BRUNSWICK CORPORATION Certain statements in Management's Discussion and Analysis of Financial Condition and Results of Operations ofBrunswick Corporation (we, us, our) are forward-looking statements. Forward-looking statements are based on current expectations, estimates, and projections about our business and by their nature address matters that are, to different degrees, uncertain. Actual results may differ materially from expectations and projections as of the date of this filing due to various risks and uncertainties. For additional information regarding forward-looking statements, refer to Forward-Looking Statements below. Certain statements in Management's Discussion and Analysis are based on non-GAAP financial measures. GAAP refers to generally accepted accounting principles inthe United States . A "non-GAAP financial measure" is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the consolidated statements of operations, balance sheets or statements of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. For example, the discussion of our cash flows includes an analysis of free cash flows and total liquidity; the discussion of our net sales includes net sales on a constant currency basis; the discussion of our earnings includes a presentation of operating earnings and operating margin excluding restructuring, exit and impairment charges, purchase accounting amortization, acquisition-related costs and other applicable charges and of diluted earnings per common share, as adjusted. Non-GAAP financial measures do not include operating and statistical measures. We include non-GAAP financial measures in Management's Discussion and Analysis as management believes these measures and the information they provide are useful to investors because they permit investors to view our performance using the same tools that management uses to evaluate our ongoing business performance. In order to better align our reported results with the internal metrics management uses to evaluate business performance as well as to provide better comparisons to prior periods and peer data, non-GAAP measures exclude the impact of purchase accounting amortization related to thePower Products andFreedom Boat Club acquisitions. We do not provide forward-looking guidance for certain financial measures on a GAAP basis because we are unable to predict certain items contained in the GAAP measures without unreasonable efforts. These items may include restructuring, exit and impairment costs, special tax items, acquisition-related costs, and certain other unusual adjustments.
Impact of COVID-19
All global manufacturing and distribution facilities continue to focus on rigorously applying, evolving, and automating COVID-19 mitigation procedures, while continuing to ramp-up global production to meet unprecedented demand as consumers continue to take advantage of more flexible work schedules allowing for more leisure time. The strong demand environment for our products experienced during the second half of 2020 has continued into 2021. Despite elevated production levels consistent with our plan, the continued surge in retail demand combined with market share gains continues to drive historically low pipeline inventory levels with 41 percent fewer boats in dealer inventory at the end of the first quarter versus the same period last year. We will continue to actively monitor the impact of COVID-19 and may take further actions that alter business operations as legally required, or that we determine are in the best interests of our employees, customers, dealers, suppliers, and other stakeholders. The full extent of the impact of COVID-19 on our business, operations, and financial results will depend on evolving factors that we cannot accurately predict. Refer to Part II. Item 1A. Risk Factors below for further information. Discontinued Operations
On
Our results for all periods presented, as discussed in Management's Discussion
and Analysis, are presented on a continuing operations basis, unless otherwise
noted. Refer to Note 3 - Discontinued Operations in the Notes to Condensed
Financial Statements for further information.
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Overview
Net sales increased 48 percent during the first quarter of 2021 when compared
with the first quarter of 2020, primarily attributable to outstanding operating
performance across all segments together with strong global demand for marine
products. All segments reported substantial net sales increases during the
quarter when compared to the first quarter of 2020. In the Propulsion segment,
we continue to gain significant retail market share in outboard engines,
especially in higher horsepower categories where we have focused higher levels
of investment in recent years. In the Parts and Accessories segment, aftermarket
sales remained elevated due to strong participation trends and service needs,
with increased OEM orders to keep up with production resulting from the
accelerating retail demand. Boat segment sales also increased across all brands,
when compared to the first quarter of 2020, due to the strong retail demand
surge. Our international net sales increased 51 percent and 42 percent in the
first quarter on a GAAP and constant currency basis, respectively, with growth
in all regions, including continued strength in Europe and Asia-Pacific
contributing to growth in Propulsion and P&A sales and Canada continuing its
growth trend from the back half of 2020.
Operating earnings in the first quarter of 2021 were $231.9 million and $243.0
million on a GAAP and As Adjusted basis, respectively. This compares to
operating earnings during the first quarter of 2020 of $103.2 million and $112.5
million on a GAAP and Adjusted basis, respectively.
Matters Affecting Comparability
Changes in Foreign Currency Rates. Percentage changes in net sales expressed in
constant currency reflect the impact that changes in currency exchange rates had
on comparisons of net sales. To determine this information, net sales transacted
in currencies other than U.S. dollars have been translated to U.S. dollars using
the average exchange rates that were in effect during the comparative period.
The percentage change in net sales expressed on a constant currency basis better
reflects the changes in the underlying business trends, excluding the impact of
translation arising from foreign currency exchange rate
fluctuations. Approximately 25 percent of our annual net sales are transacted in
a currency other than the U.S. dollar. Our most material exposures include sales
in Euros, Canadian dollars, Australian dollars and Chinese Yuan.
The table below summarizes the impact of changes in currency exchange rates on
our net sales:
Three Months Ended
Net Sales 2021 vs. 2020
April 3, March 28,
(in millions) 2021 2020 GAAP Currency impact
Propulsion $ 657.8 $ 448.6 46.6 % 2.6 %
Parts & Accessories 459.6 301.6 52.4 % 3.3 %
Boat 419.5 291.5 43.9 % 1.7 %
Segment Eliminations (103.7) (76.2) 36.1 % 1.2 %
Total $ 1,433.2 $ 965.5 48.4 % 2.6 %
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Results of Operations
Consolidated
The following table sets forth certain amounts, ratios and relationships calculated from the Condensed Consolidated Statements of Comprehensive Income for the three months ended:
April 3, March 28, $ %
(in millions, except per share data) 2021 2020 Change Change
Net sales $ 1,433.2 $ 965.5 $ 467.7 48.4 %
Gross margin(A) 417.3 243.8 173.5 71.2 %
Restructuring, exit and impairment charges 0.5 0.4 0.1 25.0 %
Operating earnings 231.9 103.2 128.7 124.7 %
Net earnings from continuing operations 169.4 70.7 98.7 139.6 %
Diluted earnings per common share from
continuing operations $ 2.15 $ 0.88 $ 1.27 144.3 %
Expressed as a percentage of Net sales:
Gross margin (A) 29.1 % 25.3 % 380 bps
Selling, general and administrative expense 10.5 % 11.5 % (100) bps
Research and development expense 2.4 % 3.0 % (60) bps
Restructuring, exit and impairment charges 0.0 % 0.0 % - bps
Operating margin 16.2 % 10.7 % 550 bps
bps = basis points
(A)Gross margin is defined as Net sales less Cost of sales as presented in the Condensed Consolidated Statements of Comprehensive Income.
The following is a summary of Adjusted operating earnings and Adjusted diluted earnings per common share from continuing operations for the three months endedApril 3, 2021 when compared with the same prior year comparative period: Diluted Earnings (Loss) Per Operating Earnings Share April 3, March 28, April 3, March 28, (in millions, except per share data) 2021 2020 2021 2020 GAAP$ 231.9 $ 103.2 $ 2.15 $ 0.88 Restructuring, exit, and impairment charges 0.5 0.4 0.00 0.00 Purchase accounting amortization 7.5 7.5 0.07 0.06 Sport Yacht & Yachts 2.5 - 0.03 - Acquisition, integration, and IT related costs 1.3 1.4 0.01 0.02 Palm Coast reclassified from held-for-sale 0.8 - 0.01 - Gain on sale of assets (1.5) - (0.01) - Special tax items - - (0.02) (0.00) As Adjusted$ 243.0 $ 112.5 $ 2.24 $ 0.96 GAAP operating margin 16.2 % 10.7 % Adjusted operating margin 17.0 % 11.7 % Net sales increased 48 percent during the first quarter of 2021 when compared with the same prior year period. Refer to the Propulsion, Parts and Accessories, and Boat segments for further details on the drivers of net sales changes. Gross margin percentage increased 380 basis points in the first quarter of 2021 when compared with the same prior year period, with all segments benefiting from increased sales resulting from strong global demand for marine products, with favorable factory absorption from increased production, and favorable changes in foreign currency exchange rates. 24 -------------------------------------------------------------------------------- Table of Contents Selling, general and administrative expense (SG&A) increased during the first quarter of 2021 when compared with the same prior year period. Excluding certain one-time items presented above, SG&A as a percentage of sales was lower in the first quarter of 2021 compared with the same prior year period, reflecting the strong increase in net sales. Research and development expense increased in 2021 versus 2020, reflecting continued investment in new products in all segments, as well as higher variable compensation costs. We recorded restructuring, exit and impairment charges of$0.5 million during the three months endedApril 3, 2021 and recorded$0.4 million during the three months endedMarch 28, 2020 . Refer to Note 4 - Restructuring, Exit and Impairment Activities in the Notes to Condensed Consolidated Financial Statements for further information. We recorded Equity earnings of$0.8 million and$1.8 million in the three months endedApril 3, 2021 andMarch 28, 2020 , respectively, which were mainly related to our marine and technology-related joint ventures. We recognized$(1.3) million and$0.7 million in Other (expense) income, net in the three months endedApril 3, 2021 andMarch 28, 2020 , respectively. Other (expense) income, net primarily includes other postretirement benefit costs and remeasurement gains and losses resulting from changes in foreign currency rates. Net interest expense decreased for the three months endedApril 3, 2021 when compared with the same prior year period due to reduction in average daily debt outstanding, which was influenced by the timing of debt retirements and debt issuances. Refer to Note 13 -Debt in the Notes to Condensed Consolidated Financial Statements and Note 16 in the Notes to Consolidated Financial Statements in the 2020 Form 10-K. We recognized an income tax provision for the three months endedApril 3, 2021 of$47.4 million , an increase of$29.0 million when compared to the tax provision for the three months endedMarch 28, 2020 of$18.4 million , primarily due to increased earnings before income taxes. The effective tax rate, which is calculated as the income tax provision as a percentage of earnings before income taxes, for the three months endedApril 3, 2021 andMarch 28, 2020 was 21.9 percent and 20.7 percent, respectively. Due to the factors described in the preceding paragraphs, operating earnings, net earnings from continuing operations, and diluted earnings per common share from continuing operations increased during the first quarter of 2021 when compared with the same prior year period.
Propulsion Segment
The following table sets forth Propulsion segment results for the three months
ended:
April 3, March 28, $ %
(in millions) 2021 2020 Change Change
Net sales $ 657.8 $ 448.6 $ 209.2 46.6 %
Operating earnings 124.5 61.3 63.2 103.1 %
Operating margin 18.9 % 13.7 % 520 bps
bps = basis points
Propulsion segment net sales increased$209.2 million , or 47 percent, in the first quarter of 2021 compared to the first quarter of 2020 as a result of strong global demand for all product categories and continued market share gains. The Propulsion segment gained substantialU.S. retail market share in every outboard engine horsepower category in excess of 50 horsepower in the quarter, with outsized gains in engines over 200 horsepower, and also experienced continued strong sales growth in international markets. International sales were 36 percent of the segment's net sales through the first quarter of 2021 and increased 50 percent from the prior year on a GAAP basis. On a constant currency basis, international net sales increased 42 percent, with increases across all regions. Propulsion segment operating earnings in the first quarter of 2021 were$124.5 million , an increase of 103 percent when compared to the first quarter of 2020, as a result of increased net sales and favorable customer mix, in addition to the factors affecting all of our segments previously mentioned. 25 -------------------------------------------------------------------------------- Table of Contents Parts & Accessories Segment The following table sets forth Parts and Accessories (P&A) segment results for the three months ended: April 3, March 28, $ % (in millions) 2021 2020 Change Change Net sales$ 459.6 $ 301.6 $ 158.0 52.4 % GAAP operating earnings$ 91.9 $ 46.2 $ 45.7 98.9 % Restructuring, exit and impairment charges 0.5 0.3 0.2 66.7 % Purchase accounting amortization 7.2 7.2 - NM Gain on sale of assets (1.5) - (1.5) NM Adjusted operating earnings$ 98.1 $ 53.7 $ 44.4 82.7 % GAAP operating margin 20.0 % 15.3 % 470 bps Adjusted operating margin 21.3 % 17.8 % 350 bps NM = not meaningful bps = basis points P&A segment net sales increased$158.0 million , or 52 percent in the first quarter of 2021 versus the first quarter of 2020 due to strong sales growth across all product categories. Net sales increases of our aftermarket business were driven by increased boating participation, which elevated parts and service needs during the off-season, and favorable early-season weather in many areas. Net sales also increased in the OEM component of the business, as we leveraged investments in technology to take advantage of strong demand from boat builders as they increased production. International sales were 32 percent of the P&A segment's net sales in the first quarter of 2021 and increased 62 percent year over year on a GAAP basis. On a constant currency basis, international net sales increased 51 percent, with increases across all regions. P&A segment operating earnings in the first quarter of 2021 were$91.9 million , an increase of 99 percent when compared to the first quarter of 2020. Contributing to the increase were strong sales increases and favorable sales mix, as well as the factors affecting all of our segments previously mentioned.
Boat Segment
The following table sets forth Boat segment results for the three months ended:
April 3, March 28, $ %
(in millions) 2021 2020 Change Change
Net sales $ 419.5 $ 291.5 $ 128.0 43.9 %
GAAP operating earnings $ 40.8 $ 5.1 $ 35.7 NMRestructuring, exit and impairment charges (0.0) (0.0)
0.0 NM
Sport Yacht & Yachts 2.5 - 2.5 NM
Acquisition, integration, and IT related costs 1.3 0.7 0.6 85.7 %
Palm Coast reclassified from held-for-sale 0.8 - 0.8 NM
Purchase accounting amortization 0.3 0.3 - NM
Adjusted operating earnings $ 45.7 $ 6.1 $ 39.6 NM
GAAP operating margin 9.7 % 1.7 % 800 bps
Adjusted operating margin 10.9 % 2.1 % 880 bps
NM = not meaningful
bps = basis points
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Boat segment net sales increased
International sales were 25 percent of the segment's net sales in the first three months of 2021 and increased 41 percent on a GAAP basis. On a constant currency basis, international sales increased 34 percent, with increases across all regions. Boat segment operating earnings in the first quarter of 2021 were$40.8 million , an increase of$35.7 million when compared to the first quarter of 2020, due to increased sales and lower retail discount levels versus 2020, in addition to the factors affecting all of our segments.
Corporate/Other
The following table sets forth Corporate/Other results for the three months
ended:
April 3, March 28, $ %
(in millions) 2021 2020 Change Change
GAAP operating loss $ (25.3) $ (9.4) $ (15.9) 169.1 %
Restructuring, exit and impairment charges - 0.1 (0.1) (100.0 %)
Acquisition, integration, and IT related
costs - 0.7 (0.7) (100.0 %)
Adjusted operating loss $ (25.3) $ (8.6) $ (16.7) 194.2 %
NM = not meaningful
Corporate operating expenses in the first quarter of 2021 were $25.3 million , an
increase of $15.9 million when compared to the first quarter of 2020, primarily
due to the increase in variable compensation expense, unfavorable mark-to-market
adjustments for deferred compensation arrangements and an increase in
investments in enterprise growth initiatives.
Cash Flow, Liquidity and Capital Resources
The following table sets forth an analysis of free cash flow for the three
months ended:
April 3, March 28,
(in millions) 2021 2020Net cash provided by (used for) operating activities of continuing operations
$ 17.3 $ (83.9) Net cash (used for) provided by: Plus: Capital expenditures (42.9) (55.9) Plus: Proceeds from the sale of property, plant and equipment 4.2 0.4 Plus: Effect of exchange rate changes (2.0) (4.4) Total free cash flow (A)$ (23.4) $ (143.8) (A) We define "Free cash flow" as cash flow from operating and investing activities of continuing operations (excluding cash provided by or used for acquisitions, investments, purchases or sales/maturities of marketable securities and other investing activities) and the effect of exchange rate changes on cash and cash equivalents. Free cash flow is not intended as an alternative measure of cash flow from operations, as determined in accordance with GAAP inthe United States . We use this financial measure both in presenting our results to shareholders and the investment community and in our internal evaluation and management of our businesses. Management believes that this financial measure and the information it provides are useful to investors because it permits investors to view our performance using the same tool that management uses to gauge progress in achieving its goals. Management believes that the non-GAAP financial measure "Free cash flow" is also useful to investors because it is an indication of cash flow that may be available to fund investments in future growth initiatives. Our major sources of funds for capital investments, acquisitions, share repurchase programs and dividend payments are cash generated from operating activities, available cash and marketable securities balances, divestitures and potential borrowings. We evaluate potential acquisitions, divestitures and joint ventures in the ordinary course of business. 27 -------------------------------------------------------------------------------- Table of Contents 2021 Cash Flow Net cash provided by operating activities of continuing operations in the first three months of 2021 totaled$17.3 million versus$83.9 million used for operating activities in the comparable period of 2020. The increase is primarily due to higher net earnings during the quarter. The primary drivers of net cash provided by operating activities of continuing operations in 2021 were net earnings, net of non-cash items, partially offset by an increase in working capital. Working capital is defined as Accounts and notes receivable, Inventories and Prepaid expenses and other, net of Accounts payable and Accrued expenses as presented in the Condensed Consolidated Balance Sheets, excluding the impact of acquisitions and non-cash adjustments. Accounts and notes receivable increased$202.0 million primarily due to increased sales across all segments. Inventory increased$57.9 million , driven by increases to support higher production volumes in advance of the marine selling season. Accounts payable increased$78.6 million primarily due to timing of payments and higher inventory levels across all reportable segments. Accrued expenses decreased$47.0 million primarily driven by payment of prior year variable compensation, which had been accrued as ofDecember 31, 2020 .
Net cash provided by investing activities of continuing operations was
Net cash used for financing activities was$56.5 million and primarily related to cash dividends paid to common shareholders, common stock repurchases, and payments of long-term debt including current maturities. Refer to Note 13 -Debt in the Notes to Condensed Consolidated Financial Statements for further details on our debt activity during the quarter.
2020 Cash Flow
Net cash used for operating activities of continuing operations in the first three months of 2020 totaled$83.9 million . The primary driver of cash used for operating activities of continuing operations was a seasonal increase in working capital, partially offset by net earnings net of non-cash expense items. Accounts and notes receivable increased$143.2 million primarily due to seasonal changes in sales in the Propulsion and P&A segments. Inventory increased$15.6 million , driven by the impact of temporary production suspensions in response to COVID-19, which resulted in slightly higher increases in raw material and work-in-process inventories. Accrued expenses decreased$15.6 million , primarily driven by payment of prior year variable compensation, which had been accrued as ofDecember 31, 2019 . Accounts payable decreased$13.3 million primarily due to timing of payments and lower production levels across all reportable segments due to temporary production suspensions in response to COVID-19.
Net cash used for investing activities of continuing operations was
Net cash provided by financing activities was$325.2 million and primarily related to net proceeds from issuances from short-term debt, which exceeded common stock repurchases and cash dividends paid to common shareholders. Refer to Note 16 - Debt in the Notes to Consolidated Financial Statements in the 2020 Form 10-K, for further details on our 2020 debt activity.
Liquidity and Capital Resources
We view our highly liquid assets as ofApril 3, 2021 ,December 31, 2020 andMarch 28, 2020 as: April 3, December 31, March 28, (in millions) 2021 2020 2020 Cash and cash equivalents$ 471.9 $ 519.6 $ 502.9 Short-term investments in marketable securities 7.3 56.7 0.8
Total cash, cash equivalents and marketable securities
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The following table sets forth an analysis of total liquidity as of April 3,
2021 , December 31, 2020 and March 28, 2020 :
April 3, December 31, March 28,
(in millions) 2021 2020 2020
Cash, cash equivalents and marketable securities
395.0 2.9 Total liquidity (B)$ 876.4 $ 971.3 $ 506.6 (A) See Note 13 -Debt in the Notes to Condensed Consolidated Financial Statements for further details on our lending facility. (B) We define Total liquidity as Cash and cash equivalents and Short-term investments in marketable securities as presented in the Condensed Consolidated Balance Sheets, plus amounts available for borrowing under its lending facilities. Total liquidity is not intended as an alternative measure to Cash and cash equivalents and Short-term investments in marketable securities as determined in accordance with GAAP inthe United States . We use this financial measure both in presenting our results to shareholders and the investment community and in our internal evaluation and management of our businesses. Management believes that this financial measure and the information it provides are useful to investors because it permits investors to view our performance using the same metric that management uses to gauge progress in achieving our goals. Management believes that the non-GAAP financial measure "Total liquidity" is also useful to investors because it is an indication of our available highly liquid assets and immediate sources of financing. Cash, cash equivalents and marketable securities totaled$479.2 million as ofApril 3, 2021 , a decrease of$97.1 million from$576.3 million as ofDecember 31, 2020 , and a decrease of$24.5 million from$503.7 million as ofMarch 28, 2020 . Total debt as ofApril 3, 2021 ,December 31, 2020 andMarch 28, 2020 was$944.7 million ,$951.4 million and$1,494.7 million , respectively. Our debt-to-capitalization ratio was 36.5 percent as ofApril 3, 2021 , down from 38.7 percent as ofDecember 31, 2020 and from 53.4 percent as ofMarch 28, 2020 . There was not any borrowing activity under the Credit Facility during the first three months of 2021, and we did not have any borrowings outstanding as ofApril 3, 2021 . Available borrowing capacity totaled$397.2 million , net of$2.8 million of letters of credit outstanding under the Credit Facility. During the first three months of 2021, there was not any borrowing activity under our unsecured commercial paper program (CP Program). Refer to Note 13 -Debt in the Notes to Condensed Consolidated Financial Statements and Note 16 - Debt in the Notes to Consolidated Financial Statements in the 2020 Form 10-K, for further details.
The level of borrowing capacity under our Credit Facility and CP Program is limited by both a leverage and interest coverage test. These covenants also pertain to termination provisions included in our wholesale financing joint venture arrangements with Wells Fargo Distribution Finance. Based on our anticipated earnings generation throughout the year, we expect to maintain sufficient cushion against the existing debt covenants.
2021 Capital Strategy
Our capital strategy assumptions have also been augmented in places to leverage our strong cash position. We plan to retire approximately$100 million of our long-term debt obligations and to continue our systematic approach to share repurchases, with our plan including between$80 million and$120 million of repurchases in 2021, spread relatively evenly across the year. Additionally, we are planning for capital expenditures in the range of approximately$250 million to$270 million to support, and in some cases accelerate, growth initiatives throughout our organization. This slightly increased spending will be directed to new product investments in all of our businesses, cost reduction and automation projects, and select additional capacity initiatives to support demand and future growth, primarily in the Propulsion business. We also raised our dividend to33.5 cents a share, or a 24 percent increase, as our strong cash position enables us to raise our dividend earlier in the year than usual, keep our payout ratio close to our target of 20 to 25 percent, and continue to provide strong returns to our shareholders.
Financing Joint Venture
OnMarch 10, 2021 , through ourBrunswick Financial Services Corporation subsidiary, we entered into an amended and restated joint venture agreement withWells Fargo Commercial Distribution Finance to extend the term of our financial services joint venture,Brunswick Acceptance Company, LLC (BAC), throughDecember 31, 2025 . The amendment did not otherwise materially change the terms of the agreement. BAC is detailed further in the 2020 Form 10-K. 29
-------------------------------------------------------------------------------- Table of Contents Off-Balance Sheet Arrangements and Contractual Obligations Our off-balance sheet arrangements and contractual obligations as ofDecember 31, 2020 are detailed in the 2020 Form 10-K. There have been no material changes in these arrangements and obligations outside the ordinary course of business sinceDecember 31, 2020 . Environmental Regulation
There were no material changes in our environmental regulatory requirements since the filing of our 2020 Form 10-K.
Critical Accounting Policies
There were no further material changes in our critical accounting policies since the filing of our 2020 Form 10-K.
As discussed in the 2020 Form 10-K, the preparation of the consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amount of reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates.
Recent Accounting Pronouncements
Recent accounting pronouncements that have been adopted during the three months endedApril 3, 2021 , or will be adopted in future periods, are included in Note 1 - Significant Accounting Policies in the Notes to Condensed Consolidated Financial Statements.
Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations, estimates, and projections about Brunswick's business and by their nature address matters that are, to different degrees, uncertain. Words such as "may," "could," "should," "expect," "anticipate," "project," "position," "intend," "target," "plan," "seek," "estimate," "believe," "predict," "outlook," and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this quarterly report. These risks include, but are not limited to: the effect of adverse general economic conditions, including the amount of disposable income consumers have available for discretionary spending; changes in currency exchange rates; fiscal policy concerns; adverse economic, credit, and capital market conditions; higher energy and fuel costs; competitive pricing pressures; the coronavirus (COVID-19) pandemic, including, without limitation, the impact on global economic conditions and on capital and financial markets, changes in consumer behavior and demand, the potential unavailability of personnel or key facilities, modifications to our operations, and the potential implementation of regulatory actions; managing our manufacturing footprint; weather and catastrophic event risks; international business risks; our ability to develop new and innovative products and services at a competitive price; our ability to meet demand in a rapidly changing environment; loss of key customers; actual or anticipated increases in costs, disruptions of supply, or defects in raw materials, parts, or components we purchase from third parties, including as a result of pressures due to the pandemic; supplier manufacturing constraints, increased demand for shipping carriers, and transportation disruptions; absorbing fixed costs in production; joint ventures that do not operate solely for our benefit; our ability to successfully implement our strategic plan and growth initiatives; attracting and retaining skilled labor, implementing succession plans for key leadership, and executing organizational and leadership changes; our ability to identify, complete, and integrate targeted acquisitions; the risk that strategic divestitures will not provide business benefits; maintaining effective distribution; adequate financing access for dealers and customers; requirements for us to repurchase inventory; inventory reductions by dealers, retailers, or independent boat builders; risks related to theFreedom Boat Club franchise business model; outages, breaches, or other cybersecurity events regarding our technology systems, which could affect manufacturing and business operations and could result in lost or stolen information and associated remediation costs; our ability to protect our brands and intellectual property; changes toU.S. trade policy and tariffs; having to record an impairment to the value of goodwill and other assets; product liability, warranty, and other claims risks; legal and regulatory compliance, including increased costs, fines, and reputational risks; changes in income tax legislation or enforcement; managing our share repurchases; and certain divisive shareholder activist actions. 30
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Table of Contents Additional risk factors are included in the 2020 Form 10-K. Forward -looking statements speak only as of the date on which they are made, and Brunswick does not undertake any obligation to update them to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.
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