Quarterly report pursuant to Section 13 or 15(d)

Share-Based Compensation

Share-Based Compensation
3 Months Ended
Apr. 02, 2022
Share-Based Payment Arrangement, Noncash Expense [Abstract]  
Share-Based Compensation Share-Based Compensation
Under the Brunswick Corporation 2014 Stock Incentive Plan, the Company may grant stock appreciation rights ("SARs"), non-vested stock units, and performance awards to executives, other employees and non-employee directors from treasury shares and from authorized, but unissued, shares of common stock initially available for grant, in addition to: (i) the forfeiture of past stock units and awards; (ii) shares not issued upon the net settlement of SARs; or (iii) shares delivered to or withheld by the Company to pay the withholding taxes related to stock units and awards. As of April 2, 2022, 4.4 million shares remained available for grant.

Share grant amounts, fair values, and fair value assumptions reflect all outstanding stock units and awards for both continuing and discontinued operations.

Non-Vested Stock Units

The Company grants both stock-settled and cash-settled non-vested stock units to key employees as determined by management and the Human Resources and Compensation Committee of the Board of Directors. The Company granted 0.2 million of stock units during both the three months ended April 2, 2022 and April 3, 2021. The Company recognizes the cost of non-vested stock units on a straight-line basis over the requisite vesting period. Additionally, cash-settled non-vested stock units are recorded as a liability on the balance sheet and adjusted to fair value each reporting period through stock compensation expense. During the three months ended April 2, 2022 and April 3, 2021, the Company charged $3.7 million and $2.9 million, respectively, to compensation expense for non-vested stock units.

As of April 2, 2022, there was $26.9 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 1.6 years.

Performance Awards

The Company granted 0.2 million performance shares to certain senior executives for each of the three months ended April 2, 2022 and April 3, 2021. Performance 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. Performance shares are earned based on a three-year performance period commencing at the beginning of the calendar year of each grant. The performance shares earned are then subject to a TSR
modifier based on the Company's stock returns measured against stock returns of a predefined comparator group over a three-year performance period. Additionally, in February 2022 and 2021, the Company granted 24,320 and 24,560 performance shares, respectively, to certain officers and certain senior managers based on the respective measures and performance periods described above but excluding the TSR modifier. During the three months ended April 2, 2022 and April 3, 2021, the Company recognized a charge of $0.6 million and $3.2 million, respectively, to compensation expense based on projections of probable attainment of the performance measures and the projected TSR modifier used to determine the performance awards.

The fair values of the senior executives' performance share award grants with a TSR modifier for grants in 2022 and 2021 were $94.59 and $91.44, respectively, which were estimated using the Monte Carlo valuation model, and incorporated the following assumptions:
2022 2021
Risk-free interest rate 1.7  % 0.2  %
Dividend yield 1.5  % 1.2  %
Volatility factor 54.8  % 65.6  %
Expected life of award 2.9 years 2.9 years

The fair value of certain officers' and certain senior managers' performance awards granted based solely on the CFROI and OM performance factors was $91.62 and $87.48 in 2022 and 2021, respectively, which was equal to the stock price on the date of grant in 2022 and 2021, respectively, less the present value of expected dividend payments over the vesting period.

As of April 2, 2022, the Company had $13.2 million of total unrecognized compensation cost related to performance awards. The Company expects this cost to be recognized over a weighted average period of 1.5 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 with a 20 percent premium.