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•	Distribution, sales, service, engineering, or representative offices in Australia, Belgium, Brazil, Canada, China, Dubai, Finland, France, Italy, Japan, the Netherlands, New Zealand, Norway, Russia, Singapore, Sweden, and Switzerland;

•	Component, parts and accessories manufacturing, and light assembly facilities in Mexico, the Netherlands, New Zealand, and Northern Ireland;

•	An outboard engine assembly plant in Suzhou, China; and

•	An outboard engine assembly plant operated by a joint venture in Japan.

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•	their ability to access certain capital markets, such as the securitization and the commercial paper markets, and to fund their operations in a cost effective manner;

•	the performance of their overall credit portfolios;

•	their willingness to accept the risks associated with lending to marine dealers;

•	the overall creditworthiness of those dealers; and

•	the overall aging and level of pipeline inventories.

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•	financial pressures on our suppliers due to a weakening economy or unfavorable conditions in other end markets;

•	a deterioration of our relationships with suppliers;

•	events such as natural disasters, power outages or labor strikes;

•	an outbreak of disease or similar public health threat, such as the existing threat of coronavirus, particularly as it may impact our operations and supply chain in China;

•	supplier manufacturing constraints and investment requirements; or

•	labor disruption at major global ports and shipping hubs.

•	the steps we take to protect our proprietary technology may be inadequate to prevent misappropriation of our technology;

•	third parties may independently develop similar technology;

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•	agreements containing protections may be breached or terminated;

•	we may not have adequate remedies for breaches;

•	existing patent, trademark, copyright, and trade secret laws may afford limited protection;

•	a third party could copy or otherwise obtain and use our products or technology without authorization; or

•	we may be required to litigate to enforce our intellectual property rights, and we may not be successful.

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•	disruptions in core, adjacent, or acquired businesses that could make it more difficult to maintain business and operational relationships, including customer and supplier relationships;

•	the possibility that the expected synergies and value creation will not be realized or will not be realized within the expected time period;

•	the risk that unexpected costs will be incurred;

•	diversion of management attention; and

•	difficulties retaining employees.

•	unfavorable market and economic conditions;

•	the trading price of our common stock;

•	the nature and magnitude of other investment opportunities available to us from time to time; and

•	the availability of cash.

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(A)	Refer to Note 22 – Quarterly Data (unaudited), for further details on certain non-recurring items which impacted 2019 and 2018 results.

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•	Deliver revenue growth.

•	Increase earnings before income taxes, as well as deliver improvements in both gross margin and operating margin percentages, excluding non-recurring charges.

•	Continue to generate strong free cash flow and execute against the Company's capital strategy.

•	The decrease in GAAP net sales included a benefit of 4.1 percent relating to recent acquisitions, negative impacts from foreign exchange rate of 1 percent, and negative impact from the exit of Sport Yacht and Yacht operations of 1 percent.

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The U.S. engine and boat operations experienced total industry powerboat retail unit declines of 5 percent in 2019 versus an expectation at the beginning of the year of a low-to-middle single digit percent increase, reflecting a challenging retail environment during the first half of the year with volumes stabilizing in the second half. Outboard engine retail units were up slightly year-over-year.

•	The Marine Engine segment reported sales increases as the addition of Power Products and continued gains in higher horsepower outboard engine categories were partially offset by reductions in outboard engines 150 horsepower and below, as well as lower sales of sterndrive engines.

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Boat segment net sales decreased as a result of planned reductions in wholesale unit shipments of value pontoons and aluminum fish products. Saltwater fishing sales were affected by challenging comparisons between years at Boston Whaler due to leaning pipelines in advance of upcoming major product launches. Sales declines were partially offset by gains in other premium offerings, including Sea Ray Sport Boats and Cruisers.

•	International sales for the Company increased 3 percent in 2019 when compared with 2018 on a GAAP basis and increased 4 percent on a constant currency basis, excluding the impact of acquisitions and Sport Yacht and Yacht operations; the increase was driven by Europe, Asia-Pacific and Rest-of-World regions, partially offset by weakness in Canada.

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•	Reported earnings before income taxes of $110.7 million in 2019 compared with earnings before income taxes of $310.7 million in 2018; adjusted earnings before income taxes were $465.2 million in 2019 versus $461.7 million in 2018

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Gross margin improved 190 basis points when compared with 2018 and reflected the absence of Sport Yacht and Yacht operations and purchase accounting amortization associated with the Power Products acquisition, both of which negatively impacted 2018. Gross margin, as adjusted, improved 50 basis points as benefits from the Power Products acquisition and favorable changes in sales mix in the Marine Engine segment outweighed the impact of lower sales, tariffs and unfavorable changes in foreign exchange rates

•	Operating margin improved by 290 basis points when compared with the prior year due to the factors affecting gross margin percentage discussed above, as well as reduced restructuring, exit, impairment and other charges and acquisition-related costs. Operating margin, as adjusted, was up 50 basis points compared with 2018

•	Earnings before income taxes included a pre-tax, non-cash charge of $292.8 million relating to the exit of its remaining defined benefit pension plans during the year

•	Generated free cash flow of $250.4 million in 2019, and had cash flow from discontinued operations of $440.6 million including proceeds from the sale of Fitness, enabling the Company to continue executing its capital strategy as follows:

•	Funded investments in growth:

•	Organically through capital expenditures and research and development, which included investments in new products as well as capacity expansions, primarily within the Marine Engine segment

•	Through the acquisition of Freedom Boat Club for $64.1 million

•	Retired $300.0 million of near-term debt including the retirement of the Company’s 4.625 percent senior notes due 2021 and refinancing of acquisition-related debt

•	Completed the exit from the Company's qualified defined benefit pension plans

•	Enhanced shareholder returns in 2019 by repurchasing $400.0 million of common stock under the Company’s share repurchase program and increased cash dividends paid to shareholders to $73.4 million

•	Ended the year with $332.7 million of cash and marketable securities

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(A)	Gross margin is defined as Net sales less Cost of sales as presented in the Consolidated Statements of Operations.

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(A)	Includes IT transformation costs of $0.02 in 2019.

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(A)	See Note 4 – Restructuring, Exit and Impairment Activities in the Notes to Consolidated Financial Statements for further details.

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(A)	During 2019, results included $(0.7) million of charges within Net sales related to estimated retail sales incentives to support the sale of sport yachts and yachts currently in the dealer pipeline. During 2018, results included $16.0 million of charges within Net sales to support the sale of sport yachts and yachts in the dealer pipeline at that time. There were no comparable charges in 2017.

(B)	See Note 4 – Restructuring, Exit and Impairment Activities in the Notes to Consolidated Financial Statements for further details.

(C)	2019 results include $2.6 million of acquisition-related costs and $0.8 million of purchase accounting amortization related to the Freedom Boat Club acquisition.

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(A)	See Note 4 – Restructuring, Exit and Impairment Activities in the Notes to Consolidated Financial Statements for further details.

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(A)	See Note 16 – Debt in the Notes to Consolidated Financial Statements for additional information on the Company's debt. “Debt” refers to future cash principal payments. Debt also includes the Company's capital leases as discussed in Note 21 – Leases in the Notes to Consolidated Financial Statements.

(B)	See Note 21 – Leases in the Notes to Consolidated Financial Statements for additional information.

(C)	Purchase obligations represent agreements with suppliers and vendors as part of the normal course of business.

(D)	Amounts primarily represent long-term deferred compensation plans for Company management.

(E)	Other long-term liabilities primarily includes long-term warranty contracts, future projected payments related to the Company's nonqualified pension plans and deferred revenue. The Company is not required to make contributions to the qualified pension plan in 2019.

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•	We tested the effectiveness of controls over management’s intangible assets impairment evaluation, including those over the determination of the fair value of the Power Products trade name, such as controls related to management’s forecasts of future Power Products revenues and selection of the royalty and discount rates.

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•	We evaluated management’s ability to accurately forecast future Power Products revenues by comparing actual Power Products revenues to management’s historical forecasts.

•	We evaluated the reasonableness of management’s forecasts of future Power Products revenues by comparing management’s forecasts to:

–	Historical revenues.

–	Internal strategic forecasts presented to management and the Board of Directors.

–	Forecasted information included in Company press releases as well as in analyst and industry reports of the Company and selected companies in its peer group.

•	With the assistance of our fair value specialists, we evaluated the reasonableness of the royalty and discount rates by:

–	Testing the source information underlying the determination of the royalty and discount rates and the mathematical accuracy of the calculation.

–	Developing a range of independent estimates and comparing those to the royalty and discount rates selected by management.

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Basis of Presentation. Brunswick Corporation (Brunswick or the Company) has prepared its consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). As stated in Note 3 – Discontinued Operations, Brunswick's results as discussed in the financial statements reflect continuing operations only, unless otherwise noted.

Principles of Consolidation. Brunswick's consolidated financial statements include the accounts of all majority owned and controlled domestic and foreign subsidiaries. Intercompany balances and transactions have been eliminated.

Use of Estimates. The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States (GAAP) requires management to make certain estimates. Actual results could differ materially from those estimates. These estimates affect:

•The reported amounts of revenues and expenses during the reporting periods;

•The reported amounts of assets and liabilities at the date of the financial statements; and

•	The disclosure of contingent assets and liabilities at the date of the financial statements.

Estimates in these consolidated financial statements include, but are not limited to:

•Allowances for doubtful accounts;

•Inventory valuation reserves;

•Variable consideration related to recorded revenue;

•Reserves related to repurchase and recourse obligations;

•Warranty related reserves;

•Losses on litigation and other contingencies;

•Environmental reserves;

•Insurance reserves;

•Valuation of goodwill and other intangible assets;

•Impairments of long-lived assets;

•Reserves related to restructuring, exit and impairment activities;

•Postretirement benefit liabilities;

•Valuation allowances on deferred tax assets; and

•Income tax reserves.

Cash and Cash Equivalents. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. These investments include, but are not limited to, investments in money market funds, bank deposits, federal government and agency debt securities and commercial paper.

Restricted Cash. Restricted Cash is primarily related to cash deposited in a trust that is pledged as collateral against certain workers' compensation-related obligations to be restricted cash. Refer to Note 13 – Commitments and Contingencies for more information.

Accounts and Notes Receivable and Allowance for Doubtful Accounts. The Company carries its accounts and notes receivable at their face amounts less an allowance for doubtful accounts. On a regular basis, the Company records an allowance for uncollectible receivables based upon known bad debt risks and past loss history, customer payment practices and economic conditions. Actual collection experience may differ from the current estimate of net receivables. A change to the allowance for doubtful accounts may be required if a future event or other change in circumstances results in a change in the estimate of the ultimate collectability of a specific account.

Inventories. Inventories are valued at the lower of cost or net realizable value, with net realizable value equal to the estimated selling price less the estimated costs to transact. Approximately 45 percent and 49 percent of the Company's inventories were determined by the first-in, first-out method (FIFO) at December 31, 2019 and December 31, 2018, respectively. Remaining inventories valued at the last-in, first-out method (LIFO) were $139.9 million and $135.5 million lower than the FIFO cost of inventories at December 31, 2019 and 2018, respectively. Inventory cost includes material, labor and manufacturing overhead. There were no liquidations of LIFO inventory layers in 2019, 2018 or 2017.

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Property. Property, including major improvements and product tooling costs, is recorded at cost. Product tooling costs principally comprise the cost to acquire and construct various long-lived molds, dies and other tooling the Company uses in its manufacturing processes. Design and prototype development costs associated with product tooling are expensed as incurred. Maintenance and repair costs are also expensed as incurred. Depreciation is recorded over the estimated service lives of the related assets, principally using the straight-line method. Buildings and improvements are depreciated over a useful life of five to forty years. Equipment is depreciated over a useful life of two to twenty years. Product tooling costs are amortized over the shorter of the useful life of the tooling or the anticipated life of the applicable product, for a period up to eight years. The Company capitalizes interest on qualifying assets during the construction period and capitalized $5.0 million and $2.2 million in the periods ending December 31, 2019 and 2018, respectively. The Company presents capital expenditures on a cash basis within the Consolidated Statements of Cash Flows. There were $27.5 million and $65.0 million of unpaid capital expenditures within Accounts payable as of December 31, 2019 and 2018, respectively. The Company includes gains and losses recognized on the sale and disposal of property in either Selling, general and administrative expenses or Restructuring, exit and impairment charges as appropriate. The amount of gains and losses for the years ended December 31 were as follows:

(in millions)	2019				2018				2017
Gains on the sale of property	$	1.8			$	0.3			$	0.7
Losses on the sale and disposal of property	(2.4		)		(0.8		)		(0.6		)
Net (losses) gains on sale and disposal of property	$	(0.6	)		$	(0.5	)		$	0.1

As of December 31, 2019 and 2018, the Company had $3.0 million and $8.9 million, respectively, of net assets classified as held-for-sale within Net property in the Consolidated Balance Sheets.

Software Development Costs for Internal Use. The Company expenses all software development and implementation costs incurred until the Company has determined that the software will result in probable future economic benefit and management has committed to funding the project. Once this is determined, external direct costs of material and services, payroll-related costs of employees working on the project and related interest costs incurred during the application development stage are capitalized. These capitalized costs are amortized over three to seven years. All other related costs, including training costs and costs to re-engineer business processes, are expensed as incurred.

Goodwill. Goodwill results from the excess of purchase price over the net assets of businesses acquired. The Company reviews goodwill for impairment annually and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. As part of the annual test, the Company may perform a qualitative, rather than quantitative, assessment to determine whether the fair values of its reporting units are “more likely than not” to be greater than their carrying values. In performing this qualitative analysis, the Company considers various factors, including the effect of market or industry changes and the reporting units' actual results compared to projected results.

If the fair value of a reporting unit does not meet the "more likely than not" criteria discussed above, the Company performs a quantitative assessment which begins by measuring the fair value of the reporting unit. If the carrying value of the reporting unit exceeds its fair value, a goodwill impairment is recorded equal to the carrying value of the reporting unit less its fair value, not to exceed the carrying value of goodwill.

The Company calculates the fair value of its reporting units considering both the income approach and the guideline public company method. The income approach calculates the fair value of the reporting unit using a discounted cash flow approach utilizing a Gordon Growth model. Internally forecasted future cash flows, which the Company believes reasonably approximate market participant assumptions, are discounted using a weighted average cost of capital (Discount Rate) developed for each reporting unit. The Discount Rate is developed using market observable inputs, as well as considering whether or not there is a measure of risk related to the specific reporting unit’s forecasted performance. Fair value under the guideline public company method is determined for each unit by applying market multiples for comparable public companies to the unit’s current and forecasted financial results. The key uncertainties in these calculations are the assumptions used in determining the reporting unit’s forecasted future performance, including revenue growth and operating margins, as well as the perceived risk associated with those forecasts in determining the Discount Rate, along with selecting representative market multiples.

The Company did not record any goodwill impairments in 2019, 2018 or 2017 in continuing operations. Refer to Note 3 – Discontinued Operations for further information on the Fitness goodwill impairment recorded during 2019.

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Other intangible assets. The Company's primary intangible assets are customer relationships and trade names acquired in business combinations. Intangible assets are initially valued using a methodology commensurate with the intended use of the asset. The customer relationships including those acquired in the Power Products acquisition, which constitute the majority of the Company's customer relationships, were valued using the income approach, specifically the multi-period excess earnings method (MPEEM). The fair value of trade names, including the Power Products trade names, is measured using a relief-from-royalty (RFR) approach, which assumes the value of the trade name is the discounted amount of cash flows that would be paid to third parties had the Company not owned the trade name and instead licensed the trade name from another company. Higher royalty rates are assigned to premium brands within the marketplace based on name recognition and profitability, while other brands receive lower royalty rates. The basis for future sales projections for both the RFR and MPEEM are based on internal revenue forecasts by brand, which the Company believes represent reasonable market participant assumptions. The future cash flows are discounted using an applicable Discount Rate as well as any potential risk premium to reflect the inherent risk of holding a standalone intangible asset.

The key uncertainties in the RFR and MPEEM calculations, as applicable, are: assumptions used in developing internal revenue growth and expense forecasts, assumed customer attrition rates, the selection of an appropriate royalty rate, as well as the perceived risk associated with those forecasts in determining the Discount Rate.

The costs of amortizable intangible assets are recognized over their expected useful lives, typically between three and fifteen years, using the straight-line method. Intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate long-lived assets described below. Intangible assets not subject to amortization are assessed for impairment at least annually and whenever events or changes in circumstances indicate that it is more likely than not that an asset may be impaired. The impairment test for indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the asset.

Refer to Note 5 – Acquisitions and Note 11 – Goodwill and Other Intangibles in the Notes to Consolidated Financial Statements for more information.

Equity Investments. For investments in which the Company owns or controls from 20 percent to 50 percent of the voting shares, the Company uses the equity method of accounting. The Company's share of net earnings or losses from equity method investments is included in the Consolidated Statements of Operations. The Company carries other investments, for which the Company does not have the ability to exercise significant influence, at fair value, with changes in fair value recognized in net income. For equity investments that do not have a readily determinable fair value, the Company measures the investment at cost less impairment, plus or minus observable price changes. The Company periodically evaluates the carrying value of its investments. See Note 9 – Investments for further details about the Company's evaluation of the fair value of its investments.

Long-Lived Assets. The Company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful lives of its definite-lived intangible assets and other long-lived assets may warrant revision or that the remaining balance of such assets may not be recoverable. Once an impairment indicator is identified, the Company tests for recoverability of the related asset group using an estimate of undiscounted cash flows over the asset group's remaining life. If an asset group's carrying value is not recoverable, the Company records an impairment loss based on the excess of the carrying value of the asset group over the long-lived asset group's fair value. Fair value is determined using observable inputs, including the use of appraisals from independent third parties, when available, and, when observable inputs are not available, based on the Company's assumptions of the data that market participants would use in pricing the asset, based on the best information available in the circumstances. Specifically, the Company uses discounted cash flows to determine the fair value of the asset when observable inputs are unavailable. The Company tested its long-lived asset balances for impairment as indicators arose during 2019, 2018 and 2017, resulting in impairment charges of $3.0 million, $12.7 million and $31.0 million, respectively, which are recognized either in Restructuring, exit and impairment charges or Selling, general and administrative expense in the Consolidated Statements of Operations.

Other Long-Term Assets. Other long-term assets consists mainly of capitalized financing costs, long-term pension assets and deposits.

Revenue Recognition. Revenue is recognized as performance obligations under the terms of contracts with customers are satisfied; this occurs when control of promised goods is transferred to the customer. The Company recognizes revenue related to the sale of extended warranty contracts that extend the coverage period beyond the standard warranty period over the life of the extended warranty period.

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Revenue is measured as the amount of consideration expected to be entitled in exchange for transferring goods or providing services. The Company has excluded sales, value add, and other taxes collected concurrent with revenue-producing activities from the determination of the transaction price for all contracts. The Company has elected to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment activity. For all contracts with customers, the Company has not adjusted the promised amount of consideration for the effects of a significant financing component as the period between the transfer of the promised goods and the customer's payment is expected to be one year or less.

For product sales, the Company transfers control and recognizes revenue at the time the product ships from a manufacturing or distribution facility ("free on board shipping point"), or at the time the product arrives at the customer's facility ("free on board destination"). When the shipping terms are "free on board shipping point", the customer obtains control and is able to direct the use of, and obtain substantially all of the benefits from, the products at the time the products are shipped. For shipments provided under “free on board destination”, control transfers to the customer upon delivery. Payment terms vary but are generally due within 30 days of transferring control. For the Company's Boat and Marine Engine segments, most product sales to dealers are wholesale financed through the Company's joint venture, Brunswick Acceptance Company, LLC (BAC), or other lending institutions, and payment is typically due in the month of shipment. For further information on the BAC joint venture, refer to Note 10 – Financing Joint Venture. In addition, periodically the Company may require the customer to provide up front cash deposits in advance of performance.

The Company also sells separately priced extended warranty contracts that extend the coverage period beyond the standard warranty period. When determining an appropriate allocation of the transaction price to the extended warranty performance obligation, the Company uses an observable price to determine the stand-alone selling price. Extended warranties typically range from an additional 1 year to 3 years. The Company receives payment at the inception of the contract and recognizes revenue over the extended warranty coverage period. This time-elapsed method is used to measure progress because the Company, on average, satisfies its performance obligation evenly over the warranty period.

See Note 2 – Revenue Recognition for more information.

Advertising Costs. The Company records advertising and promotion costs in Selling, general and administrative expense in the Consolidated Statements of Operations in the period when the advertising first takes place. Advertising and promotion costs were $35.6 million, $31.7 million and $26.3 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Foreign Currency. The functional currency for the majority of Brunswick's operations is the U.S. dollar. All assets and liabilities of operations with a functional currency other than the U.S. dollar are translated at period end current rates. The resulting translation adjustments are recorded in Accumulated other comprehensive loss, net of tax. Revenues and expenses of operations with a functional currency other than the U.S. dollar are translated at the average exchange rates for the period. Transaction gains and losses resulting from changes in foreign currency exchange rates are recorded in either Cost of sales or Other expense, net in the Consolidated Statements of Operations.

Trademark Licensing Agreement. On September 18, 2014, the Company completed the sale of its retail bowling business to AMF Bowling Centers, Inc. (AMF) and entered into a trademark licensing agreement, allowing AMF to use the Company's retail trademarks and trade names over a five year period from the date of sale. As a result, the Company recorded deferred income of $20.7 million related to this agreement, which was recognized as Other expense, net in the Consolidated Statements of Operations over five years. There was no deferred income remaining as of December 31, 2019.

Share-Based Compensation. The Company records amounts for all share-based compensation, including non-vested stock awards and performance-based share awards over the vesting period in the Consolidated Statements of Operations based upon their fair values at the date of the grant. Share-based compensation costs are included in Selling, general and administrative expense in the Consolidated Statements of Operations. See Note 18 – Stock Plans and Management Compensation for a description of the Company's accounting for share-based compensation plans.

Research and Development. Research and development costs are expensed as incurred.

Derivatives. The Company uses derivative financial instruments to manage its risk associated with movements in foreign currency exchange rates and interest rates. These instruments are used in accordance with guidelines established by the Company's management and are not used for trading or speculative purposes. The Company records all derivatives on the Consolidated Balance Sheets at fair value. See Note 14 – Financial Instruments for further discussion.

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Recently Adopted Accounting Standards

Recognition of Leases: In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases, (new leasing standard), which amended the Accounting Standards Codification (ASC) to require lessees to recognize assets and liabilities on the balance sheet for all leases with terms greater than twelve months. On January 1, 2019, the Company adopted the new leasing standard and all related amendments. The Company elected the optional transition method provided by the FASB in ASU 2018-11, Leases (Topic 842): Targeted Improvements, and as a result, has not restated its consolidated financial statements for prior periods presented. The Company has elected the practical expedients upon transition to retain the lease classification and initial direct costs for any leases that existed prior to adoption. The Company has also not reassessed whether any contracts entered into prior to adoption are leases.

The standard did not have a material impact on the Company's Consolidated Statements of Operations. The cumulative effect of the changes made to the Company's Consolidated Balance Sheet as of January 1, 2019 for the adoption of the new leasing standard was as follows:

(in millions)	Balance as of December 31, 2018				Adjustments Due to ASC 842				Balance as of January 1, 2019
Assets
Operating lease assets	$	—			$	80.1			$	80.1
Long-term assets held for sale	610.3				21.1				631.4
Current liabilities
Accrued expenses	502.1				16.4				518.5
Current liabilities held for sale	255.0				2.9				257.9
Long-term liabilities
Other	101.6				(3.4		)		98.2
Operating lease liabilities	—				67.1				67.1
Long-term liabilities held for sale	99.6				18.2				117.8

 

The Company determines if an arrangement is a lease at lease inception. Operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company's lease contracts do not include an implicit rate, the Company uses its incremental borrowing rate based on information available at commencement date in determining the present value of future payments. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The operating lease asset also includes any initial direct costs and lease payments made prior to lease commencement and excludes lease incentives incurred.

The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company has certain lease agreements that contain both lease and non-lease components, which it has elected to account for as a single lease component for all asset classes.

Measurement of Goodwill Impairment: In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment. The standard simplifies the subsequent measurement of goodwill by eliminating step two from the goodwill impairment test. Instead, goodwill impairment is measured as the difference between the fair value and the carrying value of the reporting unit. The standard also clarifies the treatment of the income tax effect of tax-deductible goodwill when measuring goodwill impairment loss. The Company early adopted this amendment on January 1, 2019, which did not have a material impact on the consolidated financial statements but will impact future goodwill impairment measurement.

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Tax Effects in Other Comprehensive Income: In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (AOCI), which requires certain new disclosures and permits companies to reclassify the disproportionate income tax effects of the Tax Cuts and Jobs Act of 2017 on items within AOCI to retained earnings. The Company currently records its stranded tax effects in AOCI using the portfolio approach. Upon adoption, the Company elected not to reclassify stranded tax effects in AOCI to retained earnings and there was no impact on its consolidated financial statements.

Hedge Accounting: In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, to simplify the application of hedge accounting and to better align an entity's risk management activities with the financial reporting of hedging relationships. The Company adopted this ASC amendment and it did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards

Defined Benefit Plan Disclosures: In August 2018, the FASB issued ASU 2018-14, Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendment is effective for interim and annual periods ending after December 15, 2020, with early adoption permitted. The company has recently adopted this standard and it did not have a material impact on the consolidated financial statements.

Current Expected Credit Loss: In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which updated the ASC to add an impairment model that is based on expected losses rather than incurred losses. On January 1, 2020, the Company adopted this standard and the adoption will not have a material impact on the consolidated financial statements.

    

The following table presents the Company's revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors:

	Year Ended December 31, 2019												Year Ended December 31, 2018
(in millions)	Marine Engine				Boat				Total				Marine Engine				Boat				Total
Geographic Markets
United States	$	2,131.1			$	1,008.5			$	3,139.6			$	2,106.6			$	1,119.9			$	3,226.5
Europe	410.9				115.6				526.5				373.7				132.9				506.6
Asia-Pacific	246.6				31.2				277.8				228.8				35.7				264.5
Canada	142.8				154.8				297.6				150.5				157.5				308.0
Rest-of-World	142.1				23.7				165.8				134.0				25.3				159.3
Marine eliminations	(298.9		)		—				(298.9		)		(344.0		)		—				(344.0		)
Total	$	2,774.6			$	1,333.8			$	4,108.4			$	2,649.6			$	1,471.3			$	4,120.9
Major Product Lines
Parts & Accessories	$	1,594.2			$	—			$	1,594.2			$	1,442.0			$	—			$	1,442.0
Propulsion	1,479.3				—				1,479.3				1,551.6				—				1,551.6
Aluminum Freshwater Boats	—				556.6				556.6				—				619.0				619.0
Recreational Fiberglass Boats	—				438.8				438.8				—				485.9				485.9
Saltwater Fishing Boats	—				316.6				316.6				—				362.1				362.1
Business Acceleration	—				21.8				21.8				—				4.3				4.3
Marine eliminations	(298.9		)		—				(298.9		)		(344.0		)		—				(344.0		)
Total	$	2,774.6			$	1,333.8			$	4,108.4			$	2,649.6			$	1,471.3			$	4,120.9

As of January 1, 2019, $74.8 million of contract liabilities associated with extended warranties and customer deposits were reported in Accrued expenses and Other Long-term liabilities with $21.7 million of this amount recognized as revenue during year ended December 31, 2019. As of December 31, 2019, total contract liabilities were $96.2 million. The total amount of the transaction

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price allocated to unsatisfied performance obligations as of December 31, 2019 is $88.8 million for contracts greater than one year, which includes extended warranties. The Company expects to recognize approximately $26.3 million of this amount in 2020 and $62.5 million thereafter. Contract assets as of January 1, 2019 and December 31, 2019 were not material. In addition, costs to obtain and fulfill contracts during the period were not material.

On May 6, 2019, the Company announced that it reached an agreement to sell its Fitness business to KPS Capital Partners, LP. On June 27, 2019, the Company completed the sale. The Company determined that the sale of its Fitness business represented a strategic shift that had a major effect on the Company's operations and financial results. The Company no longer participates in the fitness industry and now solely focuses on its global marine portfolio. As a result, the Company classified the assets and liabilities of the Fitness business as held for sale on the Consolidated Balance Sheets for all prior periods. Additionally, this business, which was previously reported in the Company's Fitness segment, is being reported as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows for all periods presented.

The sale of the Fitness business resulted in net proceeds of $473.7 million and an after-tax loss of $43.9 million, subject to a working capital adjustment. In connection with the sale of its Fitness business, the Company retained assets of $26.4 million primarily related to VAT receivables, and retained liabilities of $45.1 million primarily related to VAT payables, product warranty liabilities and certain employee benefits. As of December 31, 2019, retained assets and liabilities were $16.4 million and $30.5 million, respectively.

In connection with the sale of the Fitness business, the Company entered into a Transition Services Agreement (TSA) with the purchaser to provide certain support functions for a period of up to twelve months following the sale. The TSA is not material to the Company's consolidated financial statements. The Company does not have or anticipate having any significant continuing net cash flows associated with the Fitness business.

The following table discloses the results of operations of the business reported as discontinued operations for the year ended December 31, 2019, December 31, 2018 and December 31, 2017 respectively:

(in millions)	2019				2018				2017
Net sales	$	448.3			$	1,038.3			$	1,033.7
Cost of sales	334.6				764.3				720.1
Selling, general and administrative expense (C) (D)	113.3				206.1				177.9
Research and development expense	12.6				27.4				34.8
Restructuring, exit and impairment charges	138.3				26.1				32.8
Other (income), net	(0.3		)		(0.1		)		(0.2		)
(Loss) earnings from discontinued operations before income taxes (B) (C) (D)	(150.2		)		14.5				68.3
Income tax (benefit) provision	(32.7		)		2.6				23.2
(Loss) earnings from discontinued operations, net of tax (B) (C) (D)	(117.5		)		11.9				45.1
Loss on disposal of discontinued operations, net of tax (A)	(43.9		)		—				—
Net (loss) earnings from discontinued operations, net of tax	$	(161.4	)		$	11.9			$	45.1

(A) The Loss on disposal of discontinued operations, net of tax for the year ended December 31, 2019 includes a pre-tax loss of $51.3 million and a net tax benefit of $7.4 million.

(B) In the first quarter of 2019, the Company re-evaluated the fair value of the Fitness reporting unit and determined the fair value of the business was less than its carrying value. As a result, (Loss) Earnings from discontinued operations, net of tax, includes a $137.2 million ($103.0 million after tax) goodwill impairment charge for the year ended December 31, 2019.

(C) The Company recorded $16.5 million and $19.3 million for the year ended December 31, 2019 and December 31, 2018, respectively, of net costs incurred in connection with the sale of Fitness.

(D) The Company recorded adjustments to certain liabilities that were retained as part of the sale of the bowling businesses. As a result, (Loss) earnings from discontinued operations, net of tax, includes a gain of $3.0 million ($2.2 million after tax) for the year ended December 31, 2018.

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There were no assets and liabilities held for sale related to discontinued operations as of December 31, 2019. The following table reflects the summary of assets and liabilities held for sale as of December 31, 2018 primarily related to the Fitness business included in discontinued operations:

(in millions)	December 31, 2018
Accounts and notes receivable, net	$	198.9
Net inventory	169.7
Prepaid expenses and other	8.6
Current assets held for sale	377.2
Net property (A)	110.9
Goodwill	389.8
Other intangibles, net	60.6
Other assets	49.0
Long-term assets held for sale	610.3
Assets held for sale	$	987.5
Accounts payable	$	69.7
Accrued expenses	185.3
Current liabilities held for sale	255.0
Other liabilities	99.6
Long-term liabilities held for sale	99.6
Liabilities held for sale	$	354.6

(A) As of December 31, 2018, the Company had $8.9 million of net long-term assets classified as held for sale that were not related to the business reported as discontinued operations.

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The Company has announced and implemented a number of initiatives designed to improve its cost structure, better utilize overall capacity and improve general operating efficiencies. These initiatives resulted in the recognition of restructuring, exit and impairment charges in the Consolidated Statements of Operations during 2019, 2018 and 2017.

The costs incurred under these initiatives include:

•Restructuring and Exit Activities – These amounts relate to:

•	Employee termination and other benefits

•	Inventory adjustments to lower of cost or net realizable value

•	Costs to retain and relocate employees

•	Consulting costs

•	Consolidation of manufacturing footprint

•	Facility shutdown costs

•	Costs associated with the wind-down of Sport Yacht & Yachts

•

Asset Disposition and Impairment Actions – These amounts relate to impairments of assets and gains on the sale of assets previously impaired as part of a restructuring or exit activity. The impairments recognized were equal to the difference between the carrying amount of the asset and the estimated fair value of the asset, which was determined using observable inputs, including appraisals from independent third parties when available. When observable inputs were not available, estimated fair value was determined using the Company’s assumptions, including the data that market participants would use in pricing the asset, based on the best information available in the circumstances. Specifically, the Company used discounted cash flows to determine the fair value of the asset when observable inputs were unavailable.

The Company has reported restructuring, exit and impairment activities based on the specific driver of the cost and reflected the expense in the accounting period when the Company has committed to or incurred the cost, as appropriate. The following table is a summary of the net expense associated with the restructuring, exit and impairment activities.

(in millions)	2019				2018				2017
Restructuring and exit activities:
Employee termination and other benefits	$	11.7			$	9.5			$	3.2
Current asset write-downs	0.5				18.9				7.2
Professional fees	3.1				8.0				1.1
Other (A)	0.5				10.7				1.1
Asset disposition and impairment actions:
Definite-lived and other asset impairments	3.0				12.7				31.0
Valuation (reversal) allowance on disposal group	—				(5.0		)		5.0
Total restructuring, exit and impairment charges	$	18.8			$	54.8			$	48.6

(A) The charges in 2018 relate to warranty adjustments in connection with the wind-down of Sport Yacht & Yachts.

 

The following tables summarize the change in accrued restructuring, exit and impairment charges within Accrued expenses in the Consolidated Balance Sheets for the years ended December 31, 2019, 2018 and 2017:

	Dec 31, 2018				2019 Activity												Dec 31, 2019
(in millions)	Accrued Charges				Total Charges				Non-Cash Charges				Payments (A)				Accrued Charges (B)
Marine Engine	$	—			$	4.7			$	—			$	(3.4	)		$	1.3
Boat	15.4				9.6				(3.5		)		(15.5		)		6.0
Corporate	0.7				4.5				—				(3.7		)		1.5
Accrued balance	$	16.1			$	18.8			$	(3.5	)		$	(22.6	)		$	8.8

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	Dec 31, 2017				2018 Activity												Dec 31, 2018
(in millions)	Accrued Charges				Total Charges				Non-Cash Charges				Payments (A)				Accrued Charges
Boat	$	3.7			$	54.1			$	(26.6	)		$	(15.8	)		$	15.4
Corporate	—				0.7				—				—				0.7
Accrued balance	$	3.7			$	54.8			$	(26.6	)		$	(15.8	)		$	16.1

	Dec 31, 2016				2017 Activity												Dec 31, 2017
(in millions)	Accrued Charges				Total Charges				Non-Cash Charges				Payments (A)				Accrued Charges
Boat	$	0.7			$	48.6			$	(43.2	)		$	(2.4	)		$	3.7

(A) Cash payments may include payments related to prior period charges.

(B) The accrued charges as of December 31, 2019 are expected to be paid during 2020.

Reductions in demand for the Company’s products, further refinement of its product portfolio, further opportunities to reduce costs or the cost of integrating future acquisitions may result in additional restructuring, exit and impairment charges in future periods.

Actions Initiated in 2019

During 2019, the Company recorded restructuring charges within the Boat segment related to consolidating its commercial and government products operations in order to rationalize its product line to better align with customer demand.

In addition, the Company announced headcount reductions aimed at streamlining the cost structure of its enterprise-wide general and administrative functions, and recorded restructuring charges in 2019 as a result of these actions.

The following table is a summary of the expenses associated with the restructuring, exit and impairment activities for the year ended December 31, 2019, related to actions initiated in 2019:

(in millions)	Marine Engine				Boat				Corporate				Total
Restructuring and exit activities:
Employee termination and other benefits	$	4.7			$	3.9			$	3.1			$	11.7
Current asset write-downs	—				0.5				—				0.5
Professional fees	—				1.7				1.4				3.1
Other	—				0.5				—				0.5
Asset disposition and impairment actions:
Definite-lived and other asset impairments	—				3.0				—				3.0
Total restructuring, exit and impairment charges	$	4.7			$	9.6			$	4.5			$	18.8

Actions Initiated in 2018

In the second quarter of 2018, the Company ended the sale process of Sea Ray. As a result, the Company recorded an additional impairment of long-lived assets. During the second, third and fourth quarters of 2018, the Company also recorded additional charges in connection with the wind down of Sport Yacht & Yachts, mainly relating to inventory write-downs, increased warranty liabilities and employee severance and retention bonuses. These costs were partially offset by the reversal of the valuation allowance in the second quarter of 2018 for estimated transaction costs which was recorded when the assets and liabilities of Sea Ray were initially classified as held for sale.

In 2018, the Company executed headcount reductions in the Boat segment aimed at improving general operating efficiencies. The Company also recorded charges within Corporate related to the transition of certain corporate officers.

The following table is a summary of the expenses associated with the restructuring, exit and impairment activities for the year ended December 31, 2018, related to actions initiated in 2018:

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(in millions)	Boat				Corporate				Total
Restructuring and exit activities:
Employee termination and other benefits	$	4.7			$	0.7			$	5.4
Current asset write-downs	18.9				—				18.9
Professional fees	3.9				—				3.9
Other	10.7				—				10.7
Asset disposition and impairment actions:
Definite-lived and other asset impairments	12.7				—				12.7
Total restructuring, exit and impairment charges	$	50.9			$	0.7			$	51.6

Actions Initiated in 2017

In the fourth quarter of 2017, the Board of Directors authorized the Company to exit its Sea Ray business, including the Meridian brand. In conjunction with this decision, the Company evaluated the disposal group's fair value, less costs to sell, and compared that to its carrying value at the time. As a result, the Company recorded an impairment of long-lived assets as well as a valuation allowance for estimated transaction costs.

In the second, third and fourth quarters of 2017, the Company implemented headcount reductions in the Boat segment aimed at improving general operating efficiencies.

In the first quarter of 2017, the Company announced the closure of its boat manufacturing facility in Joinville, Santa Catarina, Brazil, as a result of continued market weakness due partially to unfavorable foreign currency impacts in the region. As a result, the Company recorded restructuring, exit and impairment charges including the write-down of inventory. The facility manufactured certain Bayliner and Sea Ray boat models for the Latin American market. The long-lived assets at this facility were previously fully impaired.

The following table is a summary of the expense associated with the restructuring, exit and impairment activities within the Boat segment, for the years ended December 31, 2018 and 2017, related to actions initiated in 2017:

(in millions)	2018				2017
Restructuring and exit activities:
Employee termination and other benefits	$	4.1			$	3.2
Current asset write-downs (reversals)	—				7.2
Professional fees	4.1				1.1
Other	—				1.1
Asset disposition and impairment actions:
Definite-lived and other asset impairments	—				31.0
Valuation allowance (reversal) on disposal	(5.0		)		5.0
Total restructuring, exit, integration and impairment charges	$	3.2			$	48.6

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2019 Acquisitions

On May 21, 2019, the Company acquired 100 percent of Freedom Boat Club, a leading boat club operator based in Florida. The acquisition expands the Company's presence and scale within the emerging and fast-growing boat club market, providing its over 20,000 members access to a fleet of nearly 2,500 boats. Freedom Boat Club is included as part of the Company's Boat segment.

The net cash consideration the Company paid to acquire Freedom Boat Club was $64.1 million, in addition to acquisition-related transaction costs of $2.5 million, for the year ended December 31, 2019. The preliminary opening balance sheet included $29.2 million of identifiable intangible assets, including customer relationships, franchise agreements and trade names for $11.1 million, $4.9 million and $13.2 million, respectively, along with $26.4 million of goodwill, most of which is deductible for tax purposes. The amount assigned to Freedom Boat Club's customer relationships and franchise agreements will be amortized over their estimated useful lives of approximately 10 years and 15 years, respectively. These amounts recorded are preliminary and are subject to change within the measurement period as the Company finalizes its fair value estimates.

The 2019 Freedom Boat Club acquisition is not material to the Company's net sales, results of operations or total assets during any period presented. Accordingly, the Company's consolidated results from operations do not differ materially from historical performance as a result of this acquisition and, therefore, pro forma results are not presented.

2018 Acquisitions

On August 9, 2018, the Company completed its acquisition of the Global Marine & Mobile business of Power Products Holdings, LLC (Power Products) for $909.6 million in cash, on a cash-free, debt-free basis. Brunswick used proceeds from a combination of 364-day, three-year and five-year term loans (Term Loans) totaling $800.0 million as described in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018, along with cash on hand to fund this acquisition.

Power Products is a leading provider of electrical products to marine and other recreational and specialty vehicle markets. The acquisition advances Brunswick’s leadership by adding integrated electrical systems solutions to the marine market and an array of other mobile, specialty vehicle and industrial applications. Power Products is managed as part of the Marine Engine segment.

  

The following table is a summary of the assets acquired, liabilities assumed and net cash consideration paid for the Power Products acquisition during 2018:

(in millions)	Fair Value				Useful Life
Accounts and notes receivable	$	38.3
Inventory	64.3
Goodwill (A) (B) (C)	355.5
Trade names	111.0				Indefinite
Customer relationships	430.0				15 years
Property and equipment	10.6
Other assets	5.6
Total assets acquired	1,015.3
Accounts payable (B)	27.3
Accrued expenses (B) (C)	22.0
Deferred tax liabilities (C)	56.4
Total liabilities assumed	105.7
Net cash consideration paid (B) (C)	$	909.6

(A) The goodwill recorded for the acquisition of Power Products is partially deductible for tax purposes.

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(B) Includes $4.4 million and $3.0 million of purchase accounting adjustments in the first and second quarters of 2019, respectively, primarily related to contingency reserves.

(C) Includes $3.9 million of purchase accounting adjustments in the third quarter of 2019 primarily related to deferred taxes.

 

Pro Forma Financial Information (Unaudited)

The pro forma information has been prepared as if the Power Products acquisition and the related debt financing had occurred on January 1, 2018. These pro forma results are based on estimates and assumptions which the Company believes to be reasonable. They are not the results that would have been realized had the acquisition actually occurred on January 1, 2018 and are not necessarily indicative of Brunswick's consolidated net earnings in future periods. The pro forma results include adjustments primarily related to interest expense on the Term Loans and amortization of intangible assets.

	(in millions)	Year Ended December 31, 2018
	Pro forma Net sales	$	4,271.1
	Pro forma Operating earnings	362.8
	Pro forma Net earnings from continuing operations	239.8

The pro forma results reflect an effective income tax rate of 17.2 percent for the year ended December 31, 2018.

Brunswick is a manufacturer and marketer of leading consumer brands and has two reportable segments: Marine Engine and Boat. The Company’s segments are defined by management’s reporting structure and operating activities.

The Marine Engine segment manufactures and markets a full range of outboard engines, sterndrive engines, inboard engines and marine parts and accessories, which are principally sold directly to boat builders, including Brunswick's Boat segment, or through marine retail dealers and distributors worldwide. The Company's engine manufacturing plants are located mainly in the United States, China and Japan, with sales mainly to markets in the Americas, Europe and Asia-Pacific.

The Boat segment designs, manufactures and markets the following types of boats: fiberglass pleasure, sport cruiser, sport fishing and center-console, offshore fishing, aluminum and fiberglass fishing, pontoon, utility, deck, inflatable, tow/wake, and heavy-gauge aluminum. The Boat segment also includes the Business Acceleration business, which through innovative service models, shared access solutions and emerging technology, aims to provide exceptional experiences to attract a wide range of customers to the marine industry and shape the future of boating. The Boat segment's products are manufactured mainly in the United States, Europe and Mexico and sold through a global network of dealer and distributor locations, primarily in North America and Europe.

The Company evaluates performance based on business segment operating earnings. Segment operating earnings do not include the expenses of corporate administration, pension costs, pension settlement charges, impairments or gains on the sale of equity investments, earnings from unconsolidated equity affiliates, other expenses and income of a non-operating nature, transaction financing charges, interest expense and income or provisions or benefits for income taxes.

Corporate/Other results include items such as corporate staff and administrative costs, investments in technology solutions, business development and other growth-related expenses, including IT enhancements. Corporate/Other total assets consist of mainly cash, cash equivalents and investments in marketable securities, restricted cash, income tax balances and investments in unconsolidated affiliates. Marine eliminations adjust for sales between the Marine Engine and Boat segments, primarily for the sale of engines and parts and accessories to various boat brands, which are consummated at established arm’s length transfer prices as the intersegment pricing for these engines and parts and accessories are based upon and consistent with selling prices to third party customers.

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Information about the operations of Brunswick's reportable segments is set forth below:

Reportable Segments

	Net Sales												Operating Earnings (Loss)												Total Assets(A)
(in millions)	2019				2018				2017				2019				2018				2017				2019				2018
Marine Engine	$	3,073.5			$	2,993.6			$	2,631.8			$	497.1			$	454.4			$	411.3			$	2,522.4			$	2,380.9
Boat	1,333.8				1,471.3				1,490.6				58.0				(12.5		)		5.3				472.4				423.2
Marine eliminations	(298.9		)		(344.0		)		(320.2		)		—				—				—				—				—
Total Marine	4,108.4				4,120.9				3,802.2				555.1				441.9				416.6				2,994.8				2,804.1
Corporate/Other	—				—				—				(84.1		)		(86.4		)		(86.3		)		569.6				508.8
Total	$	4,108.4			$	4,120.9			$	3,802.2			$	471.0			$	355.5			$	330.3			$	3,564.4			$	3,312.9

(A) As of December 31, 2018, the Company had $978.6 million of assets classified as held for sale in the Consolidated Balance Sheets relating to discontinued operations. See Note 3 – Note 3 – Discontinued Operations for further detail.

	Depreciation												Amortization
(in millions)	2019				2018				2017				2019				2018				2017
Marine Engine	$	76.2			$	69.3			$	48.8			$	30.3			$	23.0			$	1.7
Boat	28.2				26.7				31.8				1.3				1.0				1.0
Corporate/Other	2.7				4.0				3.8				—				—				—
Total	$	107.1			$	100.0			$	84.4			$	31.6			$	24.0			$	2.7

	Capital Expenditures												Research & Development Expense
(in millions)	2019				2018				2017				2019				2018				2017
Marine Engine	$	180.8			$	126.3			$	111.1			$	104.7			$	98.6			$	90.5
Boat	46.8				48.5				55.4				16.9				22.9				21.1
Corporate/Other	5.0				5.4				11.5				—				—				—
Total	$	232.6			$	180.2			$	178.0			$	121.6			$	121.5			$	111.6

Geographic Segments

	Net sales												Net property
(in millions)	2019				2018				2017				2019				2018
United States	$	2,871.1			$	2,918.0			$	2,676.2			$	714.6			$	620.5
International	1,237.3				1,202.9				1,126.0				63.0				57.5
Corporate/Other	—				—				—				18.8				16.5
Total	$	4,108.4			$	4,120.9			$	3,802.2			$	796.4			$	694.5

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

 

•	Level 1 - Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets or liabilities.

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•	Level 2 - Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily available pricing sources for comparable instruments.

•	Level 3 - Unobservable inputs, for which there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019:    

(in millions)	Level 1				Level 2				Total
Assets:
Cash equivalents	$	0.3			$	—			$	0.3
Short-term investments in marketable securities	0.8				—				0.8
Restricted cash	11.6				—				11.6
Derivatives	—				4.2				4.2
Total assets	$	12.7			$	4.2			$	16.9
Liabilities:
Derivatives	$	—			$	3.2			$	3.2
Deferred compensation	1.2				18.8				20.0
Total liabilities at fair value	$	1.2			$	22.0			$	23.2
Liabilities measured at net asset value									8.5
Total liabilities									$	31.7

The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2018:

(in millions)	Level 1				Level 2				Total
Assets:
Short-term investments in marketable securities	$	0.8			$	—			$	0.8
Restricted cash	9.0				—				9.0
Derivatives	—				7.6				7.6
Total assets	$	9.8			$	7.6			$	17.4
Liabilities:
Derivatives	$	—			$	2.2			$	2.2
Deferred compensation	3.5				20.7				24.2
Total liabilities at fair value	$	3.5			$	22.9			$	26.4
Liabilities measured at net asset value									10.2
Total liabilities									$	36.6

Refer to Note 14 – Financial Instruments for additional information related to the fair value of derivative assets and liabilities by class. In addition to the items shown in the tables above, see Note 17 – Postretirement Benefits for further discussion regarding the fair value measurements associated with the Company’s postretirement benefit plans.

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The Company has recorded financing receivables, which are defined as a contractual right to receive money, as assets on its Consolidated Balance Sheets as of December 31, 2019 and 2018. Substantially all of the Company’s financing receivables are for commercial customers, which includes receivables sold to third-party finance companies (Third-Party Receivables) and customer notes and other (Other Receivables). Third-Party Receivables are accounts that have been sold to third-party finance companies, but do not meet the definition of a true sale and are therefore recorded as an asset with an offsetting balance recorded as a secured obligation in Accrued expenses. Other Receivables are mostly comprised of notes from customers, which are originated by the Company in the normal course of business. Financing receivables are carried at their face amounts less an allowance for credit losses.

The Company sells a broad range of recreational products to a worldwide customer base and extends credit to its customers based upon an ongoing credit evaluation program. The Company’s business units maintain credit organizations to manage financial exposure and perform credit risk assessments on an individual account basis. Accounts are not aggregated into categories for credit risk determinations. Due to the composition of the account portfolio, the Company does not believe that the credit risk posed by the Company’s financing receivables is significant to its operations, financial condition or cash flows. There were no significant troubled debt restructurings during the years ended December 31, 2019, 2018 or 2017.

The Company’s financing receivables, excluding trade accounts receivable contractually due within one year as of December 31, 2019 and December 31, 2018 were $8.8 million and $11.2 million, respectively.

The activity related to the allowance for credit loss on financing receivables during the years ended December 31, 2019 and December 31, 2018 was not material.

Investments in Marketable Securities

The Company may invest 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.

As of December 31, 2019 and 2018, the fair values of the Company's available-for-sale securities, which were equal to the amortized costs, were $0.8 million and $0.8 million, respectively. The Company had no maturities of available-for-sale securities in 2019 and 2018, and had $35.0 million of maturities of available-for-sale securities during 2017.

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 in which 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 negatively impact reported results of operations.

In the fourth quarter of 2018, the Company sold its 36 percent equity investment in Bella-Veneet Oy (Bella), a Finnish boat manufacturer, which had previously been fully impaired due to significant declines in profitability that were deemed other than temporary. As a result, the Company recorded a gain of $2.3 million within Equity earnings on the Consolidated Statements of Operations, which was equal to the proceeds from the sale.

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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 February 2018, the parties entered into an amended and restated joint venture agreement (JV Agreement) to extend the term of their financial services through December 31, 2022. 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. To be considered the primary beneficiary, the Company must have the power to direct the activities of BAC that most significantly impact BAC’s economic performance and the Company must have the obligation to absorb losses or the right to receive benefits from BAC that could be potentially significant to BAC. Based on the Company's qualitative analysis, BFS did not meet the definition of a 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 at December 31, 2019 and December 31, 2018 was $18.8 million and $21.7 million, respectively.

The Company’s maximum loss exposure relating to BAC is detailed as follows:

(in millions)	December 31, 2019				December 31, 2018
Investment	$	18.8			$	21.7
Repurchase and recourse obligations (A)	36.5				41.6
Liabilities (B)	(1.7		)		(1.3		)
Total maximum loss exposure	$	53.6			$	62.0

(A)

Repurchase and recourse obligations are off-balance sheet obligations provided by the Company for the Boat and Marine Engine 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 $6.9 million, $6.4 million and $6.0 million in Equity earnings in the Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017, respectively.  

Cash Flows

BFS reported cash flows from operating activities of $7.6 million, $6.3 million and $0.0 million within Other, net on the Consolidated Statements of Cash Flows in 2019, 2018 and 2017, respectively.

In 2019, BFS reported net cash flows from investing activities within Investments on the Consolidated Statements of Cash flows. Such cash flows for 2019 were $2.2 million, consisting of $7.9 million of cash received and $(5.7) million of cash

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contributions; in 2018 were $(3.8) million, consisting of $8.2 million of cash received and $(12.0) million of cash contributions; and in 2017 were $(5.1) million, consisting of $7.0 million of cash received and $(12.1) million of cash contributions.

Changes in the Company's goodwill during the period ended December 31, 2019, by segment, are summarized below:

(in millions)	2018				Acquisitions				Adjustments				2019
Marine Engine	$	375.1			$	—			$	11.3			$	386.4
Boat	2.2				26.0				0.4				28.6
Total	$	377.3			$	26.0			$	11.7			$	415.0

Changes in the Company's goodwill during the period ended December 31, 2018, by segment, are summarized below:

(in millions)	2017				Acquisitions				Adjustments				2018
Marine Engine	$	31.7			$	344.2			$	(0.8	)		$	375.1
Boat	2.2				—				—				2.2
Total	$	33.9			$	344.2			$	(0.8	)		$	377.3

Adjustments in 2019 mainly relate to refining purchase accounting related to the Power Products and Freedom Boat Club acquisitions. See Note 5 – Acquisitions for further details on the Company's acquisitions. Adjustments in both periods include the effect of foreign currency translation on goodwill denominated in currencies other than the U.S. dollar.

As of December 31, 2019 and 2018, the Company had no accumulated impairment loss on Goodwill.

The Company's intangible assets, included within Other intangibles, net on the Consolidated Balance Sheets as of December 31, 2019 and 2018, are summarized by intangible asset type below:

	2019								2018
(in millions)	Gross Amount				Accumulated Amortization				Gross Amount				Accumulated Amortization
Intangible assets:
Customer relationships (A)	$	687.0			$	(274.6	)		$	675.7			$	(243.3	)
Trade names	165.8				—				152.5				—
Other (A)	18.4				(13.1		)		13.5				(12.6		)
Total	$	871.2			$	(287.7	)		$	841.7			$	(255.9	)

(A) The weighted average remaining amortization period for Customer relationships and Other intangibles assets were 13.2 years and 10.7 years, respectively, as of December 31, 2019.

The Company's intangible assets, included within Other intangibles, net on the Consolidated Balance Sheets as of December 31, 2019 and 2018, are summarized by segment below:

	2019								2018
(in millions)	Gross Amount				Accumulated Amortization				Gross Amount				Accumulated Amortization
Intangible assets:
Marine Engine	$	618.6			$	(82.4	)		$	618.3			$	(52.0	)
Boat	252.6				(205.3		)		223.4				(203.9		)
Total	$	871.2			$	(287.7	)		$	841.7			$	(255.9	)

See Note 5 – Acquisitions for further details on intangibles acquired during 2019 and 2018.

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Aggregate amortization expense for intangibles was $31.6 million, $14.8 million and $2.7 million for the years ended December 31, 2019, 2018 and 2017, respectively. Estimated amortization expense for intangible assets is $31.9 million for the year ending December 31, 2020, $31.9 million in 2021, $31.6 million in 2022, $31.1 million in 2023, and $31.1 million in 2024.

On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was signed into law. The TCJA made significant changes to the U.S. tax code effective for 2018, although certain provisions affected the Company’s 2017 financial results. The changes impacting 2017 included, but are not limited to, the write-down of net deferred tax assets resulting from the reduction in the U.S. federal corporate income tax rate from 35 percent to 21 percent, imposing a one-time deemed repatriation tax on certain unremitted earnings of foreign subsidiaries, and bonus depreciation that will allow for immediate full expensing of qualified property acquired and placed in service after September 27, 2017. The TCJA also established new corporate tax laws that were effective in 2018 but did not impact the Company’s 2017 financial results. These changes included, but were not limited to, lowering the U.S. federal corporate income tax rate from 35 percent to 21 percent, a general elimination of U.S. federal income taxes on income and dividends from foreign subsidiaries, a new tax on global intangible low-taxed income (GILTI) net of allowable foreign tax credits, a new deduction for foreign derived intangible income (FDII), the repeal of the domestic production activity deduction, new limitations on the deductibility of certain executive compensation and interest expense, and limitations on the use of foreign tax credits to reduce the U.S. federal income tax liability.

Due to the complexities involved in accounting for the enactment of the TCJA, the SEC staff issued Staff Accounting Bulletin (SAB) 118 which provided guidance on accounting for the income tax effects of the TCJA. SAB 118 provided a measurement period that should not extend beyond one year from the TCJA enactment date to complete the accounting for the impact of the TCJA. SAB 118 allowed the Company to provide provisional estimates of the impact of the TCJA in our financial statements for the year ended December 31, 2017. Accordingly, based on information and IRS guidance available as of December 31, 2017, we recorded a discrete net tax expense of $66.7 million for the year ended December 31, 2017. This expense consisted primarily of a net expense of $56.5 million for the write down of our net deferred tax balances due to the U.S. corporate income tax rate reduction and a net expense of $10.2 million for the one-time deemed repatriation tax. In 2018, the Company completed its accounting for the income tax effects of the TCJA and based on additional guidance from the IRS, we updated our calculations. For the year ended December 31, 2018, the Company recorded a tax benefit of $5.1 million. This benefit consists primarily of an additional $7.0 million tax expense related to the one-time deemed repatriation tax and a tax benefit of $12.1 million primarily related to additional tax benefits for pension contributions.

The TCJA created a new requirement that certain income (i.e. GILTI) earned by controlled foreign corporations (CFC’s) must be included in the gross income of the CFC’s U.S. shareholder. Under U.S. GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company has elected to use the period cost method and has reflected the impact of the GILTI tax in its financial statements for the periods ended December 31, 2019 and December 31, 2018, using such method.

The sources of Earnings before income taxes were as follows:

(in millions)	2019				2018				2017
United States	$	10.1			$	237.3			$	161.3
Foreign	100.6				73.4				51.6
Earnings before income taxes	$	110.7			$	310.7			$	212.9

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The Income tax provision consisted of the following:

(in millions)	2019				2018				2017
Current tax expense (benefit):
U.S. Federal	$	94.5			$	(2.3	)		$	(2.6	)
State and local	6.3				5.7				4.7
Foreign	29.3				22.9				17.3
Total current	130.1				26.3				19.4
Deferred tax expense (benefit):
U.S. Federal	(19.7		)		30.5				95.4
State and local	(29.5		)		0.9				(2.0		)
Foreign	(0.6		)		(0.4		)		(1.2		)
Total deferred	(49.8		)		31.0				92.2
Income tax provision	$	80.3			$	57.3			$	111.6

Temporary differences and carryforwards giving rise to deferred tax assets and liabilities at December 31, 2019 and 2018 are summarized in the table below:

(in millions)	2019				2018
Deferred tax assets:
Loss carryforwards	$	81.9			$	68.5
Tax credit carryforwards	71.8				53.2
Product warranties	28.4				33.6
Sales incentives and discounts	25.9				29.2
Operating lease liabilities	17.1				—
Deferred revenue	16.1				22.2
Equity compensation	12.0				14.7
Postretirement and postemployment benefits	11.5				12.0
Deferred compensation	10.9				13.6
Compensation and benefits	10.5				17.1
Long term contracts	3.6				11.7
Other	47.8				41.6
Gross deferred tax assets	337.5				317.4
Valuation allowance	(93.3		)		(74.7		)
Deferred tax assets	244.2				242.7
Deferred tax liabilities:
Depreciation and amortization	(85.5		)		(123.1		)
State and local income taxes	(24.3		)		(18.2		)
Operating lease assets	(15.7		)		—
Other	(5.3		)		(6.9		)
Deferred tax liabilities	(130.8		)		(148.2		)
Total net deferred tax assets	$	113.4			$	94.5

The Company's total net deferred tax asset as of December 31, 2019 and 2018 reflects the impact of the U.S. federal corporate tax rate at 21 percent that was part of the TCJA. The Company was required to value its net deferred tax balance at the lower tax rate.

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At December 31, 2019, the Company had a total valuation allowance against its deferred tax assets of $93.3 million. The remaining realizable value of deferred tax assets at December 31, 2019 was determined by evaluating the potential to recover the value of these assets through the utilization of tax loss and credit carrybacks, the reversal of existing taxable temporary differences and carryforwards, certain tax planning strategies and future taxable income exclusive of reversing temporary differences and carryforwards. At December 31, 2019, the Company retained valuation allowance reserves of $59.5 million against deferred tax assets in the U.S. primarily related to non-amortizable intangibles and various state operating loss carryforwards and state tax credits that are subject to restrictive rules for future utilization, and valuation allowances of $33.8 million for deferred tax assets related to foreign jurisdictions, primarily Brazil and Luxembourg.

At December 31, 2019, the tax benefit of loss carryforwards totaling $81.9 million was available to reduce future tax liabilities. This deferred tax asset was comprised of $1.8 million for the tax benefit of federal net operating loss (NOL) carryforwards, $46.9 million for the tax benefit of state NOL carryforwards and $33.2 million for the tax benefit of foreign NOL carryforwards. NOL carryforwards of $48.7 million expire at various intervals between the years 2020 and 2039, while $33.2 million have an unlimited life.

At December 31, 2019, tax credit carryforwards totaling $73.6 million were available to reduce future tax liabilities. This deferred tax asset was comprised of $31.0 million related to general business credits and other federal credits, and $42.6 million of various state tax credits related to research and development, capital investment and job incentives. Tax credit carryforwards of $73.6 million expire at various intervals between the years 2020 and 2039.

No deferred income taxes have been provided as of December 31, 2019 or 2018, on the applicable undistributed earnings of the non-U.S. subsidiaries where the indefinite reinvestment assertion has been applied. If at some future date these earnings cease to be indefinitely reinvested and are repatriated, the Company may be subject to additional U.S. income taxes and foreign withholding and other taxes on such amounts. Pursuant to changes made by the TCJA, remittances from foreign subsidiaries made in 2018 and future years are generally not subject to U.S. income taxation. These remittances are either excluded from U.S. taxable income as earnings that have already been subjected to taxation, or in the alternative are subject to a 100 percent foreign dividends received deduction. The Company continues to provide deferred taxes, primarily related to foreign withholding taxes, on the undistributed net earnings of foreign subsidiaries and unconsolidated affiliates that are not deemed to be indefinitely reinvested in operations outside the United States, although such amounts were immaterial as of December 31, 2019 and 2018.

As of December 31, 2019, 2018 and 2017 the Company had $3.9 million, $2.3 million and $2.3 million of gross unrecognized tax benefits, including interest, respectively. Substantially all of these amounts, if recognized, would impact the Company's tax provision and the effective tax rate.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2019, 2018 and 2017, the amounts accrued for interest and penalties were not material.

The following is a reconciliation of the total amounts of unrecognized tax benefits excluding interest and penalties for the 2019, 2018 and 2017 annual reporting periods:

(in millions)	2019				2018				2017
Balance at January 1	$	2.3			$	2.1			$	3.4
Gross increases - tax positions prior periods	2.0				0.6				0.1
Gross decreases - tax positions prior periods	(0.8		)		(0.7		)		(0.2		)
Gross increases - current period tax positions	0.4				0.4				0.4
Decreases - settlements with taxing authorities	—				(0.1		)		(0.5		)
Reductions - lapse of statute of limitations	(0.2		)		—				(1.1		)
Balance at December 31	$	3.7			$	2.3			$	2.1

The Company believes it is reasonably possible that the total amount of gross unrecognized tax benefits as of December 31, 2019 could decrease by approximately $0.6 million in 2020 due to settlements with taxing authorities or lapses in applicable statutes of limitation. Due to the various jurisdictions in which the Company files tax returns and the uncertainty regarding the timing of the settlement of tax audits, it is possible that there could be significant changes in the amount of unrecognized tax benefits in 2020, but the amount cannot be estimated at this time.

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The Company is regularly audited by federal, state and foreign tax authorities. The Internal Revenue Service (IRS) has completed its field examination and has issued its Revenue Agents Report through the 2014 tax year and all open issues have been resolved. The Company is currently open to tax examinations by the IRS for the 2016 through 2018 tax years. Primarily as a result of filing amended returns, which were generated by the closing of federal income tax audits, the Company is still open to state and local tax audits in major tax jurisdictions dating back to the 2014 taxable year. The Company is no longer subject to income tax examinations by any major foreign tax jurisdiction for years prior to 2013.

The difference between the actual income tax provision and the tax provision computed by applying the statutory Federal income tax rate to Earnings before income taxes is attributable to the following:

(in millions)	2019				2018				2017
Income tax provision at 21 percent, 21 percent and 35 percent	$	23.2			$	65.2			$	74.5
State and local income taxes, net of Federal income tax effect	(3.6		)		8.8				3.9
Deferred tax asset valuation allowance	(3.5		)		4.0				5.9
Equity compensation	(2.9		)		(3.1		)		(7.3		)
Change in estimates related to prior years and prior years amended tax return filings	(2.9		)		1.6				1.4
Federal and state tax credits	(11.6		)		(11.6		)		(9.5		)
Taxes related to foreign income, net of credits	(5.2		)		(6.5		)		(21.5		)
Deferred tax reassessment	1.9				3.3				2.1
Tax law changes	—				(5.2		)		66.7
FDII deduction	(5.5		)		(2.6		)		—
Disproportionate tax effect released from Other comprehensive income	91.4				—				—
Other	(1.0		)		3.4				(4.6		)
Actual income tax provision	$	80.3			$	57.3			$	111.6
Effective tax rate	72.6		%		18.5		%		52.4		%

During 2019, the Company fully exited its remaining defined benefit pension plans and recorded a pretax pension settlement charge of $292.8 million. The tax impact of this action consisted of a tax benefit of $73.9 million from the pension settlement charge, which was netted against a tax charge of $91.4 million resulting from the release of disproportionate tax effects in Accumulated Other Comprehensive Income. See Note 17 – Postretirement Benefits for more information.

The Company's effective tax rate also reflects the benefit of having earnings from foreign entities that are in jurisdictions that have lower statutory tax rates than the U.S. with the most significant impact related to China and Poland, which have applicable statutory tax rates of 15 percent and 19 percent, respectively.

In addition, the Company's effective tax rate for 2017 includes the utilization of excess foreign tax credits in connection with the repatriation of foreign earnings.

Income tax provision allocated to continuing operations and discontinued operations for the years ended December 31 was as follows:

(in millions)	2019				2018				2017
Continuing operations	$	80.3			$	57.3			$	111.6
Discontinued operations	(40.1		)		2.6				23.2
Total income tax provision	$	40.2			$	59.9			$	134.8

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Financial Commitments

The Company has entered into guarantees of indebtedness of third parties, primarily in connection with customer financing programs. Under these arrangements, the Company has guaranteed customer obligations to the financial institutions in the event of customer default, generally subject to a maximum amount that is less than the total outstanding obligations. The Company has also extended guarantees to third parties that have purchased customer receivables from Brunswick and, in certain instances, has guaranteed secured term financing of its customers. Potential payments in connection with these customer financing arrangements generally extend over several years. The single year and maximum potential cash obligations associated with these customer financing arrangements as of December 31, 2019 and December 31, 2018 were $4.3 million and $10.9 million, respectively.

In most instances, upon repurchase of the receivable or note, the Company receives rights to the collateral securing the financing. The Company’s risk under these arrangements is partially mitigated by the value of the collateral that secures the financing.

The Company has accounts receivable sale arrangements with third parties which are included in the guarantee arrangements discussed above. The Company treats the sale of receivables in which the Company retains an interest as a secured obligation as the transfers of the receivables under these arrangements do not meet the requirements of a “true sale.” Accordingly, the current portion of receivables underlying these arrangements of $1.7 million and $4.9 million was recorded in Accounts and notes receivable and Accrued expenses as of December 31, 2019 and December 31, 2018, respectively. As of December 31, 2019 and 2018, the Company did not have any long-term receivables related to these arrangements.

The Company has also entered into arrangements with third-party lenders in which it has agreed, in the event of a customer or franchisee default, to repurchase from the third-party lender those Brunswick products repossessed from the customer or franchisee. These arrangements are typically subject to a maximum repurchase amount. The single year and maximum potential cash payments the Company could be required to make to repurchase collateral as of December 31, 2019 and December 31, 2018 were $63.1 million and $50.4 million, respectively. Included within this repurchase amount are amounts related to BAC, as discussed in Note 10 –Financing Joint Venture.

The Company’s risk under these repurchase arrangements is partially mitigated by the value of the products repurchased as part of the transaction. The Company had $1.5 million and $1.3 million accrued for potential losses related to repurchase exposure as of December 31, 2019 and December 31, 2018, respectively. The Company’s repurchase accrual represents the expected losses that could result from obligations to repurchase products, after giving effect to proceeds anticipated to be received from the resale of those products to alternative dealers.

 

The Company has recorded its estimated net liability associated with losses from these guarantee and repurchase obligations on its Consolidated Balance Sheets based on historical experience and current facts and circumstances. Historical cash requirements and losses associated with these obligations have not been significant, but could increase if dealer defaults exceed current expectations.

Financial institutions have issued standby letters of credit and surety bonds conditionally guaranteeing obligations on behalf of the Company totaling $13.1 million and $13.0 million, respectively, as of December 31, 2019. A large portion of these standby letters of credit and surety bonds are related to the Company’s self-insured workers’ compensation program as required by its insurance companies and various state agencies. The Company has recorded reserves to cover the anticipated liabilities associated with these programs. Under certain circumstances, such as an event of default under the Company’s revolving credit facility, or, in the case of surety bonds, a ratings downgrade, the Company could be required to post collateral to support the outstanding letters of credit and surety bonds. The Company was not required to post letters of credit as collateral against surety bonds as of December 31, 2019.

The Company has a collateral trust arrangement with insurance carriers and a trustee bank. The trust is owned by the Company, but the assets are pledged as collateral against workers’ compensation related obligations in lieu of other forms of collateral including letters of credit. In connection with this arrangement, the Company had $9.1 million and $9.0 million of cash in the trust at December 31, 2019 and December 31, 2018, respectively, which was classified as Restricted cash in the Company's Consolidated Balance Sheets.

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Product Warranties

The Company records a liability for product warranties at the time of the related product sale. The liability is estimated using historical warranty experience, projected claim rates and expected costs per claim. The Company adjusts its liability for specific warranty matters when they become known and the exposure can be estimated. Product failure rates as well as material usage and labor costs incurred in correcting a product failure affect the Company's warranty liabilities. If actual costs differ from estimated costs, the Company must make a revision to the warranty liability. Changes in the Company's warranty liabilities resulting from the Company's experience and adjustments related to changes in estimates are included as Aggregate changes for preexisting warranties presented in the table below.

The following activity related to product warranty liabilities was recorded in Accrued expenses during the years ended December 31, 2019 and December 31, 2018:

(in millions)	2019				2018
Balance at beginning of period	$	116.8			$	101.7
Payments - Recurring	(59.2		)		(57.0		)
Payments - Sport Yacht and Yachts	(12.5		)		(7.3		)
Provisions/additions for contracts issued/sold	59.0				61.5
Aggregate changes for preexisting warranties (A)	7.6				13.7
Warranty liability retained from discontinued operations (B)	5.9				—
Foreign currency translation	0.0				(1.2		)
Acquisitions	—				2.8
Other	—				2.6
Balance at end of period	$	117.6			$	116.8

(A) Includes $3.6 million and $10.7 million of warranty adjustments related to the wind-down of Sport Yacht and Yachts in 2019 and 2018, respectively.

(B) The Company retained a $5.9 million warranty liability from the sale of its Fitness business in 2019, which was included in Current liabilities held for sale in 2018.

Extended Product Warranties

End users of the Company's products may purchase a contract from the Company that extends product warranty beyond the standard period. For certain extended warranty contracts in which the Company retains the warranty or administration obligation, a deferred revenue liability is recorded based on the aggregate sales price for contracts sold. The liability is reduced and revenue is recognized on a straight-line basis over the contract period during which corresponding costs are expected to be incurred.

The following activity related to deferred revenue for extended product warranty contracts was recorded in Accrued expenses and Other long-term liabilities during the years ended December 31, 2019 and December 31, 2018:

(in millions)		2019				2018
Balance at beginning of period		$	66.4			$	56.9
Extended warranty contracts sold		24.3				22.8
Revenue recognized on existing extended warranty contracts		(15.2		)		(12.8		)
Foreign currency translation		0.2				(0.2		)
Other		(0.4		)		(0.3		)
Balance at end of period		$	75.3			$	66.4

Legal

The Company accrues for litigation exposure when it is probable that future costs will be incurred and such costs can be reasonably estimated. Adjustments to estimates are recorded in the period they are identified. Management does not believe that there is a reasonable possibility that a material loss exceeding the amounts already recognized for the Company’s litigation claims and matters, if any, has been incurred. In light of existing accruals, the Company's litigation claims, when finally resolved, are not

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expected, in the opinion of management, to have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

Environmental

The Company is involved in certain legal and administrative proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 and other federal and state legislation governing the generation and disposal of certain hazardous wastes. These proceedings, which involve both on- and off-site waste disposal or other contamination, in many instances seek compensation or remedial action from the Company as a waste generator under Superfund legislation, which authorizes action regardless of fault, legality of original disposition or ownership of a disposal site. The Company has established accruals based on a range of cost estimates for all known claims.

The environmental remediation and clean-up projects in which the Company is involved have an aggregate estimated range of exposure of approximately $14.6 million to $36.7 million as of December 31, 2019. At December 31, 2019 and 2018, the Company had accruals for environmental liabilities of $14.8 million and $17.0 million, respectively, which were recorded within Accrued expenses and Other long-term liabilities in the Consolidated Balance Sheets. The Company recorded no environmental provision for the year ended December 31, 2019, and the Company recorded $0.7 million and $1.1 million for the years ended December 31, 2018 and 2017, respectively.

The Company accrues for environmental remediation-related activities for which commitments or clean-up plans have been developed and for which costs can be reasonably estimated. All accrued amounts are generally determined in consultation with third-party experts on an undiscounted basis and do not consider recoveries from third parties until such recoveries are realized. In light of existing accruals, the Company's environmental claims, when finally resolved, are not expected, in the opinion of management, to have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

The Company operates globally with manufacturing and sales facilities around the world. Due to the Company’s global operations, the Company engages in activities involving both financial and market risks. The Company utilizes normal operating and financing activities, along with derivative financial instruments, to minimize these risks.

Derivative Financial Instruments. The Company uses derivative financial instruments to manage its risks associated with movements in foreign currency exchange rates and interest rates. Derivative instruments are not used for trading or speculative purposes. The Company formally documents its hedge relationships, including identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking derivatives that are designated as hedges to specific forecasted transactions. The Company also assesses, both at the hedge’s inception and monthly thereafter, whether the derivatives used in hedging transactions are highly effective in offsetting the changes in the anticipated cash flows of the hedged item. If the hedging relationship ceases to be highly effective, or it becomes probable that a forecasted transaction is no longer expected to occur, the Company discontinues hedge accounting prospectively and immediately recognizes the gains and losses associated with those hedges. There were no material adjustments as a result of ineffectiveness to the results of operations for the years ended December 31, 2019, 2018 and 2017. The fair value of derivative financial instruments is determined through market-based valuations and may not be representative of the actual gains or losses that will be recorded when these instruments mature due to future fluctuations in the markets in which they are traded. The effects of derivative financial instruments are not expected to be material to the Company’s financial position or results of operations when considered together with the underlying exposure being hedged. Use of derivative financial instruments exposes the Company to credit risk with its counterparties when the fair value of a derivative contract is an asset. The Company mitigates this risk by entering into derivative contracts with highly rated counterparties. The maximum amount of loss due to counterparty credit risk is limited to the asset value of derivative financial instruments.

Cash Flow Hedges. The Company enters into certain derivative instruments that are designated and qualify as cash flow hedges.  The Company executes both forward and option contracts, based on forecasted transactions, to manage foreign currency exchange exposure mainly related to inventory purchase and sales transactions. 

A cash flow hedge requires that as changes in the fair value of derivatives occur, the portion of the change deemed to be effective is recorded temporarily in Accumulated other comprehensive loss and reclassified into earnings in the same period or

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periods during which the hedged transaction affects earnings. As of December 31, 2019, the term of derivative instruments hedging forecasted transactions ranged up to 18 months. 

The following activity related to cash flow hedges was recorded in Accumulated other comprehensive loss as of December 31:

	Accumulated Unrealized Derivative
	Gains (Losses)
	2019								2018
(in millions)	Pretax				After-tax				Pretax				After-tax
Beginning balance	$	6.2			$	(1.9	)		$	(7.8	)		$	(11.8	)
Net change in value of outstanding hedges	5.1				3.6				10.6				7.3
Net amount recognized into earnings	(10.2		)		(7.2		)		3.4				2.6
Ending balance	$	1.1			$	(5.5	)		$	6.2			$	(1.9	)

Fair Value Hedges. The Company enters into fixed-to-floating interest rate swaps to convert a portion of the Company's long-term debt from fixed to floating rate debt. An interest rate swap is entered into with the expectation that the change in the fair value of the interest rate swap will offset the change in the fair value of the debt instrument attributable to changes in the benchmark interest rate. Each period, the change in the fair value of the interest rate swap asset or liability is recorded in debt and the difference between the fixed interest payments and floating interest receipts is recorded as a net adjustment to interest expense.

Other Hedging Activity. The Company has entered into certain foreign currency forward contracts that have not been designated as a hedge for accounting purposes. These contracts are used to manage foreign currency exposure related to changes in the value of assets or liabilities caused by changes in foreign exchange rates. The change in the fair value of the foreign currency derivative contract and the corresponding change in the fair value of the asset or liability of the Company are both recorded through earnings, each period as incurred.

Foreign Currency Derivatives. The Company enters into forward and option contracts to manage foreign exchange exposure related to forecasted transactions and assets and liabilities that are subject to risk from foreign currency rate changes. These exposures include: product costs; revenues and expenses; associated receivables and payables; intercompany obligations and receivables and other related cash flows.

Forward exchange contracts outstanding at December 31, 2019 and December 31, 2018 had notional contract values of $332.5 million and $308.9 million, respectively. Option contracts outstanding at December 31, 2019 and December 31, 2018, had notional contract values of $17.8 million and $27.2 million, respectively. The forward and options contracts outstanding at December 31, 2019, mature during 2020 and 2021 and mainly relate to the Euro, Australian dollar, Canadian dollar and Japanese yen. As of December 31, 2019, the Company estimates that during the next 12 months, it will reclassify approximately $3.4 million of net gains (based on rates as of December 31, 2019) from Accumulated other comprehensive loss to Cost of sales.

Interest Rate Derivatives. The Company enters into fixed-to-floating interest rate swaps to convert a portion of the Company's long-term debt from fixed to floating rate debt. In the third quarter of 2019, the Company retired its Senior notes due 2021 and settled the associated interest rate swaps, which resulted in a nominal loss recorded within Interest expense. Additionally, in the fourth quarter of 2019, the Company settled the interest rate swaps related to its Debentures due 2023, resulting in a net deferred gain of $2.5 million which is included in Debt. The Company will reclassify $0.7 million of net deferred gains from Debt to Interest expense during the next 12 months. As a result, there are no outstanding interest rate swaps as of December 31, 2019. As of December 31, 2018, the outstanding swaps had notional contract values of $200.0 million, of which $150.0 million corresponded to the Company's 4.625 percent Senior notes due 2021 and $50.0 million corresponded to the Company's 7.375 percent Debentures due 2023. These instruments have been designated as fair value hedges, with the fair value recorded in Debt as discussed in Note 16 – Debt.

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The Company may also enter into forward-starting interest rate swaps to hedge the interest rate risk associated with anticipated debt issuances. There were no forward-starting interest rate swaps outstanding at December 31, 2019 or December 31, 2018, however the Company had $2.0 million and $2.5 million, respectively, of net deferred losses associated with previously settled forward-starting interest rate swaps which were included in Accumulated other comprehensive loss. As of December 31, 2019, the Company will reclassify approximately $0.6 million of net losses resulting from settled forward-starting interest rate swaps from Accumulated other comprehensive loss to Interest expense during the next 12 months.

As of December 31, 2019 and December 31, 2018, the fair values of the Company’s derivative instruments were:

(in millions)
		Derivative Assets										Derivative Liabilities
Instrument		Balance Sheet Location		Fair Value								Balance Sheet Location		Fair Value
				2019				2018						2019				2018
Derivatives Designated as Cash Flow Hedges
Foreign exchange contracts		Prepaid expenses and other		$	4.1			$	6.8			Accrued expenses		$	2.3			$	0.3
Derivatives Designated as Fair Value Hedges
Interest rate contracts		Prepaid expenses and other		—				—				Accrued expenses		$	—			$	0.1
Interest rate contracts		Other long-term assets		—				—				Other long-term liabilities		—				1.8
Total				$	—			$	—					$	—			$	1.9
Other Hedging Activity
Foreign exchange contracts		Prepaid expenses and other		$	0.1			$	0.8			Accrued expenses		$	0.9			$	0.0

The effect of derivative instruments on the Consolidated Statements of Operations for the years ended December 31, 2019 and December 31, 2018 was: 

(in millions)
Derivatives Designated as Cash Flow Hedging Instruments		Amount of Gain (Loss) on Derivatives Recognized in Accumulated Other Comprehensive Loss (Effective Portion)								Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Earnings (Effective Portion)		Amount of Gain/Loss Reclassified from Accumulated Other Comprehensive Loss into Earnings (Effective Portion)
		2019				2018						2019				2018
Interest rate contracts		$	—			$	—			Interest expense		$	(0.6	)		$	(0.9	)
Foreign exchange contracts		5.1				10.6				Cost of sales		10.8				(2.5		)
Total		$	5.1			$	10.6					$	10.2			$	(3.4	)

Derivatives Designated as Fair Value Hedging Instruments		Location of Gain (Loss) on Derivatives Recognized in Earnings		Amount of Gain (Loss) on Derivatives Recognized in Earnings
				2019				2018
Interest rate contracts		Interest expense		$	0.1			$	(0.0	)

Other Hedging Activity		Location of Gain (Loss) on Derivatives Recognized in Earnings		Amount of Gain (Loss) on Derivatives Recognized in Earnings
				2019				2018
Foreign exchange contracts		Cost of sales		$	2.4			$	7.9
Foreign exchange contracts		Other expense, net		(1.3		)		1.5
Total				$	1.1			$	9.4

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Fair Value of Other Financial Instruments. The carrying values of the Company’s short-term financial instruments, including cash and cash equivalents and accounts and notes receivable approximate their fair values because of the short maturity of these instruments. At December 31, 2019 and December 31, 2018, the fair value of the Company’s long-term debt was approximately $1,214.6 million and $1,292.9 million, respectively, and was determined using Level 1 and Level 2 inputs described in Note 7 – Fair Value Measurements, including quoted market prices or discounted cash flows based on quoted market rates for similar types of debt. The carrying value of long-term debt, including current maturities, was $1,131.6 million and $1,226.4 million as of December 31, 2019 and December 31, 2018, respectively.

Accrued Expenses at December 31, 2019 and 2018 were as follows:

(in millions)	2019				2018
Compensation and benefit plans	$	118.9			$	143.6
Product warranties	117.6				116.8
Sales incentives and discounts	116.9				124.8
Deferred revenue and customer deposits	38.7				27.6
Current operating lease liabilities	18.4				—
Interest	16.5				15.0
Insurance reserves	16.3				14.2
Legal Fees	15.1				9.4
Environmental reserves	6.6				7.6
Real, personal and other non-income taxes	4.5				3.9
Sales return reserves	3.9				3.1
Secured obligations, repurchase and recourse	3.5				6.2
Derivatives	3.2				0.4
Other	29.5				29.5
Total accrued expenses	$	509.6			$	502.1

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Long-term debt at December 31, 2019 and December 31, 2018 consisted of the following:

(in millions)	2019				2018
Term loan, floating rate due 2023, net of debt issuance costs of $1.3 and $1.6 (A) (D)	$	305.0			$	339.7
Senior Notes, 6.375%, due 2049, net of debt issuances costs of $7.8 in 2019	222.2				—
Senior Notes, 6.500% due 2048, net of debt issuance costs of $8.2 and $8.5	176.8				176.5
Notes, 7.125% due 2027, net of discount of $0.3 and $0.3 and debt issuance costs of $0.4 and $0.4	162.5				162.5
Senior Notes, currently 6.625%, due 2049, net of debt issuances costs of $4.4 and $4.5	120.6				120.5
Debentures, 7.375% due 2023, net of discount of $0.1 and $0.2 and debt issuance costs of $0.2 and $0.2 (C)	105.2				102.6
Loan with Fond du Lac County Economic Development Corporation, 2.0% due 2021, net of discount of $1.6 and $2.3 and debt issuance costs of $0.0 and $0.1	11.1				15.3
Notes, various up to 5.8% payable through 2028, net of discount of $0.0 and $0.2	5.9				6.9
Term loan, floating rate due 2021, net of debt issuance costs of $0.5 in 2018 (E)	—				149.5
Senior Notes, currently 4.625%, due 2021, net of debt issuances costs of $1.0 in 2018 (B)	—				147.3
Total long-term debt	1,109.3				1,220.8
Current maturities of long-term debt	(41.3		)		(41.3		)
Long-term debt, net of current maturities	$	1,068.0			$	1,179.5

(A) Beginning in December 2018, scheduled repayment of the 5-year term loan occurs each March, June, September and December equal to 2.50% of the aggregate principal amount of $350.0 million. The remaining principal amount is due August 2023.

(B) Included in Senior notes, 4.625 percent due 2021 at December 31, 2018, is the aggregate fair value related to the fixed-to-floating interest rate swap as discussed in Note 14 – Financial Instruments.

(C) Included in Debentures, 7.375 percent due 2023 at December 31, 2019 and December 31, 2018, are the aggregate fair values related to the fixed-to-floating interest rate swaps as discussed in Note 14 – Financial Instruments.

(D) As of December 31, 2019 and December 31, 2018, the interest rate was 3.50% and 4.10%, respectively.

(E) As of December 31, 2018, the interest rate was 3.85%.

Debt issuance costs paid for the years ended December 31, 2019 and December 31, 2018 were $8.1 million and $15.4 million, respectively. Debt issuance costs are reported in net proceeds from issuances of long-term debt within cash flows from financing activities on the Consolidated Statements of Cash Flows. There were no debt issuance costs paid during 2017.

Scheduled maturities, net:

(in millions)
2020	$	41.3
2021	42.0
2022	35.7
2023	305.8
2024	0.4
Thereafter	684.1
Total long-term debt including current maturities	$	1,109.3

Power Products Financing

In June 2018, in connection with the acquisition of Power Products the Company entered into an agreement with Morgan Stanley Senior Funding, Inc. to obtain a $1.1 billion, 364-Day Senior Unsecured Bridge Facility (Bridge Facility). Refer to Note 5 – Acquisitions for further details regarding the acquisition. In July 2018, the Company executed the First Amendment to its Credit Facility to remove certain restrictions on the Company to incur unsecured debt with a maturity date before the Credit facility termination date. Simultaneously, $300.0 million of commitments related to the Bridge Facility were terminated resulting in $800.0 million remaining under this facility. In August 2018, the commitments with respect to the Bridge Facility were reduced to zero and replaced with a term loan credit agreement (Credit Agreement) to obtain term loans (Term Loans) in an aggregate principal

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amount of $800.0 million. The Term Loan debt issued in August 2018 consisted of a $300.0 million 364-day tranche loan, a $150.0 million 3-year tranche loan and a $350.0 million 5-year tranche loan. The Company is required to maintain compliance with two financial covenants: a minimum interest coverage ratio and a maximum leverage ratio. The minimum interest coverage, as defined in the Credit Agreement, is not permitted to be less than 3.00 to 1.00. The maximum leverage ratio, as defined in the Credit Agreement, is not permitted to be more than 3.50 to 1.00. As of December 31, 2019, the Company was in compliance with the financial covenants in the Credit Agreement.

Senior Note, Notes and Debentures

Activity

In July 2019, the Company called $150.0 million of its 4.625% senior notes due 2021. The bonds were retired in August 2019 at par plus accrued interest, in accordance with the call provisions of the notes, and the associated interest rate swaps have been terminated. Refer to Note 14 – Financial Instruments for further information on the terminated interest rate swaps.

In March 2019, the Company issued an aggregate principal amount of $230.0 million of its 6.375% Senior Notes due April 2049 (6.375% Notes) in a public offering, which resulted in aggregate net proceeds to the Company of $222.0 million. Net proceeds from the offering of the 6.375% Notes were used to prepay all of the $150.0 million, 3-year tranche loan due 2021 and for general corporate purposes. The Company may, at its option, redeem the notes on or after (but not prior to) April 15, 2024.

In December 2018, the Company issued an aggregate principal amount of $125.0 million of its 6.625% Senior Notes due January 2049 (6.625% Notes) in a public offering, which resulted in aggregate net proceeds to the Company of $120.5 million. Net proceeds from the offering of the 6.625% Notes were used, together with cash on hand, to prepay the remaining $115.0 million of the $300.0 million 364-day tranche loan. The Company may, at its option, redeem the 2049 Notes on or after (but not prior to) January 15, 2024.

In October 2018, the Company issued an aggregate principal amount of $185.0 million of its 6.500% Senior Notes due October 2048 (6.500% Notes) in a public offering, which resulted in aggregate net proceeds to the Company of $176.5 million. Net proceeds from the offering of the 6.500% Notes were used, together with cash on hand, to prepay $185.0 million of the $300.0 million 364-day tranche loan. The Company may, at its option, redeem the 2048 Notes on or after (but not prior to) October 15, 2023.

Provisions

Pursuant to the indenture governing the 6.500% Notes, the 6.625% Notes and the 6.375% Notes, the Company and its restricted subsidiaries are subject to restrictions on the incurrence of debt secured by liens on principal property (as defined in the indenture) or shares of capital stock of such restricted subsidiaries, entering into sale and leaseback transactions in respect of principal property and mergers or consolidations with another entity or sales, transfers or leases of the Company's properties and assets substantially as an entirety to another person.

Interest on the Company's 2023 and 2027 notes is due semi-annually. Interest on the Company's 6.500% Notes, 6.625% Notes,6.375% Notes and the Term Loan is due quarterly.

Unless otherwise noted, the Company's debt is unsecured and does not contain subsidiary guarantees.

The Company may be required to repurchase some or all of the 6.500% Notes, 6.625% Notes and the 6.375% Notes in the event of a change of control, subject to certain circumstances, for an amount equal to 101 percent of the outstanding principal plus any accrued and unpaid interest.

The Company's 2027 notes may be redeemed at any time at the Company's discretion, in whole or in part, at the redemption price specified in the agreement, plus any accrued and unpaid interest. The Company's 2023 notes are not redeemable. The Company's 2023 floating rate term loan may be redeemed at any time at the Company's discretion, either in whole or in part, at the redemption price equal to 100 percent of the principal amount plus any accrued and unpaid interest. The remainder of the Company's 2048 and 2049 notes may be redeemed in 5 years from the date of issuance, either in whole or in part, at a redemption price equal to 100 percent of the principal amount plus any accrued and unpaid interest.

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Short-term Borrowing Arrangements

On September 26, 2018, the Company entered into an Amended and Restated Credit Agreement (Credit Facility). The Credit Facility amended and restated the Company's existing credit agreement. The Credit Facility provides for $400.0 million of borrowing capacity and is in effect through September 2024. The Credit Facility includes provisions to add up to $100.0 million of additional borrowing capacity and extend the facility for two additional one-year terms, subject to lender approval. In November 2019, the Credit Facility was amended to extend the maturity date from September 2023 to September 2024. The Company currently pays a facility fee of 15 basis points per annum. The facility fee per annum will be within a range of 12.5 to 35 basis points based on the Company's credit rating. Under the terms of the Credit Facility, the Company has two borrowing options: borrowing at a rate tied to adjusted LIBOR plus a spread of 110 basis points or a base rate plus a margin of 10.0 basis points. The rates are determined by the Company's credit ratings, with spreads ranging from 100 to 190 basis points for LIBOR rate borrowings and 0 to 90 basis points for base rate borrowings. The Company is required to maintain compliance with two financial covenants included in the Credit Facility: a minimum interest coverage ratio and a maximum leverage ratio. The minimum interest coverage ratio, as defined in the agreement, is not permitted to be less than 3.00 to 1.00. The maximum leverage ratio, as defined in the agreement, is not permitted to be more than 3.50 to 1.00. During 2019, borrowings under the Credit Facility totaled $655.0 million, all of which were repaid during the period. No borrowings were outstanding as of December 31, 2019, and available borrowing capacity totaled $387.9 million, net of $12.1 million of letters of credit outstanding under the Credit Facility. As of December 31, 2019, the Company was in compliance with the financial covenants in the Credit Facility.

On December 2019, the Company entered into an unsecured commercial paper program (CP Program) pursuant to which the Company, may issue short-term, unsecured commercial paper notes (CP Notes). Amounts available under the CP Program may be borrowed, repaid and re-borrowed from time to time, with the aggregate principal amount of CP Notes outstanding under the CP Program at any time not to exceed the available borrowing amount under the credit facility. The net proceeds of the issuances of the CP Notes are expected to be used for general corporate purposes. The maturities of the CP Notes will vary but may not exceed 397 days from the date of issue. The CP Notes will be sold under customary terms in the commercial paper market and will be issued at a discount from par or, alternatively, will be issued at par and bear varying interest rates on a fixed or floating basis. There were no borrowings under the CP program during 2019.

Other Debt

As provided under the terms of its loan agreement with the Fond du Lac County Economic Development Corporation, which is secured by the Company's property located in Fond du Lac, Wisconsin, up to a maximum 43 percent of the principal due annually can be forgiven if the Company achieves certain employment targets as outlined in the agreement. The amount of loan forgiveness is based on average employment levels at the end of the previous four quarters. Total loan forgiveness for 2019, 2018 and 2017 was $2.1 million or 43 percent of the principal due each year.

Overview. The Company has defined contribution plans and makes contributions including matching and annual discretionary contributions which are based on various percentages of compensation, and in some instances are based on the amount of the employees' contributions to the plans. The expense related to the defined contribution plans was $44.1 million in 2019, $45.3 million in 2018 and $42.2 million in 2017.

The Company's domestic pension and retiree health care and life insurance benefit plans, which are discussed below, provide benefits based on years of service and, for some plans, average compensation prior to retirement. Benefit accruals are frozen for all plan participants. The Company uses a December 31 measurement date for these plans. The Company's foreign postretirement benefit plans are not significant individually or in the aggregate.

Plan Developments. The Company historically maintained four qualified defined benefit plans: the Brunswick Pension Plan for Salaried Employees (Salaried Plan), the Brunswick Pension Plan for Hourly Bargaining Unit Employees (Bargaining Plan), the Brunswick Pension Plan For Hourly Employees (Hourly Plan) and the Brunswick Pension Plan For Hourly Wage Employees (Muskegon Plan). During the third quarter of 2018, the Company initiated actions to terminate its two remaining plans, the Salaried Plan and the Bargaining Plan, effective October 31, 2018. All benefits were settled during 2019, either through a lump-sum payment to participants or the purchase of an annuity offering on behalf of the participants. As a result of the planned terminations, the remaining over-funded position for each plan is currently recorded within Accounts and notes receivable in the Consolidated Balance Sheets. The Company has previously completed actions to terminate the Hourly Plan and the Muskegon Plan, effective as of December 31, 2016, and all benefits were paid during 2017 as described below.

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During 2019, total settlement payments of $673.9 million were made from the Salaried Plan and the Bargaining Plan, consisting of lump-sum pension distributions of $77.1 million and the purchase of group annuity contracts totaling $596.8 million to cover future benefit payments. The annuity contracts unconditionally and irrevocably guarantee the full payment of all future annuity payments to the affected participants. The insurance company assumed all risk associated with the assets and obligations that were transferred. The Company recognized a pretax settlement loss of $292.8 million during the year related to these actions.

During 2017, total settlement payments of $132.7 million were made from the Bargaining Plan and Salaried Plan to purchase group annuity contracts on behalf of participants to cover future benefit payments. In addition, settlement payments totaling $101.7 million were made from the Hourly Plan and the Muskegon Plan in connection with plan terminations. The settlement payments included group annuity contracts to cover future benefit payments as well as lump-sum benefit payments to certain participants.

The annuity contracts provide for the full payment of all future annuity payments to the participants. The insurance company assumed all investment risk associated with the assets and obligations that were transferred. The Company recognized a pretax settlement loss of $96.6 million during 2017 related to these actions.

Costs. Pension and other postretirement benefit costs included the following components for 2019, 2018 and 2017:

	Pension Benefits												Other Postretirement Benefits
(in millions)	2019				2018				2017				2019				2018				2017
Interest cost	$	6.0			$	22.6			$	28.4			$	1.3			$	1.1			$	1.2
Expected return on plan assets	(7.4		)		(24.8		)		(33.5		)		—				—				—
Amortization of prior service credits	—				—				—				(0.7		)		(0.7		)		(0.7		)
Amortization of net actuarial losses	5.8				9.9				14.4				—				—				—
Settlement charges	292.8				—				96.6				—				—				—
Net pension and other benefit costs	$	297.2			$	7.7			$	105.9			$	0.6			$	0.4			$	0.5

Net pension and other benefit costs are recorded in Pension Settlement Charge and Other expense, net in the Consolidated Statements of Operations.

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Benefit Obligations and Funded Status. A reconciliation of the changes in the benefit obligations and fair value of assets over the two-year period ending December 31, 2019, and a statement of the funded status at December 31 for these years for the Company's pension and other postretirement benefit plans follow:

	Pension Benefits								Other Postretirement Benefits
(in millions)	2019				2018				2019				2018
Reconciliation of benefit obligation:
Benefit obligation at previous December 31	$	652.8			$	716.9			$	34.3			$	38.7
Interest cost	6.0				22.6				1.3				1.1
Participant contributions	—				—				—				0.2
Actuarial losses (gains)	77.3				(42.9		)		0.2				(2.5		)
Benefit payments	(34.1		)		(43.8		)		(2.8		)		(3.2		)
Settlement payments	(673.9		)		—				—				—
Benefit obligation at December 31	28.1				652.8				33.0				34.3
Reconciliation of fair value of plan assets:
Fair value of plan assets at previous December 31	642.0				546.1				—				—
Actual return on plan assets	70.8				(24.1		)		—				—
Employer contributions	7.9				163.8				2.8				3.0
Participant contributions	—				—				—				0.2
Benefit payments	(34.1		)		(43.8		)		(2.8		)		(3.2		)
Settlement payments	(673.9		)		—				—				—
Adjustments	(2.1		)		—				—				—
Fair value of plan assets at December 31	10.6				642.0				—				—
Funded status at December 31	$	(17.5	)		$	(10.8	)		$	(33.0	)		$	(34.3	)
Funded percentage (A)	38		%		98		%		NA				NA

(A) As all of the Company's plans are frozen, the projected benefit obligation and the accumulated benefit obligation are equal. As of December 31, 2018, the plan assets for the Company's Salaried and Bargaining plans were in excess of the projected and accumulated benefit obligations.

The funded status of these pension plans includes the projected and accumulated benefit obligations for the Company's nonqualified pension plan of $28.1 million and $29.2 million at December 31, 2019 and 2018, respectively. The Company's nonqualified pension plan and other postretirement benefit plans are not funded.

The amounts included in the Company's Consolidated Balance Sheets as of December 31, 2019 and 2018, were as follows:

	Pension Benefits								Other Postretirement Benefits
(in millions)	2019				2018				2019				2018
Prepaid expenses and other	$	—			$	14.8			$	—			$	—
Accounts and notes receivable	10.6				3.6				—				—
Assets recognized	$	10.6			$	18.4			$	—			$	—
Accrued expenses	$	3.5			$	3.7			$	3.6			$	3.6
Postretirement benefit liabilities	24.6				25.5				29.4				30.7
Liabilities recognized	$	28.1			$	29.2			$	33.0			$	34.3

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Accumulated Other Comprehensive Loss. The following pretax activity related to pensions and other postretirement benefits was recorded in Accumulated other comprehensive loss as of December 31:

	Pension Benefits								Other Postretirement Benefits
(in millions)	2019				2018				2019				2018
Prior service credits
Beginning balance	$	—			$	—			$	(8.8	)		$	(9.5	)
Amount recognized as component of net benefit costs	—				—				0.7				0.7
Ending balance	—				—				(8.1		)		(8.8		)
Net actuarial losses
Beginning balance	298.3				302.1				(1.5		)		1.0
Actuarial (gains) losses arising during the period	12.3				6.1				0.1				(2.5		)
Amount recognized as component of net benefit costs	(298.6		)		(9.9		)		—				—
Ending balance	12.0				298.3				(1.4		)		(1.5		)
Total	$	12.0			$	298.3			$	(9.5	)		$	(10.3	)

  

Prior service credits associated with other postretirement benefits are being amortized on a straight-line basis over the average future working lifetime to full eligibility for active hourly plan participants and over the average remaining life expectancy for those plans' participants who are fully eligible for benefits. Actuarial gains and losses in excess of 10 percent of the greater of the benefit obligation or the market value of assets are amortized over the remaining service period of active plan participants and over the average remaining life expectancy of inactive plan participants.

Other Postretirement Benefits. Once participants eligible for other postretirement benefits turn 65 years old, the health care benefits become a flat dollar amount based on age and years of service. The assumed health care cost trend rate for other postretirement benefits for pre-age 65 benefits as of December 31 was as follows:

	Pre-age 65 Benefits
	2019			2018
Health care cost trend rate for next year	5.4	%		5.5	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.5	%		4.5	%
Year rate reaches the ultimate trend rate	2037			2037

A one percent change in the assumed health care trend rate at December 31, 2019 would not have a material impact on the accumulated postretirement benefit obligation.

The Company monitors the cost of health care and life insurance benefit plans and reserves the right to make additional changes or terminate these benefits in the future.

Assumptions. Weighted average assumptions used to determine pension and other postretirement benefit obligations at December 31 were as follows:

	Pension Benefits						Other Postretirement Benefits
	2019			2018			2019			2018
Discount rate	2.96	%		4.13	%		3.07	%		4.20	%

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Weighted average assumptions used to determine net pension and other postretirement benefit costs for the years ended December 31 were as follows:

	2019		2018		2017
Discount rate for pension benefits (A) (B)	4.13%		3.27%		3.40%
Discount rate for other postretirement benefits (A) (B)	3.85%		3.08%		3.17%
Long-term rate of return on plan assets (C)	NA		4.25%		4.75%

(A) The Company utilizes a yield curve analysis to calculate the discount rates used to determine pension and other postretirement benefit obligations. The yield curve analysis matches the cash flows of the Company's benefit obligations. The yield curve consisted of spot interest rates at half year increments for each of the next 30 years and was developed based on pricing and yield information for high quality corporate bonds rated Aa by either Moody's or Standard & Poor's, private placement bonds that are traded in reliance with Rule 144A and are at least two years from date of issuance, bonds with make-whole provisions and bonds issued by foreign corporations that are denominated in U.S. dollars, excluding callable bonds and bonds less than a minimum size and other filtering criteria. Additionally, the Company's yield curve methodology includes bonds having a yield that is greater than the regression mean yield curve as the Company believes this methodology represents an appropriate estimate of the rates at which the Company could effectively settle its pension obligations. For the Company's Salaried and Bargaining plans which were terminated during 2018, the discount rate was a blend of the December 31, 2018 yield curve rate associated with those participants electing annuity contracts to cover future benefit payments, and a lump-sum segment rate for those participants electing lump-sum benefit payments.

(B) The Company uses a "spot rate approach" in the calculation of pension and postretirement interest costs to provide a more accurate measurement of interest costs. The spot rate approach applies separate discount rates for each projected benefit payment in the calculation of pension and postretirement interest costs.

(C) The Company evaluates its assumption regarding the estimated long-term rate of return on plan assets based on historical experience, future expectations of investment returns, asset allocations, investment strategies and views of investment professionals.

Master Trust Investments. Assets of the Company's Master Pension Trust (Trust) are invested solely in the interest of the plan participants for the purpose of providing benefits to participants and their beneficiaries. Investment decisions within the Trust are made after giving appropriate consideration to the prevailing facts and circumstances that a prudent person acting in a like capacity would use in a similar situation, and follow the guidelines and objectives established within the investment policy statement for the Trust. In general, the Trust's investment strategy is to invest in a diversified portfolio of assets that will generate returns equal to or in excess of the change in liabilities resulting from interest costs and discount rate fluctuations. The excess returns generated from this strategy will contribute to improve the funded position of the plan. In order for returns to achieve this objective, the Trust will invest in fixed income investments and equities. These asset classes have historically been reasonably correlated to changes in plan liabilities resulting from changes in the discount rate. All investments are continually monitored and reviewed, with a focus on asset allocation, investment vehicles and performance of the individual investment managers, as well as overall Trust performance. Over time, the Company has shifted a greater percentage of the Trust's assets into long-term fixed-income securities, with an objective of achieving an improved matching of asset returns with changes in liabilities.

During 2019, all assets of the Trust were distributed to participants in connection with the plan terminations.

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The fair values of the Trust's pension assets at December 31, 2018, by asset class were as follows:

	Fair Value Measurements at December 31, 2018 (A)
(in millions)	Quoted Prices in Active Markets for Identical Assets				Significant Observable Inputs
Investments at fair value	(Level 1)				(Level 2)				Total
Cash and cash equivalents	$	6.1			$	—			$	6.1
Fixed-income securities:
Government securities (C)	—				126.2				126.2
Corporate securities (D)	—				356.2				356.2
Other investments (F)	—				7.2				7.2
Total investments at fair value	$	6.1			$	489.6			$	495.7
Investments at net asset value
Short-term investments									102.3
Equity securities: (B)
United States									2.0
Fixed-income securities:
Commingled funds (E)									63.3
Total investments at net asset value									167.6
Other liabilities (G)									(21.3		)
Total pension plan net assets									$	642.0

(A)

See Note 7 – Fair Value Measurements for a description of levels within the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level input that is significant to the fair value measurement in its entirety. A description of the valuation methodologies is provided following these tables. There were no transfers in and/or out of Level 1 and Level 2 in 2018.

(B)	The equity assets are invested in two indexed funds based on the Russell 3000 Index (U.S.) and the MSCI EAFE Equity Index (International). The Trust did not directly own any of the Company's common stock as of December 31, 2018.

(C)	Government securities are comprised of U.S. Treasury bonds and other government securities.

(D)	Corporate securities consist primarily of a diversified portfolio of investment grade bonds issued by companies.

(E)	This class includes commingled funds that primarily invest in investment grade corporate securities and government-related securities. This class also includes investments in non-agency collateralized mortgage obligations and mortgage-backed securities, futures and options.

(F)	Other investments consist primarily of interest rate swaps used to manage the average duration of the fixed income portfolio and credit default swaps to manage credit risk exposure.

(G)	This class includes interest receivable and receivables/payables for securities sold/purchased.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. See Note 7 – Fair Value Measurements for further description of the procedures the Company performs with respect to its Level 2 measurements:

Equity securities: The indexed equity funds are valued at the net asset value (NAV) provided by the investment managers. The NAV is based on the quoted market value of the underlying assets owned by the fund, minus its liabilities, divided by the number of units outstanding. The indexed equity funds are invested in portfolios of equity securities with the goal of matching returns to specific indices. Investments in United States equity securities are invested in an index fund that tracks the Russell 3000 index, which is an all cap market index. Withdrawal from the United States equity fund is permitted with a one-day notice prior to the trade date with subsequent settlement three days after the trade date.

Corporate debt securities: Corporate debt securities are valued based on prices provided by third-party pricing sources, which are based on estimated prices at which a dealer would pay for or sell a security.

Government debt securities: U.S. Treasury bonds are valued using quoted market prices in active markets. Other agency securities are valued based on prices provided by third-party pricing sources, which are based on estimated prices at which a dealer would pay for or sell a security.

Short-term investments, commingled funds: Short-term investments and commingled funds are valued at the NAV provided by the investment managers. The NAV is based on the quoted market value of the underlying assets owned by the fund, minus its

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liabilities, divided by the number of units outstanding. Investments in fixed income commingled funds include long-duration corporate bonds, asset-backed securities and other short-term, fixed-income securities with the goal of preserving capital and maximizing total return consistent with prudent investment management.

Other investments: Exchange-traded derivative instruments are valued using market indices. The fair value of derivatives that are not traded on an exchange are based on valuation models using observable market data as of the measurement date.

There were no pension plan assets measured using significant unobservable inputs (Level 3) for the years ended December 31, 2019 and December 31, 2018.

Expected Cash Flows. The expected cash flows for the Company's pension and other postretirement benefit plan are presented as follows:

(in millions)	Pension Benefits			Other Postretirement Benefits
Company contributions expected to be made in 2020	$	3.5		$	3.2
Expected benefit payments:
2020	3.5			3.2
2021	3.0			3.0
2022	2.8			2.9
2023	2.7			2.7
2024	2.3			2.6
2025-2029	9.7			10.8

Under the Brunswick Corporation 2014 Stock Incentive Plan, the Company may grant stock appreciation rights (SARs), non-vested stock awards, and performance awards to executives, other employees and non-employee directors, with shares from treasury shares and from authorized, but unissued, shares of common stock initially available for grant, in addition to: (i) the forfeiture of past 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 awards. As of December 31, 2019, 5.1 million shares remained available for grant.

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

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 management and the Human Resources and Compensation Committee of the Board of Directors. Non-vested stock units and awards have vesting periods of three years. Non-vested stock units and awards are eligible for dividends, which are reinvested, and are non-voting. All non-vested units and awards have restrictions on the sale or transfer of such awards during the vesting period.

Generally, grants of non-vested stock units and awards are forfeited if employment is terminated prior to vesting. Non-vested stock units and awards vest pro rata over one year if (i) the grantee has attained the age of 62, or (ii) the grantee's age plus total years of service equals 70 or more.

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 on the balance sheet and adjusted to fair value each reporting period through stock compensation expense. During the years ended December 31, 2019, 2018 and 2017, the Company charged $10.9 million, $11.1 million and $9.7 million, respectively, to compensation expense for non-vested stock units and awards. The related income tax benefit recognized in 2019, 2018 and 2017 was $2.7 million, $2.8 million and $3.7 million, respectively. The fair value of shares vested during 2019, 2018 and 2017 was $19.2 million, $4.4 million and $12.1 million respectively.

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The weighted average price per Non-vested stock award at grant date was $49.12, $59.05 and $60.30 for awards granted in 2019, 2018 and 2017, respectively. Non-vested stock award activity for the year ended December 31, 2019 was as follows:

(in thousands, except grant date fair value)	Non-vested Stock Award Activity			Weighted Average Grant Date Fair Value ($)
Non-vested awards, unvested at January 1, 2019	574			54.82
Awarded	374			49.12
Forfeited	(183	)		41.45
Vested	(321	)		57.74
Non-vested awards, unvested at December 31, 2019	444			53.42

As of December 31, 2019, there was $9.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. The Company expects this expense to be recognized over a weighted average period of 1.5 years.

SARs

Between 2005 and 2012, the Company issued stock-settled SARs. Generally, SARs are exercisable over a period of 10 years, or as otherwise determined by management and the Human Resources and Compensation Committee of the Board of Directors, and subject to vesting periods of generally 4 years. However, with respect to SARs, all grants vest immediately: (i) in the event of a change in control; (ii) upon death or disability of the grantee; or (iii) with respect to awards granted prior to 2008, upon the sale or divestiture of the business unit to which the grantee is assigned.

In addition, grantees continue to vest in accordance with the vesting schedule even upon termination if (i) the grantee has attained the age of 62, or (ii) the grantee's age plus total years of service equals 70 or more. An additional provision applies that prorates the grant in the event of termination prior to the first anniversary of the date of grant, provided the participant had met the appropriate retirement age definition of rule of 70 or age 62.

 

SARs activity for all plans for the years ended December 31, 2019, 2018 and 2017, was as follows:

	2019													2018											2017
(in thousands, except exercise price and terms)	SARs Outstanding			Weighted Average Exercise Price				Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value				SARs Outstanding			Weighted Average Exercise Price				Aggregate Intrinsic Value				SARs Outstanding			Weighted Average Exercise Price				Aggregate Intrinsic Value
Outstanding on January 1	343			$	16.04									594			$	14.40							978			$	14.43
Exercised	(224	)		$	13.13					$	10,494			(248	)		$	12.10			$	12,636			(352	)		$	14.37			$	16,071
Forfeited	0			$	5.86									(3	)		$	17.06							(32	)		$	15.76
Outstanding on December 31	119			$	21.57			1.4 years		$	4,571			343			$	16.04			$	10,439			594			$	14.40			$	24,261
Exercisable and Vested on December 31	119			$	21.57			1.4 years		$	4,571			343			$	16.04			$	10,439			594			$	14.40			$	24,261

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The following table summarizes information about SARs outstanding as of December 31, 2019:

		Outstanding and Exercisable
Exercise Price		Number (in thousands)			Weighted Average Remaining Years of Contractual Life
$11.08		2.8			0.1	years
$14.68		7.4			1.7	years
$21.52		71.1			1.1	years
$23.79		37.6			2.1	years

SARs expense was immaterial for all periods presented.

Performance Awards

In February 2019, 2018 and 2017, the Company granted performance shares to certain senior executives. 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 stock returns measured against stock returns of a predefined comparator group over a three-year performance period. Additionally, in February 2019, 2018 and 2017, the Company granted 24,605, 24,490 and 26,300 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.

The fair values of the senior executives' performance share award grants with a TSR modifier at the grant date in 2019, 2018 and 2017 were $49.64, $61.59 and $64.82, respectively, which were estimated using the Monte Carlo valuation model, and incorporated the following assumptions:

	2019			2018			2017
Risk-free interest rate	2.9	%		2.4	%		1.5	%
Dividend yield	1.7	%		1.3	%		1.1	%
Volatility factor	41.0	%		38.9	%		38.3	%
Expected life of award	2.9 years			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 $47.61, $57.19 and $58.77, which was equal to the stock price on the date of grant in 2019, 2018 and 2017, respectively, less the present value of dividend payments over the vesting period.

The Company recorded compensation expense related to performance awards of $6.4 million, $5.6 million and $6.2 million in 2019, 2018 and 2017, respectively. The related income tax benefit recognized in 2019, 2018 and 2017 was $1.6 million, $1.4 million and $2.4 million, respectively. The fair value of awards vested during 2019, 2018 and 2017 was $4.9 million, $7.8 million and $5.5 million, respectively.

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Performance award activity for the year ended December 31, 2019 was as follows:

(in thousands, except grant date fair value)	Performance Awards			Weighted Average Grant Date Fair Value ($)
Performance awards, unvested at January 1	91			61.32
Awarded	137			48.92
Forfeited	(59	)		49.30
Vested and earned	(81	)		57.49
Performance awards, unvested at December 31	88			53.55

As of December 31, 2019, the Company had $2.3 million of total unrecognized compensation expense related to performance awards. The Company expects this expense to be recognized over a weighted average period of 1.6 years.

Excess Tax Benefits/Shortfalls

For tax purposes, share-based compensation expense is deductible in the year of exercise or release based on the intrinsic value of the award on the date of exercise or release. For financial reporting purposes, share-based compensation expense is based upon grant-date fair value, which is amortized over the vesting period. Excess or "windfall" tax benefits represent the excess tax deduction received by the Company resulting from the difference between the share-based compensation expense deductible for tax purposes and the share-based compensation expense recognized for financial reporting purposes. Conversely, the Company may recognize a tax "shortfall" in circumstances when share-based expense recognized for reporting purposes exceeds the expense deductible for tax purposes. Windfall tax benefits and shortfalls are recorded directly to Income tax provision on the Company's Consolidated Statement of Operations. Windfall tax benefits for the years ended December 31, 2019, 2018 and 2017 were $2.8 million, $3.1 million and $7.4 million, respectively.

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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The following table presents reclassification adjustments out of Accumulated other comprehensive loss during the years ended December 31, 2019, 2018 and 2017:

(in millions)
Details about Accumulated other comprehensive loss components		2019				2018				2017				Affected line item in the statement where net income is presented
Amount of loss reclassified into earnings from foreign currency:
Foreign currency cumulative translation adjustment		$	(13.9	)		$	—			$	—			Loss on disposal of discontinued operations
		(13.9		)		—				—				Earnings before income taxes from discontinued operations
		0.1				—				—				Income tax provision
		$	(13.8	)		$	—			$	—			Net earnings from discontinued operations
Amortization of defined benefit items:
Prior service credits		$	0.7			$	0.7			$	0.7			Other expense, net (A)
Net actuarial losses		(6.2		)		(10.3		)		(15.2		)		Other expense, net (A)
Net actuarial losses		(292.8		)		—				(96.6		)		Pension settlement charge (A) (B)
		(298.3		)		(9.6		)		(111.1		)		Earnings before income taxes
		(15.0		)		2.2				42.3				Income tax provision (B)
		$	(313.3	)		$	(7.4	)		$	(68.8	)		Net earnings from continuing operations(B)
Amount of gain (loss) reclassified into earnings on derivative contracts:
Interest rate contracts		$	(0.6	)		$	(0.9	)		$	(1.1	)		Interest expense
Foreign exchange contracts		10.8				(2.5		)		(0.9		)		Cost of sales
		10.2				(3.4		)		(2.0		)		Earnings before income taxes
		(3.0		)		0.8				0.7				Income tax provision
		$	7.2			$	(2.6	)		$	(1.3	)		Net earnings from continuing operations

(A)	These Accumulated other comprehensive income (loss) components are included in the computation of net pension and other benefit costs. See Note 17 – Postretirement Benefits for additional details.

(B)

In 2019, the Company fully exited its qualified benefit pension plans and as a result, recorded a pre-tax settlement charge of $292.8 million. The income tax impact of the settlement action was a net provision of $17.5 million, consisting of an income tax benefit of $73.9 million associated with the pension settlement charge netted against an income tax charge of $91.4 million resulting from the release of disproportionate tax effects in Accumulated Other Comprehensive Income. Refer to Note 17 – Postretirement Benefits and Note 12 – Income Taxes in the Notes to Consolidated Financial Statements for further information on the pension settlement and related income tax consequences, respectively.

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The Company has executed share repurchases against authorizations approved by the Board of Directors in 2014, 2016 and 2019. In 2019, the Company repurchased $400.0 million of stock under these authorizations and as of December 31, 2019, the remaining authorization was $234.8 million.

Treasury stock activity for the years ended December 31, 2019, 2018 and 2017, was as follows:

(Shares in thousands)	2019			2018			2017
Balance at January 1	15,781			15,001			13,221
Compensation plans and other	(542	)		(460	)		(547	)
Share repurchases	7,730			1,240			2,327
Balance at December 31	22,969			15,781			15,001

The Company has operating lease agreements for offices, branches, factories, distribution and service facilities and certain personal property. Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. Finance leases are not material to the Company's consolidated financial statements.

Several leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at our sole discretion. Certain of our lease agreements include rental payments that vary based on changes in volume activity, storage activity, or changes in the Consumer Price Index or other indices. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

A summary of the Company's lease assets and lease liabilities as of December 31, 2019 is as follows:

(in millions)	Classification		Dec 31, 2019
Lease Assets
Operating lease assets	Operating lease assets		$	83.2
Lease Liabilities
Current operating lease liabilities	Accrued expenses		18.4
Non-current operating lease liabilities	Operating lease liabilities		70.1
Total lease liabilities			$	88.5

A summary of the Company's total lease cost for the year ended December 31, 2019 is as follows:

(in millions)	Classification		Dec 31, 2019
Operating lease cost	Selling, general, and administrative expense		$	13.9
	Cost of sales		25.6
Variable lease cost	Selling, general, and administrative expense		0.5
	Cost of sales		4.4
Total lease cost (A)			$	44.4

(A) Includes total short-term lease cost which is immaterial.

Total lease cost was $33.6 million and $30.7 million for the years ended December 31, 2018 and December 31, 2017, respectively.

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The Company's maturity analysis of its operating lease liabilities as of December 31, 2019 is as follows:

(in millions)
2020	$	22.5
2021	19.7
2022	17.8
2023	15.1
2024	11.9
Thereafter	14.4
Total lease payments	101.4
Less: Interest	(12.9		)
Present value of lease liabilities	$	88.5

The total weighted-average discount rate and remaining lease term for the Company's operating leases was 4.99 percent and 5.5 years, respectively, as of December 31, 2019. Total operating lease payments reflected in operating cash flows were $21.9 million for the year ended December 31, 2019.

The following represents the Company's future minimum rental payments at December 31, 2018 for agreements classified as operating leases under ASC 840 with non-cancelable terms in excess of one year:

(in millions)
2019	$	31.4
2020	24.5
2021	21.0
2022	14.7
2023	11.4
Thereafter	20.1
Total (not reduced by minimum sublease income of $0.1)	$	123.1

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The Company maintains its financial records on the basis of a fiscal year ended on December 31, with the fiscal quarters spanning approximately thirteen weeks. The first quarter ends on the Saturday closest to the end of the first thirteen-week period. The second and third quarters are thirteen weeks in duration and the fourth quarter is the remainder of the year. The first three quarters of fiscal year 2019 ended on March 30, 2019, June 29, 2019, and September 28, 2019, and the first three quarters of fiscal year 2018 ended on March 31, 2018, June 30, 2018, and September 29, 2018.

	Quarter Ended
(in millions, except per share data)	March 30, 2019				June 29, 2019				September 28, 2019				December 31, 2019				Year Ended December 31, 2019
Net sales (A)	$	1,050.7			$	1,163.5			$	976.6			$	917.6			$	4,108.4
Gross margin (B)	279.5				328.0				276.9				236.6				1,121.0
Restructuring, exit and impairment charges (C)	3.2				5.4				7.4				2.8				18.8
Pension settlement charge (D)	—				—				(294.1		)		1.3				(292.8		)
Net earnings (loss) from continuing operations (F)	76.2				112.1				(232.9		)		75.0				30.4
Net loss from discontinued operations, net of tax	(112.5		)		(34.6		)		(6.4		)		(7.9		)		(161.4		)
Net (loss) earnings	(36.3		)		77.5				(239.3		)		67.1				(131.0		)
Basic earnings (loss) per common share:
Net earnings (loss) from continuing operations	$	0.87			$	1.29			$	(2.74	)		$	0.92			$	0.36
Net loss from discontinued operations	(1.29		)		(0.40		)		(0.08		)		(0.10		)		(1.90		)
Net (loss) earnings	$	(0.42	)		$	0.89			$	(2.82	)		$	0.82			$	(1.54	)
Diluted earnings (loss) per common share:
Net earnings (loss) from continuing operations	$	0.87			$	1.28			$	(2.74	)		$	0.92			$	0.36
Net loss from discontinued operations	(1.29		)		(0.39		)		(0.08		)		(0.10		)		(1.89		)
Net (loss) earnings	$	(0.42	)		$	0.89			$	(2.82	)		$	0.82			$	(1.53	)
Dividends declared	$	0.21			$	0.21			$	0.21			$	0.24			$	0.87
Common stock price (NYSE symbol: BC):
High	$	55.35			$	54.76			$	54.75			$	62.23			$	62.23
Low	$	44.89			$	41.02			$	42.57			$	49.36			$	41.02

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	Quarter Ended
(in millions, except per share data)	March 31, 2018				June 30, 2018				September 29, 2018				December 31, 2018				Year Ended December 31, 2018
Net sales (A)	$	967.0			$	1,148.7			$	1,044.1			$	961.1			$	4,120.9
Gross margin (B)	243.1				281.2				278.3				244.4				1,047.0
Restructuring, exit and impairment charges (C)	2.6				34.2				9.4				8.6				54.8
Transaction financing charges (E)	—				—				(5.1		)		—				(5.1		)
Net earnings from continuing operations (F)	63.8				68.1				75.2				46.3				253.4
Net earnings (loss) from discontinued operations, net of tax	9.1				10.9				(5.2		)		(2.9		)		11.9
Net earnings	72.9				79.0				70.0				43.4				265.3
Basic (loss) earnings per common share:
Net earnings from continuing operations	$	0.72			$	0.78			$	0.86			$	0.53			$	2.89
Net earnings (loss) from discontinued operations	0.11				0.12				(0.06		)		(0.03		)		0.14
Net earnings	$	0.83			$	0.90			$	0.80			$	0.50			$	3.03
Diluted (loss) earnings per common share:
Net earnings from continuing operations	$	0.72			$	0.77			$	0.86			$	0.53			$	2.87
Net earnings (loss) from discontinued operations	0.10				0.13				(0.06		)		(0.04		)		0.14
Net earnings	$	0.82			$	0.90			$	0.80			$	0.49			$	3.01
Dividends declared	$	0.19			$	0.19			$	0.19			$	0.21			$	0.78
Common stock price (NYSE symbol: BC):
High	$	64.45			$	69.27			$	69.82			$	67.92			$	69.82
Low	$	55.35			$	54.76			$	61.78			$	41.92			$	41.92

(A) In the second quarter of 2018, the Company announced its intention to wind down Sport Yacht & Yachts (SYY) operations. During the second quarter and the full-year of 2019, SYY had Net sales of $(0.7) million. During the first, second, third and fourth quarters and the full-year of 2018, SYY had Net sales of $15.1 million, $19.9 million, $9.0 million, $5.4 million and $49.4 million, respectively.

(B) Gross margin is defined as Net sales less Cost of sales (COS) as presented in the Consolidated Statements of Operations. In the second and fourth quarter and the full-year of 2019, the company recorded $3.2 million, $3.9 million and $7.1 million in COS, respectively, related to SYY. During the first, second, third and fourth quarter and the full-year of 2018, the Company recorded $18.7 million, $43.1 million, $17.3 million, $10.0 million and $89.1 million in COS, respectively, related to SYY. During the third and fourth quarter and the full-year of 2018, the company recorded $4.6 million, $4.6 million and $9.2 million in COS, respectively, of purchase accounting amortization related to the purchase of Power Products.

(C) Restructuring, exit, integration and impairment charges are discussed in Note 4 – Restructuring, Exit and Impairment Activities.

(D) Pension settlement charges are discussed in Note 17 – Postretirement Benefits.

(E) In the third quarter and full-year of 2018, the company recorded $5.1 million of Transaction financing charges related to the acquisition of Power Products.

(F) During the first, second, third and fourth quarter and full-year of 2019, Net (loss) earnings from continuing operations includes $5.7 million, $9.0 million, $6.1 million, $8.2 million and $29.0 million, respectively, related to SYY, IT transformation costs, purchase accounting amortization and acquisition-related costs, related to the purchase of Freedom Boat Club and Power Products. Net earnings (loss) from continuing operations also includes $(1.7) million, $1.8 million, $(2.5) million, $(14.8) million and $(17.2) million related to discrete tax items. During the first, second, third and fourth quarter and full-year ended 2018, Net earnings from continuing operations includes $6.4 million, $23.3 million, $25.0 million, $16.9 million and $71.6 million, respectively, related to SYY, purchase accounting amortization and acquisition-related costs. Refer to Note 5 – Acquisitions for further details. Net earnings from continuing operations also includes $6.7 million, $(1.1) million, $(10.7) million, $0.3 million and $(4.8) million related to discrete tax items. In the third and fourth quarter and full-year of 2019, the Company had a loss (gain) of extinguishment of debt, net of tax, of $0.7 million, $(0.1) million and $0.6 million, respectively. In the fourth quarter of 2018, the Company sold its non-controlling interest in a marine joint venture and recorded a gain of $1.8 million, net of tax, within Equity earnings.

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Throughout 2019, Brunswick implemented strategic and organizational initiatives to sharpen the focus of the Company on the recreational marine market and adjacent opportunities. Starting in 2020, the Company’s strategy is focused on four business pillars - Propulsion, Parts and Accessories (P&A), Boats and Business Acceleration. Effective January 1, 2020, we changed our management reporting and updated our reportable segments to Propulsion, P&A and Boat to align with our strategy. The Propulsion segment will contain both outboard and sterndrive engine businesses, along with controls and riggings, which are closely associated with our propulsion businesses. The P&A segment will contain all other P&A categories, including engine parts and consumables, electrical products, boat parts and systems, and our distribution business. The Boat segment will continue to include Business Acceleration. As a result of the change in segments, the Goodwill balance previously reported on the Marine Engine segment will be allocated to the Propulsion and P&A segments based on their relative fair values.

Concurrent with this change, the Company has changed its measurement of segment profit and loss due to a decision to streamline internal and external reporting practices relating to marine engines sold from the Propulsion segment to the Boat segment. This change in presentation, which is not the result of a change in business practice, more closely follows current market dynamics, as well as provides improved comparability with other boat companies.

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(in millions)

Allowances for Losses on Receivables		Balance at Beginning of Year				Charges to Profit and Loss				Write-offs				Recoveries				Acquisitions				Other				Balance at End of Year
2019		$	8.7			$	1.6			$	(1.7	)		$	0.2			$	—			$	(0.3	)		$	8.5
2018		7.2				0.8				(0.9		)		0.1				1.1				0.4				8.7
2017		9.7				1.3				(4.4		)		0.1				—				0.5				7.2

Deferred Tax Asset Valuation Allowance		Balance at Beginning of Year				Charges to Profit and Loss(A)				Write-offs				Recoveries				Other(B)				Balance at End of Year
2019		$	74.7			$	(3.5	)		$	—			$	—			$	22.1			$	93.3
2018		78.0				4.0				—				—				(7.3		)		74.7
2017		75.5				5.9				—				—				(3.4		)		78.0

(A) For the year ended December 31, 2019, the deferred tax asset valuation benefit activity primarily relates to reassessments for state recognition purposes. For the years ended December 31, 2018 and 2017, the deferred tax asset valuation provision activity primarily relates to tax losses in foreign jurisdictions.

(B) For the year ended December 31, 2019, the activity primarily relates to Federal and State impact of the sale of the stock of certain entities. For the years ended December 31, 2018 and 2017, activity primarily relates to Federal tax law changes and foreign currency translation.

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