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Share-Based Compensation
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Apr. 04, 2015
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| Share-Based Compensation |
Note 6 – Share-Based Compensation
Under the Brunswick Corporation 2014 Stock Incentive Plan (Plan), the Company may grant stock options, stock appreciation rights (SARs), non-vested stock awards and performance awards to executives, other employees and non-employee directors, with 5.0 million shares from treasury shares and from authorized, but unissued, shares of common stock initially available for grant, in addition to any shares reacquired by the Company through the forfeiture of past awards, or settlement of such awards in cash. As of April 4, 2015, 5.3 million shares remained available for grant.
Stock Options and SARs
Through 2004, the Company issued stock options, and between 2005 and 2012, the Company issued stock-settled SARs. The Company has not issued SARs since 2012. In the three months ended April 4, 2015 and March 29, 2014, there was $0.1 million and $0.3 million, respectively, of total expense after adjusting for forfeitures, due to amortization of SARs previously granted.
Non-vested stock awards
The Company grants both stock-settled and cash-settled non-vested stock units and awards to key employees as determined by the Human Resources and Compensation Committee. The Company granted 0.2 million and 0.3 million of stock awards during the three months ended April 4, 2015 and March 29, 2014, respectively. The Company recognizes the cost of non-vested stock units and awards on a straight-line basis over the requisite service period. Additionally, cash-settled non-vested stock units and awards are recorded as a liability in the balance sheet and adjusted to fair value each reporting period through stock compensation expense. During the three months ended April 4, 2015 and March 29, 2014, $3.6 million and $2.2 million, respectively, was charged to compensation expense for non-vested stock awards.
As of April 4, 2015, the Company had $15.5 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. The Company expects this cost to be recognized over a weighted average period of 1.5 years.
Performance Awards
In the first quarter of 2015 and 2014, the Company granted 0.1 million performance shares to certain senior executives. The 2015 share awards are based on three performance measures--a cash flow return on investment (CFROI) measure, an operating margin (OM) measure and a total shareholder return (TSR) modifier. The 2014 share awards are based on a CFROI measure and a TSR modifier. Performance shares are earned based on a three-year performance period and a one-year performance period, commencing at the beginning of the calendar year of each grant, for the 2015 and 2014 share grants, respectively. The performance shares are then subject to a TSR modifier based on stock returns measured against stock returns of a predefined comparator group over a three-year performance period which starts at the beginning of the calendar year of each grant. Additionally, in February 2015 and 2014, the Company granted 22,990 and 24,600 performance shares, respectively, to certain officers and certain senior managers based on the respective measures and performance periods described above but excluding a TSR modifier. Based on projections of probable attainment of the CFROI and OM measures and the projected TSR modifier used to determine the performance awards, $1.2 million and $1.6 million was charged to compensation expense for the three months ended April 4, 2015 and March 29, 2014, respectively.
The fair values of the senior executives' performance share award grants with a TSR modifier at the grant date in 2015 and 2014 were $56.17 and $41.38, respectively, which were estimated using the Monte Carlo valuation model, and incorporated the following assumptions:
The fair value of the certain officers and certain senior managers' performance awards granted that were not subject to a TSR modifier was $52.39 and $40.44, which was based on the stock price on the date of grant in 2015 and 2014, respectively.
As of April 4, 2015, the Company had $7.4 million of total unrecognized compensation cost related to performance awards. The Company expects this cost to be recognized over a weighted average period of 1.2 years.
Director Awards
The Company issues stock awards to non-employee directors in accordance with the terms and conditions determined by the Nominating and Corporate Governance Committee of the Board of Directors. A portion of each director’s annual fee is paid in Brunswick common stock, the receipt of which may be deferred until a director retires from the Board of Directors. Each director may elect to have the remaining portion paid in cash, in Brunswick common stock distributed at the time of the award, or in deferred Brunswick common stock units with a 20 percent premium.
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