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Share-Based Compensation
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Sep. 28, 2013
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| Share-based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation |
Note 6 – Share-Based Compensation
Under the 2003 Stock Incentive Plan (Plan), the Company may grant stock options, stock appreciation rights (SARs), non-vested stock and other types of share-based awards to executives and other management employees. Under the Plan, the Company may issue up to 13.1 million shares from treasury shares and from authorized, but unissued, shares of common stock. As of September 28, 2013, 2.0 million shares remained available for grant.
Stock Options and SARs
Since the beginning of 2005, the Company has issued stock-settled SARs and has not issued any stock options. The Company has not issued SARs in 2013. During the three months and nine months ended September 29, 2012, the Company granted 0.0 million and 0.4 million SARs, respectively. In the three months and nine months ended September 28, 2013, there was $0.5 million and $2.4 million, respectively, of total expense after adjusting for forfeitures, due to amortization of SARs granted. In the three months and nine months ended September 29, 2012, there was $1.6 million and $4.9 million, respectively, of total expense after adjusting for forfeitures, due to amortization of SARs granted.
The weighted average fair value of individual SARs granted during the first quarter of 2012 was $12.70. The Company estimated the fair value of the grant on the date of grant using the Black-Scholes-Merton pricing model, utilizing the following weighted average assumptions for 2012:
(A) The Company uses a combination of implied and historical volatility in calculating the fair value of each grant.
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. During the three months and nine months ended September 28, 2013, the Company granted 0.0 million and 0.3 million stock awards, respectively. The Company granted 0.0 million and 0.3 million of stock awards during the three months and nine months ended September 29, 2012. The Company recognizes the cost of non-vested stock 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, which is adjusted to fair value each reporting period through stock compensation expense. During the three months and nine months ended September 28, 2013, $2.7 million and $7.4 million, respectively, was charged to compensation expense for non-vested stock awards. During the three months and nine months ended September 29, 2012, $1.6 million and $4.3 million, respectively, was charged to compensation expense for non-vested stock awards.
As of September 28, 2013, the Company had $7.1 million of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan. The Company expects this cost to be recognized over a weighted average period of 1.1 years.
Performance Awards
In both February 2013 and 2012, the Company granted 0.1 million performance shares to certain senior executives. The share awards are based on two performance measures--a cash flow return on investment (CFROI) measure and a total shareholder return (TSR) modifier. Target performance shares are earned during a one-year CFROI performance period, commencing at the beginning of the calendar year of each grant. The target performance shares earned from CFROI performance are then subject to a TSR modifier based on performance against 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 2013, the Company granted 26,000 performance shares to non-executive officers and certain senior managers based solely on the CFROI measure utilizing the same one-year performance period mentioned above. Based upon projections of probable attainment of the CFROI measure and the projected TSR modifier used to determine the performance awards, $1.7 million and $4.0 million, respectively, was charged to compensation expense for the three months and nine months ended September 28, 2013. In the three months and nine months ended September 29, 2012, $0.6 million and $1.7 million, respectively, was charged to compensation expense based upon projections of probable attainment of the CFROI measure and the projected TSR modifier used to determine the performance awards.
The fair values of the senior executives' performance awards with a TSR modifier at the grant date in 2013 and 2012 were $35.93 and $26.81, respectively, which were estimated using the Monte Carlo valuation model, and incorporated the following assumptions:
The fair value of the non-executive officers and certain senior managers' performance awards granted based solely on the CFROI performance factor was $34.65.
As of September 28, 2013, the Company had $2.2 million of total unrecognized compensation cost related to performance awards. The Company expects this cost to be recognized over a weighted average period of 1.2 years. As of September 28, 2013, 15,400 share awards granted in 2012 remain unvested resulting in $0.2 million of total unrecognized compensation cost that the Company expects to be recognized over a weighted average period of 1.3 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. One-half 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 one-half 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. Prior to May 2009, each non-employee director also received an annual grant of restricted stock units, which is deferred until the director retires from the Board.
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