Financing Joint Venture
|12 Months Ended|
Dec. 31, 2021
|Financial Services [Abstract]|
|Financial Services||Financing Joint Venture
The Company, through its Brunswick Financial Services Corporation (BFS) subsidiary, owns a 49 percent interest in a joint venture, Brunswick Acceptance Company, LLC (BAC). CDF Joint Ventures, LLC (CDFJV), a subsidiary of Wells Fargo and Company, owns the remaining 51 percent.
In March of 2021, the parties entered into an amended and restated joint venture agreement (JV Agreement) to extend the term of their financial services through December 31, 2025, which included expanded financing to FBC franchisees. The JV Agreement contains a financial covenant that conforms to the maximum leverage ratio test in the Credit Facility described in Note 16 – Debt. The joint venture agreement contains provisions allowing for the renewal of the agreement or the purchase of the other party's interest in the joint venture at the end of its term. Alternatively, either partner may terminate the agreement at the end of its term.
BAC is funded in part through a $1.0 billion secured borrowing facility from Wells Fargo Commercial Distribution Finance, LLC (WFCDF), which is in place through the term of the joint venture, and with equity contributions from both partners. BAC also sells a portion of its receivables to a securitization facility, the Wells Fargo Dealer Floorplan Master Note Trust, which is arranged by Wells Fargo. The sales of these receivables meet the requirements of a "true sale" and are therefore not retained on the financial statements of BAC. Neither the Company nor any of its subsidiaries guarantee the indebtedness of BAC. In addition, BAC is not responsible for any continuing servicing costs or obligations with respect to the securitized receivables.
The Company considers BFS's investment in BAC as an investment in a variable interest entity of which the Company is not the primary beneficiary. As a result, the Company accounts for BFS's investment in BAC under the equity method and records it as a component of Equity investments in its Consolidated Balance Sheets. The Company records BFS's share of income or loss in BAC based on its ownership percentage in the joint venture in Equity earnings in its Consolidated Statements of Operations. BFS's equity investment is adjusted monthly to maintain a 49 percent interest in accordance with the capital provisions of the joint venture agreement. The Company funds its investment in BAC through cash contributions and reinvested earnings. BFS's total investment in BAC as of December 31, 2021 and December 31, 2020 was $11.0 million and $12.0 million, respectively.
The Company's maximum loss exposure relating to BAC is detailed as follows:
(A)Repurchase and recourse obligations are off-balance sheet obligations provided by the Company for the Propulsion, Parts & Accessories and Boat segments, respectively, and are included within the Maximum Potential Obligations disclosed in Note 13 – Commitments and Contingencies. Repurchase and recourse obligations include a North American repurchase agreement with WFCDF and could be reduced by repurchase activity occurring under other similar agreements with WFCDF and affiliates. The Company's risk under these repurchase arrangements is partially mitigated by the value of the products repurchased as part of the transaction. Amounts above exclude any potential recoveries from the value of the repurchased product.
(B)Represents accrued amounts for potential losses related to recourse exposure and the Company's expected losses on obligations to repurchase products, after giving effect to proceeds anticipated to be received from the resale of these products to alternative dealers.
BFS recorded income related to the operations of BAC of $2.1 million, $4.6 million and $6.9 million in Equity earnings in the Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019, respectively.
BFS reported cash flows from operating activities of $2.1 million, $4.3 million and $7.6 million within Other, net on the Consolidated Statements of Cash Flows in 2021, 2020 and 2019, respectively.
In 2021, BFS reported net cash flows from investing activities within Investments on the Consolidated Statements of Cash flows. Such cash flows for 2021 were $2.5 million, consisting of $6.5 million of cash received and $(4.0) million of cash contributions; in 2020 were $7.2 million, consisting of $10.3 million of cash received and $(3.1) million of cash contributions; and in 2019 were $2.2 million, consisting of $7.9 million of cash received and $(5.7) million of cash contributions.