number of its
competitors. The Company believes, however, that in the United
States, it is one of the largest manufacturers of bowling equipment
and fishing reels.
Certain bowling equipment, such as BowlerVision, automatic scorers
and computerized management systems, represents innovative
developments in the market. For other recreation products,
competitive emphasis is placed on pricing and the ability to meet
delivery and performance requirements.
The Company maintains a number of specialized sales forces that
sell equipment to distributors and dealers and also, in some cases,
to retail outlets.
The Company operates 126 recreation centers worldwide. Each center
competes directly with centers owned by other parties in its
immediate geographic area; so, competitive emphasis is placed on
customer service, quality facilities and personnel, prices and
promotional programs.
Research and development
Company-sponsored research activities, relating to the development
of new products or to the improvement of existing products, are
shown below:
(in millions)
1993 1992 1991
Marine $59.3 $47.2 $44.0
Recreation Products 10.5 9.1 9.3
$69.8 $56.3 $53.3
Number of employees
The number of employees at December 31, 1993 is shown below by
industry segment:
Marine 11,300
Recreation 6,500
Corporate 200
18,000
There are approximately 800 employees in the Recreation segment and
2,200 employees in the Marine segment who are represented by labor
unions. The Company believes that relations with the labor unions
are good.
Environmental requirements
The Company is involved in certain legal and administrative
proceedings under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and other federal and state
legislation governing the generation and disposition of certain
hazardous wastes. These proceedings, which involve both on and off
site waste disposal, in many instances seek compensation from the
Company as a waste generator under Superfund legislation which
authorizes action regardless of fault, legality of original
disposition or ownership of a disposal site. The Company believes
that it has established adequate reserves to cover all known
claims.
Item 2. Properties
The Company's headquarters are located in Lake Forest, Illinois.
The Company has numerous manufacturing plants, distribution
warehouses, sales offices and test sites. Research and development
facilities are division-related, and most are located at individual
manufacturing sites.
The Company's plants are deemed to be suitable and adequate for the
Company's present needs. The Company believes that all of its
properties are well maintained and in good operating condition.
Most plants and warehouses are of modern, single-story
construction, providing efficient manufacturing and distribution
operations.
The Company's plants currently are operating at approximately 65%
of capacity, excluding the 15 closed plants in the Marine segment.
Twelve of these closed plants are being offered for sale. The
other three closed plants are not being offered for sale, but the
Company has no plans to reopen them in the near future.
The Company's headquarters and all of its principal plants are
owned by the Company. Some bowling recreation centers, three small
plants, two test facilities and an overseas distribution center are
leased.
The Company's primary facilities are in the following locations:
Mercury Marine Division
Fond du Lac, Oshkosh and Milwaukee, Wisconsin; Stillwater,
Oklahoma; St. Cloud, Florida; Juarez, Mexico; and Petit Rechain,
Belgium.
US Marine Division
Arlington and Spokane, Washington; Roseburg, Oregon; Miami and
Claremore, Oklahoma; Pipestone, Minnesota; Cumberland and
Salisbury, Maryland; Dandridge, Tennessee; Valdosta, Georgia;
Tallahassee, Florida; and Lincoln, Alabama.
Sea Ray Division
Knoxville and Vonore, Tennessee; Merritt Island, Sykes Creek and
Palm Coast, Florida; Phoenix, Arizona; and Cork, Ireland.
Fishing Boat Division
Topeka and Nappanee, Indiana; West Point, Mississippi; and
Murfreesboro, Tennessee.
Zebco Division
Tulsa, Oklahoma; and Starkville, Mississippi.
Brunswick Recreation Centers
Deerfield, Illinois headquarters; 126 bowling centers in the United
States, Canada and Europe; and Circus World Pizza theme restaurants
in the United States.
Brunswick Division
Muskegon, Michigan; Eminence, Kentucky; Bristol, Wisconsin;
Torrington, Connecticut; Des Moines, Iowa; Stockach, Germany; and
Kettering, England.
Item 3. Legal Proceedings
Genmar Industries, Inc. v. Brunswick Corporation, et al. Genmar
Industries brought an action against the Company and certain of its
subsidiaries in the United States District Court for the District
of Minnesota on June 23, 1992, alleging that the Company (i) has
monopolized or attempted to monopolize the sale of recreational
marine engines and boats through its acquisition of Bayliner Marine
Corporation and Ray Industries, Inc. in 1986; its acquisition of
four smaller fishing boat builders in 1988; its 1990 acquisition of
Kiekhaefer Aeromarine, Inc., a supplier of high performance
propulsion units to the marine engine industry and the owner of
certain patents for recreational marine engine components; and its
agreement in 1992 to form a partnership with Tracker Marine
Corporation for the manufacture and marketing of recreational
marine engines and power boats; (ii) has unlawfully coerced
purchasers to buy the Company's boats by charging higher prices for
its engines sold separately than for its engines sold with its
boats, thereby inducing purchasers to buy its boats in addition to
its engines; (iii) has breached its agreement to offer Genmar the
lowest possible price made available to other recreational marine
engine purchasers for the same quantity of engines purchased; (iv)
has not dealt in good faith with Genmar by, among other things,
communicating to Genmar dealers that Genmar is experiencing
purported financial difficulties; and, (v) by virtue of the
foregoing, has interfered with Genmar's existing and prospective
business relationships. Genmar has asked that the Company be
required to divest its boat manufacturing business, be enjoined
from continuing its partnership with Tracker Marine, and pay
damages, including treble damages under the antitrust laws. The
Company believes, based upon its assessment of the complaint and in
consultation with counsel, that this litigation is without merit
and intends to defend itself vigorously. Parties to this suit have
exchanged written discovery and have begun depositions.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Company
The Company's executive officers are listed in the following table:
Officer Present Position Age
J. F. Reichert Chairman of the Board 63
and Chief Executive Officer
J. P. Reilly President and Chief 50
Operating Officer
J. M. Charvat Executive Vice President 63
J. W. Dawson Vice President and Zebco 59
Division President
F. J. Florjancic, Jr. Vice President and Brunswick 47
Division President
W. R. McManaman Vice President-Finance 46
D. M. Yaconetti Vice President Adminis- 47
tration and Secretary
T. K. Erwin Controller 44
R. T. McNaney General Counsel 59
R. S. O'Brien Treasurer 44
W. J. Barrington Sea Ray Division President 43
A. D. Fogel BRC Division President 58
J. W. Hoag US Marine Division 54
President
D. D. Jones Mercury Marine Division 50
President
J. A. Schenk Corporate Director of 51
Planning and Development
R. C. Sigrist Technical Group President 60
There are no family relationships among these officers. The term
of office of all elected officers expires April 27, 1994. The
Division Presidents are appointed from time to time at the
discretion of the Chief Executive Officer.
Jack F. Reichert has been Chairman of the Board since 1983 and
Chief Executive Officer since 1982. He was President from 1977 to
1993.
John P. Reilly has been President and Chief Operating Officer since
1993. From 1984 to 1993 he was President of Tenneco Inc.'s
Automotive Division, a manufacturer of automotive mufflers, shocks
and brake components.
John M. Charvat has been Executive Vice President of the Company
since 1989. He was Vice President of the Company from 1986 to 1989
and Zebco Division President from 1977 to 1989.
Jim W. Dawson has been Vice President of the Company since 1994 and
Zebco Division President since 1989. From 1981 to 1989 he was
Senior Vice President of Zebco/Motor Guide Technical Operations,
responsible for manufacturing, research and development,
distribution, and consumer service.
Frederick J. Florjancic, Jr. has been Vice President of the Company
and President of the Brunswick Division since 1988.
William R. McManaman has been Vice President-Finance since 1988.
Dianne M. Yaconetti has been Vice President-Administration since
1988, Corporate Secretary since 1986 and Manager of the Office of
the Chairman since 1985.
Thomas K. Erwin has been Controller since 1988.
Robert T. McNaney has been General Counsel since 1985.
Richard S. O'Brien has been Treasurer since 1988.
William J. Barrington has been Sea Ray Division President and
President of Ray Industries, Inc. ("Ray") since 1989. From 1985 to
1989 he was Vice President-Finance and Treasurer of Ray.
Arnold D. Fogel has been Brunswick Recreation Centers Division
President since 1984.
James W. Hoag has been US Marine Division President since 1989.
From 1988 to 1989 he was Executive Vice President of the US Marine
Division.
David D. Jones has been Mercury Marine Division President since
1989. From 1985 to 1989 he was General Manager of US Marine Power.
James A. Schenk has been Corporate Director of Planning and
Development since 1988.
Robert C. Sigrist has been President of the Technical Group (known
as the Defense Division prior to 1991) since 1988.
Part II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters
The Company's common stock is traded on the New York, Chicago,
Pacific, London, and Tokyo Stock Exchanges. Quarterly information
with respect to the high and low sales prices for the common stock
and the dividends declared on the common stock is set forth in Note
21 on page 54. As of December 31, 1993, there were approximately
27,900 shareholders of record of the Company's common stock.
Item 6. Selected Financial Data
Net sales, net earnings, earnings per common share, cash dividends
declared per common share, total assets, and long-term debt are
shown in the Five Year Financial Summary on page 57.
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Management's Discussion and Analysis is presented on pages 19 to
23.
Item 8. Financial Statements and Supplementary Data
The Company's Consolidated Financial Statements are set forth on
pages 24 to 26 and are listed in the index on page 18.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to the directors of the Company is set
forth on pages 2 and 3 of the Company's definitive Proxy Statement
dated March 25, 1994 (the "Proxy Statement") for the Annual Meeting
of Stockholders to be held on April 27, 1994, and is hereby
incorporated by reference. The Company's executive officers are
listed herein on pages 10-11.
Item 11. Executive Compensation
Information with respect to executive compensation is set forth on
pages 5, 13-15 and 17-20 of the Proxy Statement and is hereby
incorporated by reference.
Item 12. Security Ownership of Certain
Beneficial Owners and Management
Information with respect to the securities of the Company owned by
the directors and certain officers of the Company, by the directors
and officers of the Company as a group and by the only persons
known to the Company to own beneficially more than 5% of the
outstanding voting securities of the Company is set forth on pages
6 and 7 of the Proxy Statement, and such information is hereby
incorporated by reference.
Item 13. Certain Relationships and Related Transactions
None.
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
a) Financial Statements and Exhibits
Financial Statements
Financial statements and schedules are incorporated in this
Annual Report on Form 10-K, as indicated in the index on page
18.
Exhibits
3.1 Restated Certificate of Incorporation of the Company
filed as Exhibit 19.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30,
1987, and hereby incorporated by reference.
3.2 By-Laws of the Company.
4.1 Indenture dated as of March 15, 1987, between the
Company and Continental Illinois National Bank and
Trust Company of Chicago filed as Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1987, and hereby
incorporated by reference.
4.2 Form of 8-1/8% Notes of the Company Due April 1,
1997, filed as Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1987, and hereby incorporated by
reference.
4.3 Officers' Certificate setting forth terms of the
Company's $125,000,000 principal amount 7-3/8%
Debentures due September 1, 2023.
4.4 The Company's Agreement to furnish additional debt
instruments upon request by the Securities and
Exchange Commission filed as Exhibit 4.10 to the
Company's Annual Report on Form 10-K for 1980, and
hereby incorporated by reference.
4.5 Rights Agreement dated as of March 15, 1986, between
the Company and Harris Trust and Savings Bank filed
as Exhibit 4.14 to the Company's Annual Report on
Form 10-K for 1985, and hereby incorporated by
reference.
4.6 Amendment dated April 3, 1989, to Rights Agreement
between the Company and Harris Trust and Savings
Bank filed as Exhibit 2 to the Company's Current
Report on Form 8-K dated April 10, 1989, and hereby
incorporated by reference.
10.1* Third Amended and Restated Employment Agreement
entered as of December 30, 1986, between the Company
and Jack F. Reichert filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-K for 1986 and
hereby incorporated by reference.
10.2* Amendment dated October 24, 1989, to Employment
Agreement by and between the Company and Jack F.
Reichert filed as Exhibit 19.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989 and hereby incorporated by
reference.
10.3* Supplemental Agreement to Employment Agreement dated
December 30, 1986, by and between the Company and
Jack F. Reichert filed as Exhibit 19.3 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1989, and hereby
incorporated by reference.
10.4* Amendment dated February 12, 1991 to Employment
Agreement by and between the Company and Jack F.
Reichert filed as Exhibit 10.4 to the Company's
Annual Report on Form 10-K for 1990 and hereby
incorporated by reference.
10.5* Amendment dated March 20, 1992 to Employment
Agreement by and between the Company and Jack F.
Reichert filed as Exhibit 10.5 to the Company's
Annual Report on Form 10-K for 1992 and hereby
incorporated by reference.
10.6* Amendment dated December 15, 1992 to Employment
Agreement by and between the Company and Jack F.
Reichert filed as Exhibit 10.6 to the Company's
Annual Report on Form 10-K for 1992 and hereby
incorporated by reference.
10.7* Employment Agreement dated as of June 1, 1989 by and
between the Company and John M. Charvat filed as
Exhibit 19.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1989,
and hereby incorporated by reference.
10.8* Amendment dated as of December 15, 1992 to
Employment Agreement by and between the Company and
John M. Charvat filed as Exhibit 10.8 to the
Company's Annual Report on Form 10-K for 1992 and
hereby incorporated by reference.
10.9* Supplemental Pension Plan filed as Exhibit 19.1 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989, and hereby incorporated
by reference.
10.10* Form of Employment Agreement by and between the
Company and each of T. K. Erwin, W. R. McManaman, R.
T. McNaney, R. S. O'Brien, J. A. Schenk, D. M.
Yaconetti, W. J. Barrington, J. W. Dawson,
F. J. Florjancic, Jr., A. D. Fogel, J. W. Hoag, D.
D. Jones, and R. C. Sigrist filed as Exhibit 19.2 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989, and hereby incorporated
by reference.
10.11* Amendment to Form of Employment Agreement filed as
Exhibit 10.11 to the Company's Annual Report on Form
10-K for 1992 and hereby incorporated by reference.
10.12* Form of Insurance Policy issued for the life of each
of the Company's officers, together with the
specifications for each of these policies, filed as
Exhibit 10.21 to the Company's Annual Report on Form
10-K for l980 and hereby incorporated by reference.
The Company pays the premiums for these policies and
will recover these premiums, with some exceptions,
from the policy proceeds.
10.13* Insurance policy issued by The Prudential Insurance
Company of America insuring all of the Company's
officers and certain other senior management
employees for medical expenses filed as Exhibit
10.23 to the Company's Annual Report on Form 10-K
for 1980 and hereby incorporated by reference.
10.14* Form of Indemnification Agreement by and between the
Company and each of M. J. Callahan, J. P. Diesel,
D. E. Guinn, L. Herzel, G. D. Kennedy, B. K. Koken,
J. W. Lorsch, B. M. Musham, R. N. Rasmus, and
R. W. Schipke filed as Exhibit 19.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1986, and hereby incorporated by
reference.
10.15* Indemnification Agreement dated September 16, 1986,
by and between the Company and J. F. Reichert filed
as Exhibit 19.3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1986,
and hereby incorporated by reference.
10.16* Form of Indemnification Agreement by and between the
Company and each of J. M. Charvat, T. K. Erwin, F.
J. Florjancic, Jr., W. R. McManaman, R. T. McNaney,
R. S. O'Brien, J. A. Schenk, and D. M. Yaconetti
filed as Exhibit 19.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1986, and hereby incorporated by reference.
10.17* Employment Agreement dated October 1, 1993 by and
between the Company and John P. Reilly.
10.18* Indemnification Agreement dated October 26, 1993 by
and between the Company and John P. Reilly.
10.19* 1991 Stock Plan filed as Exhibit A to the Company's
definitive Proxy Statement dated March 21, 1991 for
the Annual Meeting of Stockholders on April 24, 1991
and hereby incorporated by reference.
10.20* Change In Control Severance Plan filed as Exhibit
10.22 to the Company's Annual Report on Form 10-K
for 1989 and hereby incorporated by reference.
10.21* Brunswick Performance Plan for 1993 filed as Exhibit
10.21 to the Company's Annual Report on Form 10-K
for 1992 and hereby incorporated by reference.
10.22* Brunswick Performance Plan for 1994.
10.23* Brunswick Strategic Incentive Plan.
10.24* 1988 Stock Plan for Non-Employee Directors filed as
Exhibit B to the Company's definitive Proxy
Statement dated March 10, 1988 for the Annual
Meeting of Stockholders on April 27, 1988 and hereby
incorporated by reference.
10.25* 1994 Stock Option Plan for Non-Employee Directors
filed as Exhibit A to the Company's definitive Proxy
Statement dated March 25, 1994 for the Annual
Meeting of Stockholders on April 27, 1994 and hereby
incorporated by reference.
22.1 Subsidiaries of the Company.
25.1 Powers of Attorney.
b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the three
months ended December 31, 1993.
*Management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Annual Report on Form 10-K
pursuant to Item 14(c) of this Report.
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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
March 28, 1994 By /s/ Thomas K. Erwin
Thomas K. Erwin, Controller
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Name Title
Jack F. Reichert Chairman of the Board, Chief Executive
Officer (Principal Executive Officer) and
Director
John P. Reilly President, Chief Operating Officer and
Director
William R. McManaman Vice President-Finance (Principal Financial
Officer)
Thomas K. Erwin Controller (Principal Accounting Officer)
Michael J. Callahan Director
John P. Diesel Director
Donald E. Guinn Director
Leo Herzel Director
George D. Kennedy Director
Bernd K. Koken Director
Jay W. Lorsch Director
Bettye Martin Musham Director
Robert N. Rasmus Director
Roger W. Schipke Director
Thomas K. Erwin, pursuant to a Power of Attorney (executed by
each of the officers and directors listed above and filed with the
Securities and Exchange Commission, Washington, D.C.), by signing
his name hereto does hereby sign and execute this report of
Brunswick Corporation on behalf of each of the officers and
directors named above in the capacities in which the names of each
appear above.
March 28, 1994 /s/ Thomas K. Erwin
Thomas K. Erwin
Brunswick Corporation
Index to Financial Statements and Schedules
Page
Consolidated Financial Statements
Management's Discussion and Analysis 19 to 23
Statements of Results of Operations
1993, 1992 and 1991 24
Balance Sheets
December 31, 1993 and 1992 25
Statements of Cash Flows
1993, 1992 and 1991 26
Notes to Financial Statements
1993, 1992 and 1991 27 to 54
Report of Management 55
Report of Independent
Public Accountants 55,56
Five Year Financial Summary 57
Schedules
Consent of Independent Public Accountants 58
I- Marketable Securities
1993 59
V- Property
1993, 1992 and 1991 60
VI- Accumulated Depreciation
1993, 1992 and 1991 61
VIII- Valuation and Qualifying Accounts
1993, 1992 and 1991 62
X- Supplementary Income Statement Information
1993, 1992 and 1991 62
All other schedules are not submitted because they are not applicable
or not required or because the required information is included in the
consolidated financial statements or in the notes thereto. These notes
should be read in conjunction with these schedules.
The separate financial statements of Brunswick Corporation (the parent company
Registrant) are omitted because consolidated financial statements of Brunswick
Corporation and its subsidiaries are included. The parent company is primarily
an operating company, and all consolidated subsidiaries are wholly owned and do
not have any indebtedness (which is not guaranteed by the parent company) to
any person other than the parent or the consolidated subsidiaries in an amount
that is material in relation to consolidated assets.
Brunswick Corporation
Management's Discussion and Analysis
Cash Flow, Liquidity and Capital Resources
Net cash provided by operating activities increased $19.9 million in 1993 to
$188.9 million from the $169.0 million reported in 1992. The increase resulted
primarily from a $14.8 million improvement in earnings from continuing
operations. Income taxes payable increased and deferred items, primarily income
taxes, decreased as a result of the Company's January 1994 agreement with the
U.S. Internal Revenue Service regarding the IRS examination of the Company for
the years 1985 and 1986, as discussed in Note 15 to the consolidated financial
statements. Charges in both years for the cumulative effect of changes in
accounting principles and estimated losses on the divestiture of the Company's
Technical Group did not involve cash expenditures.
The net cash used for investing activities decreased $39.8 million to
$97.1 million in 1993 from the $136.9 million in 1992. The primary reason for
the decrease was reduced payments for businesses acquired.
Net cash used for financing activities was $38.5 million in 1993 compared
to net cash provided by financing activities of $61.3 million in 1992. The 1993
financing activities included payment of long-term debt of $117.3 million,
primarily for the redemption of the Company's 9.875% sinking fund debentures,
as well as net proceeds of $122.9 million from the issuance of 7.375%
debentures due in 2023. The 1992 financing activities included net proceeds of
$104.5 million received from the sale of 6.5 million shares of common stock.
Working capital at December 31, 1993, was $347.8 million compared to
$362.0 million at December 31, 1992. The Company's current ratio was 1.6 to 1
at December 31, 1993, and 1.7 to 1 at December 31, 1992.
The Company's long-term financing was primarily comprised of 30-year
debentures, 10-year unsecured notes, loans secured by mortgages on property and
the guarantee of $78.0 million of debt of the Brunswick Employee Stock
Ownership Plan (ESOP). The form and timing of all financing is determined by
the prevailing securities markets, the Company's capital requirements and its
financial position. At December 31, 1993, the Company had unused short-term and
long-term credit agreements totaling $400 million with a group of banks. The
Company's debt-to-capitalization ratio increased to 29.5% at December 31, 1993,
from 28.0% at the end of 1992. Total debt increased $15.9 million to $336.4
million at December 31, 1993, from the $320.5 million at December 31, 1992.
Capital expenditures, excluding acquisitions, were $95.8 million, $88.6
million and $74.7 million in 1993, 1992 and 1991, respectively. The Company
continues to make capital expenditures which offer increased production
efficiencies and improved product quality. The Company believes that existing
cash balances and future operating results, supplemented when necessary with
short and/or long-term borrowings, will continue to provide the financial
resources necessary for capital expenditures and working capital requirements.
Results of Operations - 1993 vs 1992
Net Sales
The Company's consolidated net sales for 1993 increased 7% to $2.21
billion from the $2.06 billion reported for 1992. Increases in both the Marine
and Recreation segments contributed to this improvement.
The Marine segment's 1993 net sales increased 4% to $1.57 billion from
$1.52 billion in 1992. Domestic sales of engines and boats increased 14% over
the prior year, while international sales declined approximately 20% as major
European and Asian markets continue to experience recessions. Price increases
accounted for 2.5% of the 4% increase with the other 1.5% attributable to
increased volume and mix changes. Unit sales of boats to dealers were slightly
lower than dealers' retail sales in 1993 and, therefore, dealer inventories
continue to remain at relatively low levels.
The Recreation segment's 1993 net sales increased 17% to $635.6 million
from $543.3 million in 1992. The Brunswick Division sales increased 29% as
international demand for capital equipment continued to increase, as did
domestic demand for consumer products, supplies and parts. Zebco Division sales
increased 15% due to domestic volume increases and the full year effect of a
1992 fourth quarter acquisition. The Brunswick Recreation Centers (BRC)
Division sales were flat in 1993 compared to 1992 as price increases, which
were limited by competitive pressures, offset slight lineage declines.
Operating Earnings
The consolidated operating earnings increased $20.0 million to $99.8
million in 1993 from the $79.8 million reported for 1992. Both the Marine and
Recreation segments contributed to this increase.
The Marine segment's operating earnings for 1993 rose 25% to $53.7 million
from the $43.0 million in 1992. The previously discussed sales increase and the
continuation of cost reduction programs begun four years ago, when the marine
industry downturn began, contributed to the operating results improvement.
The Recreation segment's operating earnings were $80.0 million for 1993
compared to $65.2 million in 1992. The Brunswick Division benefited from the
previously discussed sales increases which were partly offset by start-up costs
associated with manufacturing its new composite golf shaft and plant
rearrangement expenses in the golf unit. The Zebco Division operating earnings
increased in line with the Division's sales increase. The BRC Division's
operating earnings for 1993 declined from 1992 levels largely due to start-up
costs for its Circus World Pizza operations.
Interest and Other Items, Net
Interest expense declined to $27.2 million in 1993 from $29.9 million in
1992. The decline resulted primarily from lower levels of ESOP and other debt
and the net reduction in interest expense from the redemption of the 9.875%
sinking fund debentures on August 9, 1993, and the sale of 7.375% debentures on
August 25, 1993. Interest income and other items, net increased to $13.9
million in 1993 from $12.1 million in 1992, primarily due to increased equity
in earnings of unconsolidated affiliates.
Income Taxes
In 1993, the Company recorded a tax provision of $32.0 million compared
with a tax provision of $22.3 million in 1992. The effective tax rate for 1993
of 37% compares to 36% for 1992. The increase in the effective tax rate results
primarily from an increase in the effective foreign tax rate which was offset
by a net benefit from a change in the Federal statutory income tax rate. In
January 1994, the Company reached an agreement with the U.S. Internal Revenue
Service regarding its examination of the Company for the years 1985 and 1986.
See Note 15 for additional discussion.
Results of Operations - 1992 vs. 1991
Net Sales
The Company's consolidated net sales for 1992 increased 12% to $2.06
billion from the $1.84 billion reported for 1991. Increases in both the Marine
and Recreation segments accounted for this improvement.
The Marine segment's 1992 net sales of $1.52 billion were 11% above the
$1.37 billion reported in 1991. Increased domestic demand for engines and boats
resulted in the first year-to-year improvement since the marine industry
downturn began in 1988, but the recession that affected domestic markets has
spread to major European and Asian markets. Unit sales improved more than the
sales increase in dollars as the strongest improvements were in the areas of
fishing boats and outboard motors, which are typically in the lower price range
of the products in the segment. Sales of boats to dealers were approximately
even with retail sales in 1992, so dealer inventories remained at relatively
low levels. In anticipation of a stronger spring selling season in 1993,
dealers increased their engine inventories, primarily outboards, over the
levels of the prior year.
The Recreation segment's 1992 net sales increased 15% to $543.3 million
from $472.7 million in 1991. Each of the three Divisions in the segment
reported increases. The Zebco Division experienced an increase of 29% as a
result of increased volume to major retailers. The Brunswick Recreation Centers
(BRC) Division increase of 3% resulted primarily from higher demand by value
conscious consumers. The Brunswick Division net sales increased 14% on
continued increases in international demand for capital equipment.
Operating Earnings
The consolidated operating earnings of $79.8 million in 1992 compares to
an operating loss of $18.4 million in 1991. The 1991 operating results include
a $38.0 million provision for litigation matters, of which $30.0 million is
included in the Marine segment.
The Marine segment's operating earnings for 1992 of $43.0 million compared
to an operating loss of $30.5 million in 1991 which included the $30.0 million
litigation provision. The previously discussed sales increases and the benefits
of cost reduction programs, which included production consolidations and plant
closings, begun three years ago when the marine industry downturn began,
contributed to the operating results improvement.
The Recreation segment's operating earnings were $65.2 million for 1992
compared to $52.5 million in 1991. This increase resulted from higher operating
earnings at the Zebco and Brunswick Divisions because of their sales increases
and lower warranty costs in the Brunswick Division. The BRC Division's
operating earnings were flat with the prior year, despite the small sales
increase, because of pricing pressures on open (non-league) bowling.
Interest and Other Items, Net
Interest expense declined to $29.9 million in 1992 from $32.0 million in
1991. The Company utilized no commercial paper borrowings in 1992, resulting in
a reduction of interest expense of $3.0 million. This reduction was partially
offset by interest expense of $0.9 million on a foreign borrowing made in the
fourth quarter of 1991. Interest income and other items, net increased to $12.1
million in 1992 from $9.9 million in 1991 primarily due to increased equity in
earnings of unconsolidated affiliates.
Income Taxes
In 1992, the Company recorded a tax provision of $22.3 million compared
with a tax benefit of $5.5 million in 1991. The effective tax rate in 1992 of
36% compares to a benefit rate of 13.6% in 1991. The 1991 benefit rate of 13.6%
is below the statutory rate primarily due to the inability to utilize $9.3
million of foreign tax credits in the calculation of the consolidated tax
provision.
Brunswick Corporation
Consolidated Statements of Results Of Operations
For the Years Ended December 31,
(in millions, except per share data)
1993 1992 1991
Net sales $ 2,206.8 $ 2,059.4 $ 1,841.0
Cost of sales 1,636.6 1,554.1 1,410.9
Selling, general and administrative 470.4 425.5 448.5
Operating earnings(loss) 99.8 79.8 (18.4)
Interest expense (27.2) (29.9) (32.0)
Interest income and other items, net 13.9 12.1 9.9
Earnings(loss) before income taxes 86.5 62.0 (40.5)
Income tax provision(benefit) 32.0 22.3 (5.5)
Earnings(loss) from continuing operations before
extraordinary item and cumulative effect
of accounting changes 54.5 39.7 (35.0)
Earnings(loss) from discontinued operations - (1.7) 11.3
Extraordinary loss from retirement of debt (4.6) - -
Estimated loss on divestiture of Technical segment (12.2) (26.0) -
Cumulative effect on prior years of changes
in accounting principles (14.6) (38.3) -
Net earnings(loss) $ 23.1 $ (26.3)$ (23.7)
Earnings (loss) per common share
Continuing operations $ 0.57 $ 0.43 $ (0.40)
Discontinued operations - (0.02) 0.13
Extraordinary item (0.05) - -
Estimated loss on divestiture of Technical segment (0.13) (0.28) -
Cumulative effect of changes in accounting principles (0.15) (0.41) -
Net earnings(loss) per common share $ 0.24 $ (0.28)$ (0.27)
The notes are an integral part of these consolidated statements.
Brunswick Corporation
Consolidated Balance Sheets
As of December 31,
(in millions, except per share data)
Assets 1993 1992
Current assets
Cash and cash equivalents, at cost, which
approximates market $ 248.8 $ 195.5
Accounts and notes receivable, less allowances
of $16.9 and $15.6 168.9 160.1
Inventories 321.4 305.9
Prepaid income taxes 186.5 180.5
Prepaid expenses 24.1 21.1
Income tax refunds receivable - 1.8
Current assets 949.7 864.9
Property
Land 60.9 63.7
Buildings 357.5 349.7
Equipment 720.9 693.0
1,139.3 1,106.4
Accumulated depreciation (595.0) (571.4)
Property 544.3 535.0
Other assets
Dealer networks 171.6 203.5
Trademarks and other 106.7 88.8
Excess of cost over net assets of businesses acquired 117.7 120.4
Investments 67.6 59.8
Other assets 463.6 472.5
Assets of continuing operations 1,957.6 1,872.4
Net assets of discontinued operations 26.1 35.6
Total assets $ 1,983.7 $ 1,908.0
Liabilities And Shareholders' Equity
Current liabilities
Short-term debt, including current maturities
of long-term debt $ 11.9 $ 16.0
Accounts payable 122.8 106.8
Accrued expenses 404.5 380.1
Income taxes payable 62.7 -
Current liabilities 601.9 502.9
Long-term debt
Notes, mortgages and debentures 324.5 304.5
Deferred items
Income taxes 103.9 175.4
Postretirement and postemployment benefits 126.9 85.3
Compensation and other 22.1 17.4
Deferred items 252.9 278.1
Common shareholders' equity
Common stock; authorized: 200,000,000 shares,
$.75 par value; issued: 100,687,992 shares 75.5 75.5
Additional paid-in capital 261.4 261.7
Retained earnings 648.5 667.3
Treasury stock, at cost: 5,430,523 shares and
5,555,954 shares (102.7) (105.7)
Minimum pension liability adjustment (6.7) -
Unearned portion of restricted stock for future services (2.3) (3.4)
Cumulative translation adjustments 7.9 8.9
Unamortized ESOP expense (77.2) (81.8)
Common shareholders' equity 804.4 822.5
Total liabilities and shareholders' equity $ 1,983.7 $ 1,908.0
The notes are an integral part of these consolidated statements. Brunswick Corporation
Consolidated Statements Of Cash Flows
For the Years ended December 31,
(in millions)
1993 1992 1991
Cash flows from operating activities
Net earnings(loss) $ 23.1 $ (26.3) $ (23.7)
Adjustments to reconcile net earnings(loss) to net
cash provided by operating activities:
Depreciation and amortization by continuing operations 117.8 115.9 125.0
Changes in noncash current assets and current
liabilities of continuing operations:
(Increase) decrease in accounts and notes receivable (7.8) 7.9 (14.8)
(Increase) decrease in inventories (10.9) 6.1 13.5
(Increase) decrease in prepaid income taxes (6.0) (2.0) 1.4
(Increase) decrease in prepaid expenses (3.1) 3.5 (2.8)
Increase in accounts payable 16.4 5.0 1.4
Increase (decrease) in accrued expenses 31.8 (23.4) 32.7
Increase (decrease) in taxes payable 64.5 (0.2) (7.0)
Increase (decrease) in deferred items (50.2) 24.5 2.8
Pension cost in excess of (less than) funding (17.8) (3.8) 2.1
Other, net 5.1 (5.0) (2.3)
Cumulative effect of changes in accounting principles 14.6 38.3 -
Estimated loss on disposition of Technical segment 12.2 26.0 -
(Increase)decrease in net assets of discontinued operations (0.8) 2.5 2.5
Net cash provided by operating activities 188.9 169.0 130.8
Cash flows from investing activities
Payments for businesses acquired, net of cash acquired and
including other cash payments associated with the acquisitions (2.1) (19.8) (1.8)
Capital expenditures (95.8) (88.6) (74.7)
Proceeds from sales of property 7.1 3.0 1.6
Investments in unconsolidated affiliates (2.8) (6.7) (1.8)
Other, net (1.6) (21.2) (6.1)
Net investing activities of discontinued operations (1.9) (3.6) (6.4)
Net cash used for investing activities (97.1) (136.9) (89.2)
Cash flows from financing activities
Proceeds from issuance of long-term debt 122.9 - 20.0
Proceeds from public offering of common stock - 104.5 -
Payments of long-term debt, including current maturities (117.3) (5.5) (5.5)
Cash dividends paid (41.9) (41.1) (38.9)
Other, net (2.2) 3.4 0.3
Net cash provided by (used for) financing activities (38.5) 61.3 (24.1)
Net increase in cash and cash equivalents 53.3 93.4 17.5
Cash and cash equivalents at beginning of year 195.5 102.1 84.6
Cash and cash equivalents at end of year $ 248.8 $ 195.5 $ 102.1
Supplemental cash flow disclosures:
Interest paid $ 25.5 $ 31.1 $ 31.7
Income taxes paid, net of refunds 23.9 26.5 0.3
Supplemental schedule of noncash investing and financing activities:
Fair market value of treasury stock issued for
compensation plans and other $ 2.1 $ 0.8 $ 3.5
The notes are an integral part of these consolidated statements.
Brunswick Corporation
Notes to Consolidated Financial Statements
December 31, 1993, 1992 and 1991
1. Significant Accounting Policies
Restatement. The Company's consolidated financial statements have been restated
to segregate the results of operations and net assets of the Company's
discontinued Technical segment.
In addition, certain previously reported amounts have been reclassified to
conform with year-end 1993 presentations.
Principles of consolidation. The Company's consolidated financial statements
include the accounts of its significant domestic and foreign subsidiaries,
after eliminating transactions between Brunswick Corporation and such
subsidiaries. Investments in certain affiliates, including some majority-owned
subsidiaries which are immaterial, are reported using the equity method.
Cash and cash equivalents. For purposes of the consolidated statements of cash
flows, the Company considers all highly liquid investments with a maturity of
three months or less from the time of purchase to be cash equivalents.
Inventories. Approximately fifty percent of the Company's inventories are
valued at the lower of first-in, first-out (FIFO) cost or market (replacement
cost or net realizable value). All other inventories are valued at last-in,
first-out (LIFO) cost, which is not in excess of market. Inventory cost
includes material, labor and manufacturing overhead.
Property. Property, including major improvements, is recorded at cost. The
costs of maintenance and repairs are charged against results of operations as
incurred.
Depreciation is charged against results of operations over the estimated
service lives of the related assets. Improvements to leased property are
amortized over the life of the lease or the life of the improvement, whichever
is shorter. For financial reporting purposes, the Company principally uses the
straight-line method of depreciation. For tax purposes, the Company generally
uses accelerated methods where permitted.
Sales and retirements of depreciable property are recorded by removing the
related cost and accumulated depreciation from the accounts. Gains or losses on
sales and retirements of property are reflected in results of operations.
Intangibles. The costs of dealer networks, trademarks and other intangible
assets are amortized over their expected useful lives using the straight-line
method. Accumulated amortization was $253.2 million and $278.3 million at
December 31, 1993 and 1992, respectively. The decline resulted primarily from
fully amortized intangible assets of $60.6 million being written off. The
excess of cost over net assets of businesses acquired is being amortized using
the straight-line method, principally over 40 years. Accumulated amortization
was $25.2 million and $21.7 million at December 31, 1993 and 1992,
respectively. Subsequent to acquisition, the Company continually evaluates
whether later events and circumstances have occurred that indicate the
remaining estimated useful life of its intangible assets may warrant revision
or that the remaining balance of such assets may not be recoverable. When
factors indicate that such assets should be evaluated for possible impairment,
the Company uses an estimate of the related business segment's undiscounted
cash flows or, in the case of goodwill, undiscounted operating earnings, over
the remaining life of the asset in measuring whether the asset is recoverable.
Income taxes. Statement of Financial Accounting Standards No. 109 (SFAS No.
109), "Accounting for Income Taxes", was issued by the Financial Accounting
Standards Board (FASB) in February 1992, effective for fiscal years beginning
after December 15, 1992, with earlier adoption encouraged. The Company elected
to adopt SFAS No. 109 as of January 1, 1992. The adoption of SFAS No. 109
changed the Company's method of accounting for income taxes from the deferred
method (under APB No. 11) to an asset and liability approach. Previously, the
Company deferred the past tax effects of timing differences between financial
reporting and taxable income. The asset and liability approach requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the book carrying amounts and the
tax bases of assets and liabilities.
Retirement plans. The Company accrues the cost of pension and retirement plans
which cover substantially all employees. Pension costs, which are primarily
computed using the projected unit credit method, are generally funded based on
the minimum required contribution under the Employee Retirement Income Security
Act of 1974 for the Company's domestic pension plans and in accordance with
local laws and income tax regulations for foreign plans. During 1993, the
Company contributed $19.0 million in excess of the required minimum funding for
its domestic pension plans.
2. Earnings (loss) Per Common Share
Earnings (loss) per common share are based on the weighted average number of
common and common equivalent shares outstanding during each period. Such
average shares were 95.3 million, 92.7 million and 88.4 million for 1993, 1992
and 1991, respectively.
3. Inventories
At December 31, 1993 and 1992, $133.7 million and $111.1 million, respectively,
of inventories were valued using the LIFO method. If the FIFO method of
inventory accounting had been used by the Company for inventories valued at
LIFO, inventories at December 31 would have been $73.9 million and $71.2
million higher than reported for 1993 and 1992, respectively. The FIFO cost of
inventories at these dates approximated replacement cost or net realizable
value.
Inventories at December 31 consisted of the following:
(in millions)
1993 1992
Finished goods $ 188.1 $ 189.7
Work-in-process 79.1 66.2
Raw materials 54.2 50.0
Inventories $ 321.4 $ 305.9
4. Investments
On April 14, 1992, the Company acquired a significant minority interest in
Tracker Marine, L.P., a limited partnership, which manufactures and markets
boats, trailers and accessories. The Company also entered into various other
agreements, including contracts to supply outboard motors, trolling motors and
various other Brunswick products for Tracker boats. The Company's total
payments relating to these transactions were $25 million.
5. Discontinued Operations
In February 1993, the Company's Board of Directors approved plans to divest
the Technical Group, the only remaining business in the Company's Technical
segment. A $26.0 million estimated loss ($42.0 million pretax) on the
divestiture of the Technical Group and for certain other expenses of the
previously divested Technical businesses was recorded in 1992. In 1993, the
Company recorded an additional $12.2 million estimated loss ($20.0 million
pretax) on the divestiture of the Technical Group which reflects the offers for
that operation which the Company is reviewing.
The net sales and earnings from discontinued operations for each of the
three years in the period ended December 31, 1993, were as follows:
(in millions)
1993 1992 1991
Net sales $ 147.4 $ 168.3 $ 247.3
Earnings from discontinued
operations before income taxes - (2.9) 18.3
Provision (benefit) for income taxes - (1.2) 7.0
Earnings (loss) from
discontinued operations $ - $ (1.7) $ 11.3
Operating losses of discontinued operations for 1993 have been charged against
the reserve established in 1992.
6. Acquisitions
In 1993, the Company purchased the assets of three companies. The
consideration for these acquisitions totaled $2.1 million in cash.
In October 1992, the Company purchased certain assets of three companies
in the United States and Europe, which comprised the Fishing Division of
Browning, a line of fishing rods and reels. The consideration for these assets
consisted of cash of $17.9 million and assumed liabilities of $2.1 million. The
Company also purchased certain assets of another company for $1.9 million in
cash in 1992.
In 1991, the Company purchased the assets of four companies. The
consideration for these acquisitions totaled $1.8 million in cash.
The effect of the aforementioned acquisitions, which were accounted for as
purchases, was not significant to the Company's consolidated results of
operations in the year of acquisition.
7. Commitments and Contingent Liabilities
It is customary within the marine industry for manufacturers to enter into
product repurchase agreements with financial institutions that provide
financing to marine dealers. The Company has entered into agreements which
provide for the repurchase of its products from a financial institution in the
event of repossession upon a dealer's default. Most of these agreements contain
provisions which limit the Company's annual repurchase obligation. The Company
accrues for the cost and losses that are anticipated in connection with
expected repurchases. Such losses are mitigated by the Company's resale of
repurchased products. Repurchases and losses incurred under these agreements
have not and are not expected to have a significant impact on the Company's
results of operations. The maximum potential repurchase commitments at December
31, 1993 and 1992, were approximately $124.0 million and $136.0 million,
respectively.
The Company also has various agreements with financial institutions that
provide limited recourse on marine and bowling capital equipment sales. The
maximum potential recourse liabilities outstanding under these programs were
approximately $45.0 million and $40.0 million at December 31, 1993 and 1992,
respectively. Recourse losses have not and are not expected to have a
significant impact on the Company's results of operations.
The Company had outstanding standby letters of credit and financial
guarantees of approximately $19.0 million and $34.0 million at December 31,
1993 and 1992, respectively, representing conditional commitments whereby the
Company guarantees performance to a third party. The majority of these
commitments are standby letters of credit which guarantee premium payment
under certain of the Company's insurance programs.
The Company enters into interest rate swap agreements in connection with
the management of its assets and liabilities and interest rate exposure. The
differential to be paid or received is recognized over the lives of the
agreements. These agreements are entered into to reduce the impact of changes
in interest rates on the Company's investments and borrowings. The Company is
exposed to credit loss in the event of nonperformance by the other parties to
the interest rate swap agreements. The Company regularly monitors its positions
and the credit ratings of these counterparties and considers the risk of
default to be remote. At December 31, 1993 and 1992, the Company had an
outstanding floating-to-floating interest rate swap agreement with a notional
principal amount of $260.0 million that terminates in September 2003. The
interest rate on this agreement is set on a semi-annual basis in arrears, the
first such setting took place in March 1992. The Company also has entered into
fixed-to-floating interest rate swap agreements through October 1996 on $200.0
million of its fixed-rate debt. The floating interest rates are set on a
semi-annual basis. The first such setting took place in October 1993. The cost
exposure of the interest rate swaps, which represents the net cost to terminate
these agreements, is not material to the Company.
The Company also enters into forward exchange contracts to hedge the U.S.
dollar exposure of its foreign operations. Realized and unrealized gains
and losses on contracts are recognized and included in net income.
At December 31, 1993, the Company had contracted to exchange 1,057.2
million Belgian francs for $29.2 million during 1994. Had this contract been
entered into on December 31, 1993, the Company would have to exchange 1,057.2
million Belgian francs for $29.8 million. A loss of $0.6 million has been
included in net income. At December 31, 1992, the Company had contracted to
exchange 46.8 million Deutsche marks for $29.2 million during 1993. Had this
contract been entered into on December 31, 1992, the Company would have to
exchange 46.8 million Deutsche marks for $28.4 million.
8. Segment Information
Industry segments Geographic segments
Total United
(in millions) Marine Recreation Eliminations Segments States Foreign Eliminations Corporate Consolidated
1993
Net sales
Customers $ 1,571.2 635.6 - $ 2,206.8 1,802.7 404.1 - - $ 2,206.8
Intersegment - 3.7 (3.7) - 197.4 35.4 (232.8) - -
$ 1,571.2 639.3 (3.7) $ 2,206.8 2,000.1 439.5 (232.8) - $ 2,206.8
Operating earnings $ 53.7 80.0 - $ 133.7 95.5 38.2 - (33.9) $ 99.8
Assets of continuing
operations $ 1,031.0 375.4 - $ 1,406.4 1,258.7 147.7 - 551.2 $ 1,957.6
Capital expenditures 51.1 34.0 - 85.1 10.7 95.8
Depreciation 56.7 19.5 - 76.2 1.9 78.1
1992
Net sales
Customers $ 1,516.1 543.3 - $ 2,059.4 1,664.3 395.1 - - $ 2,059.4
Intersegment - 3.0 (3.0) - 183.3 33.5 (216.8) - -
$ 1,516.1 546.3 (3.0) $ 2,059.4 1,847.6 428.6 (216.8) - $ 2,059.4
Operating earnings $ 43.0 65.2 - $ 108.2 75.0 33.2 - (28.4) $ 79.8
Assets of continuing
operations $ 1,039.1 359.4 - $ 1,398.5 1,259.6 138.9 - 473.9 $ 1,872.4
Capital expenditures 47.2 29.5 - 76.7 11.9 88.6
Depreciation 59.4 17.0 - 76.4 1.4 77.8
1991
Net sales
Customers $ 1,368.3 472.7 - $ 1,841.0 1,495.2 345.8 - - $ 1,841.0
Intersegment - 3.4 (3.4) - 159.2 39.8 (199.0) - -
$ 1,368.3 476.1 (3.4) $ 1,841.0 1,654.4 385.6 (199.0) - $ 1,841.0
Operating earnings(loss) $ (30.5) 52.5 - $ 22.0 (20.8) 42.8 - (40.4) $ (18.4)
Assets of continuing
operations $ 1,083.4 318.5 - $ 1,401.9 1,267.2 134.7 - 359.0 $ 1,760.9
Capital expenditures 43.7 26.2 - 69.9 4.8 74.7
Depreciation 67.1 15.9 - 83.0 1.0 84.0
Net sales to customers include immaterial amounts sold to unconsolidated
affiliates. Sales between domestic and foreign operations generally are priced
with reference to prevailing market prices.
Operating earnings of segments do not include the expenses of corporate
administration, other expenses and income of a nonoperating nature, and
provisions for income taxes.
The 1991 operating loss of the Marine segment includes litigation charges
of $30.0 million. The 1991 Corporate expenses include litigation charges of
$8.0 million.
Corporate assets consist primarily of cash and marketable securities,
prepaid income taxes and investments in unconsolidated affiliates.
The Company's export sales to unaffiliated customers for the three years
ended December 31, 1993, 1992 and 1991 were $181.4 million, $218.2 million and
$256.2 million, respectively.
9. Accrued Expenses
Accrued expenses at December 31 were as follows:
(in millions)
1993 1992
Payroll and other compensation $ 49.9 $ 42.4
Product warranties 69.6 65.5
Dealer allowances and discounts 52.4 53.1
Litigation and claims 67.0 55.9
Health and liability insurance 54.3 52.9
Restructuring charges and disposition costs 36.4 32.0
Taxes, other than income taxes 14.2 15.0
Other 60.7 63.3
Accrued expenses $ 404.5 $ 380.1
10. Debt
Short-term debt at December 31 consisted of the following:
(in millions)
1993 1992
Notes payable $ 6.6 $ 4.4
Current maturities of long-term debt 5.3 11.6
Short-term debt $ 11.9 $ 16.0
Long-term debt at December 31 consisted of the following:
(in millions)
1993 1992
Mortgage notes and other, 3% to 10%,
payable through 1999 $ 27.9 $ 34.6
Sinking fund debentures, 9.875%,
due 2016, net of discount of $0.9 - 99.1
Notes, 8.125%, due 1997,
net of discounts of $0.2 99.8 99.8
Debentures, 7.375%, due 2023
net of discount of $0.9 124.1 -
Guaranteed ESOP debt, 8.13%,
payable through 2004 78.0 82.6
329.8 316.1
Current maturities (5.3) (11.6)
Long-term debt $ 324.5 $ 304.5
Scheduled maturities
1995 $ 25.8
1996 6.1
1997 106.3
1998 10.8
Thereafter 175.5
$ 324.5
On November 8, 1993, the Company and seventeen banks entered into a short-term
credit agreement for $100 million and a long-term credit agreement for $300
million with termination dates of November 7, 1994, and December 31, 1996,
respectively. With mutual agreement between the Company and the banks, the
Company may extend both agreements. The short-term credit agreement may be
extended each 364 day anniversary, but not beyond December 31, 1996. The
long-term credit agreement contains two one-year extension options with the
extension requests permitted on the first and second anniversaries.
Under terms of the new agreements, the Company has multiple borrowing
options, including borrowing at a corporate base rate, as announced by The
First National Bank of Chicago, or a rate tied to the Eurodollar rate.
Currently, the Company must pay a facility fee of 0.1875% per annum on the
short-term agreement and 0.25% per annum on the long-term agreement.
Under the agreements, the Company is subject to interest coverage, net
worth and leverage tests, as well as a restriction on secured debt, as defined.
On the interest coverage test, the Company is required to maintain a ratio of
consolidated income before interest and taxes, as defined, to consolidated
interest expense of not less than 2.0 to 1.0 on a cumulative twelve-month
basis. This ratio, on a cumulative twelve-month basis, was 3.7 to 1.0 at
December 31, 1993. The leverage ratio of consolidated total debt to
capitalization, as defined, may not exceed 0.55 to 1.00, and at December 31,
1993, this ratio was 0.30 to 1.00. The Company also is required to maintain
shareholders' equity of at least $711.6 million at December 31, 1993. The
required level of shareholders' equity at December 31 of each subsequent year
is increased by 50% of net earnings for that year. The Company has complied
with this limitation and the secured debt limitation as of December 31, 1993.
There were no borrowings under the credit agreements at December 31, 1993.
On August 9, 1993, the $100 million 9.875% sinking fund debentures were
redeemed by the Company at 105.704% of the principal amount of the debentures
plus accrued interest to the redemption date. Proceeds of the Company's common
stock offering in May 1992 of $104.5 million, and cash from operations were
used to redeem the debentures. The Company recorded an after-tax extraordinary
loss of $4.6 million ($7.4 million pretax) relating to this transaction during
the third quarter of 1993. On August 25, 1993, the Company sold $125 million of
7.375% debentures maturing on September 1, 2023. The proceeds will be used for
general corporate purposes.
On February 27, 1990, the Brunswick Employee Stock Ownership Plan (ESOP)
sold $96.7 million principal amount of notes bearing interest at the rate of
8.2% per annum, which were guaranteed by the Company and are payable in
semi-annual installments of interest and principal ending in 2004. The interest
rate on these notes was reduced to 8.13% per annum, effective as of January 1,
1993, as a result of the change in tax law passed by the U.S. Congress in
August 1993. Company contributions to the ESOP along with dividends paid on
shares purchased with ESOP debt proceeds are used to service the ESOP debt.
Under the terms of the ESOP debt agreement, future changes in tax law could
cause the interest rate on the debt to vary within the range of 6.8% to 10.3%.
The carrying amounts for the short-term debt and current maturities of
long-term debt approximate their fair value because of the short maturity of
these instruments. The fair value of the long-term debt is $318.2 million and
$316.3 million, respectively, versus carrying amounts of $324.5 million and
$304.5 million, respectively, at December 31, 1993 and 1992. The fair value is
based on quoted market prices where available or discounted cash flows using
market rates available for similar debt of the same remaining maturities.
11. Consolidated Common Shareholders' Equity
(in millions, except per share data)
Minimum
Addt'l pension Unearned Cumulative Unamort.
Common stock paid-in Retained Treasury stock liability restricted translation ESOP
Shares Amount capital earnings Shares Amount adj. stock adjustments Expense Total
Balance, December 31, 1990 94.2 $70.6 $165.4 $787.6 (5.9)($114.3) - ($7.5) $12.2 ($90.0) $824.0
1991
Net loss - - - (23.7) - - - - - - (23.7)
Dividends declared ($.33 per
common share) - - - (29.2) - - - - - - (29.2)
Compensation plans and other - - (2.3) - 0.3 6.6 - 1.2 - - 5.5
Deferred Compensation-ESOP - - - - - - - - - 3.9 3.9
Currency translation - - - - - - - - (1.8) - (1.8)
Balance, December 31, 1991 94.2 $70.6 $163.1 $734.7 (5.6)($107.7) - ($6.3) $10.4 ($86.1) $778.7
1992
Net loss - - - (26.3) - - - - - - (26.3)
Dividends declared ($.44 per
common share) - - - (41.1) - - - - - - (41.1)
Compensation plans and other - - (1.0) - - 2.0 - 2.9 - - 3.9
Deferred Compensation-ESOP - - - - - - - - - 4.3 4.3
Issuance of common stock 6.5 4.9 99.6 - - - - - - - 104.5
Currency translation - - - - - - - - (1.5) - (1.5)
Balance, December 31, 1992 100.7 $75.5 $261.7 $667.3 (5.6)($105.7) - ($3.4) $8.9 ($81.8) $822.5
1993
Net Earnings - - - 23.1 - - - - - - 23.1
Dividends declared ($.44 per
common share) - - - (41.9) - - - - - - (41.9)
Compensation plans and other - - (0.3) - 0.2 3.0 (6.7) 1.1 - - (2.9)
Deferred Compensation-ESOP - - - - - - - - - 4.6 4.6
Currency translation - - - - - - - - (1.0) - (1.0)
Balance, December 31, 1993 100.7 $75.5 $261.4 $648.5 (5.4)($102.7) ($6.7) ($2.3) $7.9 ($77.2) $804.4
At December 31, 1993, 1192, 1991, the Company had no preferred stock outstanding(Authorized: 12.5 million shares,
$.75 par value at December 31, 1993)
The Company's Board of Directors approved a new schedule for the declaration and payment of dividends which resulted in only three
dividends being declared in 1991. However, four dividends were paid during 1992 and 1993. Quarterly dividend declarations are now
considered at the February, April, July and October meetings of the Board of Directors. Payments of declared amounts would be
made on the fifteenth of March, June, September and December.
12. Litigation
The Company is subject to certain legal proceedings and claims which have
arisen in the ordinary course of its business and have not been finally
adjudicated. In 1993, 1992 and 1991, the Company recorded pretax provisions of
$18.2 million, $4.8 million and $38.0 million ($11.2 million, $3.1 million and
$23.6 million after-tax), respectively, for litigation matters. In light of
existing reserves, the Company's litigation and environmental claims, including
those discussed below, when finally resolved, will not, in the opinion of
management, have a material adverse effect on the Company's consolidated
financial position and results of operations.
The Company is involved in certain legal and administrative proceedings
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 and other federal and state legislation governing the generation and
disposition of certain hazardous wastes. These proceedings, which involve both
on and off site waste disposal, in many instances seek compensation from the
Company as a waste generator under Superfund legislation which authorizes
action regardless of fault, legality of original disposition or ownership of a
disposal site.
In June 1992, Genmar Industries brought an action against the Company and
certain of its subsidiaries in the United States District Court for the
District of Minnesota, alleging that the Company (i) has monopolized or
attempted to monopolize the sale of recreational marine engines and boats, (ii)
has unlawfully coerced engine purchasers to buy the Company's boats, (iii) has
breached its contract with Genmar, (iv) has not dealt in good faith with
Genmar, and (v) has interfered with Genmar's existing and prospective business
relationships. Genmar has asked that the Company be required to divest its boat
manufacturing business, be enjoined from continuing its partnership with
Tracker Marine, and pay damages, including treble damages under the antitrust
laws. The Company believes, based upon its assessment of the complaint and in
consultation with counsel, that this litigation is without merit and intends to
defend itself vigorously. Parties to this suit have exchanged written discovery
and have begun depositions.
The Federal Trade Commission is conducting an investigation of whether the
formation or operations of Tracker Marine, L.P. and the Company's contracts
with Tracker Marine, L.P. violate antitrust laws. The Company has received and
responded to a subpoena seeking information relating to the Company's outboard
motor sales. The Company understands that other marine companies have received
similar subpoenas from the Federal Trade Commission.
In August 1988, certain plaintiffs brought an action against the Company
in the United States District Court in Los Angeles, California alleging
violations of the federal antitrust laws arising out of their planned
construction of a bowling center and asserting three claims under state law
principles. On May 3, 1991, a jury returned a verdict against the Company in
the amount of $5.1 million in actual damages and in the amount of one dollar in
punitive damages. Pursuant to federal antitrust laws, plaintiffs' antitrust
damages were trebled to $15.3 million. The plaintiff was also entitled to legal
fees and costs totalling $1.4 million plus interest at the rate of 6.04% per
annum on both the damage award and the attorney fees and costs. On October 13,
1993, the United States Court of Appeals reversed the District Court's judgment
and directed that judgment be entered in favor of the Company.
13. Stock Plans and Management Compensation
On April 24, 1991, shareholders of the Company approved the 1991 Stock
Plan (Plan) to succeed the 1984 Restricted Stock Plan and the 1971 Stock Plan.
Under this Plan, the Company may grant non-qualified stock options, incentive
stock options, stock appreciation rights and restricted stock and other various
types of awards to executives and other management employees of the Company.
The Plan provides for the issuance of a maximum of 5,000,000 shares of common
stock of the Company which may be authorized but unissued shares or treasury
shares. No grants or awards were made under this Plan during 1991.
During 1993 and 1992, non-qualified stock options were awarded to 413 and
420, respectively, executives and management employees of the Company. Under
the terms of the Plan, the option price per share may not be less than 100% of
the fair market value on the date of grant. The stock options are exercisable
over a period of time determined by the Compensation Committee of the Board of
Directors. In the event of a change in control as defined below, the option
holder may exercise all unexercised options until the earlier of the stated
expiration date or two years following termination of employment. At December
31, 1993, 263,110 shares were exercisable under outstanding options at a
weighted average option price of $14.0077 per share.
In addition to stock options, restricted shares were also awarded during
1993 and 1992 to seventeen and sixteen senior executives of the Company,
respectively. Restrictions will lapse on a portion of these shares four years
from the date of grant and after five years on the remaining shares. As the
restrictions lapse, the shares awarded are transferred to the employees.
According to the terms of this grant, a participant may elect within 90 days of
a change in control to terminate the restricted period for all shares awarded
to him. Charges against earnings from continuing operations for the
compensation element of the Plan were $0.3 million and $0.2 million for 1993
and 1992, respectively.
Stock option and restricted stock activities including discontinued
operations are as follows:
Stock Average Restricted Available
Options Option Stock for
Outstanding Price Outstanding Grant
At January 1, 1992 - - - 5,000,000
Granted 820,000 $ 13.875 71,050 (891,050)
Exercised 0 $ N/A 0
Canceled (22,300) $ 13.875 0 22,300
At December 31, 1992 797,700 71,050 4,131,250
Granted 825,475 $ 16.600 87,575 (913,050)
Exercised (8,870) $ 13.875 0
Canceled (29,540) $ 15.332 0 29,540
At December 31, 1993 1,584,765 158,625 3,247,740
Selected management employees, including employees of its discontinued
operations, have received shares of the Company's common stock under the 1984
Restricted Stock Plan (1984 Plan). Under the 1984 Plan, 1,367,232 shares, net
of canceled shares, have been awarded. No award has been made since 1991 and no
further awards will be made under the 1984 Plan. After a restricted period of
one to three years, the shares awarded are transferred to the employees. At
that time, the employees may also receive a cash award if certain performance
standards, as established by the Compensation Committee of the Board of
Directors, have been met.
The 1984 Plan provides that, within 90 days after a change in control of
the Company, a participant may elect to terminate the restricted period on
shares of common stock awarded under the 1984 Plan. A "change in control of the
Company" occurs when 1) any person is or becomes a beneficial owner directly or
indirectly of 30% or more of the combined voting power of the Company, 2)
individuals nominated by the Board of Directors for election as directors do
not constitute a majority of the Board of Directors after such election, or 3)
a tender offer is made for the Company's stock, involving a control block,
which is not negotiated and approved by the Board of Directors.
The 1984 Plan also provides that the Compensation Committee may at any
time reduce the restricted period for restricted stock of any participant or
group of participants to a minimum of one year. Charges against earnings
(loss) from continuing operations for the compensation element of the 1984 Plan
were $0.7 million, $1.4 million, and $1.9 million for 1993, 1992 and 1991,
respectively.
Under the 1971 Stock Plan (1971 Plan), certain other management employees
were granted shares of the Company's common stock at no cost during 1988
through 1991. There have been no grants since 1991 and there will be no further
grants under the 1971 Plan. The shares awarded or purchased under the 1971 Plan
are subject to restrictions which lapse ratably over a period of one to five
years. The shares will be released at the time of a change in control of the
Company or on a date selected by the Compensation Committee. Charges against
earnings (loss) from continuing operations for the compensation element of the
1971 Plan were $0.4 million in 1993, $0.6 million in 1992 and $1.0 million in
1991.
The Company has employment agreements with certain executive officers that
become operative only upon a change in control of the Company, as defined
above. In 1989, the Company established a severance plan for all other salaried
employees of the Company which also only becomes operative upon a change in
control of the Company. Compensation which might be payable under these
agreements and the severance plan has not been accrued in the consolidated
financial statements as a change in control has not occurred.
Under the Brunswick Employee Stock Ownership Plan (ESOP), the Company may
make annual contributions to a trust for the benefit of eligible domestic
employees in the form of either cash or common shares of the Company. In April
1989, the Company's Board of Directors approved an amendment to the ESOP that
permits the ESOP to borrow funds to acquire the Company's common shares.
Subsequent to that amendment, the ESOP obtained a bridge loan of $100 million
and purchased from the Company 5,095,542 shares (ESOP Shares) of the Company's
common stock at a price of $19.625 per share. The bridge loan was repaid with
notes sold on February 27, 1990. The debt of the ESOP is guaranteed by the
Company and is recorded in the Company's consolidated financial statements.
The ESOP Shares are maintained in a Suspense Account until released and
allocated to participants' accounts. The release of shares from the Suspense
Account is determined by multiplying the number of shares in the Suspense
Account by the ratio of debt service payments (principal plus interest) made by
the ESOP during the year to the sum of the debt service payments made by the
ESOP in the current year plus the debt service payments to be made by the ESOP
in future years. Allocation of released shares to participants' accounts is
done at the discretion of the Compensation Committee of the Board of Directors.
The shares released from the Suspense Account were 327,900 in 1993
and 1992 and 327,899 in 1991 leaving 3,442,948 shares in the Suspense Account
at December 31, 1993.
The expense recorded by the Company since 1989 is based on cash
contributed or committed to be contributed by the Company to the ESOP during
the year. Unamortized ESOP expense is reduced as the Company recognizes
compensation expense (excluding the impact of dividends on ESOP Shares).
In 1993, 1992 and 1991, the ESOP made debt service payments totaling $11.2
million which were funded by Company contributions of $9.0 million and
dividends received on ESOP shares of $2.2 million in each of the three years.
The Company, including discontinued operations, recognized expense of $9.0
million in 1993, 1992 and 1991 ($5.5 million, $5.9 million and $5.6 million
after-tax) of which $6.6 million, $7.0 million and $7.3 million, respectively,
were recorded as interest expense and $2.4 million, $2.0 million and $1.7
million, respectively, were recorded as compensation expense.
14. Retirement and Employee Benefit Costs
The Company has pension and retirement plans covering substantially all of
its employees, including certain employees in foreign countries.
Pension cost of continuing operations for all plans was $7.3 million, $3.6
million and $6.2 million in 1993, 1992 and 1991, respectively. Plan benefits
are based on years of service, and for some plans, the average compensation
prior to retirement. Plan assets generally consist of debt and equity
securities, real estate and investments in insurance contracts.
Pension costs for 1993, 1992 and 1991, determined in accordance with the
Financial Accounting Standards Board Statement No. 87, "Employers' Accounting
for Pensions" (SFAS No. 87), included the following components:
(in millions)
1993 1992 1991
Service cost-benefits earned
during the period $ 9.4 $ 9.4 $ 9.1
Interest cost on projected benefit
obligation 29.4 26.3 24.5
Actual return on assets (25.7) (14.5) (69.1)
Net amortization and deferral (5.8) (17.6) 41.7
Net pension cost $ 7.3 $ 3.6 $ 6.2
The funded status of the plans accounted for in accordance with SFAS No.
87 and the amounts recognized in the Company's balance sheets at December 31
were as follows:
1993 1992
Plans whose Plans whose Plans whose Plans whose
assets exceed accumulated assets exceed accumulated
accumulated benefits accumulated benefits
(in millions) benefits exceed assets benefits exceed assets
Actuarial present value of:
Vested benefits
obligation $ (69.7) $(288.8) $(206.0) $(100.0)
Nonvested benefits
obligation (10.7) (14.5) (1.6) (5.7)
Accumulated benefit
obligation (80.4) (303.3) (207.6) (105.7)
Effects of anticipated
future compensation
levels and other
events (1.1) (25.6) (25.9) (1.9)
Projected benefit
obligation (81.5) (328.9) (233.5) (107.6)
Plan assets at fair
value 83.6 262.0 240.1 75.3
Plan assets in excess of
(less than) projected
benefit obligation 2.1 (66.9) 6.6 (32.3)
Unrecognized net
transition asset (4.2) (12.0) (20.3) (1.4)
Unrecognized prior
service cost 9.7 3.0 1.0 12.8
Net unrecognized loss from
past experience different
from assumed and effects of
changes in assumptions 16.5 50.2 8.8 3.8
Adjustment to recognize
minimum liability - (15.0) - (14.4)
Pension asset (liability)
recognized in financial
statements $ 24.1 $ (40.7) $ (3.9) $ (31.5)
The projected benefit obligations were determined primarily using assumed
weighted average discount rates of 7.5% in 1993 and 8.5% in 1992, and an
assumed compensation increase of 5.5% in 1993 and 1992. The assumed weighted
average long-term rate of return on plan assets was primarily 9% in 1993 and
1992.
The unrecognized asset or liability at the initial adoption of SFAS No. 87
is being amortized on a straight-line basis over 10 years for the Company's
domestic plans and over the average remaining service period of plan
participants for the Company's foreign plans. The unrecognized prior service
cost is being amortized on a straight-line basis over the average remaining
service period of plan participants.
Two of the Company's salaried pension plans provide that in the event of a
termination, merger or transfer of assets of the plans during the five years
following a change in control of the Company occurring on or before March 1,
1996, benefits would be increased so that there would be no excess net assets.
The Company's supplemental pension plan provides for a lump sum payout to plan
participants of the present value of accumulated benefits upon a change in
control of the Company. For a definition of "change in control of the Company"
refer to Note 13.
The Company has an unfunded retirement plan which provides for payments to
retired directors. This plan is accounted for as a deferred compensation
arrangement and resulted in charges to net earnings (loss) of $0.2 million in
1993 and 1992 and $0.1 million in 1991.
Sea Ray employees participate in a noncontributory employee stock
ownership and profit sharing plan, under which the Company makes annual cash
contributions to a trust for the benefit of eligible employees. The charges to
net earnings (loss) for this plan were $1.3 million, $1.4 million and $1.2
million in 1993, 1992 and 1991, respectively.
Certain employees participate in a profit sharing plan to which the
Company makes cash contributions. Participants become vested in the
contributions after they are employed for a specified period. This plan
resulted in charges to net earnings (loss) of $2.2 million, $2.1 million and
$1.5 million in 1993, 1992 and 1991, respectively.
The Brunswick Retirement Savings Plan for salaried and certain hourly
employees, including discontinued operations, allows participants to make
contributions via payroll deductions pursuant to section 401(k) of the Internal
Revenue Code. Effective January 1, 1991, the Company makes a minimum matching
contribution of 5% of a participant's pretax contributions limited to 6%of
their salary. The Company may increase the matching percentage to 30% of the
participant's pretax contributions. The Company made 10% matching contributions
in 1993 and 1992, and the minimum 5% matching contribution in 1991. The
Company's contribution is made in common stock of the Company. In 1993 and
1992, the net charge to continuing operations for matching contributions was
$0.5 million and $0.4 million in 1991.
In addition to providing benefits to present employees, the Company
currently provides certain health care and life insurance benefits for eligible
retired employees. Employees may become eligible for those benefits if they
have fulfilled specific age and service requirements. The Company monitors the
cost of these plans, and has, from time to time, changed the benefits provided
under these plans. The plans contain requirements for retiree contributions
generally based on years of service as well as other cost sharing features such
as deductibles and copayments. The Company reserves the right to make
additional changes or terminate these benefits in the future. The Company's
plans are not funded; claims are paid as incurred.
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (SFAS No. 106), for its domestic unfunded
postretirement health care and life insurance programs. SFAS No. 106 requires
the cost of postretirement benefits to be accrued during the service lives of
employees. As 1991 costs were recognized as expense when the claims were paid
by the Company, postretirement benefit cost is not comparable with 1993 and
1992. The cumulative effect on years prior to 1992 of adopting SFAS No. 106 on
an immediate recognition basis, including discontinued operations, was to
decrease net earnings by $38.3 million. The Company had previously recognized
approximately $9.6 million of its accumulated postretirement benefit obligation
primarily in conjunction with the disposition of the non-Defense businesses of
the Technical segment. Postretirement benefit cost was $6.4 million, $6.7
million and $1.4 million in 1993, 1992, and 1991, respectively.
Net periodic postretirement benefit cost of continuing operations for 1993
and 1992 included the following components:
(in millions)
1993 1992
Service cost-benefits attributed to service
during the period $ 1.5 $ 1.9
Interest cost on accumulated
postretirement benefit obligation 4.9 4.8
Net periodic postretirement benefit cost $ 6.4 $ 6.7
The amounts recognized in the Company's balance sheets at December 31 were as
follows:
(in millions)
1993 1992
Accumulated postretirement benefit obligation:
Retirees $ 30.3 $ 31.7
Fully eligible active plan participants 5.3 4.4
Other active plan participants 26.7 26.4
Total 62.3 62.5
Unrecognized prior service cost 1.4 -
Unrecognized net gains 0.9 -
Postretirement liability recognized in
financial statements $ 64.6 $ 62.5
The accumulated postretirement benefit obligation was determined using
weighted average discount rates of 7.5% in 1993 and 8.5% in 1992, and an
assumed compensation increase of 5.5% in 1993 and 1992. The health care cost
trend rates were assumed to be 12% and 10% in 1994 for pre-65 and post-65
benefits, respectively, gradually declining to 5% after eight years and four
years, respectively, and remaining at that level thereafter. The health care
cost trend rates were assumed to be 15%, and 10% in 1993 for pre-65 and post-65
benefits, respectively, gradually declining to 6% after ten years and seven
years, respectively, and remaining at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported.
For example, a 1% increase in the health care trend rate would increase the
accumulated postretirement benefit obligation by $7.9 million at December 31,
1993 and the net periodic cost by $1.0 million for the year.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (SFAS No. 112), for employees' disability benefits. SFAS No. 112
requires the accrual method for recognizing the cost of postemployment
benefits. The cumulative effect on prior years of adopting SFAS No. 112,
including discontinued operations, was to decrease net earnings by $14.6
million. The effect of this change on 1993 consolidated results of operations
was not material.
15. Income Taxes
The sources of earnings (loss) before income taxes are presented as
follows:
(in millions)
1993 1992 1991
United States $ 89.0 $ 50.1 $ (69.4)
Foreign (2.5) 11.9 28.9
Earnings (loss) before income taxes $ 86.5 $ 62.0 $ (40.5)
The income tax provision (benefit) consisted of the following:
(in millions)
1993 1992 1991
Current tax expense
U.S. Federal $ 13.9 $ 2.8 $ (6.9)
State and local 11.1 3.6 (5.8)
Foreign 7.0 8.4 15.0
Total current $ 32.0 $ 14.8 $ 2.3
Deferred tax expense
U.S. Federal $ 8.5 $ 10.0 $ (8.2)
State and local (7.0) (2.0) -
Foreign (1.5) (0.5) 0.4
Total deferred $ 0.0 $ 7.5 $ (7.8)
Total provision (benefit) $ 32.0 $ 22.3 $ (5.5)
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities at December 31 are as follows:
(in millions)
1993 1992
Deferred tax assets
Litigation and claims $ 24.5 $ 20.7
Product warranty 29.0 25.6
Dealer allowance and discounts 12.7 15.2
Bad debts 10.3 9.4
Sales of businesses 24.2 12.0
Insurance reserves 22.9 23.5
Credit carryforwards and carrybacks 22.6 23.4
Loss carryforwards and carrybacks 16.2 15.1
Other 29.9 44.4
Valuation allowance (5.8) (8.8)
Total deferred tax assets $ 186.5 $ 180.5
Deferred tax liabilities (assets)
Depreciation and amortization $ 21.4 $ 96.7
Postretirement and postemployment benefits (36.9) (28.0)
Other assets and investments 87.5 66.9
Other 31.9 39.8
Total deferred tax liabilities $ 103.9 $ 175.4
The valuation allowance relates to deferred tax assets established under
SFAS No. 109 for capital loss carryforwards of $3.1 million, and foreign tax
credit carryforwards of $2.7 million. These unutilized loss and credit
carryforwards, which will expire in 1996, will be carried forward to future
years for possible utilization. No benefit for these carryforwards has been
recognized in the financial statements. No other valuation allowances were
deemed necessary, as all deductible temporary differences will be utilized
either by carryback to prior years' taxable income, charges against reversals
of future taxable temporary differences, or charges against expected future
taxable income other than reversals. The change in the valuation allowance from
1992 to 1993 is primarily due to the utilization of foreign tax credit
carryforwards which reduced income tax expense for the current year.
During 1991, deferred income taxes were provided for timing differences in
the recognition of revenue and expenses for tax and financial statement
purposes. The deferred tax provision (benefit) consisted of the following:
(in millions)
1991
U.S. Federal
Litigation and claims $ (11.8)
Restructuring charge 4.9
Employee benefits (1.8)
Bad debts (0.1)
Product warranty (0.5)
Dealer allowances and discounts (2.0)
Inventory 0.8
State and local taxes 2.5
Sales of businesses 2.2
Insurance (2.3)
Depreciation and amortization (0.6)
Other 0.5
(8.2)
Foreign 0.4
Total deferred tax (benefit) $ (7.8)
Deferred taxes have been provided, as required, on the undistributed
earnings of foreign subsidiaries and unconsolidated affiliates.
The difference between the actual income tax provision and the tax
provision (benefit) computed by applying the statutory Federal income tax rate
to earnings (loss) before taxes is attributable to the following:
(in millions)
1993 1992 1991
Income tax provision (benefit)
at 35% in 1993 and 34% in 1992
and 1991 $ 30.3 $ 21.1 $ (13.8)
State and local income taxes,
net of Federal income tax
effect 2.7 1.1 (3.8)
Foreign sales corporation benefit (1.5) (1.4) (1.3)
Taxes related to foreign income,
net of credits (1.9) (4.7) 10.4
Goodwill and other amortization 1.8 1.7 1.6
Enacted tax rate change (3.6)
Other 4.2 4.5 1.4
Actual income tax
provision (benefit) $ 32.0 $ 22.3 $ (5.5)
Effective tax rate 37.0% 36.0% (13.6)%
In January 1994, the Company reached an agreement with the U.S. Internal
Revenue Service regarding its examination of the Company for the years 1985 and
1986. The issues of this examination dealt primarily with the deductibility of
approximately $500 million of acquired intangible assets, which the IRS
proposed to reclassify to non-deductible intangible assets. Under the terms of
the agreement, the IRS has agreed to allow amortization deductions for
virtually all of the acquired intangible assets, and the Company has agreed to
increase the amortizable lives of most of the acquired intangible assets.
The revised lives create a temporary difference which results in an
initial obligation by the Company to pay the IRS approximately $55 million,
representing taxes and interest net of taxes for the years 1986 through 1993.
This initial $55 million obligation will subsequently be reduced by the future
tax benefits of the temporary difference created by the agreement. Since the
interest will be charged to existing reserves and the taxes paid represent
temporary differences which create, and have been recorded as, deferred tax
assets, this agreement will have no impact on the Company's consolidated
results of operations.
16. Translation of Foreign Currencies
Most of the Company's foreign entities use the local currency as the
functional currency and translate all assets and liabilities at year-end
exchange rates, all income and expense accounts at average rates and record
adjustments resulting from the translation in a separate component of common
shareholders' equity. The following is an analysis of the cumulative
translation adjustments reflected in common shareholders' equity:
(in millions)
1993 1992 1991
Balance at January 1 $ 8.9 $ 10.4 $ 12.2
Translation and other (1.9) (4.4) (3.6)
Allocated income taxes 0.9 2.9 1.8
Balance at December 31 $ 7.9 $ 8.9 $ 10.4
The remaining foreign entities translate monetary assets and liabilities
at year-end exchange rates and inventories, property and nonmonetary assets and
liabilities at historical rates. Income and expense accounts are translated at
the average rates in effect during the year, except that depreciation and cost
of sales are translated at historical rates. Adjustments resulting from the
translation of these entities are included in the results of operations. Gains
and losses resulting from transactions of the Company and its subsidiaries
which are made in currencies different from their own are included in income as
they occur. Currency losses of $1.0 million and $5.1 million were recorded in
1993 and 1992, respectively, and a gain of $3.2 million was recorded in 1991.
17. Leases
The Company has various lease agreements for offices, branches, factories,
distribution and service facilities, certain Company-operated bowling centers,
and certain personal property. These obligations extend through 2032.
Most leases contain renewal options and some contain purchase options.
Many leases for Company-operated bowling centers contain escalation clauses,
and many provide for contingent rentals based on percentages of gross revenue.
No leases contain restrictions on the Company's activities concerning
dividends, additional debt or further leasing.
Rent expense consisted of the following:
(in millions)
1993 1992 1991
Basic expense $ 21.2 $ 21.5 $ 22.9
Contingent expense 0.6 1.1 1.0
Sublease income (1.2) (1.5) (3.0)
Rent expense, net $ 20.6 $ 21.1 $ 20.9
Future minimum rental payments at December 31, 1993, under agreements
classified as operating leases with noncancelable terms in excess of one year,
are as follows:
(in millions)
1994 $ 3.2
1995 2.5
1996 1.7
1997 1.6
1998 1.3
Thereafter 2.7
Future minimum operating lease rental payments (not reduced
by minimum sublease rentals of $1.3 million) $ 13.0
18. Technological Expenditures
Technological expenditures consisted of the following:
(in millions)
1993 1992 1991
Research and development $ 60.8 $ 52.0 $ 49.5
Engineering and other 9.0 4.3 3.8
Technological expenditures $ 69.8 $ 56.3 $ 53.3
19. Preferred Share Purchase Rights
In March 1986, the Company's Board of Directors declared a dividend of one
Preferred Share Purchase Right (Right) on each outstanding share of the
Company's common stock. After the two-for-one stock split distributed on June
9, 1987, under certain conditions, each holder of Rights may purchase one
one-hundredth share of a new series of junior participating preferred stock at
an exercise price of $100 for each two Rights held.
The Preferred Share Purchase Rights become exercisable at the earlier of
(1) a public announcement that a person or group acquired or obtained the right
to acquire 15% or more of the Company's common stock or (2) ten days after
commencement or public announcement of an offer for more than 15% of the
Company's common stock. After a person or group acquires 15% or more of the
common stock of the Company, other shareholders may purchase additional shares
of the Company at fifty percent of the current market price. These Rights may
cause substantial ownership dilution to a person or group who attempts to
acquire the Company without approval of the Company's Board of Directors.
The Rights, which do not have any voting rights, expire on March 31, 1996,
and may be redeemed by the Company at a price of $.025 per Right at any time
prior to a person's or group's acquisition of 15% or more of the Company's
common stock. The new series of preferred stock that may be purchased upon
exercise of the Rights may not be redeemed and may be subordinate to other
series of the Company's preferred stock designated in the future. A Right also
will be issued with each share of the Company's common stock that becomes
outstanding prior to the time the Rights become exercisable or expire.
In the event that the Company is acquired in a merger or other business
combination transaction, provision will be made so that each holder of Rights
will be entitled to buy the number of shares of common stock of the surviving
company, which at the time of such transaction would have a market value of two
times the exercise price of the Rights.
20. Unconsolidated Affiliates and Subsidiaries
The Company has certain unconsolidated foreign and domestic affiliates
that are accounted for on the equity method.
Summary financial information of the unconsolidated affiliates is
presented below:
(in millions)
1993 1992 1991
Net sales $ 332.2 $ 259.4 $ 155.1
Gross margin $ 70.5 $ 49.3 $ 22.7
Net earnings $ 24.2 $ 16.8 $ 7.0
Company's share of net earnings $ 11.3 $ 8.4 $ 4.7
Current assets $ 155.4 $ 138.4
Non-current assets 104.2 87.6
Total assets 259.6 226.0
Current liabilities (125.1) (115.5)
Non-current liabilities (28.8) (12.0)
Net assets $ 105.7 $ 98.5
The net sales of affiliates include an insignificant amount of sales to
the Company.
21. Quarterly Data (unaudited)
(in millions, except per share data) 1st 2nd 3rd 4th Year
1993
Net sales $ 542.8 $ 589.0 $ 539.4 $ 535.6 $ 2,206.8
Gross margin $ 140.1 $ 159.6 $ 134.1 $ 136.4 $ 570.2
Earnings from continuing operations $ 9.8 $ 22.5 $ 15.2 $ 7.0 $ 54.5
Earnings (loss) from discontinued operations (0.8) 0.8 - - -
Extraordinary loss from retirement of debt - - (4.6) - (4.6)
Estimated loss on divestiture of Technical segment - - - (12.2) (12.2)
Cumulative effect of change in accounting principle (14.6) - - - (14.6)
Net earnings (loss) $ (5.6) $ 23.3 $ 10.6 $ (5.2) $ 23.1
Per common share
Earnings from continuing operations $ 0.10 $ 0.24 $ 0.16 $ 0.07 $ 0.57
Earnings (loss) from discontinued operations (0.01) 0.01 - - -
Extraordinary item - - (0.05) - (0.05)
Estimated loss on divestiture of Technical segment - - - (0.13) (0.13)
Cumulative effect of change in accounting principle (0.15) - - - (0.15)
Earnings (loss) $ (0.06) $ 0.25 $ 0.11 $ (0.06) $ 0.24
Dividends declared $ 0.11 $ 0.11 $ 0.11 $ 0.11 $ 0.44
Common stock price (NYSE)
High $ 17 1/8 $ 15 $ 15 1/2 $ 18 1/2 $ 18 1/2
Low $ 14 1/2 $ 12 5/8 $ 12 1/2 $ 14 $ 12 1/2
1992
Net sales $ 544.7 $ 546.4 $ 503.4 $ 464.9 $ 2,059.4
Gross margin $ 133.3 $ 140.4 $ 121.8 $ 109.8 $ 505.3
Earnings (loss) from continuing operations $ 11.3 $ 18.0 $ 11.5 $ (1.1) $ 39.7
Earnings (loss) from discontinued operations - 0.5 (1.2) (1.0) (1.7)
Estimated loss on divestiture of Technical segment - - - (26.0) (26.0)
Cumulative effect of change in accounting principle (38.3) - - - (38.3)
Net earnings (loss) $ (27.0) $ 18.5 $ 10.3 $ (28.1) $ (26.3)
Per common share
Earnings (loss) from continuing operations $ 0.13 $ 0.20 $ 0.12 $ (0.01) $ 0.43
Earnings (loss) from discontinued operations - - (0.01) (0.01) (0.02)
Estimated loss on divestiture of Technical segment - - - (0.27) (0.28)
Cumulative effect of change in accounting principle (0.43) - - - (0.41)
Earnings (loss) $ (0.30) $ 0.20 $ 0.11 $ (0.29) $ (0.28)
Dividends declared $ 0.11 $ 0.11 $ 0.11 $ 0.11 $ 0.44
Common stock price (NYSE)
High $ 17 1/4 $ 17 3/4 $ 14 3/4 $ 16 7/8 $ 17 3/4
Low $ 13 7/8 $ 13 3/4 $ 12 3/8 $ 12 1/4 $ 12 1/4
In 1993, the first quarter has been restated to reflect the cumulative effect for the adoption of SFAS No. 112.
In 1992, first, second and third quarters have been restated to reflect the adoption of SFAS No. 106.
The 1992 results have been restated to segregate the results of operations of the Company's discontinued
Technical segment.
Report of Management
The Company maintains accounting and related internal control systems which are
intended to provide reasonable assurance that assets are safeguarded from loss
or unauthorized use and to produce records necessary for the preparation of
financial information. There are limits inherent in all systems of internal
control, and the cost of the systems should not exceed the expected benefits.
Through the use of a program of internal audits and through discussions with
and recommendations from its independent public accountants, the Company
periodically reviews these systems and controls and compliance therewith.
The Audit Committee of the Board of Directors, comprised entirely of
nonemployee directors, meets regularly with management, the internal auditors,
and the independent public accountants to review the results of their work and
to satisfy itself that their responsibilities are being properly discharged.
The internal auditors and independent public accountants have full and free
access to the Audit Committee and have discussions regarding appropriate
matters, with and without management present.
The primary responsibility for the integrity of financial information rests
with management. Certain valuations contained herein result, of necessity, from
estimates and judgments of management. The accompanying consolidated financial
statements, notes thereto, and other related information were prepared in
conformity with generally accepted accounting principles applied on a
consistent basis.
Report of Independent Public Accountants
To the Shareholders of Brunswick Corporation:
We have audited the accompanying consolidated balance sheets of Brunswick
Corporation(a Delaware Corporation) and Subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of results of operations, and
cash flows for each of three years ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brunswick Corporation and
Subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 14 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for
postemployment benefits, and effective January 1, 1992, the Company changed its
method of accounting for postretirement benefits other than pensions.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in
the preceding index are the responsibility of the company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen & Co.
Chicago, Illinois,
February 6, 1994
Brunswick Corporation
Five Year Financial Summary
(in millions, except ratios and per share data 1993 1992 1991 1990 1989
Results of Operations Data
Net sales $2,206.8 $2,059.4 $1,841.0 $2,106.9 $2,410.6
Depreciation 78.1 77.8 84.0 88.8 85.7
Amortization 39.7 38.1 41.0 43.7 57.6
Operating earnings(loss) 99.8 79.8 (18.4) 52.1 (41.5)
Earnings(loss) before income taxes 86.5 62.0 (40.5) 15.4 (95.5)
Earnings(loss) from continuing operations
before extraordinary item and cumulative
effect of accounting changes 54.5 39.7 (35.0) 9.4 (81.7)
Earnings(loss) from discontinued operations - (1.7) 11.3 14.8 10.4
Extraordinary loss from retirement of debt (4.6) - - - -
Gain(estimated loss) on divestitures of
Technical segment businesses (12.2) (26.0) - 46.7 -
Cumulative efffect on prior years of changes
in accounting principles (14.6) (38.3) - - -
Net earnings(loss) 23.1 (26.3) (23.7) 70.9 (71.3)
Per Common Share Data
Earnings(loss) from continuing operations
before extraordinary item and cumulative
effect of accounting changes $ 0.57 $ 0.43 $ (0.40) $ 0.10 $ (0.93)
Earnings(loss) from discontinued operations - (0.02) 0.13 0.17 0.12
Extraordinary item (0.05) - - - -
Gain(estimated loss) on divestitures of
Technical segment businesses (0.13) (0.28) - 0.53 -
Cumulative efffect on prior years of changes
in accounting principles (0.15) (0.41) - - -
Net earnings(loss) 0.24 (0.28) (0.27) 0.80 (0.81)
Dividends declared 0.44 0.44 0.33 0.44 0.44
Dividends paid 0.44 0.44 0.44 0.44 0.44
Book value 8.44 8.65 8.79 9.53 8.82
Balance Sheet Data
Capital expenditures $ 95.8 $ 88.6 $ 74.7 $ 77.7 $ 104.1
Assets of continuing operations 1,957.6 1,872.4 1,760.9 1,790.6 1,712.5
Debt
Short-term $ 11.9 $ 16.0 $ 6.3 $ 5.8 $ 10.7
Long-term 324.5 304.5 315.9 301.5 462.0
Total debt 336.4 320.5 322.2 307.3 472.7
Common shareholders' equity 804.4 822.5 778.7 824.0 776.1
Total capitalization $1,140.8 $1,143.0 $1,100.9 $1,131.3 $1,248.8
Other Data
Return on beginning
shareholders' equity 6.6 % 5.1 % (4.2)% 1.2 % (8.6)%
Effective tax rate(benefit) 37.0 % 36.0 % (13.6)% 39.0 % (14.4)%
Working capital ratio 1.6 1.7 1.5 1.5 1.3
Debt-to-capitalization rate 29.5 % 28.0 % 29.3 % 26.8 % 37.9 %
Common Stock Price(NYSE)
High $ 18 1/2 $ 17 3/4 $ 16 1/8 $ 16 $ 21 3/8
Low 12 1/2 12 1/4 8 3/4 6 5/8 13
Close 18 16 1/4 13 7/8 9 14
The Notes to Consolidated Financial Statements should be read in conjunction with the above summary.
The 1989 operating results include a provision for restructuring of $90.5 million($72.7 million after tax)
for the write-off of assets, primarily intangibles, and costs associated with the consolidation and
reorganization of the Marine segment. Brunswick Corporation
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to
the incorporation of our report dated February 6, 1994, included
in this Form 10-K, into the Company's previously filed registration
statements on Form S-8 (File No. 33-4683), Form S-3 (File No. 33-61512)
and Form S-8 (File No. 33-55022).
Arthur Andersen & Co.
Chicago, Illinois,
March 28, 1994
Brunswick Corporation
Schedule I - Marketable Securities and Other Investments
Balance
Principal Market at end of
(in millions) Amount Cost Value period
Marketable Securities
Governmental $ 61.9 $ 61.9 $ 61.9 $ 61.9
Corporate 149.3 149.3 149.3 149.3
$ 211.2 $ 211.2 $ 211.2 $ 211.2
Cash 37.6 37.6 37.6 37.6
Total cash and
cash equivalents $ 248.8 $ 248.8 $ 248.8 $ 248.8
Brunswick Corporation
Schedule V - Property
Balance at Balance
beginning Retirements at end of
(in millions) of period Additions * and Sales Other period
1993
Land $ 63.7 $ 0.2 $ (0.5) $ (2.5) $ 60.9
Buildings 349.7 19.0 (12.7) 1.5 357.5
Equipment 693.0 76.9 (47.0) (2.0) 720.9
$ 1,106.4 $ 96.1 $ (60.2) $ (3.0) $ 1,139.3
1992
Land $ 62.2 $ 1.8 $ (0.7) $ 0.4 $ 63.7
Buildings 328.2 25.9 (4.4) 0.0 349.7
Equipment 673.7 61.7 (39.6) (2.8) 693.0
$ 1,064.1 $ 89.4 $ (44.7) $ (2.4) $ 1,106.4
1991
Land $ 54.6 $ 7.8 $ (0.1) $ (0.1) $ 62.2
Buildings 319.0 12.4 (3.2) 0.0 328.2
Equipment 664.3 55.0 (44.9) (0.7) 673.7
$ 1,037.9 $ 75.2 $ (48.2) $ (0.8) $ 1,064.1
* Includes $0.3 million, $0.8 million and $0.5 million resulting from
acquisitions in 1993, 1992 and 1991, respectively.
This schedule reflects only the financial information of continuing
operations.
Brunswick Corporation
Schedule VI - Accumulated Depreciation
Balance at Balance
beginning Retirements at end of
(in millions) of period Additions and Sales Other period
1993
Buildings $ 131.9 $ 12.7 $ (8.3) $ (2.5) $ 133.8
Equipment 439.5 65.4 (44.2) 0.5 461.2
$ 571.4 $ 78.1 $ (52.5) $ (2.0) $ 595.0
1992
Buildings $ 118.8 $ 12.3 $ (2.0) $ 2.8 $ 131.9
Equipment 412.6 65.5 (37.6) (1.0) 439.5
$ 531.4 $ 77.8 $ (39.6) $ 1.8 $ 571.4
1991
Buildings $ 108.8 $ 12.1 $ (2.1) $ 0.0 $ 118.8
Equipment 384.3 71.9 (42.5) (1.1) 412.6
$ 493.1 $ 84.0 $ (44.6) $ (1.1) $ 531.4
This schedule reflects only the financial information of continuing
operations.
Brunswick Corporation
Schedule VIII - Valuation and Qualifying Accounts
Balance at Charges Balance
beginning to profit at end of
(in millions) of period and loss Write-offs Recoveries Other period
Allowances for
possible losses
on receivables
1993 $ 15.6 $ 2.1 $ (4.0) $ 1.1 $ 2.1 * $ 16.9
1992 $ 13.6 $ 3.8 $ (4.7) $ 1.1 $ 1.8 $ 15.6
1991 $ 17.8 $ 7.9 $ (12.9) $ 1.1 $ (0.3) $ 13.6
* Includes $2.4 million relating to acquisitions
This schedule reflects only the financial information of continuing
operations.
Deferred tax
asset valuation
allowance
1993 $ 8.8 $ - $ - $ (3.0) $ - $ 5.8
1992 $ 11.6 $ - $ - $ (2.8) $ - $ 8.8
This account reflects the adoption of SFAS No. 109, "Accounting for
Income Taxes", which was adopted effective January 1, 1992. In 1992 and 1993, the
Company utilized $2.8 million and $3.0 million, respectively, of foreign tax credits
from prior years. The utilization of these foreign tax credit carryforwards reduced
reduced income tax expense for the current year.
Schedule X - Supplementary Income Statement Information
Charges to
(in millions) costs and expenses
1993 1992 1991
Maintenance and repairs $ 35.5 $ 36.2 $ 33.2
Advertising $ 66.1 $ 64.3 $ 63.0
Amortization of intangibles
Dealer networks $ 31.9 $ 31.8 $ 31.8
Excess of cost over net assets
of businesses acquired 4.0 3.6 3.5
Trademarks and other 3.8 2.7 5.7
$ 39.7 $ 38.1 $ 41.0
This schedule reflects only the financial information of continuing
operations.