BC Brunswick Corp - 10-K

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 international conflicts or tensions, the risk of inflation, 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 to trade policy, tariffs, and import/export regulations may have a material adverse effect on our business, financial condition, and results of operations.

All our businesses are affected by global trade policy. We have been, and continue to be, subject to meaningful tariffs, such as China Section 301 investigation tariffs, Section 232 tariffs on steel and aluminum, and recent tariffs imposed under the International Emergency Economic Powers Act. U.S. trade actions have also prompted retaliatory measures by other countries, including tariffs on U.S.‑origin goods, which can reduce the competitiveness of our products in certain international markets. There may be no opportunity for exclusions from such tariffs, or we may not be granted exclusions. In addition to having to pay the tariffs, the volatile trade policy environment may lead to declining consumer confidence, inflation, lower economic expectations, and ultimately reduced demand for our products and services. This may result in a material adverse effect on our business, financial condition and results of operations as well as future asset impairments.

While we continue to attempt to mitigate or avoid some of these increased costs and disruptions, our ability to do so may be limited by operational and supply chain constraints, especially in the short term. In addition, our ability to recover cost increases through price adjustments may be limited by competitive pressures, customer acceptance, and contractual limitations. As a result, these changes could have a material adverse effect on our business, financial condition, and results of operations.

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, become unavailable to customers, or if interest rates remain elevated and adversely affect the ability of customers to finance potential purchases at acceptable terms and interest rates or at all, 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.

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 strong 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 to date.

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

Failure to successfully manage our manufacturing footprint could affect our operating and financial results.

Over the past several years, we have made decisions to close certain manufacturing and distribution facilities while also choosing to make strategic capital investments in other facilities to enhance efficiency and support long-term growth. For example, in 2025, we announced the decision to close our Reynosa, Mexico facility, transitioning production to two high-performing U.S.-based manufacturing centers, as well as the Flagler Beach, Florida facility, consolidating production in our Edgewater, Florida operations. While these moves are designed to reduce fixed

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costs and unlock greater productivity and efficiency while maintaining flexibility for future growth, they also pose certain risks.

Decreasing or ceasing production at a facility, moving production to a different plant, or expanding capacity at an existing facility all involve 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.

We must carefully manage our 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. Failure to do so could materially and adversely affect our business, financial condition, and results of operations.

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 m aterial portion o f 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, or 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 domestic or foreign trade, manufacturing, or other policies 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 increase our operating

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costs, and could reduce our profitability if we are unable to recoup the increased costs through higher product prices, improved operating efficiencies, or hedging programs. 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.

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 global tariff regimes, 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;

• cybersecurity events that affect supplier systems;

• disruption at major global ports and shipping hubs; or

• an outbreak of disease or facility closures due to a 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 2025. 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. Our revenues could be negatively affected if our sales were to fall below expected seasonal levels during these periods. 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, wildfires, and catastrophic natural or environmental disasters, as well as acts of terrorism, violence, 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 at or 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 FBC locations on waterfronts.

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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. Competitors may adopt new technologies and technological advancements, such as using artificial intelligence and machine learning to pursue new products, services, and approaches more quickly, successfully and effectively. 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.

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 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, 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 volatility in demand, positively or negatively, for one or more of our products and 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.

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, and improving operating efficiency. 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.

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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 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 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.

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.

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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. In addition, dealers or distributors could decide to reduce their level of inventory of our products. A significant deterioration in the number or effectiveness of our dealers and distributors, and their inventory levels of our products, could have a material adverse effect on our financial results.

Although at present we believe dealer health to be generally favorable, continued 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 further 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.

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.

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Inventory reductions by major dealers, retailers, and independent boat builders driven by weaker demand for our products could adversely affect our financial results.

If demand for recreational boats declines with a weakening economy, 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. In the future, customers may have fewer hybrid or flexible work opportunities, which could reduce their available recreational time or willingness to purchase our products. These factors and recent economic headwinds could weaken demand for marine products and result in sustained lower dealer stocking levels. 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 the FBC business and its growth strategies. We may be unable to successfully implement our 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. While our franchisees are required to comply with franchise and related agreements, our franchisees are independent and manage their boat clubs as independent businesses, responsible for 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.

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RISKS RELATED TO CYBERSECURITY AND TECHNOLOGY

Our business operations could be negatively impacted by a system outage caused by a breach of our information technology systems or operational technology systems.

We manage our global business operations through a variety of information technology (IT) and operational technology (OT) systems which we regularly 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 acquisitions using other systems have added to the complexity of our IT and OT 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 and OT 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 and/or disrupt our IT and OT systems. Depending on the nature of the information or systems 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 IT security incident in June 2023. 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.

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.

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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, privacy authorities and private litigants are active in pursuing investigations and litigation, and these and future laws and regulations could impose even greater compliance burdens and risks with respect to privacy and data security. The EU (through the GDPR), all fifty U.S. states, and a growing number of legislative and regulatory bodies elsewhere in the world have adopted data breach 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 service marks, 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.

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.

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

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.

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.

We recorded $322.5 million in impairment charges for Navico Group associated with an impairment of the Navico Group reporting unit's goodwill and trade names during the year ended December 31, 2025. As of December 31, 2025, the balance of total goodwill and indefinite lived intangible assets for the enterprise was $976.4 million, which represents approximately 18 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 additional 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.

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 claims. The adoption of new technologies, such as artificial intelligence or autonomous products, may result in new or enhanced regulations, litigation, or liability. To manage these risks, 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, and such claims could divert the efforts of our personnel, even if we are successful in defending them. 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

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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 European Union Battery Directive or other similar regulations regarding transportation, storage, handling, and use of batteries and the components used in battery manufacturing. 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.

W e anticipate that increased global regulation relating to climate change, such as climate disclosure requirements, will require us to comply or potentially face market access limitations or other penalties, including fines. 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. These requirements could increase our costs or could result in fines, suspension of production, the need to alter manufacturing processes, and legal liability, and could negatively affect our competitive position.

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.

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. H.R. 1 (the Act), enacted on July 4, 2025, included multiple changes to business tax and international tax provisions that apply to us. We continue to monitor the impact of the Act and to evaluate the different elections that are available with respect to the timing of deductions. The Act did not have a material impact on the our financial statements for the year ended December 31, 2025. It is possible that future interpretations or additional tax law changes could have a material impact on our tax rate. In addition, many non-U.S. jurisdictions are implementing local legislation based upon the Organization for Economic Co-operation and Development’s (OECD) base erosion and profit shifting project. On January 5, 2026, the OECD announced that the Inclusive Framework on Base Erosion and Profit Shifting agreed to a new package of administrative guidance for the global minimum tax rules. We do not expect this package (often referred to as the side-by-side agreement) will have a material impact on our tax provision, and we will continue to evaluate our obligations under these rules as local country legislation continues to evolve. Future 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.

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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 2025, we repurchased $ 80.0 million of shares , and we plan to continue share repurchases in 2026 and b eyond. 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 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 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 effort. These items may include restructuring, exit and impairment costs, special tax items, acquisition-related costs, and certain other unusual adjustments.

For a discussion of Brunswick's consolidated results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, refer to Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2024 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 14, 2025.

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IT Security Incident

In June 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.

Acquisitions

On September 12, 2024, we acquired additional Freedom Boat Club franchise operations and territories in Southeast Florida for net cash consideration of $31.3 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 the U.S. dollar 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 26 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 Sales

(in millions)

GAAP

Currency Impact

Acquisition Impact

Propulsion

Engine P&A

Navico Group

Boat

Segment Eliminations

Total

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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 2025 and 2024:

(in millions, except per share data)

Net sales

Cost of sales

Gross margin (A)

Selling, general and administrative expense

Research and development expense

Restructuring, exit and impairment charges

Operating (loss) earnings

Equity earnings

Other (expense) income, net

(Loss) earnings before interest and income taxes

Interest expense

Interest income

Gain (loss) on early extinguishment of debt

(Loss) earnings before income taxes

Income tax provision

Net (loss) earnings from continuing operations

Net (loss) from discontinued operations, net of tax

Net (loss) earnings

Diluted (loss) earnings per common share from continuing operations

Expressed as a percentage of Net sales:

Gross margin (A)

(100) bps

Selling, general and administrative expense

160 bps

Research and development expense

(10) bps

Restructuring, exit and impairment charges

430 bps

Operating margin

(670) 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.

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The following is a reconciliation of our non-GAAP measures, adjusted operating earnings and adjusted diluted earnings per common share from continuing operations for 2025 and 2024:

Operating (loss) Earnings

Diluted (Loss) Earnings Per Share

(in millions, except per share data)

GAAP

Restructuring, exit and impairment charges

Purchase accounting amortization

Acquisition, integration, and IT related costs

Special tax items (A)

(Gain) loss on early extinguishment of debt

Release of dissolved entity foreign currency translation

Gain on sale of business

As Adjusted

GAAP operating margin

Adjusted operating margin

(A) Special tax items during the year ended December 31, 2025 primarily relates to the discrete income tax benefit associated with goodwill impairment and 2024 tax return to provision adjustments. Special tax items during the year ended December 31, 2024 primarily relate to the discrete income tax expense recorded associated with an increase in the state valuation allowance and the discrete income tax benefit associated with goodwill impairment.

Net sales increased 2.4 percent during 2025 when compared with 2024. The components of the consolidated net sales change were as follows:

Percent change in net sales compared to the prior year

Volume

Product Mix and Price

Acquisitions

Currency

Sales in 2025 increased compared to the prior year resulting from improved second-half market conditions and resulting stronger wholesale orders together with strong P&A and after market performance that helped overcome the impacts of the challenging first-half retail environment. Refer to the Propulsion, Engine P&A, Navico Group and Boat segments for further details on the drivers of net sales changes.

Gross margin decreased 100 basis points in 2025 when compared with 2024 driven by material inflation including tariffs (250 bps), partially offset by an increase in sales (120 bps), favorable currency exchange-rate fluctuations (20 bps), and higher absorption (10 bps).

Selling, general and administrative expenses as a percentage of net sales increased 160 basis points during 2025 when compared with the same prior year period, primarily due to the reinstatement of variable compensation (194 bps), which was partially offset by higher sales (34 bps). Research and development expense remained flat during 2025 versus 2024.

During 2025, we recorded restructuring, exit and impairment charges of $353.1 million compared with $121.7 million in 2024. Restructuring, exit and impairment charges include $322.5 million and $85.0 million of Navico Group impairments in 2025 and 2024 respectively. We estimate that the restructuring actions executed in 2025 will result in approximately $16.0 million of annualized cost savings. See Note 3 – Restructuring, Exit and Impairment Activities in the Notes to Consolidated Financial Statements for further details.

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We recognized Equity earnings (loss) of $7.0 million and $8.6 million in 2025 and 2024, respectively, which were mainly related to our marine and technology-related joint ventures. Refer to Note 1 – Significant Accounting Policies in the Notes to Consolidated Financial Statements for further information.

We recognized $(1.6) million and $9.0 million in 2025 and 2024, respectively, in Other (loss) income, net. Other (loss) income, net primarily includes remeasurement gains and losses resulting from changes in foreign currency rates and other postretirement benefit costs as well as the gain on sale of one of our businesses in 2024.

Net interest expense decreased in 2025 compared with 2024 due to a decrease in average daily debt outstanding, which was driven by early extinguishment of debt. We recognized a gain on early extinguishment of debt related to the tender offer slightly offset by a loss on early extinguishment of debt related to 2048 Notes and 2049 Notes. Refer to Note 14 – Debt in the Notes to Consolidated Financial Statements.

We recognized an income tax provision of $0.2 million and $54.0 million in 2025 and 2024, respectively. For the year ended December 31, 2025 the effective income tax rate differed from the statutory federal income tax rate of 21%, primarily due to the impact of the goodwill and intangible asset impairments. The effective tax rate, which is calculated as the income tax provision as a percentage of earnings before income taxes, was (0.2) percent and 26.6 percent for 2025 and 2024, 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 (loss) earnings, Net (loss) earnings from continuing operations, and Diluted (loss) earnings per common share from continuing operations decreased during 2025. Diluted (loss) 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.

Propulsion Segment

The following table sets forth Propulsion segment results and a reconciliation to our non-GAAP measure of adjusted operating earnings for the years ended December 31, 2025 and 2024:

(in millions)

Net sales

GAAP operating earnings

Restructuring, exit and impairment charges

Purchase accounting amortization

Acquisition, integration, and IT related costs

Adjusted operating earnings

GAAP operating margin

(280) bps

Adjusted operating margin

(330) bps

bps = basis points

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Propulsion segment's net sales increased 5 percent in 2025 versus prior year due to pricing actions and strong OEM orders. The components of the Propulsion segment's net sales change were as follows:

Percent change in net sales compared to the prior year

Volume

Product Mix and Price

Currency

International sales were 37 percent of the Propulsion segment's net sales in 2025. International sales increased 8 percent year-over-year on a GAAP basis and 8 percent on a constant currency basis.

Propulsion segment's operating earnings decreased versus the prior year, primarily due to the impact of incremental tariffs and reinstatement of variable compensation slightly offset by increased sales and higher absorption.

Engine P&A Segment

The following table sets forth Engine P&A segment results and a reconciliation to our non-GAAP measure of adjusted operating earnings for the years ended December 31, 2025 and 2024:

(in millions)

Net sales

GAAP operating earnings

Restructuring, exit and impairment charges

Adjusted operating earnings

GAAP operating margin

(80) bps

Adjusted operating margin

(130) bps

NM = not meaningful

bps = basis points

Engine P&A segment's net sales increased 4.9 percent in 2025 versus the prior year reflecting strong boater participation and continued share gains in our distribution business line. 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

Volume

Product Mix and Price

Currency

International sales were 29 percent of the Engine P&A segment's net sales in 2025. International sales increased 2 percent year-over-year on a GAAP basis and increased 1 percent on a constant currency basis.

Engine P&A segment's operating earnings increased slightly versus prior year primarily due to increased sales, which were partially offset by the reinstatement of variable compensation and tariffs.

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Navico Group Segment

The following table sets forth Navico Group segment results and a reconciliation to our non-GAAP measure of adjusted operating earnings for the years ended December 31, 2025 and 2024:

(in millions)

Net sales

GAAP operating loss

Restructuring, exit and impairment charges

Purchase accounting amortization

Acquisition, integration, and IT related costs

Adjusted operating earnings

GAAP operating margin

Adjusted operating margin

(60) bps

NM = not meaningful

bps = basis points

Navico Group segment's net sales were flat in 2025 versus the prior year. The components of the Navico Group segment's net sales change were as follows:

Percent change in net sales compared to the prior year

Volume

Product Mix and Price

Currency

International sales were 42 percent of the Navico Group segment's net sales in 2025. International sales increased 2 percent year-over-year on a GAAP and slight decrease on a constant currency basis.

Navico Group segment's operating loss increased versus the prior year primarily due to the impact of non-cash, intangible asset impairment charges along with the impact of tariffs and reinstatement of variable compensation.

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Boat Segment

The following table sets forth Boat segment results and a reconciliation to our non-GAAP measure of adjusted operating earnings for the years ended December 31, 2025 and 2024:

(in millions)

Net sales

GAAP operating earnings

Restructuring, exit and impairment charges

Purchase accounting amortization

Acquisition, integration, and IT related costs

Adjusted operating earnings

GAAP operating margin

(200) bps

Adjusted operating margin

(130) bps

NM = not meaningful

bps = basis points

Boat segment's net sale s slightly decreased in 2025 versus the prior year as second half growth only partially offset first half cautious wholesale ordering patterns. The components of the Boat segment's net sales change were as follows:

Percent change in net sales compared to the prior year

Volume

Product Mix and Price

Acquisitions

Currency

International sales were 20 percent of the Boat segment's net sales in 2025. International sales decreased 2 percent year-over-year on a GAAP basis and 3 percent on a constant currency basis.

Boat segment operating earnings decreased versus the prior year due to the lower volume, impact of tariffs, and reinstatement of variable compensation.

Corporate/Other

The following table sets forth Corporate/Other results and a reconciliation to our non-GAAP measure of adjusted operating loss for the years ended December 31, 2025 and 2024:

(in millions)

GAAP operating loss

Restructuring, exit and impairment charges

Adjusted operating loss

Corporate operating loss increased compared with 2024 driven by higher variable compensation costs slightly offset by lower restructuring charges compared to prior year.

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Cash Flow, Liquidity and Capital Resources

The following table sets forth data from our Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024:

(in millions)

Net cash provided by operating activities

Net cash used for investing activities

Net cash used for financing activities

Effect of exchange rate changes

Net decrease in Cash and cash equivalents and Restricted cash

Cash and cash equivalents and Restricted cash at beginning of period

Cash and cash equivalents and Restricted cash at end of period

The following table sets forth an analysis of free cash flow for the years ended December 31, 2025 and 2024:

(in millions)

Net cash provided by operating activities of continuing operations

Net cash (used for) provided by:

Plus: Capital expenditures

Plus: Proceeds from the sale of property, plant and equipment

Plus: Effect of exchange rate changes on cash and cash equivalents

Total free cash flow (A)

(A) We define "Free cash flow" as cash flow from operating and investing activities of continuing operations (excluding cash provided by or used for acquisitions, investments, purchases or sales/maturities of marketable securities and other investing activities, net of tax) and the effect of exchange rate changes on cash and cash equivalents. Free cash flow is not intended as an alternative measure of cash flow from operations, as determined in accordance with GAAP in the United States. We use this financial measure both in presenting results to shareholders and the investment community and in our internal evaluation and management of our businesses. We believe that this financial measure and the information it provides are useful to investors because it permits investors to view our performance using the same tool that we use to gauge progress in achieving our goals. We believe that the non-GAAP financial measure "Free cash flow" is also useful to investors because it is an indication of cash flow that may be available to fund investments in future growth initiatives.

Our major sources of funds for capital investments, acquisitions, share repurchase programs and dividend payments are cash generated from operating activities, available cash and marketable securities balances, divestitures and borrowings. We evaluate potential acquisitions, divestitures and joint ventures in the ordinary course of business.

2025 Cash Flow

Net cash provided by operating activities of continuing operations in 2025 totaled $585.7 million versus $449.5 million in 2024. The primary drivers of Net cash provided by operating activities of continuing operations in 2025 were net earnings, net of non-cash items, and working capital. Net inventory decreased $114.3 million primarily due to lower production. Accounts and notes receivable increased $73.4 million primarily due to increased sales and timing of collections. Accounts payable decreased $26.1 million, primarily due to lower purchasing resulting from reduced production. Accrued expenses increased $96.8 million, primarily driven by an increase in accrued variable compensation.

Net cash used for investing activities was $141.6 million, which included $165.8 million of capital expenditures, and $12.6 million of proceeds from sales of property, plant and equipment. Our capital spending was focused on investments in new products and technologies.

Net cash used for financing activities was $441.2 million, which included $412.6 million of payments of long-term debt including current maturities, $80.0 million of common stock repurchases, $112.6 million of cash dividends paid to common shareholders, partially offset by $173.1 million of proceeds from issuances of short-term debt. Refer to Note 14 – Debt in the Notes to Consolidated Financial Statements for further details on our debt activity during the year ended December 31, 2025.

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Liquidity and Capital Resources

We view our highly liquid assets as of December 31, 2025 and 2024 as:

(in millions)

Cash and cash equivalents, at cost, which approximates fair value

Short-term investments in marketable securities

Total cash, cash equivalents and marketable securities

The following table sets forth an analysis of Total liquidity as of December 31, 2025 and 2024:

(in millions)

Cash, cash equivalents and marketable securities

Amounts available under lending facilities (A)

Total liquidity (B)

(A) See  Note 14 – Debt  in the Notes to Consolidated Financial Statements for further details on our lending facilities.

(B) We define Total liquidity as Cash and cash equivalents and Short-term investments in marketable securities as presented in the Consolidated Balance Sheets, plus amounts available for borrowing under our lending facilities. Total liquidity is not intended as an alternative measure to Cash and cash equivalents and Short-term investments in marketable securities as determined in accordance with GAAP in the United States. We use this financial measure both in presenting our results to shareholders and the investment community and in our internal evaluation and management of our businesses. We believe that this financial measure and the information it provides are useful to investors because it permits investors to view our performance using the same metric that we use to gauge progress in achieving our goals. We believe that the non-GAAP financial measure "Total liquidity" is also useful to investors because it is an indication of our available highly liquid assets and immediate sources of financing.

Cash, cash equivalents and marketable securities totaled $257.6 million as of December 31, 2025, a decrease of $12.2 million from $269.8 million as of December 31, 2024. Total debt as of December 31, 2025 and December 31, 2024 was $2,102.2 million and $2,340.6 million, respectively. Our debt-to-capitalization ratio was 56 percent and 55 percent as of December 31, 2025 and December 31, 2024, respectively.

There were no borrowings under the Revolving Credit Agreement (Credit Facility) during 2025. Available borrowing capacity under the Credit Facility as of December 31, 2025 totaled $994.0 million, net of $6.0 million of letters of credit outstanding. During 2025, the maximum amount utilized under our unsecured commercial paper program (CP Program) was $445.5 and as of December 31, 2025, we had $290.0 million of borrowings outstanding under the CP Program.

There were no borrowings under the Credit Facility during 2024. Available borrowing capacity under the Credit Facility as of December 31, 2024 totaled $997.0 million, net of $3.0 million of letters of credit outstanding. During 2024, the maximum amount utilized under our CP Program was $280.0 million.

The level of borrowing capacity under our Credit Facility and CP Program is limited by both a leverage and interest coverage test. These covenants also pertain to termination provisions included in our wholesale financing joint venture arrangements with Wells Fargo Commercial Distribution Finance. Based on our anticipated earnings generation throughout the year, we expect to maintain sufficient cushion against the existing debt covenants. As of December 31, 2025, we were in compliance with the financial covenants in the Credit Facility and CP Program.

We believe that we have adequate sources of liquidity to meet our short-term and long-term needs.

2026 Capital Strategy

We anticipate executing a thoughtful capital strategy in 2026 with planned debt reductions of approximately $160 million, capital expenditures of approximately $200 million, and $50 million of share repurchases, which could increase in the event cash generation outpaces initial expectations.

Financial Services

Refer to Note 8 – Financing Joint Venture in the Notes to Consolidated Financial Statements for more information about our financial services.

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Off-Balance Sheet Arrangements

Guarantees. We have reserves to cover potential losses associated with guarantees and repurchase obligations based on historical experience and current facts and circumstances. Historical cash requirements and losses associated with these obligations have not been significant. See Note 11 – Commitments and Contingencies in the Notes to Consolidated Financial Statements for a description of these arrangements.

Contractual Obligations

The following table sets forth a summary of our contractual cash obligations as of December 31, 2025:

Payments due by period

(in millions)

Total

Less than 1 year

1-3 years

3-5 years

More than 5 years

Contractual Obligations

Debt (A)

Interest payments on long-term debt

Operating leases (B)

Purchase obligations (C)

Deferred management compensation (D)

Other long-term liabilities (E)

Total contractual obligations

(A)    See Note 14 – Debt in the Notes to Consolidated Financial Statements for additional information on our debt. "Debt" refers to future cash principal payments. Debt also includes our finance leases as discussed in Note 20 – Leases in the Notes to Consolidated Financial Statements.

(B)    See Note 20 – Leases in the Notes to Consolidated Financial Statements for additional information.

(C)    Purchase obligations represent agreements with suppliers and vendors as part of the normal course of business.

(D)    Amounts primarily represent long-term deferred compensation plans.

(E)    Other long-term liabilities primarily include long-term warranty contracts, future projected payments related to our nonqualified pension plans.

Legal Proceedings

See Note 11 – Commitments and Contingencies in the Notes to Consolidated Financial Statements.

Critical Accounting Estimates

The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amount of reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. If current estimates for the cost of resolving any specific matters are later determined to be inadequate, results of operations could be adversely affected in the period in which additional provisions are required. We have discussed the development and selection of the critical accounting policies with the Audit and Finance Committee of the Board of Directors and believe the following are the most critical accounting policies that could have an effect on our reported results.

Revenue Recognition and Sales Incentives. Revenue is recognized as performance obligations under the terms of contracts with customers are satisfied; this occurs when control of promised goods (engines, parts and accessories, and boats) is transferred to the customer. We exercise judgment and consider the timing of right to payment, transfer of risk and rewards, transfer of title, transfer of physical possession, and customer acceptance when determining when control transfers to the customer. We recognize revenue related to the sale of extended warranty contracts that extend the coverage period beyond the standard warranty period over the life of the extended warranty period.

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Revenue is measured as the amount of consideration expected to be entitled to in exchange for transferring goods or providing services. We have excluded sales, value add, and other taxes collected concurrent with revenue-producing activities from the determination of the transaction price for all contracts. We exercise judgment when determining the transaction price, including the estimate of discounts, which is partly based on estimates of customer sales volumes. These estimates are subject to uncertainty as historical discount experience and sales volumes may not be consistent with future activity. We have elected to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment activity. For all contracts with customers, we have not adjusted the promised amount of consideration for the effects of a significant financing component as the period between the transfer of the promised goods and the customer's payment is expected to be one year or less.

See Note 2 – Revenue Recognition in the Notes to Consolidated Financial Statements for more information.

Warranty Reserves. We record an estimated liability for product warranties at the time revenue is recognized. The liability is estimated using historical warranty experience, projected claim rates and expected costs per claim. We exercise judgment when determining the appropriate historical periods to project claim rates and expected costs per claim. Further, these estimates are subject to uncertainty as historical warranty experience may not be consistent with future warranty claims. We adjust our liability for specific warranty matters when they become known and the exposure can be estimated. Our warranty liabilities are affected by product failure rates as well as material usage and labor costs incurred in correcting a product failure. If actual costs differ from estimated costs, we must make a revision to the warranty liability, which could have an adverse impact on our results of operations and cash flows.

Goodwill. Goodwill results from the excess of purchase price over the net assets of businesses acquired. We review goodwill for impairment annually and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. As part of the annual test, we may perform a qualitative, rather than quantitative, assessment to determine whether the fair values of our reporting units are "more likely than not" to exceed their carrying values. In performing this qualitative analysis, we consider various factors, including the effect of market or industry changes and the reporting units' actual results compared with projected results. We exercise judgment when evaluating the impact of market and industry changes and when comparing actual results to projected results.

If the fair value of a reporting unit does not meet the "more likely than not" criteria discussed above, we perform a quantitative assessment which begins by measuring the fair value of the reporting unit. If the carrying value of the reporting unit exceeds its fair value, a goodwill impairment is recorded equal to the carrying value of the reporting unit less its fair value, not to exceed the carrying value of goodwill.

We calculate the fair value of our reporting units considering both the income approach and the guideline public company method, a form of the market approach. The income approach calculates the fair value of the reporting unit using a discounted cash flow approach utilizing a Gordon Growth model. Internally forecasted future cash flows, which we believe reasonably approximates market participant assumptions, are discounted using a weighted average cost of capital (Discount Rate) developed for each reporting unit. The Discount Rate is developed using market observable inputs, as well as considering whether or not there is a measure of risk related to the specific reporting unit’s forecasted performance. We exercise judgment when forecasting future cash flows including the performance of the underlying market in which the reporting unit operates as well as the impact of specific initiatives. We exercise judgment when determining the level of risk associated with achieving the forecasted future cash flows. These estimates are subject to uncertainty as actual results may differ from our forecast. If actual results differ from the forecast, our results of operations could be materially adversely affected. Fair value under the guideline public company method is determined for each reporting unit by applying market multiples for comparable public companies to the unit’s current and forecasted financial results. We exercise judgment when determining the comparable public companies and market multiples. The key uncertainties in these calculations are the assumptions used in determining the reporting unit’s forecasted future performance, including revenue growth and operating margins, as well as the perceived risk associated with those forecasts in determining the Discount Rate, along with selecting representative market multiples.

We recorded a $305.8 million and $80.0 million impairment of the Navico Group reporting unit's goodwill in 2025 and 2024, respectively.

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Other Intangible Assets. Our primary other intangible assets are customer relationships, trade names, and developed technology acquired in business combinations. Intangible assets are initially valued using a methodology commensurate with the intended use of the asset. Customer relationships, trade names, and developed technology are valued using the income approach. The fair value of customer relationships is measured using the multi-period excess earnings method (MPEEM). The fair value of trade names and developed technology are measured using a relief-from-royalty (RFR) approach, which assumes the value of the trade name or technology is the discounted amount of cash flows that would be paid to third parties had we not owned the trade name or technology and instead licensed the trade name or technology from another company. Higher royalty rates are assigned to premium brands within the marketplace based on name recognition and profitability, while other brands receive lower royalty rates. We exercise judgment when selecting the royalty rates and evaluating profitability. The basis for future sales projections for both the RFR and MPEEM are internal revenue forecasts which we believe represent reasonable market participant assumptions. We exercise judgment when forecasting revenue including the performance of the underlying market in which the intangible asset operates as well as the impact of specific initiatives. The future cash flows are discounted using an applicable Discount Rate as well as any potential risk premium to reflect the inherent risk of holding a standalone intangible asset. We exercise judgment when determining the level of risk associated with achieving the forecasted revenue. For MPEEM calculations, we exercise judgment in determining the customer attrition rate, which is generally based on historical experience. These estimates are subject to uncertainty as actual results may differ from our forecast. If actual results differ from the forecast including higher than anticipated customer attrition, our results of operations could be materially adversely affected.

The key uncertainties in the RFR and MPEEM calculations, as applicable, are: the selection of an appropriate royalty rate, assumptions used in developing internal revenue growth and expense forecasts, assumed customer attrition rates, as well as the perceived risk associated with those forecasts in determining the Discount Rate and risk premium.

The costs of amortizable intangible assets are recognized over their expected useful lives, typically between three and fifteen years, using the straight-line method. Intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate long-lived assets. Intangible assets not subject to amortization are assessed for impairment at least annually and whenever events or changes in circumstances indicate that it is more likely than not that an asset may be impaired. The impairment test for indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset. We recorded impairment charges of $16.7 million during the year ended December 31, 2025 related to various Navico trade names. We recorded impairment charges of $5.0 million during the year ended December 31, 2024 related to the Navico trade name. We recorded impairment charges of $16.6 million during the year ended December 31, 2023, including a $13.0 million impairment of the Navico trade name.

Refer to Note 4 – Acquisitions and Note 9 – Goodwill and Other Intangibles in the Notes to Consolidated Financial Statements for more information.

Recent Accounting Pronouncements

See Note 1 – Significant Accounting Policies in the Notes to Consolidated Financial Statements for the recent accounting pronouncements that have been adopted during the year ended December 31, 2025, or will be adopted in future periods.