Brunswick(US:BC)2023-02-15 16:00Financial Performance - Brunswick Corporation reported net sales of $6,812.2 million for 2022, a 16.5% increase compared to $5,846.2 million in 2021[175]. - The gross margin for 2022 was $1,947.2 million, reflecting a 16.9% increase from $1,666.0 million in 2021[175]. - Operating earnings for 2022 were $947.8 million, up 16.6% from $812.9 million in 2021[175]. - The diluted earnings per share from continuing operations increased to $9.06 in 2022, a 19.4% rise from $7.59 in 2021[175]. - The increase in gross margin percentage was driven by higher sales (620 basis points) and acquisitions (60 basis points), offset by increased manufacturing costs (670 basis points)[178]. - The company experienced a 9.9% increase in product mix and price, contributing to overall sales growth in 2022[177]. - Selling, general and administrative expenses as a percentage of revenue decreased by 60 basis points in 2022 compared to 2021, due to lower variable compensation expenses[178]. - Free cash flow from continuing operations was $191.5 million in 2022, a decrease from $320.8 million in 2021, primarily due to increased capital expenditures[216]. - Net cash provided by operating activities of continuing operations was $580.4 million in 2022, slightly down from $586.2 million in 2021, mainly due to increased working capital[218]. Acquisitions and Investments - Brunswick Corporation acquired Freedom Boat Club franchise operations and marine assets for $93.9 million in Q2 2022[170]. - The company completed the acquisition of Navico for $1.094 billion in October 2021, enhancing its position in marine electronics[171]. - The acquisition of Navico in 2021 was financed through the issuance of Notes for net proceeds of $992.9 million, resulting in the retirement of $25.0 million of debt[228]. - The company evaluated potential acquisitions and joint ventures as part of its ordinary course of business, indicating a focus on growth strategies[217]. - Capital expenditures in 2022 totaled $388.3 million, reflecting investments in capacity expansion, new products, and technology[219]. - Capital expenditures are projected to be $350 million in 2023, focusing on new product investments and cost-reduction projects[230]. - The company intends to spend around $150 million on share repurchases in 2023, with potential for increased spending based on market conditions[230]. Segment Performance - Propulsion segment net sales reached $2,824.0 million in 2022, a 12.7% increase from $2,504.7 million in 2021[188]. - Operating earnings for the Propulsion segment were $522.9 million in 2022, reflecting a 16.3% increase from $449.7 million in 2021[191]. - Parts & Accessories segment net sales increased to $2,323.7 million in 2022, up 15.7% from $2,008.1 million in 2021[196]. - P&A segment operating earnings were $336.2 million in 2022, a slight increase of 0.1% compared to the previous year[199]. - Boat segment's net sales increased by $416.3 million or 24.4% in 2022 compared to 2021, driven by increased sales volumes and favorable product mix and pricing[205]. - Operating earnings for the Boat segment reached $212.8 million in 2022, a 49.5% increase from the previous year, attributed to higher sales and operational efficiencies[207]. - International sales represented 32% of the Propulsion segment's net sales in 2022, with a 6% increase on a GAAP basis[190]. - International sales accounted for 24% of the Boat segment's net sales in 2022, increasing by 13% on a GAAP basis and 19% on a constant currency basis[206]. Financial Position and Debt - Total debt rose to $2,509.0 million as of December 31, 2022, compared to $1,816.4 million in 2021, resulting in a debt-to-capitalization ratio increase to 55% from 49%[226]. - Available borrowing capacity under the Credit Facility was $747.2 million as of December 31, 2022, up from $497.2 million in 2021[226][227]. - The company plans to retire approximately $80 million of long-term debt obligations in 2023, with estimated interest expense of $100 million[230]. - Total contractual obligations as of December 31, 2022, amounted to $4,711.2 million, including $2,544.7 million in debt and $1,755.6 million in interest payments[235]. - The company is in compliance with financial covenants in its Credit Facility and CP Program as of December 31, 2022[228]. Tax and Interest - Income tax provision increased to $172.3 million in 2022 from $141.0 million in 2021, with an effective tax rate of 20.2% compared to 19.1% in the prior year[180]. - Net interest expense rose due to increased average daily debt outstanding, influenced by debt issuances[180]. Impairment and Valuation - Restructuring, exit, and impairment charges amounted to $25.1 million in 2022, up from $0.8 million in 2021[179]. - The company recorded impairment charges of $17.4 million related to capitalized software intangible assets during the year ended December 31, 2022[249]. - Impairment charges for long-lived assets were $1.5 million, $0.8 million, and $0.9 million for the years 2022, 2021, and 2020, respectively[251]. - The company exercises judgment in forecasting future cash flows, which may impact the recoverability of long-lived assets[251]. - The impairment test for indefinite-lived intangible assets involves comparing fair value with carrying amount, with losses recognized when carrying value exceeds fair value[249]. Currency and Risk Management - Approximately 24% of annual net sales are transacted in currencies other than the U.S. dollar, with significant exposure to Euros and Canadian dollars[173]. - The estimated reduction in fair market value from a 10 percent adverse change in foreign currency rates was $71.6 million for 2022 and $53.4 million for 2021[257]. - The company uses foreign currency forward and option contracts to manage exposure related to anticipated transactions, primarily in Euro, Australian dollar, Japanese yen, and Canadian dollar[255]. - Fixed-to-floating interest rate swaps are utilized to convert a portion of long-term debt from fixed to floating rate debt[256]. - The company does not use financial instruments for trading or speculative purposes, focusing instead on hedging transactions[254]. Environmental and Regulatory Compliance - The company continues to develop engine technologies and other innovations to reduce environmental impact and comply with regulatory standards[237].