10-K 1 bcorp-20231231.htm 10-K bcorp-20231231
Common stock, par value $0.75 per shareBC000001493012/316,006,140,47568,167,5422023FYFALSE6,401.46,812.25,846.2135402208373151101510Financing Receivables
The Company has recorded financing receivables, which are defined as a contractual right to receive money, as assets on its Consolidated Balance Sheets as of December 31, 2023 and 2022. Substantially all of the Company’s financing receivables, which includes receivables sold to third-party finance companies (Third-Party Receivables) and customer notes and other (Other Receivables), stem from commercial customers. Third-Party Receivables are accounts that have been sold to third-party finance companies, but do not meet the definition of a true sale and are therefore recorded as an asset with an offsetting balance recorded as a secured obligation in Accrued expenses. Other Receivables are mostly comprised of notes from customers, which are originated by the Company in the normal course of business. Financing receivables are carried at their face amounts less an allowance for credit losses.

The Company sells a broad range of marine products to a worldwide customer base and extends credit to its customers based upon an ongoing credit evaluation program. The Company’s business units maintain credit departments to manage financial exposure and perform credit-risk assessments on an individual account basis. Accounts are not aggregated into categories for credit-risk determinations. Due to the composition of the account portfolio, the Company does not believe that the credit risk posed by the Company’s financing receivables is significant to its operations, financial condition or cash flows. There were no significant troubled debt restructurings during the years ended December 31, 2023, 2022 or 2021.
The Company’s financing receivables, excluding trade accounts receivable contractually due within one year, as of December 31, 2023 and December 31, 2022 were $6.3 million and $6.1 million, respectively.

The activity related to the allowance for credit loss on financing receivables during the years ended December 31, 2023 and December 31, 2022 was not material.
The Company’s financing receivables, excluding trade accounts receivable contractually due within one year, as of December 31, 2023 and December 31, 2022 were $6.3 million and $6.1 million, respectively.
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UNITED STATES
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
 For the fiscal year ended December 31, 2023
 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ______________ to ______________
Commission file number 1-1043

Brunswick Logo_Midnight Blue (1).jpg
Brunswick Corporation

(Exact name of registrant as specified in its charter)
Delaware 36-0848180
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
26125 N. Riverwoods Blvd., Suite 500, Mettawa, IL 60045-3420
(Address of principal executive offices, including zip code)
(847) 735-4700
 (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common stock, par value $0.75 per share
BC
New York Stock Exchange
Chicago Stock Exchange
6.500% Senior Notes due 2048
BC-A
New York Stock Exchange
6.625% Senior Notes due 2049
BC-B
New York Stock Exchange
6.375% Senior Notes due 2049
BC-C
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o    

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

As of July 1, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting stock of the registrant held by non-affiliates was $6,006,140,475. Such number excludes stock beneficially owned by executive officers and directors. This does not constitute an admission that they are affiliates.

The number of shares of Common Stock ($0.75 par value) of the registrant outstanding as of February 14, 2024 was 68,167,542.

DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Report on Form 10-K incorporates by reference certain information that will be set forth in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on May 1, 2024.



BRUNSWICK CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
December 31, 2023
 
 
TABLE OF CONTENTS
PART IPage
PART II
PART III
PART IV




Forward-Looking Statements

Certain statements in this Annual Report on Form 10-K are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations, estimates and projections about Brunswick's business and by their nature address matters that are, to different degrees, uncertain. Words such as "may," "could," "should," "expect," "anticipate," "project," "position," "intend," "target," "plan," "seek," "estimate," "believe," "predict," "outlook," and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties that may cause actual results to differ materially from expectations as of the date of this Annual Report on Form 10-K. These risks include, but are not limited to, those set forth under Item 1A of this Annual Report on Form 10-K. Forward-looking statements speak only as of the date on which they are made and Brunswick does not undertake any obligation to update them to reflect events or circumstances after the date of this Annual Report.



PART I

Item 1. Business

References to "we," "us," "our," the "Company," "Brunswick," and "Brunswick Corporation" refer to Brunswick Corporation and its consolidated subsidiaries unless the context specifically states or implies otherwise.

Brunswick Corporation is a global leader in marine recreation, delivering innovation that transforms experiences on the water and beyond. Our unique, technology-driven solutions are informed and inspired by deep consumer insights and powered by our belief that “Next Never Rests.™” We design, manufacture, and market recreational marine products, including leading marine propulsion products and boats, as well as parts and accessories for the marine and RV markets, and we operate the world's largest boat club. We are dedicated to industry leadership, to being the best and most trusted partner to our many customers, and to building synergies and ecosystems that enable us to challenge convention and define the future. Incorporated in Delaware on December 31, 1907, Brunswick has traded on the New York Stock Exchange for nearly 100 years.

Our strategy is focused on:

Understanding and addressing the changing needs and behaviors of global boating participants;
Investing in innovative, global product leadership and leveraging our leading brands to meet consumer needs;
Delivering distinctive, elevated ownership and shared-access experiences that expand boating participation;
Being the partner of choice to our customers by offering integrated technical and business solutions;
Engaging consumers with the richest, most intuitive digital experiences;
Leading the industry in Autonomy, Connectivity, Electrification, and Shared Access (ACES) strategies, with an expanding set of commercially available products in each category;
Unlocking unique and profound enterprise synergies;
Investing in increasing global business resiliency;
Being an acknowledged marine industry leader in sustainability; and
Being an employer of choice through our clear purpose and culture of inclusiveness.

These strategies support our aim to create exceptional experiences, expand participation in recreational boating, deliver industry-transforming technology, and leverage our leading businesses to grow earnings and enhance shareholder value. Our integrated business strategy is supported by a balanced capital strategy that includes critical investments in new products and technology to further our market leadership position, organic growth initiatives, and our ACES and technology strategies while also managing debt levels and maturities, maintaining strong cash and liquidity positions, and continuing to return capital to shareholders through share repurchases and dividends.

Effective January 1, 2023, the Company changed its management reporting and updated its reportable segments to Propulsion, Engine Parts and Accessories (Engine P&A), Navico Group and Boat to align with our internal operating structure, described further below.

1

Key brands associated with each of our segments are listed below.

10-KBrandsChart-Ligher.jpg

Refer to Note 5 – Segment Information in the Notes to Consolidated Financial Statements for additional information regarding our segments.

Propulsion Segment

The Propulsion segment, which we believe is a world leader in the manufacturing and sale of recreational marine engines and propulsion systems, had net sales of $2,763.8 million in 2023. The Propulsion segment designs, manufactures and sells engines, controls, rigging, and propellers globally to over 860 boat builders (both independent and Brunswick's Boat segment) and a network of more than 8,900 marine dealers and distributors, specialty marine retailers, marine service centers, and various local, state, and federal governmental accounts. White River Marine Group, LLC (including Tracker and Ranger Boats) and Brunswick Boat Group are significant customers.

Propulsion segment engines are designed for use in recreational, commercial, and racing applications. Mercury designs and sells four-stroke outboard engine models ranging from 2.5 to 600 horsepower; Mercury Marine and Mercury Racing manufacture inboard and sterndrive engine models ranging from 115 to 1,550 horsepower. Mercury Marine also manufactures two-stroke, non-DFI (direct fuel injection) engines for certain markets outside the United States and Avator™ electric propulsion systems in models ranging from 7.5e to 110e. In 2023, Brunswick acquired Fliteboard Pty Ltd (Fliteboard), a leader in eFoiling technology, to further enhance our electrification and shared-access strategies. Fliteboard is operated as part of the Propulsion segment.

Engine P&A Segment

The Engine P&A segment had net sales of $1,199.8 million in 2023. Engine P&A sells products such as engine parts and consumables including oils and lubricants, electrical products, boat parts and systems, and also includes our marine parts and accessories distribution businesses.

2

Engine P&A products are designed for and sold mostly to aftermarket retailers, dealers, distributors, and original equipment manufacturers (including Brunswick Boat segment brands) for both marine and non-marine markets. The Engine P&A distribution businesses are leading distributors of Brunswick and third party marine parts and accessories throughout North America, Europe, and Asia-Pacific, offering same-day or next-day delivery service to a broad array of marine service facilities.

Navico Group Segment

The Navico Group segment, which had net sales of $914.7 million in 2023, designs, develops, manufactures, and markets products and systems for the marine, RV, specialty vehicle, mobile and industrial markets, as well as aftermarket channels. Navico Group products include marine electronics, sensors, and control systems, digital control and monitoring systems, instruments, fish finders, sonar, radar, trolling motors, fuel systems, batteries, power management, and electrical systems. Navico Group sells its products to aftermarket distributors and retailers as well as original equipment manufacturers. White River Marine Group, LLC, Brunswick's Engine P&A distribution businesses and Brunswick Boat Group are significant customers.

Boat Segment

The Boat segment consists of the Brunswick Boat Group (Boat Group), which manufactures and distributes recreational boats, and Business Acceleration. We believe that the Boat segment, which had net sales of $1,989.4 million during 2023, is a world leader in the manufacture and sale of pleasure boats. The Boat segment manages Brunswick's boat brands, evaluates and optimizes the Boat segment's boat portfolio, promotes recreational boating services and activities to enhance the consumer experience and dealer profitability, including through its Business Acceleration initiatives, and speeds the introduction of new technologies into boat manufacturing and design processes.

The Boat segment procures substantially all of its engines from Brunswick's Propulsion segment, and boats often include other parts and accessories supplied by the Engine P&A and Navico Group segments. The Boat Group sells its products through a global network of more than 1,300 dealers and distributors, with some operating in more than one location and some carrying more than one of our boat brands. The Boat Group's largest dealer, MarineMax, Inc., is a significant external customer which carries a number of the Boat Group's product lines and has multiple locations.

Included within the Boat segment is the Business Acceleration business, which is dedicated to developing emerging and disruptive business models, focusing on services and subscriptions, and engaging the next generation of diverse boaters. Business Acceleration businesses accounted for 8 percent of Boat segment net sales in 2023.

Business Acceleration's Freedom Boat Club (FBC) is the world's largest boat club network. FBC operates in more than 400 locations across the U.S., Canada, Australia, and Europe, and has nearly 60,000 memberships. FBC members pay an upfront initiation fee and ongoing monthly dues in exchange for gaining shared access to their local club’s diverse fleet of boats and reciprocal privileges at all other FBC locations. Business Acceleration also operates a variety of other businesses including dealer and retailer financing; retail extended warranty and insurance businesses; Boateka, a certified pre-owned boat platform; and other marine services businesses.

Financing Services

Through our Brunswick Financial Services Corporation subsidiary, we own a 49 percent interest in a joint venture, Brunswick Acceptance Company, LLC (BAC). Under the terms of the joint venture agreement (JV Agreement), BAC provides secured wholesale inventory floor plan financing to our boat and engine dealers as well as Freedom Boat Club franchisees. A subsidiary of Wells Fargo & Company owns the remaining 51 percent.

The JV Agreement contains a financial covenant that conforms to the maximum leverage ratio test in the Credit Facility described in Note 14 – Debt in the Notes to Consolidated Financial Statements. The JV Agreement contains provisions allowing for the renewal of the JV Agreement or the purchase of the other party's interest in the joint venture at the end of its term. Alternatively, either partner may terminate the JV Agreement at the end of its term. Refer to Note 8 – Financing Joint Venture in the Notes to Consolidated Financial Statements for more information about our financial services offered through BAC.

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Many dealers secure floor plan financing from BAC, and, to a lesser extent, from other third party financing companies, enabling them to stock product in advance of the peak selling season and providing stable channels for our products. Brunswick provides risk mitigation to BAC and other finance companies in the form of inventory repurchase commitments, under which we are obligated to repurchase inventory in the event of a dealer's default. This risk mitigation is reflected in our estimate of repurchase liabilities. Our business units, along with BAC, maintain active credit operations to manage this financial exposure, and we continually seek opportunities to sustain and improve the financial health of our various distribution channel partners. Refer to Note 11 – Commitments and Contingencies in the Notes to Consolidated Financial Statements for further discussion of these arrangements.

In addition to floor plan financing, Business Acceleration recently announced the launch of Brunswick Finance, a digital retail finance solution that simplifies the purchase process by leveraging a fully integrated technology platform offering end-to-end integration across the boat buying ecosystem, from applying for pre-qualification to underwriting, finalizing agreements and e-signing for loans.

Distribution

We utilize independent distributors, dealers, and retailers (Dealers) for the majority of our boat sales, sales of parts and accessories, and some sales of marine engines. We have over 19,000 active Dealers serving our business segments worldwide. Our Dealers typically carry one or more product categories and are independent companies or proprietors that range in size from small, family-owned businesses to a large, publicly traded corporation with substantial revenues and multiple locations. Some Dealers sell our products exclusively, while a majority also carry competitor and complementary products. We partner with our Dealer network to improve quality, service, distribution, and delivery of parts and accessories to enhance the boating customer's experience.
 
Besides our network of independent Dealers, we sell parts and accessories to boat builders and operate our own wholesale parts and accessories distribution companies, which are leading distributors of marine parts and accessories with a network of warehouses located throughout the markets they serve, offering same or next-day delivery to a broad array of marine service facilities and Dealers. In addition, we operate a leading boat dealer in the Southeastern U.S. with four locations selling boats and parts and accessories.

Technology and Innovation

We believe Brunswick is uniquely positioned to continue defining the future of the global marine industry. We are continuously and consistently innovating the future of recreational boating through growing service, connectivity, and alternative participation capabilities and businesses. To support our goal, we have established cross-functional and cross-business investments and initiatives, and hire leaders with strong technology experience. We continue to develop solutions to further improve boater experiences both by advancing the efficiency and capabilities of our core product lines and through our ACES strategy.

We continue to develop and refine future innovative projects through our team at the i-Jet Innovation Lab at the University of Illinois Urbana-Champaign. In 2023, Mercury Marine unveiled its Avator 7.5e electric outboard at the Consumer Electronics Show in Las Vegas and has since introduced Avator electric propulsion systems up to 110e. Mercury Marine also entered into an agreement with Jing-Jin Electric (JJE), an electrified propulsion leader in components, assemblies, and systems for global automotive applications, to collaborate on Mercury's portfolio of electric propulsion solutions. Our Boat Group introduced the new Veer boat brand, intended to support electric propulsion, and Navan by Quicksilver, which combines innovative technology with superior performance. Navico Group introduced three new Mastervolt brand larger capacity, lithium-ion deep-cycle supply batteries to provide enhanced power storage capacity in a lighter weight and smaller footprint. Navico Group's Whale brand launched Heat Air, a lightweight, space-efficient, propane-based, heating solution for recreational vehicles.

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Brunswick won numerous awards in 2023 for our groundbreaking products, including:

National Marine Manufacturers Association (NMMA) and Boating Writers International (BWI) honored our Veer boat brand with a 2023 Minneapolis Innovation Award in the fishing boat category.

Multiple NMMA Innovation Awards at the 2023 Miami International Boat Show, including for the Fathom e-Power System, Lowrance HDS Pro with Active Imaging HD and ActiveTarget 2, and the Sea Ray SLX 260 Outboard.

A record 11 Boating Industry Magazine 2023 Top Product Awards to products across our portfolio.

International Operations

Non-U.S. sales are set forth in Note 2 – Revenue Recognition and Note 5 – Segment Information in the Notes to Consolidated Financial Statements and are also included in the table below, which details our non-U.S. sales by region:
(in millions)202320222021
Europe$837.3 $904.4 $796.2 
Canada373.0 458.2 411.7 
Asia-Pacific410.0 466.0 439.0 
Rest-of-World331.3 284.4 237.4 
Total$1,951.6 $2,113.0 $1,884.3 
Total International Sales as a Percentage of Net Sales30 %31 %32 %

We transact a portion of our sales in non-U.S. markets in local currencies, while a meaningful portion of our product costs are denominated in U.S. dollars as a result of our U.S. manufacturing operations. As a result, the strengthening or weakening of the U.S. dollar affects the financial results of our non-U.S. operations.

Propulsion non-U.S. sales comprised approximately 43 percent of our non-U.S. sales in 2023. Engine P&A non-U.S. sales comprised approximately 18 percent of our non-U.S. sales in 2023. Navico Group non-U.S. sales comprised approximately 17 percent of our non-U.S. sales in 2023. Boat non-U.S. sales comprised approximately 22 percent of our non-U.S. sales in 2023.

Raw Materials and Supplies

We purchase a wide variety of raw materials from our supplier base, including commodities such as aluminum, copper, resins, oil, and steel, as well as product parts and components, such as boat windshields. The prices for these raw materials, parts, and components fluctuate depending on market conditions and inflation. In 2023, our operations continued to experience intermittent supply chain uncertainty and disruptions. Our global procurement operations constantly strive to obtain adequate supplies, better leverage purchasing power across our divisions, and improve cost efficiencies. We mitigate commodity price risk on certain raw material purchases by entering into fixed priced contracts or derivatives to reduce our exposure related to changes in commodity prices.

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Intellectual Property

We own intellectual property, including patents, trademarks, and trade secrets, related to our current and future products and production methods, in the U.S. and certain other countries. By law, patents have a limited term, so our patents expire over time. Our trademarks and trade secrets have potentially indefinite lives. We consider our collection of intellectual property to be a valuable asset that is important to our competitive position. As of December 31, 2023, we own more than:

1,100 active U.S. patents;
450 pending U.S. patent applications;
650 active foreign patents;
270 pending foreign patent applications;
370 U.S. registered trademarks; and
1,800 foreign registered trademarks.

We invest substantial resources in acquiring, maintaining, and defending our intellectual property rights, and we expect to continue to do so. When feasible, we seek patent protection on products and production methods that are under development, and in areas of possible future development. We require employees who will develop intellectual property, or who have access to intellectual property, to sign confidentiality and intellectual property assignment agreements. We invest in physical and IT security programs to prevent theft and inadvertent disclosure of trade secrets. In addition to "Brunswick," our primary trademarks include Mercury Marine, Boston Whaler, Lund, and Sea Ray.

Market and Competitive Conditions

Demand for our products is typically seasonal, with sales generally highest in the second quarter of the calendar year. Strong competition exists in each of our product groups, but no single enterprise competes with us in all product groups. In each product area, competitors range in size from large, highly-diversified companies to small, single-product businesses. We also indirectly compete with businesses that offer alternative leisure products or activities. The following summarizes our competitive position in each segment:
 
Propulsion. The marine engine market is highly competitive among several major international companies, such as outboard engine manufacturers based in Japan and several smaller companies. Our competitive advantage is a function of product features, technology, quality and durability, breadth of product line, performance, distribution and manufacturing capabilities, along with effective promotion, after-sales service, and distribution.

Engine P&A. The marine parts and accessories market is highly competitive and fragmented. Our competitive advantage in this market includes our product breadth and quality, proprietary parts and technology, global distribution network, extensive portfolio of recognized brands, sales team, delivery timing, and service.

Navico Group. Navico Group competes in the marine, RV, and specialty vehicle parts and accessories markets, which are also highly competitive and fragmented. Our competitive advantage in these markets includes our extensive portfolio of recognized brands, proprietary technology, integrated solutions, product quality, sales team, and service offering.
 
Boat. Although there are many boat manufacturers, few manufacturers compete in the breadth of categories or geographies in which our Boat segment competes. We compete on the bases of product features, technology, quality, brand strength, dealer service, pricing, performance, value, durability, and styling, along with effective promotion and distribution. In addition, FBC competes on number and quality of locations, pricing, and service.

Climate Change and Environmental Compliance

Our customers rely on clean air and water to enjoy our products and services, and we are committed to practices and policies designed to help protect the environment and the well-being of our employees, customers, and the public. We seek to comply with applicable environmental regulatory and industry standards across all our facilities and in the products we manufacture. We strive continually to improve energy efficiency, minimize the carbon emissions of our operations, supply chain, and product portfolio, and deliver more cost-effective and lower carbon technology products and solutions to our customers. These environmental sustainability efforts are integrated into our business strategy and operations.
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Some of our recent sustainability projects and accomplishments include:

Product ManagementEnergy ManagementWaste ReductionWater ReductionConservation
Mercury Marine expanded the Avator™ electric outboard motor line to include the 20e and 35e, and announced plans for the 75e and 110e.Boat Group’s Reynosa, Mexico facility operationalized a solar installation and Mercury Marine announced two small-scale solar installations in Australia.Land 'N' Sea attained 90% waste to landfill reduction at all 13 of its distribution facilities.Mercury's Suzhou, China manufacturing facility converted to a powder paint system, which is expected to reduce water consumption by 8 million gallons per year.Lowrance partnered with OzFish, an Australian project to attract new shellfish growth, improve water cleanliness, and increase fish populations.
Mercury Marine acquired Fliteboard, a battery-powered e-foil personal watercraft, further bolstering its commitment to electrification.Mercury Marine’s Brownsburg distribution facility received LEED (Leadership in Energy and Environmental Design) Silver certification. Navico Group attained its first 90% waste-to-landfill reduction at its Lowell, MI facility.System improvements at Mercury Marine’s Fond du Lac campus are expected to reduce use of 6 million gallons of water per year.Simrad partnered on fish tagging programs led by Gray Fishtag Research and the Scientific Angler Tagging Tour.
RELiON launched the RB36V40, a 36V 40Ah marine lithium battery with 20% more energy capacity than its series equivalent.Boat Group introduced a new energy audit program and completed audits at seven primary manufacturing locations.Boat Group’s New York Mills, MN facility converted to a reusable racking system for windshields.Boat Group’s Reynosa, Mexico facility introduced an osmosis wastewater recovery system to reduce water consumption by an estimated 10% per year.Teams of Brunswick employees around the world completed more than 40 conservation-related community service events.
Boat Group’s new Navan by Quicksilver features a twin step hull which reduces drag, making the boats faster and more fuel efficient.LED lighting upgrades completed at 12 manufacturing facilities.Boat Group's Tellico, TN facility began a recycling program for wood pallets and plastic parts skeletons.The Brunswick Foundation made grants to eight organizations dedicated to marine conservation.

In recognition of its sustainability efforts, Brunswick was listed among Newsweek’s America's Most Responsible Companies for 2023 for the fourth consecutive year, Sustainalytics' “Industry Top Rated” for 2023, Newsweek's inaugural list of America's Greenest Companies and USA Today and Statista's inaugural Climate Leaders List, which recognizes companies' efforts to reduce Scope 1 and Scope 2 greenhouse gas emissions. Additionally, Mercury Marine received Green Masters status from the Wisconsin Sustainable Business Council for the 13th consecutive year.

For more information on our sustainability strategy, programming, data, and goals, we refer you to our annual Sustainability Report (which is not incorporated by reference herein), available on our website at https://www.brunswick.com/corporate-responsibility/sustainability.

We anticipate that increased global regulation relating to climate change, such as climate disclosure requirements or product emissions limitations, will require us to comply or potentially face market access limitations or other penalties, including fines. Our manufacturing operations and products are subject to numerous and increasingly strict federal, state, local, and foreign environmental laws and regulations. As we evolve our product electrification strategy, we are subject to other regulations and requirements relating to the transportation, storage, handling, and use of batteries and the components used in battery manufacturing. Our products are subject to increasingly stringent regulations regarding chemical and material composition, and we are subject to extended producer responsibility laws and regulations requiring manufacturers to be responsible for collection, recovery, and recycling of wastes from certain products. Compliance with these laws and regulations has not had a material impact on our capital expenditures, earnings, financial condition, or competitive position. There can be no assurance, however, that current or future environmental laws and regulations will not impose costly requirements upon us. Any failure to comply with applicable environmental laws, regulations, and contractual obligations could result in fines, suspension of production, the need to alter manufacturing processes, and legal liability, and could negatively affect our competitive position.

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For further information, refer to Section 1A, Risk Factors, for a discussion of risks related to environmental compliance and to Note 11 – Commitments and Contingencies in the Notes to Consolidated Financial Statements for a description of certain environmental proceedings.

Human Capital Resources

Brunswick is dedicated to creating an inspiring and inclusive work environment that attracts, develops, and retains top talent. This environment unlocks our employees’ potential to continue transforming the marine industry.

Employee Information

As of December 31, 2023, we employed approximately 17,300 employees, 96 percent of whom were full-time. Our employee base is approximately 65 percent hourly and 35 percent salaried. Temporary and contingent employees (including interns and co-ops) and contractors accounted for approximately 2,300 additional workers.

EmploymentPieCharts_2024.jpg

Approximately 2,500 of our U.S. employees belong to labor unions and approximately 1,000 additional employees are members of international unions or work councils. We believe that the relationships among our employees, the unions or work councils, and the Company remain stable. Mercury Marine and its largest union, the International Association of Machinists and Aerospace Workers (IAM) Lodge 1947, negotiated a new collective bargaining agreement in 2023, which will remain in place through September 30, 2028. During 2023, we experienced no union-related work stoppages.

Diversity and Inclusion

We view diversity, equity, and inclusion (DEI) as a strategic business initiative. We consider DEI to be a competitive advantage and have therefore focused our efforts on expanding diverse representation throughout our global workforce and reinforcing a culture of belonging at every worksite.

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A cross-functional/divisional core team leads our enterprise-wide initiative, TIDE (Together: Inclusion, Diversity and Equity), to integrate DEI in our business processes and behaviors.

We maintain five employee resource groups (ERGs): Women on Water, Brunswick Black Professionals Network, Asians and Pacific Islanders in Marine, Organization for Hispanic/Latinos for Leadership and Advancement, and Brunswick Veterans Network. These ERGs are self-organized, Company-supported groups focused on cultivating a sense of belonging and inclusion at Brunswick. Each ERG strives to support employees by deepening engagement, unifying and connecting communities, and fostering professional and personal growth.

Through TIDE and our ERGs, we accomplished the following in 2023:

Grew our ERGs to over 1,000 participants, up 100 percent over 2022.
Conducted 18 experiential activities, including commemorative events and cultural programming.
Held 10 professional and personal development events.
Introduced three new inclusion programs including the United People of Brunswick experience, Inspiring Inclusion Award and the Inclusivity & You learning program.
Developed three new pipeline programs to support diversity in early career hiring for technical talent.

We support increasing representation of diverse populations at all levels of the organization. Women make up one-third of our Executive Officers and one-third of our Directors are female. Women comprise approximately 29 percent of our total global workforce, and racially or ethnically diverse employees make up approximately 25 percent of our U.S. workforce.

We are proud to note that Forbes named Brunswick to its 2023 lists of World’s Best Employers, America's Best Employers for Veterans, and America’s Best Employers for Women. U.S. News and World Report named us one of the Best Companies to Work For in 2023, and Brunswick finished in the top 10 of all companies on both its Best Companies for Work-Life Balance and Best Companies for Quality of Pay lists. Boating Industry Magazine named four of our exceptional female colleagues as “Women Making Waves" and Manufacturing Institute (MI), the workforce development and education partner of the National Association of Manufacturers, named Brunswick Boat Group President Aine Denari as a 2023 Women MAKE America Awards Honoree.

Health and Safety

Employee health and safety are top priorities. We proactively identify and address potential safety risks in our business and operations. Our goal is to achieve zero work-related incidents and injuries. We maintain a Safety Management System (SMS) to formally address safety risks throughout the workplace and use our SMS to manage potential work-related hazards that pose a risk of high consequence of potential injury. Implementing processes and systems that meet SMS criteria is designed to result in less frequent and less severe work-related incidents and injuries.

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The Company's recordable and lost-time incident rates from 2021 to 2023, recorded as of December 31, are as follows:
Safety.jpg
Our global recordable incident rate is considerably lower than the benchmarks of the U.S. Bureau of Labor Statistics for similar businesses and operations. Additionally, we reported no fatalities in 2023.

Compensation and Benefits

Our compensation philosophy is to encourage performance that creates sustainable, long-term shareholder value; motivates achievement of financial and strategic goals; attracts, retains, and motivates talent; and reinforces our pay-for-performance culture. We are committed, and strive to ensure, that employees are paid equitably for their work, regardless of their race or gender.

We offer market-competitive salaries and wages including incentive bonus opportunities for managers and senior individual contributors, an equity incentive program for director-level positions and above, and a discretionary retirement contribution dependent on the Company’s performance.

Our range of benefits (varying by country) includes:

Paid time off (vacation, parental leave, sick time, and disability programs);
Healthcare coverage (medical, dental, prescription, vision, and hearing);
Financial savings and investment opportunities (flexible spending accounts, health savings accounts, retirement, employee stock purchase, and credit monitoring programs);
A suite of life, accident, and critical illness insurance programs;
Wellness programs; and
Educational assistance programs.

Employee Learning and Development

We support career advancement and create a rewarding environment for employees to learn, grow, and perform at their best. We provide opportunities for continuous learning and development, such as:

Workday Learning, a learning platform that offers courses in leadership and innovation, effective communication, and strategic thinking;
Rotational leadership programs to develop Brunswick’s future business and financial leaders;
Women’s development and mentoring programs, which enhance our succession bench strength and champion female leaders of the future; and
Wide-ranging hands-on learning and development programs to enhance and grow our critical functional skills.

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We recognize that we operate in competitive marketplaces when it comes to finding top talent, particularly in technical fields. We strive to offer our employees career-specific tools, skilled apprenticeship programs, and robust on-the-job training opportunities. Our technical career tracks provide development for engineers and technology personnel who will shape our future ACES initiatives. We also incentivize innovation through a long-established inventor recognition award program.

Part of employee development includes annual performance feedback and management for all employees, for which we have a standard process that includes opportunities for employee engagement at every stage. We also maintain succession plans that foster internal promotion to key positions.

We believe our strong compliance culture plays a central role in our success. The Integrity Playbook, Brunswick’s code of conduct, serves as the foundation of our Ethics Program. In 2023, 97 percent of our active global salaried population completed our annual code of conduct training.

Employee Engagement

During 2023, Brunswick again completed a global employee engagement survey, in which approximately 85 percent of employees participated, an increase of three percentage points compared to 2022. Insights from the survey will be used to develop action plans at the manager, facility, division, and corporate level to further enhance employee satisfaction and positive connections to Brunswick.

Please see our annual Sustainability Report (which is not incorporated by reference herein), available on our website, for additional information about our human capital management programs.

Available Information

Brunswick maintains an Internet website at http://www.brunswick.com that includes links to our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports, and Proxy Statements (SEC Filings). The SEC Filings are available without charge as soon as reasonably practicable following the time that they are filed with, or furnished to, the SEC. Shareholders and other interested parties may request email notification of the posting of these documents through the Investors section of our website. Brunswick’s SEC Filings are also available on the SEC’s website at http://www.sec.gov.

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Item 1A.  Risk Factors

Our operations and financial results are subject to certain risks and uncertainties, including those described below, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock.

RISKS RELATED TO ECONOMIC AND MARKET CONDITIONS

Worldwide economic conditions significantly affect our industries and businesses, and economic decline can materially impact our financial results.

In times of economic uncertainty or recession, consumers tend to have less discretionary income and defer significant spending on non-essential items, which may adversely affect our financial performance. Economic uncertainty caused by rising interest rates, inflation, international conflicts, and the macroeconomic environment may lead to unfavorable business outcomes. We continue to enhance our portfolio with new and/or expanded technologies, business models, services, and solutions that are less susceptible to economic cycles, but a portion of our business remains cyclical and sensitive to consumer spending on new engines, boats, and associated parts and accessories.

Deterioration in general economic conditions that in turn diminishes consumer confidence or discretionary income may reduce our sales, or we may decide to lower pricing for our products, thus adversely affecting our financial results, including increasing the potential for future impairment charges. Further, most of our products are recreational, and consumers’ limited discretionary income may be diverted to other activities that occupy their time, such as other forms of recreational, religious, cultural, or community activities. We cannot predict the strength of global economies or the timing of economic recoveries, either worldwide or in the specific markets in which we compete.

Changes in currency exchange rates can adversely affect our results.

Some of our sales are denominated in a currency other than the U.S. dollar. Consequently, a strong U.S. dollar may adversely affect reported revenues and our profitability. We have hedging programs in place to reduce our risk to currency fluctuations; however, we cannot hedge against all currency risks, especially over the long term. We maintain a portion of our cost structure in currencies other than the U.S. dollar, which partially mitigates the impact of a strengthening U.S. dollar. This includes boats manufactured in Europe and Canada, and smaller outboard engines either manufactured in China or purchased from our joint venture in Japan. We also continue to evaluate the supply chain and cost structure for opportunities to further mitigate foreign currency risks.

We sell products manufactured in the U.S. into certain international markets, including Europe, Canada, Latin America and Asia-Pacific in U.S. dollars. Demand for our products in these markets may be diminished by a strengthening U.S. dollar, or we may need to lower prices to remain competitive. Some of our competitors with cost positions based outside the U.S., including Asian-based outboard engine manufacturers and European-based large fiberglass boat manufacturers, may have an improved cost position due to a strengthening U.S. dollar, which could result in pricing pressures on our products. Although these factors have existed for several years, we do not believe they have had a material adverse effect on our competitive position.

Fiscal and monetary policy changes may negatively impact worldwide economic and credit conditions and adversely affect our industries, businesses, and financial condition.

Fiscal and monetary policy could have a material adverse impact on worldwide economic conditions, the financial markets, and availability of credit and, consequently, may negatively affect our industries, businesses, and overall financial condition. Customers often finance purchases of our products, particularly boats, and as interest rates rise, the cost of financing the purchase also increases. If credit conditions worsen and adversely affect the ability of customers to finance potential purchases at acceptable terms and interest rates, it could result in a decrease in sales or delay improvement in sales.

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Adverse capital market conditions could have a negative impact on our financial results.

We may rely on short-term capital markets to meet our working capital requirements, fund capital expenditures or pay dividends, and we maintain short-term borrowing facilities that can be used to meet these capital requirements. In addition, over the long term, we may determine that it is necessary to access the capital markets to refinance existing long-term indebtedness or to raise capital for other initiatives. Adverse economic and capital market conditions, market volatility, and regulatory uncertainty could negatively affect our ability to access capital markets or increase the cost to do so, which could adversely impact our business, financial results, and competitive position.

Our profitability may suffer as a result of competitive pricing and other pressures.

The introduction of lower-priced alternative products or services by other companies can hurt our competitive position in all of our businesses. We are constantly subject to competitive pressures in which predominantly international manufacturers may pursue a strategy of aggressive pricing, particularly during periods when their local currency weakens versus the U.S. dollar. Such pricing pressure may limit our ability to increase prices for our products in response to raw material and other cost increases and negatively affect our profit margins.

In addition, our independent boat builder customers may react negatively to potential competition for their products from Brunswick's own boat brands, which can lead them to purchase marine engines, boat systems, parts and accessories, and marine engine supplies from competing manufacturers and may negatively affect demand for our products.

Higher energy and fuel costs can affect our results.

Higher energy and fuel costs increase operating expenses at our manufacturing facilities and the cost of shipping products to customers. In addition, increases in energy costs can adversely affect the pricing and availability of petroleum-based raw materials such as resins and foam that are used in many of our marine products. Higher fuel prices may also have an adverse effect on demand for our parts and accessories businesses, as they increase the cost of boat ownership and possibly affect product use.

RISKS RELATED TO OUR BUSINESS AND OPERATIONS

Successfully managing our manufacturing operations is critical to our operating and financial results.

Over the past several years, we have made strategic capital investments in capacity expansion activities to successfully capture growth opportunities and enhance product offerings, including expansions at our Fond du Lac, Wisconsin and Ensenada, Mexico facilities. We also continue to implement manufacturing efficiency enhancements that are important to our success. Conversely, we may make decisions to decrease production at existing facilities or reduce our manufacturing footprint in accordance with our business strategy. We must carefully manage these capital improvement projects, expansions, efficiency enhancements, and any consolidation or decrease in capacity utilization to ensure the projects meet cost targets, comply with applicable environmental, safety, and other regulations, uphold high-quality workmanship, and meet our business goals.

Moving production to a different plant, expanding capacity at an existing facility, and decreasing or ceasing production at a facility involves risks, including difficulties initiating production within the cost and timeframe estimated, supplying product to customers when expected, integrating new products, and attracting and retaining skilled workers. If we fail to meet these objectives, it could adversely affect our ability to meet customer demand for products and increase the cost of production versus projections, both of which could result in a significant adverse impact on operating and financial results. Additionally, plant consolidation or expansion can result in manufacturing inefficiencies, additional expenses, including higher wages or severance costs, and cost inefficiencies, which could negatively impact financial results.

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Loss of key customers could harm our business.

In each segment, we have important relationships with key customers, including White River Marine Group, LLC for the Propulsion and Navico Group segments and MarineMax, Inc. for the Boat segment. From time to time, contracts with these customers come up for renewal. We cannot be certain we will renew such contracts, or renew them on favorable terms. If we lose a key customer, or a significant portion of its business, we could be adversely affected. In addition, certain customers could try to negotiate more favorable pricing of our products, which could depress earnings. In an effort to mitigate the risk associated with reliance on key customer accounts, we continually monitor these relationships and maintain a complete and competitive product lineup.

A material portion of our revenue is derived from international sources, which creates additional uncertainty.

We intend to continue to expand our international operations and customer base as part of our growth strategy. Sales outside the United States, especially in emerging markets, are subject to various risks, including government embargoes or foreign trade restrictions, foreign currency effects, tariffs, customs duties, inflation, difficulties in enforcing agreements and collecting receivables through foreign legal systems, compliance with international laws, treaties, and regulations, changes in regulatory environments, disruptions in distribution, dependence on foreign personnel and unions, economic and social instability, and public health crises. In addition, there may be tax inefficiencies in repatriating cash from non-U.S. subsidiaries, or changes to tax laws that affect cash repatriation.  

Instability, including, but not limited to, political events, civil unrest, and an increase in criminal activity in locations where we maintain a significant presence could adversely impact our manufacturing and business operations. Decreased stability poses a risk of business interruption and delays in shipments of materials, components, and finished goods, as well as a risk of decreased local retail demand for our products.

In addition, political and economic uncertainty and shifts pose risks of volatility in other global markets, which could affect our operations and financial results. Changes in U.S. policy regarding foreign trade or manufacturing may create negative sentiment about the U.S. among non-U.S. customers, employees, or prospective employees, which could adversely affect our business, sales, hiring, and employee retention. If we continue to expand our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other risks, which could materially impact international operations or the business as a whole.

Our financial results may be adversely affected by our third party suppliers' increased costs or inability to meet required production levels due to increased demand or disruption of supply of raw materials, parts, and product components.

We rely on third parties to supply raw materials used in the manufacturing process, including oil, aluminum, copper, steel, and resins, as well as product parts and components. The prices for these raw materials, parts, and components fluctuate depending on market conditions and, in some instances, commodity prices or trade policies, including tariffs. Substantial increases in the prices of raw materials, parts, and components would increase our operating costs, and could reduce our profitability if we are unable to recoup the increased costs through higher product prices or improved operating efficiencies. Similarly, if a critical supplier were to close its operations, cease manufacturing, or otherwise fail to deliver an essential component necessary to our manufacturing operations, that could detrimentally affect our ability to manufacture and sell our products, resulting in an interruption in business operations and/or a loss of sales. 

In addition, some components used in our manufacturing processes, including certain engine components, furniture, upholstery, and boat windshields, are available from a sole supplier or a limited number of suppliers. Operational and financial difficulties that these or other suppliers may face in the future could adversely affect their ability to supply us with the parts and components we need, which could significantly disrupt our operations. It may be difficult to find a replacement supplier for a limited or sole source raw material, part, or component without significant delay or on commercially reasonable terms. In addition, an uncorrected defect or supplier's variation in a raw material, part, or component, either unknown to us or incompatible with our manufacturing process, could jeopardize our ability to manufacture products.  

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Some additional supply risks that could disrupt our operations, impair our ability to deliver products to customers, and negatively affect our financial results include:

financial pressures on our suppliers due to a weakening economy or unfavorable conditions in other end markets;
supplier manufacturing constraints and investment requirements;
deterioration of our relationships with suppliers;
events such as natural disasters, power outages, or labor strikes;
disruption at major global ports and shipping hubs; or
an outbreak of disease or facility closures due to COVID-19 or a similar public health threat.

These risks are exacerbated in the case of single-source suppliers, and the exclusive supplier of a key component could potentially exert significant bargaining power over price, quality, warranty claims, or other terms.

We experienced supply shortages and increases in costs to certain materials in 2023. We continue to address these issues by identifying alternative suppliers for key materials and components, working to secure adequate inventories of critical supplies, and continually monitoring the capabilities of our supplier base. In the future, however, we may experience shortages, delayed delivery, and/or increased prices for key materials, parts, and supplies that are essential to our manufacturing operations.

Adverse weather conditions and climate change events can have a negative effect on revenues.

Changes in seasonal weather conditions can have a significant effect on our operating and financial results. Sales of our marine products are typically stronger just before and during spring and summer, and favorable weather during these months generally has a positive effect on consumer demand. Conversely, unseasonably cool weather, excessive rainfall, or drought conditions during these periods can reduce or change the timing of demand. Climate change could have an impact on longer-term natural weather trends, resulting in environmental changes including, but not limited to, increases in severe weather; changing sea levels; changes in sea, land, and air temperatures; poor water conditions; and reduced access to water, which could disrupt or negatively affect our business.

Catastrophic events, including natural and environmental disasters, acts of terrorism, or civil unrest, could have a negative effect on our operations and financial results.

Hurricanes, floods, earthquakes, storms, and catastrophic natural or environmental disasters, as well as acts of terrorism or civil unrest, could disrupt our distribution channel, operations, or supply chain and decrease consumer demand. If a catastrophic event takes place in one of our major markets, our sales could be diminished or our assets could be damaged. Additionally, if such an event occurs near our business locations, manufacturing facilities, or key supplier facilities, business operations and/or operating systems could be interrupted. We could be uniquely affected by weather-related catastrophic events, the severity of which may increase as a result of climate change, due to the location of certain of our boat facilities in coastal Florida, the size of the manufacturing operation in Fond du Lac, Wisconsin, and Freedom Boat Club locations on waterfronts.

Our ability to remain competitive depends on successfully introducing new products, experiences, and services that meet customer expectations.

We believe that our customers look for and expect quality, innovation, and advanced features when evaluating and making purchasing decisions about products and services in the marketplace. Our ability to remain competitive and meet our growth objectives may be adversely affected by difficulties or delays in product development, such as an inability to develop viable new products or customer solutions, gain market acceptance of new products, generate sufficient capital to fund new product development, or obtain adequate intellectual property protection for new products. To meet ever-changing consumer demands, timing of market entry, pricing of new products, and satisfying customers are all critical. As a result, we may not be able to introduce new products that are necessary to remain competitive in all markets that we serve. Furthermore, we must continue to meet or exceed customers' expectations regarding product quality, experiences, and after-sales service or our operating results could suffer.

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Our ability to meet demand in a rapidly changing environment may adversely affect our results of operations.

Although we have remained focused on our strategic priorities, our businesses may experience difficulty in meeting demand, particularly in rapidly changing economic conditions. We may not be able to recruit or retain sufficient skilled labor or our suppliers may not be able to deliver sufficient quantities of parts and components for us to match production with forecasted demand. Consumers may pursue other recreational activities if our products are not readily available, consumers may purchase from competitors, or our fixed costs may grow, all of which could adversely impact our results of operations.

We have a fixed cost base that can affect our profitability if demand decreases.

The fixed cost levels of operating production facilities can put pressure on profit margins when sales and production decline. We have maintained discipline over our fixed cost base, and improvements in gross margin can help mitigate the risks related to a fixed cost base. However, our profitability is dependent, in part, on our ability to absorb fixed costs over an increasing number of products sold and shipped. Decreased demand or the need to reduce inventories can lower our production levels and impact our ability to absorb fixed costs, consequently materially affecting our results.

Actual or potential public health emergencies, epidemics, or pandemics, such as COVID-19, could have a material adverse effect on our business, results of operations, or financial condition.

The impact of actual or potential public health emergencies, epidemics, or pandemics on the Company, our suppliers, dealers, and customers, and the general economy could be wide-ranging and significant, depending on the nature of the issue, governmental actions taken in response, and the public reaction. The impact of such events could include employee illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in economic activity, and supply chain interruptions, which could cause significant disruptions to global economies and financial markets. In addition, these events could result in future significant volatility in demand, positively or negatively, for one or more of our products.

The COVID-19 pandemic resulted in disruption, uncertainty, and volatility in the global financial and credit markets, and similar future events could do the same. Such volatility could impact our access to capital resources and liquidity in the future, including making credit difficult to obtain or only available on less favorable terms. Impact on our operations could also be material, affecting employee absenteeism rates, facility closures, or adverse effects on customers or suppliers. These impacts could have a negative effect on our business, financial condition, and results of operations.

Some of our operations are conducted by joint ventures that are not operated solely for our benefit.

We share ownership and management responsibilities with jointly owned companies such as BAC and Tohatsu Marine Corporation. These joint ventures may not have the same goals, strategies, priorities, or resources as we do because they are intended to be operated for the benefit of all co-owners, rather than for our exclusive benefit. If our interests are not aligned, it could negatively impact our sales or financial results.

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RISKS RELATED TO OUR STRATEGIC PLANS

Failure to execute our strategic plan and growth initiatives could have a material adverse effect on our business and financial condition.

Our ability to continue generating strong cash flow and profits depends partly on the sustained successful execution of our strategic plan and growth initiatives, including optimizing our business and product portfolio, continuing to successfully integrate acquisitions, improving operating efficiency, and expanding into new adjacent markets. To address risks associated with our plan and growth initiatives, we have established processes to regularly review, manage, and modify our plans, and we believe we have appropriate oversight to monitor initiatives and their impact. However, our strategic plan and growth initiatives may require significant investment and management attention, which could result in the diversion of these resources from the core business and other business issues and opportunities. Additionally, any strategic plan is subject to certain risks, including market conditions, customer acceptance, competition, the ability to manufacture products on schedule and to specification, the supply chain, and/or the ability to attract and retain qualified management and other personnel. There is no assurance that we will be able to develop and successfully implement our strategic plan and growth initiatives in a manner that fully achieves our strategic objectives.

Our business and operations are dependent on the expertise of our key contributors, our successful implementation of succession plans, and our ability to attract and retain management employees and skilled labor.

The talents and efforts of our employees, particularly key managers, are vital to our success. Our management team has significant industry experience and would be difficult to replace. We may be unable to retain them or to attract other highly qualified employees. Failure to hire, develop, and retain highly qualified and diverse employee talent and to develop and implement an adequate succession plan for the management team could disrupt our operations and adversely affect our business and our future success. We perform an annual review of management succession plans with the Board of Directors, including reviewing executive officer and other important positions to substantially mitigate the risk associated with key contributor transitions, but we cannot ensure that all transitions will be implemented successfully.

Our ability to continue to execute our growth strategy could potentially be adversely affected by the effectiveness of organizational changes. Any disruption or uncertainty resulting from such changes could have a material adverse impact on our business, results of operations, and financial condition. 

Much of our future success depends on, among other factors, our ability to attract and retain skilled labor. If we are not successful in these efforts, we may be unable to meet our operating goals and plans, which may impact our financial results. We continually invest in automation and improve our efficiency, but availability and retention of skilled hourly workers remains critical to our operations. In order to manage this risk, we regularly monitor and make improvements to wages and benefit programs, as well as develop and improve recruiting, training, and safety programs to attract and retain an experienced and skilled workforce.

The inability to successfully integrate acquisitions could negatively impact financial results.

Our strategic acquisitions pose risks, such as our ability to project and evaluate market demand; maximize potential synergies and cost savings; make accurate accounting estimates; and achieve anticipated business objectives. Acquisitions present integration risks, including:

disruptions in core, adjacent, or acquired businesses that could make it more difficult to maintain business and operational relationships, including customer and supplier relationships;
the possibility that the expected synergies and value creation will not be realized or will not be realized within the expected time period;
the possibility that we will incur unexpected costs and liabilities;
diversion of management attention; and
difficulties recruiting and retaining employees.

If we fail to timely and successfully integrate acquired businesses into existing operations, we may see higher costs, lost sales, or otherwise diminished earnings and financial results.

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There can be no assurance that strategic divestitures or restructurings will provide business benefits.

As part of our strategy, we continuously evaluate our portfolio of businesses to further maximize shareholder value. We have previously, and may in the future, make changes to our portfolio which may be material. Divestitures involve risks, including difficulties in the separation of operations, services, products, and personnel, disruption in our operations or businesses, finding a suitable purchaser, the diversion of management's attention from our other businesses, the potential loss of key employees, adverse effects on relationships with our dealer or supplier partners or their businesses, the erosion of employee morale or customer confidence, and the retention of contingent liabilities related to the divested business. If we do not successfully manage the risks associated with divestitures, our business, financial condition, and results of operations could be adversely affected as the potential strategic benefits may not be realized or may take longer to realize than expected.

An inability to identify and complete targeted acquisitions could negatively impact financial results.

Our growth initiatives include making strategic acquisitions when appropriate, which depend on the availability of suitable targets at acceptable terms and our ability to complete the transactions. In managing our acquisition strategy, we conduct rigorous due diligence, involve various functions, and continually review target acquisitions, all of which we believe mitigates some of our acquisition risks. However, we cannot assure that suitable acquisitions will be identified or consummated or that, if consummated, they will be successful. Acquisitions include a number of risks, including our ability to project and evaluate market demand, identify and realize potential synergies and cost savings, and make accurate financial forecasts, as well as diversion of management attention during the pursuit of acquisitions. Uncertainties exist in assessing the value, risks, profitability, and liabilities associated with certain businesses or assets, negotiating acceptable terms, obtaining financing on acceptable terms, and receiving any necessary regulatory approvals. As we continue to grow, in part, through acquisitions, our success depends on our ability to anticipate and effectively manage these risks. Our failure to successfully do so could have a material adverse effect on our financial condition and results of operations.

RISKS RELATED TO OUR DEALERS, DISTRIBUTORS, AND FRANCHISEES

Our financial results could be adversely affected if we are unable to maintain effective distribution.

We rely on third-party dealers and distributors to sell most of our products. Maintaining a reliable network of dealers is essential to our success. We face competition from other manufacturers in attracting and retaining distributors and independent boat dealers. A significant deterioration in the number or effectiveness of our dealers and distributors could have a material adverse effect on our financial results.

Although at present we believe dealer health to be generally favorable, weakening demand for marine products could hurt our dealers’ financial performance. In particular, reduced cash flow from decreases in sales and tightening credit markets could impair dealers' ability to fund operations. Inability to fund operations can force dealers to cease business, and we may be unable to obtain alternate distribution in the vacated market. An inability to obtain alternate distribution could unfavorably affect our net sales through reduced market presence. If economic conditions deteriorate, we anticipate that dealer failures or voluntary market exits would increase, especially if overall retail demand materially declines. 

Dealer or distributor inability to secure adequate access to capital could adversely affect our sales.

Our dealers require adequate liquidity to finance their operations, including purchasing our products. Dealers are subject to numerous risks and uncertainties that could unfavorably affect their liquidity positions, including, among other things, continued access to adequate financing sources on a timely basis on reasonable terms. These financing sources are vital to our ability to sell products through our distribution network, particularly to boat and engine dealers. Entities affiliated with Wells Fargo & Company, including BAC, our 49 percent owned joint venture, finance a significant portion of our boat and engine sales to dealers through floor plan financing to marine dealers.

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Many factors continue to influence the availability and terms of financing that our dealer floor plan financing providers offer, including:

their ability to access certain capital markets, such as the securitization and the commercial paper markets, and to fund their operations in a cost effective manner;
the performance of their overall credit portfolios;
their willingness to accept the risks associated with lending to marine dealers;
the overall creditworthiness of those dealers; and
the overall aging and level of pipeline inventories. 

Our sales could be adversely affected if financing terms change unfavorably or if BAC were to be terminated. This could require dealers to find alternative sources of financing, including our direct financing to dealers, which could require additional capital to fund the associated receivables.

Inventory reductions by major dealers, retailers, and independent boat builders could adversely affect our financial results.

If demand for our products declines or if new product introductions are expected to replace existing products, our dealers, retailers, and other distributors could decide to reduce the number of units they hold. These actions could result in wholesale sales reductions in excess of retail sales reductions and would likely result in lower production levels of certain products, potentially causing lower rates of absorption of fixed costs in our manufacturing facilities and lower margins. While we have processes in place to help manage dealer inventories at appropriate levels, potential inventory reductions remain a risk to our future sales and results of operations.

We may be required to repurchase inventory or accounts of certain dealers.

We have agreements with certain third-party finance companies to provide financing to our customers, enabling them to purchase our products. In connection with these agreements, we may either have obligations to repurchase our products from the finance company or have recourse obligations. These obligations may be triggered if our dealers default on their payment or other obligations to the finance companies.

Our maximum contingent obligation to repurchase inventory and our maximum contingent recourse obligations on customer receivables are less than the total balances of dealer financings outstanding under these programs, because our obligations under certain of these arrangements are subject to caps or are limited based on the age of product. Our risk related to these arrangements is partially mitigated by the proceeds we receive on the resale of repurchased product to other dealers, or by recoveries on receivables purchased under the recourse obligations.

Our inventory repurchase obligations relate mainly to the inventory floor plan credit facilities of our boat and engine dealers. Our actual historical repurchase experience related to these arrangements has been substantially less than our maximum contractual obligations. If dealers default on their obligations, file for bankruptcy, or cease operations, we could incur losses associated with the repurchase of our products. In addition, our net sales and earnings may be unfavorably affected due to reduced market coverage and an associated decline in sales.

Future declines in marine industry demand could cause an increase in repurchase activity, or could require us to incur losses in excess of established reserves. In addition, our cash flow and loss experience could be adversely affected if repurchased inventory is not successfully distributed to other dealers in a timely manner, or if the recovery rate on the resale of the product declines. The finance companies could require changes in repurchase or recourse terms that would result in an increase in our contractual contingent obligations.

The franchise business model of Freedom Boat Club presents risks.

Our franchisees are an integral part of our Freedom Boat Club business and its growth strategies. We may be unable to successfully implement the growth strategies if our franchisees do not participate in the implementation of those strategies or if we are unable to attract a sufficient number of qualified franchisees.
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While our franchisees are required to comply with our franchise and related agreements, our franchisees are independent and manage their boat clubs as independent businesses, responsible for all day-to-day operations of their boat clubs. If these franchisees fail to maintain or act in accordance with applicable brand standards; experience service, safety, or other operational problems, including any data breach involving club member information; or project a brand image inconsistent with ours, our image and reputation could suffer, which in turn could hurt our business and operating results.

RISKS RELATED TO CYBERSECURITY AND TECHNOLOGY

Our business operations could be negatively impacted by an outage or breach of our information technology systems, operational technology systems, or a cybersecurity event.

We manage our global business operations through a variety of information technology (IT) and operational technology systems which we continually enhance to increase efficiency and security. We depend on these systems for commercial transactions, customer interactions, manufacturing, branding, employee tracking, and other applications. Some of the systems are based on legacy technology and operate with a minimal level of available support, and recent acquisitions using other systems have added to the complexity of our IT infrastructure. New system implementations across the enterprise also pose risks of outages or disruptions, which could affect our suppliers, commercial operations, and customers. We continue to upgrade, streamline, and integrate these systems and have invested in strategies to prevent a failure or breach but, like those of other companies, our systems are susceptible to outages due to natural disasters, power loss, computer viruses, security breaches, hardware or software vulnerabilities, disruptions, and similar events.

In June 2023, Brunswick disclosed an IT security incident that impacted some systems and global facilities. We activated our response protocols, which included pausing operations in some locations, engaging leading security experts and coordinating with relevant law enforcement agencies. Normal global business operations resumed over the course of nine days following the incident. However, if a similar event occurred, and if legacy systems or other key systems were to fail or if our IT systems were unable to communicate effectively, this could result in missed or delayed sales or lost opportunities for cost-reduction or efficient cash management.

We exchange information with many trading partners across all aspects of our commercial operations through our IT systems. A breakdown, outage, malicious intrusion, breach, ransom attack, or other disruption of communications could result in erroneous or fraudulent transactions, disclosure of confidential information, loss of reputation and confidence, and may also result in legal claims or proceedings, penalties, and remediation costs. We have numerous e-commerce and e-marketing portals and our systems may contain personal information of customers or employees; therefore, we must continue to be diligent in protecting against malicious cyber attacks. We have been the target of attempted cyber attacks and other security threats and we may be subject to future breaches of our IT systems. We have programs in place that are intended to detect, contain, and respond to data security incidents and that provide at least annual employee awareness training regarding phishing, malware, and other cyber risks. However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect, we may be unable to anticipate these techniques or implement adequate preventive measures. Moreover, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks. If our security measures are breached or fail, unauthorized persons may be able to obtain access to or acquire personal or other confidential data. Depending on the nature of the information compromised, we may also have obligations to notify consumers and/or employees about the incident, and we may need to provide some form of remedy, such as a subscription to a credit monitoring service, for the individuals affected by the incident. For example, we provided certain affected individuals credit monitoring as a result of the June IT Security Incident. This or future events could negatively affect our relationships with customers or trading partners, lead to potential claims against us, and damage our image and reputation.

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We rely on third parties for computing, storage, processing, and similar services. Any disruption of or interference with our use of these third-party services could have an adverse effect on our business, financial condition, and operating results.

Most of our business systems reside on third-party outsourced cloud infrastructure providers. We are therefore vulnerable to service interruptions experienced by these providers and could experience interruptions, delays, or outages in service availability in the future due to a variety of factors, including infrastructure changes, human, hardware or software errors, cyber attacks, hosting disruptions, and capacity constraints. While we have mitigation and service redundancy plans in place, outages and/or capacity constraints could still arise from a number of causes such as technical failures, natural disasters, fraud, or internal or third-party security attacks on us or our third-party providers, which could negatively impact our ability to manufacture and/or operate our business.

We collect, store, process, share, and use personal information, and rely on third parties that are not directly under our control to do so as well, which subjects us to legal obligations, laws and regulations related to security and privacy, and any actual or perceived failure to meet those obligations could harm our business.

We are subject to various data protection and privacy laws and regulations in the countries where we operate because we collect, store, process, share, and use personal information, and we rely on third parties that are not directly under our control to do so as well. For example, we are subject to the General Data Protection Regulation (GDPR) in the European Union (EU) and the California Consumer Privacy Act (CCPA). Although we have implemented plans to comply with these laws, GDPR, CCPA, and future laws and regulations could impose even greater compliance burdens and risks with respect to privacy and data security than prior laws. The EU (through the GDPR) and a growing number of legislative and regulatory bodies elsewhere in the world have adopted consumer notification requirements in the event of unauthorized access to or acquisition of certain types of personal information. These breach notification laws continue to evolve and may be inconsistent from one jurisdiction to another. Complying with these obligations could cause us to incur substantial costs, require significant management time and attention, and increase negative publicity surrounding any incident that compromises personal information.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

Our success depends upon the continued strength of our brands.

We believe that our brands, particularly including Mercury Marine, Boston Whaler, Lund, and Sea Ray, significantly contribute to our success, and that maintaining and enhancing these brands is important to expanding our customer base. A failure to adequately promote, protect, and strengthen our brands could adversely affect our business and results of operations. Further, in connection with the divestiture of the bowling and billiards businesses, we licensed certain trademarks and servicemarks, including use of the name "Brunswick," to the acquiring companies. Our reputation may be adversely affected by the purchasers' inappropriate use of the marks or of the name Brunswick, including potential negative publicity, loss of confidence, or other damage to our image due to this licensed use.

Either inadequate intellectual property protection that could allow others to use our technologies and impair our ability to compete or the failure to successfully defend against patent infringement claims could have a material adverse effect on our financial condition and results of operations.

We regard much of the technology underlying our products as proprietary. We rely on a combination of patents, trademark, copyright, and trade secret laws; employee and third-party non-disclosure agreements; and other contracts to establish and protect our technology and other intellectual property rights. However, we remain subject to risks, including:

the steps we take to protect our proprietary technology may be inadequate to prevent misappropriation of our technology;
third parties may independently develop similar technology;
agreements containing protections may be breached or terminated;
we may not have adequate remedies for breaches;
existing patent, trademark, copyright, and trade secret laws may afford limited protection;
a third party could copy or otherwise obtain and use our products or technology without authorization; or
we may be required to litigate to enforce our intellectual property rights, and we may not be successful.

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Policing unauthorized use of our intellectual property is difficult, particularly outside the U.S., and litigating intellectual property claims may result in substantial cost and divert management’s attention.

In addition, we may be required to defend our products against patent or other intellectual property infringement claims or litigation. Besides defense expenses and costs, we may not prevail in such cases, forcing us to seek licenses or royalty arrangements from third parties, which we may not be able to obtain on reasonable terms, or subjecting us to an order or requirement to stop manufacturing, using, selling, or distributing products that included challenged intellectual property, which could harm our business and financial results.

RISKS RELATED TO OUR REGULATORY, ACCOUNTING, LEGAL, AND TAX ENVIRONMENT

Changes to trade policy, tariffs, and import/export regulations may have a material adverse effect on our business, financial condition, and results of operations.

Changes in laws and policies governing trade could adversely affect our business and trigger retaliatory actions by affected countries. We continue to be subject to meaningful tariffs, such as China Section 301 investigation tariffs, and there is no assurance that we will be granted exclusions in the future. Like many other multinational corporations, we do a significant amount of business that would be affected by changes to the trade policies of the U.S. and foreign countries (including governmental action related to tariffs and international trade agreements). Such changes have the potential to adversely impact the U.S. economy, our industry, our suppliers, and global demand for our products and, as a result, could have a material adverse effect on our business, financial condition, and results of operations.

An impairment in the carrying value of goodwill, trade names, and other long-lived assets could negatively affect our consolidated results of operations and net worth.

Goodwill and indefinite-lived intangible assets, such as our trade names, are recorded at fair value at the time of acquisition and are not amortized, but are reviewed for impairment at least annually or more frequently if impairment indicators arise. In evaluating the potential for impairment of goodwill and trade names, we make assumptions regarding future operating performance, business trends, and market and economic conditions. Such analyses further require us to make certain assumptions about sales, operating margins, growth rates, and discount rates. Uncertainties are inherent in evaluating and applying these factors to the assessment of goodwill and trade name recoverability. We could be required to evaluate the recoverability of goodwill or trade names prior to the annual assessment if we experience business disruptions, unexpected significant declines in operating results, a divestiture of a significant component of our business, or declines in market capitalization.

During the year ended December 31, 2023, the Company recorded $16.6 million of intangible asset impairment charges recognized in Restructuring, exit and impairment charges in the Consolidated Statements of Operations, including a $13.0 million impairment of the Navico trade name as a result of declines in forecasted revenues primarily driven by macroeconomic factors and a decline in market conditions. Further, as part of our required fourth quarter goodwill impairment testing, the estimated fair value of the Navico Group reporting unit was approximately 10 percent in excess of its carrying value, which included goodwill of $599.7 million. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the impairment tests will prove to be an accurate prediction of the future. To the extent future operating results differ from those in our current forecasts, or if the assumptions underlying the discount rates change, it is possible that further impairment charges could be recorded.

We also continually evaluate whether events or circumstances have occurred that indicate the remaining estimated useful lives of our definite-lived intangible assets and other long-lived assets may warrant revision or whether the remaining balance of such assets may not be recoverable. We use an estimate of the related undiscounted cash flow over the remaining life of the asset in measuring whether the asset is recoverable.

As of December 31, 2023, the balance of total goodwill and indefinite lived intangible assets was $1,342.2 million, which represents approximately 22 percent of total assets. If the future operating performance of either the Company or individual operating segments is not sufficient, we could be required to record non-cash impairment charges. Impairment charges could substantially affect our reported earnings in the periods such charges are recorded. In addition, impairment charges could indicate a reduction in business value which could limit our ability to obtain adequate financing in the future.  
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We manufacture and sell products that create exposure to potential claims and litigation.

Our manufacturing operations and the products we produce could result in product quality, warranty, personal injury, property damage, and other issues, thereby increasing the risk of litigation and potential liability as well as regulatory fines. To manage this risk, we have established a global, enterprise-wide program charged with the responsibility for reviewing, addressing, and reporting on product integrity issues. Historically, the resolution of such claims has not had a materially adverse effect on our business, and we maintain what we believe to be adequate insurance coverage to mitigate a portion of these risks. However, we may experience material losses in the future, incur significant costs to defend claims or issue product recalls, experience claims in excess of our insurance coverage or that are not covered by insurance, or be subjected to fines or penalties. Our reputation may be adversely affected by such claims, whether or not successful, including potential negative publicity about our products. We record accruals for known potential liabilities, but there is the possibility that actual losses may exceed these accruals and therefore negatively impact earnings.

Compliance with environmental, health, safety, zoning, and other laws and regulations may increase costs and reduce demand for our products.

We are subject to federal, state, local, and foreign laws and regulations, including product safety, environmental, health and safety, and other regulations. While we believe that we maintain the requisite licenses and permits and that we are in material compliance with applicable laws and regulations, a failure to satisfy these and other regulatory requirements could result in fines or penalties, and compliance could increase the cost of operations. The adoption of additional laws, rules, and regulations, including stricter emissions standards or limitations on the use of internal combustion engines, could increase our manufacturing costs, require additional product development investment, increase consumer pricing, and reduce consumer demand for our products or boat club operations.

Environmental restrictions, boat plant emission restrictions, and permitting and zoning requirements can limit production capacity, access to water for boating (or certain types of boats or propulsion) and marinas, and storage space. While future requirements, including any imposed on recreational boating, are not expected to be unduly restrictive, they may deter potential customers, thereby reducing our sales. Furthermore, regulations allowing the sale of fuel containing higher levels of ethanol for automobiles, which is not appropriate or intended for use in marine engines, may nonetheless result in increased warranty, service costs, customer dissatisfaction with products, and other claims against us if boaters mistakenly use this fuel in marine engines, causing damage to and the degradation of components in their marine engines. Many of our customers use our products for fishing and related recreational activities. Regulatory or commercial policies and practices impacting access to water, including availability of slip locations and/or the ability to transfer boats among different waterways, access to fisheries, or the ability to fish in some areas could negatively affect demand for our products. As we evolve our product electrification strategy, we are potentially subject to emerging regulations and requirements under the proposed European Union Battery Directive or other similar regulations. These requirements, if adopted, could increase our costs, potentially reducing consumer demand for our products.

Our manufacturing processes involve the use, handling, storage, and contracting for recycling or disposal of hazardous or toxic substances or wastes. Accordingly, we are subject to regulations regarding these substances, and the misuse or mishandling of such substances could expose us to liabilities, including claims for property, personal injury, or natural resources damages, or fines. We are also subject to laws requiring the cleanup of contaminated property, including cleanup efforts currently underway. If a release of hazardous substances occurs at or from one of our current or former properties or another location where we have disposed of hazardous materials, we may be held liable for the contamination, regardless of knowledge or whether we were at fault, and the amount of such liability could be material.

Additionally, we are subject to laws governing our relationships with employees, including, but not limited to, employment obligations as a federal contractor and employee wage, hour, and benefits issues, such as health care benefits. Compliance with these rules and regulations, and compliance with any changes to current regulations, could increase the cost of our operations.

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Changes in income tax laws or enforcement could have a material adverse impact on our financial results.

Our provision for income taxes and cash tax liability may be adversely impacted by changes in tax laws and interpretations in the U.S. or in other countries in which we operate. The Inflation Reduction Act of 2022 (IRA) included various tax provisions, including a 15% minimum tax on global adjusted financial statement income. While we do not believe the IRA will have a material negative impact on our business, it is possible that future interpretations or additional tax law changes could have a material impact on the Company’s tax rate. In addition, many non-U.S. jurisdictions are implementing local legislation based upon the Organization for Economic Co-operation and Development’s base erosion and profit shifting project. These changes could negatively impact our tax provision, cash flows, and/or tax-related balance sheet amounts, including our deferred tax asset values, and increase the complexity, burden, and cost of tax compliance.

RISKS RELATED TO OUR COMMON STOCK

The timing and amount of our share repurchases are subject to a number of uncertainties.

The Board of Directors has authorized our discretionary repurchase of outstanding common stock, to be systematically completed in the open market or through privately negotiated transactions. In 2023, we repurchased $275.0 million of shares, and we plan to continue share repurchases in 2024 and beyond. The amount and timing of share repurchases are based on a variety of factors. Important considerations that could cause us to limit, suspend, or delay future stock repurchases include:

unfavorable market and economic conditions;
the trading price of our common stock;
the nature and magnitude of other investment opportunities available to us from time to time;
the availability of cash; and
additional taxes imposed on share repurchases.

Delaying, limiting, or suspending our stock repurchase program may negatively affect performance versus earnings per share targets, and ultimately our stock price.
Certain activist shareholder actions could cause us to incur expense and hinder execution of our strategy.

We may at times be subject to certain divisive activist shareholder tactics, which can take many forms. Some shareholder activism, including potential proxy contests, could result in substantial costs, such as legal fees and expenses, and divert management’s and our Board’s attention and resources from our businesses and strategic plans. Additionally, public shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with dealers, distributors, or customers, make it more difficult to attract and retain qualified personnel, and cause our stock price to fluctuate based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. These risks could adversely affect our business and operating results.

Item 1B. Unresolved Staff Comments

None.

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Item 1C. Cybersecurity

Brunswick’s leadership recognizes the importance of information security and managing cybersecurity risks across the enterprise. We manage our global business operations through a variety of systems for commercial transactions, customer interactions, manufacturing, branding, employee tracking, and other applications. Systems based on legacy technology, sometimes added through acquisitions or hosted by third parties, and/or that contain personal information of customers or employees, present risks of erroneous or fraudulent transactions, disclosure of personal, sensitive, and confidential information, loss of reputation and confidence, potential impacts on our operations, and may result in legal claims or proceedings, penalties, and remediation costs. Our mature cybersecurity program has been strategically designed to assess, identify, and manage these cyber risks, protect the organization, respond to, and recover from cybersecurity incidents.

Brunswick’s Board of Directors (the Board) and its committees are actively engaged in managing cybersecurity risk and overseeing our information security programs. The Audit and Finance Committee (the Committee) is primarily responsible for oversight of Brunswick’s information technology and information security/cybersecurity programs. The Committee is composed of directors with expertise in technology, audit, finance, and compliance, equipping them to effectively oversee the program. The Chief Information Officer (CIO) and/or Chief Information Security Officer (CISO) update the Committee at each of its regularly scheduled meetings. These reports include updates on the Company’s cybersecurity programs and key performance indicators; assessment of the program; emerging risks; policies, procedures, and training; and risk mitigation strategies. The CIO and CISO also provide the full Board with information technology and cybersecurity reports on at least an annual basis and with greater frequency as necessary. In addition, the Board oversees Brunswick’s long-standing enterprise risk management (ERM) process, which regularly identifies, assesses, and mitigates enterprise and emerging risks, including cyber risks.

The underlying controls of our cyber risk management program are based on recognized best practices and standards for cybersecurity and information technology, including the National Institute of Standards and Technology (NIST) Cybersecurity Framework (CSF). A dedicated Office of the CISO, which reports to the CIO, is responsible for developing enterprise-wide cybersecurity strategy, architecture, policies, processes, and controls, and is directly responsible for our cybersecurity program. Our cybersecurity team members have extensive information technology and program management experience. The CIO and/or CISO personnel regularly inform the Chief Executive Officer (CEO) and other members of senior management about the program, best practices, current cybersecurity threats, the risk landscape, and mitigation approaches.

We use various tools and methodologies to identify, manage, and test for cybersecurity risk on a regular cadence both at the enterprise level and using third party service providers. These third parties include cybersecurity managed security service providers (MSSPs), consultants, advisors, and auditors, who we engage to evaluate our controls, whether through penetration testing, independent audits, or consulting on best practices to address new threats or challenges. We also actively engage with key vendors, industry participants, and law enforcement communities as part of our continuing efforts to evaluate and improve our program. Internally, our employees are a key part of our program. All employees are required to complete cybersecurity training at least once every year, and employees in certain roles must complete additional, specialized cybersecurity training on a regular basis.

Our regular interactions with third party vendors and suppliers also pose a cybersecurity risk that could adversely impact our business or employees. We conduct information security assessments before onboarding and upon detection of an increase in risk profile. In addition, we require providers to meet appropriate security requirements, controls and responsibilities and include additional security and privacy addenda to our contracts where applicable. We also make available cybersecurity education and awareness materials to our suppliers.

The Office of the CISO continually works to enhance our robust enterprise security structure with the ultimate goal of preventing cybersecurity incidents to the extent feasible, while simultaneously increasing our system resilience in an effort to minimize the business impact should an incident occur. We have an established playbook to promptly detect, assess, and respond to cyber incidents. Depending on the nature and severity of an incident, this process provides for escalating notification to functional leaders, senior management, our CEO, and the Board.

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On June 13, 2023, Brunswick disclosed an IT security incident that impacted some systems and global facilities. We activated our response protocols, including pausing operations in some locations, engaging leading security experts, and coordinating with relevant law enforcement agencies. Normal global business operations resumed over the course of nine days following the incident. We estimate the incident resulted in lost revenue of approximately $80 million to $85 million and operating earnings of $35 million to $40 million. To date, Brunswick has not identified any other cyber event or risks from cybersecurity threats that could be considered material, individually or in the aggregate.

Notwithstanding our vigilant cybersecurity program, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. For further information, refer to Section 1A, Risk Factors, for a discussion of risks related to cybersecurity and technology.

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Item 2. Properties

We have numerous manufacturing plants, distribution warehouses, sales and engineering offices, and product test sites around the world. Research and development facilities are primarily located at manufacturing sites. We believe our facilities are suitable and adequate for our current needs and are well maintained and in good operating condition. Most plants and warehouses are of modern, single-story construction, providing efficient manufacturing and distribution operations. We believe our manufacturing facilities have the capacity, or we are investing to increase capacity, to meet current and anticipated demand. Our principal properties are as follows:

SegmentLocationPrimary UseOwnership
Mettawa, IL (US)Corporate headquartersLeased
Propulsion and Engine P&AFond du Lac, WI (US)Manufacturing and officeOwned
Propulsion and Engine P&AMelbourne, AustraliaDistribution and officeLeased
Propulsion, Engine P&A and BoatPetit-Rechain, BelgiumDistribution and officeOwned
Propulsion and Engine P&ASuzhou, ChinaManufacturing, distribution, officeOwned/Leased
Propulsion, Engine P&A, Navico Group and BoatAuckland, New ZealandManufacturing, light assembly, engineering, distribution, officeLeased
Propulsion and Engine P&AJuarez, MexicoLight assembly and distributionOwned/Leased
Engine P&ABrisbane, AustraliaDistributionLeased
Engine P&ABrownsburg, IN (US)DistributionLeased
Engine P&AHeerenveen, NetherlandsDistributionLeased
Navico GroupLowell, MI (US)Manufacturing and officeLeased
Navico GroupMenomonee Falls, WI (US)Light assembly, distribution, officeLeased
Navico GroupStuart, FL (US)Manufacturing and distributionOwned
Navico GroupEnsenada, MexicoManufacturing and distributionOwned
Navico GroupAmsterdam, NetherlandsEngineering, distribution, officeLeased
BoatEdgewater, FL (US)ManufacturingOwned
BoatPalm Coast, FL (US)ManufacturingOwned
BoatMerritt Island, FL (US)ManufacturingOwned
BoatVenice, FL (US)OfficeLeased
BoatFort Wayne, IN (US)ManufacturingOwned
BoatNew York Mills, MN (US)ManufacturingOwned
BoatLebanon, MO (US)ManufacturingOwned
BoatKnoxville, TN (US)OfficeLeased
BoatVonore, TN (US)ManufacturingOwned
BoatPrinceville, Quebec, CanadaManufacturingOwned
BoatReynosa, MexicoManufacturingOwned
BoatVila Nova de Cerveira, PortugalManufacturingOwned


Item 3. Legal Proceedings

Refer to Note 11 – Commitments and Contingencies in the Notes to Consolidated Financial Statements for information about our legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.
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Information About Our Executive Officers

Brunswick's Executive Officers are listed in the following table:
Officer NamePresent PositionFirst Became an Executive OfficerAge
David M. FoulkesChief Executive Officer201962
Ryan M. GwillimExecutive Vice President and Chief Financial and Strategy Officer202044
John G. BuelowExecutive Vice President and President — Mercury Marine202353
Christopher F. DekkerExecutive Vice President, General Counsel, Secretary, and Chief Compliance Officer201455
Aine L. DenariExecutive Vice President and President — Brunswick Boat Group202051
Brett A. DibkeyExecutive Vice President and President — Navico Group202051
Brenna D. PreisserExecutive Vice President and President — Business Acceleration201646
Jill M. WrobelExecutive Vice President and Chief Human Resources Officer202143
Randall S. AltmanSenior Vice President and Controller201952

The executive officers named above have been appointed to serve until their successors are chosen and qualified or until the executive officer's earlier resignation or removal.

David M. Foulkes was named Chief Executive Officer of Brunswick in 2019. He served as Chief Technology Officer and President, Brunswick Marine Consumer Solutions from May 2018 to 2019, as Vice President and Brunswick Chief Technology Officer from 2014 to 2018, as Vice President of Product Development and Engineering, Mercury Marine, from 2010 to 2018 and as President of Mercury Racing from 2012 to 2018. Previously, Mr. Foulkes held positions of increasing responsibility at Mercury Marine from the start of his employment in 2007.

Ryan M. Gwillim has served as Executive Vice President and Chief Financial Officer of Brunswick since June 2020. Mr. Gwillim assumed additional responsibility as Chief Strategy Officer in November 2023. Previously, he served as Vice President – Finance and Treasurer from June 2019 to June 2020, and Vice President – Investor Relations from 2017 to 2019. Mr. Gwillim served as Associate General Counsel - International from 2015 to 2017 and held positions of increasing responsibility within the Legal Department since his Brunswick employment began in 2011.

John G. Buelow was named Executive Vice President and President – Mercury Marine in February 2023. He previously served as Vice President of Global Operations, Mercury Marine, from June 2018 to February 2023, and as Vice President Category Management, Mercury Marine, from 2016 to 2018. Prior to 2016, Mr. Buelow served in a variety of positions of increasing responsibility at Mercury Marine since he was hired in 2004.

Christopher F. Dekker has served as Executive Vice President, General Counsel, Secretary, and Chief Compliance Officer since 2014. Prior to his appointment, Mr. Dekker served as Brunswick's Associate General Counsel, with responsibilities for litigation, employment, and compliance matters, from the start of his employment with Brunswick in 2010.

Aine L. Denari has served as Executive Vice President and President – Brunswick Boat Group since October 2020. Prior to joining Brunswick, Ms. Denari worked at ZF AG as Senior Vice President and General Manager, Global Electronics ADAS (Advanced Driver Assistance Systems) from December 2017 to October 2020, as Senior Vice President, Planning and Business Development from 2015 to 2017, and as Vice President, Business Development and Product Planning from 2014 to 2017. Ms. Denari previously served in a variety of executive positions within the automotive industry, and in leadership positions at major global consulting firms.

Brett A. Dibkey has served as Executive Vice President and President – Navico Group since July 2022 and previously served as Executive Vice President and President – Advanced Systems Group from 2020 to 2022. Mr. Dibkey joined Brunswick following 12 years at Whirlpool Corporation, a multinational manufacturer and marketer of home appliances, where he served as Vice President and General Manager, Business Units, Brand Marketing, eCommerce, and IoT from January 2017 to December 2019, Vice President and General Manager, Integrated Business Units from 2012 to 2020, and General Manager, Dishwasher Category and New Business Development from 2007 to 2012. Prior to his career at Whirlpool, Mr. Dibkey worked in a variety of business development and strategic planning roles for Pfizer and Crowe Horwath, LLP.

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Brenna D. Preisser has served in her role as Executive Vice President and President – Business Acceleration since 2020. She previously held the role of Chief Human Resources Officer from 2016 to 2021. Ms. Preisser has served in a variety of roles of increasing responsibility since she started with Brunswick in 2004.

Jill M. Wrobel was named Executive Vice President and Chief Human Resources Officer in December 2021. Ms. Wrobel was named Brunswick's Vice President, Enterprise Human Resources and Transformation Leader in December 2020 when she joined Brunswick from Walgreens Boots Alliance, Inc., an integrated global pharmacy, healthcare and retail leader. Ms. Wrobel served as Group Vice President, Global HR Business Strategy and HR M&A Integration during 2020, Vice President, Global HRBP Development, Digital and HR M&A Integration from 2018 to 2019, and Vice President HR Mergers & Acquisitions and Rite Aid HR Lead from 2016 to 2018. Prior to Walgreens Boots Alliance, Inc., Ms. Wrobel worked in a variety of human resources and leadership roles at Walgreens and PricewaterhouseCoopers LLP.

Randall S. Altman was named Brunswick's Senior Vice President and Controller in 2022 and served as Vice President and Controller since June 2019. Previously, he served as Vice President – Treasurer from 2013 to 2019. Mr. Altman has held a series of roles of increasing responsibility within Brunswick since he joined Brunswick in 2003.
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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Brunswick's common stock is traded on the New York and Chicago Stock Exchanges under the symbol "BC". As of February 14, 2024, there were 6,418 shareholders of record of our common stock.

We expect to continue to pay quarterly dividends at the discretion of the Board of Directors, subject to continued capital availability and a determination that cash dividends continue to be in the best interest of our shareholders. Our dividend and share repurchase policies may be affected by, among other things, our views on future liquidity, potential future capital requirements and restrictions contained in certain credit agreements.

Performance Graph

Comparison of Cumulative Total Shareholder Return among Brunswick, S&P 400 Index and S&P 400 Global Industry Classification Standard (GICS) Consumer Discretionary Index

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201820192020202120222023
Brunswick100.00 131.24 169.24 224.46 165.54 225.78 
S&P 400 GICS Consumer Discretionary Index100.00 81.92 103.17 171.32 135.32 169.26 
S&P 400 Index100.00 89.02 112.50 156.48 136.29 160.05 

The basis of comparison is a $100 investment made on December 31, 2018 in each of: (i) Brunswick, (ii) the S&P 400 GICS Consumer Discretionary Index and (iii) the S&P 400 Index. All dividends are assumed to be reinvested. The S&P 400 GICS Consumer Discretionary Index encompasses industries including household durable goods, textiles and apparel and leisure equipment. Brunswick believes the companies included in this index provide the most representative sample of enterprises that are in primary lines of business that are similar to ours.

Issuer Purchases of Equity Securities

On July 19, 2022, our Board of Directors approved a $500.0 million increase to our share repurchase authorization. In 2023, we repurchased $275.0 million of stock under this authorization and as of December 31, 2023, the remaining authorization was $121.5 million. On January 30, 2024, our Board of Directors approved a $500.0 million increase to our share repurchase authorization.

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During the three months ended December 31, 2023, we repurchased the following shares of common stock:
PeriodTotal Number of Shares PurchasedWeighted Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramMaximum Amount of Dollars that May Yet Be Used to Purchase Shares Under the Program
October 1 to October 28134,197 $74.52 134,197 
October 29 to November 25394,467 70.88 394,467 
November 26 to December 31197,118 86.45 197,118 
Total725,782 75.78 725,782 $121,468,669 

Item 6. Reserved

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations of Brunswick Corporation (the Company, we, us, our) are forward-looking statements. Forward-looking statements are based on current expectations, estimates, and projections about our business and by their nature address matters that are, to different degrees, uncertain. Actual results may differ materially from expectations and projections as of the date of this filing due to various risks and uncertainties. For additional information regarding forward-looking statements, refer to Forward-Looking Statements above.

Certain statements in Management's Discussion and Analysis are based on non-GAAP financial measures. GAAP refers to generally accepted accounting principles in the United States. A "non-GAAP financial measure" is a numerical measure of a registrant’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the consolidated statements of operations, balance sheets or statements of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. For example, the discussion of our cash flows includes an analysis of free cash flows and total liquidity; the discussion of our net sales includes net sales on a constant currency basis; the discussion of our net sales includes net sales excluding acquisitions; and the discussion of our earnings includes a presentation of operating earnings and operating margin excluding restructuring, exit and impairment charges, purchase accounting amortization, acquisition, integration and IT-related costs, IT security incident costs, Sport Yacht & Yachts, reclassification of held-for-sale items, gain on sale of assets, TN-BC Holdings LLC joint venture impairment, loss on early extinguishment of debt, special tax items, and other applicable charges and of diluted earnings per common share, as adjusted. Non-GAAP financial measures do not include operating and statistical measures.

We include non-GAAP financial measures in Management's Discussion and Analysis as management believes these measures and the information they provide are useful to investors because they permit investors to view our performance using the same tools that management uses to evaluate our ongoing business performance. In order to better align our reported results with the internal metrics management uses to evaluate business performance as well as to provide better comparisons to prior periods and peer data, non-GAAP measures exclude the impact of purchase accounting amortization related to acquisitions, among other adjustments.

We do not provide forward-looking guidance for certain financial measures on a GAAP basis because we are unable to predict certain items contained in the GAAP measures without unreasonable efforts. These items may include restructuring, exit and impairment costs, special tax items, acquisition-related costs, and certain other unusual adjustments.

IT Security Incident

As previously announced on June 13, 2023, the Company experienced an IT security incident that impacted some of its systems and global facilities. Please refer to Note 1 – Significant Accounting Policies in the Notes to the Consolidated Financial Statements for further details.

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Change in Reportable Segments

Effective January 1, 2023, the Company changed its management reporting and updated its reportable segments to Propulsion, Engine Parts and Accessories (Engine P&A), Navico Group and Boat to align with its internal operating structure. For further information, refer to Note 5 – Segment Information in the Notes to the Consolidated Financial Statements.

Acquisitions

During the fourth quarter of 2023, we acquired additional Freedom Boat Club franchise operations and territory rights as well as certain marine assets in the Southeast United States for net cash consideration of $16.0 million. On September 1, 2023, the Company acquired all of the issued and outstanding shares of Fliteboard Pty Ltd for $87.6 million net cash consideration. Refer to Note 4 – Acquisitions in the Notes to the Consolidated Financial Statements for further information.

During the second quarter of 2022, we acquired certain Freedom Boat Club franchise operations and territory rights as well as certain marine assets in the Southeast United States for net cash consideration of $93.9 million. Refer to Note 4 – Acquisitions in the Notes to the Consolidated Financial Statements for further information.

On October 4, 2021, we completed the acquisition of Navico for $1.094 billion net cash consideration. Navico was a privately held global company based in Egersund, Norway, and is a global leader in marine electronics and sensors, including multi-function displays, fish finders, autopilots, sonar, radar, and cartography. We also completed the acquisitions of substantially all the net assets of RELiON Battery, LLC, SemahTronix, LLC, Fanautic Club, and certain Freedom Boat Club franchise operations and territory rights in the United States during 2021 for net cash consideration of $66.1 million. Refer to Note 4 – Acquisitions in the Notes to the Consolidated Financial Statements for further information.

Matters Affecting Comparability
Changes in Foreign Currency Rates. Percentage changes in net sales expressed in constant currency reflect the impact that changes in currency exchange rates had on comparisons of net sales. To determine this information, net sales transacted in currencies other than U.S. dollars have been translated to U.S. dollars using the average exchange rates that were in effect during the comparative period. The percentage change in net sales expressed on a constant currency basis better reflects the changes in the underlying business trends, excluding the impact of translation arising from foreign currency exchange rate fluctuations. Approximately 23 percent of our annual net sales are transacted in a currency other than the U.S. dollar. Our most material exposures include sales in Euros, Canadian dollars, Australian dollars and Brazilian real.

The table below summarizes the impact of changes in currency exchange rates and also the impact of acquisitions on our net sales:
Net Sales2023 vs. 20222022 vs. 2021
(in millions)202320222021GAAPCurrency ImpactAcquisitions ImpactGAAPCurrency ImpactAcquisitions Impact
Propulsion$2,763.8 $2,824.0 $2,504.7 (2.1)%(0.2)%0.4%12.7%(2.4)%—%
Engine P&A1,199.8 1,310.2 1,371.7 (8.4)%(0.4)%—%(4.5)%(1.9)%—%
Navico Group914.7 1,069.3 688.3 (14.5)%—%—%55.4%(3.0)%55.0%
Boat1,989.4 2,119.4 1,703.1 (6.1)%(0.1)%1.0%24.4%(1.7)%3.0%
Segment Eliminations(466.3)(510.7)(421.6)(8.7)%(0.2)%—%21.1%(1.0)%3.8%
Total$6,401.4 $6,812.2 $5,846.2 (6.0)%(0.1)%0.4%16.5%(2.2)%7.1%
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Results of Operations

Consolidated

The following table sets forth certain amounts, ratios and relationships calculated from the Consolidated Statements of Operations for 2023, 2022 and 2021:
2023 vs. 20222022 vs. 2021
(in millions, except per share data)202320222021 $% $%
Net sales$6,401.4$6,812.2$5,846.2$(410.8)(6.0)%$966.016.5%
Gross margin (A)
1,787.01,947.21,666.0(160.2)(8.2)%281.216.9%
Restructuring, exit and impairment charges54.725.10.829.6NM24.3NM
Operating earnings734.9947.8812.9(212.9)(22.5)%134.916.6%
Loss on early extinguishment of debt(0.1)(4.2)0.1NM4.1(97.6)%
Transaction financing charges(4.0)NM4.0NM
Net earnings from continuing operations432.6681.3595.4(248.7)(36.5)%85.914.4%
Diluted earnings per share from continuing operations
$6.13$9.06$7.59$(2.93)(32.3)%$1.4719.4%
Expressed as a percentage of Net sales:     
Gross margin (A)
27.9 %28.6 %28.5 % (70) bps10 bps
Selling, general and administrative expense12.7 %11.3 %11.9 % 140 bps(60) bps
Research and development expense2.9 %3.0 %2.6 % (10) bps40 bps
Operating margin11.5 %13.9 %13.9 % (240) bps— bps

NM = not meaningful
bps = basis points

(A)Gross margin is defined as Net sales less Cost of sales as presented in the Consolidated Statements of Operations.

The following is a reconciliation of our non-GAAP measures, adjusted operating earnings and adjusted diluted earnings per common share from continuing operations for 2023, 2022 and 2021:
Operating EarningsDiluted Earnings (Loss) Per Share
(in millions, except per share data)202320222021202320222021
GAAP$734.9 $947.8 $812.9 $6.13 $9.06 $7.59 
Restructuring, exit and impairment charges54.7 25.1 0.8 0.61 0.25 0.01 
Purchase accounting amortization57.5 65.0 45.7 0.64 0.65 0.46 
Acquisition, integration, and IT related costs12.1 10.8 24.3 0.14 0.11 0.27 
IT security incident costs10.1 — — 0.12 — — 
Sport Yacht & Yachts — 3.8  — 0.04 
Palm Coast reclassified from held-for-sale — 0.8  — 0.01 
Gain on sale of assets — (1.5) — (0.01)
TN-BC Holdings LLC joint venture impairment — — 0.21 — — 
Loss on early extinguishment of debt — —  — 0.04 
Special tax items — — 0.95 (0.04)(0.13)
As Adjusted$869.3 $1,048.7 $886.8 $8.80 $10.03 $8.28 
GAAP operating margin11.5 %13.9 %13.9 %
Adjusted operating margin13.6 %15.4 %15.2 %
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2023 vs. 2022

Net sales decreased 6.0 percent during 2023 when compared with 2022. The components of the consolidated net sales change were as follows:
Percent change in net sales compared to the prior year
2023
Volume(13.2)%
Product Mix and Price8.1 %
IT Security Incident(1.2)%
Acquisitions0.4 %
Currency(0.1)%
(6.0)%

Sales in 2023 were below the prior year as higher discounts in select segments coupled with the impact of cautious wholesale ordering patterns by dealers, OEMs and retailers in the second half of the year were partially offset by successful new product momentum, positive mix and pricing. Refer to the Propulsion, Engine P&A, Navico Group and Boat segments for further details on the drivers of net sales changes.

Gross margin percentage decreased 70 basis points in 2023 when compared with 2022 driven by higher manufacturing costs including material and labor inflation (260 bps), depreciation (60 bps), absorption (35 bps), the IT security incident (30 bps), and unfavorable foreign currency exchange-rate fluctuations (25 bps), offset by sales-related drivers (330 bps) and acquisitions (10 bps).

Selling, general and administrative expenses as a percentage of net sales increased 140 basis points during 2023 when compared with the same prior year period, due to lower sales (70 bps), increased relative spending on technology initiatives and the IT security incident (20 bps), sales and marketing (20 bps), operating expenses associated with current year acquisitions (20 bps) and amortization (10 bps).

During 2023, we recorded restructuring, exit and impairment charges of $54.7 million compared with $25.1 million in 2022. The Company estimates the restructuring actions executed in 2023 will result in approximately $45 million of annualized cost savings. The future cost savings related to restructuring actions executed in 2022 are not expected to be material to our Consolidated Financial Statements. See Note 3 – Restructuring, Exit and Impairment Activities in the Notes to Consolidated Financial Statements for further details.

We recognized equity (loss) earnings of $(11.4) million and $4.0 million in 2023 and 2022, respectively. The primary driver of the loss in 2023 is the impairment charge taken related to our investment in TN-BC Holdings LLC. Refer to Note 1 – Significant Accounting Policies in the Notes to Consolidated Financial Statements for further information.

We recognized $7.6 million and $(6.1) million in 2023 and 2022, respectively, in Other income (expense), net. Other income (expense), net primarily includes remeasurement gains and losses resulting from changes in foreign currency rates and other postretirement benefit costs.

Net interest expense increased in 2023 compared with 2022 due to an increase in average daily debt outstanding, which was influenced by debt issuances. Refer to Note 14 – Debt in the Notes to Consolidated Financial Statements.

We recognized an income tax provision of $196.3 million and $172.3 million in 2023 and 2022, respectively. The increase is primarily due to the discrete income tax expense recorded in connection with the intercompany sales of intellectual property rights in the first and third quarters of 2023. The effective tax rate, which is calculated as the income tax provision as a percentage of earnings before income taxes, was 31.2 percent and 20.2 percent for 2023 and 2022, respectively. See Note 10 – Income Taxes in the Notes to Consolidated Financial Statements for a reconciliation of our effective tax rate and statutory Federal income tax rate.

Due to the factors described in the preceding paragraphs, operating earnings, net earnings from continuing operations, and diluted earnings per common share from continuing operations decreased during 2023. Diluted earnings per common share from continuing operations benefited from common stock repurchases in both years.
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2022 vs. 2021

Net sales increased 16.5 percent during 2022 when compared with 2021. The components of the consolidated net sales change were as follows:
Percent change in net sales compared to the prior year
2022
Product Mix and Price9.9 %
Acquisitions7.1 %
Volume1.7 %
Currency(2.2)%
16.5 %

Sales in each segment benefited from steady demand, new product performance, and pricing implemented throughout the year, partially offset by unfavorable changes in foreign currency exchange rates. Refer to the Propulsion, Engine P&A, Navico Group and Boat segments for further details on the drivers of net sales changes.

Gross margin percentage increased 10 basis points in 2022 when compared with 2021 driven by increased sales (620 bps) and acquisitions (60 bps), partially offset by higher manufacturing costs including material and labor inflation and inefficiencies caused by supply chain disruptions (670 bps).

The 60 basis points decrease in selling, general and administrative expenses as a percentage of revenue in 2022 compared to 2021 reflects the impact of less variable compensation expense (130 bps) partially offset by increased spending on sales and marketing (40 bps) and increased purchase accounting intangible asset amortization (30 bps).

During 2022, we recorded restructuring, exit and impairment charges of $25.1 million compared with $0.8 million in 2021. The future cost savings related to restructuring actions executed in 2022 are not expected to be material to our Consolidated Financial Statements. See Note 3 – Restructuring, Exit and Impairment Activities in the Notes to Consolidated Financial Statements for further details.

We recognized equity earnings of $4.0 million and $2.3 million in 2022 and 2021, respectively, which were mainly related to our marine and technology-related joint ventures.

We recognized $(6.1) million and $(6.8) million in 2022 and 2021, respectively, in Other income (expense), net. Other income (expense), net primarily includes remeasurement gains and losses resulting from changes in foreign currency rates and other postretirement benefit costs.

Net interest expense increased in 2022 compared with 2021 due to an increase in average daily debt outstanding, which was influenced by debt issuances. Refer to Note 14 – Debt in the Notes to Consolidated Financial Statements.

We recognized an income tax provision of $172.3 million and $141.0 million in 2022 and 2021, respectively. The increase is primarily due to increased earnings before income taxes. The effective tax rate, which is calculated as the income tax provision as a percentage of earnings before income taxes, was 20.2 percent and 19.1 percent for 2022 and 2021, respectively. See Note 10 – Income Taxes in the Notes to Consolidated Financial Statements for a reconciliation of our effective tax rate and statutory Federal income tax rate.

Due to the factors described in the preceding paragraphs, operating earnings, net earnings from continuing operations and diluted earnings per common share from continuing operations increased during 2022. Diluted earnings per common share from continuing operations benefited from common stock repurchases in both years.

Segments

We have four reportable segments: Propulsion, Engine P&A, Navico Group, and Boat. Refer to Note 5 – Segment Information in the Notes to Consolidated Financial Statements for details on the segment operations.

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Propulsion Segment

The following table sets forth the Propulsion segment results and a reconciliation to our non-GAAP measure of adjusted operating earnings for the years ended December 31, 2023, 2022 and 2021:
2023 vs. 20222022 vs. 2021
(in millions)202320222021 $% $%
Net sales$2,763.8$2,824.0$2,504.7$(60.2)(2.1)%$319.3 12.7 %
GAAP operating earnings$494.7$522.9$449.7(28.2)(5.4)%73.2 16.3 %
Restructuring, exit and impairment charges2.72.7 NM— NM
IT security incident costs3.43.4 NM— NM
Acquisition, integration, and IT related costs2.52.5 NM— NM
Purchase accounting amortization0.90.9 NM— NM
Adjusted operating earnings$504.2$522.9$449.7(18.7)(3.6)%73.2 16.3 %
GAAP operating margin 17.9 %18.5 %18.0 %(60) bps50 bps
Adjusted operating margin18.2 %18.5 %18.0 %(30) bps50 bps

NM = not meaningful
bps = basis points

2023 vs. 2022

Propulsion segment's net sales decreased $60.2 million or 2.1 percent in 2023 versus prior year due to cautious OEM ordering patterns in the second half of the year, partially offset by continued market share gains in outboard engines, positive mix and pricing as well as the acquisition of Fliteboard. The components of the Propulsion segment's net sales change were as follows:
Percent change in net sales compared to the prior year
2023
Volume(14.1)%
Product Mix and Price13.4 %
IT Security Incident(1.6)%
Acquisitions0.4 %
Currency(0.2)%
(2.1)%

International sales were 32 percent of the Propulsion segment's net sales in 2023. International sales decreased 4 percent year-over-year on a GAAP basis and 3 percent on a constant currency basis.

Propulsion segment's operating earnings for the year were $494.7 million, a decrease of 5.4 percent versus the prior year, as sales declines and higher input costs more than offset benefits from cost-control measures.

2022 vs. 2021

Propulsion segment's net sales increased $319.3 million or 12.7 percent in 2022 versus the prior year due to favorable product mix, pricing and higher sales volume. The components of the Propulsion segment's net sales change were as follows:
Percent change in net sales compared to the prior year
2022
Product Mix and Price12.4 %
Volume2.7 %
Currency(2.4)%
12.7 %

36

International sales were 32 percent of the Propulsion segment's net sales in 2022. International sales increased 6 percent year-over-year on a GAAP basis and 13 percent on a constant currency basis.

Propulsion segment's operating earnings for the year were $522.9 million, an increase of 16.3 percent in 2022 versus the prior year, as a result of increased sales and lower operating expenses, slightly offset by higher inflationary costs and investments in new products and capacity expansion.

Engine P&A Segment

The following table sets forth the Engine P&A segment results and a reconciliation to our non-GAAP measure of adjusted operating earnings for the years ended December 31, 2023, 2022 and 2021:
2023 vs. 20222022 vs. 2021
(in millions)202320222021 $% $%
Net sales$1,199.8$1,310.2$1,371.7$(110.4)(8.4)%$(61.5)(4.5)%
GAAP operating earnings$217.4$268.0$282.4$(50.6)(18.9)%$(14.4)(5.1)%
Restructuring, exit and impairment charges3.33.3 NM— NM
Acquisition, integration, and IT related costs0.60.6 NM— NM
IT security incident costs0.50.5 NM— NM
Adjusted operating earnings$221.8$268.0$282.4$(46.2)(17.2)%$(14.4)(5.1)%
GAAP operating margin18.1 %20.5 %20.6 % (240) bps(10) bps
Adjusted operating margin18.5 %20.5 %20.6 %(200) bps(10) bps

NM = not meaningful
bps = basis points

2023 vs. 2022

Engine P&A segment's net sales decreased $110.4 million or 8.4 percent in 2023 versus the prior year due to lower sales in both of the Products and Distribution businesses. The components of the Engine P&A segment's net sales change were as follows:
Percent change in net sales compared to the prior year
2023
Volume(9.4)%
Product Mix and Price3.1 %
IT Security Incident(1.7)%
Currency(0.4)%
(8.4)%

International sales were 29 percent of the Engine P&A segment's net sales in 2023. International sales decreased 11 percent year-over-year on a GAAP basis and 9 percent on a constant currency basis.

Engine P&A segment's operating earnings for the year were $217.4 million, a decrease of 18.9 percent versus the prior year, due to a decline in sales and higher manufacturing costs more than offsetting the impact of pricing and lower operating expenses.

37

2022 vs. 2021

Engine P&A segment's net sales decreased $61.5 million or 4.5 percent in 2022 versus the prior year due to a decline in sales volume only partially offset by the benefit of product mix and pricing implemented throughout the year. The components of the Engine P&A segment's net sales change were as follows:
Percent change in net sales compared to the prior year
2022
Volume(11.7)%
Product Mix and Price9.1 %
Currency(1.9)%
(4.5)%

International sales were 30 percent of the Engine P&A segment's net sales in 2022. International sales decreased 9 percent year-over-year on a GAAP basis and 3 percent on a constant currency basis.

Engine P&A segment's operating earnings were $268.0 million in 2022, a decrease of 5.1 percent, driven by lower sales, as well as material and labor inflation and transition costs from a new distribution center.

Navico Group Segment

The following table sets forth the Navico Group segment results and a reconciliation to our non-GAAP measure of adjusted operating earnings for the years ended December 31, 2023, 2022 and 2021:
2023 vs. 20222022 vs. 2021
(in millions)202320222021 $% $%
Net sales$914.7$1,069.3$688.3$(154.6)(14.5)%$381.0 55.4 %
GAAP operating earnings$5.2$68.2$53.4$(63.0)(92.4)%$14.8 27.7 %
Restructuring, exit and impairment charges30.57.70.722.8 NM7.0 NM
Purchase accounting amortization53.061.944.1(8.9)(14.4)%17.8 40.4 %
Acquisition, integration, and IT related costs2.19.717.8(7.6)(78.4)%(8.1)(45.5)%
IT security incident costs0.50.5 NM— NM
Gain on sale of assets(1.5)— NM1.5 NM
Adjusted operating earnings$91.3$147.5$114.5$(56.2)(38.1)%$33.0 28.8 %
GAAP operating margin0.6 %6.4 %7.8 % (580) bps(140) bps
Adjusted operating margin10.0 %13.8 %16.6 %(380) bps(280) bps

NM = not meaningful
bps = basis points

2023 vs. 2022

Navico Group segment's net sales decreased by $154.6 million or 14.5 percent in 2023 versus the prior year due to lower sales resulting from softer marine OEM orders and the continued weak RV manufacturing environment. The components of the Navico Group segment's net sales change were as follows:
Percent change in net sales compared to the prior year
2023
Volume(14.4)%
IT Security Incident(1.2)%
Product Mix and Price1.1 %
(14.5)%

International sales were 37 percent of the Navico Group segment's net sales in 2023. International sales decreased 9 percent year-over-year on a GAAP basis and 10 percent on a constant currency basis.
38

Navico Group segment's operating earnings for the year were $5.2 million, a decrease of 92.4 percent versus the prior year due to lower sales, restructuring charges associated with actions executed in the year and slightly elevated input costs, partially offset by benefits from new product introductions and cost reduction initiatives.

2022 vs. 2021

Navico Group segment's net sales increased $381.0 million or 55.4 percent in 2022 versus the prior year due to the factors affecting all of our segments previously mentioned, in addition to having a full year of the Navico acquisition included in the segment's net sales for 2022. The components of the Navico Group segment's net sales change were as follows:
Percent change in net sales compared to the prior year
2022
Acquisitions55.0 %
Product Mix and Price5.9 %
Currency(3.0)%
Volume(2.5)%
55.4 %

International sales were 35 percent of the Navico Group segment's net sales in 2022. International sales increased 72 percent year-over-year on a GAAP basis and 82 percent on a constant currency basis.

Navico Group segment's operating earnings were $68.2 million in 2022, an increase of 27.7 percent due to increased sales factors mentioned above, partially offset by increased input costs.

Boat Segment

The following table sets forth the Boat segment results and a reconciliation to our non-GAAP measure of adjusted operating earnings for the years ended December 31, 2023, 2022 and 2021:
2023 vs. 20222022 vs. 2021
(in millions)202320222021 $% $%