BRUNSWICK CORP

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Statements of Comprehensive Income

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Cash Flows

Brunswick Corporation

Condensed Consolidated Statements of Shareholders' Equity

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

Note 1 – Significant Accounting Policies

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

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

The Company maintains its financial records on the basis of a fiscal year ending on December 31, with the fiscal quarters spanning approximately thirteen weeks. The first quarter ends on the Saturday closest to the end of the first thirteen-week period. The second and third quarters are thirteen weeks in duration and the fourth quarter is the remainder of the year. The first quarter of fiscal year 2024 ended on March 30, 2024 and the first quarter of fiscal year 2023 ended on April 1, 2023.

Recently Issued Accounting Standards

Segment Reporting: In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures, which adds new disclosure requirements related to significant segment expenses regularly provided to the chief operating decision maker (CODM) and included in each reported measure of segment profit or loss, other segment items that constitute the difference between segment revenues less significant segment expenses and the measure of profit or loss, disclosure of the CODMs title and position as well as an explanation of how the CODM uses the reported measures and expanded interim disclosures. ASU 2023-07 is effective for financial statements for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. We are currently evaluating the potential impact of adopting this guidance on the consolidated financial statements.

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

Note 2 –Revenue Recognition

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

As of December 31, 2023,$187.1 million of contract liabilities associated with extended warranties, deferred revenue and customer deposits were reported in Accrued expenses and Other long-term liabilities, of which $20.5 million were recognized as revenue during the three months ended March 30, 2024. As of March 30, 2024, total contract liabilities were $198.4 million. The total amount of the transaction price allocated to unsatisfied performance obligations as of March 30, 2024 was $189.8 million for contracts greater than one year, which primarily relates to extended warranties. The Company expects to recognize $48.6 million of this amount in 2024, $52.0 million in 2025, and $89.2 million thereafter.

Note 3 –Restructuring, Exit and Impairment Activities

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

During the three months ended March 30, 2024 and April 1, 2023, the Company recorded restructuring charges related to headcount reductions and related costs associated with streamlining the enterprise-wide cost structure and improving operating efficiencies.

The following table is a summary of these expenses for the three months ended March 30, 2024:

(A) Cash payments for the three months ended March 30, 2024 may include payments related to prior period charges.

(B) Restructuring, exit and impairment charges accrued as of March 30, 2024 are expected to be paid in the next twelve months.

The following table is a summary of these expenses for the three months ended April 1, 2023:

(A) Cash payments for the three months ended April 1, 2023 may include payments related to prior period charges.

Note 4 –Acquisitions

2023 Acquisitions

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

The Company paid net cash consideration of $16.0 million for these acquisitions. The opening balance sheets, which are preliminary and subject to change in the measurement period as the Company finalizes the purchase price allocation and fair value estimates, include $13.9 million of goodwill and $3.3 million of customer relationships. The amount assigned to customer relationships will be amortized over the estimated useful life of 10 years. Transaction costs associated with these acquisitions were not material to the Company's consolidated results of operations.

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

The opening balance sheet, which is preliminary and subject to change in the measurement period as the Company finalizes the purchase price allocation and fair value estimates, includes $38.7 million of goodwill, $20.7 million of trade names, $8.4 million of customer relationships, and $7.1 million of developed technology. The amounts assigned to customer relationships and developed technology will be amortized over the estimated useful lives of 15 years and 10 years, respectively. Transaction costs associated with the acquisition of $1.9 million were expensed as incurred within Selling, general and administrative expense in 2023.

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

Note 5 –Financial Instruments

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

Cross-Currency Swaps. The Company enters into cross-currency swaps to hedge Euro currency exposures of the net investment in certain foreign subsidiaries. The cross-currency swaps were designated as net investment hedges, with the amount of gain or loss associated with the change in fair value of these instruments deferred within Accumulated other comprehensive loss and recognized upon termination of the respective investment. During the fourth quarter of 2023, the company entered into $250.0 million of cross-currency swap contr acts. As of March 30, 2024 and December 31, 2023, the notional value of cross-currency swap contracts outstanding was $250.0 million. There were no cross-currency swaps outstanding as of April 1, 2023.

Commodity Price. The Company uses commodity swaps to hedge anticipated purchases of aluminum and copper. As of March 30, 2024, December 31, 2023 and April 1, 2023, the notional value of commodity swap contracts outstanding was $27.7 million, $31.8 million and $28.5 million, respectively, and the contracts mature through 2025. The amount of gain or loss associated with the change in fair value of these instruments is deferred in Accumulated other comprehensive loss and recognized in Cost of sales in the same period or periods during which the hedged transaction affects earnings. As of March 30, 2024, the Company estimates that, during the next 12 months, it will reclassify approximately $1.0 million in net losses (based on current prices) from Accumulated other comprehensive loss to Cost of sales.

Foreign Currency Derivatives. The Company enters into forward contracts to manage foreign exchange exposure related to forecasted transactions and assets and liabilities that are subject to risk from foreign currency exchange rate changes. Forward exchange contracts outstanding as of March 30, 2024, December 31, 2023 and April 1, 2023 had notional contract values of$720.2 million, $694.6 million and $690.6 million, respectively. The forward contracts outstanding as of March 30, 2024 mature through 2025 and mainly relate to the Euro, Australian dollar, Norwegian krone and Mexican peso. As of March 30, 2024, the Company estimates that during the next 12 months, it will reclassify approximately $5.3 million of net gains (based on current rates) from Accumulated other comprehensive loss to Cost of sales.

Interest-Rate Derivatives. The Company had net deferred gains associated with previously settled forward-starting interest-rate swaps and treasury-lock swaps of$3.3 millionas of March 30, 2024, December 31, 2023, and April 1, 2023, respectively. These instruments were designated as cash flow hedges with gains and losses included in Accumulated other comprehensive loss. As of March 30, 2024, the Company estimates that during the next 12 months, it will reclassify approximately $0.1 million of net gains from Accumulated other comprehensive loss to Interest expense.

As of March 30, 2024, December 31, 2023 and April 1, 2023, the fair values of the Company’s derivative instruments were:

As of March 30, 2024, December 31, 2023 and April 1, 2023, asset derivatives are included within Prepaid expenses and other, and liability derivatives are included within Accrued expenses and Other long-term liabilities in the Condensed Consolidated Balance Sheets.

The effect of derivative instruments on the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 30, 2024 and April 1, 2023 is shown in the tables below.

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

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

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

Fair Value of Other Financial Instruments. The carrying values of the Company's short-term financial instruments, including cash and cash equivalents and accounts and notes receivable, approximate their fair values because of the short maturity of these instruments. As of March 30, 2024, December 31, 2023 and April 1, 2023, the fair value of the Company’s long-term debt, including current maturities, and short-term debt was approximately $2,659.5 million, $2,228.2 million and $2,257.4 million, respectively, and was determined using Level 1 and Level 2 inputs described in Note 6 to the Notes to Consolidated Financial Statements in the 2023 Form 10-K. The carrying value of long-term debt, including current maturities, and short-term debt was $2,859.1 million, $2,458.7 million and $2,541.2 million as of March 30, 2024, December 31, 2023 and April 1, 2023, respectively.

Note 6 –Fair Value Measurements

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

Note 7 –Commitments and Contingencies

Product Warranties

The following activity related to product warranty liabilities was recorded in Accrued expenses during the three months ended March 30, 2024 and April 1, 2023:

Extended Product Warranties

The following activity related to deferred revenue for extended product warranty contracts was recorded in Accrued expenses and Other long-term liabilities during the three months ended March 30, 2024 and April 1, 2023:

Note 8 –Goodwill and Other Intangibles

Changes in the Company's goodwill during the three months ended March 30, 2024 and April 1, 2023, by segment, are summarized below:

Adjustments in both periods include the effect of foreign currency translation on goodwill denominated in currencies other than the U.S. dollar. Adjustments during the three months ended March 30, 2024 also include immaterial purchase accounting adjustments related to the 2023 Fliteboard and Freedom Boat Club acquisitions. Adjustments during the three months ended April 1, 2023 also include $4.5 million of purchase accounting adjustments from 2022 Freedom Boat Club acquisitions, related to boat fleet fair market value adjustments. There was no accumulated impairment loss on goodwill as of March 30, 2024, December 31, 2023 or April 1, 2023.

The Company's intangible assets, included within Other intangibles, net on the Condensed Consolidated Balance Sheets as of March 30, 2024, December 31, 2023 and April 1, 2023, are summarized by intangible asset type below:

Other intangible assets primarily consist of software, patents, and franchise agreements. Gross amounts and related accumulated amortization amounts include adjustments related to the impact of foreign currency translation. Aggregate amortization expense for intangibles was $17.9 million and $16.6 million for three months ended March 30, 2024 and April 1, 2023, respectively.

The Company tests its intangible assets for impairment during the fourth quarter of each year, or whenever a change in events and circumstances (triggering event) occurs that indicates the fair value of intangible assets may be below their carrying values. The Company did not record any impairment charges during the three months ended March 30, 2024 or April 1, 2023.

Note 9 –Segment Information

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

Note 10 –Comprehensive Income

Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets includes foreign currency cumulative translation adjustments; prior service costs and credits and net actuarial gains and losses for defined benefit plans; and unrealized derivative gains and losses, all net of tax. Changes in the components of Accumulated other comprehensive loss, all net of tax, for the three months ended March 30, 2024 and April 1, 2023 are as follows:

The following table presents the changes in Accumulated other comprehensive loss by component, all net of tax, for the three months ended March 30, 2024:

(A) The tax effects for the three months ended March 30, 2024 were $3.0 million for foreign currency translation and $(3.7) million for derivatives.

(B) The tax effects for the three months ended March 30, 2024 were $0.4 million for derivatives.

(C) The reclassification adjustments from Accumulated other comprehensive loss and associated tax effects related to defined benefit items were not material for the three months ended March 30, 2024. Refer to Note 5 – Financial Instruments for the reclassification adjustments from Accumulated other comprehensive loss related to derivatives.

The following table presents the changes in Accumulated other comprehensive loss by component, all net of tax, for the three months ended April 1, 2023:

(A) The tax effects for the three months ended April 1, 2023 were $(0.1) million for foreign currency translation and $(1.0) million for derivatives.

(B) The tax effects for the three months ended April 1, 2023 were $1.9 million for derivatives.

(C) The reclassification adjustments from Accumulated other comprehensive loss and associated tax effects related to defined benefit items were not material for the three months ended April 1, 2023. Refer to Note 5 – Financial Instruments for the reclassification adjustments from Accumulated other comprehensive loss related to derivatives.

Note 11 –Income Taxes

The effective tax rate for the three months ended March 30, 2024 and April 1, 2023 was 21.4 percent and 46.8 percent, respectively. The effective tax rate for the three months ended March 30, 2024 was lower than the same period in the prior year, primarily due to the prior year intercompany sale of certain intellectual property rights from one of our affiliates in Norway to the United States and lower pretax income in high tax jurisdictions.

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

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

Note 12 –Debt

The following table provides the changes in the Company's debt for the three months ended March 30, 2024:

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

As of March 30, 2024, Brunswick was in compliance with the financial covenants associated with its debt.

2029 Notes

In March 2024, the Company issued an aggregate principal amount of $400.0 million of 5.850% Senior Notes due 2029 (the 2029 Notes) in a public offering, which resulted in aggregate net proceeds to the Company of $396.9 million. The Company intends to use the net proceeds from the sale of the 2029 Notes for general corporate purposes, which may include the repayment, repurchase or redemption of certain of its outstanding securities, including its 0.85% Senior Notes due 2024, as may be determined by management from time to time.

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

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

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

Debentures

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

Credit Facility

The Company maintains a Revolving Credit Agreement (Credit Facility). During the three months ended March 30, 2024 and April 1, 2023, there were no borrowings under the Credit Facility. As of March 30, 2024, available borrowing capacity totaled $741.7 million, net of $8.3 million of letters of credit outstanding under the Credit Facility. As of April 1, 2023, available borrowing capacity totaled $741.9 million, net of $8.1 million of letters of credit outstanding under the Credit Facility. Refer to Note 14 in the Notes to Consolidated Financial Statements in the 2023 Form 10-K for details regarding Brunswick's Credit Facility.

Commercial Paper

The Company maintains an unsecured commercial paper program (CP Program) pursuant to which the Company may issue short-term, unsecured commercial paper notes (CP Notes). During the three months ended March 30, 2024, borrowings under the CP Program totaled $425.0 million, all of which were repaid during the period. During the three months ended March 30, 2024, the maximum amount utilized under the CP Program was $225.0 million. During the three months ended April 1, 2023, borrowings under the CP Program totaled $85.0 million, all of which were repaid during the period. During the three months ended April 1, 2023, the maximum amount utilized under the CP Program was $85.0 million. Refer to Note 14 in the Notes to Consolidated Financial Statements in the 2023 Form 10-K for details regarding Brunswick's CP Program.

Note 13 – Supplier Finance Program Obligations

Under our supplier finance program, the Company agrees to pay Bank of America (the Bank) the stated amount of confirmed invoices from our suppliers on the original invoice payment due date. Our suppliers may request payment from the Bank at a date earlier than the payment due date stated on the original invoice in exchange for a fee in the form of a discounted invoice amount. Brunswick or the Bank may terminate the agreement upon at least 90 days’ notice. The supplier invoices that have been confirmed as valid under the program require payment ranging from 60 to 120 days from the invoice date, consistent with the terms of the original invoice. The Company does not pay the Bank any service fees or subscription fees under the program. In addition, the Company does not pledge any assets as security or provide other forms of guarantees for the committed payment to the Bank. As of March 30, 2024, December 31, 2023, and April 1, 2023, the Company had $14.8 million, $11.6 million and $19.9 million confirmed invoices under the supplier finance program, respectively, which were included in Accounts payable on the Condensed Consolidated Balance Sheets.