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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, 1994
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 14, 1995, the aggregate market value of the voting stock
of the registrant held by non-affiliates of the registrant was $1,877,974,003.
Such number excludes stock beneficially owned by officers and directors.
This does not constitute an admission that they are affiliates.
The number of shares of Common Stock($.75 par value) of the registrant
outstanding as of March 14, 1995, was 95,722,505.
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 26, 1995.
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 9 on page 34.
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 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.
New Environmental Protection Agency guidelines that become
effective in mid-1997 call for reduced hydrocarbon emissions in
marine engines over a nine-year period. Two cycle outboard engines
are the principal engines which do not meet the proposed EPA
guidelines. Stern drive engines are four cycle engines, which with
only minor modifications will satisfy the EPA guidelines. Mercury
Marine expects to meet or exceed the proposed emission standards.
Four stroke outboard engines in the 5 to 100 horsepower range which
meet the EPA guidelines can be developed with existing technology.
In 1994, in anticipation of the impending EPA requirements, Mercury
Marine introduced a four-cycle 9.9 horsepower outboard and in early
1995 began production of a 50 horsepower four cycle outboard which
will satisfy the EPA guidelines. Mercury Marine has an agreement
with Yamaha Motors Co., Ltd. to co-develop additional four stroke
outboard engines. Also, in early 1995 Mercury formed a joint
venture with Orbital Engine Corporation, Ltd., of Australia to
design, manufacture and market fuel systems for low emission, two
cycle outboard engines. Called SEFIS (Small Engine Fuel Injection
Systems), this new technology will be employed on a significant
range of Mercury Marine outboards. Another direct fuel injection
method to lower hydrocarbon emissions in two cycle outboard engines
is also being evaluated.
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),
Trophy and Robalo (sport fishing boats), and Quantum (freshwater
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, Spectrum and Wahoo! trademarks.
The Company has a minority 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, 1994, 1993, and 1992:
(in millions, unaudited)
1994 1993 1992
Boats $ 956.6 $ 754.5 $ 751.0
Engines 1,034.1 816.7 765.1
$1,990.7 $1,571.2 $1,516.1
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
spincast, spinning and baitcast fishing reels, rods, reel/rod
combinations, Martin fly reels and 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. In August 1994 the Zebco
Division acquired Swivl-Eze Marine Products, Inc. which
manufactures fishing pedestals and ski tows and pylons.
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 1994, the Division entered into joint ventures to
build, own and operate bowling centers in China and Korea and to
sell bowling equipment in China. The Division has other joint
ventures (i) to build, own and operate bowling centers in Brazil
and Thailand; (ii) to sell bowling equipment in Thailand; and (iii)
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 and Taiwan.
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.
The Division also operates seven Circus World Pizza facilities
which contain children's play and entertainment areas and
restaurants which serve pizza.
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,
Swivl-Eze fishing pedestals and ski tows and pylons, 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
On December 1, 1994, the Company announced it had executed a
contract for the sale of substantially all the assets of the
Technical Group. The transaction is expected to be closed in the
first half of 1995. The Company and the buyer have settled with
the government all issues related to the Federal Grand Jury
investigation of the Company's Marion, Virginia facility. Excluded
from the transaction are the assets associated with the Company's
facility in Costa Mesa, California. Negotiations for the sale of
these assets are continuing. The Technical Group operations 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 engine
blocks 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 2-4
herein.
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, 1994 was
$35 million, and the Company expects to fill all of such orders
during 1995. The backlog of bowling capital equipment at December
31, 1993 was $47 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 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)
1994 1993 1992
Marine $67.0 $59.3 $47.2
Recreation Products 12.5 10.5 9.1
$79.5 $69.8 $56.3
Number of employees
The number of employees at December 31, 1994 is shown below by
industry segment:
Marine 13,600
Recreation 7,000
Corporate 200
20,800
There are approximately 900 employees in the Recreation segment and
2,500 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 77
percent of capacity, excluding the 13 closed plants in the Marine
segment. Ten 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 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; and
Tallahassee, Florida.
Sea Ray Division
Knoxville, Riverview 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;
Murfreesboro, Tennessee; and Lincoln, Alabama.
Zebco Division
Tulsa, Oklahoma; Starkville, Mississippi; and Lancaster, Texas.
Brunswick Recreation Centers
Deerfield, Illinois headquarters; 126 bowling centers in the United
States, Canada and Europe; and seven Circus World Pizza theme
restaurants in the United States.
Brunswick Division
Muskegon, Michigan; Eminence, Kentucky; Bristol, Wisconsin;
Torrington, Connecticut; Des Moines, Iowa; and Stockach, Germany.
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, (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. The Company and Genmar have settled this
lawsuit, and a judgment of dismissal with prejudice and on the
merits was entered on February 6, 1995.
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, 64
President and Chief
Executive Officer
J. M. Charvat Executive Vice President 64
and Brunswick Marine
Group President
J. W. Dawson Vice President and Zebco 60
Division President
F. J. Florjancic, Jr. Vice President and Brunswick 48
Division President
W. R. McManaman Vice President-Finance 47
D. M. Yaconetti Vice President Adminis- 48
tration and Secretary
T. K. Erwin Controller 45
R. T. McNaney General Counsel 60
R. S. O'Brien Treasurer 45
W. J. Barrington Sea Ray Division President 44
A. D. Fogel BRC Division President 59
D. D. Jones Mercury Marine Division 51
President
J. A. Schenk Corporate Director of 52
Planning and Development
R. C. Sigrist Technical Group President 61
R. C. Steinway US Marine Division 43
President
There are no family relationships among these officers. The term
of office of all elected officers expires April 26, 1995. 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, Chief
Executive Officer since 1982, and President since 1994 and from
1977 to 1993.
John M. Charvat has been Executive Vice President of the Company
since 1989.
Jim W. Dawson has been Vice President of the Company since 1994 and
Zebco Division President since 1989.
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. since 1989.
Arnold D. Fogel has been Brunswick Recreation Centers Division
President since 1984.
David D. Jones has been Mercury Marine Division President since
1989.
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.
Robert C. Steinway has been US Marine Division President since
1994. From 1992 to 1994 he was Senior Vice President-Marketing of
the US Marine Division. From 1989 to 1992 he was General Manager
of the Aluminium Fishing Boat Operating Unit.
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
23 on page 49. As of December 31, 1994, there were approximately
25,800 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 52.
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
24.
Item 8. Financial Statements and Supplementary Data
The Company's Consolidated Financial Statements are set forth on
pages 25 to 27 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 27, 1995 (the "Proxy Statement") for the Annual Meeting
of Stockholders to be held on April 26, 1995, 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, 14-16 and 18-21 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 filed as Exhibit
4.3 to the Company's Annual Report on Form 10-K for
1993, and hereby incorporated by reference.
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 W. J. Barrington, J. W. Dawson,
T. K. Erwin, F. J. Florjancic, Jr., A. D. Fogel,
D. D. Jones, D. B. Horner, W. R. McManaman,
R. T. McNaney, R. S. O'Brien, J. C. Olson,
J. A. Schenk, R. C. Sigrist, R. C. Steinway and
D. M. Yaconetti 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 1980 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, 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 W. J. Barrington, J. M. Charvat,
J. W. Dawson, T. K. Erwin, F. J. Florjancic, Jr.,
A. D. Fogel, D. B. Horner, D. D. Jones,
W. R. McManaman, R. T. McNaney, R. S. O'Brien,
J. C. Olson, J. A. Schenk, R. C. Sigrist,
R. C. Steinway 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* 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.
10.18* 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.
10.19* Brunswick Performance Plan for 1994 filed as Exhibit
10.22 to the Company's Annual Report on Form 10-K
for 1993 and hereby incorporated by reference.
10.20* Brunswick Performance Plan for 1995.
10.21* Brunswick Strategic Incentive Plan filed as Exhibit
10.23 to the Company's Annual Report on Form 10-K
for 1993 and hereby incorporated by reference.
10.22* 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.
21.1 Subsidiaries of the Company.
24.1 Powers of Attorney.
27.1 Financial Data Schedule
b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the three
months ended December 31, 1994.
*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 20, 1995 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
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
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 20, 1995 /s/ Thomas K. Erwin
Thomas K. Erwin
BRUNSWICK CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Page
Consolidated Financial Statements
Management's Discussion and Analysis 19 to 24
Statements of Results of Operations
1994, 1993 and 1992 25
Balance Sheets
December 31, 1994 and 1993 26
Statements of Cash Flows
1994, 1993 and 1992 27
Notes to Financial Statements
1994, 1993 and 1992 28 to 49
Report of Management 50
Report of Independent
Public Accountants 51
Five Year Financial Summary 52
Consent of Independent Public Accountants 53
Schedule
II- Valuation and Qualifying Accounts
1994, 1993 and 1992 54
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 was $121.2 million in 1994 compared
to $188.9 million in 1993. The $105.9 million improvement in net earnings was
more than offset by increases in non-cash working capital requirements for
accounts receivable and inventory, reflecting the significant improvement in
the marine business in 1994, and a $55 million payment to the U.S. Internal
Revenue Service in the first quarter of 1994, as discussed in Note 16 to the
consolidated financial statements. The charges for the cumulative effect of the
change in accounting principle and the estimated loss on the divestiture of the
Company's Technical Group in 1993 did not involve cash expenditures.
The net cash used for investing activities rose to $129.3 million in 1994
from $97.1 million in 1993. The increase resulted primarily from investing
$18.2 million in marketable securities with maturities greater than 90 days and
increases in capital expenditures of $8.8 million.
Net cash used for financing activities was $55.5 million in 1994 compared to
$38.5 million in 1993. The net cash used was higher in 1994 as the 1993
activity includes cash provided of $13.8 million from the sale of the Company's
7.375% debentures, net of the redemption of the 9.875% debentures in August
1993.
Working capital at December 31, 1994 was $436.2 million compared to $347.8
million at December 31, 1993. The Company's current ratio was 1.7 to 1 at
December 31, 1994, and 1.6 to 1 at December 31, 1993.
The Company's long-term financing is primarily comprised of 30-year
debentures, 10-year unsecured notes, loans secured by mortgages on property and
the guarantee of $73.1 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, 1994 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 decreased to 26.4% at December 31, 1994,
from 29.5% at the end of 1993. Total debt decreased to $327.0 million at
December 31, 1994, from $336.4 million at December 31, 1993.
Capital expenditures, excluding acquisitions, were $104.6 million, $95.8
million and $88.6 million in 1994, 1993 and 1992, respectively. The Company
continues to make capital expenditures which offer increased production
efficiencies and improvement in 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 - 1994 vs. 1993
Net Sales
The Company's consolidated net sales for 1994 rose 22% to $2.70 billion from
the $2.21 billion reported for 1993. Increases in both the Marine and
Recreation segments contributed to this improvement.
The Marine segment's 1994 net sales increased 27% to $1.99 billion from
$1.57 billion in 1993. Increased volume and an improved product mix accounted
for 24% of the increase while price increases constituted the remaining 3%.
Domestic sales of boats and engines increased 30% over the prior year, while
international sales increased 17%. Engine sales rose 34% in Europe, and the
Latin and South American, Asian and Middle Eastern markets also reported
increases. International boat sales were flat in 1994 compared to 1993.
Retail sales increased at a rate greater than wholesale sales to dealers,
therefore dealer inventories continue to remain at low levels.
The Recreation segment's 1994 net sales increased 12% to $709.4 million from
$635.6 million in 1993. The Brunswick Division's sales increased 13% on a 14%
increase in international sales as strong demand for capital equipment in
Asia and Europe continued, and a 10% increase in domestic sales as all
product lines reflected improvements. Zebco Division's sales increased 20% on
increased volume as domestic and international sales rose 19% and 25%,
respectively. The Brunswick Recreation Centers (BRC) Division sales were flat
in 1994 compared to 1993 as price increases of approximately 4% were offset
by reduced bowling lineage, the effects of the severe winter weather in early
1994 and the California earthquake, which closed several centers in the first
quarter of 1994.
Operating Earnings
Consolidated operating earnings increased to $210.0 million in 1994 from
$99.8 million in 1993. The Marine segment contributed significantly to this
improvement while the Recreation segment was up slightly over 1993.
The Marine segment's operating earnings for 1994 rose to $175.6 million
from $53.7 million in 1993. The previously discussed domestic and
international sales increases, a more favorable product mix and the benefits
of the cost reduction and consolidation programs begun when the marine
downturn began in 1988 contributed to the improvement.
The Recreation segment's operating earnings were $82.8 million for 1994
compared to $80.0 million in 1993. The Brunswick Division's operating
earnings increased as a result of the sales increases discussed above, but
were largely offset by continued operating losses experienced in its
composite golf shaft operations and increased costs for new product
development and market expansion efforts. The Zebco Division's operating
earnings also increased slightly primarily due to the domestic sales
increase, which was offset by reduced foreign operating earnings despite
higher foreign sales, as foreign margins declined and as the Division
continues to incur costs as it integrates the Browning acquisition made in
late 1992. The BRC Division's operating earnings for 1994 declined from 1993
primarily due to additional start-up costs and operating losses for its
Circus World Pizza operations.
Corporate expenses rose to $48.4 million in 1994 from the $33.9 million
reported in 1993. The increase was primarily due to losses on derivatives of
$4.3 million, increased compensation expenses of $4.4 million and a second
quarter severance charge of $1.6 million.
Interest and Other Items, Net
Interest expense rose to $28.5 million in 1994 from $27.2 million in 1993.
The increase resulted primarily from higher interest rates on swaps, which
more than offset the reduced interest expense on lower levels of debt and the
net reduction in interest expense resulting 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 $16.9
million in 1994 from $13.9 million in 1993, primarily due to higher interest
income resulting from higher average investment rates, offset by lower
earnings of unconsolidated affiliates.
Income Taxes
In 1994, the Company recorded a tax provision of $69.4 million compared with
a tax provision of $32.0 million in 1993. The effective tax rate for 1994 of
35% compares to 37% for 1993. The decrease in the effective tax rate resulted
primarily from increased tax credits and the impact of tax rates on the mix
of the Company's income, as well as the settlement of a dispute with the
U. S. Internal Revenue Service, as discussed in Note 16.
Looking to the Future
The Company has experienced improving results from continuing operations in
each of the last three years. This increase in profitability can be traced to
the following factors: 1.) A marine industry that has rebounded from the
severe recession that began in the second half of 1988; 2.) During the
downturn the Company restructured its Marine segment through plant closings,
consolidations and manpower reductions to maximize production efficiencies
and lower costs; and 3.) A Recreation segment that has experienced growth
internationally through the Brunswick Division's sales of capital equipment.
Past financial results are in no way a guarantee of future performance.
Worldwide economic cycles that are affected by factors such as inflation,
unemployment and interest rates impact the performance of the Company's
business segments. Based on prior marine industry cycles, the Company
believes the present marine industry upturn will sustain itself into 1995.
Beyond 1995, the Company remains optimistic, but the long-range outlook is
difficult to predict. For 1995, the early results from boat shows indicate an
overall increase in units sold compared to 1994. The Company believes its
Marine segment should have a double digit sales increase in 1995 over 1994.
The Recreation segment will continue to seek business arrangements and
acquisitions both domestically and internationally to enhance existing
product lines and take advantage of emerging markets.
Based on the Company's improved results and a belief that positive business
trends will continue, the Board of Directors on February 7, 1995 announced an
increase in the quarterly dividend to 12.5 cents per share from 11 cents per
share.
Environmental Matters
The U.S. Environmental Protection Agency (EPA) has announced proposed
regulations for limiting air emissions from gasoline engines used in pleasure
boats. Specifically, the EPA proposal seeks to reduce hydrocarbon exhaust
emissions from two-cycle, gasoline marine engines by more than 75 percent
over a nine-year phase-in period beginning with the 1998 model year. Final
regulations are scheduled to be published in November 1995.
In anticipation of these requirements, in 1993 the Company's Mercury Marine
Division signed an agreement with Yamaha to co-develop and co-manufacture
four-cycle outboard engines. The first such engine was introduced in 1994 and
a second began production in early 1995.
Also in early 1995, Mercury formed a joint venture with Orbital Engine
Corporation, Ltd. of Australia to design, manufacture and market fuel systems
for low emissions, two-cycle engines. Called SEFIS (Small Engine Fuel
Injection Systems), this new technology will be employed on a significant
range of Mercury outboards. Another direct fuel injection method to lower
hydrocarbon emissions in two-cycle engines is also being evaluated. Mercury
expects to be producing at least one direct fuel-injection, low-emissions
model by the end of 1995.
The Company expects these four-cycle and low emissions two-cycle engines
will meet or exceed the proposed emission standards.
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.
Brunswick Corporation
Consolidated Statements of Results Of Operations
For the Years Ended December 31,
(in millions, except per share data)
1994 1993 1992
Net sales $ 2,700.1 $ 2,206.8 $ 2,059.4
Cost of sales 1,951.7 1,636.6 1,554.1
Selling, general and administrative 538.4 470.4 425.5
Operating earnings 210.0 99.8 79.8
Interest expense (28.5) (27.2) (29.9)
Interest income and other items, net 16.9 13.9 12.1
Earnings before income taxes 198.4 86.5 62.0
Income tax provision 69.4 32.0 22.3
Earnings from continuing operations before
extraordinary item and cumulative effect
of accounting changes 129.0 54.5 39.7
Cumulative effect on prior years of changes
in accounting principles - (14.6) (38.3)
Extraordinary loss from retirement of debt - (4.6) -
Discontinued operations
Loss from discontinued operations - - (1.7)
Estimated loss on divestiture of Technical segment - (12.2) (26.0)
Net earnings(loss) $ 129.0 $ 23.1 $ (26.3)
Earnings (loss) per common share
Continuing operations $ 1.35 $ 0.57 $ 0.43
Cumulative effect of changes in accounting principles - (0.15) (0.41)
Extraordinary item - (0.05) -
Discontinued operations
Loss from discontinued operations - - (0.02)
Estimated loss on divestiture of Technical segment - (0.13) (0.28)
Net earnings(loss) per common share $ 1.35 $ 0.24 $ (0.28)
The notes are an integral part of these consolidated statements.
Consolidated Balance Sheets
As of December 31,
(in millions, except per share data)
Assets 1994 1993
Current assets
Cash and cash equivalents, at cost, which
approximates market $ 185.2 $ 248.8
Marketable securities 18.2 -
Accounts and notes receivable, less allowances
of $19.5 and $16.9 218.9 168.9
Inventories 409.0 321.4
Prepaid income taxes 175.0 186.5
Prepaid expenses 33.9 24.1
Income tax refunds receivable 17.3 -
Current assets 1,057.5 949.7
Property
Land 61.0 60.9
Buildings 367.8 357.5
Equipment 779.9 720.9
1,208.7 1,139.3
Accumulated depreciation (643.3) (595.0)
Property 565.4 544.3
Other assets
Dealer networks 140.9 171.6
Trademarks and other 136.0 106.7
Excess of cost over net assets of businesses acquired 117.8 117.7
Investments 76.1 67.6
Other assets 470.8 463.6
Assets of continuing operations 2,093.7 1,957.6
Net assets of discontinued operations 28.6 26.1
Total assets $ 2,122.3 $ 1,983.7
Liabilities And Shareholders' Equity
Current liabilities
Short-term debt, including current maturities
of long-term debt $ 8.2 $ 11.9
Accounts payable 157.3 122.8
Accrued expenses 455.8 404.5
Income taxes payable - 62.7
Current liabilities 621.3 601.9
Long-term debt
Notes, mortgages and debentures 318.8 324.5
Deferred items
Income taxes 133.8 103.9
Postretirement and postemployment benefits 114.0 126.9
Compensation and other 23.7 22.1
Deferred items 271.5 252.9
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 261.5 261.4
Retained earnings 735.5 648.5
Treasury stock, at cost: 5,236,856 shares and
5,430,523 shares (98.3) (102.7)
Minimum pension liability adjustment (0.7) (6.7)
Unearned portion of restricted stock for future services (2.4) (2.3)
Cumulative translation adjustments 11.8 7.9
Unamortized ESOP expense (72.2) (77.2)
Common shareholders' equity 910.7 804.4
Total liabilities and shareholders' equity $ 2,122.3 $ 1,983.7
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)
1994 1993 1992
Cash flows from operating activities
Net earnings(loss) $ 129.0 $ 23.1 $ (26.3)
Adjustments to reconcile net earnings(loss) to net
cash provided by operating activities:
Depreciation and amortization by continuing operations 119.8 117.8 115.9
Changes in noncash current assets and current
liabilities of continuing operations:
(Increase) decrease in accounts and notes receivable (50.1) (7.8) 7.9
(Increase) decrease in inventories (83.6) (10.9) 6.1
(Increase) decrease in prepaid income taxes 11.5 (6.0) (2.0)
(Increase) decrease in prepaid expenses (9.7) (3.1) 3.5
(Increase) in income tax refunds receivable (17.3) - -
Increase in accounts payable 34.5 16.4 5.0
Increase (decrease) in accrued expenses 50.5 31.8 (23.4)
Increase (decrease) in taxes payable (62.7) 64.5 (0.2)
Increase (decrease) in deferred items 24.4 (50.2) 24.5
Pension cost less than funding (32.6) (17.8) (3.8)
Other, net 8.8 5.1 (5.0)
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 (1.3) (0.8) 2.5
Net cash provided by operating activities 121.2 188.9 169.0
Cash flows from investing activities
Payments for businesses acquired, net of cash acquired and
including other cash payments associated with the acquisitions (7.1) (2.1) (19.8)
Capital expenditures (104.6) (95.8) (88.6)
Proceeds from sales of property 5.9 7.1 3.0
Investments in unconsolidated affiliates (1.7) (2.8) (6.7)
Investments in marketable securities (18.2) - -
Other, net (2.4) (1.6) (21.2)
Net investing activities of discontinued operations (1.2) (1.9) (3.6)
Net cash used for investing activities (129.3) (97.1) (136.9)
Cash flows from financing activities
Proceeds from issuance of long-term debt - 122.9 -
Proceeds from public offering of common stock - - 104.5
Payments of long-term debt, including current maturities (6.2) (117.3) (5.5)
Cash dividends paid (42.0) (41.9) (41.1)
Other, net (7.3) (2.2) 3.4
Net cash provided by (used for) financing activities (55.5) (38.5) 61.3
Net increase (decrease) in cash and cash equivalents (63.6) 53.3 93.4
Cash and cash equivalents at beginning of year 248.8 195.5 102.1
Cash and cash equivalents at end of year $ 185.2 $ 248.8 $ 195.5
Supplemental cash flow disclosures:
Interest paid $ 35.1 $ 25.5 $ 31.1
Income taxes paid, net of refunds 114.9 23.9 26.5
Supplemental schedule of noncash investing and financing activities:
Fair market value of treasury stock issued for
compensation plans and other $ 4.0 $ 2.1 $ 0.8
The notes are an integral part of these consolidated statements.
Brunswick Corporation
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
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.
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 forty-five 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 $240.7 million and $253.2 million at
December 31, 1994 and 1993, respectively. The decline resulted primarily from
fully amortized intangible assets of $67.0 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 $29.9 million and $25.2 million at December 31, 1994 and
1993, 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. The Company adopted Statement of Financial Accounting
Statement Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes," as
of January 1, 1992. Under SFAS 109, an asset and liability approach is
required. Such approach results in 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 basis of assets and
liabilities.
Retirement plans. The Company accrues the cost of pension and retirement
plans which cover substantially all employees. Pensions costs, which are
primarily computed using the projected unit credit method, are generally
funded based on the legal requirements, tax considerations and investment
opportunities for the Company's domestic pension plans and in accordance with
local laws and income tax regulations for foreign plans. During 1994 and
1993, the Company contributed $37.3 million and $19.0 million, respectively,
in excess of the required minimum funding for its domestic pension plans.
Derivatives. Gains and losses related to qualifying hedges of firm
committments and anticpated transactions are deferred and recognized in
income, or as adjustments of carrying amounts, when the hedged transaction
occurs. Gains and losses on instruments that do not qualify as hedges are
recognized as other income or expense. The Company does not hold or issue
financial instruments for trading purposes.
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 95.7 million, 95.3 million and 92.7 million for 1994,
1993 and 1992, respectively.
3. Inventories
At December 31, 1994 and 1993, $183.1 million and $133.7 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 $78.5 million and
$73.9 million higher than reported for 1994 and 1993, 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) 1994 1993
Finished goods $ 233.4 $ 188.1
Work-in-process 105.2 79.1
Raw materials 70.4 54.2
Inventories $ 409.0 $ 321.4
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 $25.0 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. On December 1, 1994, the Company executed a contract for the sale of
substantially all the assets of the Technical Group. The transaction is
expected to be closed in the first half of 1995. The Company is finalizing a
settlement acceptable to the buyer and the government of all issues related
to the Federal Grand Jury investigation of its Marion, Virginia facility.
Excluded from the transaction are assets associated with Brunswick's facility
in Costa Mesa, California. Negotiations for the sale of these assets to
potential buyers are continuing. 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
reflected the estimated net realizable value on disposition including
post-sale expenses.
The net sales and earnings from discontinued operations for each of the
three years in the period ended December 31, 1994, were as follows:
(in millions) 1994 1993 1992
Net Sales $ 135.5 $ 147.4 $ 168.3
Loss from discontinued
operations before income taxes -- -- (2.9)
Income Tax benefit -- -- 1.2
Loss from discontinued operations $ -- $ -- $ (1.7)
Operating results of discontinued operations for 1994 and 1993 have been
credited to/charged against the reserve established in 1992.
6. Acquisitions
In 1994, the Company purchased the assets of four companies and majority
positions in three joint ventures for $7.1 milion in cash.
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.
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, 1994 and 1993, were approximately
$152.0 million and $124.0 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 $38.0 million and $45.0 million at December 31, 1994 and 1993,
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 $21.0 million and $19.0 million at December 31,
1994 and 1993, respectively, representing conditional commitments whereby the
Company guarantees performance to a third party. The majority of these
commitments include guarantees of premium payment under certain of the
Company's insurance programs and other guarantees issued in the ordinary
course of business.
8. Financial Instruments
The Company enters into various financial instruments in the normal course of
business and in connection with the management of its assets and liabilities.
The carrying values of the Company's short-term financial instruments,
including cash and cash equivalents, marketable securities, accounts and note
receivables, short-term debt and the 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 $304.0 million and
$318.2 million, respectively, versus carrying amounts of $318.8 million and
$324.5 million, respectively, at December 31, 1994 and 1993. The fair value
of the Company's long-term investments was determined based on quoted market
prices, where available. Discounted cash flows using market rates available
for long-term debt with similar terms and remaining maturities were used in
determining the fair value of long-term debt.
The Company has entered into interest rate swap agreements to reduce the
impact of changes in interest rates on the Company's investments and
borrowings. These agreements involve the exchange of interest payments based
on underlying notional principal amounts. The differential to be paid or
received is recognized over the lives of the agreements as an adjustment of
interest income and other items, net or as interest expense. 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, 1994 and 1993, the Company had an outstanding
floating-to-floating interest rate swap agreement with a notional principal
amount of $260.0 million which term expires in September 2003. The swap
matches the Company's invested cash portfolio. The interest rates on this
agreement are set on a semi-annual basis in arrears. In September 1994, the
Company entered into two $260.0 million notional principal
floating-to-floating interest rate swap agreements which terms expire in
September 2003. The purpose of the agreements is to mitigate the exposure on
the original $260.0 million swap agreement. The interest rates on these
agreements are set on an annual and semi-annual basis or quarterly basis in
arrears, depending on the interest rate definition contained in the swap
agreements. The fair value of the interest rate swaps is based on dealer
quotes and represents the amount of consideration the Company would receive
or pay to terminate the contracts. The estimated aggregate market value of
these agreements at December 31, 1994 and 1993 were losses of $5.4 million
and $3.6 million, respectively. Under the terms of the swap agreements, the
timing of payments and receipts between the Company and its counterparties do
not always fall within the same accounting period. As a result, the Company
has recorded prepaid assets related to the interest rate swap agreements at
December 31, 1994 of $10.2 million. Other liabilities relating to the
original interest rate swap agreement were $4.3 million at December 31, 1994
and 1993.
At December 31, 1993, the Company also had outstanding fixed-to-floating
interest rate swap agreements with notional principal amounts totaling $200.0
million, with an estimated market value loss of $2.6 million, which terms
expire in September 1996. These agreements, which matched a portion of the
Companys fixed rate debt, were terminated in September 1994 to recognize the
loss on these agreements for tax purposes. A deferred loss of $10.1 million,
which is included in other assets, is being amortized over the original terms
of the interest rate swap agreements. The Company replaced these agreements
with interest rate swap agreements with notional principal amounts totaling
$200.0 million that contained revised rates, shorter terms and new
counterparties. These agreements were terminated in October 1994. The impact
of these terminations, which is being deferred and amortized over the original
terms of the agreements, was not material.
The Company also enters into forward exchange contracts, whose durations are
usually less than two years, 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 earnings. A loss of $2.9 million was included in
net earnings for both 1994 and 1992, and a gain of $1.2 million was recorded in
1993.
Forward exchange contracts outstanding at December 31 were as follows:
Contract
Foreign U.S. Fair Market
(in millions) Currency Dollar Value
1994
Belgium Franc 1,909.0 $ 58.4 $ 58.9
Canadian Dollar 22.4 16.0 16.0
Italian Lira 1,415.8 .9 .9
French Franc 4.0 .7 .7
German Mark 5.0 3.3 3.2
Total $ 79.3 $79.7
1993
Belgium Franc 1,057.2 $ 29.2 $ 29.8
1992
German Mark 46.8 $ 29.2 $ 28.4
The Company uses commodity swap agreements to hedge anticipated purchases
of aluminum. Under the aluminum swap agreements, the Company receives or
makes payments based on the difference between a specified price and the
market price of aluminum. At December 31, 1994, the Company had swap
agreements with dealers to exchange monthly payments on approximately 50% of
the Company's total aluminum purchases in 1995 and 17% in 1996 and 1997. The
Company records the payments when received or made and does not have a
carrying value recorded. These agreements have a notional principal value of
$29.9 million. During the year ended December 31, 1994, the Company had swaps
covering approximately 31% of the 41 million pounds of aluminum purchased.
The Company had no outstanding commodity swaps at December 31, 1993 or 1992.
The fair market value of these agreements was $6.4 million at December 31,
1994. The fair market value was obtained from dealer quotes based on a
financial model used to project future prices of aluminum.
The Company monitors and controls market risk from derivative activities by
utilizing floating rates that historically have moved in tandem with each
other, matching positions and limiting the terms of contracts to short
durations. To minimize credit risk, the Company limits derivative
arrangements to those banks and investment firms that the Company has
continuing business relationships with and regularly monitors the credit
ratings of its counterparties. The Company prepares periodic analyses of its
positions in derivatives to assess the current and projected status of these
agreements.
The fair market value of the financial instruments held by the Company at
December 31, 1994, may not be representative of the actual gains or losses
that will be recorded when these instruments mature due to the volatility of
the markets in which they are traded.
9. Segment Information
Industry segments Geographic segments
(in millions) Marine Recreation Eliminations Total United Foreign Eliminations Corporate Consolidated
1994 segments States
Net sales
Customers $ 1,990.7 709.4 - $ 2,700.1 2,212.7 487.4 - - $ 2,700.1
Intersegment - 3.8 (3.8) - 235.4 30.3 (265.7) - -
$ 1,990.7 713.2 (3.8)$ 2,700.1 2,448.1 517.7 (265.7) - $ 2,700.1
Operating earnings $ 175.6 82.8 - $ 258.4 205.4 53.0 - (48.4)$ 210.0
Assets of continuing
operations $ 1,115.7 437.1 - $ 1,552.8 1,388.9 163.9 - 540.9 $ 2,093.7
Capital expenditures 69.5 34.5 - 104.0 0.6 104.6
Depreciation 54.7 23.1 - 77.8 2.0 79.8
Amortization $ 38.1 1.5 $ 39.6 0.4 $ 40.0
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
Amortization $ 37.6 0.9 $ 38.5 1.2 $ 39.7
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
Amortization $ 37.3 0.5 $ 37.8 0.3 $ 38.1
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.
Corporate assets consist primarily of cash and marketable securities,
prepaid income taxes and investments in unconsolidated affiliates.
The Companys export sales to unaffiliated customers for the three years
ended December 31, 1994, 1993 and 1992, were $190.6 million, $181.4 million
and $218.2 million, respectively.
10. Accrued Expenses
Accrued expenses at December 31 were as follows:
(in millions) 1994 1993
Payroll and other compensation $80.3 $49.9
Product warranties 78.3 69.6
Dealer allowances and discounts 67.9 52.4
Litigation and claims 45.1 67.0
Health and liability insurance 59.9 54.3
Restructuring charges and
disposition costs 28.4 36.4
Taxes, other than income taxes 17.2 14.2
Other 78.7 60.7
Accrued expenses $ 455.8 $ 404.5
11. Debt
Short-term debt at December 31 consisted of the following:
(in millions) 1994 1993
Notes payable $ 2.6 $ 6.6
Current maturities of
long-term debt 5.6 5.3
Short-term debt $ 8.2 $ 11.9
Long-term debt at December 31 consisted of the following:
(in millions) 1994 1993
Mortgage notes and other,
3% to 10% payable through 2001 $ 27.3 $ 27.9
Notes, 8.125% due 1997,
net of discounts of $0.1 and $0.2 99.9 99.8
Debentures, 7.375% due 2023
net of discount of $0.9 124.1 124.1
Guaranteed ESOP debt, 8.13%
payable through 2004 73.1 78.0
324.4 329.8
Current maturities (5.6) (5.3)
Long-term debt $318.8 $324.5
Scheduled maturities
1996 $ 6.1
1997 106.3
1998 10.8
1999 9.9
Thereafter 185.7
$318.8
On November 7, 1994, the Company and seventeen banks amended the short-term
credit agreement for $100 million and the long-term credit agreement for $300
million. The termination date of the short-term agreement was extended to
November 6, 1995, and the long-term agreement was extended to December 31,
1999.
Under terms of the amended 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. The
Company must pay a facility fee of 0.10% per annum on the short-term
agreement and 0.15% 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. Under 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 8.1 to 1.0 at December 31, 1994. The leverage ratio of
consolidated total debt to capitalization, as defined, may not exceed 0.55 to
1.00, and at December 31, 1994, this ratio was 0.26 to 1.00. The Company also
is required to maintain shareholders' equity of at least $776.0 million at
December 31, 1994. 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, 1994. There were no borrowings under the credit agreements
at December 31, 1994.
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 were 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%.
12. Consolidated Common Shareholders' Equity
(in millions, except per share data)
Minimum
Additional pension Unearned Cumulative Unamortized
Common stock paid-in Retained Treasury stock liability restricted translation ESOP
Shares Amount capital earnings Shares Amount adjustment stock adjustments Expense Total
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) $804.4
1994
Net Earnings - - - 129.0 - - - - - - 129.0
Dividends declared ($.44 per
common share) - - - (42.0) - - - - - - (42.0)
Compensation plans and other - - 0.1 - 0.2 4.4 6.0 (0.1) - - 10.4
Deferred Compensation-ESOP - - - - - - - - - 5.0 5.0
Currency translation - - - - - - - - 3.9 - 3.9
Balance, December 31, 1994 100.7 $75.5 $261.5 $735.5 (5.2) ($98.3) ($0.7) ($2.4) $11.8 ($72.2) $910.7
At December 31, 1994, 1993, 1992, the Company had no preferred stock outstanding(Authorized: 12.5 million shares,
$.75 par value at December 31, 1994).
13. 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 1994, 1993 and 1992, the Company recorded pretax provisions of
$15.6 million, $18.2 million and $4.8 million ($9.7 million, $11.2 million and
$3.1 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 Genmars existing and prospective
business relationships. The Company and Genmar have settled this lawsuit and a
judgment of dismissal with prejudice and on the merits was entered on February
6, 1995, as further discussed in Note 22.
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 Companys outboard
motor sales. The Company understands that other marine companies have received
similar subpoenas from the Federal Trade Commission.
14. 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.
Non-qualified stock options were awarded to 364, 413 and 420 executives and
management employees of the Company in 1994, 1993 and 1992, respectively.
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, 1994, 606,963 shares were exercisable under outstanding
options at a weighted average option price of $14.88 per share.
In addition to stock options, restricted shares were also awarded to
seventeen senior executives of the Company during 1994 and 1993 and sixteen
senior executives during 1992. 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 $0.5
million, $0.3 million and $0.2 million for 1994, 1993 and 1992, respectively.
Stock option and restricted stock activities including discontinued
operations were 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 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
Granted 719,150 $18.217 102,989 (822,139)
Exercised (124,765) $14.596 (4,925) --
Canceled (81,910) $16.401 (21,175) 81,910
At December 31, 1994 2,097,240 235,514 2,507,511
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, 1,366,832 shares, net
of canceled shares, were awarded. No awards have been made since 1991 and no
further awards will be made under the 1984 Plan. Restrictions lapsed on the
final grant of shares awarded under the terms of the 1984 Plan on March 15,
1994. Charges against earnings from continuing operations for the compensation
element of the 1984 Plan were $0.1 million, $0.7 million, and $1.4 million for
1994, 1993 and 1992, 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 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 from
continuing operations for the compensation element of the 1971 Plan were $0.2
million, $0.4 million and $0.6 million in 1994, 1993 and 1992, respectively.
On April 26, 1994, shareholders of the Company approved the 1994 Stock Option
Plan for Non-Employee Directors. Under this plan, the Company may grant options
to non-employee directors to purchase up to a maximum of 200,000 shares of the
Company's common stock with the grant price being the market price at the date
of grant. In 1994, options were granted to purchase 22,500 shares of common
stock at an option price of $22.75 per share.
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 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 Companys 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.
Shares committed-to-be released, allocated and remaining in suspense at
December 31 were as follows:
Share accounts 1994 1993
Committed-to-be released 298,806 303,661
Allocated 1,310,686 1,094,458
Suspense 3,116,075 3,442,948
The Accounting Standards Division of the American Institute of Certified
Public Accountants issued Statement of Position 93-6 (SOP 93-6), "Employers'
Accounting for Employee Stock Ownership Plans," in November 1993. SOP 93-6
requires accounting for ESOPs under the shares allocated method for shares
purchased by ESOPs after December 31, 1992. The Company is covered by the
grandfather provisions of SOP 93-6 for its current ESOP shares which were
purchased from the Company prior to December 31, 1992 and are accounted for
under the cash payment method. All ESOP shares are considered outstanding for
earnings (loss) per common share purposes.
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,
net of dividend payments to the ESOP. Unamortized ESOP expense is reduced as
the Company recognizes compensation expense. Dividend payments made by the
Company to the ESOP are reported as a reduction of retained earnings and are
used by the ESOP to pay down ESOP debt. The Company's contributions to the
ESOP were as follows:
(in millions) 1994 1993 1992
Compensation expense $ 2.9 $ 2.4 $ 2.0
Interest expense 6.2 6.6 7.0
Dividends 2.1 2.2 2.2
Total debt service payments $11.2 $11.2 $11.2
15. 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 $11.2 million, $7.3
million and $3.6 million in 1994, 1993 and 1992, 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 1994, 1993 and 1992, 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) 1994 1993 1992
Service cost-benefits
earned during the period $ 11.7 $ 9.4 $ 9.4
Interest cost on projected
benefit obligation 31.2 29.4 26.3
Actual return on assets 3.0 (25.7) (14.5)
Net amortization and deferral (34.7) (5.8) (17.6)
Net pension cost $ 11.2 $ 7.3 $ 3.6
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:
1994 1993
Plans whose Plans whose Plans whose Plans whose
assets exceed accumulated assets exceed accumulated
accumulated benefits accumulated benefits
benefits exceed assets benefits exceed assets
(in millions)
Actuarial present value of:
Vested benefit
obligation $(316.8) $(23.9) (69.7) $(288.8)
Nonvested
benefit obligation ( 22.8) (0.2) (10.7) (14.5)
Accumulated benefit
obligation (339.6) (24.1) (80.4) (303.3)
Effects of anticipated
future compensation
levels and other
events (43.3) (5.3) (1.1) (25.6)
Projected benefit
obligation (382.9) (29.4) (81.5) (328.9)
Plan assets at fair
value 361.0 2.0 83.6 262.0
Plan assets in excess of
(less than) projected
benefit obligation (21.9) (27.4) 2.1 (66.9)
Unrecognized net
transition asset (12.3) 1.8 (4.2) (12.0)
Unrecognized prior
service cost 20.5 (0.2) 9.7 3.0
Net unrecognized loss from
past experience different
from assumed and effects
of changes in
assumptions 64.0 3.7 16.5 50.2
Adjustment to recognize
minimum liability - (1.6) - (15.0)
Pension asset (liability)
recognized in
financial statements $ 50.3 $(23.7) $24.1 $(40.7)
The projected benefit obligations were determined primarily using assumed
weighted average discount rates of 8.5% in 1994 and 7.5% in 1993, and an
assumed compensation increase of 5.5% in 1994 and 1993. The assumed weighted
average long-term rate of return on plan assets was primarily 9% in 1994 and
1993.
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 14.
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
1994, 1993 and 1992.
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 $2.5 million, $1.3 million and $1.4
million in 1994, 1993 and 1992, respectively.
Certain other Brunswick 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 $3.0 million, $2.2 million and
$2.1 million in 1994, 1993 and 1992, respectively.
The Brunswick Retirement Savings Plan for salaried and certain hourly
employees, including employees of 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 a 30% matching
contribution in 1994 and 10% matching contributions in 1993 and 1992. The
Company contributions is made in common stock of the Company. The net charges
to continuing operations for matching contributions were $2.1 million, $0.5
million and $0.4 million in 1994, 1993 and 1992, respectively.
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.
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 $5.3 million, $6.4
million and $6.7 million in 1994, 1993 and 1992, respectively.
Net periodic postretirement benefit cost of continuing operations for 1994,
1993 and 1992 included the following components:
(in millions) 1994 1993 1992
Service cost-benefits attributed
to service during the period $ 1.5 $ 1.5 $ 1.9
Interest cost on accumulated
postretirement benefit obligation 4.2 4.9 4.8
Net amortization and deferral (0.4) - -
Net periodic postretirement
benefit cost $ 5.3 $ 6.4 $ 6.7
The amounts recognized in the Company's balance sheets at December 31 were as
follows:
(in millions) 1994 1993
Accumulated postretirement benefit obligation:
Retirees $ 24.9 $ 30.3
Fully eligible active plan
participants 4.8 5.3
Other active plan participants 23.8 26.7
Total 53.5 62.3
Unrecognized prior service cost 2.5 1.4
Unrecognized net gains 12.2 0.9
Postretirement liability recognized
in financial statements $ 68.2 $ 64.6
The accumulated postretirement benefit obligation was determined using weighted
average discount rates of 8.5% in 1994 and 7.5% in 1993, and an assumed
compensation increase of 5.5% in 1994 and 1993 . The health care cost trend
rates were assumed to be 10.4% and 8% in 1995 for pre-65 and post-65 benefits,
respectively, gradually declining to 5% after seven years and three years,
respectively, and remaining at that level thereafter. 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 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 $5.5 million at December 31,
1994 and the net periodic cost by $0.7 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 years prior to 1993 of adopting SFAS No.
112, including discontinued operations, was to decrease net earnings by $14.6
million. The effect of this change on 1994 and 1993 consolidated results of
operations was not material.
16. Income Taxes
The sources of earnings (loss) before income taxes are presented as follows:
(in millions) 1994 1993 1992
United States $191.6 $89.0 $50.1
Foreign 6.8 (2.5) 11.9
Earnings before income taxes $198.4 $86.5 $62.0
The income tax provision (benefit) consisted of the following:
(in millions) 1994 1993 1992
Current tax expense
U.S. Federal $ 48.3 $13.9 $ 2.8
State and local 2.6 11.1 3.6
Foreign 8.4 7.0 8.4
Total current $ 59.3 $32.0 $14.8
Deferred tax expense
U.S. Federal $ 4.2 $ 8.5 $10.0
State and local 6.6 (7.0) (2.0)
Foreign (0.7) (1.5) (0.5)
Total deferred $ 10.1 $ 0.0 $ 7.5
Total provision $ 69.4 $32.0 $22.3
Temporary differences and carryforwards which give rise to deferred tax assets
and liabilities at December 31 are as follows:
(in millions) 1994 1993
Deferred tax assets
Litigation and claims $18.6 $24.5
Product warranty 33.1 29.0
Dealer allowance and discounts 15.8 12.7
Bad debts 9.8 10.3
Sales of businesses 9.9 12.6
Insurance reserves 27.3 22.9
Credit carryforwards and carrybacks 2.5 22.6
Loss carryforwards and carrybacks 13.0 16.2
Other 48.2 41.5
Valuation allowance (3.2) (5.8)
Total deferred tax assets $175.0 $186.5
Deferred tax liabilities (assets)
Depreciation and amortization $ 24.5 $ 21.4
Postretirement and postemployment benefits (22.2) (36.9)
Other assets and investments 86.5 87.5
Other 45.0 31.9
Total deferred tax liabilities $133.8 $103.9
The valuation allowance relates to deferred tax assets established under SFAS
No. 109 for capital loss carryforwards of $2.9 million, and state net
operating loss carryforwards of $0.3 million. These unutilized loss
carryforwards, which will expire through 1999, 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 primarily by carryback to prior years' taxable income or as charges
against reversals of future taxable temporary differences. Based upon prior
earnings history, it is expected that future taxable income will be more than
sufficient to utilize the remaining deductible temporary differences. The
change in the valuation allowance from 1993 to 1994 is primarily due to the
utilization of foreign tax credit carryforwards which reduced income tax
expense for the current year.
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 computed by applying the statutory Federal income tax rate to
earnings before taxes is attributable to the following:
(in millions) 1994 1993 1992
Income tax provision
at 35% in 1994 and
1993 and 34% in 1992 $ 69.4 $ 30.3 $ 21.1
State and local income taxes
net of Federal income tax effect 5.8 2.7 1.1
Foreign sales corporation benefit (1.5) (1.5) (1.4)
Taxes related to foreign income,
net of credits (2.3) (1.9) (4.7)
Goodwill and other amortization 0.8 1.8 1.7
Enacted tax rate change - (3.6) -
Other (2.8) 4.2 4.5
Actual income tax provision $ 69.4 $ 32.0 $ 22.3
Effective tax rate 35.0% 37.0% 36.0%
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 their examination dealt primarily with the
deductablility 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 agreed to allow amortization
deductions for virtually all of the acquired intangible assets, and the
Company agreed to increase the amortizable lives of most of the acquired
intangible assets.
The revised lives created a temporary difference which resulted in an
initial obligation by the Company to pay the IRS approximately $55 million
during the first quarter of 1994, 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 was charged to
existing reserves and the taxes paid represent temporary differences which
created, and have been recorded as deferred tax assets, this agreement had no
impact on the Companys consolidated results of operations.
17. Translation of Foreign Currencies
Most of the Company's 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) 1994 1993 1992
Balance at January 1 $ 7.9 $ 8.9 $10.4
Translation and other 7.8 (1.9) (4.4)
Allocated income taxes (3.9) 0.9 2.9
Balance at December 31 $11.8 $ 7.9 $ 8.9
The remaining foreign entities translate monetary assets and liabilities at
year-end exchange rates and inventories, property and nonmonetrary 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 $5.4 million, $1.0
million and $5.1 million were recorded in 1994, 1993 and 1992, respectively.
18. 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) 1994 1993 1992
Basic expense $22.0 $21.2 $21.5
Contingent expense 0.6 0.6 1.1
Sublease income (1.7) (1.2) (1.5)
Rent expense, net $20.9 $20.6 $21.1
Future minimum rental payments at December 31, 1994, under agreements
classified as operating leases with noncancelable terms in excess of one
year, are as follows:
(in millions)
1995 $ 7.2
1996 5.0
1997 3.2
1998 2.9
1999 1.6
Thereafter 4.3
Future minimum operating lease rental payments
(not reduced by minimum sublease rentals
of $0.8 million) $ 24.2
19. Technological Expenditures
Technological expenditures consisted of the following:
(in millions) 1994 1993 1992
Research and development $ 68.6 $ 60.8 $ 52.0
Engineering and other 10.9 9.0 4.3
Technological expenditures $ 79.5 $ 69.8 $ 56.3
20. 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 on the Companys 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.
21. 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) 1994 1993 1992
Net sales $392.3 $332.2 $259.4
Gross margin $ 80.4 $ 70.5 $ 49.3
Net earnings $ 26.0 $ 24.2 $ 16.8
Company's share of net earnings $ 10.1 $ 11.3 $ 8.4
Current assets $178.5 $155.4 $138.4
Non-current assets 114.2 104.2 87.6
Total assets 292.7 259.6 226.0
Current liabilities (134.9) (125.1) (115.5)
Non-Current liabilities (27.2) (28.8) (12.0)
Net assets $130.6 $105.7 $ 98.5
The net sales of affiliates include an insignificant amount of sales to the
Company.
22. Subsequent Events
On January 20, 1995, the Company and Orbital Engine Corporation, Ltd. of
Perth, Australia, formed a joint venture to design, manufacture and market
fuel systems for low-emission two-stroke engines. Brunswick contributed $6.6
million for its 50% share of this joint venture.
On February 3, 1995, the Company announced a series of agreements with Genmar
Industries, Inc., including settlement of an antitrust lawsuit brought by
Genmar against the Company. Agreements were entered to supply Genmar with
marine engines manufactured by the Company and to acquire certain investments
in another boat manufacturer from Genmar. The Company's total cash payment
relating to these agreements was $22.5 million and will have no material
impact on the results of operations of the Company.
23. Quarterly Data (unaudited)
Quarter
(in millions, except per share data) 1st 2nd 3rd 4th Year
1994
Net sales $ 634.9 $ 748.2 $ 662.1 $ 654.9 $ 2,700.1
Gross margin $ 176.3 $ 225.4 $ 177.1 $ 169.6 $ 748.4
Earnings from continuing operations $ 26.4 $ 55.2 $ 29.4 $ 18.0 $ 129.0
Net earnings $ 26.4 $ 55.2 $ 29.4 $ 18.0 $ 129.0
Per common share
Earnings from continuing operations $ 0.28 $ 0.58 $ 0.31 $ 0.19 $ 1.35
Net earnings $ 0.28 $ 0.58 $ 0.31 $ 0.19 $ 1.35
Dividends declared $ 0.11 $ 0.11 $ 0.11 $ 0.11 $ 0.44
Common stock price (NYSE)
High $ 23 5/8 $ 25 1/8 $ 24 5/8 $ 22 $ 25 1/8
Low $ 18 1/8 $ 20 1/8 $ 19 7/8 $ 17 $ 17
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
Cumulative effect of change in accounting principle (14.6) - - - (14.6)
Extraordinary loss from retirement of debt - - (4.6) - (4.6)
Discontinued operations
Earnings (loss) from discontinued operations (0.8) 0.8 - - -
Estimated loss on divestiture of Technical segment - - - (12.2) (12.2)
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
Cumulative effect of change in accounting principle (0.15) - - - (0.15)
Extraordinary item - - (0.05) - (0.05)
Discontinued operations
Earnings (loss) from discontinued operations (0.01) 0.01 - - -
Estimated loss on divestiture of Technical segment - - - (0.13) (0.13)
Net 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
In 1993, the first quarter has been restated to reflect the cumulative effect for the adoption of SFAS No. 112.
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, 1994
and 1993, and the related consolidated statements of results of operations
and cash flows for each of the three years in the period ended December 31,
1994. 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, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note 15 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 schedule listed in the index of
financial statements is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in
our opinion, fairly states 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 LLP
Chicago, Illinois,
February 5, 1995
Brunswick Corporation
Five Year Financial Summary
(in millions, except ratios and per share data 1994 1993 1992 1991 1990
Results of Operations Data
Net sales $2,700.1 $2,206.8 $2,059.4 $1,841.0 $2,106.9
Depreciation 79.8 78.1 77.8 84.0 88.8
Amortization 40.0 39.7 38.1 41.0 43.7
Operating earnings(loss) 210.0 99.8 79.8 (18.4) 52.1
Earnings(loss) before income taxes 198.4 86.5 62.0 (40.5) 15.4
Earnings(loss) from continuing operations
before extraordinary item and cumulative
effect of accounting changes 129.0 54.5 39.7 (35.0) 9.4
Cumulative effect on prior years of changes
in accounting principles - (14.6) (38.3) - -
Extraordinary loss from retirement of debt - (4.6) - - -
Discontinued operations
Earnings(loss) from discontinued operations - - (1.7) 11.3 14.8
Gain(estimated loss) on divestitures of
Technical segment businesses - (12.2) (26.0) - 46.7
Net earnings(loss) 129.0 23.1 (26.3) (23.7) 70.9
Per Common Share Data
Earnings(loss) from continuing operations
before extraordinary item and cumulative
effect of accounting changes $ 1.35 $ 0.57 $ 0.43 $ (0.40) $ 0.10
Cumulative efffect on prior years of changes
in accounting principles - (0.15) (0.41) - -
Extraordinary item - (0.05) - - -
Discontinued operations
Earnings(loss) from discontinued operations - - (0.02) 0.13 0.17
Gain(estimated loss) on divestitures of
Technical segment businesses - (0.13) (0.28) - 0.53
Net earnings(loss) 1.35 0.24 (0.28) (0.27) 0.80
Dividends declared 0.44 0.44 0.44 0.33 0.44
Dividends paid 0.44 0.44 0.44 0.44 0.44
Book value 9.55 8.44 8.65 8.79 9.53
Balance Sheet Data
Capital expenditures $ 104.6 $ 95.8 $ 88.6 $ 74.7 $ 77.7
Assets of continuing operations 2,093.7 1,957.6 1,872.4 1,760.9 1,790.6
Debt
Short-term $ 8.2 $ 11.9 $ 16.0 $ 6.3 $ 5.8
Long-term 318.8 324.5 304.5 315.9 301.5
Total debt 327.0 336.4 320.5 322.2 307.3
Common shareholders' equity 910.7 804.4 822.5 778.7 824.0
Total capitalization $1,237.7 $1,140.8 $1,143.0 $1,100.9 $1,131.3
Other Data
Return on beginning
shareholders' equity 16.0 % 6.6 % 5.1 % (4.2)% 1.2 %
Effective tax rate(benefit) 35.0 % 37.0 % 36.0 % (13.6)% 39.0 %
Working capital ratio 1.7 1.6 1.7 1.5 1.5
Debt-to-capitalization rate 26.4 % 29.5 % 28.0 % 29.3 % 26.8 %
Common Stock Price(NYSE)
High $ 25 1/8 $ 18 1/2 $ 17 3/4 $ 16 1/8 $ 16
Low 17 12 1/2 12 1/4 8 3/4 6 5/8
Close 18 7/8 18 16 1/4 13 7/8 9
The Notes to Consolidated Financial Statements should be read in conjunction with the above summary.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
the incorporation of our report dated February 5, 1995, 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),
Form S-8 (File No. 33-55022), and Form S-8(File No. 33-56193).
Arthur Andersen LLP
Chicago, Illinois,
March 17, 1995
BRUNSWICK CORPORATION
SCHEDULE II - 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
1994 $ 16.9 $ 6.0 $ (4.3) $ 1.1 $ (0.2) $ 19.5
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
* Includes $2.4 million relating to acquisitions
This schedule reflects only the financial information of continuing
operations.
Deferred tax
asset valuation
allowance
1994 $ 5.8 $ - $ - $ (2.6) $ - $ 3.2
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, 1993 and 1994,
the Company utilized $2.8 million, $3.0 million and $2.6 million,
respectively, of foreign tax credits from prior years. The utilization of
of these foreign tax credit carryforwards reduced income tax expense for the
for the current year.
This schedule reflects only the financial information of continuing
operations.