-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ZTtDOHJOx430s2A9kcsd4Yy2GdfW79hine0uSa5Fw4gRHjGYarYxybo4NODD1zyY f5Dw3ebMb4OB4aoRoo0yTw== 0000014930-94-000004.txt : 19940330 0000014930-94-000004.hdr.sgml : 19940330 ACCESSION NUMBER: 0000014930-94-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRUNSWICK CORP CENTRAL INDEX KEY: 0000014930 STANDARD INDUSTRIAL CLASSIFICATION: 3510 IRS NUMBER: 360848180 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-01043 FILM NUMBER: 94518466 BUSINESS ADDRESS: STREET 1: 1 N. FIELD CT. STREET 2: C/O MICHAEL SCHMITZ CITY: LAKE FOREST STATE: IL ZIP: 60045 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 10-K 1 1993 FORM 10-K Securities and Exchange Commission Washington, D.C. 20549 Form 10-K Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended December 31, 1993 Commission file number 1-1043 Brunswick Corporation (Exact name of registrant in its charter) Delaware 36-0848180 (State of Incorporation) (I.R.S. Employer Identification No.) 1 N. Field Ct. 60045-4811 Lake Forest, Illinois (zip code) (Address of principal executive offices) Registrant's telephone number, including area code: (708) 735-4700 Securities Registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock ($.75 par value) New York, Chicago, Pacific, Tokyo and London Stock Exchanges Securities Registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the the registrant was required to file such reports) and (2) has been subject to such filing requirements the past 90 days. Yes X . No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] As of March 21, 1994, the aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant was $2,210,256,968. Such number excludes stock beneficially owned by officers and directors. This does not constitute an admission that they are affiliates. The number of shares of Common Stock($.75 par value) of the registrant outstanding as of March 21, 1994, was 95,378,080. Documents Incorporated by Reference Part III of this Report on Form 10-K incorporates by reference certain information from the Company's definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on April 27, 1994. Part I Item 1. Business Brunswick Corporation (the "Company") is organized into seven divisions with operations in two industry segments: Marine and Recreation. Segment information is contained in Note 8 on page 32. Marine The Marine industry segment consists of the Mercury Marine Division, which manufactures and sells marine propulsion systems, and the US Marine, Sea Ray and Fishing Boat Divisions, which manufacture and sell pleasure and fishing boats. The Company believes it has the largest dollar volume of sales of recreational marine engines and pleasure boats in the world. The Mercury Marine Division manufactures and sells Mercury, Mariner and Force outboard motors, MerCruiser gasoline and diesel inboard and stern drive engines, and the Sport-Jet 90 water-jet system. Outboard motors are sold through marine dealers for pleasure craft and commercial use and to the Company's US Marine, Sea Ray and Fishing Boat Divisions. The MerCruiser engines and the water-jet systems are sold principally to boatbuilders, including the Company's US Marine, Sea Ray and Fishing Boat Divisions. The Mercury Marine Division also manufactures and sells replacement parts for engines and outboard motors and marine accessories, including steering systems, instruments, controls, propellers, service aids and marine lubricants. These products are marketed through marinas, dealers and boatbuilders under the Quicksilver brand name. Mercury Marine products are manufactured in North America and Europe for global distribution. International assembly facilities are located in Belgium and Mexico, and offshore distribution centers are in Belgium, Japan and Australia. Trademarks for Mercury Marine products include MerCruiser, Mercury, Mariner, Force and Quicksilver. The US Marine Division builds and sells several brands of fiberglass pleasure and fishing boats, ranging in size from 14 to 47 feet. Bayliner is the Division's oldest and most well known brand, with offerings that include jet powered boats, family runabouts, cabin cruisers, sport fishing boats and luxury motor yachts. Other brands include Maxum (runabouts and cabin cruisers) and Robalo (sport fishing boats). The US Marine Division is vertically integrated, producing many of the parts and accessories which make up the boats. Escort boat trailers are also produced by the Division and sold with smaller boats as part of boat-motor-trailer packages. Outboard motors and stern drive and inboard engines are purchased from the Mercury Marine Division. The US Marine Division's boats, Escort boat trailers, and parts and accessories are sold through dealers. Trademarks for US Marine products include Bayliner, Maxum, Cobra, Quantum, Robalo, Ciera, Trophy, Jazz, Escort and US Marine. The Sea Ray Division builds and sells Sea Ray fiberglass boats from 13 to 65 feet in length, including luxury motor yachts, cabin cruisers, sport fishing boats, sport boats, runabouts, water skiing boats, and jet powered boats. Sea Ray boats use and are sold with outboard motors, stern drive engines and gasoline or diesel inboard engines. The Division purchases its outboard motors and most of its stern drive and gasoline inboard engines from the Mercury Marine Division. Sea Ray boats are sold through dealers under the Sea Ray, Laguna, Ski Ray and Sea Rayder trademarks. The Fishing Boat Division manufactures and sells fiberglass and aluminum boats for the sport fishing and recreational boating markets. Some of these boats are equipped with Mercury, Mariner or Force outboard motors at the factory and are sold in boat-motor-trailer packages by marine dealers. The Fishing Boat Division's boats are sold through dealers under the Astro, Fisher, MonArk, Procraft, Starcraft, and Spectrum trademarks. The Company has an interest in Tracker Marine, L.P., a limited partnership, which manufactures and markets boats, motors, trailers and accessories. The Company has various agreements with Tracker Marine, L.P., including contracts to supply outboard motors, trolling motors and various other Brunswick products for Tracker Marine boats. The Company's Marine segment sales to unaffiliated customers include sales of the following principal products for the three years ended December 31, 1993, 1992, and 1991:
(in millions, unaudited) 1993 1992 1991 Boats $ 754.5 $ 751.0 $ 685.1 Engines 816.7 765.1 683.2 $1,571.2 $1,516.1 $1,368.3
Boat sales include the value of engines when such engines are sold as a component of a finished boat. Engine sales include sales to boat manufacturers which are not Company-owned, marine dealers and others, when the engine is not sold with a Company-manufactured boat. Recreation There are three divisions in the Recreation industry segment: Zebco, Brunswick, and Brunswick Recreation Centers. The Zebco Division manufactures, assembles, purchases and sells fishing reels, rods, reel/rod combinations, and accessories. The Division also manufactures and sells electric trolling motors for fishermen and for use by boat manufacturers, including Marine segment operations. The Brunswick Division manufactures and sells products for the bowling industry, including bowling lanes, automatic pinsetters, ball returns, computerized scoring equipment and business systems, and BowlerVision, a computer software bowling system which allows pins to be set up in a variety of configurations, creating new games for bowlers to play. BowlerVision also is able to analyze and display ball path, ball speed and entry angle. In addition, the Division manufactures and sells seating and locker units for bowling centers; bowling pins, lane finishes and supplies; and bowling balls and bags. The Brunswick Division also manufactures and sells golf club shafts and golf bags and sells billiards tables which are manufactured for the Company to its specifications. The Brunswick Division has a 50% interest in Nippon Brunswick K. K., which sells bowling equipment and operates bowling centers in Japan. In 1993, the Division entered into a joint venture to build, own and operate bowling centers in Brazil and a joint venture to build, own and operate bowling centers and to sell bowling equipment in Thailand. The Division also entered into a joint venture to build, own and operate recreation centers containing the Q-Zar laser tag game and to sell Q-Zar laser tag equipment in Brazil and Mexico. The Division also has the rights to sell Q-Zar laser game equipment in Korea. The Brunswick Recreation Centers Division operates 126 recreation centers worldwide. Recreation centers are bowling centers which offer, in varying degrees depending on size and location, the following additional activities and services: billiards and other family games, children's playrooms, restaurants and cocktail lounges. The Company owns most of its recreation centers. In 1993, the Division also opened three Circus World Pizza facilities which contain children's play and entertainment areas and restaurants which serve pizza. The Company intends to open seven Circus World Pizza facilities in 1994. Among the Company's trademarks in the recreation field are Zebco, Quantum, Pro Staff, Classic and Martin fishing equipment, MotorGuide, Stealth and Thruster electric trolling motors, Brunswick Recreation Centers, Circus World Pizza, Leiserv, Brunswick, AS-90, Armor Plate 3000, Anvilane, BallWall, Guardian, Perry-Austen, Rhino, GS-10, Systems 2000, BowlerVision and Colorvision bowling equipment, and Brunswick Golf and Precision FM golf club shafts. Browning S.A. has licensed the Zebco Division to manufacture and sell Browning fishing equipment. Recreation products are distributed, mainly under these trademarks, to mass merchants, distributors, dealers, bowling centers, and retailers by the Company's salesmen and manufacturers' representatives and to the recreation centers operated by the Company. Recreation products are distributed worldwide from regional warehouses, sales offices and factory stocks of merchandise. Discontinued operations The Company has announced its intention to divest its Technical Group, and the businesses in the Technical Group are considered and have been accounted for as discontinued operations. The Technical Group manufactures and sells composite structures for aircraft, helicopters, spacecraft, propulsion systems, missiles, ships, automobiles, trucks, buses, oil and gas wells and offshore platforms; radomes; space qualified products including fire detection systems, filters and extendable robotic arms; camouflage; infrared optical surveillance systems; tactical weapons; flight decoys and target training systems; relocatable and mobile shelter systems; and chemical protective detectors/alarms. These products are sold to the U.S. Department of Defense; major defense prime contractors; electronics, aerospace and commercial aircraft manufacturers; and machinery, automotive and oil and gas manufacturers and distributors. Raw materials Many different raw materials are purchased from various sources. At the present time, no critical raw material shortages are anticipated in either of the Company's industry segments. General Motors Corporation is a significant supplier of the gasoline engines used to manufacture the Company's gasoline stern drives. Patents, trademarks and licenses The Company has and continues to obtain patent rights, consisting of patents and patent licenses, covering certain features of the Company's products and processes. The Company's patents, by law, have a limited life, and rights expire periodically. In the Marine segment, patent rights principally relate to boats and features of outboard motors and inboard-outboard drives including die-cast powerheads, cooling and exhaust systems, drive train, clutch and gearshift mechanisms, boat/engine mountings, shock absorbing tilt mechanisms, ignition systems, propellers, spark plugs, and fuel and oil injection systems. In the Recreation segment, patent rights principally relate to computerized bowling scorers and business systems, bowling lanes and related equipment, lightweight golf club shafts, game tables, fishing reels and electric trolling motors. Although the Company has important patent and patent license positions, the Company believes that its performance is mainly dependent upon its engineering, manufacturing, and marketing capabilities. The Company has many trademarks associated with its various divisions and applied to its products. Many of these trademarks are well known to the public and are considered valuable assets of the Company. Significant trademarks are listed on pages 1-4 herein. Seasonality of business The Company's overall business is not seasonal. Demand in the marine business is typically strongest in the first half of the year, when for the past several years between 50 and 60 percent of that segment's annual sales have been recorded. In the recreation segment, slightly more than 50 percent of the segment's annual sales are recorded in the second half of the year. 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, 1993 was $47 million, and the Company expects to fill all of such orders during 1994. The backlog of bowling capital equipment at December 31, 1992 was $61 million. Competitive conditions and position The Company believes that it has a reputation for quality in its highly competitive lines of business. The Company competes in its various markets by utilizing efficient production techniques and innovative marketing, advertising and sales efforts, and by providing high quality products at competitive prices. Strong competition exists with respect to each of the Company's product groups, but no single manufacturer competes with the Company in all product groups. In each product area, competitors range in size from large, highly diversified companies to small producers. The following paragraphs summarize what the Company believes its position is in each area. Marine. The Company believes it has the largest dollar volume of sales of recreational marine engines and of pleasure boats in the world. The domestic marine engine market includes relatively few major competitors. There are 10-12 competitors in outboard engine markets worldwide, and foreign competition continues in the domestic marine engine market. The marine engine markets are experiencing pricing pressures. The marine accessories business is highly competitive. There are many manufacturers of pleasure and fishing boats, and consequently, this business is highly competitive. The Company competes on the basis of quality, value, performance, durability, styling and price. Demand for pleasure and fishing boats and marine engines is dependent on a number of factors, including economic conditions, the availability of fuel and marine dockage and, to some extent, prevailing interest rates and consumer confidence in spending discretionary dollars. Recreation. The Company competes directly with many manufacturers of recreation products. In view of the diversity of its recreation products, the Company cannot identify the number of its competitors. The Company believes, however, that in the United States, it is one of the largest manufacturers of bowling equipment and fishing reels. Certain bowling equipment, such as BowlerVision, automatic scorers and computerized management systems, represents innovative developments in the market. For other recreation products, competitive emphasis is placed on pricing and the ability to meet delivery and performance requirements. The Company maintains a number of specialized sales forces that sell equipment to distributors and dealers and also, in some cases, to retail outlets. The Company operates 126 recreation centers worldwide. Each center competes directly with centers owned by other parties in its immediate geographic area; so, competitive emphasis is placed on customer service, quality facilities and personnel, prices and promotional programs. Research and development Company-sponsored research activities, relating to the development of new products or to the improvement of existing products, are shown below:
(in millions) 1993 1992 1991 Marine $59.3 $47.2 $44.0 Recreation Products 10.5 9.1 9.3 $69.8 $56.3 $53.3
Number of employees The number of employees at December 31, 1993 is shown below by industry segment: Marine 11,300 Recreation 6,500 Corporate 200 18,000 There are approximately 800 employees in the Recreation segment and 2,200 employees in the Marine segment who are represented by labor unions. The Company believes that relations with the labor unions are good. Environmental requirements The Company is involved in certain legal and administrative proceedings under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and other federal and state legislation governing the generation and disposition of certain hazardous wastes. These proceedings, which involve both on and off site waste disposal, in many instances seek compensation from the Company as a waste generator under Superfund legislation which authorizes action regardless of fault, legality of original disposition or ownership of a disposal site. The Company believes that it has established adequate reserves to cover all known claims. Item 2. Properties The Company's headquarters are located in Lake Forest, Illinois. The Company has numerous manufacturing plants, distribution warehouses, sales offices and test sites. Research and development facilities are division-related, and most are located at individual manufacturing sites. The Company's plants are deemed to be suitable and adequate for the Company's present needs. The Company believes that all of its properties are well maintained and in good operating condition. Most plants and warehouses are of modern, single-story construction, providing efficient manufacturing and distribution operations. The Company's plants currently are operating at approximately 65% of capacity, excluding the 15 closed plants in the Marine segment. Twelve of these closed plants are being offered for sale. The other three closed plants are not being offered for sale, but the Company has no plans to reopen them in the near future. The Company's headquarters and all of its principal plants are owned by the Company. Some bowling recreation centers, three small plants, two test facilities and an overseas distribution center are leased. The Company's primary facilities are in the following locations: Mercury Marine Division Fond du Lac, Oshkosh and Milwaukee, Wisconsin; Stillwater, Oklahoma; St. Cloud, Florida; Juarez, Mexico; and Petit Rechain, Belgium. US Marine Division Arlington and Spokane, Washington; Roseburg, Oregon; Miami and Claremore, Oklahoma; Pipestone, Minnesota; Cumberland and Salisbury, Maryland; Dandridge, Tennessee; Valdosta, Georgia; Tallahassee, Florida; and Lincoln, Alabama. Sea Ray Division Knoxville and Vonore, Tennessee; Merritt Island, Sykes Creek and Palm Coast, Florida; Phoenix, Arizona; and Cork, Ireland. Fishing Boat Division Topeka and Nappanee, Indiana; West Point, Mississippi; and Murfreesboro, Tennessee. Zebco Division Tulsa, Oklahoma; and Starkville, Mississippi. Brunswick Recreation Centers Deerfield, Illinois headquarters; 126 bowling centers in the United States, Canada and Europe; and Circus World Pizza theme restaurants in the United States. Brunswick Division Muskegon, Michigan; Eminence, Kentucky; Bristol, Wisconsin; Torrington, Connecticut; Des Moines, Iowa; Stockach, Germany; and Kettering, England. Item 3. Legal Proceedings Genmar Industries, Inc. v. Brunswick Corporation, et al. Genmar Industries brought an action against the Company and certain of its subsidiaries in the United States District Court for the District of Minnesota on June 23, 1992, alleging that the Company (i) has monopolized or attempted to monopolize the sale of recreational marine engines and boats through its acquisition of Bayliner Marine Corporation and Ray Industries, Inc. in 1986; its acquisition of four smaller fishing boat builders in 1988; its 1990 acquisition of Kiekhaefer Aeromarine, Inc., a supplier of high performance propulsion units to the marine engine industry and the owner of certain patents for recreational marine engine components; and its agreement in 1992 to form a partnership with Tracker Marine Corporation for the manufacture and marketing of recreational marine engines and power boats; (ii) has unlawfully coerced purchasers to buy the Company's boats by charging higher prices for its engines sold separately than for its engines sold with its boats, thereby inducing purchasers to buy its boats in addition to its engines; (iii) has breached its agreement to offer Genmar the lowest possible price made available to other recreational marine engine purchasers for the same quantity of engines purchased; (iv) has not dealt in good faith with Genmar by, among other things, communicating to Genmar dealers that Genmar is experiencing purported financial difficulties; and, (v) by virtue of the foregoing, has interfered with Genmar's existing and prospective business relationships. Genmar has asked that the Company be required to divest its boat manufacturing business, be enjoined from continuing its partnership with Tracker Marine, and pay damages, including treble damages under the antitrust laws. 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. Parties to this suit have exchanged written discovery and have begun depositions. Item 4. Submission of Matters to a Vote of Security Holders None. Executive Officers of the Company The Company's executive officers are listed in the following table: Officer Present Position Age J. F. Reichert Chairman of the Board 63 and Chief Executive Officer J. P. Reilly President and Chief 50 Operating Officer J. M. Charvat Executive Vice President 63 J. W. Dawson Vice President and Zebco 59 Division President F. J. Florjancic, Jr. Vice President and Brunswick 47 Division President W. R. McManaman Vice President-Finance 46 D. M. Yaconetti Vice President Adminis- 47 tration and Secretary T. K. Erwin Controller 44 R. T. McNaney General Counsel 59 R. S. O'Brien Treasurer 44 W. J. Barrington Sea Ray Division President 43 A. D. Fogel BRC Division President 58 J. W. Hoag US Marine Division 54 President D. D. Jones Mercury Marine Division 50 President J. A. Schenk Corporate Director of 51 Planning and Development R. C. Sigrist Technical Group President 60 There are no family relationships among these officers. The term of office of all elected officers expires April 27, 1994. The Division Presidents are appointed from time to time at the discretion of the Chief Executive Officer. Jack F. Reichert has been Chairman of the Board since 1983 and Chief Executive Officer since 1982. He was President from 1977 to 1993. John P. Reilly has been President and Chief Operating Officer since 1993. From 1984 to 1993 he was President of Tenneco Inc.'s Automotive Division, a manufacturer of automotive mufflers, shocks and brake components. John M. Charvat has been Executive Vice President of the Company since 1989. He was Vice President of the Company from 1986 to 1989 and Zebco Division President from 1977 to 1989. Jim W. Dawson has been Vice President of the Company since 1994 and Zebco Division President since 1989. From 1981 to 1989 he was Senior Vice President of Zebco/Motor Guide Technical Operations, responsible for manufacturing, research and development, distribution, and consumer service. Frederick J. Florjancic, Jr. has been Vice President of the Company and President of the Brunswick Division since 1988. William R. McManaman has been Vice President-Finance since 1988. Dianne M. Yaconetti has been Vice President-Administration since 1988, Corporate Secretary since 1986 and Manager of the Office of the Chairman since 1985. Thomas K. Erwin has been Controller since 1988. Robert T. McNaney has been General Counsel since 1985. Richard S. O'Brien has been Treasurer since 1988. William J. Barrington has been Sea Ray Division President and President of Ray Industries, Inc. ("Ray") since 1989. From 1985 to 1989 he was Vice President-Finance and Treasurer of Ray. Arnold D. Fogel has been Brunswick Recreation Centers Division President since 1984. James W. Hoag has been US Marine Division President since 1989. From 1988 to 1989 he was Executive Vice President of the US Marine Division. David D. Jones has been Mercury Marine Division President since 1989. From 1985 to 1989 he was General Manager of US Marine Power. James A. Schenk has been Corporate Director of Planning and Development since 1988. Robert C. Sigrist has been President of the Technical Group (known as the Defense Division prior to 1991) since 1988. Part II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters The Company's common stock is traded on the New York, Chicago, Pacific, London, and Tokyo Stock Exchanges. Quarterly information with respect to the high and low sales prices for the common stock and the dividends declared on the common stock is set forth in Note 21 on page 54. As of December 31, 1993, there were approximately 27,900 shareholders of record of the Company's common stock. Item 6. Selected Financial Data Net sales, net earnings, earnings per common share, cash dividends declared per common share, total assets, and long-term debt are shown in the Five Year Financial Summary on page 57. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis is presented on pages 19 to 23. Item 8. Financial Statements and Supplementary Data The Company's Consolidated Financial Statements are set forth on pages 24 to 26 and are listed in the index on page 18. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Part III Item 10. Directors and Executive Officers of the Registrant Information with respect to the directors of the Company is set forth on pages 2 and 3 of the Company's definitive Proxy Statement dated March 25, 1994 (the "Proxy Statement") for the Annual Meeting of Stockholders to be held on April 27, 1994, and is hereby incorporated by reference. The Company's executive officers are listed herein on pages 10-11. Item 11. Executive Compensation Information with respect to executive compensation is set forth on pages 5, 13-15 and 17-20 of the Proxy Statement and is hereby incorporated by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information with respect to the securities of the Company owned by the directors and certain officers of the Company, by the directors and officers of the Company as a group and by the only persons known to the Company to own beneficially more than 5% of the outstanding voting securities of the Company is set forth on pages 6 and 7 of the Proxy Statement, and such information is hereby incorporated by reference. Item 13. Certain Relationships and Related Transactions None. Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K a) Financial Statements and Exhibits Financial Statements Financial statements and schedules are incorporated in this Annual Report on Form 10-K, as indicated in the index on page 18. Exhibits 3.1 Restated Certificate of Incorporation of the Company filed as Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1987, and hereby incorporated by reference. 3.2 By-Laws of the Company. 4.1 Indenture dated as of March 15, 1987, between the Company and Continental Illinois National Bank and Trust Company of Chicago filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1987, and hereby incorporated by reference. 4.2 Form of 8-1/8% Notes of the Company Due April 1, 1997, filed as Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1987, and hereby incorporated by reference. 4.3 Officers' Certificate setting forth terms of the Company's $125,000,000 principal amount 7-3/8% Debentures due September 1, 2023. 4.4 The Company's Agreement to furnish additional debt instruments upon request by the Securities and Exchange Commission filed as Exhibit 4.10 to the Company's Annual Report on Form 10-K for 1980, and hereby incorporated by reference. 4.5 Rights Agreement dated as of March 15, 1986, between the Company and Harris Trust and Savings Bank filed as Exhibit 4.14 to the Company's Annual Report on Form 10-K for 1985, and hereby incorporated by reference. 4.6 Amendment dated April 3, 1989, to Rights Agreement between the Company and Harris Trust and Savings Bank filed as Exhibit 2 to the Company's Current Report on Form 8-K dated April 10, 1989, and hereby incorporated by reference. 10.1* Third Amended and Restated Employment Agreement entered as of December 30, 1986, between the Company and Jack F. Reichert filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for 1986 and hereby incorporated by reference. 10.2* Amendment dated October 24, 1989, to Employment Agreement by and between the Company and Jack F. Reichert filed as Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989 and hereby incorporated by reference. 10.3* Supplemental Agreement to Employment Agreement dated December 30, 1986, by and between the Company and Jack F. Reichert filed as Exhibit 19.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989, and hereby incorporated by reference. 10.4* Amendment dated February 12, 1991 to Employment Agreement by and between the Company and Jack F. Reichert filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for 1990 and hereby incorporated by reference. 10.5* Amendment dated March 20, 1992 to Employment Agreement by and between the Company and Jack F. Reichert filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for 1992 and hereby incorporated by reference. 10.6* Amendment dated December 15, 1992 to Employment Agreement by and between the Company and Jack F. Reichert filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for 1992 and hereby incorporated by reference. 10.7* Employment Agreement dated as of June 1, 1989 by and between the Company and John M. Charvat filed as Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989, and hereby incorporated by reference. 10.8* Amendment dated as of December 15, 1992 to Employment Agreement by and between the Company and John M. Charvat filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for 1992 and hereby incorporated by reference. 10.9* Supplemental Pension Plan filed as Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, and hereby incorporated by reference. 10.10* Form of Employment Agreement by and between the Company and each of T. K. Erwin, W. R. McManaman, R. T. McNaney, R. S. O'Brien, J. A. Schenk, D. M. Yaconetti, W. J. Barrington, J. W. Dawson, F. J. Florjancic, Jr., A. D. Fogel, J. W. Hoag, D. D. Jones, and R. C. Sigrist filed as Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, and hereby incorporated by reference. 10.11* Amendment to Form of Employment Agreement filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for 1992 and hereby incorporated by reference. 10.12* Form of Insurance Policy issued for the life of each of the Company's officers, together with the specifications for each of these policies, filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for l980 and hereby incorporated by reference. The Company pays the premiums for these policies and will recover these premiums, with some exceptions, from the policy proceeds. 10.13* Insurance policy issued by The Prudential Insurance Company of America insuring all of the Company's officers and certain other senior management employees for medical expenses filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for 1980 and hereby incorporated by reference. 10.14* Form of Indemnification Agreement by and between the Company and each of M. J. Callahan, J. P. Diesel, D. E. Guinn, L. Herzel, G. D. Kennedy, B. K. Koken, J. W. Lorsch, B. M. Musham, R. N. Rasmus, and R. W. Schipke filed as Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1986, and hereby incorporated by reference. 10.15* Indemnification Agreement dated September 16, 1986, by and between the Company and J. F. Reichert filed as Exhibit 19.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1986, and hereby incorporated by reference. 10.16* Form of Indemnification Agreement by and between the Company and each of J. M. Charvat, T. K. Erwin, F. J. Florjancic, Jr., W. R. McManaman, R. T. McNaney, R. S. O'Brien, J. A. Schenk, and D. M. Yaconetti filed as Exhibit 19.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1986, and hereby incorporated by reference. 10.17* Employment Agreement dated October 1, 1993 by and between the Company and John P. Reilly. 10.18* Indemnification Agreement dated October 26, 1993 by and between the Company and John P. Reilly. 10.19* 1991 Stock Plan filed as Exhibit A to the Company's definitive Proxy Statement dated March 21, 1991 for the Annual Meeting of Stockholders on April 24, 1991 and hereby incorporated by reference. 10.20* 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 1993 filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for 1992 and hereby incorporated by reference. 10.22* Brunswick Performance Plan for 1994. 10.23* Brunswick Strategic Incentive Plan. 10.24* 1988 Stock Plan for Non-Employee Directors filed as Exhibit B to the Company's definitive Proxy Statement dated March 10, 1988 for the Annual Meeting of Stockholders on April 27, 1988 and hereby incorporated by reference. 10.25* 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. 22.1 Subsidiaries of the Company. 25.1 Powers of Attorney. b) Reports on Form 8-K The Company filed no reports on Form 8-K during the three months ended December 31, 1993. *Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c) of this Report. Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Brunswick Corporation March 28, 1994 By /s/ Thomas K. Erwin Thomas K. Erwin, Controller Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Jack F. Reichert Chairman of the Board, Chief Executive Officer (Principal Executive Officer) and Director John P. Reilly President, Chief Operating Officer and Director William R. McManaman Vice President-Finance (Principal Financial Officer) Thomas K. Erwin Controller (Principal Accounting Officer) Michael J. Callahan Director John P. Diesel Director Donald E. Guinn Director Leo Herzel Director George D. Kennedy Director Bernd K. Koken Director Jay W. Lorsch Director Bettye Martin Musham Director Robert N. Rasmus Director Roger W. Schipke Director Thomas K. Erwin, pursuant to a Power of Attorney (executed by each of the officers and directors listed above and filed with the Securities and Exchange Commission, Washington, D.C.), by signing his name hereto does hereby sign and execute this report of Brunswick Corporation on behalf of each of the officers and directors named above in the capacities in which the names of each appear above. March 28, 1994 /s/ Thomas K. Erwin Thomas K. Erwin Brunswick Corporation Index to Financial Statements and Schedules Page Consolidated Financial Statements Management's Discussion and Analysis 19 to 23 Statements of Results of Operations 1993, 1992 and 1991 24 Balance Sheets December 31, 1993 and 1992 25 Statements of Cash Flows 1993, 1992 and 1991 26 Notes to Financial Statements 1993, 1992 and 1991 27 to 54 Report of Management 55 Report of Independent Public Accountants 55,56 Five Year Financial Summary 57 Schedules Consent of Independent Public Accountants 58 I- Marketable Securities 1993 59 V- Property 1993, 1992 and 1991 60 VI- Accumulated Depreciation 1993, 1992 and 1991 61 VIII- Valuation and Qualifying Accounts 1993, 1992 and 1991 62 X- Supplementary Income Statement Information 1993, 1992 and 1991 62 All other schedules are not submitted because they are not applicable or not required or because the required information is included in the consolidated financial statements or in the notes thereto. These notes should be read in conjunction with these schedules. The separate financial statements of Brunswick Corporation (the parent company Registrant) are omitted because consolidated financial statements of Brunswick Corporation and its subsidiaries are included. The parent company is primarily an operating company, and all consolidated subsidiaries are wholly owned and do not have any indebtedness (which is not guaranteed by the parent company) to any person other than the parent or the consolidated subsidiaries in an amount that is material in relation to consolidated assets. Brunswick Corporation Management's Discussion and Analysis Cash Flow, Liquidity and Capital Resources Net cash provided by operating activities increased $19.9 million in 1993 to $188.9 million from the $169.0 million reported in 1992. The increase resulted primarily from a $14.8 million improvement in earnings from continuing operations. Income taxes payable increased and deferred items, primarily income taxes, decreased as a result of the Company's January 1994 agreement with the U.S. Internal Revenue Service regarding the IRS examination of the Company for the years 1985 and 1986, as discussed in Note 15 to the consolidated financial statements. Charges in both years for the cumulative effect of changes in accounting principles and estimated losses on the divestiture of the Company's Technical Group did not involve cash expenditures. The net cash used for investing activities decreased $39.8 million to $97.1 million in 1993 from the $136.9 million in 1992. The primary reason for the decrease was reduced payments for businesses acquired. Net cash used for financing activities was $38.5 million in 1993 compared to net cash provided by financing activities of $61.3 million in 1992. The 1993 financing activities included payment of long-term debt of $117.3 million, primarily for the redemption of the Company's 9.875% sinking fund debentures, as well as net proceeds of $122.9 million from the issuance of 7.375% debentures due in 2023. The 1992 financing activities included net proceeds of $104.5 million received from the sale of 6.5 million shares of common stock. Working capital at December 31, 1993, was $347.8 million compared to $362.0 million at December 31, 1992. The Company's current ratio was 1.6 to 1 at December 31, 1993, and 1.7 to 1 at December 31, 1992. The Company's long-term financing was primarily comprised of 30-year debentures, 10-year unsecured notes, loans secured by mortgages on property and the guarantee of $78.0 million of debt of the Brunswick Employee Stock Ownership Plan (ESOP). The form and timing of all financing is determined by the prevailing securities markets, the Company's capital requirements and its financial position. At December 31, 1993, the Company had unused short-term and long-term credit agreements totaling $400 million with a group of banks. The Company's debt-to-capitalization ratio increased to 29.5% at December 31, 1993, from 28.0% at the end of 1992. Total debt increased $15.9 million to $336.4 million at December 31, 1993, from the $320.5 million at December 31, 1992. Capital expenditures, excluding acquisitions, were $95.8 million, $88.6 million and $74.7 million in 1993, 1992 and 1991, respectively. The Company continues to make capital expenditures which offer increased production efficiencies and improved product quality. The Company believes that existing cash balances and future operating results, supplemented when necessary with short and/or long-term borrowings, will continue to provide the financial resources necessary for capital expenditures and working capital requirements. Results of Operations - 1993 vs 1992 Net Sales The Company's consolidated net sales for 1993 increased 7% to $2.21 billion from the $2.06 billion reported for 1992. Increases in both the Marine and Recreation segments contributed to this improvement. The Marine segment's 1993 net sales increased 4% to $1.57 billion from $1.52 billion in 1992. Domestic sales of engines and boats increased 14% over the prior year, while international sales declined approximately 20% as major European and Asian markets continue to experience recessions. Price increases accounted for 2.5% of the 4% increase with the other 1.5% attributable to increased volume and mix changes. Unit sales of boats to dealers were slightly lower than dealers' retail sales in 1993 and, therefore, dealer inventories continue to remain at relatively low levels. The Recreation segment's 1993 net sales increased 17% to $635.6 million from $543.3 million in 1992. The Brunswick Division sales increased 29% as international demand for capital equipment continued to increase, as did domestic demand for consumer products, supplies and parts. Zebco Division sales increased 15% due to domestic volume increases and the full year effect of a 1992 fourth quarter acquisition. The Brunswick Recreation Centers (BRC) Division sales were flat in 1993 compared to 1992 as price increases, which were limited by competitive pressures, offset slight lineage declines. Operating Earnings The consolidated operating earnings increased $20.0 million to $99.8 million in 1993 from the $79.8 million reported for 1992. Both the Marine and Recreation segments contributed to this increase. The Marine segment's operating earnings for 1993 rose 25% to $53.7 million from the $43.0 million in 1992. The previously discussed sales increase and the continuation of cost reduction programs begun four years ago, when the marine industry downturn began, contributed to the operating results improvement. The Recreation segment's operating earnings were $80.0 million for 1993 compared to $65.2 million in 1992. The Brunswick Division benefited from the previously discussed sales increases which were partly offset by start-up costs associated with manufacturing its new composite golf shaft and plant rearrangement expenses in the golf unit. The Zebco Division operating earnings increased in line with the Division's sales increase. The BRC Division's operating earnings for 1993 declined from 1992 levels largely due to start-up costs for its Circus World Pizza operations. Interest and Other Items, Net Interest expense declined to $27.2 million in 1993 from $29.9 million in 1992. The decline resulted primarily from lower levels of ESOP and other debt and the net reduction in interest expense from the redemption of the 9.875% sinking fund debentures on August 9, 1993, and the sale of 7.375% debentures on August 25, 1993. Interest income and other items, net increased to $13.9 million in 1993 from $12.1 million in 1992, primarily due to increased equity in earnings of unconsolidated affiliates. Income Taxes In 1993, the Company recorded a tax provision of $32.0 million compared with a tax provision of $22.3 million in 1992. The effective tax rate for 1993 of 37% compares to 36% for 1992. The increase in the effective tax rate results primarily from an increase in the effective foreign tax rate which was offset by a net benefit from a change in the Federal statutory income tax rate. In January 1994, the Company reached an agreement with the U.S. Internal Revenue Service regarding its examination of the Company for the years 1985 and 1986. See Note 15 for additional discussion. Results of Operations - 1992 vs. 1991 Net Sales The Company's consolidated net sales for 1992 increased 12% to $2.06 billion from the $1.84 billion reported for 1991. Increases in both the Marine and Recreation segments accounted for this improvement. The Marine segment's 1992 net sales of $1.52 billion were 11% above the $1.37 billion reported in 1991. Increased domestic demand for engines and boats resulted in the first year-to-year improvement since the marine industry downturn began in 1988, but the recession that affected domestic markets has spread to major European and Asian markets. Unit sales improved more than the sales increase in dollars as the strongest improvements were in the areas of fishing boats and outboard motors, which are typically in the lower price range of the products in the segment. Sales of boats to dealers were approximately even with retail sales in 1992, so dealer inventories remained at relatively low levels. In anticipation of a stronger spring selling season in 1993, dealers increased their engine inventories, primarily outboards, over the levels of the prior year. The Recreation segment's 1992 net sales increased 15% to $543.3 million from $472.7 million in 1991. Each of the three Divisions in the segment reported increases. The Zebco Division experienced an increase of 29% as a result of increased volume to major retailers. The Brunswick Recreation Centers (BRC) Division increase of 3% resulted primarily from higher demand by value conscious consumers. The Brunswick Division net sales increased 14% on continued increases in international demand for capital equipment. Operating Earnings The consolidated operating earnings of $79.8 million in 1992 compares to an operating loss of $18.4 million in 1991. The 1991 operating results include a $38.0 million provision for litigation matters, of which $30.0 million is included in the Marine segment. The Marine segment's operating earnings for 1992 of $43.0 million compared to an operating loss of $30.5 million in 1991 which included the $30.0 million litigation provision. The previously discussed sales increases and the benefits of cost reduction programs, which included production consolidations and plant closings, begun three years ago when the marine industry downturn began, contributed to the operating results improvement. The Recreation segment's operating earnings were $65.2 million for 1992 compared to $52.5 million in 1991. This increase resulted from higher operating earnings at the Zebco and Brunswick Divisions because of their sales increases and lower warranty costs in the Brunswick Division. The BRC Division's operating earnings were flat with the prior year, despite the small sales increase, because of pricing pressures on open (non-league) bowling. Interest and Other Items, Net Interest expense declined to $29.9 million in 1992 from $32.0 million in 1991. The Company utilized no commercial paper borrowings in 1992, resulting in a reduction of interest expense of $3.0 million. This reduction was partially offset by interest expense of $0.9 million on a foreign borrowing made in the fourth quarter of 1991. Interest income and other items, net increased to $12.1 million in 1992 from $9.9 million in 1991 primarily due to increased equity in earnings of unconsolidated affiliates. Income Taxes In 1992, the Company recorded a tax provision of $22.3 million compared with a tax benefit of $5.5 million in 1991. The effective tax rate in 1992 of 36% compares to a benefit rate of 13.6% in 1991. The 1991 benefit rate of 13.6% is below the statutory rate primarily due to the inability to utilize $9.3 million of foreign tax credits in the calculation of the consolidated tax provision. Brunswick Corporation Consolidated Statements of Results Of Operations For the Years Ended December 31, (in millions, except per share data)
1993 1992 1991 Net sales $ 2,206.8 $ 2,059.4 $ 1,841.0 Cost of sales 1,636.6 1,554.1 1,410.9 Selling, general and administrative 470.4 425.5 448.5 Operating earnings(loss) 99.8 79.8 (18.4) Interest expense (27.2) (29.9) (32.0) Interest income and other items, net 13.9 12.1 9.9 Earnings(loss) before income taxes 86.5 62.0 (40.5) Income tax provision(benefit) 32.0 22.3 (5.5) Earnings(loss) from continuing operations before extraordinary item and cumulative effect of accounting changes 54.5 39.7 (35.0) Earnings(loss) from discontinued operations - (1.7) 11.3 Extraordinary loss from retirement of debt (4.6) - - Estimated loss on divestiture of Technical segment (12.2) (26.0) - Cumulative effect on prior years of changes in accounting principles (14.6) (38.3) - Net earnings(loss) $ 23.1 $ (26.3)$ (23.7) Earnings (loss) per common share Continuing operations $ 0.57 $ 0.43 $ (0.40) Discontinued operations - (0.02) 0.13 Extraordinary item (0.05) - - Estimated loss on divestiture of Technical segment (0.13) (0.28) - Cumulative effect of changes in accounting principles (0.15) (0.41) - Net earnings(loss) per common share $ 0.24 $ (0.28)$ (0.27) The notes are an integral part of these consolidated statements.
Brunswick Corporation Consolidated Balance Sheets As of December 31, (in millions, except per share data)
Assets 1993 1992 Current assets Cash and cash equivalents, at cost, which approximates market $ 248.8 $ 195.5 Accounts and notes receivable, less allowances of $16.9 and $15.6 168.9 160.1 Inventories 321.4 305.9 Prepaid income taxes 186.5 180.5 Prepaid expenses 24.1 21.1 Income tax refunds receivable - 1.8 Current assets 949.7 864.9 Property Land 60.9 63.7 Buildings 357.5 349.7 Equipment 720.9 693.0 1,139.3 1,106.4 Accumulated depreciation (595.0) (571.4) Property 544.3 535.0 Other assets Dealer networks 171.6 203.5 Trademarks and other 106.7 88.8 Excess of cost over net assets of businesses acquired 117.7 120.4 Investments 67.6 59.8 Other assets 463.6 472.5 Assets of continuing operations 1,957.6 1,872.4 Net assets of discontinued operations 26.1 35.6 Total assets $ 1,983.7 $ 1,908.0 Liabilities And Shareholders' Equity Current liabilities Short-term debt, including current maturities of long-term debt $ 11.9 $ 16.0 Accounts payable 122.8 106.8 Accrued expenses 404.5 380.1 Income taxes payable 62.7 - Current liabilities 601.9 502.9 Long-term debt Notes, mortgages and debentures 324.5 304.5 Deferred items Income taxes 103.9 175.4 Postretirement and postemployment benefits 126.9 85.3 Compensation and other 22.1 17.4 Deferred items 252.9 278.1 Common shareholders' equity Common stock; authorized: 200,000,000 shares, $.75 par value; issued: 100,687,992 shares 75.5 75.5 Additional paid-in capital 261.4 261.7 Retained earnings 648.5 667.3 Treasury stock, at cost: 5,430,523 shares and 5,555,954 shares (102.7) (105.7) Minimum pension liability adjustment (6.7) - Unearned portion of restricted stock for future services (2.3) (3.4) Cumulative translation adjustments 7.9 8.9 Unamortized ESOP expense (77.2) (81.8) Common shareholders' equity 804.4 822.5 Total liabilities and shareholders' equity $ 1,983.7 $ 1,908.0 The notes are an integral part of these consolidated statements. Brunswick Corporation
Consolidated Statements Of Cash Flows For the Years ended December 31, (in millions)
1993 1992 1991 Cash flows from operating activities Net earnings(loss) $ 23.1 $ (26.3) $ (23.7) Adjustments to reconcile net earnings(loss) to net cash provided by operating activities: Depreciation and amortization by continuing operations 117.8 115.9 125.0 Changes in noncash current assets and current liabilities of continuing operations: (Increase) decrease in accounts and notes receivable (7.8) 7.9 (14.8) (Increase) decrease in inventories (10.9) 6.1 13.5 (Increase) decrease in prepaid income taxes (6.0) (2.0) 1.4 (Increase) decrease in prepaid expenses (3.1) 3.5 (2.8) Increase in accounts payable 16.4 5.0 1.4 Increase (decrease) in accrued expenses 31.8 (23.4) 32.7 Increase (decrease) in taxes payable 64.5 (0.2) (7.0) Increase (decrease) in deferred items (50.2) 24.5 2.8 Pension cost in excess of (less than) funding (17.8) (3.8) 2.1 Other, net 5.1 (5.0) (2.3) Cumulative effect of changes in accounting principles 14.6 38.3 - Estimated loss on disposition of Technical segment 12.2 26.0 - (Increase)decrease in net assets of discontinued operations (0.8) 2.5 2.5 Net cash provided by operating activities 188.9 169.0 130.8 Cash flows from investing activities Payments for businesses acquired, net of cash acquired and including other cash payments associated with the acquisitions (2.1) (19.8) (1.8) Capital expenditures (95.8) (88.6) (74.7) Proceeds from sales of property 7.1 3.0 1.6 Investments in unconsolidated affiliates (2.8) (6.7) (1.8) Other, net (1.6) (21.2) (6.1) Net investing activities of discontinued operations (1.9) (3.6) (6.4) Net cash used for investing activities (97.1) (136.9) (89.2) Cash flows from financing activities Proceeds from issuance of long-term debt 122.9 - 20.0 Proceeds from public offering of common stock - 104.5 - Payments of long-term debt, including current maturities (117.3) (5.5) (5.5) Cash dividends paid (41.9) (41.1) (38.9) Other, net (2.2) 3.4 0.3 Net cash provided by (used for) financing activities (38.5) 61.3 (24.1) Net increase in cash and cash equivalents 53.3 93.4 17.5 Cash and cash equivalents at beginning of year 195.5 102.1 84.6 Cash and cash equivalents at end of year $ 248.8 $ 195.5 $ 102.1 Supplemental cash flow disclosures: Interest paid $ 25.5 $ 31.1 $ 31.7 Income taxes paid, net of refunds 23.9 26.5 0.3 Supplemental schedule of noncash investing and financing activities: Fair market value of treasury stock issued for compensation plans and other $ 2.1 $ 0.8 $ 3.5 The notes are an integral part of these consolidated statements.
Brunswick Corporation Notes to Consolidated Financial Statements December 31, 1993, 1992 and 1991 1. Significant Accounting Policies Restatement. The Company's consolidated financial statements have been restated to segregate the results of operations and net assets of the Company's discontinued Technical segment. In addition, certain previously reported amounts have been reclassified to conform with year-end 1993 presentations. Principles of consolidation. The Company's consolidated financial statements include the accounts of its significant domestic and foreign subsidiaries, after eliminating transactions between Brunswick Corporation and such subsidiaries. Investments in certain affiliates, including some majority-owned subsidiaries which are immaterial, are reported using the equity method. Cash and cash equivalents. For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less from the time of purchase to be cash equivalents. Inventories. Approximately fifty percent of the Company's inventories are valued at the lower of first-in, first-out (FIFO) cost or market (replacement cost or net realizable value). All other inventories are valued at last-in, first-out (LIFO) cost, which is not in excess of market. Inventory cost includes material, labor and manufacturing overhead. Property. Property, including major improvements, is recorded at cost. The costs of maintenance and repairs are charged against results of operations as incurred. Depreciation is charged against results of operations over the estimated service lives of the related assets. Improvements to leased property are amortized over the life of the lease or the life of the improvement, whichever is shorter. For financial reporting purposes, the Company principally uses the straight-line method of depreciation. For tax purposes, the Company generally uses accelerated methods where permitted. Sales and retirements of depreciable property are recorded by removing the related cost and accumulated depreciation from the accounts. Gains or losses on sales and retirements of property are reflected in results of operations. Intangibles. The costs of dealer networks, trademarks and other intangible assets are amortized over their expected useful lives using the straight-line method. Accumulated amortization was $253.2 million and $278.3 million at December 31, 1993 and 1992, respectively. The decline resulted primarily from fully amortized intangible assets of $60.6 million being written off. The excess of cost over net assets of businesses acquired is being amortized using the straight-line method, principally over 40 years. Accumulated amortization was $25.2 million and $21.7 million at December 31, 1993 and 1992, respectively. Subsequent to acquisition, the Company continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of its intangible assets may warrant revision or that the remaining balance of such assets may not be recoverable. When factors indicate that such assets should be evaluated for possible impairment, the Company uses an estimate of the related business segment's undiscounted cash flows or, in the case of goodwill, undiscounted operating earnings, over the remaining life of the asset in measuring whether the asset is recoverable. Income taxes. Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes", was issued by the Financial Accounting Standards Board (FASB) in February 1992, effective for fiscal years beginning after December 15, 1992, with earlier adoption encouraged. The Company elected to adopt SFAS No. 109 as of January 1, 1992. The adoption of SFAS No. 109 changed the Company's method of accounting for income taxes from the deferred method (under APB No. 11) to an asset and liability approach. Previously, the Company deferred the past tax effects of timing differences between financial reporting and taxable income. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax bases of assets and liabilities. Retirement plans. The Company accrues the cost of pension and retirement plans which cover substantially all employees. Pension costs, which are primarily computed using the projected unit credit method, are generally funded based on the minimum required contribution under the Employee Retirement Income Security Act of 1974 for the Company's domestic pension plans and in accordance with local laws and income tax regulations for foreign plans. During 1993, the Company contributed $19.0 million in excess of the required minimum funding for its domestic pension plans. 2. Earnings (loss) Per Common Share Earnings (loss) per common share are based on the weighted average number of common and common equivalent shares outstanding during each period. Such average shares were 95.3 million, 92.7 million and 88.4 million for 1993, 1992 and 1991, respectively. 3. Inventories At December 31, 1993 and 1992, $133.7 million and $111.1 million, respectively, of inventories were valued using the LIFO method. If the FIFO method of inventory accounting had been used by the Company for inventories valued at LIFO, inventories at December 31 would have been $73.9 million and $71.2 million higher than reported for 1993 and 1992, respectively. The FIFO cost of inventories at these dates approximated replacement cost or net realizable value. Inventories at December 31 consisted of the following:
(in millions) 1993 1992 Finished goods $ 188.1 $ 189.7 Work-in-process 79.1 66.2 Raw materials 54.2 50.0 Inventories $ 321.4 $ 305.9
4. Investments On April 14, 1992, the Company acquired a significant minority interest in Tracker Marine, L.P., a limited partnership, which manufactures and markets boats, trailers and accessories. The Company also entered into various other agreements, including contracts to supply outboard motors, trolling motors and various other Brunswick products for Tracker boats. The Company's total payments relating to these transactions were $25 million. 5. Discontinued Operations In February 1993, the Company's Board of Directors approved plans to divest the Technical Group, the only remaining business in the Company's Technical segment. A $26.0 million estimated loss ($42.0 million pretax) on the divestiture of the Technical Group and for certain other expenses of the previously divested Technical businesses was recorded in 1992. In 1993, the Company recorded an additional $12.2 million estimated loss ($20.0 million pretax) on the divestiture of the Technical Group which reflects the offers for that operation which the Company is reviewing. The net sales and earnings from discontinued operations for each of the three years in the period ended December 31, 1993, were as follows:
(in millions) 1993 1992 1991 Net sales $ 147.4 $ 168.3 $ 247.3 Earnings from discontinued operations before income taxes - (2.9) 18.3 Provision (benefit) for income taxes - (1.2) 7.0 Earnings (loss) from discontinued operations $ - $ (1.7) $ 11.3
Operating losses of discontinued operations for 1993 have been charged against the reserve established in 1992. 6. Acquisitions In 1993, the Company purchased the assets of three companies. The consideration for these acquisitions totaled $2.1 million in cash. In October 1992, the Company purchased certain assets of three companies in the United States and Europe, which comprised the Fishing Division of Browning, a line of fishing rods and reels. The consideration for these assets consisted of cash of $17.9 million and assumed liabilities of $2.1 million. The Company also purchased certain assets of another company for $1.9 million in cash in 1992. In 1991, the Company purchased the assets of four companies. The consideration for these acquisitions totaled $1.8 million in cash. The effect of the aforementioned acquisitions, which were accounted for as purchases, was not significant to the Company's consolidated results of operations in the year of acquisition. 7. Commitments and Contingent Liabilities It is customary within the marine industry for manufacturers to enter into product repurchase agreements with financial institutions that provide financing to marine dealers. The Company has entered into agreements which provide for the repurchase of its products from a financial institution in the event of repossession upon a dealer's default. Most of these agreements contain provisions which limit the Company's annual repurchase obligation. The Company accrues for the cost and losses that are anticipated in connection with expected repurchases. Such losses are mitigated by the Company's resale of repurchased products. Repurchases and losses incurred under these agreements have not and are not expected to have a significant impact on the Company's results of operations. The maximum potential repurchase commitments at December 31, 1993 and 1992, were approximately $124.0 million and $136.0 million, respectively. The Company also has various agreements with financial institutions that provide limited recourse on marine and bowling capital equipment sales. The maximum potential recourse liabilities outstanding under these programs were approximately $45.0 million and $40.0 million at December 31, 1993 and 1992, respectively. Recourse losses have not and are not expected to have a significant impact on the Company's results of operations. The Company had outstanding standby letters of credit and financial guarantees of approximately $19.0 million and $34.0 million at December 31, 1993 and 1992, respectively, representing conditional commitments whereby the Company guarantees performance to a third party. The majority of these commitments are standby letters of credit which guarantee premium payment under certain of the Company's insurance programs. The Company enters into interest rate swap agreements in connection with the management of its assets and liabilities and interest rate exposure. The differential to be paid or received is recognized over the lives of the agreements. These agreements are entered into to reduce the impact of changes in interest rates on the Company's investments and borrowings. The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreements. The Company regularly monitors its positions and the credit ratings of these counterparties and considers the risk of default to be remote. At December 31, 1993 and 1992, the Company had an outstanding floating-to-floating interest rate swap agreement with a notional principal amount of $260.0 million that terminates in September 2003. The interest rate on this agreement is set on a semi-annual basis in arrears, the first such setting took place in March 1992. The Company also has entered into fixed-to-floating interest rate swap agreements through October 1996 on $200.0 million of its fixed-rate debt. The floating interest rates are set on a semi-annual basis. The first such setting took place in October 1993. The cost exposure of the interest rate swaps, which represents the net cost to terminate these agreements, is not material to the Company. The Company also enters into forward exchange contracts to hedge the U.S. dollar exposure of its foreign operations. Realized and unrealized gains and losses on contracts are recognized and included in net income. At December 31, 1993, the Company had contracted to exchange 1,057.2 million Belgian francs for $29.2 million during 1994. Had this contract been entered into on December 31, 1993, the Company would have to exchange 1,057.2 million Belgian francs for $29.8 million. A loss of $0.6 million has been included in net income. At December 31, 1992, the Company had contracted to exchange 46.8 million Deutsche marks for $29.2 million during 1993. Had this contract been entered into on December 31, 1992, the Company would have to exchange 46.8 million Deutsche marks for $28.4 million. 8. Segment Information
Industry segments Geographic segments Total United (in millions) Marine Recreation Eliminations Segments States Foreign Eliminations Corporate Consolidated 1993 Net sales Customers $ 1,571.2 635.6 - $ 2,206.8 1,802.7 404.1 - - $ 2,206.8 Intersegment - 3.7 (3.7) - 197.4 35.4 (232.8) - - $ 1,571.2 639.3 (3.7) $ 2,206.8 2,000.1 439.5 (232.8) - $ 2,206.8 Operating earnings $ 53.7 80.0 - $ 133.7 95.5 38.2 - (33.9) $ 99.8 Assets of continuing operations $ 1,031.0 375.4 - $ 1,406.4 1,258.7 147.7 - 551.2 $ 1,957.6 Capital expenditures 51.1 34.0 - 85.1 10.7 95.8 Depreciation 56.7 19.5 - 76.2 1.9 78.1 1992 Net sales Customers $ 1,516.1 543.3 - $ 2,059.4 1,664.3 395.1 - - $ 2,059.4 Intersegment - 3.0 (3.0) - 183.3 33.5 (216.8) - - $ 1,516.1 546.3 (3.0) $ 2,059.4 1,847.6 428.6 (216.8) - $ 2,059.4 Operating earnings $ 43.0 65.2 - $ 108.2 75.0 33.2 - (28.4) $ 79.8 Assets of continuing operations $ 1,039.1 359.4 - $ 1,398.5 1,259.6 138.9 - 473.9 $ 1,872.4 Capital expenditures 47.2 29.5 - 76.7 11.9 88.6 Depreciation 59.4 17.0 - 76.4 1.4 77.8 1991 Net sales Customers $ 1,368.3 472.7 - $ 1,841.0 1,495.2 345.8 - - $ 1,841.0 Intersegment - 3.4 (3.4) - 159.2 39.8 (199.0) - - $ 1,368.3 476.1 (3.4) $ 1,841.0 1,654.4 385.6 (199.0) - $ 1,841.0 Operating earnings(loss) $ (30.5) 52.5 - $ 22.0 (20.8) 42.8 - (40.4) $ (18.4) Assets of continuing operations $ 1,083.4 318.5 - $ 1,401.9 1,267.2 134.7 - 359.0 $ 1,760.9 Capital expenditures 43.7 26.2 - 69.9 4.8 74.7 Depreciation 67.1 15.9 - 83.0 1.0 84.0
Net sales to customers include immaterial amounts sold to unconsolidated affiliates. Sales between domestic and foreign operations generally are priced with reference to prevailing market prices. Operating earnings of segments do not include the expenses of corporate administration, other expenses and income of a nonoperating nature, and provisions for income taxes. The 1991 operating loss of the Marine segment includes litigation charges of $30.0 million. The 1991 Corporate expenses include litigation charges of $8.0 million. Corporate assets consist primarily of cash and marketable securities, prepaid income taxes and investments in unconsolidated affiliates. The Company's export sales to unaffiliated customers for the three years ended December 31, 1993, 1992 and 1991 were $181.4 million, $218.2 million and $256.2 million, respectively. 9. Accrued Expenses Accrued expenses at December 31 were as follows:
(in millions) 1993 1992 Payroll and other compensation $ 49.9 $ 42.4 Product warranties 69.6 65.5 Dealer allowances and discounts 52.4 53.1 Litigation and claims 67.0 55.9 Health and liability insurance 54.3 52.9 Restructuring charges and disposition costs 36.4 32.0 Taxes, other than income taxes 14.2 15.0 Other 60.7 63.3 Accrued expenses $ 404.5 $ 380.1
10. Debt Short-term debt at December 31 consisted of the following:
(in millions) 1993 1992 Notes payable $ 6.6 $ 4.4 Current maturities of long-term debt 5.3 11.6 Short-term debt $ 11.9 $ 16.0
Long-term debt at December 31 consisted of the following:
(in millions) 1993 1992 Mortgage notes and other, 3% to 10%, payable through 1999 $ 27.9 $ 34.6 Sinking fund debentures, 9.875%, due 2016, net of discount of $0.9 - 99.1 Notes, 8.125%, due 1997, net of discounts of $0.2 99.8 99.8 Debentures, 7.375%, due 2023 net of discount of $0.9 124.1 - Guaranteed ESOP debt, 8.13%, payable through 2004 78.0 82.6 329.8 316.1 Current maturities (5.3) (11.6) Long-term debt $ 324.5 $ 304.5
Scheduled maturities 1995 $ 25.8 1996 6.1 1997 106.3 1998 10.8 Thereafter 175.5 $ 324.5 On November 8, 1993, the Company and seventeen banks entered into a short-term credit agreement for $100 million and a long-term credit agreement for $300 million with termination dates of November 7, 1994, and December 31, 1996, respectively. With mutual agreement between the Company and the banks, the Company may extend both agreements. The short-term credit agreement may be extended each 364 day anniversary, but not beyond December 31, 1996. The long-term credit agreement contains two one-year extension options with the extension requests permitted on the first and second anniversaries. Under terms of the new agreements, the Company has multiple borrowing options, including borrowing at a corporate base rate, as announced by The First National Bank of Chicago, or a rate tied to the Eurodollar rate. Currently, the Company must pay a facility fee of 0.1875% per annum on the short-term agreement and 0.25% per annum on the long-term agreement. Under the agreements, the Company is subject to interest coverage, net worth and leverage tests, as well as a restriction on secured debt, as defined. On the interest coverage test, the Company is required to maintain a ratio of consolidated income before interest and taxes, as defined, to consolidated interest expense of not less than 2.0 to 1.0 on a cumulative twelve-month basis. This ratio, on a cumulative twelve-month basis, was 3.7 to 1.0 at December 31, 1993. The leverage ratio of consolidated total debt to capitalization, as defined, may not exceed 0.55 to 1.00, and at December 31, 1993, this ratio was 0.30 to 1.00. The Company also is required to maintain shareholders' equity of at least $711.6 million at December 31, 1993. The required level of shareholders' equity at December 31 of each subsequent year is increased by 50% of net earnings for that year. The Company has complied with this limitation and the secured debt limitation as of December 31, 1993. There were no borrowings under the credit agreements at December 31, 1993. On August 9, 1993, the $100 million 9.875% sinking fund debentures were redeemed by the Company at 105.704% of the principal amount of the debentures plus accrued interest to the redemption date. Proceeds of the Company's common stock offering in May 1992 of $104.5 million, and cash from operations were used to redeem the debentures. The Company recorded an after-tax extraordinary loss of $4.6 million ($7.4 million pretax) relating to this transaction during the third quarter of 1993. On August 25, 1993, the Company sold $125 million of 7.375% debentures maturing on September 1, 2023. The proceeds will be used for general corporate purposes. On February 27, 1990, the Brunswick Employee Stock Ownership Plan (ESOP) sold $96.7 million principal amount of notes bearing interest at the rate of 8.2% per annum, which were guaranteed by the Company and are payable in semi-annual installments of interest and principal ending in 2004. The interest rate on these notes was reduced to 8.13% per annum, effective as of January 1, 1993, as a result of the change in tax law passed by the U.S. Congress in August 1993. Company contributions to the ESOP along with dividends paid on shares purchased with ESOP debt proceeds are used to service the ESOP debt. Under the terms of the ESOP debt agreement, future changes in tax law could cause the interest rate on the debt to vary within the range of 6.8% to 10.3%. The carrying amounts for the short-term debt and current maturities of long-term debt approximate their fair value because of the short maturity of these instruments. The fair value of the long-term debt is $318.2 million and $316.3 million, respectively, versus carrying amounts of $324.5 million and $304.5 million, respectively, at December 31, 1993 and 1992. The fair value is based on quoted market prices where available or discounted cash flows using market rates available for similar debt of the same remaining maturities. 11. Consolidated Common Shareholders' Equity (in millions, except per share data)
Minimum Addt'l pension Unearned Cumulative Unamort. Common stock paid-in Retained Treasury stock liability restricted translation ESOP Shares Amount capital earnings Shares Amount adj. stock adjustments Expense Total Balance, December 31, 1990 94.2 $70.6 $165.4 $787.6 (5.9)($114.3) - ($7.5) $12.2 ($90.0) $824.0 1991 Net loss - - - (23.7) - - - - - - (23.7) Dividends declared ($.33 per common share) - - - (29.2) - - - - - - (29.2) Compensation plans and other - - (2.3) - 0.3 6.6 - 1.2 - - 5.5 Deferred Compensation-ESOP - - - - - - - - - 3.9 3.9 Currency translation - - - - - - - - (1.8) - (1.8) Balance, December 31, 1991 94.2 $70.6 $163.1 $734.7 (5.6)($107.7) - ($6.3) $10.4 ($86.1) $778.7 1992 Net loss - - - (26.3) - - - - - - (26.3) Dividends declared ($.44 per common share) - - - (41.1) - - - - - - (41.1) Compensation plans and other - - (1.0) - - 2.0 - 2.9 - - 3.9 Deferred Compensation-ESOP - - - - - - - - - 4.3 4.3 Issuance of common stock 6.5 4.9 99.6 - - - - - - - 104.5 Currency translation - - - - - - - - (1.5) - (1.5) Balance, December 31, 1992 100.7 $75.5 $261.7 $667.3 (5.6)($105.7) - ($3.4) $8.9 ($81.8) $822.5 1993 Net Earnings - - - 23.1 - - - - - - 23.1 Dividends declared ($.44 per common share) - - - (41.9) - - - - - - (41.9) Compensation plans and other - - (0.3) - 0.2 3.0 (6.7) 1.1 - - (2.9) Deferred Compensation-ESOP - - - - - - - - - 4.6 4.6 Currency translation - - - - - - - - (1.0) - (1.0) Balance, December 31, 1993 100.7 $75.5 $261.4 $648.5 (5.4)($102.7) ($6.7) ($2.3) $7.9 ($77.2) $804.4 At December 31, 1993, 1192, 1991, the Company had no preferred stock outstanding(Authorized: 12.5 million shares, $.75 par value at December 31, 1993) The Company's Board of Directors approved a new schedule for the declaration and payment of dividends which resulted in only three dividends being declared in 1991. However, four dividends were paid during 1992 and 1993. Quarterly dividend declarations are now considered at the February, April, July and October meetings of the Board of Directors. Payments of declared amounts would be made on the fifteenth of March, June, September and December.
12. Litigation The Company is subject to certain legal proceedings and claims which have arisen in the ordinary course of its business and have not been finally adjudicated. In 1993, 1992 and 1991, the Company recorded pretax provisions of $18.2 million, $4.8 million and $38.0 million ($11.2 million, $3.1 million and $23.6 million after-tax), respectively, for litigation matters. In light of existing reserves, the Company's litigation and environmental claims, including those discussed below, when finally resolved, will not, in the opinion of management, have a material adverse effect on the Company's consolidated financial position and results of operations. The Company is involved in certain legal and administrative proceedings under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and other federal and state legislation governing the generation and disposition of certain hazardous wastes. These proceedings, which involve both on and off site waste disposal, in many instances seek compensation from the Company as a waste generator under Superfund legislation which authorizes action regardless of fault, legality of original disposition or ownership of a disposal site. In June 1992, Genmar Industries brought an action against the Company and certain of its subsidiaries in the United States District Court for the District of Minnesota, alleging that the Company (i) has monopolized or attempted to monopolize the sale of recreational marine engines and boats, (ii) has unlawfully coerced engine purchasers to buy the Company's boats, (iii) has breached its contract with Genmar, (iv) has not dealt in good faith with Genmar, and (v) has interfered with Genmar's existing and prospective business relationships. Genmar has asked that the Company be required to divest its boat manufacturing business, be enjoined from continuing its partnership with Tracker Marine, and pay damages, including treble damages under the antitrust laws. 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. Parties to this suit have exchanged written discovery and have begun depositions. The Federal Trade Commission is conducting an investigation of whether the formation or operations of Tracker Marine, L.P. and the Company's contracts with Tracker Marine, L.P. violate antitrust laws. The Company has received and responded to a subpoena seeking information relating to the Company's outboard motor sales. The Company understands that other marine companies have received similar subpoenas from the Federal Trade Commission. In August 1988, certain plaintiffs brought an action against the Company in the United States District Court in Los Angeles, California alleging violations of the federal antitrust laws arising out of their planned construction of a bowling center and asserting three claims under state law principles. On May 3, 1991, a jury returned a verdict against the Company in the amount of $5.1 million in actual damages and in the amount of one dollar in punitive damages. Pursuant to federal antitrust laws, plaintiffs' antitrust damages were trebled to $15.3 million. The plaintiff was also entitled to legal fees and costs totalling $1.4 million plus interest at the rate of 6.04% per annum on both the damage award and the attorney fees and costs. On October 13, 1993, the United States Court of Appeals reversed the District Court's judgment and directed that judgment be entered in favor of the Company. 13. Stock Plans and Management Compensation On April 24, 1991, shareholders of the Company approved the 1991 Stock Plan (Plan) to succeed the 1984 Restricted Stock Plan and the 1971 Stock Plan. Under this Plan, the Company may grant non-qualified stock options, incentive stock options, stock appreciation rights and restricted stock and other various types of awards to executives and other management employees of the Company. The Plan provides for the issuance of a maximum of 5,000,000 shares of common stock of the Company which may be authorized but unissued shares or treasury shares. No grants or awards were made under this Plan during 1991. During 1993 and 1992, non-qualified stock options were awarded to 413 and 420, respectively, executives and management employees of the Company. Under the terms of the Plan, the option price per share may not be less than 100% of the fair market value on the date of grant. The stock options are exercisable over a period of time determined by the Compensation Committee of the Board of Directors. In the event of a change in control as defined below, the option holder may exercise all unexercised options until the earlier of the stated expiration date or two years following termination of employment. At December 31, 1993, 263,110 shares were exercisable under outstanding options at a weighted average option price of $14.0077 per share. In addition to stock options, restricted shares were also awarded during 1993 and 1992 to seventeen and sixteen senior executives of the Company, respectively. Restrictions will lapse on a portion of these shares four years from the date of grant and after five years on the remaining shares. As the restrictions lapse, the shares awarded are transferred to the employees. According to the terms of this grant, a participant may elect within 90 days of a change in control to terminate the restricted period for all shares awarded to him. Charges against earnings from continuing operations for the compensation element of the Plan were $0.3 million and $0.2 million for 1993 and 1992, respectively. Stock option and restricted stock activities including discontinued operations are as follows:
Stock Average Restricted Available Options Option Stock for Outstanding Price Outstanding Grant At January 1, 1992 - - - 5,000,000 Granted 820,000 $ 13.875 71,050 (891,050) Exercised 0 $ N/A 0 Canceled (22,300) $ 13.875 0 22,300 At December 31, 1992 797,700 71,050 4,131,250 Granted 825,475 $ 16.600 87,575 (913,050) Exercised (8,870) $ 13.875 0 Canceled (29,540) $ 15.332 0 29,540 At December 31, 1993 1,584,765 158,625 3,247,740
Selected management employees, including employees of its discontinued operations, have received shares of the Company's common stock under the 1984 Restricted Stock Plan (1984 Plan). Under the 1984 Plan, 1,367,232 shares, net of canceled shares, have been awarded. No award has been made since 1991 and no further awards will be made under the 1984 Plan. After a restricted period of one to three years, the shares awarded are transferred to the employees. At that time, the employees may also receive a cash award if certain performance standards, as established by the Compensation Committee of the Board of Directors, have been met. The 1984 Plan provides that, within 90 days after a change in control of the Company, a participant may elect to terminate the restricted period on shares of common stock awarded under the 1984 Plan. A "change in control of the Company" occurs when 1) any person is or becomes a beneficial owner directly or indirectly of 30% or more of the combined voting power of the Company, 2) individuals nominated by the Board of Directors for election as directors do not constitute a majority of the Board of Directors after such election, or 3) a tender offer is made for the Company's stock, involving a control block, which is not negotiated and approved by the Board of Directors. The 1984 Plan also provides that the Compensation Committee may at any time reduce the restricted period for restricted stock of any participant or group of participants to a minimum of one year. Charges against earnings (loss) from continuing operations for the compensation element of the 1984 Plan were $0.7 million, $1.4 million, and $1.9 million for 1993, 1992 and 1991, respectively. Under the 1971 Stock Plan (1971 Plan), certain other management employees were granted shares of the Company's common stock at no cost during 1988 through 1991. There have been no grants since 1991 and there will be no further grants under the 1971 Plan. The shares awarded or purchased under the 1971 Plan are subject to restrictions which lapse ratably over a period of one to five years. The shares will be released at the time of a change in control of the Company or on a date selected by the Compensation Committee. Charges against earnings (loss) from continuing operations for the compensation element of the 1971 Plan were $0.4 million in 1993, $0.6 million in 1992 and $1.0 million in 1991. The Company has employment agreements with certain executive officers that become operative only upon a change in control of the Company, as defined above. In 1989, the Company established a severance plan for all other salaried employees of the Company which also only becomes operative upon a change in control of the Company. Compensation which might be payable under these agreements and the severance plan has not been accrued in the consolidated financial statements as a change in control has not occurred. Under the Brunswick Employee Stock Ownership Plan (ESOP), the Company may make annual contributions to a trust for the benefit of eligible domestic employees in the form of either cash or common shares of the Company. In April 1989, the Company's Board of Directors approved an amendment to the ESOP that permits the ESOP to borrow funds to acquire the Company's common shares. Subsequent to that amendment, the ESOP obtained a bridge loan of $100 million and purchased from the Company 5,095,542 shares (ESOP Shares) of the Company's common stock at a price of $19.625 per share. The bridge loan was repaid with notes sold on February 27, 1990. The debt of the ESOP is guaranteed by the Company and is recorded in the Company's consolidated financial statements. The ESOP Shares are maintained in a Suspense Account until released and allocated to participants' accounts. The release of shares from the Suspense Account is determined by multiplying the number of shares in the Suspense Account by the ratio of debt service payments (principal plus interest) made by the ESOP during the year to the sum of the debt service payments made by the ESOP in the current year plus the debt service payments to be made by the ESOP in future years. Allocation of released shares to participants' accounts is done at the discretion of the Compensation Committee of the Board of Directors. The shares released from the Suspense Account were 327,900 in 1993 and 1992 and 327,899 in 1991 leaving 3,442,948 shares in the Suspense Account at December 31, 1993. The expense recorded by the Company since 1989 is based on cash contributed or committed to be contributed by the Company to the ESOP during the year. Unamortized ESOP expense is reduced as the Company recognizes compensation expense (excluding the impact of dividends on ESOP Shares). In 1993, 1992 and 1991, the ESOP made debt service payments totaling $11.2 million which were funded by Company contributions of $9.0 million and dividends received on ESOP shares of $2.2 million in each of the three years. The Company, including discontinued operations, recognized expense of $9.0 million in 1993, 1992 and 1991 ($5.5 million, $5.9 million and $5.6 million after-tax) of which $6.6 million, $7.0 million and $7.3 million, respectively, were recorded as interest expense and $2.4 million, $2.0 million and $1.7 million, respectively, were recorded as compensation expense. 14. Retirement and Employee Benefit Costs The Company has pension and retirement plans covering substantially all of its employees, including certain employees in foreign countries. Pension cost of continuing operations for all plans was $7.3 million, $3.6 million and $6.2 million in 1993, 1992 and 1991, respectively. Plan benefits are based on years of service, and for some plans, the average compensation prior to retirement. Plan assets generally consist of debt and equity securities, real estate and investments in insurance contracts. Pension costs for 1993, 1992 and 1991, determined in accordance with the Financial Accounting Standards Board Statement No. 87, "Employers' Accounting for Pensions" (SFAS No. 87), included the following components:
(in millions) 1993 1992 1991 Service cost-benefits earned during the period $ 9.4 $ 9.4 $ 9.1 Interest cost on projected benefit obligation 29.4 26.3 24.5 Actual return on assets (25.7) (14.5) (69.1) Net amortization and deferral (5.8) (17.6) 41.7 Net pension cost $ 7.3 $ 3.6 $ 6.2
The funded status of the plans accounted for in accordance with SFAS No. 87 and the amounts recognized in the Company's balance sheets at December 31 were as follows:
1993 1992 Plans whose Plans whose Plans whose Plans whose assets exceed accumulated assets exceed accumulated accumulated benefits accumulated benefits (in millions) benefits exceed assets benefits exceed assets Actuarial present value of: Vested benefits obligation $ (69.7) $(288.8) $(206.0) $(100.0) Nonvested benefits obligation (10.7) (14.5) (1.6) (5.7) Accumulated benefit obligation (80.4) (303.3) (207.6) (105.7) Effects of anticipated future compensation levels and other events (1.1) (25.6) (25.9) (1.9) Projected benefit obligation (81.5) (328.9) (233.5) (107.6) Plan assets at fair value 83.6 262.0 240.1 75.3 Plan assets in excess of (less than) projected benefit obligation 2.1 (66.9) 6.6 (32.3) Unrecognized net transition asset (4.2) (12.0) (20.3) (1.4) Unrecognized prior service cost 9.7 3.0 1.0 12.8 Net unrecognized loss from past experience different from assumed and effects of changes in assumptions 16.5 50.2 8.8 3.8 Adjustment to recognize minimum liability - (15.0) - (14.4) Pension asset (liability) recognized in financial statements $ 24.1 $ (40.7) $ (3.9) $ (31.5)
The projected benefit obligations were determined primarily using assumed weighted average discount rates of 7.5% in 1993 and 8.5% in 1992, and an assumed compensation increase of 5.5% in 1993 and 1992. The assumed weighted average long-term rate of return on plan assets was primarily 9% in 1993 and 1992. The unrecognized asset or liability at the initial adoption of SFAS No. 87 is being amortized on a straight-line basis over 10 years for the Company's domestic plans and over the average remaining service period of plan participants for the Company's foreign plans. The unrecognized prior service cost is being amortized on a straight-line basis over the average remaining service period of plan participants. Two of the Company's salaried pension plans provide that in the event of a termination, merger or transfer of assets of the plans during the five years following a change in control of the Company occurring on or before March 1, 1996, benefits would be increased so that there would be no excess net assets. The Company's supplemental pension plan provides for a lump sum payout to plan participants of the present value of accumulated benefits upon a change in control of the Company. For a definition of "change in control of the Company" refer to Note 13. The Company has an unfunded retirement plan which provides for payments to retired directors. This plan is accounted for as a deferred compensation arrangement and resulted in charges to net earnings (loss) of $0.2 million in 1993 and 1992 and $0.1 million in 1991. Sea Ray employees participate in a noncontributory employee stock ownership and profit sharing plan, under which the Company makes annual cash contributions to a trust for the benefit of eligible employees. The charges to net earnings (loss) for this plan were $1.3 million, $1.4 million and $1.2 million in 1993, 1992 and 1991, respectively. Certain employees participate in a profit sharing plan to which the Company makes cash contributions. Participants become vested in the contributions after they are employed for a specified period. This plan resulted in charges to net earnings (loss) of $2.2 million, $2.1 million and $1.5 million in 1993, 1992 and 1991, respectively. The Brunswick Retirement Savings Plan for salaried and certain hourly employees, including discontinued operations, allows participants to make contributions via payroll deductions pursuant to section 401(k) of the Internal Revenue Code. Effective January 1, 1991, the Company makes a minimum matching contribution of 5% of a participant's pretax contributions limited to 6%of their salary. The Company may increase the matching percentage to 30% of the participant's pretax contributions. The Company made 10% matching contributions in 1993 and 1992, and the minimum 5% matching contribution in 1991. The Company's contribution is made in common stock of the Company. In 1993 and 1992, the net charge to continuing operations for matching contributions was $0.5 million and $0.4 million in 1991. In addition to providing benefits to present employees, the Company currently provides certain health care and life insurance benefits for eligible retired employees. Employees may become eligible for those benefits if they have fulfilled specific age and service requirements. The Company monitors the cost of these plans, and has, from time to time, changed the benefits provided under these plans. The plans contain requirements for retiree contributions generally based on years of service as well as other cost sharing features such as deductibles and copayments. The Company reserves the right to make additional changes or terminate these benefits in the future. The Company's plans are not funded; claims are paid as incurred. Effective January 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS No. 106), for its domestic unfunded postretirement health care and life insurance programs. SFAS No. 106 requires the cost of postretirement benefits to be accrued during the service lives of employees. As 1991 costs were recognized as expense when the claims were paid by the Company, postretirement benefit cost is not comparable with 1993 and 1992. The cumulative effect on years prior to 1992 of adopting SFAS No. 106 on an immediate recognition basis, including discontinued operations, was to decrease net earnings by $38.3 million. The Company had previously recognized approximately $9.6 million of its accumulated postretirement benefit obligation primarily in conjunction with the disposition of the non-Defense businesses of the Technical segment. Postretirement benefit cost was $6.4 million, $6.7 million and $1.4 million in 1993, 1992, and 1991, respectively. Net periodic postretirement benefit cost of continuing operations for 1993 and 1992 included the following components:
(in millions) 1993 1992 Service cost-benefits attributed to service during the period $ 1.5 $ 1.9 Interest cost on accumulated postretirement benefit obligation 4.9 4.8 Net periodic postretirement benefit cost $ 6.4 $ 6.7
The amounts recognized in the Company's balance sheets at December 31 were as follows:
(in millions) 1993 1992 Accumulated postretirement benefit obligation: Retirees $ 30.3 $ 31.7 Fully eligible active plan participants 5.3 4.4 Other active plan participants 26.7 26.4 Total 62.3 62.5 Unrecognized prior service cost 1.4 - Unrecognized net gains 0.9 - Postretirement liability recognized in financial statements $ 64.6 $ 62.5
The accumulated postretirement benefit obligation was determined using weighted average discount rates of 7.5% in 1993 and 8.5% in 1992, and an assumed compensation increase of 5.5% in 1993 and 1992. The health care cost trend rates were assumed to be 12% and 10% in 1994 for pre-65 and post-65 benefits, respectively, gradually declining to 5% after eight years and four years, respectively, and remaining at that level thereafter. The health care cost trend rates were assumed to be 15%, and 10% in 1993 for pre-65 and post-65 benefits, respectively, gradually declining to 6% after ten years and seven 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 $7.9 million at December 31, 1993 and the net periodic cost by $1.0 million for the year. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" (SFAS No. 112), for employees' disability benefits. SFAS No. 112 requires the accrual method for recognizing the cost of postemployment benefits. The cumulative effect on prior years of adopting SFAS No. 112, including discontinued operations, was to decrease net earnings by $14.6 million. The effect of this change on 1993 consolidated results of operations was not material. 15. Income Taxes The sources of earnings (loss) before income taxes are presented as follows:
(in millions) 1993 1992 1991 United States $ 89.0 $ 50.1 $ (69.4) Foreign (2.5) 11.9 28.9 Earnings (loss) before income taxes $ 86.5 $ 62.0 $ (40.5)
The income tax provision (benefit) consisted of the following:
(in millions) 1993 1992 1991 Current tax expense U.S. Federal $ 13.9 $ 2.8 $ (6.9) State and local 11.1 3.6 (5.8) Foreign 7.0 8.4 15.0 Total current $ 32.0 $ 14.8 $ 2.3 Deferred tax expense U.S. Federal $ 8.5 $ 10.0 $ (8.2) State and local (7.0) (2.0) - Foreign (1.5) (0.5) 0.4 Total deferred $ 0.0 $ 7.5 $ (7.8) Total provision (benefit) $ 32.0 $ 22.3 $ (5.5)
Temporary differences and carryforwards which give rise to deferred tax assets and liabilities at December 31 are as follows:
(in millions) 1993 1992 Deferred tax assets Litigation and claims $ 24.5 $ 20.7 Product warranty 29.0 25.6 Dealer allowance and discounts 12.7 15.2 Bad debts 10.3 9.4 Sales of businesses 24.2 12.0 Insurance reserves 22.9 23.5 Credit carryforwards and carrybacks 22.6 23.4 Loss carryforwards and carrybacks 16.2 15.1 Other 29.9 44.4 Valuation allowance (5.8) (8.8) Total deferred tax assets $ 186.5 $ 180.5 Deferred tax liabilities (assets) Depreciation and amortization $ 21.4 $ 96.7 Postretirement and postemployment benefits (36.9) (28.0) Other assets and investments 87.5 66.9 Other 31.9 39.8 Total deferred tax liabilities $ 103.9 $ 175.4
The valuation allowance relates to deferred tax assets established under SFAS No. 109 for capital loss carryforwards of $3.1 million, and foreign tax credit carryforwards of $2.7 million. These unutilized loss and credit carryforwards, which will expire in 1996, will be carried forward to future years for possible utilization. No benefit for these carryforwards has been recognized in the financial statements. No other valuation allowances were deemed necessary, as all deductible temporary differences will be utilized either by carryback to prior years' taxable income, charges against reversals of future taxable temporary differences, or charges against expected future taxable income other than reversals. The change in the valuation allowance from 1992 to 1993 is primarily due to the utilization of foreign tax credit carryforwards which reduced income tax expense for the current year. During 1991, deferred income taxes were provided for timing differences in the recognition of revenue and expenses for tax and financial statement purposes. The deferred tax provision (benefit) consisted of the following: (in millions) 1991 U.S. Federal Litigation and claims $ (11.8) Restructuring charge 4.9 Employee benefits (1.8) Bad debts (0.1) Product warranty (0.5) Dealer allowances and discounts (2.0) Inventory 0.8 State and local taxes 2.5 Sales of businesses 2.2 Insurance (2.3) Depreciation and amortization (0.6) Other 0.5 (8.2) Foreign 0.4 Total deferred tax (benefit) $ (7.8) Deferred taxes have been provided, as required, on the undistributed earnings of foreign subsidiaries and unconsolidated affiliates. The difference between the actual income tax provision and the tax provision (benefit) computed by applying the statutory Federal income tax rate to earnings (loss) before taxes is attributable to the following:
(in millions) 1993 1992 1991 Income tax provision (benefit) at 35% in 1993 and 34% in 1992 and 1991 $ 30.3 $ 21.1 $ (13.8) State and local income taxes, net of Federal income tax effect 2.7 1.1 (3.8) Foreign sales corporation benefit (1.5) (1.4) (1.3) Taxes related to foreign income, net of credits (1.9) (4.7) 10.4 Goodwill and other amortization 1.8 1.7 1.6 Enacted tax rate change (3.6) Other 4.2 4.5 1.4 Actual income tax provision (benefit) $ 32.0 $ 22.3 $ (5.5) Effective tax rate 37.0% 36.0% (13.6)%
In January 1994, the Company reached an agreement with the U.S. Internal Revenue Service regarding its examination of the Company for the years 1985 and 1986. The issues of this examination dealt primarily with the deductibility of approximately $500 million of acquired intangible assets, which the IRS proposed to reclassify to non-deductible intangible assets. Under the terms of the agreement, the IRS has agreed to allow amortization deductions for virtually all of the acquired intangible assets, and the Company has agreed to increase the amortizable lives of most of the acquired intangible assets. The revised lives create a temporary difference which results 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 initial $55 million obligation will subsequently be reduced by the future tax benefits of the temporary difference created by the agreement. Since the interest will be charged to existing reserves and the taxes paid represent temporary differences which create, and have been recorded as, deferred tax assets, this agreement will have no impact on the Company's consolidated results of operations. 16. Translation of Foreign Currencies Most of the Company's foreign entities use the local currency as the functional currency and translate all assets and liabilities at year-end exchange rates, all income and expense accounts at average rates and record adjustments resulting from the translation in a separate component of common shareholders' equity. The following is an analysis of the cumulative translation adjustments reflected in common shareholders' equity:
(in millions) 1993 1992 1991 Balance at January 1 $ 8.9 $ 10.4 $ 12.2 Translation and other (1.9) (4.4) (3.6) Allocated income taxes 0.9 2.9 1.8 Balance at December 31 $ 7.9 $ 8.9 $ 10.4
The remaining foreign entities translate monetary assets and liabilities at year-end exchange rates and inventories, property and nonmonetary assets and liabilities at historical rates. Income and expense accounts are translated at the average rates in effect during the year, except that depreciation and cost of sales are translated at historical rates. Adjustments resulting from the translation of these entities are included in the results of operations. Gains and losses resulting from transactions of the Company and its subsidiaries which are made in currencies different from their own are included in income as they occur. Currency losses of $1.0 million and $5.1 million were recorded in 1993 and 1992, respectively, and a gain of $3.2 million was recorded in 1991. 17. Leases The Company has various lease agreements for offices, branches, factories, distribution and service facilities, certain Company-operated bowling centers, and certain personal property. These obligations extend through 2032. Most leases contain renewal options and some contain purchase options. Many leases for Company-operated bowling centers contain escalation clauses, and many provide for contingent rentals based on percentages of gross revenue. No leases contain restrictions on the Company's activities concerning dividends, additional debt or further leasing. Rent expense consisted of the following:
(in millions) 1993 1992 1991 Basic expense $ 21.2 $ 21.5 $ 22.9 Contingent expense 0.6 1.1 1.0 Sublease income (1.2) (1.5) (3.0) Rent expense, net $ 20.6 $ 21.1 $ 20.9
Future minimum rental payments at December 31, 1993, under agreements classified as operating leases with noncancelable terms in excess of one year, are as follows: (in millions) 1994 $ 3.2 1995 2.5 1996 1.7 1997 1.6 1998 1.3 Thereafter 2.7 Future minimum operating lease rental payments (not reduced by minimum sublease rentals of $1.3 million) $ 13.0 18. Technological Expenditures Technological expenditures consisted of the following:
(in millions) 1993 1992 1991 Research and development $ 60.8 $ 52.0 $ 49.5 Engineering and other 9.0 4.3 3.8 Technological expenditures $ 69.8 $ 56.3 $ 53.3
19. Preferred Share Purchase Rights In March 1986, the Company's Board of Directors declared a dividend of one Preferred Share Purchase Right (Right) on each outstanding share of the Company's common stock. After the two-for-one stock split distributed on June 9, 1987, under certain conditions, each holder of Rights may purchase one one-hundredth share of a new series of junior participating preferred stock at an exercise price of $100 for each two Rights held. The Preferred Share Purchase Rights become exercisable at the earlier of (1) a public announcement that a person or group acquired or obtained the right to acquire 15% or more of the Company's common stock or (2) ten days after commencement or public announcement of an offer for more than 15% of the Company's common stock. After a person or group acquires 15% or more of the common stock of the Company, other shareholders may purchase additional shares of the Company at fifty percent of the current market price. These Rights may cause substantial ownership dilution to a person or group who attempts to acquire the Company without approval of the Company's Board of Directors. The Rights, which do not have any voting rights, expire on March 31, 1996, and may be redeemed by the Company at a price of $.025 per Right at any time prior to a person's or group's acquisition of 15% or more of the Company's common stock. The new series of preferred stock that may be purchased upon exercise of the Rights may not be redeemed and may be subordinate to other series of the Company's preferred stock designated in the future. A Right also will be issued with each share of the Company's common stock that becomes outstanding prior to the time the Rights become exercisable or expire. In the event that the Company is acquired in a merger or other business combination transaction, provision will be made so that each holder of Rights will be entitled to buy the number of shares of common stock of the surviving company, which at the time of such transaction would have a market value of two times the exercise price of the Rights. 20. Unconsolidated Affiliates and Subsidiaries The Company has certain unconsolidated foreign and domestic affiliates that are accounted for on the equity method. Summary financial information of the unconsolidated affiliates is presented below:
(in millions) 1993 1992 1991 Net sales $ 332.2 $ 259.4 $ 155.1 Gross margin $ 70.5 $ 49.3 $ 22.7 Net earnings $ 24.2 $ 16.8 $ 7.0 Company's share of net earnings $ 11.3 $ 8.4 $ 4.7 Current assets $ 155.4 $ 138.4 Non-current assets 104.2 87.6 Total assets 259.6 226.0 Current liabilities (125.1) (115.5) Non-current liabilities (28.8) (12.0) Net assets $ 105.7 $ 98.5 The net sales of affiliates include an insignificant amount of sales to the Company.
21. Quarterly Data (unaudited)
(in millions, except per share data) 1st 2nd 3rd 4th Year 1993 Net sales $ 542.8 $ 589.0 $ 539.4 $ 535.6 $ 2,206.8 Gross margin $ 140.1 $ 159.6 $ 134.1 $ 136.4 $ 570.2 Earnings from continuing operations $ 9.8 $ 22.5 $ 15.2 $ 7.0 $ 54.5 Earnings (loss) from discontinued operations (0.8) 0.8 - - - Extraordinary loss from retirement of debt - - (4.6) - (4.6) Estimated loss on divestiture of Technical segment - - - (12.2) (12.2) Cumulative effect of change in accounting principle (14.6) - - - (14.6) Net earnings (loss) $ (5.6) $ 23.3 $ 10.6 $ (5.2) $ 23.1 Per common share Earnings from continuing operations $ 0.10 $ 0.24 $ 0.16 $ 0.07 $ 0.57 Earnings (loss) from discontinued operations (0.01) 0.01 - - - Extraordinary item - - (0.05) - (0.05) Estimated loss on divestiture of Technical segment - - - (0.13) (0.13) Cumulative effect of change in accounting principle (0.15) - - - (0.15) Earnings (loss) $ (0.06) $ 0.25 $ 0.11 $ (0.06) $ 0.24 Dividends declared $ 0.11 $ 0.11 $ 0.11 $ 0.11 $ 0.44 Common stock price (NYSE) High $ 17 1/8 $ 15 $ 15 1/2 $ 18 1/2 $ 18 1/2 Low $ 14 1/2 $ 12 5/8 $ 12 1/2 $ 14 $ 12 1/2 1992 Net sales $ 544.7 $ 546.4 $ 503.4 $ 464.9 $ 2,059.4 Gross margin $ 133.3 $ 140.4 $ 121.8 $ 109.8 $ 505.3 Earnings (loss) from continuing operations $ 11.3 $ 18.0 $ 11.5 $ (1.1) $ 39.7 Earnings (loss) from discontinued operations - 0.5 (1.2) (1.0) (1.7) Estimated loss on divestiture of Technical segment - - - (26.0) (26.0) Cumulative effect of change in accounting principle (38.3) - - - (38.3) Net earnings (loss) $ (27.0) $ 18.5 $ 10.3 $ (28.1) $ (26.3) Per common share Earnings (loss) from continuing operations $ 0.13 $ 0.20 $ 0.12 $ (0.01) $ 0.43 Earnings (loss) from discontinued operations - - (0.01) (0.01) (0.02) Estimated loss on divestiture of Technical segment - - - (0.27) (0.28) Cumulative effect of change in accounting principle (0.43) - - - (0.41) Earnings (loss) $ (0.30) $ 0.20 $ 0.11 $ (0.29) $ (0.28) Dividends declared $ 0.11 $ 0.11 $ 0.11 $ 0.11 $ 0.44 Common stock price (NYSE) High $ 17 1/4 $ 17 3/4 $ 14 3/4 $ 16 7/8 $ 17 3/4 Low $ 13 7/8 $ 13 3/4 $ 12 3/8 $ 12 1/4 $ 12 1/4 In 1993, the first quarter has been restated to reflect the cumulative effect for the adoption of SFAS No. 112. In 1992, first, second and third quarters have been restated to reflect the adoption of SFAS No. 106. The 1992 results have been restated to segregate the results of operations of the Company's discontinued Technical segment.
Report of Management The Company maintains accounting and related internal control systems which are intended to provide reasonable assurance that assets are safeguarded from loss or unauthorized use and to produce records necessary for the preparation of financial information. There are limits inherent in all systems of internal control, and the cost of the systems should not exceed the expected benefits. Through the use of a program of internal audits and through discussions with and recommendations from its independent public accountants, the Company periodically reviews these systems and controls and compliance therewith. The Audit Committee of the Board of Directors, comprised entirely of nonemployee directors, meets regularly with management, the internal auditors, and the independent public accountants to review the results of their work and to satisfy itself that their responsibilities are being properly discharged. The internal auditors and independent public accountants have full and free access to the Audit Committee and have discussions regarding appropriate matters, with and without management present. The primary responsibility for the integrity of financial information rests with management. Certain valuations contained herein result, of necessity, from estimates and judgments of management. The accompanying consolidated financial statements, notes thereto, and other related information were prepared in conformity with generally accepted accounting principles applied on a consistent basis. Report of Independent Public Accountants To the Shareholders of Brunswick Corporation: We have audited the accompanying consolidated balance sheets of Brunswick Corporation(a Delaware Corporation) and Subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of results of operations, and cash flows for each of three years ended December 31, 1993. 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, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Note 14 to the consolidated financial statements, effective January 1, 1993, the Company changed its method of accounting for postemployment benefits, and effective January 1, 1992, the Company changed its method of accounting for postretirement benefits other than pensions. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules listed in the preceding index are the responsibility of the company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state 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 & Co. Chicago, Illinois, February 6, 1994 Brunswick Corporation Five Year Financial Summary
(in millions, except ratios and per share data 1993 1992 1991 1990 1989 Results of Operations Data Net sales $2,206.8 $2,059.4 $1,841.0 $2,106.9 $2,410.6 Depreciation 78.1 77.8 84.0 88.8 85.7 Amortization 39.7 38.1 41.0 43.7 57.6 Operating earnings(loss) 99.8 79.8 (18.4) 52.1 (41.5) Earnings(loss) before income taxes 86.5 62.0 (40.5) 15.4 (95.5) Earnings(loss) from continuing operations before extraordinary item and cumulative effect of accounting changes 54.5 39.7 (35.0) 9.4 (81.7) Earnings(loss) from discontinued operations - (1.7) 11.3 14.8 10.4 Extraordinary loss from retirement of debt (4.6) - - - - Gain(estimated loss) on divestitures of Technical segment businesses (12.2) (26.0) - 46.7 - Cumulative efffect on prior years of changes in accounting principles (14.6) (38.3) - - - Net earnings(loss) 23.1 (26.3) (23.7) 70.9 (71.3) Per Common Share Data Earnings(loss) from continuing operations before extraordinary item and cumulative effect of accounting changes $ 0.57 $ 0.43 $ (0.40) $ 0.10 $ (0.93) Earnings(loss) from discontinued operations - (0.02) 0.13 0.17 0.12 Extraordinary item (0.05) - - - - Gain(estimated loss) on divestitures of Technical segment businesses (0.13) (0.28) - 0.53 - Cumulative efffect on prior years of changes in accounting principles (0.15) (0.41) - - - Net earnings(loss) 0.24 (0.28) (0.27) 0.80 (0.81) Dividends declared 0.44 0.44 0.33 0.44 0.44 Dividends paid 0.44 0.44 0.44 0.44 0.44 Book value 8.44 8.65 8.79 9.53 8.82 Balance Sheet Data Capital expenditures $ 95.8 $ 88.6 $ 74.7 $ 77.7 $ 104.1 Assets of continuing operations 1,957.6 1,872.4 1,760.9 1,790.6 1,712.5 Debt Short-term $ 11.9 $ 16.0 $ 6.3 $ 5.8 $ 10.7 Long-term 324.5 304.5 315.9 301.5 462.0 Total debt 336.4 320.5 322.2 307.3 472.7 Common shareholders' equity 804.4 822.5 778.7 824.0 776.1 Total capitalization $1,140.8 $1,143.0 $1,100.9 $1,131.3 $1,248.8 Other Data Return on beginning shareholders' equity 6.6 % 5.1 % (4.2)% 1.2 % (8.6)% Effective tax rate(benefit) 37.0 % 36.0 % (13.6)% 39.0 % (14.4)% Working capital ratio 1.6 1.7 1.5 1.5 1.3 Debt-to-capitalization rate 29.5 % 28.0 % 29.3 % 26.8 % 37.9 % Common Stock Price(NYSE) High $ 18 1/2 $ 17 3/4 $ 16 1/8 $ 16 $ 21 3/8 Low 12 1/2 12 1/4 8 3/4 6 5/8 13 Close 18 16 1/4 13 7/8 9 14 The Notes to Consolidated Financial Statements should be read in conjunction with the above summary. The 1989 operating results include a provision for restructuring of $90.5 million($72.7 million after tax) for the write-off of assets, primarily intangibles, and costs associated with the consolidation and reorganization of the Marine segment. Brunswick Corporation
Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation of our report dated February 6, 1994, 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) and Form S-8 (File No. 33-55022). Arthur Andersen & Co. Chicago, Illinois, March 28, 1994 Brunswick Corporation Schedule I - Marketable Securities and Other Investments
Balance Principal Market at end of (in millions) Amount Cost Value period Marketable Securities Governmental $ 61.9 $ 61.9 $ 61.9 $ 61.9 Corporate 149.3 149.3 149.3 149.3 $ 211.2 $ 211.2 $ 211.2 $ 211.2 Cash 37.6 37.6 37.6 37.6 Total cash and cash equivalents $ 248.8 $ 248.8 $ 248.8 $ 248.8
Brunswick Corporation Schedule V - Property
Balance at Balance beginning Retirements at end of (in millions) of period Additions * and Sales Other period 1993 Land $ 63.7 $ 0.2 $ (0.5) $ (2.5) $ 60.9 Buildings 349.7 19.0 (12.7) 1.5 357.5 Equipment 693.0 76.9 (47.0) (2.0) 720.9 $ 1,106.4 $ 96.1 $ (60.2) $ (3.0) $ 1,139.3 1992 Land $ 62.2 $ 1.8 $ (0.7) $ 0.4 $ 63.7 Buildings 328.2 25.9 (4.4) 0.0 349.7 Equipment 673.7 61.7 (39.6) (2.8) 693.0 $ 1,064.1 $ 89.4 $ (44.7) $ (2.4) $ 1,106.4 1991 Land $ 54.6 $ 7.8 $ (0.1) $ (0.1) $ 62.2 Buildings 319.0 12.4 (3.2) 0.0 328.2 Equipment 664.3 55.0 (44.9) (0.7) 673.7 $ 1,037.9 $ 75.2 $ (48.2) $ (0.8) $ 1,064.1 * Includes $0.3 million, $0.8 million and $0.5 million resulting from acquisitions in 1993, 1992 and 1991, respectively. This schedule reflects only the financial information of continuing operations.
Brunswick Corporation Schedule VI - Accumulated Depreciation
Balance at Balance beginning Retirements at end of (in millions) of period Additions and Sales Other period 1993 Buildings $ 131.9 $ 12.7 $ (8.3) $ (2.5) $ 133.8 Equipment 439.5 65.4 (44.2) 0.5 461.2 $ 571.4 $ 78.1 $ (52.5) $ (2.0) $ 595.0 1992 Buildings $ 118.8 $ 12.3 $ (2.0) $ 2.8 $ 131.9 Equipment 412.6 65.5 (37.6) (1.0) 439.5 $ 531.4 $ 77.8 $ (39.6) $ 1.8 $ 571.4 1991 Buildings $ 108.8 $ 12.1 $ (2.1) $ 0.0 $ 118.8 Equipment 384.3 71.9 (42.5) (1.1) 412.6 $ 493.1 $ 84.0 $ (44.6) $ (1.1) $ 531.4 This schedule reflects only the financial information of continuing operations.
Brunswick Corporation Schedule VIII - Valuation and Qualifying Accounts
Balance at Charges Balance beginning to profit at end of (in millions) of period and loss Write-offs Recoveries Other period Allowances for possible losses on receivables 1993 $ 15.6 $ 2.1 $ (4.0) $ 1.1 $ 2.1 * $ 16.9 1992 $ 13.6 $ 3.8 $ (4.7) $ 1.1 $ 1.8 $ 15.6 1991 $ 17.8 $ 7.9 $ (12.9) $ 1.1 $ (0.3) $ 13.6 * Includes $2.4 million relating to acquisitions This schedule reflects only the financial information of continuing operations.
Deferred tax asset valuation allowance 1993 $ 8.8 $ - $ - $ (3.0) $ - $ 5.8 1992 $ 11.6 $ - $ - $ (2.8) $ - $ 8.8 This account reflects the adoption of SFAS No. 109, "Accounting for Income Taxes", which was adopted effective January 1, 1992. In 1992 and 1993, the Company utilized $2.8 million and $3.0 million, respectively, of foreign tax credits from prior years. The utilization of these foreign tax credit carryforwards reduced reduced income tax expense for the current year.
Schedule X - Supplementary Income Statement Information
Charges to (in millions) costs and expenses 1993 1992 1991 Maintenance and repairs $ 35.5 $ 36.2 $ 33.2 Advertising $ 66.1 $ 64.3 $ 63.0 Amortization of intangibles Dealer networks $ 31.9 $ 31.8 $ 31.8 Excess of cost over net assets of businesses acquired 4.0 3.6 3.5 Trademarks and other 3.8 2.7 5.7 $ 39.7 $ 38.1 $ 41.0 This schedule reflects only the financial information of continuing operations.
EX-1 2 10K EXHIBITS 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 By-Laws of the Company. 4.1 Indenture dated as of March 15, 1987, between the Company and Continental Illinois National Bank and Trust Company of Chicago filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1987, and hereby incorporated by reference. 4.2 Form of 8-1/8% Notes of the Company Due April 1, 1997, filed as Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1987, and hereby incorporated by reference. 4.3 Officers' Certificate setting forth terms of the Company's $125,000,000 principal amount 7-3/8% Debentures due September 1, 2023. 4.4 The Company's Agreement to furnish additional debt instruments upon request by the Securities and Exchange Commission filed as Exhibit 4.10 to the Company's Annual Report on Form 10-K for 1980, and hereby incorporated by reference. 4.5 Rights Agreement dated as of March 15, 1986, between the Company and Harris Trust and Savings Bank filed as Exhibit 4.14 to the Company's Annual Report on Form 10-K for 1985, and hereby incorporated by reference. 4.6 Amendment dated April 3, 1989, to Rights Agreement between the Company and Harris Trust and Savings Bank filed as Exhibit 2 to the Company's Current Report on Form 8-K dated April 10, 1989, and hereby incorporated by reference. 10.1* Third Amended and Restated Employment Agreement entered as of December 30, 1986, between the Company and Jack F. Reichert filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for 1986 and hereby incorporated by reference. 10.2* Amendment dated October 24, 1989, to Employment Agreement by and between the Company and Jack F. Reichert filed as Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989 and hereby incorporated by reference. 10.3* Supplemental Agreement to Employment Agreement dated December 30, 1986, by and between the Company and Jack F. Reichert filed as Exhibit 19.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989, and hereby incorporated by reference. 10.4* Amendment dated February 12, 1991 to Employment Agreement by and between the Company and Jack F. Reichert filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for 1990 and hereby incorporated by reference. 10.5* Amendment dated March 20, 1992 to Employment Agreement by and between the Company and Jack F. Reichert filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for 1992 and hereby incorporated by reference. 10.6* Amendment dated December 15, 1992 to Employment Agreement by and between the Company and Jack F. Reichert filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for 1992 and hereby incorporated by reference. 10.7* Employment Agreement dated as of June 1, 1989 by and between the Company and John M. Charvat filed as Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989, and hereby incorporated by reference. 10.8* Amendment dated as of December 15, 1992 to Employment Agreement by and between the Company and John M. Charvat filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for 1992 and hereby incorporated by reference. 10.9* Supplemental Pension Plan filed as Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, and hereby incorporated by reference. 10.10* Form of Employment Agreement by and between the Company and each of T. K. Erwin, W. R. McManaman, R. T. McNaney, R. S. O'Brien, J. A. Schenk, D. M. Yaconetti, W. J. Barrington, J. W. Dawson, F. J. Florjancic, Jr., A. D. Fogel, J. W. Hoag, D. D. Jones, and R. C. Sigrist filed as Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1989, and hereby incorporated by reference. 10.11* Amendment to Form of Employment Agreement filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for 1992 and hereby incorporated by reference. 10.12* Form of Insurance Policy issued for the life of each of the Company's officers, together with the specifications for each of these policies, filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for l980 and hereby incorporated by reference. The Company pays the premiums for these policies and will recover these premiums, with some exceptions, from the policy proceeds. 10.13* Insurance policy issued by The Prudential Insurance Company of America insuring all of the Company's officers and certain other senior management employees for medical expenses filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for 1980 and hereby incorporated by reference. 10.14* Form of Indemnification Agreement by and between the Company and each of M. J. Callahan, J. P. Diesel, D. E. Guinn, L. Herzel, G. D. Kennedy, B. K. Koken, J. W. Lorsch, B. M. Musham, R. N. Rasmus, and R. W. Schipke filed as Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1986, and hereby incorporated by reference. 10.15* Indemnification Agreement dated September 16, 1986, by and between the Company and J. F. Reichert filed as Exhibit 19.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1986, and hereby incorporated by reference. 10.16* Form of Indemnification Agreement by and between the Company and each of J. M. Charvat, T. K. Erwin, F. J. Florjancic, Jr., W. R. McManaman, R. T. McNaney, R. S. O'Brien, J. A. Schenk, and D. M. Yaconetti filed as Exhibit 19.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1986, and hereby incorporated by reference. 10.17* Employment Agreement dated October 1, 1993 by and between the Company and John P. Reilly. 10.18* Indemnification Agreement dated October 26, 1993 by and between the Company and John P. Reilly. 10.19* 1991 Stock Plan filed as Exhibit A to the Company's definitive Proxy Statement dated March 21, 1991 for the Annual Meeting of Stockholders on April 24, 1991 and hereby incorporated by reference. 10.20* 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 1993 filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for 1992 and hereby incorporated by reference. 10.22* Brunswick Performance Plan for 1994. 10.23* Brunswick Strategic Incentive Plan. 10.24* 1988 Stock Plan for Non-Employee Directors filed as Exhibit B to the Company's definitive Proxy Statement dated March 10, 1988 for the Annual Meeting of Stockholders on April 27, 1988 and hereby incorporated by reference. 10.25* 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. 22.1 Subsidiaries of the Company. 25.1 Powers of Attorney. *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. Exhibit 3.2 Brunswick Corporation By-Laws Article I Offices Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The corporation may also have offices in the City of Lake Forest, State of Illinois, and at such other places as the board of directors may from time to time determine or the business of the corporation may require. Article II Meetings of Stockholders Section 1. Meetings of stockholders may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. An annual meeting of stockholders shall be held at such time and on such day in the month of April or in such other month as the board of directors may specify by resolution. At the annual meeting the stockholders shall elect by a plurality vote of those stockholders voting at the meeting, by ballot, a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. Section 4. At least ten days before every election of directors, a complete list of the stockholders entitled to vote at said election arranged in alphabetical order, shall be prepared or caused to be prepared by the secretary. Such list shall be open at the place where the election is to be held for said ten days, to the examination of any stockholder, and shall be produced and kept at the time and place of election during the whole time thereof, and subject to the inspection of any stockholder who may be present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the chairman of the board and shall be called by the president or secretary at the request in writing of a majority of the board of directors. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting of stockholders stating the place, date and hour of meeting, and the purpose or purposes for which the meeting is called shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the shares of the capital stock of the corporation, issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation or by these by-laws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Section 9. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation or of these by-laws, a different vote is required, in which case such express provisions shall govern and control the decision of such question. Section 10. At any meeting of the stockholders every stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless said instrument provides for a longer period. Each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the corporation. Except where the transfer books of the corporation shall have been closed or a date shall have been fixed as a record date for the determination of its stockholders entitled to vote, no share of stock shall be voted on at any election for directors which shall have been transferred on the books of the corporation within twenty days next proceeding such election of directors. Article III Directors Section 1. The number of directors shall be twelve but the number of directors may, from time to time, be altered by amendment of these by-laws in accordance with the certificate of incorporation. Section 2. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of directors may be made by the board of directors or committee appointed by the board of directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the secretary of the corporation not later than (a) with respect to an election to be held at an annual meeting of stockholders, ninety days prior to the anniversary date of the immediately preceding annual meeting, and (b) with respect to an election to be held as a special meeting of stockholders for the election of directors, the close of business on the tenth day following the date on which notice of such meeting is first given to stockholders. Each such notice shall set forth: (i) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (ii) a representation that the stockholder is the holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (iv) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (v) the consent of each nominee to serve as a director of the corporation if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. Section 3. The property and business of the corporation shall be managed by its board of directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. Meetings of the Board of Directors Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. The first meeting of each newly elected board shall be held immediately after, and at the same place as, the annual meeting of stockholders at which such board shall have been elected, for the purpose of electing officers, and for the consideration of any other business that may properly be brought before the meeting. No notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. Section 6. Regular meetings of the board of directors shall be held on such dates, not less often than once each calendar quarter, as may be fixed from time to time by resolution of the board of directors. No notice need be given of such meetings, provided that notice of such resolution has been furnished to each director. Such meetings shall be held at the Lake Forest office of the corporation or at such other place as is stated in the notice of the meeting. Upon the assent, given either verbally or in writing, of a majority of the whole board, any regular meeting may be cancelled, the time changed, or may be held at such other place and time, as a majority of the whole board may designate, either verbally or in writing, upon reasonable notice given to each director, either personally or by mail or by telegram. Section 7. Special meetings of the board of directors may be called by the chairman of the board, or by the secretary on the written request of two directors, to be held either at the Lake Forest office of the corporation or at such other place as may be convenient and may be designated by the officer calling the meeting. Reasonable notice of such special meeting shall be given to each director, either personally or by mail or telegram; provided, that a majority of the whole board of directors present at a meeting called by any of said officers, in matters requiring prompt attention by the board, may hold a valid meeting and transact business without the giving of notice to each director as above provided. Section 8. At all meetings of the board the presence of a majority of the whole board shall be necessary and sufficient to constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation or by these by-laws. If a quorum shall not be present at any meeting of the board of directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Executive Committee Section 9. (a) The board of directors of the corporation at the annual or any regular or special meeting may, by resolution adopted by a majority of the whole board, designate three or more directors, one of whom shall be either the chairman of the board or the president of the corporation, to constitute an executive committee. Vacancies in the executive committee may be filled at any meeting of the board of directors. Each member of the executive committee shall hold office until his successor shall have been duly elected, or until his death, or until he shall resign or shall have been removed from office or shall cease to be a director. Any member of the executive committee may be removed by resolution adopted by a majority of the whole board of directors whenever in its judgment the best interests of the corporation would be served thereby. The compensation, if any, of members of the executive committee shall be established by resolution of the board of directors. (b) The executive committee shall have and may exercise all of the authority of the board of directors in the management of the corporation, provided such committee shall not have the authority of the board of directors in reference to amending the certificate of incorporation, adopting a plan of merger or consolidation with another corporation or corporations, recommending to the stockholders the sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the property and assets of the corporation if not made in the usual and regular course of its business, recommending to the stockholders a voluntary dissolution of the corporation or a revocation thereof, amending, altering or repealing the by-laws of the corporation, electing or removing officers of the corporation or members of the executive committee, fixing the compensation of officers, directors, or any member of the executive committee, declaring dividends, amending, altering or repealing any resolution of the board of directors which by its terms provides that it shall not be amended, altered or replaced by the executive committee, the acquisition or sale of companies, businesses or fixed assets where the fair market value thereof or the consideration therefor exceeds $10,000,000, authorizing the issuance of any shares of the corporation, or authorizing the creation of any indebtedness for borrowed funds, in excess of $2,000,000. (c) The executive committee shall have power to authorize the seal of the corporation to be affixed to all papers which may require it. Minutes of all meetings of the executive committee shall be submitted to the board of directors of the corporation at each meeting following a meeting of the executive committee. The minute books of the executive committee shall at all times be open to the inspection of any director. (d) The executive committee shall meet at the call of the chairman of the executive committee, chairman of the board, the president, or any two members of the executive committee. Three members of the executive committee shall constitute a quorum for the transaction of business and the act of a majority of those present shall constitute the act of the committee. Audit Committee Section 10. (a) The board of directors of the corporation at the annual or any regular or special meeting shall, by resolution adopted by a majority of the whole board, designate three or more independent directors to constitute an audit committee and appoint one of the directors so designated as the chairman of the audit committee. Membership on the audit committee shall be restricted to those directors who are independent of the management of the corporation and are free from any relationship that, in the opinion of the corporation's board of directors, would interfere with the exercise of independent judgment as a member of the committee. Vacancies in the committee may be filled at any meeting of the board of directors. Each member of the committee shall hold office until his successor shall have been duly elected, or until his death, or until he shall resign or shall have been removed from the audit committee by the board or shall cease to be a director. Any member of the audit committee may be removed from the committee by resolution adopted by a majority of the whole board of directors whenever in its judgment (1) such person is no longer an independent director or free from any relationship with the corporation or any of its officers prohibited by this section, or (2) the best interests of the corporation would be served thereby. The compensation, if any, of members of the committee shall be established by resolution of the board of directors. (b) The audit committee shall be responsible for recommending to the board of directors the appointment or discharge of independent auditors, reviewing with management and the independent auditors the terms of engagement of independent auditors, including the fees, scope and timing of the audit and any other services rendered by such independent auditors; reviewing with independent auditors and management the corporation's policies and procedures with respect to internal auditing, accounting and financial controls, and dissemination of financial information; reviewing with management, the independent auditors and the internal auditors, the corporation's financial statements, audit results and reports and the recommendations made by the auditors with respect to changes in accounting procedures and internal controls; reviewing the results of studies of the corporation's system of internal accounting controls; and performing any other duties or functions deemed appropriate by the board of directors. The committee shall have such powers and rights as may be necessary or desirable to fulfill these responsibilities including, the power and right to consult with legal counsel and to rely upon the opinion of such legal counsel. The audit committee is authorized to communicate directly with the corporation's financial officers and employees, internal auditors and independent auditors on such matters as it deems desirable and to have the internal auditors and independent auditors perform such additional procedures as it deems appropriate. The audit committee shall periodically report to the board of directors on its activities. (c) Minutes of all meetings of the audit committee shall be submitted to the board of directors of the corporation. The minute books of the committee shall at all times be open to the inspection of any director. (d) The audit committee shall meet at the call of its chairman or any two members of the committee. Two members of the audit committee shall constitute a quorum for the transaction of business and the act of a majority of those present, but no less than two members, shall constitute the act of the committee. Compensation Committee Section 11. (a) The board of directors of the corporation at the annual or any regular or special meeting shall, by resolution adopted by a majority of the whole board, designate three or more directors to constitute a compensation committee and appoint one of the directors so designated as the chairman of the compensation committee. Membership on the compensation committee shall be restricted to disinterested persons which for this purpose shall mean any director, who, during the time he is a member of the compensation committee is not eligible, and has not at any time within one year prior thereto been eligible, for selection to participate in any of the compensation plans administered by the compensation committee, except for the 1988 Stock Plan for Non-Employee Directors. Vacancies in the committee may be filled at any meeting of the board of directors. Each member of the committee shall hold office until his successor shall have been duly elected, or until his death or resignation, or until he shall have been removed from the committee by the board of directors, or until he shall cease to be a director or a disinterested person. Any member of the compensation committee may be removed by resolution adopted by a majority of the whole board of directors whenever in its judgment the best interests of the corporation would be served thereby. A majority of the compensation committee shall constitute a quorum and an act of the majority of the members present at any meeting at which a quorum is present, or an act approved in writing by each of the members of the committee without a meeting, shall be the act of the compensation committee. The compensation, if any, of members of the committee shall be established by resolution of the board of directors. (b) The compensation committee shall administer the CEO Incentive Plan, Brunswick Performance Plan, Strategic Incentive Plan, 1971 Stock Option Plan, 1984 Restricted Stock Plan, 1988 Stock Plan for Non-Employee Directors, 1991 Stock Plan, and Supplemental Pension Plan. The compensation committee shall have the power and authority vested in it by any plan of the corporation which the committee administers. The compensation committee shall from time to time recommend to the board of directors the compensation of the officers of the corporation except for assistant officers whose compenation shall be fixed by the officers of the corporation. The compensation committee shall also make recommendations to the board of directors with regard to the compensation of the board of directors and its committees except the compensation committee. Nominating Committee Section 12. (a) The board of directors of the corporation at the annual or any regular or special meeting shall, by resolution adopted by a majority of the whole board, designate three or more directors to constitute a nominating committee and appoint one of the directors so designated as the chairman of the nominating committee. The majority of the members of the nominating committee shall be persons who are not, during the time they are members of the nominating committee, either officers or employees of the corporation. Vacancies in the committee may be filled at any meeting of the board of directors. Each member of the committee shall hold office until his successor shall have been duly elected, or until his death or resignation, or until he shall have been removed from the committee by the board of directors, or until he shall cease to be a director. Any member of the nominating committee may be removed by resolution of the whole board of directors whenever in its judgment the best interests of the corporation would be served thereby. A majority of the nominating committee shall constitute a quorum and an act of the majority of the members present at any meeting at which a quorum is present, or an act approved in writing by each of the members of the committee without a meeting, shall be the act of the nominating committee. The compensation, if any, of members of the committee shall be established by resolution of the board of directors. (b) Before the annual meeting of the stockholders of the corporation, and before any special meeting of stockholders at which directors are to be elected, the nominating committee shall recommend to the board of directors the names of individuals for submission to the stockholders in the corporation's proxy material as the board's nominees for election as directors of the corporation for which the board is soliciting proxies. From time to time, the nominating committee shall make recommendations to the board of nominees to fill vacancies on the board of directors as they occur. The nominating committee shall also, from time to time, consider and make recommendations to the board with regard to increases or decreases in the size of the board. (c) Nothing in this by-law is intended to prevent any individual director from making a recommendation of a person to be a director of the corporation either to the nominating committee or to the board. Other Committees Section 13. The board of directors may from time to time create and appoint such committees in addition to the executive, audit, compensation and nominating committees as it deems desirable. Each additional committee shall bear such designation, shall have such powers and shall perform such duties, not inconsistent with these by-laws or with law, as may be assigned to it by the board of directors; provided that no such additional committee may exercise the powers of the board of directors in the management of the business and affairs of the corporation except such as shall be expressly delegated to it. The board of directors shall have the power to change the members of any such additional committee at any time, to fill vacancies, and to discharge any such additional committee at any time. The compensation, if any, of members of any such committee shall be established by resolution of the board of directors. Compensation of Directors Section 14. Directors shall receive such fees and reimbursement of reasonable expenses as may be fixed from time to time by resolution of the board. Members of special or standing committees shall also be allowed such fees and reimbursements for reasonable expenses in connection with service on such committees as may from time to time be fixed by resolution of the board. Such fees may be fixed on the basis of meetings attended or on an annual basis or both and may be payable currently or deferred. Action by Written Consent Section 15. Any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee. Action by Telephone or Other Communications Equipment Section 16. Directors may participate in a meeting of the board or any committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. Alternate Committee Members Section 17. The board of directors may designate one or more directors as alternate members of any committee, any of whom may be selected by the chairman of a committee to replace any absent or disqualified member at any meeting of a committee. In the absence or disqualification of a member of a committee and of the alternate members of such committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitutes a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. Article IV Notices Section 1. Except as may be otherwise provided for in these by-laws, whenever under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder at such address as appears on the books of the corporation, and such notice shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram or telex. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation, or of these by-laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Article V Officers Section 1. The officers of the corporation shall be elected by the board of directors and shall be a chairman of the board, a president, one or more vice presidents, a secretary, a treasurer and a general counsel. The board of directors may also elect a senior vice president, an executive vice president, a controller and one or more assistant vice presidents, assistant secretaries, assistant treasurers and assistant general counsels. Two or more offices may be held by the same person, except as where the offices of president and secretary are held by the same person, such person shall not hold any other office. Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall elect a chairman of the board from among the directors, and shall elect a president, one or more vice presidents, a secretary and a treasurer, none of whom need be a member of the board. Section 3. The board of directors may elect such other officers as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The board of directors shall fix the salaries of all officers of the corporation, except that the salaries of the assistant vice presidents, assistant secretaries, and assistant treasurers may be fixed by the chairman of the board or the president of the corporation. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the whole board of directors. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise shall be filled by the board of directors. The Chairman of the Board Section 6. The chairman of the board shall be the chief executive officer of the corporation and, subject to the board of directors and the executive committee, shall be in general charge of the affairs of the corporation. He shall preside at all meetings of the stockholders and the board of directors and shall see that all orders and resolutions of the board of directors are carried into effect. He shall possess such powers and perform such duties as usually appertain to the chief executive officer in business corporations. The President Section 7. The president, subject to the direction of the chairman of the board, shall be the chief operating officer and shall have general charge of all operations of the corporation and of such related staff functions as the chairman of the board shall designate from time to time. In the absence of the chairman of the board, he shall preside at all meetings of the stockholders and the board of directors. The Executive Vice President Section 8. The executive vice president shall exercise such supervision over the business and affairs of the corporation as shall be prescribed from time to time by the board of directors or by the president. In the absence or disability of the president, and unless otherwise determined by the board of directors, the executive vice president shall perform the duties and exercise the powers of the president. The Vice Presidents Section 9. The vice presidents shall perform such duties and have such powers as the board of directors may from time to time prescribe. The Secretary and Assistant Secretaries Section 10. The secretary shall attend all meetings of the board of directors, the executive committee, and all meetings of the stockholders, and shall record all of the proceedings of said meetings in books to be kept for that purpose, and shall perform like duties for the standing committees when required. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or the chairman of the board, under whose supervision the secretary shall be. The secretary may sign with the president or a vice president, in the name of the corporation, all contracts and instruments of conveyance authorized by the board of directors, and the secretary shall keep in safe custody the seal of the corporation and, when authorized by the board of directors, affix the same to any instrument requiring it and, when so affixed, it shall be attested by the signature of the secretary or an assistant secretary, and the secretary shall in general perform all the duties incident to the office of secretary. The secretary shall have charge of the stock certificate books, transfer books and stock ledgers; provided, however, that the secretary may employ corporate transfer agents and registrars whom the ecretary reasonably believes to be financially responsible and competent in the performance of their duties to maintain such stock certificate books, transfer books and stock ledgers and such other books and paper as may be appropriate and all of such records may be kept either in the form of writings, punch cards, magnetic tape, photographs, micro-photographs or any other information storage device as appropriate, so long as the form of such records is designed to allow reasonably prompt and appropriate access thereto and retrieval of information in clearly legible form therefrom. Section 11. An assistant secretary shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary. The assistant secretaries shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. The Treasurer and Assistant Treasurers Section 12. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. The board of directors, in its discretion, may delegate its responsibilities regarding the designation of depositories contained in this section to any officer or officers of the corporation. The treasurer shall in general perform all the duties incident to the office of the treasurer. Section 13. He shall be responsible for the disbursement of the funds of the corporation and shall take proper vouchers for such disbursements, and upon the request of the president or the board of directors, shall render an account of all his transactions as treasurer and of the financial condition of the corporation. Section 14. If required by the board of directors, he shall give the corporation a bond, which shall be renewed regularly, in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 15. The assistant treasurers, unless otherwise determined by the board of directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. They shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. The Controller Section 16. The controller shall maintain adequate records of all assets, liabilities, and other financial transactions of the corporation and, in general, shall perform all the duties ordinarily connected with the office of controller and such other duties as, from time to time, may be assigned to him by the board of directors or the president. The General Counsel and Assistant General Counsels Section 17. The general counsel shall be in charge of the law department and patent functions, shall supervise all legal matters affecting the corporation and render all necessary advice in connection therewith and shall give such legal advice as may be appropriate to the directors, officers and employees of the corporation. He may retain such law firms and other legal counsel who are not employees of the corporation as he considers desirable for the purpose of effectively carrying out his duties as general counsel. Section 18. The assistant general counsels shall perform such duties and have such powers as the board of directors may from time to time prescribe. Article VI Indemnification of Directors and Officers Section 1. The corporation may indemnify to the fullest extent that is lawful, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines, taxes, penalties and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding. Section 2. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not he would be entitled to indemnity against the same liability under the provisions of this article. Section 3. The corporation may enter into an indemnity agreement with any director, officer, employee or agent of the corporation, upon terms and conditions that the board of directors deems appropriate, as long as the provisions of the agreement are not inconsistent with this article. Article VII Certificates of Stock Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by the chairman of the board, the president or a vice president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, designations, preferences and relative, participating, optional and other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions or such preferences and rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock; provided, however, that, to the full extent allowed by law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and rights. Section 2. If such certificate is countersigned (1) by a transfer agent, or (2) by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Lost Certificates Section 3. The board of directors may authorize the transfer agents and registrars of the corporation to issue and register, respectively, new certificates in place of any certificates alleged to have been lost, stolen or destroyed, and in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems necessary to protect the corporation and said transfer agents and registrars. Transfers of Stock Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Fixing Record Date Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. Registered Stockholders Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the party of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. Article VIII General Provisions Dividends Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation,if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 3. The board of directors shall present at each annual meeting and when called for by vote of the stockholders at any special meeting of the stockholders, a full and clear statement of the business and condition of the corporation. Checks Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. The board of directors, in its discretion, may delegate its responsibilities contained in this section to any officer or officers of the corporation. Fiscal Year Section 5. The fiscal year of the corporation shall begin on the first day of January, and terminate on the thirty-first day of December, in each year. Seal Section 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Incorporated Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Article IX Tennessee Authorized Corporation Protection Act Section 1. This corporation shall be subject to Section 24(a) of Chapter 30 of the Tennessee Business Corporation Act. Article X Amendments Section 1. The holders of shares of capital stock of the corporation entitled at the time to vote for the election of directors shall have the power to adopt, alter, amend, or repeal the by-laws of the corporation by vote of such percentage of such shares as is required by the Certificate of Incorporation, or if no percentage is specified by the Certificate of Incorporation, by vote of not less than 66-2/3% of such shares. The board of directors shall also have the power to adopt, alter, amend or repeal the by-laws of the corporation by vote of such percentage of the entire board as is required by the Certificate of Incorporation, or if no percentage is specified by the Certificate of Incorporation, by vote of not less than a majority of the entire board. Exhibit 4.3 Officers' Certificate We, the undersigned, being respectively Vice President-Finance and Secretary of Brunswick Corporation (the "Company"), do hereby deliver this Officers' Certificate to Continental Bank, National Association (the "Trustee") pursuant to Sections 2.01 and 2.03 of the Indenture dated as of March 15, 1987 (the "Indenture"), between the Company and the Trustee, to establish the terms and provisions of a series of securities ("Securities") to be issued under the Indenture; the Securities of such series shall include the following terms and provisions (all words capitalized in this Officers' Certificate which are defined in the Indenture have the meanings ascribed to them in the Indenture): 1. The title of the Securities of such series shall be: 7-3/8% Debentures Due September 1, 2023 ("Debentures"). 2. The Debentures of such series may be authenticated and delivered under the Indenture up to the aggregate principal amount of $125,000,000 (except for Debentures of such series authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Debentures of such series under Sections 2.05, 2.06, 2.07, 11.04, and 12.02 of the Indenture). 3. The principal of the Debentures of such series shall be payable on September 1, 2023, unless payable prior to such date upon the declaration of acceleration of their maturity in accordance with Section 7.01 of the Indenture. 4. The Debentures of such series shall bear interest at the rate of 7-3/8% per annum; such interest shall accrue from the most recent date to which interest has been paid or, if no such interest has been paid, from September 1, 1993; such interest shall be payable semi-annually on March 1 and September 1 in each year to the Person in whose name such Debentures were registered on the February 15 or August 15 preceding each such date, respectively. 5. The currency in which the principal amount of and interest on the Debentures of such series shall be paid, and with which they shall be purchased, shall be United States Dollars. 6. Principal of the Debentures of such series shall be payable, they may be presented for registration of transfer and for exchange, and notices to or upon the Company in respect of such Debentures may be served, at the offices and agencies of the Company named in Section 5.02 of the Indenture, and at the offices of the Company in Lake Forest, Illinois. Holders must present Debentures of such series to the Company or the Trustee to collect payments of principal of the Debentures of such series. Interest on each Debenture of such series will be paid by check mailed to the registered holder thereof at the registered address of such holder. 7. The Debentures of such series shall not be redeemable. In Witness Whereof, this Officers' Certificate has been executed and delivered this 25th day of August, 1993. William R. McManaman Vice President-Finance Dianne M. Yaconetti Secretary Exhibit 10.17 Employment Agreement This Agreement, made and entered into as of October 1, 1993, by and between John P. Reilly (the "Executive") and Brunswick Corporation, a Delaware corporation (the "Company"); Witnesseth That: Whereas, the parties desire to enter into this Agreement pertaining to the employment of the Executive by the Company; Now, Therefore, in consideration of the mutual covenants and agreements set forth below, it is hereby covenanted and agreed by the Executive and the Company as follows: 1. Positions and Employment Period. The Company hereby employs the Executive as President and Chief Operating Officer, and the Executive hereby agrees to remain in the employ of the Company in such capacity, for the period beginning on October 1, 1993 and ending on December 31, 1994 (the "Employment Period"). 2. Performance of Duties. The Executive agrees that during the Employment Period he shall devote his best efforts and full business time exclusively to the business affairs of the Company and its subsidiaries and shall perform his duties faithfully and efficiently, subject to the direction of the Company's Chairman and Chief Executive Officer. The Executive, however, may become a director of other corporations and engage in charitable, civic and other similar pursuits to the extent that such activities do not interfere with his devoting his best efforts to his duties to the Company. 3. Compensation. Subject to the terms of this Agreement, during the Employment Period, the Company shall compensate the Executive for his services as follows: (a) He shall receive a base salary of $425,000 per annum, payable biweekly in accordance with Company practice and subject to all normal deductions and withholdings. (b) He shall be entitled to a bonus from the Company payable as of October 1, 1994 in the amount of $425,000 or, if earlier, upon a Change in Control (as defined in the Company's 1991 Stock Plan). (c) He shall be entitled to life insurance death benefit coverage in an amount equal to $1,487,500 (3-1/2 times base salary). (d) He shall be a participant, to the extent that he meets all conditions of general applicability, in any and all employee benefit plans maintained by the Company from time to time to provide accident, medical, hospital or retirement benefits for its senior executives or for its salaried employees generally, including, without limitation, any pension, 401(k) or employee stock ownership plan. (e) He shall be reimbursed in accordance with the Company's regular policies for all reasonable expenses for entertainment, traveling, meals and lodging incurred in promoting the Company's business. (f) He shall be reimbursed for the cost of regular periodic membership fees and dues accruing during the Employment Period in connection with his membership in The Knollwood Club, Lake Forest, Illinois. (g) He shall be entitled to the use of a Company automobile and shall be entitled to tax gross-up payments in such amounts as the Company reasonably determines are sufficient, after payment of all Federal and state income taxes thereon, to reimburse the Executive for the Federal and state income taxes payable with respect to such usage. (h) He shall be entitled to executive tax planning services paid for by the Company for senior executives for (i) up to $7,500 per year for tax return preparation services for his tax returns for each of 1993 and 1994, and (ii) up to $3,000 for financial and estate planning services during the employment period. (i) He shall receive a grant under the Company's 1991 Stock Plan of shares of restricted stock (rounded to the nearest full share) with a fair market value on the date of grant of $212,500 (50% of base salary), which shares shall be subject to a five year restriction period, and he shall receive a stock option grant under such plan to acquire shares (rounded to the nearest full share) of the Company's common stock which options have a value calculated as one-third of the fair market value of such shares on the date of grant equal to $106,250 (25% of base salary). In each such case, the date of grant shall be October 29, 1993. Such options shall have an exercise price per share equal to the fair market value of a share of common stock on the date of grant and shall become exercisable in cumulative installments of 30% on October 29, 1994, 30% on October 29, 1995 and 40% on October 29, 1996. The terms of such restricted stock and stock option grants shall provide that, in the event of a Change in Control, all restrictions on such restricted stock shall lapse, and any stock option that has been outstanding for at least six months shall be immediately exercisable. 4. Termination. In the event that the Company terminates the Executive's employment during the Employment Period but prior to a Change in Control for any reason other than Cause (as defined below), or in the event that the Company fails to offer the Executive a contract for continued employment commencing on January 1, 1995 at a base salary of no less than $425,000 and incentive opportunities to earn a total rate of compensation no less favorable in the aggregate than the rate of compensation payable under this Agreement, the Executive shall be entitled to a lump sum payment of $425,000 which shall be payable as soon as practicable after the Executive's termination of employment or as soon as practicable after January 1, 1995, as the case may be. Such amount shall be in lieu of all other compensation or benefits from the Company (other than unpaid salary and benefits accrued and earned by the Executive prior to the effective date of such termination). In the event of the Executive's death or resignation or the termination of the Executive's employment by the Company for Cause, the Executive shall be entitled to no further compensation or benefits from the Company (other than unpaid salary and benefits accrued and earned by him prior to the effective date of such termination). For purposes of this Agreement, the term "Cause" means the Executive's willful misconduct or gross negligence in the performance of duties contemplated by this Agreement or the Executive's inability to adequately perform the duties contemplated by this Agreement for a period of six consecutive months by reason of a physical or mental disability. Notwithstanding the foregoing provisions of this paragraph, in the event of the Executive's termination of employment for any reason, the Compensation Committee of the Company's Board of Directors may, but shall not be required to, release the restrictions on any shares of restricted stock then held by the Executive and accelerate the vesting of any stock options then held by the Executive and, if such termination occurs prior to October 1, 1994, may, but shall not be required to, authorize payment of a pro rata portion of the bonus that would otherwise be payable as of October 1, 1994. 5. Change in Control. In the event of a Change in Control (as defined in the Company's 1991 Stock Plan): (a) the Employment Period shall be automatically extended to the third anniversary of the date of the Change in Control and, during such extended Employment Period, the Executive shall be entitled to a base salary of no less than $425,000, employee benefits and perquisites no less favorable than those in effect on the date of the Change in Control, and opportunities to receive incentive compensation at least equal to the incentive compensation provided under this Agreement; (b) the Executive shall be entitled to an accelerated payment of his bonus to the extent provided in paragraph 3(b) above and accelerated vesting of his restricted stock and stock options to the extent provided in paragraph 3(i) above; (c) if, after such Change in Control and prior to the end of the extended Employment Period, the Company terminates the Executive for any reason other than Cause (as defined in paragraph 4 above) or the Executive resigns for Good Reason (as defined below), the Executive shall be entitled to a lump sum payment within ten days of such termination or resignation equal to $2,550,000 (three times the amount of the Executive's annual rate of salary and bonus); (d) if the Executive resigns from the employ of the Company during the six-month period after such Change in Control for any reason other than Good Reason, the Executive shall be entitled to a lump sum payment (within ten days of such resignation) equal to $1,700,000 (two times the amount of the Executive's annual rate of salary and bonus); and (e) the Executive shall be entitled to a tax gross-up payment in such amount as the Company reasonably determines is sufficient, after payment of all Federal and state income taxes and Federal excise taxes thereon, to reimburse the Executive for the amount of any Federal excise taxes payable by the Executive under section 4999 of the Internal Revenue Code of 1986, as amended. For purposes of this Agreement, the term "Good Reason" means: (i) a significant change in the nature or scope of the Executive's authorities or duties from those described in paragraphs 1 and 2 above, a reduction in total compensation from that provided in paragraph 3 above, or the material breach by the Company of any other provision of this Agreement; (ii) a reasonable determination by the Executive that, as a result of a Change in Control and a change in circumstances thereafter significantly affecting his position, he is unable to exercise the authorities, powers, functions or duties attached to his position and contemplated by paragraphs 1 and 2 above; or (iii) the relocation of the Executive's office to a location more than fifty miles from the location of his office immediately prior to the Change in Control. 6. Noncompetition and Confidentiality. During his employment by the Company and for a period of three years after termination of his employment (whether voluntary or involuntary), the Executive shall not directly or indirectly be employed or retained by, or render any services for, or be financially interested in any manner in any person, firm or corporation engaged in any business, which at the particular time is competitive in any way with any business in which the Company or any of its subsidiaries or affiliates was engaged (including any program of development or research) during the Executive's employment, if, but only if, such employment or activity is likely to cause, or causes, material damage to the Company or any of its subsidiaries or affiliates. During and after his employment, the Executive will not divulge or appropriate to his own use or to the use of others any secret or confidential information or knowledge pertaining to the business of the Company or any of its subsidiaries or affiliates obtained by him during such employment. The Executive acknowledges that the Company would be irreparably injured by a violation of the foregoing provisions of this paragraph 6, and he agrees that the Company, in addition to any other remedies available to it for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of such provisions. If a bond is required to be posted in order for the Company to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum. The Executive acknowledges that the foregoing provisions are reasonable and are required to protect the legitimate interests of the Company, and represents that such provisions will not operate as a bar to the Executive's sole means of support or prevent the Executive from obtaining employment to which he is suited by experience and training. 7. Nonalienation. The interests of the Executive under this Agreement are not subject to the claims of his creditors, and may not otherwise be voluntarily or involuntarily assigned, alienated or encumbered. 8. Amendment. This Agreement may be amended or cancelled only by mutual agreement of the parties in writing without the consent of any other person. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof. 9. Applicable Law. The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Illinois, without regard to the conflict of law provisions of any state. 10. Severability. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified). 11. Waiver of Breach. No waiver by the Company or the Executive of a breach of any provision of this Agreement by the other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party or any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party to take any action by reason of any such breach will not deprive such party of the right to take action at any time while such breach continues. 12. Successors. This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company's assets and business. 13. Notices. Notices and all other communications in connection with this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, to the parties at the addresses set forth below: to the Company: Brunswick Corporation One N. Field Court Lake Forest, Illinois 60045-4811 or to the Executive: John P. Reilly 644 Spruce Lake Forest, Illinois 60045 All notices to the Company shall be directed to the attention of the Chairman of the Board of the Company, with a copy to the Secretary of the Company. Each party, by written notice furnished to the other party, may modify the applicable delivery address, except that notice of a change of address shall be effective only upon receipt. 14. Resolution of Disputes. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in the City of Chicago in accordance with the laws of the State of Illinois by three arbitrators, one of whom shall be appointed by the Company, one by the Executive, and the third by the other two. If the other two arbitrators cannot agree on the appointment of a third arbitrator, or if either party fails to appoint an arbitrator, then such arbitrator shall be appointed by the Chief Judge of the United States Court of Appeals for the Seventh Circuit. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association, except with respect to the selection of arbitrators which shall be as provided in this paragraph 15. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. In the event that it shall be necessary or desirable for the Executive to retain legal counsel or incur other costs and expenses in connection with the enforcement of any and all of his rights under this Agreement, he shall be entitled to recover from the Company reasonable attorney's fees and costs and expenses incurred by him in connection with the enforcement of those rights. Payments shall be made to the Executive by the Company at the time these attorney's fees and costs and expenses are incurred by the Executive. If, however, the arbitrators should later determine that under the circumstances it was unjust for the Company to have made any of these payments of attorney's fees and costs and expenses to the Executive, he shall repay them to the Company in accordance with the order of the arbitrators. Any award of the arbitrators shall include interest at a rate or rates considered just under the circumstances by the arbitrators. 15. Survival of Agreement. Except as otherwise expressly provided in this Agreement, the rights and obligations of the parties to this Agreement shall survive the termination of the Executive's employment with the Company. 16. Entire Agreement. Except as otherwise noted herein, this Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior and contemporaneous agreements, if any, between the parties relating to the subject matter hereof. In Witness Thereof, the Executive has hereunto set his hand, and the Company has caused these presents to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed, all as of the day and year first above written. /s/ J. P. Reilly Executive Brunswick Corporation By /s/ Jack F. Reichert Its Chairman and CEO Attest: /s/ D. M. Yaconetti Its Secretary (Seal) Exhibit 10.18 Indemnification Agreement Agreement, made and entered into as of October 26, 1993 by and between Brunswick Corporation, a Delaware corporation (the "Corporation"), and John P. Reilly ("Indemnitee"). Whereas, the Corporation is a Delaware corporation; Whereas, at the request of the Corporation, Indemnitee currently serves as a director and officer of the Corporation and may, therefore, be subjected to claims, suits or proceedings arising as a result of his service; Whereas, as an inducement to Indemnitee to continue to serve as a director or officer, the Corporation has agreed to indemnify Indemnitee against expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings, to the fullest extent that is lawful; and Whereas, the parties by this Agreement desire to set forth their agreement regarding indemnification. Now, Therefore, the parties agree as follows: 1. Acts of Omissions Covered By This Agreement. This Agreement shall cover any act or omission by an Indemnitee which (i) occurs or is alleged to have occurred by reason of his being or having been a director or officer, (ii) occurs or is alleged to have occurred before, during or after the time when the Indemnitee served as a director or officer and (iii) gives rise to, or is the direct or indirect subject of a claim in any threatened, pending or completed action, suit or proceeding at any time or times whether during or after his service as a director or officer. 2. Indemnity. (a) The Corporation hereby agrees to indemnify, and keep indemnified in accordance with, and to the fullest extent permitted by the Corporation's charter and that is lawful, and regardless of any by-law provision to the contrary, Indemnitee, from and against any expenses (including attorney's fees), judgments, fines, taxes, penalties and amounts paid in settlement actually and reasonably incurred by Indemnitee in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise and whether or not such action is by or in the right of the Corporation or that other corporation, partnership, joint venture, trust or other enterprise with respect to which the Indemnitee serves or has served. (b) Despite anything to the contrary in subsection (a), the Corporation agrees to indemnify Indemnitee in a suit or proceeding initiated by the Indemnitee only if the Indemnitee acted with the authorization of the Corporation in initiating that suit or proceeding. However, an arbitration proceeding brought under Section 8 shall not be subject to this subsection (b). (c) An indemnification under this Agreement shall be made by agreement between the Board of Directors and the Indemnitee. If the Board of Directors and the Indemnitee cannot agree, any disagreement they have shall be resolved by a decision of the arbitrators in an arbitration proceeding pursuant to Section 8. For purposes of this Agreement, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries. 3. Burden of Proof. Indemnitee shall be presumed to be entitled to indemnification for any act or omission covered in Section 1 of this Agreement. The burden of proof of establishing that Indemnitee is not entitled to indemnification because of the failure to fulfill some requirement of Delaware law, the Corporation's charter, by-laws, or this Agreement shall be on the Corporation. 4. Notice by Indemnitee. Indemnitee shall notify the Corporation in writing of any matter with respect to which Indemnitee intends to seek indemnification hereunder as soon as reasonably practicable following the receipt by Indemnitee of written threat thereof, provided that failure to so notify the Corporation shall not constitute a waiver by Indemnitee of his rights hereunder. 5. Advancement of Expenses. In the event of any action, suit or proceeding against Indemnitee which may give rise to a right of indemnification from the Corporation pursuant to this Agreement, following written request to the Corporation by the Indemnitee, the Corporation shall advance to Indemnitee amounts to cover expenses incurred by Indemnitee in defending the action, suit or proceeding in advance of final disposition upon receipt of (i) an undertaking by or on behalf of the Indemnitee to repay the amount advanced in the event that it shall be ultimately determined in accordance with Section 3 of this Agreement that he is not entitled to indemnification by the Corporation, and (ii) satis- factory evidence as to the amount of such expenses. Indemnitee's written certification together with a copy of the statement paid or to be paid by Indemnitee shall constitute satisfactory evidence unless determined to the contrary in an arbitration proceeding conducted pursuant to Section 8 of this Agreement. 6. Non-Exclusivity of Right of Indemnification. The indemnification rights granted to Indemnitee under this Agreement shall not be deemed exclusive of, or in limitation of, any rights to which Indemnitee may be entitled under Delaware law, the Corporation's charter or By-laws, any other agreement, vote of stockholders or directors or otherwise. 7. Termination of Agreement and Survival of Right of Indemnification. (a) Subject to subparagraph (b) of this section, this Agreement shall terminate when the Indemnitee's terms of office as a director and officer end. (b) The rights granted to Indemnitee hereunder shall continue after termination as provided in Section 1 and shall inure to the benefit of Indemnitee, his personal representative, heirs, executors, administrators and beneficiaries, and this Agreement shall be binding upon the Corporation, its successors and assigns. 8. Arbitration of all Disputes Concerning Entitlement. Any controversy or claim arising out of or relating to the Indemnitee's entitlement to indemnification under this Agreement shall be settled by arbitration in the City of Chicago by three arbitrators, one of whom shall be appointed by the Corporation, one by the Indemnitee and the third of whom shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the appointment of a third arbitrator or if either party fails to appoint an arbitrator, then that arbitrator shall be appointed by the Chief Judge of the United States Court of Appeals for the Seventh Circuit. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Interest on any judgment shall be assessed at a rate or rates the arbitrators consider just under the circumstances. If it is necessary or desirable for the Indemnitee to retain legal counsel or incur other costs and expenses in connection with enforcement of his rights under this Agreement, the Corporation shall pay his reasonable attorneys' fees and costs and expenses in connection with enforcement of his rights (including the enforcement of any arbitration award in court), regardless of the final outcome, unless the arbitrators determine that under the circumstances recovery by the Indemnitee of all or a part of any such fees and costs and expenses would be unjust. 9. Governing Law. (a) Except as provided for in subparagraph (b) of this section, this Agreement shall be governed by the laws of the State of Delaware. (b) Any arbitration under this Agreement shall be governed by the laws of the State of Illinois. 10. Severability. If any provision of this Agreement is determined to be invalid or unenforceable, this invalidity or unenforceability shall not affect the validity or enforceability of any other provisions of this Agreement, and this Agreement shall be interpreted as though the invalid or unenforceable provision was not part of this Agreement. In Witness Whereof, the parties hereto have executed this Agreement as of the day and year first above stated. Brunswick Corporation By: /s/ D. M. Yaconetti Indemnitee John P. Reilly Exhibit 10.22 Brunswick Performance Plan 1994 Financial Targets: There will be two financial targets: Pre-tax, pre-amortization earnings and cash flow (minimum, goal and target). Objectives: In addition to the financial goals, each Division will be assigned specific objectives to be completed during the year. Weighting: The financial targets and Division objectives will be weighted as follows with respect to bonus potential: Pre-tax, pre-amort. earnings - 75% Cash Flow -------------------- 10% Division objectives ---------- 15% Bonus Pools: The generation of a bonus pool will generally revolve around the achievement of the pre-tax earnings goals. A bonus pool must be earned through the achievement of the earnings goals before a bonus can be earned for cash flow. However, a Division may earn a bonus by achieving the assigned objective(s) even though the minimum earnings goal has not been met. The value of this pool will be equal to 15% of the bonus pool for minimum earnings. When the minimum pre-tax earnings goal has been met, the bonus pool will equal 3% of this amount. If the pre-tax earnings goal is achieved, the accrual is increased to 4% of pre-tax earnings from the first dollar. After achieving the target level, 5% of pre-tax earnings from the first dollar. The bonus pool for Corporate participants will be 13%, 15% and 18%, respectively of bonus pools earned by the Divisions at their minimum, goal and target performance levels. Participation: Each Division will determine the guidelines for participation in the Plan. Payment: Bonus payments will be made after the year-end financial results have been reviewed and certified by Arthur Andersen & Co. Proposed bonus payments to Division Presidents and Senior Corporate Staff will be reviewed and approved by the Compensation Committee. Exhibit 10.23 Strategic Incentive Plan Concept: A medium-term incentive plan for key executives of the Corporation and its Divisions. Bonuses are earned based on the achievement of assigned strategic goals. Purpose: To attract and retain high quality executives and officers who will enhance shareholder value. To motivate these executives to achieve important strategic goals of the Company and its Divisions. To provide these executives with competitive compensation levels by enhancing the Company's other short and long-term incentive programs. Eligibility: Participation is limited to Senior Executives reporting to the CEO or the COO and executives reporting to these Senior Executives. Participants will be nominated based on the recommendation of the Division Presidents and Corporate Staff. Nomination for participation in one Performance Period does not entitle a participant to participate in any subsequent Performance Periods. Performance The Performance Period for each strategic incentive Period: award will be three years. Award Frequency: Strategic Incentive Plan awards will be granted on an annual basis. Award Size: Prior to the beginning of each Performance Period, participants will be assigned a maximum award expressed in dollars. Performance Prior to the beginning of each Performance Period, the Measurement: strategic goals for that Performance Period for each Division will be assigned. Each participant's actual award value will be based on the achievement of the strategic goals established for the participant's organizational unit. Form & Timing Award payments will be made in cash and will be paid Payments: after a review of the achievement of the goals at the end of the third year of the Performance Period. Transfer Between Participants transferring between organizational units Organizational during a Performance Period will be paid an award based Units: on the proportion of the participant's number of months of service in each unit to the total number on months in the Performance Period. Termination of Termination by reason of retirement at or after age 65, Employment: death, or total and permanent disability: awards will be paid out at the end of the Performance Period, pro rata, based on the number of months of service to the total number of months in the Performance Period. Termination for any other reason: participant will forfeit all rights to an award under the Plan for Performance Periods not yet completed. This automatic forfeiture may be waived by the Compensation Committee, at its discretion. Exhibit 22.1 Subsidiaries of the Company The following corporations are direct or in-direct wholly-owned subsidiaries of Brunswick Corporation: Place of Incorporation Appletree Ltd. Bermuda Bayliner Marine Corporation Delaware Brunswick AG Switzerland Brunswick Bowling & Billiards Corporation Delaware Brunswick Bowling & Billiards (U.K.) Limited England Brunswick Bowling GmbH West Germany Brunswick Bowling Pin Corporation Delaware Brunswick Centres, Inc. Ontario Brunswick Export Corporation Delaware Brunswick GmbH West Germany Brunswick International (Canada) Limited Ontario Brunswick International GmbH West Germany Brunswick International Holdings, Inc. Delaware Brunswick International Limited Delaware Brunswick International Sales Corporation U.S. Virgin Islands Centennial Assurance Company, Ltd. Bermuda Escort Trailer Corporation Washington Jupiter Marine, Inc. Delaware Leiserv, Inc. Delaware Marine Power Australia Pty. Limited Australia Marine Power Europe, Inc. Delaware Marine Power International Limited Delaware Marine Power International Pty. Limited Delaware Marine Power Italia S.p.A. Italy Marine Xpress Corporation Delaware Mercury Marine Limited Ontario Normalduns B.V. Netherlands OBC International Holdings Inc. Delaware Productos Marine de Mexico, S.A. de C.V. Mexico Ray Industries, Inc. Arizona Ray Industries, Inc. Delaware SBC International Holdings Inc. Delaware Sea Ray Boats Europe B.V. Netherlands Sea Ray Boats, Inc. Arizona Sea Ray Boats, Inc. Florida Sea Ray Boats, Inc. Michigan Sea Ray Boats, Inc. South Carolina Sea Ray Boats, Inc. Tennessee Skokie Investment Corporation Delaware Starcraft Power Boats Corp. Delaware Wintergreen Finance, Inc. Delaware Zebco Corporation Delaware Zebco Sports France S.A. France In addition, Brunswick Corporation owns 50% of the outstanding stock of Nippon Brunswick Kabushiki Kaisha, a Japanese corporation. The names of a number of subsidiaries have been omitted. Such subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. Schedule "1" List of Material Subsidiaries As Set Forth in the Company's 10-K Report (See Section 4.8) As of March 15, 1993, the following corporations are direct or in-direct wholly-owned subsidiaries of Brunswick Corporation: Place of Incorporation Appletree Ltd. Bermuda Bayliner Marine Corporation Delaware Brunswick AG Switzerland Brunswick Bowling & Billiards Corporation Delaware Brunswick Bowling & Billiards (U.K.) Limited England Brunswick Bowling GmbH West Germany Brunswick Bowling Pin Corporation Delaware Brunswick Centres, Inc. Ontario Brunswick Export Corporation Delaware Brunswick GmbH West Germany Brunswick International (Canada) Limited Ontario Brunswick International GmbH West Germany Brunswick International Holdings, Inc. Delaware Brunswick International Limited Delaware Brunswick International Sales Corporation U.S. Virgin Islands Centennial Assurance Company, Ltd. Bermuda Escort Trailer Corporation Washington Jupiter Marine, Inc. Delaware Leiserv, Inc. Delaware Marine Power Australia Pty. Limited Australia Marine Power Europe, Inc. Delaware Marine Power International Limited Delaware Marine Power International Pty. Limited Delaware Marine Power Italia S.p.A. Italy Marine Xpress Corporation Delaware Mercury Marine Limited Ontario Normalduns B.V. Netherlands OBC International Holdings Inc. Delaware Productos Marine de Mexico, S.A. de C.V. Mexico Ray Industries, Inc. Arizona Ray Industries, Inc. Delaware SBC International Holdings Inc. Delaware Sea Ray Boats Europe B.V. Netherlands Sea Ray Boats, Inc. Arizona Sea Ray Boats, Inc. Florida Sea Ray Boats, Inc. Michigan Sea Ray Boats, Inc. South Carolina Sea Ray Boats, Inc. Tennessee Skokie Investment Corporation Delaware Starcraft Power Boats Corp. Delaware Wintergreen Finance, Inc. Delaware Zebco Corporation Delaware Zebco Sports France S.A. France In addition, Brunswick Corporation owns 50% of the outstanding stock of Nippon Brunswick Kabushiki Kaisha, a Japanese corporation. The names of a number of subsidiaries have been omitted. Such subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. Exhibit 25.1 Power of Attorney The undersigned directors and officers of Brunswick Corporation, a Delaware corporation (the "Company"), do hereby nominate, constitute and appoint Thomas K. Erwin, William R. McManaman, and Dianne M. Yaconetti and each of them individually, the true and lawful attorney or attorneys of the undersigned, with power to act with or without the others and with full power of substitution and resubstitution, to execute in the name and on behalf of the undersigned as directors and officers of the Company, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1993 and any and all amendments thereto; and each of the undersigned hereby ratifies and approves all that said attorneys or any of them shall do or cause to be done by virtue hereof. In Witness Whereof, each of the undersigned has executed this Power of Attorney in one or more counterparts on the date set opposite his name. Capacity Signature Date Chairman of the Board, /s/ Jack F. Reichert February 8, 1994 Chief Executive Officer Jack F. Reichert (Principal Executive Officer) and Director President, Chief /s/ John P. Reilly February 8, 1994 Operating Officer John P. Reilly and Director Vice President-Finance /s/ William R. McManaman February 8, 1994 (Principal Financial William R. McManaman Officer) Controller (Principal /s/ Thomas K. Erwin February 8, 1994 Accounting Officer) Thomas K. Erwin Director /s/ Michael J. Callahan February 8, 1994 Michael J. Callahan Director /s/ John P. Diesel February 8, 1994 John P. Diesel Director /s/ Leo Herzel February 8, 1994 Leo Herzel Director /s/ George D. Kennedy February 8, 1994 George D. Kennedy Director /s/ B. K. Koken February 8, 1994 Bernd K. Koken Director /s/ Jay W. Lorsch February 8, 1994 Jay W. Lorsch Director /s/ Bettye Martin Musham February 8, 1994 Bettye Martin Musham Director /s/ Robert N. Rasmus February 8, 1994 Robert N. Rasmus Director /s/ Roger W. Schipke February 8, 1994 Roger W. Schipke Power of Attorney The undersigned director of Brunswick Corporation, a Delaware corporation (the "Company"), hereby nominates, constitutes and appoints Thomas K. Erwin, William R. McManaman, and Dianne M. Yaconetti and each of them individually, the true and lawful attorney or attorneys of the undersigned, with power to act with or without the others and with full power of substitution and resubstitution, to execute in the name and on behalf of the undersigned as a director of the Company, the Annual Report of the Company on Form 10-K for the fiscal year ended December 31, 1993 and any and all amendments thereto; and the undersigned hereby ratifies and approves all that said attorneys or any of them shall do or cause to be done by virtue hereof. IN Witness Whereof, the undersigned has executed this Power of Attorney in one or more counterparts on February 7, 1994. /s/ Donald E. Guinn Donald E. Guinn -----END PRIVACY-ENHANCED MESSAGE-----