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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 1-1043
BRUNSWICK CORPORATION
(EXACT NAME OF REGISTRANT IN ITS CHARTER)
36-0848180
DELAWARE (I.R.S. EMPLOYER IDENTIFICATION NO.)
(STATE OF INCORPORATION)
60045-4811
1 N. FIELD CT. (ZIP CODE)
LAKE FOREST, ILLINOIS
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 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,
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
registrant was required to file such reports) and (2) has been subject to such
filing requirements the past 90 days. Yes No
[X][_]
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 the 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 17, 1997, the aggregate market value of the voting stock of the
registrant held by non-affiliates was $2,808,737,719. Such number excludes
stock beneficially owned by officers and directors. This does not constitute
an admission that they are affiliates.
The number of shares of Common Stock ($.75 par value) of the registrant
outstanding as of March 17, 1997, was 98,944,275.
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 SCHEDULED TO BE HELD ON APRIL 23, 1997.
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PART I
ITEM 1. BUSINESS
Brunswick Corporation (the "Company") is a multinational, branded consumer
products company serving the outdoor and indoor active recreation markets. Its
major brands include Zebco(R), Quantum(R), Browning(R) and Lew's(R) fishing
reels and reel/rod combinations; MotorGuide(R) and Thruster(R) trolling
motors; Swivl-Eze(R) marine accessories; American Camper(R) and Remington(R)
camping gear; Roadmaster(R) and Ride Hard(TM) bicycles; Roadmaster(R) wagons;
Flexible Flyer(R) sleds; Brunswick Recreation Centers(R) and Brunswick(R)
bowling capital equipment and consumer products; Brunswick(R) billiards
tables; Sea Ray(R), Bayliner(R) and Maxum(R) pleasure boats; Boston Whaler(R),
Trophy(R) and Robalo(R) offshore fishing boats; Quicksilver(R) marine parts
and accessories; Mercury(R), Mariner(R) and Force(R) outboard engines and
MerCruiser(R) sterndrives and inboard engines.
Since mid-1995, the Company has been implementing a strategic plan to build
its active recreation business by:
. Expanding its leading brand franchises through the introduction of
innovative products and the application of data-based and other marketing
efforts;
. Acquiring active recreation consumer products companies with:
--leading brands,
--growth potential, and
--synergies with the Company's product lineup, such as a high level of
customer cross participation;
. Divesting under-performing businesses; and
. Improving margins through effective cost management and enhanced
operating efficiencies.
The Company operates in two business segments: Recreation and Marine.
Recreation
The Recreation segment consists of the Brunswick Outdoor Recreation Group
("BORG") and the Brunswick Indoor Recreation Group ("BIRG").
BORG markets and manufactures fishing and camping equipment, bicycles,
wagons and sleds. The Company believes that it holds the leading domestic
market share of fishing reels and reel/rod combinations. BORG also
manufactures and sells fishing pedestals, ski tows, pylons and electric
trolling motors for fishermen and for use by boat manufacturers including
Marine segment operations.
The Company acquired its camping business from Roadmaster Industries, Inc.
in March 1996 for approximately $119 million. Camping products include
sleeping bags, tents, backpacks, canvas bags, foul weather gear, waders,
propane lanterns and stoves, cookware and utensils. The Roadmaster bicycle,
wagon and sled business was acquired in September 1996 for approximately $190
million.
In January 1997 the Company acquired Igloo Holdings, Inc. for approximately
$143 million. Igloo is the domestic market leader in ice chests, beverage
coolers and thermoelectric cooler/warmer products.
BIRG is the leading manufacturer of bowling products including bowling balls
and capital equipment such as bowling lanes, automatic pinsetters, ball
returns, computerized scoring equipment and seating and locker units.
BIRG operates 123 recreation centers worldwide, and its joint ventures
operate 32 recreation centers. Recreation centers offer bowling and, depending
on size and location, the following activities and services: billiards, video
games, children's playrooms, restaurants and cocktail lounges. The Company
also operates four family entertainment centers, which in addition to the
above activities, also offer more extensive recreation alternatives such as
basketball courts, in-line skating rinks and interactive video games. Most of
the centers offer Cosmic Bowling(R), a glow in the dark bowling experience
that transforms bowling into a new and different form of recreation. Most of
the recreation centers are owned.
BIRG has a 50 percent interest in Nippon Brunswick K. K., which sells
bowling equipment and operates bowling centers in Japan. The Group has other
joint ventures (i) to build, own and operate bowling centers and family
entertainment centers, which include bowling, billiards and many other games,
in Brazil, China, Korea and Thailand; and (ii) to sell bowling equipment in
China and Thailand.
The Company's products are distributed through mass merchants, distributors,
dealers, bowling centers, and retailers by Company sales personnel and
manufacturers' representatives. Recreation products are distributed worldwide
from regional warehouses, sales offices and factory stocks of merchandise.
Marine
The Marine segment consists of the Mercury Marine, US Marine and Sea Ray
Divisions. The Company believes its Marine segment has the largest dollar
sales volume of recreational marine engines and pleasure boats in the world.
The Mercury Marine Division markets and manufactures a full range of
outboard engines, sterndrives and inboard engines and propless water-jet
systems under the familiar Mercury, Mariner, Force, MerCruiser and SportJet(R)
brand names. A portion of Mercury Marine's outboards and its Quicksilver parts
and accessories, including steering systems, instruments, controls,
propellers, service aids and marine lubricants, are sold directly to end-users
through a dealer network. The remaining outboards and virtually all of the
sterndrive and inboard engines and the water-jet systems are sold to boat
builders, including the Company's boat divisions.
In 1996 Mercury introduced the OPTIMAX(R) 200-horsepower outboard engine
featuring its new direct fuel injection ("DFI") technology. DFI is part of
Mercury's plan to reduce engine emissions by 75 percent over a nine-year
period beginning in mid-1997 to comply with Environmental Protection Agency
requirements. Mercury's line of low emission engines also includes four-cycle
versions of its smaller two-cycle outboards, which require no modification to
meet reduced emission levels.
Mercury Marine products are manufactured in North America for global
distribution. International assembly facilities are located in Belgium and
Mexico, and offshore distribution centers are in Belgium, Japan and Australia.
The boat divisions consist of US Marine and Sea Ray, makers and marketers of
fiberglass pleasure and offshore fishing boats. US Marine, known for its
Bayliner brand of motor yachts, cabin cruisers, sport fishing boats, runabouts
and jet powered boats, also markets and manufactures Maxum runabouts and cabin
cruisers, Robalo and Trophy sport fishing boats and Quantum(R) fish 'n' ski
boats.
The US Marine Division is vertically integrated, producing many of the parts
and accessories which make up the boats. Escort boat trailers also are
produced by the Division and are sold with smaller boats as part of boat-
motor-trailer packages. Outboard motors and sterndrives are purchased from the
Mercury Marine Division.
The Sea Ray Division, best recognized for its luxury motor yachts, cabin
cruisers, sport fishing boats, sport boats, runabouts, water skiing boats and
jet powered boats marketed and manufactured under the same name, also makes
and sells Baja(R) high-performance boats and Boston Whaler(R) offshore boats.
The Division purchases its outboard motors and most of its sterndrives and
gasoline inboard engines from the Mercury Marine Division.
US Marine and Sea Ray boats are sold through worldwide dealer networks.
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.
2
The Company's Marine segment sales to unaffiliated customers include sales
of the following principal products for the three years ended December 31,
1996, 1995, and 1994:
1996 1995 1994
-------- -------- --------
(IN MILLIONS, UNAUDITED)
Boats.......................................... $1,175.2 $ 978.4 $ 796.0
Engines........................................ 1,112.1 1,168.7 1,086.6
-------- -------- --------
$2,287.3 $2,147.1 $1,882.6
======== ======== ========
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.
The Company's fresh water fishing boat operations, which comprised
substantially all of the assets of the Fishing Boat Division, were sold during
1996.
RAW MATERIALS
Many different raw materials are purchased from various sources. At the
present time, no critical raw material shortages are anticipated. General
Motors Corporation is a significant supplier of the gasoline engine blocks
used to manufacture the Company's gasoline sterndrives.
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 Recreation segment, patent rights principally relate to computerized
bowling scorers and business systems, bowling lanes and related equipment,
game tables, fishing reels, electric trolling motors, camping equipment,
bicycles, ice chests, coolers and thermoelectric cooler/warmer products.
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.
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.
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, 1996 was $22.6 million, and the Company
expects to fill all of such orders during 1997. The backlog of bowling capital
equipment at December 31, 1995 was $38.3 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.
3
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.
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
fishing reels, bicycles, camping equipment, ice chests, beverage coolers and
thermoelectric cooler/warmer products. For these recreation products,
competitive emphasis is placed on product innovation, quality, marketing
activities, pricing and the ability to meet delivery and performance
requirements.
The Company believes it is the world's largest manufacturer of bowling
capital equipment. Certain bowling products, such as automatic scorers and
computerized management systems, represent innovative developments in the
market. For other bowling products competitive emphasis is placed on quality,
marketing activities and pricing. The Company operates 123 recreation centers
and four family entertainment centers worldwide. Each center competes directly
with centers owned by other parties in its immediate geographic area.
Competitive emphasis is, therefore, placed on customer service, quality
facilities and personnel, and prices.
Marine. The Company believes it has the largest dollar sales volume of
recreational marine engines and pleasure boats in the world. The domestic
marine engine market includes relatively few major competitors. There are
approximately 11 competitors in outboard engine markets worldwide, and foreign
competition continues in the domestic marine engine market. There are many
competitors in the highly competitive marine accessories business. Competitive
advantage in the marine engine and accessories markets is a function of
product features, technology leadership and effective distribution in addition
to pricing.
There are many manufacturers of pleasure and fishing boats, and
consequently, this business is highly competitive. The Company competes on the
basis of product features and technology, quality, value, performance,
durability, styling and price. Demand for pleasure boats and marine engines is
influenced by a number of factors, including consumer education about boating,
economic conditions and, to some extent, prevailing interest rates and
consumer confidence in spending discretionary dollars.
RESEARCH AND DEVELOPMENT
Company-sponsored research activities, relating to the development of new
products or to the improvement of existing products, are shown below:
1996 1995 1994
----- ----- -----
(IN MILLIONS)
Recreation.............................................. $11.1 $13.9 $11.5
Marine.................................................. 75.4 74.0 55.5
----- ----- -----
$86.5 $87.9 $67.0
===== ===== =====
NUMBER OF EMPLOYEES
The number of employees at December 31, 1996 is shown below by industry
segment:
Recreation......................................................... 8,350
Marine............................................................. 14,300
Corporate.......................................................... 150
------
22,800
======
There are approximately 1,800 employees in the Recreation segment and 2,300
employees in the Marine segment who are represented by labor unions. The
Company believes that relations with these labor unions are good.
4
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 are operating at approximately 70 percent of current
capacity.
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, Hartford and Milwaukee, Wisconsin; Stillwater, Oklahoma;
Placida and 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; Edgewater, Merritt Island, Sykes
Creek and Palm Coast, Florida; Bucyrus, Ohio; Phoenix, Arizona; Cork, Ireland;
and Amsterdam, The Netherlands.
Brunswick Outdoor Recreation Group
Haleyville, Alabama; Olney and Effingham, Illinois; Tulsa, Oklahoma;
Starkville, Mississippi; Houston, Katy and Lancaster, Texas; and St. George,
Utah.
Brunswick Indoor Recreation Group
Muskegon, Michigan; Bristol, Wisconsin; Des Moines, Iowa; Stockach, Germany;
and 123 bowling centers and four family entertainment centers in the United
States, Canada and Europe.
5
ITEM 3. LEGAL PROCEEDINGS
Concord Boat Corporation, et al v. Brunswick Corporation. On December 7,
1995, Independent Boat Builders, Inc. ("IBBI"), a boat materials buying group,
and eighteen of its boat building members, brought suit against the Company in
the United States District Court for the Eastern District of Arkansas alleging
that the Company has unlawfully acquired and maintained a monopoly in the
domestic sterndrive marine engine market and has attempted to monopolize the
domestic sterndrive recreational boat market through (i) its acquisitions of
the Company's current boat companies, (ii) its failure to perform its
obligations under an alleged joint venture agreement to manufacture sterndrive
engines for Yamaha Motor Co., Ltd., forcing Yamaha to exit the domestic
sterndrive marine engine market, (iii) its sterndrive engine buying programs
to IBBI members which offer the best discounts to members purchasing at least
70% of their sterndrive engine requirements from the Company, (iv) its
negotiation in supply contracts of price cap provisions for IBBI members on
sterndrive engines which the Company allegedly knew were going to be
discontinued, (v) its alleged disclosure of IBBI members' confidential
business information to members' competitors, (vi) its condition that engine
and boat dealers purchase a substantial share of their engine and boat
requirements from the Company in order to receive the Company's best engine
and boat discounts, and (vii) its alleged offer of cash payments to boat
dealers to terminate their relationship with competing sterndrive boat
manufacturers. The Plaintiffs also maintain that some of this same alleged
conduct by the Company constitutes a breach of the Company's sterndrive engine
purchasing contract with them, a breach of the Company's covenant of good
faith and fair dealing under that contract, and fraudulent misrepresentations.
On February 29, 1996, the Plaintiffs and five additional members of IBBI filed
an Amended Complaint making similar allegations with respect to the Company's
manufacture and sale of outboard engines and boats powered by outboard
engines, and asserting that certain of the Company's agreements with its
dealers violate the antitrust laws. The Plaintiffs have requested an
injunction requiring the Company to divest its boat manufacturing operations
and to cease the alleged practices set forth above, as well as actual damages,
treble damages, punitive damages, and attorneys' fees and costs.
The Company believes, based upon its assessment of the complaint and in
consultation with counsel, that this litigation is without merit and intends
to defend itself vigorously. The Company has filed its Answer to the complaint
and the parties have begun the discovery process. On February 12, 1996, the
Company filed a counterclaim against the Plaintiffs alleging that the
Plaintiffs have conspired to restrain trade in violation of federal antitrust
law by (i) pressuring the Company to replace its market share sterndrive
engine discounts with volume discounts to the disadvantage of smaller
sterndrive boat builders who are not members of a buying group, (ii)
soliciting the Company to limit its boat building divisions' competition with
the Plaintiffs in the manufacture and sale of sterndrive boats, (iii)
soliciting the Company to raise the price of its sterndrive engines to certain
other buyers to favor the Plaintiffs in competition with those buyers, and
(iv) agreeing to limit the display of boats equipped with the Company's
sterndrive engines at industry boat shows. The Company's counterclaim seeks
injunctive relief against the Plaintiffs and the dissolution of IBBI, actual
and treble damages, attorneys' fees and costs.
In December 1996 the Internal Revenue Service notified the Company that it
allocated $190.0 million in short-term capital gains and $18.1 million in
ordinary income to the Company and its subsidiaries for 1990 and 1991 in
connection with two partnership investments by the Company. The IRS alleges
that these investments lacked economic substance, were prearranged and
predetermined, and had no legitimate business purpose. The Company strongly
disagrees with the IRS position, and on January 23, 1997 the Company filed
petitions in the United States Tax Court contesting the IRS allocations. If
the IRS were to prevail, the Company would owe the IRS approximately $60
million in taxes plus accrued interest. The Company intends to defend itself
vigorously and does not believe that this case will have an unfavorable impact
on the Company's results of operations.
The Company has agreed to payment of a civil penalty in the amount of
$112,500 to the State of Ohio in settlement of claims relating to air
emissions in excess of permitted levels at the Company's former defense plant
in Willard, Ohio, during the years 1989 through 1992.
6
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
------- ---------------- ---
P. N. Larson........... Chairman and Chief Executive Officer 57
P. B. Hamilton......... Senior Vice President, Chief Financial 50
Officer and Secretary
K. J. Chieger.......... Vice President-Corporate and Investor 48
Relations
J. W. Dawson........... Corporate Vice President and President- 62
Brunswick Outdoor Recreation Group
F. J. Florjancic, Jr. . Corporate Vice President and President- 50
Brunswick Indoor Recreation Group
D. D. Jones............ Corporate Vice President and President- 53
Mercury Marine Division
R. T. McNaney.......... Vice President and General Counsel 62
R. S. O'Brien.......... Vice President and Treasurer 47
V. J. Reich............ Vice President and Controller 39
K. B. Zeigler.......... Vice President and Chief Human Resources 48
Officer
W. J. Barrington....... President-Sea Ray Division 46
J. A. Schenk........... Staff Vice President-Corporate Planning 54
R. C. Steinway......... President-US Marine Division 45
There are no family relationships among these officers. The term of office
of all elected officers expires April 23, 1997. The Division Presidents and
Staff Vice Presidents are appointed from time to time at the discretion of the
Chief Executive Officer.
Peter N. Larson has been Chairman and Chief Executive Officer of the Company
since 1995. He was Chairman of the Worldwide Consumer and Personal Care Group,
Johnson & Johnson, a leading health care company from 1994 to 1995 and Company
Group Chairman, Johnson & Johnson from 1991 to 1994.
Peter B. Hamilton has been Senior Vice President and Chief Financial Officer
of the Company since 1995, and Secretary since 1996. He was Vice President and
Chief Financial Officer, Cummins Engine Company, Inc., a leading worldwide
designer and manufacturer of diesel engines and related products from 1988 to
1995.
Kathryn J. Chieger has been Vice President-Corporate and Investor Relations
of the Company since 1996. She was Vice President-Corporate Affairs of Gaylord
Container Corporation, a paper manufacturer ("Gaylord"), from 1994 to 1996 and
Director of Corporate Affairs of Gaylord from 1989 to 1994.
Jim W. Dawson has been Corporate Vice President since 1994, and President-
Brunswick Outdoor Recreation Group since 1996. He was President-Zebco Division
from 1989 to 1996.
Frederick J. Florjancic, Jr. has been Corporate Vice President since 1988,
and President-Brunswick Indoor Recreation Group since 1995. He was President-
Brunswick Division from 1988 to 1995.
David D. Jones has been Corporate Vice President since 1995 and President-
Mercury Marine Division since 1989.
Robert T. McNaney has been Vice President of the Company since 1996 and
General Counsel since 1985.
Richard S. O'Brien has been Vice President of the Company since 1996 and
Treasurer of the Company since 1988.
7
Victoria J. Reich has been Vice President and Controller of the Company
since 1996. She was Finance Manager of the General Electric Company's Wiring
Devices business from 1994 to 1996, Manager of the G.E. Plastics Customer
Financial Services Operation from 1993 to 1994 and Manager of the G.E.
Plastics Commercial Finance Unit from 1990 to 1993.
Kenneth B. Zeigler has been Vice President and Chief Human Resources Officer
of the Company since 1995. He was Senior Vice President, The Continental
Corporation, a property and casualty insurance holding company, from 1992 to
1995.
William J. Barrington has been President-Sea Ray Division and President of
Ray Industries, Inc. since 1989.
James A. Schenk has been Staff Vice President-Corporate Planning since 1996.
He was Corporate Director of Planning and Development of the Company from 1988
to 1996.
Robert C. Steinway has been President-US Marine Division since 1994. From
1992 to 1994 he was Senior Vice President-Marketing, US Marine Division. From
1989 to 1992 he was General Manager of the Aluminum Fishing Boat Division.
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, and
London 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 17 on page 39. As of December 31, 1996, there were
approximately 18,400 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, assets of continuing operations, and long-term debt are
shown in the Six Year Financial Summary on page 42.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis is presented on pages 15 to 18.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Financial Statements are set forth on pages 19 to
39 and are listed in the index on page 14.
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 2-4 of the Company's definitive Proxy Statement dated March 20, 1997
(the "Proxy Statement") for the Annual Meeting of Stockholders to be held on
April 23, 1997. All of the foregoing information is hereby incorporated by
reference. The Company's executive officers are listed herein on pages 7 and
8.
8
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is set forth on pages 5-
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 percent 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 14.
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 Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
1995, and hereby incorporated by reference.
3.3 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 Officers' Certificate setting forth terms of the Company's
$125,000,000 principal amount of 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.
4.3 Form of the Company's $250,000,000 principal amount of
6.75% Notes due December 15, 2006 filed as Exhibit 4.1 to
the Company's Current Report on Form
8-K dated December 10, 1996 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 February 5, 1996, between the
Company and Harris Trust and Savings Bank filed as Exhibit
1 to the Company's Registration Statement for Preferred
Share Purchase Rights on Form 8-A dated March 13, 1996, 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.
9
EXHIBITS
--------
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* Amended and Restated Employment Agreement dated February 3,
1997 by and between the Company and Peter N. Larson.
10.8* Employment Agreement dated December 1, 1995 by and between
the Company and Peter B. Hamilton filed as Exhibit 10.8 to
the Company's Annual Report on Form
10-K for 1995 and hereby incorporated by reference.
10.9* Form of Employment Agreement by and between the Company and
each of W. J. Barrington, K. J. Chieger, J. W. Dawson, F.
J. Florjancic, Jr., P. B. Hamilton, D. D. Jones, R. S.
O'Brien, V. J. Reich, J. A. Schenk, R. C. Steinway and K.
B. Zeigler filed as Exhibit 10.9 to the Company's Annual
Report on Form 10-K for 1995 and hereby incorporated by
reference.
10.10* 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.
10.11* 1995 Stock Plan for Non-Employee Directors filed as Exhibit
B to the Company's definitive Proxy Statement dated March
19, 1996 for the Annual Meeting of Stockholders on April
24, 1996 and hereby incorporated by reference.
10.12* 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.
10.13* 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.
10.14* 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
EXHIBITS
--------
10.15* Form of Indemnification Agreement by and between the
Company and each of N. D. Archibald, M. J. Callahan, J. P.
Diesel, M. A. Fernandez, P. Harf, G. D. Kennedy, B. K.
Koken, J. W. Lorsch, B. M. Musham, K. Roman 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.
10.16* 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.
10.17* Indemnification Agreement dated April 1, 1995 by and
between the Company and P. N. Larson filed as Exhibit 10.17
to the Company's Annual Report on Form 10-K for 1995 and
hereby incorporated by reference.
10.18* Form of Indemnification Agreement by and between the
Company and each of W. J. Barrington, K. J. Chieger, J. W.
Dawson, F. J. Florjancic, Jr., P. B. Hamilton, D. D. Jones,
R. T. McNaney, R. S. O'Brien, V. J. Reich, J. A. Schenk, R.
C. Steinway, and K. B. Zeigler 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.
10.19* 1991 Stock Plan filed as Exhibit A to the Company's
definitive Proxy Statement dated March 19, 1996 for the
Annual Meeting of Stockholders on April 24, 1996 and hereby
incorporated by reference.
10.20* Change In Control Severance Plan filed as Exhibit 10.22 to
the Company's Annual Report on Form 10-K for 1989 and
hereby incorporated by reference.
10.21* Brunswick Performance Plan for 1996 filed as Exhibit 10.22
to the Company's Annual Report on Form 10-K for 1995 and
hereby incorporated by reference.
10.22* Brunswick Performance Plan for 1997.
10.23* Brunswick Strategic Incentive Plan for 1994-1996 and 1995-
1997 filed as Exhibit 10.23 to the Company's Annual Report
on Form 10-K for 1993 and hereby incorporated by reference.
10.24* Brunswick Strategic Incentive Plan for 1996-1997 filed as
Exhibit 10.24 to the Company's Annual Report on Form 10-K
for 1995 and hereby incorporated by reference.
10.25* Brunswick Strategic Incentive Plan for 1997-1998.
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 the following reports on Form 8-K during the three months
ended December 31, 1996.
1. Report on Form 8-K dated November 19, 1996 reporting in Item 5 that
the Company had signed a definitive agreement to acquire Igloo Holdings,
Inc.
2. Report on Form 8-K dated December 10, 1996 reporting in Item 5 that
the Company had closed an offering of 6 3/4% Notes due December 15, 2006.
- --------
*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.
11
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 27, 1997 By___________________________________
Victoria J. Reich,
Vice President and 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
---- -----
Peter N. Larson Chairman and Chief Executive Officer
(Principal Executive Officer) and
Director
Peter B. Hamilton Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
Victoria J. Reich Vice President and Controller (Principal
Accounting Officer)
Nolan D. Archibald Director
Michael J. Callahan Director
John P. Diesel Director
Manuel A. Fernandez Director
George D. Kennedy Director
Bernd K. Koken Director
Jay W. Lorsch Director
12
NAME TITLE
---- -----
Bettye Martin Musham Director
Jack F. Reichert Director
Kenneth Roman Director
Roger W. Schipke Director
Victoria J. Reich, as Principal Accounting Officer and pursuant to a Power
of Attorney (executed by each of the other officers and directors listed above
and filed with the Securities and Exchange Commission, Washington, D.C.), by
signing her 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 27, 1997 _____________________________________
Victoria J. Reich
13
BRUNSWICK CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
PAGE
----
Management's Discussion and Analysis....................................... 15
Consolidated Statements of Income 1996, 1995 and 1994...................... 19
Consolidated Balance Sheets December 31, 1996 and 1995..................... 20
Consolidated Statements of Cash Flows 1996, 1995 and 1994.................. 22
Notes to Consolidated Financial Statements 1996, 1995 and 1994............. 23
Report of Management....................................................... 40
Report of Independent Public Accountants................................... 41
Six-Year Financial Summary................................................. 42
Consent of Independent Public Accountants.................................. 43
Schedule II--Valuation and Qualifying Accounts 1996, 1995 and 1994......... 44
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.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
The Company's strategy is to build its active recreation business and
strengthen its positions in leadership brands. Actions taken in 1996 in
pursuit of this strategy resulted in increased earnings from continuing
operations for the fifth consecutive year.
In the Recreation segment, the Company formed the Brunswick Outdoor
Recreation Group and acquired new businesses which have been included in this
organization. The group consists of the Zebco, MotorGuide and Browning fishing
tackle units; the American Camper operation, which was acquired as the
Nelson/Weather-Rite camping unit on March 8, 1996; and the Roadmaster bicycle
business, which was acquired on September 6, 1996. On January 3, 1997, the
Company added, through acquisition, the Igloo cooler and thermoelectric
products business. The Outdoor Recreation Group represents a key growth area
for the Company as it pursues additional acquisitions, focusing on consumer
products and services aimed at active recreation enthusiasts.
Also included in the Recreation segment is the Brunswick Indoor Recreation
Group, which is responsible for the bowling products, recreation centers and
billiards businesses. During 1996, the group experienced rapid growth in
equipment sales into China. While these sales did not fully offset a decline
in sales into the mature Korean and Taiwanese markets, by the fourth quarter
of 1996, the group experienced its first quarter-over-quarter increase from
the combined sales to these markets. The group also successfully completed the
sale of its golf shaft business which, along with the divestiture of the
Circus World pizza operations in 1995, improved the group's product mix.
In the Marine segment, the Company invested in product marketing programs,
cost management actions and new product introductions. This is reflected in a
$20.0 million or 23.5 percent increase in capital expenditures and continued
investment in research and development activities. The Company improved its
product mix by divesting its freshwater fishing boat unit (accounted for as a
discontinued operation) and by acquiring the Boston Whaler line of offshore
fishing boats on May 31, 1996.
RESULTS OF OPERATIONS
Consolidated
The following table sets forth certain ratios and relationships calculated
from the consolidated statements of income:
1996 1995 1994
----- ----- ------
Percentage increases in
Net sales............................................ 8.7% 12.1% 22.0%
Operating earnings (1)............................... 18.0% 24.8% 109.6%
Earnings from continuing operations (1).............. 17.6% 24.3% 136.2%
Earnings per share (1)............................... 14.6% 23.3% 137.5%
Expressed as a percentage of net sales
Gross margin......................................... 27.7% 27.8% 27.9%
Research and development expense..................... 2.7% 3.0% 2.6%
Selling, general and administrative expense.......... 15.3% 15.9% 17.3%
Operating margin (1)................................. 9.6% 8.9% 8.0%
- --------
(1) Excludes the effect of restructuring charges of $40.0 million ($24.4
million, after-tax) recorded in 1995 and reflects results from continuing
operations.
Sales increased by $254.0 million in 1996 and $314.3 million in 1995. In
1996, the Marine segment recorded a sales increase of $140.2 million, and the
Recreation segment added $113.8 million. These increases reflect growth in
sales of higher-priced large boats and the effect of revenues from the
companies acquired in 1996. Double-digit sales gains in both the domestic and
international marine markets delivered $264.5 million of the 1995 sales
increase.
The Company's gross margin percentages remained relatively unchanged over
the past three years, as benefits from productivity enhancements and product
innovations offset cost increases. Acquisitions and
15
investments in marketing activities resulted in a $23.1 million increase in
selling, general and administrative expenses in 1996. During the past three
years, selling, general and administrative expenses as a percentage of sales
have decreased from 17.3 percent in 1994, to 15.9 percent in 1995 and 15.3
percent in 1996. This trend is due to effective cost management designed to
keep the growth in costs at rates below the growth in revenues. This
relationship resulted in operating margin improvement over the three-year
period.
In 1996, an 18.0 percent increase in operating earnings was achieved on an
8.7 percent sales gain. These comparisons exclude the effect of restructuring
charges recorded in 1995, discussed below. Earnings from continuing operations
increased 17.6 percent in 1996 and 24.3 percent in 1995, excluding the effects
of the 1995 restructuring charges.
The Company's effective tax rate increased to 36.0 percent in 1996 from 35.5
percent in 1995 and 35.0 percent in 1994 reflecting a changing mix of
international earnings. Between 1996 and 1995, weighted average shares
outstanding increased to 98.8 million from 96.2 million primarily due to the
sale of 1.8 million shares to the master trust of the Company's defined
benefit plans in December 1995.
Earnings per share from continuing operations increased to $1.88 in 1996
from $1.38 in 1995 and $1.33 in 1994. Excluding the impact of the 1995
restructuring charges, 1995 earnings per share were $1.64, resulting in a 14.6
percent increase in 1996 and a 23.3 percent increase in 1995.
Restructuring charges and discontinued operations. In the second quarter of
1995, the Company recorded restructuring charges of $40.0 million, which
reduced earnings from continuing operations by $24.4 million and earnings per
share by $0.26. The charges included $25.8 million recorded in the Recreation
segment relating to the divestitures of the Circus World and golf shaft
businesses, and $14.2 million for management transition costs included in
Corporate expenses.
The Company has accounted for the divested freshwater fishing boat unit and
the Technical segment as discontinued operations. In 1995, the Company
recorded an after-tax charge of $7.0 million, or $0.07 per share, relating to
the disposition of the Technical Group.
MARINE SEGMENT
The following table pertains to the Marine segment:
1996 1995 1994
-------- -------- --------
(DOLLARS IN MILLIONS)
Net sales............................... $2,287.3 $2,147.1 $1,882.6
Percentage increase..................... 6.5% 14.0% 30.1%
Operating earnings...................... $ 260.5 $ 229.6 $ 172.5
Percentage increase..................... 13.5% 33.1% 227.9%
Operating margin........................ 11.4% 10.7% 9.2%
Capital expenditures.................... $ 105.2 $ 85.2 $ 66.0
The Marine segment posted sales gains of 6.5 percent and 14.0 percent over
the past two years. The gain in 1996 was the result of higher boat revenues
due to effective marketing programs, investment in new products and
acquisitions. The increase was partially offset by a decline in outboard
engine sales, as inclement weather dampened retail and wholesale activity in
the first half of 1996 versus 1995 and dealers adjusted field inventories.
The 1995 sales increase was favorably affected by growth in international
boat sales, primarily in Europe, and strong global demand for marine engines,
especially in the first six months of 1995.
Operating earnings for the segment reached $260.5 million in 1996, $229.6
million in 1995 and $172.5 million in 1994. Operating margins improved to 11.4
percent in 1996 from 10.7 percent in 1995. This margin improvement resulted
from effective cost management actions and increased investments in product
and process improvements.
In 1995, the previously discussed domestic and international sales increases
accounted for the improvement in operating earnings, offset in part by
increased advertising, marketing and product research and development
expenses.
16
RECREATION SEGMENT
The following table pertains to the Recreation segment:
1996 1995 1994
------ ------ ------
(DOLLARS IN
MILLIONS)
Net sales............... $873.0 $759.2 $709.4
Percentage increase..... 15.0% 7.0% 11.6%
Operating earnings (1).. $ 86.1 $ 76.4 $ 82.8
Percentage increase
(decrease) (1)......... 12.7% (7.7)% 3.5%
Operating margin (1).... 9.9% 10.1% 11.7%
Capital expenditures.... $ 52.7 $ 31.1 $ 34.5
- --------
(1)1995 amounts exclude the $25.8 million restructuring charge.
In 1996, Recreation segment sales increased 15.0 percent to $873.0 million
while operating earnings, excluding the effects of the 1995 restructuring
charge, increased 12.7 percent to $86.1 million. These gains reflect the
contribution of the acquisitions discussed previously, partially offset by a
decline in the sale of bowling capital equipment into East Asian markets.
Operating margins for the segment declined slightly to 9.9 percent in 1996
from 10.1 percent in 1995, excluding the 1995 restructuring charge, reflecting
the effects of retail inventory reductions in fishing tackle and lower margins
experienced in acquired businesses as full benefits of integration activities
had not yet been realized.
The Recreation segment's sales increased 7.0 percent in 1995, to $759.2
million. The improvement resulted primarily from strong East Asian demand for
bowling capital equipment and increased domestic sales of the consumer
products and billiards product lines. Sales of fishing tackle increased both
domestically and internationally.
The Recreation segment operating earnings were $50.6 million in 1995
compared to $82.8 million in 1994. Excluding the restructuring charge, 1995
operating earnings were $76.4 million. The decline resulted from increased
research and development, marketing and manufacturing expenses related to the
Brunswick Indoor Recreation Group's Frameworx capital equipment line, where
shipments began in the third quarter of 1995, and lower margins on sales of
German-manufactured pinsetters due to currency fluctuations. The decline in
1995 was partially offset by higher operating earnings resulting from the
previously discussed increase in fishing tackle sales.
LOOKING TO THE FUTURE
The Company's future performance will be influenced by a number of factors.
Revenues will be affected by the changes in domestic and international
marine market conditions. The Company will emphasize new product
introductions, marketing initiatives and cost management efforts to mitigate
the effects of any adverse changes in market conditions and to enhance its
financial performance. The Company will also benefit from the acquisitions
completed in 1996 and 1997. While these acquisitions will have an immediate
positive effect on the Company's revenues, the full earnings benefits will not
be recognized until integration efforts are near completion.
The Company will also continue to evaluate the profit margins of existing
businesses, making investments where necessary to improve quality, efficiency
and cost; actively managing the supply chain; and adjusting cost structures,
if appropriate.
Engine Emissions Regulations. U.S. Environmental Protection Agency (EPA)
regulations require that certain exhaust emissions from two-cycle, gasoline
marine outboard engines be reduced by 8.3 percent each year for nine years
beginning with the 1998 model year. The Company is implementing a plan that
meets the EPA compliance schedule. It includes both modifying automotive fuel
injection technology for marine use and converting certain two-cycle engines
to four-cycle engines. In 1995, the Company introduced a new 200 horsepower
DFI (direct fuel injection) outboard engine and will begin offering models in
other horsepower
17
ranges in 1997. The new technology requires adjustments to the design of
existing models and will increase manufacturing costs in the near term;
however, per unit costs are expected to decline as sales of these engines
increase.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
Cash generated from operating activities, available cash balances and
selected borrowings are the Company's major sources of funds for investments
and dividend payments.
Cash and cash equivalents totalled $238.5 million at the end of 1996, down
from $344.3 million in 1995.
Cash generated from operating activities totalled $400.1 million in 1996, up
significantly from $280.1 million in 1995 and $121.2 million in 1994. The
primary components of cash generated from operating activities include the
Company's net earnings adjusted for noncash revenues and expenses; the timing
of cash flows relating to operating expenses, sales, and income taxes; and the
management of inventory levels. The increase in cash generated from operating
activities between 1995 and 1996 reflects stronger operating results and
improved inventory management. Included in 1995 and 1994 amounts are $42.2
million and $40.0 million, respectively, of contributions to the Company's
defined benefit plans. Additionally, 1994 includes a payment to the Internal
Revenue Service of approximately $55.0 million in settlement of a prior-year
tax audit obligation.
During 1996, the Company invested $169.9 million in capital expenditures,
compared to $118.0 million in 1995 and $101.1 million in 1994. The $51.9
million increase between 1996 and 1995 reflects the Company's emphasis on
investing to achieve improved production efficiencies and product quality,
growth from new products and expansion of existing product lines. Management
anticipates that 1997 capital expenditures could approach $200.0 million,
principally for growth and productivity.
The Company invested $360.6 million in 1996 to acquire various businesses
including the Roadmaster bicycle and American Camper (formerly the
Nelson/Weather-Rite camping division) businesses from Roadmaster Industries,
Inc., and the Boston Whaler line of boats from Meridian Sports. Management
continues to evaluate acquisition opportunities to build the Company's active
recreation business.
Total debt at year-end 1996 was $568.0 million versus $318.9 million at the
end of 1995, with debt-to-capitalization ratios at those dates of 32.2 percent
and 23.4 percent, respectively. Excluding $100.0 million of debt to be retired
in April 1997, the debt-to-capitalization ratio would have been 28.1 percent
at December 31, 1996. The Company issued $250.0 million of 10-year notes at
6.75 percent during the fourth quarter of 1996 and, on January 3, 1997, $143.0
million was used to fund the acquisition of Igloo Holdings, Inc. The remainder
will be used to retire $100.0 million of 8.125 percent notes maturing on April
1, 1997. The cash used to acquire Igloo Holdings, Inc. was classified as
unrestricted cash held for acquisition of Igloo Holdings, Inc. on the December
31, 1996, balance sheet.
The Company has a substantial amount of financial flexibility and access to
the capital markets stemming from its strong balance sheet, investment-grade
credit ratings and ability to generate significant cash from operating
activities. The Company has $400.0 million available under a long-term line of
credit with a group of banks (see Note 7-Debt) and $350.0 million under a
universal shelf registration filed in 1996 with the Securities and Exchange
Commission for the issuance of equity and/or debt securities.
The Company uses its cash balances and other sources of liquidity to invest
in its active recreation businesses to enhance current product lines, to
acquire complementary businesses and to improve operating efficiencies. These
investments are designed to improve the Company's financial performance and
enhance shareholder value.
FORWARD LOOKING STATEMENTS
Certain statements in this Annual Report are forward looking as defined in
the Private Securities Litigation Reform Law. These statements involve certain
risks and uncertainties that may cause actual results to differ materially
from expectations as of the Date of this Report. These risks include, but are
not limited to, adverse weather conditions retarding sales; inventory
adjustments by major retailers; competitive pricing pressures; success of
planned acquisitions; marketing and cost-management programs and shifts in
market demand.
18
BRUNSWICK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31
1996 1995 1994
-------- -------- --------
(IN MILLIONS, EXCEPT PER
SHARE DATA)
Net sales........................................ $3,160.3 $2,906.3 $2,592.0
Cost of sales.................................... 2,285.0 2,099.2 1,869.2
Selling, general and administrative expense...... 484.0 460.9 448.9
Research and development expense................. 86.5 87.9 67.0
Restructuring charges............................ -- 40.0 --
-------- -------- --------
Operating earnings............................... 304.8 218.3 206.9
-------- -------- --------
Interest expense................................. (33.4) (32.5) (28.5)
Other income and expense......................... 18.9 21.0 16.9
-------- -------- --------
Earnings before income taxes..................... 290.3 206.8 195.3
Income tax provision............................. 104.5 73.2 68.2
-------- -------- --------
Earnings from continuing operations.............. 185.8 133.6 127.1
Loss on disposition of Technical segment....... -- (7.0) --
Earnings from discontinued operations.......... -- 0.6 1.9
-------- -------- --------
Net earnings..................................... $ 185.8 $ 127.2 $ 129.0
======== ======== ========
Earnings (loss) per common share
Continuing operations.......................... $ 1.88 $ 1.38 $ 1.33
Loss on disposition of Technical segment....... -- (.07) --
Earnings from discontinued operations.......... -- .01 .02
-------- -------- --------
Net earnings per common share.................... $ 1.88 $ 1.32 $ 1.35
======== ======== ========
Average shares used for computation of earnings
per share....................................... 98.8 96.2 95.7
======== ======== ========
The notes are an integral part of these consolidated statements.
19
BRUNSWICK CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31
1996 1995
-------- --------
(IN MILLIONS,
EXCEPT SHARE
DATA)
ASSETS
Current assets
Cash and cash equivalents, at cost, which approximates
market................................................... $ 238.5 $ 344.3
Marketable securities..................................... 3.6 11.2
Accounts and notes receivable, less allowances of $17.2
and $16.9................................................ 326.9 253.2
Inventories
Finished goods........................................... 225.3 195.5
Work-in-process.......................................... 137.2 127.7
Raw materials............................................ 82.4 63.4
-------- --------
Net inventories........................................ 444.9 386.6
-------- --------
Prepaid income taxes....................................... 184.4 203.8
Prepaid expenses........................................... 33.6 34.0
Income tax refunds receivable.............................. 9.9 15.0
-------- --------
Current assets......................................... 1,241.8 1,248.1
-------- --------
Property
Land...................................................... 65.0 61.5
Buildings................................................. 404.6 369.1
Equipment................................................. 825.7 683.1
-------- --------
Total land, buildings and equipment.................... 1,295.3 1,113.7
Accumulated depreciation................................... (670.3) (594.1)
-------- --------
Net land, buildings and equipment...................... 625.0 519.6
Unamortized product tooling costs.......................... 60.4 63.3
-------- --------
Net property........................................... 685.4 582.9
-------- --------
Other assets
Unrestricted cash held for acquisition of Igloo Holdings,
Inc...................................................... 143.0 --
Goodwill.................................................. 352.4 119.0
Other intangibles......................................... 137.9 158.9
Investments............................................... 87.5 85.0
Other long-term assets.................................... 154.4 116.7
-------- --------
Other assets........................................... 875.2 479.6
-------- --------
Assets of continuing operations............................ 2,802.4 2,310.6
Net assets of discontinued operations...................... -- 23.5
-------- --------
Total assets........................................... $2,802.4 $2,334.1
======== ========
The notes are an integral part of these consolidated statements.
20
BRUNSWICK CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31
1996 1995
-------- --------
(IN MILLIONS,
EXCEPT SHARE
DATA)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt, including current maturities of long-term
debt..................................................... $ 112.6 $ 6.1
Accounts payable.......................................... 202.4 149.6
Accrued expenses.......................................... 516.1 498.4
-------- --------
Current liabilities.................................... 831.1 654.1
-------- --------
Long-term debt
Notes, mortgages and debentures........................... 455.4 312.8
-------- --------
Deferred items
Income taxes.............................................. 155.6 157.8
Postretirement and postemployment benefits................ 131.7 138.3
Compensation and other.................................... 30.9 28.0
-------- --------
Deferred items......................................... 318.2 324.1
-------- --------
Common shareholders' equity
Common stock; authorized: 200,000,000 shares, $.75 par
value; issued: 102,537,692 76.9 76.9
Additional paid-in capital................................ 302.0 299.4
Retained earnings......................................... 951.3 814.8
Treasury stock, at cost: 4,071,644 shares and 4,633,036
shares................................................... (75.4) (85.0)
Cumulative translation adjustments........................ 11.2 13.7
Unamortized ESOP expense and other........................ (68.3) (76.7)
-------- --------
Common shareholders' equity............................ 1,197.7 1,043.1
-------- --------
Total liabilities and shareholders' equity............. $2,802.4 $2,334.1
======== ========
The notes are an integral part of these consolidated statements.
21
BRUNSWICK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
1996 1995 1994
------ ------ ------
(IN MILLIONS)
Cash flows from operating activities
Net earnings.......................................... $185.8 $127.2 $129.0
Depreciation and amortization......................... 129.7 118.0 118.0
Changes in noncash current assets and current
liabilities of continuing operations:
Change in accounts and notes receivable.............. (26.9) (34.6) (48.5)
Change in inventories................................ 24.2 2.7 (79.1)
Change in prepaid expenses........................... 2.4 (1.1) (9.5)
Change in accounts payable........................... 11.7 (2.5) 33.4
Change in accrued expenses........................... 3.6 6.0 65.1
Income taxes.......................................... 35.2 25.6 (45.4)
Dividends received from equity investments............ 24.5 6.4 2.5
Pension funding (in excess of) less than provision.... 5.0 (33.3) (32.6)
Other, net............................................ 4.9 14.2 (11.7)
Restructuring charges................................. -- 40.0 --
Loss on discontinued operations....................... -- 11.5 --
------ ------ ------
Net cash provided by operating activities.......... 400.1 280.1 121.2
------ ------ ------
Cash flows from investing activities
Acquisitions of businesses............................ (360.6) (10.3) (7.1)
Unrestricted cash held for acquisition of Igloo
Holdings, Inc........................................ (143.0) -- --
Capital expenditures.................................. (169.9) (118.0) (101.1)
Proceeds from businesses disposed..................... 24.1 22.0 --
Investments in marketable securities.................. 7.6 7.0 (18.2)
Payments advanced for long-term supply arrangements... (44.9) -- --
Other, net............................................ (12.3) (5.7) (2.9)
------ ------ ------
Net cash used for investing activities............. (699.0) (105.0) (129.3)
------ ------ ------
Cash flows from financing activities
Net proceeds from issuances of long-term debt......... 248.2 -- --
Net proceeds from equity issuance to pension plan..... -- 40.0 --
Payments of long-term debt............................ (5.8) (6.0) (6.2)
Cash dividends paid................................... (49.3) (47.9) (42.0)
Other, net............................................ -- (2.1) (7.3)
------ ------ ------
Net cash provided by (used for) financing
activities........................................ 193.1 (16.0) (55.5)
------ ------ ------
Net increase (decrease) in cash and cash equivalents... (105.8) 159.1 (63.6)
Cash and cash equivalents at beginning of year......... 344.3 185.2 248.8
------ ------ ------
Cash and cash equivalents at end of year............... $238.5 $344.3 $185.2
====== ====== ======
Supplemental cash flow disclosures:
Interest paid......................................... $ 32.7 $ 34.2 $ 35.1
Income taxes paid, net................................ 69.3 43.8 114.9
Noncash investing and financing activities:
Fair market value of treasury stock issued for
compensation plans and other......................... $ 11.8 $ 11.9 $ 4.0
The notes are an integral part of these consolidated statements.
22
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
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 divested freshwater fishing boat unit and Technical segment as
discontinued operations.
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 are reported using the equity
method.
Use of estimates in the financial statements. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect reported
amounts and related disclosures. Actual results could differ from those
estimates.
Cash and cash equivalents. The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
Inventories. Approximately 51 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). Inventories valued at last-in, first-out (LIFO)
cost were $83.6 million and $83.5 million lower than the FIFO cost of
inventories at December 31, 1996 and 1995, respectively. Inventory cost
includes material, labor and manufacturing overhead.
Property. Property, including major improvements and product tooling costs,
is recorded at cost. Maintenance and repair costs are charged against results
of operations as incurred.
Depreciation is charged against results of operations over the estimated
service lives of the related assets principally using the straight-line
method.
Intangibles. The excess of cost over net assets of businesses acquired is
recorded as goodwill and amortized using the straight-line method, principally
over 40 years. Accumulated amortization was $42.8 million and $35.0 million at
December 31, 1996 and 1995, respectively. The costs of other intangible assets
are amortized over their expected useful lives using the straight-line method.
Accumulated amortization was $293.2 million and $266.9 million at December 31,
1996 and 1995, respectively.
Long-lived assets. The Company continually evaluates whether events and
circumstances have occurred that indicate the remaining estimated useful life
of its intangible and other long-lived assets may warrant revision or that the
remaining balance of such assets may not be recoverable. The Company uses an
estimate of the related 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.
2. ACQUISITIONS
In 1996, the Company acquired the assets of certain businesses, including
the Roadmaster bicycle business from Roadmaster Industries, Inc. on September
6, 1996; the Nelson/Weather-Rite camping division (now American Camper) of
Roadmaster Industries, Inc. on March 8, 1996; and the Boston Whaler line of
boats from Meridian Sports on May 31, 1996. Cash consideration paid in 1996
for these businesses totalled $198.4 million, $119.2 million and $26.6
million, respectively. In January 1997, the Company received an $8.2 million
payment from Roadmaster Industries, Inc. in settlement of the final purchase
price adjustment on the bicycle business, which reduces the final cash
consideration paid for the business to $190.2 million.
In addition to the cash consideration paid in 1996 for these businesses, the
Company assumed certain liabilities. The acquisitions were accounted for as
purchases, and resulted in goodwill of $241.6 million that will be amortized
using the straight-line method over 40 years. The assets and liabilities of
the acquired companies have been recorded in the Company's consolidated
financial statements at their estimated fair values at the
23
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
acquisition dates. These estimates of fair value are subject to change when
final information concerning asset and liability valuations is obtained. The
operating results of each acquisition are included in the Company's results of
operations since the date of acquisition.
On a pro forma basis, the net sales (unaudited) of the Company would have
been $3,305.4 million in 1996 and $3,263.5 million in 1995. These pro forma
sales amounts assume that the acquisitions of Roadmaster, American Camper and
Boston Whaler would have occurred at the beginning of each period presented.
On a pro forma basis, the results of operations of the companies acquired
would not have had a material effect on the Company's net earnings and
earnings per share in 1996 and 1995.
Cash consideration paid for other acquisitions totalled $16.4 million in
1996, $10.3 million in 1995, and $7.1 million in 1994.
On November 18, 1996, the Company signed a definitive agreement to acquire
the stock of Igloo Holdings, Inc. The purchase was completed on January 3,
1997. At December 31, 1996, cash of $143.0 million was classified in long-term
assets as unrestricted cash held for acquisition of Igloo Holdings, Inc.
3. SEGMENT INFORMATION
The Company is a multinational manufacturer and marketer of branded consumer
products designed for outdoor and indoor recreation participants, primarily in
fishing, camping, biking, bowling, billiards and pleasure boating. The
Company's business segments are Recreation and Marine.
Within the Recreation segment, the Company markets fishing products,
including fishing reel and reel/rod combinations, trolling motors and other
fishing accessories; camping products, including tents, sleeping bags,
backpacks, cookware and other accessories; a complete line of ice chests,
beverage coolers and thermoelectric cooler/warmer products; bicycles; bowling
capital equipment, including lanes, pinsetters, and automatic scorers; bowling
balls and other accessories; and billiards tables and accessories. These
products are primarily manufactured in plants throughout the United States and
in some cases sourced from or manufactured in foreign locations. Fishing,
camping, and cooler products, along with bicycles, bowling balls and billiards
equipment are predominantly sold in the United States and are distributed
primarily through mass merchants, sporting goods stores and specialty shops.
Bowling capital equipment is sold through a direct sales force into the United
States and foreign markets. The segment also includes a chain of bowling and
family entertainment centers, primarily located in the United States.
The Marine segment includes a complete line of pleasure boats including
runabouts, cruisers, yachts, high-performance boats and offshore fishing
boats, which are marketed through worldwide dealer networks. The Company also
manufactures outboard, sterndrive and inboard engines, and marine parts and
accessories, which are sold directly to boat builders or through a worldwide
dealer network. The Company's boat and engine manufacturing plants are located
primarily in the United States. The sales of this segment are primarily in the
United States.
INDUSTRY SEGMENTS
ASSETS OF CONTINUING
SALES TO CUSTOMERS OPERATING EARNINGS OPERATIONS
-------------------------- ---------------------- --------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- -------- -------- ------ ------ ------ -------- -------- --------
(IN MILLIONS)
Marine.................. $2,287.3 $2,147.1 $1,882.6 $260.5 $229.6 $172.5 $1,195.3 $1,086.8 $1,070.3
Recreation.............. 873.0 759.2 709.4 86.1 50.6 82.8 826.8 464.2 437.1
Corporate............... -- -- -- (41.8) (61.9) (48.4) 780.3 759.6 540.9
-------- -------- -------- ------ ------ ------ -------- -------- --------
Total................ $3,160.3 $2,906.3 $2,592.0 $304.8 $218.3 $206.9 $2,802.4 $2,310.6 $2,048.3
======== ======== ======== ====== ====== ====== ======== ======== ========
24
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DEPRECIATION AND RESEARCH AND DEVELOPMENT
CAPITAL EXPENDITURES AMORTIZATION EXPENSE
-------------------------- ---------------------- --------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- -------- -------- ------ ------ ------ -------- -------- --------
(IN MILLIONS)
Marine.................. $ 105.2 $ 85.2 $ 66.0 $ 95.3 $ 87.7 $ 91.0 $ 75.4 $ 74.0 $ 55.5
Recreation.............. 52.7 31.1 34.5 32.0 28.2 24.6 11.1 13.9 11.5
Corporate............... 12.0 1.7 0.6 2.4 2.1 2.4 -- -- --
-------- -------- -------- ------ ------ ------ -------- -------- --------
Total................ $ 169.9 $ 118.0 $ 101.1 $129.7 $118.0 $118.0 $ 86.5 $ 87.9 $ 67.0
======== ======== ======== ====== ====== ====== ======== ======== ========
GEOGRAPHIC SEGMENTS
ASSETS OF
SALES TO CUSTOMERS OPERATING EARNINGS CONTINUING OPERATIONS
-------------------------- ---------------------- --------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- -------- -------- ------ ------ ------ -------- -------- --------
(IN MILLIONS)
United States........... $2,722.3 $2,397.1 $2,104.6 $312.2 $229.3 $202.3 $1,799.2 $1,367.2 $1,343.5
Foreign................. 438.0 509.2 487.4 34.4 50.9 53.0 222.9 183.8 163.9
Corporate............... -- -- -- (41.8) (61.9) (48.4) 780.3 759.6 540.9
-------- -------- -------- ------ ------ ------ -------- -------- --------
Total................ $3,160.3 $2,906.3 $2,592.0 $304.8 $218.3 $206.9 $2,802.4 $2,310.6 $2,048.3
======== ======== ======== ====== ====== ====== ======== ======== ========
SUPPLEMENTAL SALES INFORMATION
1996 1995 1994
------ ------ ------
(IN MILLIONS)
Intersegment sales
U.S. to foreign................................... $209.2 $237.1 $231.2
Foreign to U.S.................................... 43.7 38.5 30.3
Export sales........................................ 346.2 288.2 188.1
Sales to unconsolidated affiliates.................. 186.8 125.0 85.8
Sales between domestic and foreign operations generally are priced with
reference to prevailing market prices.
Operating earnings of segments do not include the expenses of corporate
administration, other expenses and income of a nonoperating nature, and
provisions for income taxes.
The Recreation segment's 1995 operating earnings include a $25.8 million
charge for the losses on the divestitures of the golf club shaft business and
Circus World Pizza operations.
The Corporate operating expenses for 1995 include $14.2 million of
management transition expenses and costs associated with an early retirement
and selective separation program at the Company's corporate office.
Corporate assets consist primarily of cash and marketable securities,
prepaid income taxes, unrestricted cash held for acquisition of Igloo
Holdings, Inc. and investments in unconsolidated affiliates.
4. COMMITMENTS AND CONTINGENCIES
Financial Commitments. The Company has entered into agreements, which are
customary in the marine industry, that provide for the repurchase of its
products from a financial institution in the event of repossession upon a
dealer's default. Repurchases and losses incurred under these agreements have
not had and are not expected to have a significant impact on the Company's
results of operations. The maximum potential repurchase commitments at
December 31, 1996 and 1995, were approximately $186.0 million and $158.0
million, respectively.
25
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company also has various agreements with financial institutions that
provide limited recourse on marine and bowling capital equipment sales.
Recourse losses have not had and are not expected to have a significant impact
on the Company's results of operations. The maximum potential recourse
liabilities outstanding under these programs were approximately $39.0 million
at December 31, 1996 and 1995.
The Company had outstanding standby letters of credit and financial
guarantees of approximately $35.2 million and $50.3 million at December 31,
1996 and 1995, 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.
Legal and Environmental. The Company is subject to certain legal and
environmental proceedings and claims which have arisen in the ordinary course
of its business.
The Independent Boat Builders, Inc. ("IBBI"), a boat materials buying group
and a portion of its boat building members, has brought a suit against the
Company in United States District Court, alleging that the Company has
unlawfully acquired and maintained a monopoly in the domestic sterndrive and
outboard engine markets and has attempted to monopolize the domestic
sterndrive and outboard recreational boat markets through its acquisition of
the Company's current boat companies and its marketing, sales and business
practices. The plaintiffs have requested an injunction requiring the Company
to divest its boat manufacturing operations and to cease the alleged
monopolizing practices, as well as actual and treble damages, punitive
damages, and attorneys' fees and costs. The Company has filed its answer to
the complaint and the parties have begun the discovery process. The Company
filed a counterclaim in this litigation against the plaintiffs alleging that
the plaintiffs have unlawfully conspired to restrain trade in violation of
Federal antitrust laws. The Company believes, based upon its assessment of the
complaint and in consultation with counsel, that this litigation is without
merit and plans to aggressively pursue its counterclaim, which seeks
injunctive relief, the dissolution of IBBI, actual and treble damages,
attorneys' fees and costs.
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 Baja Boats, Inc. from Genmar. The Company's total cash payment relating to
these agreements was $22.5 million and had no material impact on the results
of operations of the Company.
The Federal Trade Commission has been conducting an investigation since 1993
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 subpoenas seeking information relating
to the Company's outboard motor sales. The Company understands that other
marine companies have received similar subpoenas from the Federal Trade
Commission.
In light of existing reserves, the Company's litigation and environmental
claims, including those discussed, 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.
5. 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 Company does not hold or issue financial instruments for
trading purposes. The Company prepares periodic analyses of its positions in
derivatives to assess the current and projected status of these agreements.
26
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Gains and losses related to qualifying hedges of firm commitments and
anticipated 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
incurred.
The Company monitors and controls market risk from financial instrument
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 enters into contracts
with banks and investment firms that the Company has continuing business
relationships with and regularly monitors the credit ratings of its
counterparties.
The fair market value of the financial instruments is determined through
dealer quotes and 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. The impact of financial instruments
transactions is not material to the Company's results of operations.
The carrying values of the Company's short-term financial instruments,
including cash and cash equivalents, marketable securities, accounts and notes
receivable, short-term debt and the current maturities of long-term debt,
approximate their fair value because of the short maturity of these
instruments.
Interest Rate Swaps. 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.
At December 31, 1996 and 1995, the Company had three outstanding floating-
to-floating interest rate swap agreements each with a notional principal
amount of $260.0 million that expire in September 2003. The estimated
aggregate market values of these three agreements at December 31, 1996 and
1995, which represents the costs to settle outstanding agreements, were not
material.
Forward Exchange Contracts. The Company enters into forward exchange
contracts, whose durations are usually less than two years, to hedge the U.S.
dollar exposure of its foreign operations. Forward exchange contracts
outstanding at December 31, 1996 and 1995, had contract values of $17.1
million and $72.0 million, respectively, with fair values which were not
materially different from the contract values. The contracts outstanding at
December 31, 1996, mature during 1997.
Commodity Swaps. The Company uses commodity swap agreements to hedge
anticipated purchases of key raw materials. Commodity swap contracts
outstanding at December 31, 1996 and 1995, had a notional value of $24.0
million and $32.0 million, respectively, with fair values that approximate the
notional values. The contracts outstanding at December 31, 1996, mature
through 1998.
6. ACCRUED EXPENSES
Accrued expenses at December 31 were as follows:
1996 1995
------ ------
(IN MILLIONS)
Payroll and other compensation............................. $ 94.1 $ 94.5
Product warranties......................................... 92.7 84.8
Dealer allowances and discounts............................ 79.9 68.2
Litigation and claims...................................... 32.6 39.4
Health and liability insurance............................. 60.7 57.1
Disposition costs and restructuring charges................ 45.3 59.2
Taxes, other than income taxes............................. 15.5 15.5
Other...................................................... 95.3 79.7
------ ------
Accrued expenses........................................... $516.1 $498.4
====== ======
27
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. DEBT
Long-term debt at December 31 consisted of the following:
1996 1995
------ ------
(IN MILLIONS)
Mortgage notes and other, 3% to 10% payable through
2001................................................ $ 33.7 $ 26.8
Notes, 6.75% due 2006, net of discount of $2.2....... 247.8 --
Notes, 8.125% due 1997, net of discount of $0.1...... 100.0 99.9
Debentures, 7.375% due 2023, net of discount of $0.8
and $0.9............................................ 124.2 124.1
Guaranteed ESOP debt, 8.13% payable through 2004..... 62.0 67.8
------ ------
567.7 318.6
------ ------
Current maturities................................... (112.3) (5.8)
------ ------
Long-term debt....................................... $455.4 $312.8
====== ======
Scheduled maturities
1998............................................... $ 11.2
1999............................................... 10.3
2000............................................... 8.3
2001............................................... 8.6
Thereafter......................................... 417.0
------
Total............................................ $455.4
======
At December 31, 1996 and 1995, the fair value of the Company's long-term
debt was $450.0 million and $332.9 million, respectively, as estimated by
using quoted market prices or discounted cash flows based on market rates for
similar types of debt.
The Company has a $400.0 million long-term credit agreement with a group of
banks that terminates on December 31, 2000.
Under terms of the amended agreement, 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 0.11% per annum on the agreement.
Under the agreement, the Company is subject to interest coverage, net worth
and leverage tests, as well as a restriction on secured debt, as defined. The
Company was in compliance with these covenants at December 31, 1996.
On December 10, 1996, the Company sold $250.0 million of 6.75% notes due
December 15, 2006. The proceeds from the sale of the notes were used to
purchase Igloo Holdings, Inc. on January 3, 1997 and will be used to repay, at
maturity, the Company's $100.0 million principal amount of 8.125% notes due
April 1, 1997. Pending such uses, the net proceeds will be used for general
corporate purposes.
8. DISCONTINUED OPERATIONS
In April 1996, the Company announced its intention to divest its freshwater
fishing boat operations, which comprised substantially all of the assets and
certain liabilities of the discontinued Fishing Boat Division in the Marine
segment and included the Starcraft, Fisher, MonArk, Spectrum, Astro and
Procraft brands. Certain assets and liabilities of discontinued operations,
which are being retained by the Company, are reflected in the Company's
continuing operations in 1996 and reserves to cover related exposures have
been established. These disposition transactions, which were completed in the
third quarter of 1996, did not have a significant effect upon the Company's
consolidated results of operations.
28
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The net sales of the freshwater fishing boat unit for the years ended
December 31, 1996, 1995 and 1994, were $82.5 million, $200.2 million and
$175.7 million, respectively. Intercompany sales between the continuing and
discontinued operations that were previously eliminated in consolidation have
been included in continuing operations.
In April 1995, the Company completed the sale of substantially all of the
assets of its Technical Group, which was in the discontinued Technical
segment, with the final disposition of remaining assets occurring in June
1996. Certain liabilities of discontinued operations, which were retained by
the Company, are reflected in the Company's continuing operations and are
adequately covered by existing reserves. In the second quarter of 1995, the
Company recorded a provision of $11.5 million ($7.0 million after-tax)
reflecting a lower than anticipated selling price for the Technical Group. The
net sales of the Technical Group were $7.6 million, $35.1 million, and $135.5
million, for the years 1996, 1995 and 1994, respectively. Operating results of
the Technical Group for 1996, 1995 and 1994 have been recorded against the
divestiture reserve.
9. RESTRUCTURING CHARGES
In the second quarter of 1995, the Company recorded restructuring charges of
$40.0 million ($24.4 million after-tax). The charges consisted of losses of
$25.8 million recorded in the Recreation segment on the divestitures of the
golf club shaft business, completed in the second quarter of 1996, and Circus
World Pizza operations, completed in 1995. Also included were $14.2 million of
management transition expenses including the costs of an early retirement and
selective separation program at the Company's corporate office which was
completed in 1995.
The net sales and operating earnings (losses) (excluding divestiture
provisions) of the divested businesses for each of the three years ended
December 31, 1996 were as follows:
1996 1995 1994
----- ----- -----
(IN MILLIONS)
Net sales.................................................. $10.2 $21.0 $17.2
===== ===== =====
Operating earnings (losses)................................ $ 1.4 $(7.6) $(6.4)
===== ===== =====
10. STOCK PLANS AND MANAGEMENT COMPENSATION
Under the 1991 Stock Plan, the Company may grant stock options, stock
appreciation rights, restricted stock and other various types of awards to
executives and other management employees. Issuances under the plan may be
from either authorized, but unissued shares or treasury shares. The plan
provides for the issuance of a maximum of 11,200,000 shares. The option price
per share has not been less than the fair market value at the date of grant.
The stock options are generally exercisable over a period of 10 years or as
determined by the Human Resource and Compensation Committee of the Board of
Directors. Options vest over 3 years, although the Company provides for
accelerated vesting should certain earnings per share or stock price levels be
attained, or immediately in the event of a change in control.
The Company adopted the disclosure-only provision under Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for Stock-
Based Compensation," as of December 31, 1996, while continuing to measure
compensation cost under APB Opinion No. 25, "Accounting for Stock Issued to
Employees." If the accounting provisions of SFAS No. 123 had been adopted as
of the beginning of 1995, the effect on net earnings for 1996 and 1995 would
have been immaterial.
29
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock option activities for the three years ending December 31, 1996, were
as follows:
WEIGHTED
STOCK AVERAGE
OPTIONS EXERCISE
OUTSTANDING PRICE
----------- --------
(SHARES IN
THOUSANDS)
At January 1, 1994................................... 1,585 $ --
Granted............................................ 719 $18.22
Exercised.......................................... (125) $14.60
Forfeited.......................................... (82) $16.40
----- ------
At December 31, 1994................................. 2,097 $16.27
Granted............................................ 1,396 $19.42
Exercised.......................................... (114) $15.04
Forfeited.......................................... (46) $17.91
----- ------
At December 31, 1995................................. 3,333 $17.61
Granted............................................ 3,054 $21.40
Exercised.......................................... (262) $16.33
Forfeited.......................................... (184) $22.18
----- ------
At December 31, 1996................................. 5,941 $19.48
===== ======
EXERCISABLE WEIGHTED
STOCK AVERAGE SHARES
OPTIONS EXERCISE AVAILABLE
OUTSTANDING PRICE FOR GRANT
----------- -------- ---------
(OPTIONS AND SHARES IN
THOUSANDS)
At December 31, 1994....................... 607 $14.88 2,508
At December 31, 1995....................... 1,386 $15.88 897
At December 31, 1996....................... 1,969 $16.91 4,147
The following table summarizes information about stock options outstanding
at December 31, 1996.
(OPTIONS IN THOUSANDS) OPTIONS OUTSTANDING
---------------------- ---------------------------------
NUMBER
OUTSTANDING WEIGHTED WEIGHTED
AT AVERAGE AVERAGE
RANGE OF EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE
PRICE 1996 LIFE PRICE
----------------- ------------ ----------- --------
$13.88 to $16.75........................ 1,111 5 years $15.38
$16.75 to $20.25........................ 3,063 8 years $18.76
$20.25 to $25.50........................ 1,767 9 years $23.31
OPTIONS EXERCISABLE
---------------------
NUMBER
EXERCISABLE WEIGHTED
AT AVERAGE
DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICE 1996 PRICE
----------------------- ------------ --------
$13.88 to $16.75................................... 1,111 $15.38
$16.75 to $20.25................................... 844 $18.83
$20.25 to $25.50................................... 14 $22.78
The Company maintains a leveraged employee stock ownership plan (ESOP). In
April 1989, the ESOP borrowed $100 million to purchase 5,095,542 shares of the
Company's common stock at $19.625 per share. The debt of the ESOP is
guaranteed by the Company and is recorded in the Company's financial
statements.
30
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The ESOP shares are maintained in a suspense account until released and
allocated to participants' accounts. Shares committed-to-be-released,
allocated and remaining in suspense at December 31 were as follows:
1996 1995
----- -----
(SHARES IN
THOUSANDS)
Committed-to-be-released...................................... 301 298
Allocated..................................................... 1,542 1,451
Suspense...................................................... 2,461 2,789
All ESOP shares are considered outstanding for earnings per share purposes.
Under the grandfather provisions of SOP 93-6, the expense recorded by the
Company is based on cash contributed or committed to be contributed by the
Company to the ESOP during the year, net of dividends received which are
primarily used by the ESOP to pay down debt. The Company's contributions to
the ESOP were as follows:
1996 1995 1994
----- ----- -----
(IN MILLIONS)
Compensation expense................................... $ 4.1 $ 3.1 $ 2.9
Interest expense....................................... 5.3 5.8 6.2
Dividends.............................................. 1.8 2.3 2.1
----- ----- -----
Total debt service payments........................ $11.2 $11.2 $11.2
===== ===== =====
The Company has certain employment agreements and a severance plan that
become effective upon a change in control of the Company which will result in
compensation expense in the period that a change in control occurs.
11. RETIREMENT AND EMPLOYEE BENEFIT COSTS
The Company has pension and retirement plans covering substantially all of
its employees, including certain employees in foreign countries. Plan benefits
are based on years of service, and for some plans, the average compensation
prior to retirement. Pension 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. Plan assets generally consist of debt and
equity securities, real estate and investments in insurance contracts.
Pension costs of continuing operations for 1996, 1995 and 1994, included the
following components:
1996 1995 1994
----- ----- -----
(IN MILLIONS)
Service cost-benefits earned during the period....... $16.0 $11.6 $11.7
Interest cost on projected benefit obligation........ 43.1 34.2 31.2
Actual return on assets.............................. (91.9) (90.8) 3.0
Net amortization and deferral........................ 41.9 57.7 (34.7)
----- ----- -----
Net pension cost..................................... $ 9.1 $12.7 $11.2
===== ===== =====
31
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The funded status of the plans and the amounts recognized in the Company's
balance sheets at December 31 were as follows:
1996 1995
----------------------- -----------------------
PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
(IN MILLIONS)
Actuarial present value of:
Vested benefit
obligation.............. $(461.4) $(26.1) $(440.1) $(43.9)
Nonvested benefit
obligation.............. (29.7) (0.3) (30.5) (0.4)
------- ------ ------- ------
Accumulated benefit
obligation................ (491.1) (26.4) (470.6) (44.3)
Effects of anticipated
future compensation levels
and other events.......... (60.9) (8.0) (59.3) (7.5)
------- ------ ------- ------
Projected benefit
obligation................ (552.0) (34.4) (529.9) (51.8)
Plan assets at fair value.. 616.9 2.5 543.3 13.7
------- ------ ------- ------
Plan assets in excess of
(less than) projected
benefit obligation........ 64.9 (31.9) 13.4 (38.1)
Unrecognized net transition
obligation (asset)........ (0.7) 1.3 (6.6) 1.6
Unrecognized prior service
cost...................... 17.7 (0.3) 17.2 (0.1)
Net unrecognized (gain)
loss from past experience
different from assumed and
effects of changes in
assumptions............... (2.9) 5.0 60.4 10.0
Adjustment to recognize
minimum liability......... -- (0.5) -- (6.1)
------- ------ ------- ------
Pension asset (liability)
recognized in financial
statements................ $ 79.0 $(26.4) $ 84.4 $(32.7)
======= ====== ======= ======
The projected benefit obligations were determined primarily using assumed
weighted average discount rates of 7.75% in 1996 and 7.25% in 1995, and an
assumed compensation increase of 5.5% in 1996 and 1995. The assumed weighted
average long-term rate of return on plan assets was primarily 9% in 1996 and
1995.
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 April 1,
2001, 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 equal to the present value of accumulated benefits upon a change
in control of the Company.
The Company also sponsors other defined contribution retirement plans whose
costs are not material.
In addition to providing benefits to present employees, the Company
currently provides certain health care and life insurance benefits for
eligible retired employees that have fulfilled specific age and service
requirements. The Company monitors the cost of these plans and reserves the
right to make additional changes or terminate these benefits in the future.
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's plans are not funded; claims are paid as
incurred.
32
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net periodic postretirement benefit cost of continuing operations for 1996,
1995 and 1994 included the following components:
1996 1995 1994
---- ---- ----
(IN MILLIONS)
Service cost-benefits attributed to service during the
period................................................ $1.7 $1.2 $1.5
Interest cost on accumulated postretirement benefit
obligation............................................ 4.0 4.3 4.2
Net amortization and deferral.......................... (0.7) (1.0) (0.4)
---- ---- ----
Net periodic postretirement benefit cost............... $5.0 $4.5 $5.3
==== ==== ====
The postretirement benefit amounts recognized in the Company's balance
sheets at December 31 were as follows:
1996 1995
----- -----
(IN
MILLIONS)
Accumulated postretirement benefit obligation:
Retirees.................................................... $33.9 $40.9
Fully eligible active plan participants..................... 5.7 6.5
Other active plan participants.............................. 28.5 29.3
----- -----
Total..................................................... 68.1 76.7
Unrecognized prior service cost............................... 3.1 2.4
Unrecognized net gains........................................ 14.7 6.9
----- -----
Postretirement liability recognized in financial statements... $85.9 $86.0
===== =====
The accumulated postretirement benefit obligation was determined using
weighted average discount rates of 7.75% in 1996 and 7.25% in 1995, and an
assumed compensation increase of 5.5% in 1996 and 1995. The health care cost
trend rates were assumed to be 9% and 6% in 1997 for pre-65 and post-65
benefits, respectively, gradually declining to 5% after five years and one
year, respectively, and remaining at that level thereafter. The health care
cost trend rates were assumed to be 9.7% and 7% in 1996 for pre-65 and post-65
benefits, respectively, gradually declining to 5% after six years and two
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 $8.6 million at December 31,
1996 and the net periodic cost by $1.1 million for the year then ended.
The Company also provides postemployment benefits to qualified former or
inactive employees. The liability for these benefits has been recognized in
the financial statements. The cost of providing these benefits is not
material. The Company does not fund these benefits and has the right to modify
these plans in the future.
12. INCOME TAXES
The sources of earnings before income taxes are presented as follows:
1996 1995 1994
------ ------ ------
(IN MILLIONS)
United States....................................... $284.9 $195.8 $188.5
Foreign............................................. 5.4 11.0 6.8
------ ------ ------
Earnings before income taxes........................ $290.3 $206.8 $195.3
====== ====== ======
33
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The income tax provision (benefit) consisted of the following:
1996 1995 1994
------ ----- -----
(IN MILLIONS)
CURRENT TAX EXPENSE
U.S. Federal....................................... $ 73.4 $56.4 $47.3
State and local.................................... 3.4 8.5 2.4
Foreign............................................ 8.8 7.7 8.4
------ ----- -----
Total current.................................... 85.6 72.6 58.1
------ ----- -----
DEFERRED TAX EXPENSE
U.S. Federal....................................... 11.1 2.0 4.2
State and local.................................... 6.9 (2.4) 6.6
Foreign............................................ 0.9 1.0 (0.7)
------ ----- -----
Total deferred................................... 18.9 0.6 10.1
------ ----- -----
Total provision.................................. $104.5 $73.2 $68.2
====== ===== =====
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities at December 31 are as follows:
1996 1995
------ ------
(IN MILLIONS)
DEFERRED TAX ASSETS
Litigation and claims............................... $ 14.2 $ 18.3
Product warranty.................................... 37.2 36.9
Dealer allowance and discounts...................... 16.5 15.2
Bad debts........................................... 9.3 9.5
Sales of businesses................................. 10.2 16.1
Insurance reserves.................................. 31.3 28.9
Restructuring....................................... 9.0 13.5
Loss carryforwards and carrybacks................... 12.3 14.4
Compensation and benefits........................... 10.7 8.9
Other............................................... 34.0 45.3
Valuation allowance................................. (0.3) (3.2)
------ ------
Total deferred tax assets......................... $184.4 $203.8
====== ======
DEFERRED TAX LIABILITIES (ASSETS)
Depreciation and amortization....................... $ 28.7 $ 32.6
Postretirement and postemployment benefits.......... (24.2) (22.1)
Other assets and investments........................ 87.7 84.7
Other............................................... 63.4 62.6
------ ------
Total deferred tax liabilities.................... $155.6 $157.8
====== ======
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.
Deferred taxes have been provided, as required, on the undistributed
earnings of foreign subsidiaries and unconsolidated affiliates.
34
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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:
1996 1995 1994
------ ----- -----
(IN MILLIONS)
Income tax provision at 35%........................ $101.6 $72.4 $68.4
State and local income taxes, net of Federal income
tax effect........................................ 6.7 4.0 5.6
Foreign sales corporation benefit.................. (2.5) (1.7) (1.5)
Taxes related to foreign income, net of credits.... 1.2 0.8 (2.3)
Goodwill and other amortization.................... 0.9 0.8 0.8
Other.............................................. (3.4) (3.1) (2.8)
------ ----- -----
Actual income tax provision........................ $104.5 $73.2 $68.2
====== ===== =====
Effective tax rate................................. 36.0% 35.5% 35.0%
====== ===== =====
In December 1996, the Company received notification that the income
allocation and tax basis of assets distributed from two partnership
investments are being challenged by the IRS. Should the IRS prevail, it may
result in a cash payment of up to approximately $60 million for taxes due plus
accrued interest. The Company strongly disagrees with the IRS position and
will vigorously contest it. Although the outcome cannot be predicted with
certainty, it is not expected to have an unfavorable impact on the Company's
results of operations.
In January 1994, the Company reached an agreement with the U.S. Internal
Revenue Service regarding the issue of deductibility of approximately $500
million of acquired 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 for the acquired intangible assets resulted in an initial
obligation by the Company to pay the IRS approximately $55 million
representing taxes and interest, net of taxes for the years 1986 through 1993.
This agreement had no impact on the Company's consolidated results of
operations.
35
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. CONSOLIDATED COMMON SHAREHOLDERS' EQUITY
UNAMORTIZED
ADDITIONAL CUMULATIVE ESOP
COMMON PAID-IN RETAINED TREASURY TRANSLATION EXPENSE
STOCK CAPITAL EARNINGS STOCK ADJUSTMENTS AND OTHER TOTAL
------ ---------- -------- -------- ----------- ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Balance, December 31,
1993................... $75.5 $261.4 $648.5 $(102.7) $ 7.9 $(86.2) $ 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 -- 4.4 -- 5.9 10.4
Deferred
compensation--ESOP... -- -- -- -- -- 5.0 5.0
Currency translation.. -- -- -- -- 3.9 -- 3.9
----- ------ ------ ------- ----- ------ --------
Balance, December 31,
1994................... $75.5 $261.5 $735.5 $ (98.3) $11.8 $(75.3) $ 910.7
----- ------ ------ ------- ----- ------ --------
1995
Net earnings.......... -- -- 127.2 -- -- -- 127.2
Dividends declared
($.50 per common
share)............... -- -- (47.9) -- -- -- (47.9)
Compensation plans and
other................ -- (0.7) -- 13.3 -- (6.6) 6.0
Deferred
compensation--ESOP... -- -- -- -- -- 5.2 5.2
Purchase of stock by
pension plan master
trust................ 1.4 38.6 -- -- -- -- 40.0
Currency translation.. -- -- -- -- 1.9 -- 1.9
----- ------ ------ ------- ----- ------ --------
Balance, December 31,
1995................... $76.9 $299.4 $814.8 $ (85.0) $13.7 $(76.7) $1,043.1
----- ------ ------ ------- ----- ------ --------
1996
Net earnings.......... -- -- 185.8 -- -- -- 185.8
Dividends declared
($.50 per common
share)............... -- -- (49.3) -- -- -- (49.3)
Compensation plans and
other................ -- 2.6 -- 9.6 -- 2.5 14.7
Deferred
compensation--ESOP... -- -- -- -- -- 5.9 5.9
Currency translation.. -- -- -- -- (2.5) -- (2.5)
----- ------ ------ ------- ----- ------ --------
Balance, December 31,
1996................... $76.9 $302.0 $951.3 $ (75.4) $11.2 $(68.3) $1,197.7
===== ====== ====== ======= ===== ====== ========
At December 31, 1996, 1995 and 1994, the Company had no preferred stock
outstanding (Authorized: 12.5 million shares, $.75 par value at December 31,
1996).
36
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Common and treasury stock activities were as follows:
COMMON TREASURY
STOCK STOCK
------ --------
(SHARES IN
MILLIONS)
Balance, December 31, 1993................................ 100.7 (5.4)
----- ----
1994
Compensation plans and other............................ -- 0.2
----- ----
Balance, December 31, 1994................................ 100.7 (5.2)
----- ----
1995
Compensation plans and other............................ -- 0.6
Purchase of stock by pension plan master trust.......... 1.8 --
----- ----
Balance, December 31, 1995................................ 102.5 (4.6)
----- ----
1996
Compensation plans and other............................ -- 0.5
----- ----
Balance, December 31, 1996................................ 102.5 (4.1)
===== ====
14. 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:
1996 1995 1994
----- ----- -----
(IN MILLIONS)
Basic expense........................................ $29.6 $21.5 $21.1
Contingent expense................................... 0.4 0.5 0.5
Sublease income...................................... (1.1) (1.9) (1.7)
----- ----- -----
Rent expense, net.................................... $28.9 $20.1 $19.9
===== ===== =====
Future minimum rental payments at December 31, 1996, under agreements
classified as operating leases with noncancelable terms in excess of one year,
are as follows:
(IN MILLIONS)
-------------
1997................................................................ $17.1
1998................................................................ 16.5
1999................................................................ 14.0
2000................................................................ 12.6
2001................................................................ 9.6
Thereafter.......................................................... 13.7
-----
Total (not reduced by minimum sublease rentals of $1.4 million). $83.5
=====
37
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. PREFERRED SHARE PURCHASE RIGHTS
In February 1996, the Board of Directors declared a dividend of one
Preferred Share Purchase Right (Right) on each outstanding share of the
Company's common stock. Under certain conditions, each holder of Rights may
purchase one one-thousandth of a share of a new series of junior participating
preferred stock at an exercise price of $85 for each Right held. The Rights
expire on April 1, 2006.
The Rights become exercisable at the earlier of (1) a public announcement
that a person or group acquired or obtained the right to acquire 15% or more
of the Company's common stock or (2) fifteen days (or such later time as
determined by the Board of Directors) 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, may be redeemed by the
Company at a price of $.01 per Right at any time prior to a person's or
group's acquisition of 15% or more of the Company's common stock. 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.
16. UNCONSOLIDATED AFFILIATES AND SUBSIDIARIES
The Company has certain unconsolidated foreign and domestic affiliates that
are accounted for using the equity method.
Summary financial information of the unconsolidated affiliates is presented
below:
1996 1995 1994
------- ------- -------
(IN MILLIONS)
Net sales...................................... $ 489.5 $ 414.4 $ 392.3
------- ------- -------
Gross margin................................... $ 83.8 $ 62.9 $ 80.4
------- ------- -------
Net earnings................................... $ 32.1 $ 17.8 $ 26.0
------- ------- -------
Company's share of net earnings................ $ 14.7 $ 11.5 $ 10.1
------- ------- -------
Current assets................................. $ 199.3 $ 200.1 $ 178.5
Noncurrent assets.............................. 153.0 123.5 114.2
------- ------- -------
Total assets................................... 352.3 323.6 292.7
Current liabilities............................ (170.1) (157.4) (134.9)
Noncurrent liabilities......................... (27.7) (17.8) (27.2)
------- ------- -------
Net assets..................................... $ 154.5 $ 148.4 $ 130.6
======= ======= =======
The net sales of affiliates include an insignificant amount of sales to the
Company.
38
BRUNSWICK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
17. QUARTERLY DATA (UNAUDITED)
QUARTER
----------------------------------
1ST 2ND 3RD 4TH YEAR
------- ------- ------- ------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
1996
Net sales........................ $ 738.9 $ 858.3 $ 763.6 $ 799.5 $3,160.3
Gross margin..................... 214.9 256.4 207.5 196.5 875.3
------- ------- ------- ------- --------
Earnings from continuing
operations...................... $ 46.4 $ 69.8 $ 40.5 $ 29.1 $ 185.8
Earnings (loss) from
discontinued operations....... (1.0) 1.0 -- -- --
------- ------- ------- ------- --------
Net earnings................... $ 45.4 $ 70.8 $ 40.5 $ 29.1 $ 185.8
======= ======= ======= ======= ========
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations.......... $ .47 $ .71 $ .41 $ .29 $ 1.88
Earnings (loss) from
discontinued operations....... (.01) .01 -- -- --
------- ------- ------- ------- --------
Net earnings..................... $ .46 $ .72 $ .41 $ .29 $ 1.88
======= ======= ======= ======= ========
Dividends declared............... $ .125 $ .125 $ .125 $ .125 $ .50
======= ======= ======= ======= ========
COMMON STOCK PRICE (NYSE)
High........................... $24 5/8 $23 3/4 $24 5/8 $25 3/4 $ 25 3/4
Low............................ 21 1/4 20 18 1/8 23 1/2 18 1/8
1995
Net sales........................ $ 742.5 $803.7 $ 694.6 $ 665.5 $2,906.3
Gross margin..................... 209.0 237.3 188.6 172.2 807.1
------- ------- ------- ------- --------
Earnings from continuing
operations...................... $ 40.2 $ 36.0 $ 35.0 $ 22.4 $ 133.6
Loss on disposition of
Technical segment............. -- (7.0) -- -- (7.0)
Earnings (loss) from
discontinued operations....... -- 1.1 (0.3) (0.2) 0.6
------- ------- ------- ------- --------
Net earnings..................... $ 40.2 $ 30.1 $ 34.7 $ 22.2 $ 127.2
======= ======= ======= ======= ========
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations.......... $ .42 $ .37 $ .36 $ .23 $ 1.38
Loss on disposition of
Technical segment............. -- (.07) -- -- (.07)
Earnings from discontinued
operations.................... -- .01 -- -- .01
------- ------- ------- ------- --------
Net earnings..................... $ .42 $ .31 $ .36 $ .23 $ 1.32
======= ======= ======= ======= ========
Dividends declared............... $ .125 $ .125 $ .125 $ .125 $ .50
======= ======= ======= ======= ========
COMMON STOCK PRICE (NYSE)
High........................... $ 21 $23 1/2 $21 3/8 $ 24 $ 24
Low............................ 18 7/8 16 3/8 16 7/8 19 16 3/8
The 1996 and 1995 results have been restated to segregate the results of
operations of the Company's divested freshwater fishing boat unit as
discontinued operations. Second quarter net earnings in 1995 include after-tax
restructuring charges of $24.4 million for losses on the divestitures of the
golf club shaft business and Circus World Pizza operations in the Recreation
segment and management transition expenses and the cost of an early retirement
and selective separation program at the Company's corporate office.
18. SUBSEQUENT EVENT (UNAUDITED)
On March 18, 1997, the Company received notification from the Federal Trade
Commission that the investigation referenced in footnote 4 "Commitments and
Contingencies" on page 26 had been concluded, with no action warranted by the
Commission.
39
REPORT OF MANAGEMENT
The financial data in this report, including the audited financial
statements, have been prepared by management, which is responsible for their
integrity and objectivity. The statements have been prepared in conformity
with generally accepted accounting principles and include some amounts that
are based upon management's best estimates and judgments to present fairly the
results of operations.
The Company maintains accounting and related internal control systems which
professional finance managers are responsible for implementing and overseeing.
These systems are intended to provide reasonable assurance, at reasonable
cost, that assets are safeguarded and to produce accurate financial records. A
staff of corporate auditors periodically reviews these systems and controls
and compliance therewith.
The Audit and Finance Committee of the Board of Directors, comprised
entirely of outside directors, meets regularly with the independent public
accountants, management and internal auditors to review the results of their
work and confirm that they are properly fulfilling their responsibilities.
40
REPORT OF INDEPENDENT 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, 1996
and 1995, and the related consolidated statements of income and cash flows for
each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
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
January 29, 1997
41
BRUNSWICK CORPORATION
SIX-YEAR FINANCIAL SUMMARY
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT RATIOS AND PER SHARE DATA)
Results of Operations
Data
Net sales............. $3,160.3 $2,906.3 $2,592.0 $2,125.0 $1,980.5 $1,756.3
Depreciation and
amortization......... 129.7 118.0 118.0 116.0 113.8 123.0
Restructuring charges. -- 40.0 -- -- -- --
Operating earnings
(loss)............... 304.8 218.3 206.9 98.7 80.4 (13.5)
Earnings (loss) before
income taxes......... 290.3 206.8 195.3 85.4 62.6 (35.5)
Earnings (loss) from
continuing operations
before extraordinary
item, cumulative
effect of accounting
changes and
discontinued
operations........... $ 185.8 $ 133.6 $ 127.1 $ 53.8 $ 40.1 $ (31.9)
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 on disposition
of Technical
segment............ -- (7.0) -- (12.2) (26.0) --
Earnings (loss) from
discontinued
operations......... -- 0.6 1.9 0.7 (2.1) 8.2
-------- -------- -------- -------- -------- --------
Net earnings
(loss)........... $ 185.8 $ 127.2 $ 129.0 $ 23.1 $ (26.3) $ (23.7)
======== ======== ======== ======== ======== ========
Per Common Share Data
Earnings (loss) from
continuing operations
before extraordinary
item, cumulative
effect of accounting
changes and
discontinued
operations........... $ 1.88 $ 1.38 $ 1.33 $ .56 $ .43 $ (.36)
Cumulative effect on
prior years of
changes in accounting
principles........... -- -- -- (.15) (.41) --
Extraordinary loss
from retirement of
debt................. -- -- -- (.05) -- --
Discontinued
operations
Loss on disposition
of Technical
segment............ -- (.07) -- (.13) (.28) --
Earnings (loss) from
discontinued
operations......... -- .01 .02 .01 (.02) .09
-------- -------- -------- -------- -------- --------
Net earnings
(loss)........... $ 1.88 $ 1.32 $ 1.35 $ .24 $ (.28) $ (.27)
-------- -------- -------- -------- -------- --------
Dividends declared.... $ .50 $ .50 $ .44 $ .44 $ .44 $ .33
Dividends paid........ .50 .50 .44 .44 .44 .44
Book value............ 12.16 10.66 9.55 8.44 8.65 8.79
Balance Sheet Data
Capital expenditures.. $ 169.9 $ 118.0 $ 101.1 $ 94.3 $ 87.6 $ 73.8
Assets of continuing
operations........... 2,802.4 2,310.6 2,048.3 1,922.0 1,829.4 1,721.9
Debt
Short-term.......... $ 112.6 $ 6.1 $ 8.2 $ 11.9 $ 10.4 $ 6.3
Long-term........... 455.4 312.8 318.8 324.5 310.1 315.9
-------- -------- -------- -------- -------- --------
Total debt........ 568.0 318.9 327.0 336.4 320.5 322.2
Common shareholders'
equity............... 1,197.7 1,043.1 910.7 804.4 822.5 778.7
-------- -------- -------- -------- -------- --------
Total
capitalization..... $1,765.7 $1,362.0 $1,237.7 $1,140.8 $1,143.0 $1,100.9
======== ======== ======== ======== ======== ========
Other Data
Return on beginning
shareholders' equity. 17.8% 14.7% 15.8% 6.5% 5.1% (3.9)%
Effective tax rate
(benefit)............ 36.0% 35.5% 35.0% 37.0% 36.0% (10.1)%
Debt-to-capitalization
rate................. 32.2% 23.4% 26.4% 29.5% 28.0% 29.3%
Common Stock Price
(NYSE)
High.................. $ 25 3/4 $ 24 $ 25 1/8 $ 18 1/2 $ 17 3/4 $ 16 1/8
Low................... 18 1/8 16 3/8 17 12 1/2 12 1/4 8 3/4
Close................. 24 24 18 7/8 18 16 1/4 13 7/8
The Notes to Consolidated Financial Statements should be read in conjunction
with the above summary.
42
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated January 29, 1997, 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), Form S-8
(File No. 33-56193), Form S-8 (File No. 33-61835), Form S-8 (File No. 33-
65217), Form S-8 (File No. 333-04289) and Form S-3 (File No. 333-9997).
Arthur Andersen LLP
Chicago, Illinois
March 27, 1997
43
BRUNSWICK CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
CHARGES
TO
BALANCE AT PROFIT BALANCE
ALLOWANCES FOR POSSIBLE BEGINNING AND AT END OF
LOSSES ON RECEIVABLES OF PERIOD LOSS WRITE-OFFS RECOVERIES OTHER PERIOD
- ----------------------- ---------- ------- ---------- ---------- ----- ---------
(IN MILLIONS)
1996................... $16.9 $5.3 $(7.0) $ 0.4 $ 1.6* $17.2
===== ==== ===== ===== ===== =====
1995................... $18.1 $5.1 $(6.4) $ 0.4 $(0.3) $16.9
===== ==== ===== ===== ===== =====
1994................... $15.8 $5.9 $(4.3) $ 1.1 $(0.4) $18.1
===== ==== ===== ===== ===== =====
- --------
* Includes $2.1 million relating to acquisitions
This schedule reflects only the financial information of continuing
operations.
DEFERRED TAX ASSET
VALUATION ALLOWANCE
- -------------------
1996................... $ 3.2 $ -- $ -- $(2.9) $ -- $ 0.3
===== ==== ===== ===== ===== =====
1995................... $ 3.2 $ -- $ -- $ -- $ -- $ 3.2
===== ==== ===== ===== ===== =====
1994................... $ 5.8 $ -- $ -- $(2.6) $ -- $ 3.2
===== ==== ===== ===== ===== =====
This account reflects the adoption of SFAS No. 109, "Accounting for Income
Taxes", which was adopted effective January 1, 1992. The Company utilized $2.6
million of foreign tax credits in 1994 and $2.9 million of capital loss
carryforwards in 1996 to reduce income tax expense for the year.
This schedule reflects only the financial information of continuing
operations.
44
EXHIBIT INDEX
-------------
Exhibit
Number Description
- ------- -----------
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 Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock filed as Exhibit 3.2 to the
Company's Annual Report on Form 10-K for 1995 and hereby
incorporated by reference.
3.3 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 Officers' Certificate setting forth terms of the Company's
$125,000,000 principal amount of 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.
4.3 Form of the Company's $250,000,000 principal amount of 6.75% Notes
due December 15, 2006 filed as Exhibit 4.1 to the Company's Current
Report on Form 8-K dated December 10, 1996 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 February 5, 1996, between the Company
and Harris Trust and Savings Bank filed as Exhibit 1 to the
Company's Registration Statement for Preferred Share Purchase Rights
on Form 8-A dated March 13, 1996 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
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Company's Annual Report on Form 10-K for 1992 and hereby
incorporated by reference.
10.7* Amended and Restated Employment Agreement dated February 3, 1997 by
and between the Company and Peter N. Larson.
10.8* Employment Agreement dated December 1, 1995 by and between the
Company and Peter B. Hamilton filed as Exhibit 10.8 to the Company's
Annual Report on Form 10-K for 1995 and hereby incorporated by
reference.
10.9* Form of Employment Agreement by and between the Company and each of
W. J. Barrington, K. J. Chieger, J. W. Dawson, F. J. Florjancic,
Jr., P. B. Hamilton, D. D. Jones, R. S. O'Brien, V. J. Reich, J. A.
Schenk, R. C. Steinway and K. B. Zeigler filed as Exhibit 10.9 to
the Company's Annual Report on Form 10-K for 1995 and hereby
incorporated by reference.
10.10* 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.
10.11* 1995 Stock Plan for Non-Employee Directors filed as Exhibit B to the
Company's definitive Proxy Statement dated March 19, 1996 for the
Annual Meeting of Stockholders on April 24, 1996 and hereby
incorporated by reference.
10.12* 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.
10.13* 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
-3-
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.
10.14* 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.
10.15* Form of Indemnification Agreement by and between the Company and
each of N. D. Archibald, M. J. Callahan, J. P. Diesel, M. A.
Fernandez, P. Harf, G. D. Kennedy, B. K. Koken, J. W. Lorsch, B. M.
Musham, K. Roman 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.
10.16* 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.
10.17* Indemnification Agreement dated April 1, 1995 by and between the
Company and P. N. Larson filed as Exhibit 10.17 to the Company's
Annual Report on Form 10-K for 1995 and hereby incorporated by
reference.
10.18* Form of Indemnification Agreement by and between the Company and
each of W. J. Barrington, K. J. Chieger, J. W. Dawson, F. J.
Florjancic, Jr., P. B. Hamilton, D. D. Jones, R. S. O'Brien, V. J.
Reich, J. A. Schenk, R. C. Steinway, and K. B. Zeigler filed as
-4-
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.
10.19* 1991 Stock Plan filed as Exhibit A to the Company's definitive Proxy
Statement dated March 19, 1996 for the Annual Meeting of
Stockholders on April 24, 1996 and hereby incorporated by reference.
10.20* Change In Control Severance Plan filed as Exhibit 10.22 to the
Company's Annual Report on Form 10-K for 1989 and hereby
incorporated by reference.
10.21* Brunswick Performance Plan for 1996 filed as Exhibit 10.22 to the
Company's Annual Report on Form 10-K for 1995 and hereby
incorporated by reference.
10.22* Brunswick Performance Plan for 1997.
10.23* Brunswick Strategic Incentive Plan for 1994-1996 and 1995-1997 filed
as Exhibit 10.23 to the Company's Annual Report on Form 10-K for
1993 and hereby incorporated by reference.
10.24* Brunswick Strategic Incentive Plan for 1996-1997 filed as Exhibit
10.24 to the Company's Annual Report on Form 10-K for 1995 and
hereby incorporated by reference.
10.25* Brunswick Strategic Incentive Plan for 1997-1998.
21.1 Subsidiaries of the Company.
24.1 Power of Attorney.
27.1 Financial Data Schedule
-5-