Brunswick Corporation — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied text does not provide standalone fourth-quarter results. Brunswick designs, manufactures, and sells marine propulsion products, parts and accessories, and recreational boats, and operates shared-access and other marine services.
Financial performance
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Net sales | $6,812.2 million | $5,846.2 million | +16.5% |
| Gross margin | $1,947.2 million; 28.6% | $1,666.0 million; 28.5% | +16.9%; +10 bps |
| Operating earnings | $947.8 million; 13.9% margin | $812.9 million; 13.9% margin | +16.6% |
| Net earnings from continuing operations | $681.3 million | $595.4 million | +14.4% |
| Diluted EPS from continuing operations | $9.06 | $7.59 | +19.4% |
| Cash from continuing operating activities | $580.4 million | $586.2 million | Down $5.8 million |
| Free cash flow (non-GAAP) | $191.5 million | $320.8 million | Down $129.3 million |
Sales growth reflected product mix and pricing (+9.9%), acquisitions (+7.1%), and volume (+1.7%), partly offset by currency (-2.2%). Higher material and labor inflation and supply-chain inefficiencies largely offset the gross-margin benefit from sales growth. The 2022 results included $25.1 million of restructuring, exit, and impairment charges, including a $17.4 million impairment of capitalized software not expected to be placed into service. Adjusted operating earnings were $1,048.7 million and adjusted diluted continuing-operations EPS was $10.03; these are non-GAAP measures.
Segments
- Propulsion: Sales of $2,824.0 million (+12.7%); operating earnings of $522.9 million (+16.3%); operating margin 18.5%, up 50 bps.
- Parts & Accessories: Sales of $2,323.7 million (+15.7%); GAAP operating earnings of $336.2 million, essentially flat. Volume fell 8.4%; acquisition contribution was 18.8%.
- Boat: Sales of $2,119.4 million (+24.4%); operating earnings of $212.8 million (+49.5%); operating margin 10.0%, up 160 bps.
Segment sales above are reported before segment eliminations; consolidated sales were $6,812.2 million.
Cash, debt, and capital allocation
- Cash, cash equivalents, and marketable securities were $600.1 million at year-end, versus $355.3 million in 2021. Total liquidity, including available lending capacity, was $1,347.3 million, versus $852.5 million.
- Total debt was $2,509.0 million, up from $1,816.4 million; debt-to-capitalization rose to 55% from 49%. The company reported compliance with its credit covenants and no year-end borrowings under its revolving credit facility.
- Operating cash flow was nearly flat, while free cash flow declined as capital expenditures rose to $388.3 million from $267.1 million and working capital increased. Inventory rose $292.8 million, primarily to support higher production.
- Brunswick repurchased $450.0 million of shares in 2022 and paid $108.6 million in dividends. Remaining repurchase authorization at year-end was $396.4 million.
Outlook, commentary, and risks
Management did not provide specific 2023 sales or earnings guidance in the supplied filing text. Its 2023 capital plan anticipates approximately $350 million of capital expenditures, about $80 million of long-term debt retirement, approximately $100 million of interest expense, and about $150 million of share repurchases. Management stated it expects adequate liquidity and covenant headroom.
Management cited continued investment in new products, capacity, technology, automation, and cost reduction. Risks include economic weakness and higher interest rates affecting discretionary purchases and customer financing; inflation, supply disruptions, and skilled-labor availability; foreign-exchange movements; seasonal and weather-driven demand; dealer financial health and inventory reductions; and regulatory and environmental requirements. Brunswick also has dealer financing guarantees and product repurchase obligations; historical losses have not been significant, but could rise if defaults increase.
Environmental remediation exposure was estimated at $15.1 million to $39.5 million, with $15.4 million accrued. The auditor identified Navico goodwill and trade-name valuation as a critical audit matter. No goodwill impairment was recorded; Navico goodwill fair value exceeded carrying value by 16%, making valuation assumptions worth monitoring. The filing also reports $1,273.0 million of total goodwill and indefinite-lived intangible assets.
Key facts for investors to verify
- Whether demand, dealer inventory, and production levels remain aligned as economic conditions and financing costs change.
- Whether operating cash generation improves and inventory and other working-capital investment moderates.
- Debt maturities, interest costs, refinancing plans, and continued compliance with credit covenants.
- Progress against 2023 capital-spending, debt-repayment, and repurchase plans.
- Navico performance and the assumptions supporting its goodwill and trade-name valuations.
- Developments in warranty claims, dealer repurchase or recourse obligations, and environmental remediation costs.