This document is a portion of the SEC electronic filing made by Brunswick. We are not greatly interested in the "financials" so we eliminated them and kept the mangerial reports. The full report is available in the Edgar Database.
0000014930-96-000007.txt : 19961113 0000014930-96-000007.hdr.sgml : 19961113 ACCESSION NUMBER: 0000014930-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRUNSWICK CORP CENTRAL INDEX KEY: 0000014930 STANDARD INDUSTRIAL CLASSIFICATION: ENGINES & TURBINES  IRS NUMBER: 360848180 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01043 FILM NUMBER: 96660136 BUSINESS ADDRESS: STREET 1: ONE N FIELD CT STREET 2: C/O MICHAEL SCHMITZ CITY: LAKE FOREST STATE: IL ZIP: 60045-4811 BUSINESS PHONE: 7087354700 MAIL ADDRESS: STREET 1: ONE N FIELD CT CITY: LAKE FOREST STATE: IL ZIP: 60045-4811 FORMER COMPANY: FORMER CONFORMED NAME: BRUNSWICK BALKE COLLENDER CO DATE OF NAME CHANGE: 19660919 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549
Note 4 - Acquisitions On March 8, 1996, the Company acquired the Nelson/Weather-Rite camping division of Roadmaster Industries, Inc. for $120.0 million in cash and the assumption of certain liabilities. The Company acquired assets, including goodwill that will be amortized using the straight-line method over 40 years. This operation has been named the American Camper Division and is part of the Brunswick Outdoor Recreation Group of the Recreation segment. On May 31, 1996, the Company acquired the assets related to the Boston Whaler line of boats from Meridian Sports for $27.4 million in cash and the assumption of certain liabilities. The Company acquired assets, including goodwill that will be amortized using the straight-line method over 40 years. This operation is a part of the Sea Ray Division of the Marine segment. On September 6, 1996, the Company acquired the assets related to the Roadmaster bicycle business and other outdoor products, including the Flexible Flyer line of sleds and wagons, from Roadmaster Industries, Inc. for $197.7 million in cash and the assumption of certain liabilities. The Company acquired assets, including goodwill that will be amortized using the straight- line method over 40 years. This operation has been included in the Brunswick Outdoor Recreation Group of the Recreation segment. These acquisitions were accounted for as purchases and have been recorded using preliminary valuations of the opening balance sheets. Operating results are included in the Company's results of operations since the dates of acquisition.
Note 5 - Discontinued Operations On April 1, 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 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. In the second quarter, the Company completed negotiations for the disposition of these operations and in the third quarter has completed these transactions. These disposition transactions did not have a significant effect upon the Company's consolidated results of operations. The net sales of the businesses divested for the quarter ended September 30, 1995 were $46.9 million and for the nine-month periods ended September 30, 1996 and 1995 were $80.4 million and $147.7 million, respectively. Intercompany sales between the continued and discontinued operations that were previously eliminated in consolidation have been included in the results of continuing operations.
Note 6 - Dispositions In the second quarter of 1995, the Company announced its intention to divest its golf club shaft business and the Circus World Pizza operations in the Recreation segment and recorded a $25.8 million restructuring charge to cover estimated losses on the dispositions. The Circus World divestiture was completed in 1995 and the sale of the golf club shaft business was completed in the second quarter of 1996. The losses associated with these transactions, including the estimated exposure on retained liabilities, were adequately covered by the 1995 restructuring charge. The net sales and operating earnings(losses)(excluding divestiture provisions) of the businesses divested for the quarter and nine-month periods ended September 30, 1996 and 1995 were as follows (in millions): Quarter Nine months 1996 1995 1996 1995 Net sales $ 0.0 $ 4.6 $ 9.9 $16.4 Operating earnings(losses) $ 0.0 $(1.9) $ 1.4 $(5.8)
Management's Discussion and Analysis Cash Flow, Liquidity and Capital Resources Management assesses the Company's liquidity in terms of its overall ability to generate cash to fund its operating and investing activities. Of particular importance in the management of liquidity are cash flows generated from operating activities; cash used to fund capital expenditures, acquisitions and other strategic activities; cash needed to service existing short- and long-term debt and pay dividends; and the Company's ability to secure long-term capital at reasonable terms. For the nine months ended September 30, 1996, cash and cash equivalents decreased $268.3 million to $76.0 million. The decline was primarily due to the Company's investing activities, which included $354.4 million for acquisitions, $106.5 million for capital expenditures and $42.8 million advanced to boat manufacturers in connection with long-term engine supply contracts. These activities were funded with available cash balances, cash generated from operating activities and commercial paper borrowings. Cash generated from operating activities in the first nine months of 1996 totalled $153.4 million versus $178.8 million in 1995. The primary components of cash generated from operating activities include the Company s net earnings; the level of noncash revenues and expenses included in net earnings; the timing of cash flows relating to operating expenses, sales, and income taxes; and the management of inventory levels. The decrease between periods reflects the impact of higher levels of inventories and accounts receivable, primarily resulting from increased sales volume. During the first nine months of 1996, the Company's net earnings increased to $156.7 million from $105.0 million in 1995. Net earnings in 1995 include a $40.0 million pretax ($24.4 million after-tax) restructuring charge and a $7.0 million after-tax loss ($11.0 million pre-tax) on the disposition of discontinued operations recorded in the second quarter. During the first nine months of 1996, the Company invested $106.5 million in capital expenditures, an increase of $25.2 million from 1995 levels. This increase reflects the Company's continued emphasis on investing to achieve improved production efficiencies and product quality, supporting new product development activities and maintaining existing production capacity. Management anticipates that 1996 capital expenditures may exceed $160 million. The Company also spent $354.4 million on acquisitions in the first nine months of 1996, including the purchase of the Roadmaster bicycle business for $197.7 million and American Camper, formerly the Nelson/Weather-Rite camping division, for $120.0 million from Roadmaster Industries, Inc. The Boston Whaler line of boats was purchased from Meridian Sports for $27.4 million. Management continues to evaluate acquisition opportunities as it continues to reposition the Company's sales and profit mix towards a higher contribution from consumer recreation products that offer more stable growth opportunities.
Total debt at September 30, 1996, was $408.0 million versus $318.9 million at December 31, 1995, with debt-to-capitalization ratios at those dates of 25.8% and 23.4%, respectively. The Company issued commercial paper during the third quarter of 1996 and $88.8 million was outstanding at September 30, 1996. The Company s debt structure at September 30, 1996, included $100.0 million of 8.125% notes due April 1, 1997, which Management intends to refinance prior to maturity with long-term debt. The continued increased levels of capital expenditures and normal operating cash requirements will be funded through existing cash balances, cash generated from operating activities and short-term commercial paper borrowing, if necessary. Additional significant acquisition activity or changes in business conditions would require the Company to increase its borrowing levels in the near- term. The Company can provide the necessary liquidity from various sources, including a revolving credit agreement, commercial paper offerings, existing cash balances, and cash generated from operating activities. The Company continues to maintain a $400 million long-term line of credit with a group of banks. For an explanation of the agreement and a discussion of the specific covenant restrictions, see Note 8 - Debt. In addition, the Company filed a universal shelf registration in the third quarter of 1996 with the Securities and Exchange Commission for the issuance of up to $600 million in various equity and/or debt securities. Results of Operations - Third Quarter and the First Nine Months of 1996 versus 1995 Consolidated In the third quarter of 1996, consolidated sales increased 10% to $763.6 million from $694.6 million, while year-to-date sales increased 5% to $2,360.8 million from $2,240.8 million a year ago. In both 1996 periods, the Company benefitted from stronger sales of its large boat units and from the contribution of the newly acquired American Camper and Roadmaster bicycle businesses. The Company's results for the third quarter of 1995 and nine months of 1996 and 1995 have been restated to account for the recently divested freshwater fishing boat operations as discontinued operations. International sales for the third quarter decreased 6% to $169.8 million in 1996 from $181.3 million in 1995. In the year-to-date periods, 1996 international sales declined to $570.1 million from $606.8 million in 1995. The reductions in both periods were primarily due to the continued decline in the sales of bowling capital equipment to the mature Korean and Taiwanese markets, where new center development has substantially slowed, partially offset by rapidly expanding sales volumes in China and other East Asian countries, where volumes are not yet adequate to compensate for the decline in the Taiwanese and Korean markets. Based on current market conditions, management expects this trend in bowling capital equipment sales to continue throughout 1996. The Company's consolidated operating earnings in the third quarter increased 23% to $66.0 million in 1996 compared to $53.6 million in 1995, while nine-month operating earnings levels rose 40% to $255.9 million in 1996 from $182.9 million in 1995. The increase in the current year-to-date period versus prior year's was partially attributable to a $40.0 million second quarter charge for restructuring and management transition expenses recorded in 1995. Absent this charge, nine-month operating earnings would have increased 15% to $255.9 million in 1996 from $222.9 million in 1995. The gain for both periods reflects the impact of higher sales levels and improved Marine and Recreation segment operating margins. Interest expense increased in the third quarter to $8.3 million in 1996 from $8.0 million in 1995, while year-to-date interest expense increased to $24.3 million in 1996 from $23.9 million in 1995 due to the issuance of short-term commercial paper in September 1996. Interest income and other items, net declined in the quarter to $3.2 million in 1996 from $8.2 million in 1995, reflecting lower interest income due to decreased cash balances and an unfavorable swing in the accounting recognition of foreign currency transactions between periods. In the nine-month period, Interest income and other items, net increased to $15.2 million in 1996, from $14.7 million in 1995, on stronger 1996 earnings from the Company's marine and bowling joint ventures. These gains were partially offset by an unfavorable swing in the accounting recognition of foreign currency transactions between periods and lower interest income. The estimated effective tax rate for the full year 1996 was 36.5% at September 1996 versus 36.0% at September 1995. In the third quarter of 1996, the estimated effective tax rate for 1996 was reduced from 37.5%, reflecting the reinstatement of the research and development tax credit by the Congress. Marine Segment In the third quarter, sales of the Company's Marine segment increased to $566.1 million in 1996, representing a 9% improvement over 1995 levels. In the nine-month periods, sales of the Marine segment were 5% ahead of 1995 levels, increasing to $1,751.5 million in 1996 from $1,671.4 million. The Company recorded sales gains in both periods in this segment despite the marine industry overall having a flat year. These gains occurred in the Sea Ray and US Marine Divisions' large boat operations, as a result of enhanced marketing efforts, new product introductions, recent acquisitions and a more favorable product mix. The Mercury Marine Division reported sales slightly above prior-year levels in the quarter and below prior-year levels in the year-to-date period. Sales gains in stern drive engines, which are primarily used on larger boats, were offset by a reduction in sales of outboard engines, reflecting a slowdown in sales of smaller boats where outboards are used, and retail inventory reductions by dealers. Marine segment operating earnings increased 19% in the 1996 third quarter to $65.0 million versus $54.7 million in 1995. In the nine-month period, Marine segment operating earnings increased 12% to $228.3 million in 1996 from 1995 levels. This performance reflects improved sales of the Sea Ray and US Marine Divisions discussed above, along with the favorable shift in sales mix to larger boats. The Mercury Marine Division posted an improvement in operating earnings in the third quarter, primarily due to a more favorable sales mix and improved pricing and cost management.
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