BRUNSWICK CORP

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Statements of Comprehensive Income

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Cash Flows

Brunswick Corporation

Condensed Consolidated Statements of Shareholders' Equity

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

Note 1 – Significant Accounting Policies

Interim Financial Statements. Brunswick's unaudited interim condensed consolidated financial statements have been prepared pursuant to SEC rules and regulations. Therefore, certain information and disclosures normally included in financial statements and related notes prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted.

These financial statements should be read in conjunction with, and have been prepared in conformity with, the accounting principles reflected in the consolidated financial statements and related notes included in Brunswick's 2023 Annual Report on Form 10-K for the year ended December 31, 2023 (the 2023 Form 10-K). These results include, in management's opinion, all normal and recurring adjustments necessary to present fairly Brunswick's financial position, results of operations and cash flows. Due to the seasonality of Brunswick's businesses, the interim results are not necessarily indicative of the results that may be expected for the remainder of the year.

The Company maintains its financial records on the basis of a fiscal year ending on December 31, with the fiscal quarters spanning approximately thirteen weeks. The first quarter ends on the Saturday closest to the end of the first thirteen-week period. The second and third quarters are thirteen weeks in duration and the fourth quarter is the remainder of the year. The third quarter of fiscal year 2024 ended on September 28, 2024 and the third quarter of fiscal year 2023 ended on September 30, 2023.

Recently Issued Accounting Standards

Segment Reporting: In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures, which adds new disclosure requirements related to significant segment expenses regularly provided to the chief operating decision maker (CODM) and included in each reported measure of segment profit or loss, other segment items that constitute the difference between segment revenues less significant segment expenses and the measure of profit or loss, disclosure of the CODM's title and position as well as an explanation of how the CODM uses the reported measures and expanded interim disclosures. ASU 2023-07 is effective for financial statements for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, and as a result, will require additional segment expense disclosures when adopted in the Company's Form 10-K for the year ended December 31, 2024 and in periodic reports thereafter.

Income Taxes: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures. Under this ASU, entities must disclose, on an annual basis, specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires entities to disclose additional information about income taxes paid. ASU 2023-09 is effective for financial statements for annual periods beginning after December 15, 2024. We are currently evaluating the potential impact of adopting this guidance on the consolidated financial statements and the notes to consolidated financial statements.

Note 2 –Revenue Recognition

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

As of December 31, 2023,$187.1 million of contract liabilities associated with extended warranties, deferred revenue and customer deposits were reported in Accrued expenses and Other long-term liabilities, of which $53.0 million were recognized as revenue during the nine months ended September 28, 2024. As of September 28, 2024, total contract liabilities were $201.4 million. The total amount of the transaction price allocated to unsatisfied performance obligations as of September 28, 2024 was $196.4 million for contracts greater than one year, which primarily relates to extended warranties. The Company expects to recognize $20.7 million of this amount in 2024, $64.8 million in 2025, and $110.9 million thereafter.

Note 3 –Restructuring, Exit and Impairment Activities

The Company recorded restructuring, exit and impairment charges in the Condensed Consolidated Statements of Comprehensive Income in 2024.

During the three and nine months ended September 28, 2024 and September 30, 2023, the Company recorded restructuring charges related to headcount reductions and related costs associated with streamlining the enterprise-wide cost structure and improving operating efficiencies. The Company also incurred charges related to the rationalization of its manufacturing footprint.

The following table is a summary of these expenses for the three months ended September 28, 2024:

(A) Cash payments for the three months ended September 28, 2024 may include payments related to prior period charges.

(B) Restructuring, exit and impairment charges accrued as of September 28, 2024 are expected to be paid in the next twelve months.

The following table is a summary of these expenses for the three months ended September 30, 2023:

(A) Cash payments for the three months ended September 30, 2023 may include payments related to prior period charges.

The following table is a summary of these expenses for the nine months ended September 28, 2024:

(A) Cash payments for the nine months ended September 28, 2024 may include payments related to prior period charges.

(B) Restructuring, exit and impairment charges accrued as of September 28, 2024 are expected to be paid in the next twelve months.

The following table is a summary of these expenses for the nine months ended September 30, 2023:

(A) Cash payments for the nine months ended September 30, 2023 may include payments related to prior period charges.

Note 4 –Acquisitions

2024 Acquisition

On September 12, 2024, the Company acquired additional Freedom Boat Club franchise operations and territories in Southeast Florida. The acquisition enhances Freedom Boat Club's presence in Florida and provides an opportunity to leverage synergies across Brunswick's portfolio of brands. The acquisition is included as part of the Company's Boat segment.

The Company paid net cash consideration of $31.2 million for the acquisition. The opening balance sheet, which is preliminary and subject to change in the measurement period as the Company finalizes the purchase price allocation and fair value estimates, includes $28.2 million of goodwill and $5.2 million of customer relationships. The amount assigned to customer relationships will be amortized over the estimated useful life of 10 years. Transaction costs associated with the acquisition were not material to the Company's consolidated results of operations. The acquisition is not material to the Company's net sales, results of operations, or total assets during any period presented. Accordingly, the Company's consolidated results of operations do not differ materially from historical performance as a result of the acquisition, and pro forma results for prior periods are not presented.

2023 Acquisitions

During the fourth quarter of 2023, the Company acquired additional Freedom Boat Club franchise operations and territories in the Southeast United States. These acquisitions should unlock operational efficiencies while providing members with additional boating destinations, as the Company plans for continued expansion across the Southeast Coastal region. These acquisitions are included as part of the Company's Boat segment.

The Company paid net cash consideration of $16.0 million for these acquisitions. The opening balance sheets, which are preliminary and subject to change in the measurement period as the Company finalizes the purchase price allocation and fair value estimates, include $12.9 million of goodwill and $3.3 million of customer relationships. The amount assigned to customer relationships will be amortized over the estimated useful life of 10 years. Transaction costs associated with these acquisitions were not material to the Company's consolidated results of operations.

On September 1, 2023, the Company acquired all of the issued and outstanding shares of Fliteboard Pty Ltd (Fliteboard) for $88.3 million net cash consideration. Fliteboard is a leader in eFoiling technology, which combines advanced hydrofoils and electric propulsion on the water. The acquisition of Fliteboard allows the Company to enter the emerging electric-foiling surfboard market and presents the opportunity for technological, manufacturing, commercial and consumer synergies with our existing portfolio. Fliteboard is included as part of the Company's Propulsion segment.

The opening balance sheet includes $38.0 million of goodwill, $20.7 million of trade names, $8.4 million of customer relationships, and $7.1 million of developed technology. The amounts assigned to customer relationships and developed technology will be amortized over the estimated useful lives of 15 years and 10 years, respectively. Transaction costs associated with the acquisition of $1.9 million were expensed as incurred within Selling, general and administrative expense in 2023. Purchase accounting is final as of September 28, 2024.

These 2023 acquisitions are not material to the Company's net sales, results of operations, or total assets during any period presented. Accordingly, the Company's consolidated results of operations do not differ materially from historical performance as a result of the acquisitions, and pro forma results for prior periods are not presented.

Note 5 –Financial Instruments

The Company operates globally with manufacturing and sales facilities around the world. Due to the Company’s global operations, the Company engages in activities involving both financial and market risks. The Company utilizes normal operating and financing activities, along with derivative financial instruments, to minimize these risks. See Note 12 in the Notes to Consolidated Financial Statements in the 2023 Form 10-K for further details regarding the Company's financial instruments and hedging policies.

The following table summarizes the notional values of the Company's derivative instruments as of September 28, 2024, December 31, 2023, and September 30, 2023:

(A) Commodity contracts outstanding as of September 28, 2024 mature through 2026.

(B) Forward contracts outstanding as of September 28, 2024 mature through 2026 and mainly relate to the Euro, Australian dollar, Norwegian krone and Mexican peso.

(C) The amount of gain or loss that is expected to be reclassified from Accumulated other comprehensive loss to earnings in the next twelve months is immaterial.

As of September 28, 2024, December 31, 2023 and September 30, 2023, the fair values of the Company’s derivative instruments were:

As of September 28, 2024, December 31, 2023 and September 30, 2023, asset derivatives are included within Prepaid expenses and other and Other long-term assets, and liability derivatives are included within Accrued expenses and Other long-term liabilities in the Condensed Consolidated Balance Sheets.

The effect of derivative instruments on the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 28, 2024 and September 30, 2023 is shown in the tables below.

The amount of gain (loss) on derivatives recognized in Accumulated other comprehensive loss was as follows:

The amount of gain (loss) reclassified from Accumulated other comprehensive loss into earnings was as follows:

The amount of gain (loss) on derivatives recognized directly into earnings was as follows:

Fair Value of Other Financial Instruments. The carrying values of the Company's short-term financial instruments, including cash and cash equivalents and accounts and notes receivable, approximate their fair values because of the short maturity of these instruments. As of September 28, 2024, December 31, 2023 and September 30, 2023, the fair value of the Company’s long-term debt, including current maturities, and short-term debt was approximately $2,462.8 million, $2,228.2 million and $2,102.3 million, respectively, and was determined using Level 1 and Level 2 inputs described in Note 6 to the Notes to Consolidated Financial Statements in the 2023 Form 10-K. The carrying value of long-term debt, including current maturities, and short-term debt was $2,602.3 million, $2,458.7 million and $2,460.5 million as of September 28, 2024, December 31, 2023 and September 30, 2023, respectively.

Note 6 –Fair Value Measurements

The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis:

Note 7 –Commitments and Contingencies

Product Warranties

The following activity related to product warranty liabilities was recorded in Accrued expenses during the nine months ended September 28, 2024 and September 30, 2023:

Extended Product Warranties

The following activity related to deferred revenue for extended product warranty contracts was recorded in Accrued expenses and Other long-term liabilities during the nine months ended September 28, 2024 and September 30, 2023:

Note 8 –Goodwill and Other Intangibles

Changes in the Company's goodwill during the nine months ended September 28, 2024 and September 30, 2023, by segment, are summarized below:

Adjustments in both periods include the effect of foreign currency translation on goodwill denominated in currencies other than the U.S. dollar. Adjustments during the nine months ended September 28, 2024 also include $1.6 million of purchase accounting adjustments from the 2023 Fliteboard and Freedom Boat Club acquisitions, primarily related to income taxes. Adjustments during the nine months ended September 30, 2023 also include $4.8 million of purchase accounting adjustments from the 2022 Freedom Boat Club acquisitions, a majority of which relate to boat fleet fair market value adjustments. There was no accumulated impairment loss on goodwill as of September 28, 2024, December 31, 2023 or September 30, 2023.

The Company's intangible assets, included within Other intangibles, net on the Condensed Consolidated Balance Sheets as of September 28, 2024, December 31, 2023, and September 30, 2023, are summarized by intangible asset type below:

Other intangible assets primarily consist of software, patents, and franchise agreements. Gross amounts and related accumulated amortization amounts include adjustments related to the impact of foreign currency translation. Aggregate amortization expense for intangibles was $18.2 million and $54.0 million for the three and nine months ended September 28, 2024, respectively. Aggregate amortization expense for intangibles was $17.0 million and $50.8 million for the three and nine months ended September 30, 2023, respectively.

The Company tests its intangible assets for impairment during the fourth quarter of each year, or whenever a change in events and circumstances (triggering event) occurs that indicates the fair value of intangible assets may be below their carrying values. The Company did not record any impairment charges during the nine months ended September 28, 2024. The Company recorded impairment charges of $3.0 million during the three months ended September 30, 2023, associated with the Company's decision to no longer go to market under the Garelick trade name. The Company did not record any other impairment charge during the nine months ended September 30, 2023.

Note 9 –Segment Information

Information about the operations of Brunswick's reportable segments is set forth below:

Note 10 –Comprehensive Income

Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets includes foreign currency cumulative translation adjustments; prior service costs and credits and net actuarial gains and losses for defined benefit plans; and unrealized derivative gains and losses, all net of tax. Changes in the components of Accumulated other comprehensive loss, all net of tax, for the three and nine months ended September 28, 2024 and September 30, 2023 are as follows:

The following table presents the changes in Accumulated other comprehensive loss by component, all net of tax, for the three months ended September 28, 2024:

(A) The tax effects for the three months ended September 28, 2024 were $(3.3) million for foreign currency translation and $4.2 million for derivatives.

(B) The tax effects for the three months ended September 28, 2024 were $(0.2) million for derivatives.

(C) The reclassification adjustments from Accumulated other comprehensive loss and associated tax effects related to defined benefit items were not material for the three months ended September 28, 2024. Refer to Note 5 – Financial Instruments for the reclassification adjustments from Accumulated other comprehensive loss related to derivatives.

The following table presents the changes in Accumulated other comprehensive loss by component, all net of tax, for the nine months ended September 28, 2024:

(A) The tax effects for the nine months ended September 28, 2024 were $1.0 million for foreign currency translation and $1.1 million for derivatives.

(B) The tax effects for the nine months ended September 28, 2024 were $0.9 million for derivatives.

(C) The reclassification adjustments from Accumulated other comprehensive loss and associated tax effects related to defined benefit items were not material for the nine months ended September 28, 2024. Refer to Note 5 – Financial Instruments for the reclassification adjustments from Accumulated other comprehensive loss related to derivatives.

The following table presents the changes in Accumulated other comprehensive loss by component, all net of tax, for the three months ended September 30, 2023:

(A) The tax effects for the three months ended September 30, 2023 were $1.1 million for foreign currency translation and $(2.9) million for derivatives.

(B) The tax effects for the three months ended September 30, 2023 were $0.5 million for derivatives.

(C) The reclassification adjustments from Accumulated other comprehensive loss and associated tax effects related to defined benefit items were not material for the three months ended September 30, 2023. Refer to Note 5 – Financial Instruments for the reclassification adjustments from Accumulated other comprehensive loss related to derivatives.

The following table presents the changes in Accumulated other comprehensive loss by component, all net of tax, for the nine months ended September 30, 2023:

(A) The tax effects for the nine months ended September 30, 2023 were $0.6 million for foreign currency translation and $(3.3) million for derivatives.

(B) The tax effects for the nine months ended September 30, 2023 were $3.4 million for derivatives.

(C) The reclassification adjustments from Accumulated other comprehensive loss and associated tax effects related to defined benefit items were not material for the nine months ended September 30, 2023. Refer to Note 5 – Financial Instruments for the reclassification adjustments from Accumulated other comprehensive loss related to derivatives.

Note 11 –Income Taxes

The effective tax rate for the three months ended September 28, 2024 and September 30, 2023 was 32.3 percent and 28.9 percent, respectively. The effective tax rate for the three months ended September 28, 2024 was higher than the same period in the prior year, primarily due to the discrete income tax expense recorded associated with an increase in the state valuation allowance.

The effective tax rate for the nine months ended September 28, 2024 and September 30, 2023 was 23.8 percent and 33.4 percent, respectively. The effective tax rate for the nine months ended September 28, 2024 was lower than the same period in the prior year, primarily due to the prior year intercompany sale of certain intellectual property rights from one of our affiliates in Norway to the United States, partially offset by the discrete income tax expense recorded associated with an increase in the state valuation allowance.

The Company has evaluated the effects of the Global Anti-Base Erosion Model Rules set forth by the Organization for Economic Co-operation and Development (OECD), referred to as “Pillar Two”, which establishes a global minimum corporate tax rate of 15 percent. The Company has determined that Pillar Two legislation has been enacted in one or more of the jurisdictions in which we operate and the Company is within the scope of the legislation. The Company assessed such enacted legislation, and, as applicable, the transitional safe harbor provisions of Pillar Two, and concluded that the tax effects are not material to the financial statements.

The Company is regularly audited by federal, state and foreign tax authorities. The Internal Revenue Service (IRS) has completed its field examination and has issued its Revenue Agents Report through the 2014 tax year and all open issues have been resolved. The Company is currently open to tax examinations by the IRS for the 2020 through 2022 tax years. The Company is open to state and local tax audits in major tax jurisdictions dating back to the 2017 taxable year. The Company is no longer subject to income tax examinations by any major foreign tax jurisdiction for years prior to 2016.

Note 12 –Debt

The following table provides the changes in the Company's debt for the nine months ended September 28, 2024:

(A) During the third quarter of 2024, the Company had short-term borrowings under its unsecured commercial paper program of $195.0 million.

(B) During the first quarter of 2024, $400.0 million of 5.850% Senior Notes due 2029 were issued.

(C) During the third quarter of 2024, the Company made the remaining principal repayments, totaling $450.0 million, of its 0.850% Senior Notes due 2024.

As of September 28, 2024, Brunswick was in compliance with the financial covenants associated with its debt.

2024 Notes

During the third quarter of 2024, the Company made the remaining principal repayments, totaling $450.0 million, of its 0.850% Senior Notes due 2024. The 2024 Notes were repaid at 100 percent of the principal amount plus accrued interest in accordance with the provisions of the notes.

2029 Notes

In March 2024, the Company issued an aggregate principal amount of $400.0 million of 5.850% Senior Notes due 2029 (the 2029 Notes) in a public offering, which resulted in aggregate net proceeds to the Company of $396.9 million. The Company intends to use the net proceeds from the sale of the 2029 Notes for general corporate purposes, which may include the repayment, repurchase or redemption of certain of its outstanding securities.

The 2029 Notes bear interest at a rate of 5.850% per year. Interest on the 2029 Notes is payable semiannually in arrears on March 18 and September 18 of each year, and the first interest payment date was September 18, 2024. The 2029 Notes will mature on March 18, 2029.

The Company may, at its option, redeem the 2029 Notes, in whole or in part, at any time and from time to time prior to maturity. If the Company elects to redeem any (or all) of the 2029 Notes at any time prior to February 18, 2029 (the date that is one month prior to the maturity of the 2029 Notes), it will pay a "make-whole" redemption price set forth in the Sixth Supplemental Indenture dated as of March 18, 2024 (Sixth Supplemental Indenture) to the Indenture dated as of October 3, 2018. On or after February 18, 2029, the Company may, at its option, redeem the 2029 Notes, in whole or in part at any time and from time to time, at a redemption price equal to 100% of the principal amount thereof. In addition to the redemption price, the Company will pay accrued and unpaid interest, if any.

If the Company experiences a change of control triggering event with respect to the 2029 Notes, as defined in the Sixth Supplemental Indenture, each holder of the 2029 Notes may require the Company to repurchase some or all of its 2029 Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest.

Debentures

During the third quarter of 2023, the Company made the remaining principal repayments, totaling $79.7 million, of its 7.375% debentures due 2023. The debentures were repaid at 100 percent of the principal amount plus accrued interest in accordance with the provisions of the debentures.

Credit Facility

The Company maintains a Revolving Credit Agreement (Credit Facility). During the nine months ended September 28, 2024 and September 30, 2023, there were no borrowings under the Credit Facility. As of September 28, 2024, available borrowing capacity totaled $747.0 million, net of $3.0 million of letters of credit outstanding under the Credit Facility. As of September 30, 2023, available borrowing capacity totaled $741.9 million, net of $8.1 million of letters of credit outstanding under the Credit Facility. Refer to Note 14 in the Notes to Consolidated Financial Statements in the 2023 Form 10-K for details regarding Brunswick's Credit Facility.

Commercial Paper

The Company maintains an unsecured commercial paper program (CP Program) pursuant to which the Company may issue short-term, unsecured commercial paper notes (CP Notes). During the nine months ended September 28, 2024, borrowings under the CP Program totaled $720.0 million. As of September 28, 2024, the Company had $195.0 million of borrowings outstanding under the CP Program. During the nine months ended September 28, 2024, the maximum amount utilized under the CP Program was $245.0 million. During the nine months ended September 30, 2023, borrowings under the CP Program totaled $410.0 million, all of which were repaid during the period. During the nine months ended September 30, 2023, the maximum amount utilized under the CP Program was $125.0 million. Refer to Note 14 in the Notes to Consolidated Financial Statements in the 2023 Form 10-K for details regarding Brunswick's CP Program.

Refer to Note 14 – Subsequent Eventsfor a discussion of the Company's redemption of its 7.125% Notes due 2027 and amendment to its Credit Facility and CP Program.

Note 13 –Supplier Finance Program Obligations

Under our supplier finance program, the Company agrees to pay Bank of America (the Bank) the stated amount of confirmed invoices from our suppliers on the original invoice payment due date. Our suppliers may request payment from the Bank at a date earlier than the payment due date stated on the original invoice in exchange for a fee in the form of a discounted invoice amount. Brunswick or the Bank may terminate the agreement upon at least 90 days notice. The supplier invoices that have been confirmed as valid under the program require payment ranging from 60 to 120 days from the invoice date, consistent with the terms of the original invoice. The Company does not pay the Bank any service fees or subscription fees under the program. In addition, the Company does not pledge any assets as security or provide other forms of guarantees for the committed payment to the Bank. As of September 28, 2024, December 31, 2023, and September 30, 2023, the Company had $7.2 million, $11.6 million and $13.9 million confirmed invoices under the supplier finance program, respectively, which were included in Accounts payable on the Condensed Consolidated Balance Sheets.

Note 14 –Subsequent Events

Credit Facility

On October 11, 2024 (the Closing Date), the Company amended its Credit Facility with certain wholly-owned subsidiaries of the Company as subsidiary borrowers and lenders as parties, and JPMorgan Chase Bank, N.A. as administrative agent. This amends and restates the Credit Facility, dated as of March 21, 2011, as amended and restated through March 31, 2022. The amended Credit Facility increased the revolving commitments to $1.0 billion, with capacity to add up to $250.0 million of additional revolving commitments, and amended the Credit Facility in certain respects, including, among other things, extending the maturity date to October 11, 2029, with up to two one-year extensions available.

On the Closing Date, the Company also increased the size of its CP Program to permit the issuance of CP Notes in an aggregate principal amount not to exceed $1.0 billion at any time outstanding. Amounts available under the CP Program may be borrowed, repaid and re-borrowed from time to time. At any point in time, the Company intends to maintain available commitments under the Credit Facility in an amount at least equal to the amount of CP Notes outstanding. The net proceeds of issuances of the CP Notes are expected to be used for general corporate purposes.

2027 Notes

On October 21, 2024, the Company issued an irrevocable notice of redemption to the holders of its 7.125% Notes due 2027 (2027 Notes). The 2027 Notes will be redeemed on November 20, 2024 at a redemption price equal to 100% of the outstanding principal amount of $160.7 million plus accrued interest of $3.5 million and a make-whole redemption premium of $12.5 million in accordance with the redemption provision of the 2027 Notes. The Company expects to finance the retirement of the 2027 Notes using commercial paper borrowings.