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Investments
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Dec. 31, 2014
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| Investments |
Note 9 – Investments
Investments in Marketable Securities
The Company invests a portion of its cash reserves in marketable debt securities. These investments are reported in Short-term investments in marketable securities on the Consolidated Balance Sheets. Furthermore, the debt securities have readily determinable market values and are being accounted for as available-for-sale investments. These investments are recorded at fair value with unrealized gains and losses reflected in Accumulated other comprehensive loss, a component of Shareholders’ equity on the Company’s Consolidated Balance Sheets, on an after-tax basis.
The following is a summary of the Company’s available-for-sale securities, all due in one year or less, as of December 31, 2014:
The following is a summary of the Company’s available-for-sale securities, all due in one year or less, as of December 31, 2013:
The Company had $11.9 million in redemptions of available-for-sale securities during 2014. The Company had $116.9 million in redemptions and $35.7 million in sales of available-for-sale securities during 2013. During the second quarter of 2013, proceeds from the redemptions and sales of available-for-sale securities were used to repurchase outstanding Senior notes due in 2016. Refer to Note 16 – Debt for more information.
At each reporting date, management reviews the debt securities to determine if any loss in the value of a security below its amortized cost should be considered “other-than-temporary.” For the evaluation, management determines whether it intends to sell, or if it is more likely than not that it will be required to sell, the securities. This determination considers current and forecasted liquidity requirements, regulatory and capital requirements and the strategy for managing the Company’s securities portfolio. For all impaired debt securities for which there was no intent or expected requirement to sell, the evaluation considers all available evidence to assess whether it is likely the amortized cost value will be recovered. The Company also considers the nature of the securities, the credit rating or financial condition of the issuer, the extent and duration of the unrealized loss and market conditions. As of December 31, 2014, there were no unrealized losses related to debt securities that required management evaluation.
Equity Investments
The Company has certain unconsolidated international and domestic affiliates that are accounted for using the equity method. The equity method is applied in situations where the Company has the ability to exercise significant influence, but not control, over the investees. Management reviews equity investments for impairment whenever indicators are present suggesting that the carrying value of an investment is not recoverable. The following items are examples of impairment indicators: significant, sustained declines in an investee’s revenue, earnings, and cash flow trends; adverse market conditions of the investee’s industry or geographic area; the investee’s inability to execute its operating plan; the investee’s ability to continue operations measured by several items, including liquidity; and other factors. Once an impairment indicator is identified, management uses considerable judgment to determine if the decline in value is other than temporary, in which case the equity investment is written down to its estimated fair value, which could significantly adversely impact reported results of operations.
In the fourth quarter of 2014, the Company determined that the fair value of its 36 percent investment in Bella-Veneet Oy (Bella), a Finnish boat manufacturer, had declined significantly as a result of the inability of the business to achieve profitability due to weak market conditions for its products, which has led to significant declines in revenue. The Company calculates fair value using the income approach described in the Goodwill and Other Intangibles section of Note 1 – Significant Accounting Policies. As a result of performing its analysis, the Company determined that the book value of its investment exceeded its fair value and concluded that this decline in value was other than temporary. The Company recorded a $20.2 million charge during the fourth quarter of 2014 in order to reflect the fair value of the Company’s investment in Bella of $1.1 million. This charge is reported as Impairment of equity method investment in the Consolidated Statements of Operations. Management performed similar analyses in 2013 and 2012 and concluded that no impairment adjustments were required.
Refer to Note 10 – Financial Services for more details on the Company’s Brunswick Acceptance Company, LLC joint venture. The Company contributed $0.9 million and $0.8 million in 2014 and 2013, respectively, to fund a part ownership of Mercury Finance, a joint venture between Brunswick's Mercury Marine division and Allied Credit, an Australian-based finance company. The Company did not make any contributions to its other joint ventures in 2012.
Brunswick did not receive any dividends from its unconsolidated affiliates in 2014 or 2012, but did receive $0.3 million of dividends in the year ended December 31, 2013.
The Company's sales to and purchases from its equity investments, along with the corresponding receivables and payables, were not material to the Company's overall results of operations for the years ended December 31, 2014, 2013, and 2012, or its financial position as of December 31, 2014 and 2013.
In December 2011, the Company announced plans to dissolve the Cummins MerCruiser Diesel Marine LLC joint venture between Brunswick's Mercury Marine division and Cummins Marine, a division of Cummins Inc. During the second quarter of 2012, the joint venture ceased operations and began the liquidation process as the joint venture's business activities were transitioned to the parent companies. The liquidation process was completed in 2013.
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