UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________________________________
FORM 11-K
_____________________________________
[X] Annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2012
OR
[ ] Transition report pursuant to Section 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 001-01043
_____________________________________
A. Full title of the plans and the address of the plans, if different from that of the issuer named below:
Brunswick Retirement Savings Plan
Brunswick Rewards Plan
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
BRUNSWICK CORPORATION
1 N. Field Court
Lake Forest, Illinois 60045-4811
Financial Statements and Supplemental Schedule
Brunswick Retirement Savings Plan
December 31, 2012 and 2011, and
Year Ended December 31, 2012
With Report of Independent Registered Public Accounting Firm
Brunswick Retirement Savings Plan
Financial Statements and Supplemental Schedule
December 31, 2012 and 2011, and Year Ended December 31, 2012
Contents
Page | |
Audited Financial Statements | |
Supplemental Schedule | |
Report of Independent Registered Public Accounting Firm
To the Benefits Administration Committee
of the Brunswick Retirement Savings Plan
Lake Forest, Illinois
We have audited the accompanying statements of net assets available for benefits of the Brunswick Retirement Savings Plan (Plan) as of December 31, 2012 and 2011, and the related statement of changes in net assets available for benefits for the year ended December 31, 2012. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2012 and 2011, and the changes in net assets available for benefits for the year ended December 31, 2012 in conformity with U.S. generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule, Schedule H, Line 4i - Schedule of Assets (Held at End of Year), is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic 2012 financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic 2012 financial statements taken as a whole.
/s/ Crowe Horwath LLP
Oak Brook, Illinois
June 27, 2013
1
Brunswick Retirement Savings Plan | ||||||||
Statements of Net Assets Available for Benefits | ||||||||
December 31, | ||||||||
2012 | 2011 | |||||||
Assets | ||||||||
Investments at fair value | $ | 128,533,610 | $ | 132,898,754 | ||||
Receivables: | ||||||||
Employer | 19,792 | 57,057 | ||||||
Notes receivable from participants | 1,300,739 | 2,003,824 | ||||||
Total receivables | 1,320,531 | 2,060,881 | ||||||
Total assets and Net assets available for benefits | $ | 129,854,141 | $ | 134,959,635 | ||||
The notes to financial statements are an integral part of these statements. | ||||||||
2
Brunswick Retirement Savings Plan | |||
Statement of Changes in Net Assets Available for Benefits | |||
Year Ended December 31, 2012 | |||
Additions | |||
Income: | |||
Net appreciation in fair value of investments | $ | 14,952,545 | |
Interest and dividends from investments | 2,487,224 | ||
Interest income on notes receivable from participants | 49,372 | ||
17,489,141 | |||
Contributions: | |||
Participants | 3,212,663 | ||
Rollovers | 36,520 | ||
Employer | 1,082,044 | ||
Total contributions | 4,331,227 | ||
Other income | 33,581 | ||
Total additions | 21,853,949 | ||
Deductions | |||
Distributions and withdrawals to participants | 24,028,962 | ||
Administrative expenses | 59,025 | ||
Other deductions | 34,533 | ||
Total deductions | 24,122,520 | ||
Interplan transfers out | 2,836,923 | ||
Net decrease in net assets available for benefits | 5,105,494 | ||
Net assets available for benefits: | |||
Beginning of year | 134,959,635 | ||
End of year | $ | 129,854,141 | |
The notes to financial statements are an integral part of these statements. | |||
3
Brunswick Retirement Savings Plan
Notes to Financial Statements
December 31, 2012 and 2011
1. Description of the Plan
The following description of the Brunswick Retirement Savings Plan (the Plan) provides only general information. Brunswick Corporation (the Company) is the Plan's sponsor. Participants should refer to the plan document and summary plan description for a more complete description of the Plan’s provisions.
General
The Plan, established by the Company effective January 1, 1986, is a defined-contribution plan subject to the requirements of the Employee Retirement Income Security Act of 1974 (ERISA). Any related company, as defined in the Plan, may, with the Company’s consent, adopt the Plan. The Plan is administered by the Benefits Administration Committee, consisting of at least three members appointed for indefinite terms by the Company’s Board of Directors. Vanguard Fiduciary Trust Company (the Trustee) is the Trustee of the Plan under a trust agreement with the Company.
Participation
Eligible employees include all groups as identified by the Benefits Administration Committee.
Eligible employees, as identified by the Benefits Administration Committee, who are not eligible to participate in the Brunswick Rewards Plan, must be at least 21 years of age and employed by the Company or a related company to which the Plan has been extended. Eligible employees include all employee groups as outlined in the plan document.
Employees working at least 24 hours per week are eligible to participate in the Plan on the first day of the month following or coinciding with 60 days of employment. Employees working less than 24 hours per week are eligible to participate on the first day of the month following or coinciding with 12 months of employment. Employees can generally increase, decrease, or cancel their deferrals at any time.
Participant Accounts
Each participant’s account is credited with the participant’s contributions and allocations of: (a) the Company’s contributions, and (b) the Plan’s earnings (losses). Allocations are based on participant earnings or account balances, as defined in the Plan. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account balances.
Participants may direct their own contributions and related Company contributions into any of the Plan’s fund options. Participants may generally change their elections and transfer balances between funds at any time.
Contributions
Participants may make pretax contributions from 1% to 40% of compensation as defined in the Plan. Contributions are made via payroll deductions and are remitted to the Trustee on the earliest date on which funds can be segregated from the Company’s funds. Participants who have attained age 50 before the end of the year are eligible to make catch-up contributions. Participant pretax and catch-up contributions were subject to the Internal Revenue Service (IRS) limit of $17,000 and $5,500, respectively, in 2012, and these combined contributions cannot exceed 40% of the participant’s compensation.
The basic matching contribution for members of the Fond du Lac Union, Local 1947, is 50% of pretax deferrals, up to 6% of compensation. The Company’s basic matching contribution for all other employees in the Plan is 5% of pretax deferrals, up to 6% of compensation. These contributions are invested in accordance with the participant’s investment elections. Employee catch-up contributions are not eligible for Company match.
Additional contributions are granted at the discretion of senior management. Such discretionary contributions are limited to 25% of total pretax contributions that do not exceed 6% of compensation. The Fond du Lac Union, Local 1947, is exempt from consideration for discretionary contributions. Discretionary contributions for the year ended December 31, 2012 were $10,159, and were included as employer contributions receivable in the accompanying statements of net assets available for benefits.
4
Brunswick Retirement Savings Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
1. Description of the Plan (continued)
The Plan provides a true-up feature, which allows the Company to make up for any missed match that may have occurred due to unequal deferrals. The true-up is performed during the first quarter of the following plan year and is included as an employer contribution receivable in the accompanying statements of net assets available for benefits. It takes into account the maximum matching contribution that could have been received and makes up for any difference in comparison to the matching contributions that were actually made.
For the year ended December 31, 2012, $9,633 relating to the true-ups of certain participant accounts was contributed to the Plan. The true-up balance is reflected as a component of employer contributions receivable in the accompanying statements of net assets available for benefits.
Vesting
Participants are fully vested in the balance of all of their accounts at all times.
Notes Receivable From Participants
Active participants may borrow from their interest in the funds held by the Trustee. The minimum loan amount is $1,000. Beginning January 1, 2006, a participant was not permitted to have more than one loan outstanding at any one time with the exception of certain grandfathered loans outstanding. After these grandfathered loans are paid off, only one loan is allowed at a time, with the exception of any temporary amendments whereby the Plan may be amended to temporarily allow active participants to request up to two outstanding loans at a time.
Participant loans bear interest, are secured by the participants’ accounts, and are payable over a period not to exceed five years unless the loan is for the purchase of a home, in which case, the loan term may be up to 10 years. The interest rate on loans is fixed at the prime rate reported by Reuters at the initiation of the loan.
Payment of Benefits
In-service distributions are allowed for certain cases of financial hardship or upon the participant's attainment of age 59-1/2. Upon termination of employment, participants may elect to roll over account balances into another qualified retirement vehicle or receive a lump-sum distribution. Terminated participants with balances exceeding $1,000 may elect to remain in the Plan and defer payment until such time the participant attains age 70-1/2 and becomes subject to required minimum distributions. Account balances less than $1,000 are distributed as soon as administratively possible following termination of employment.
Administrative Expenses
Investment management fees, recordkeeping fees, agent fees, and brokerage commissions are paid by the Plan’s participants and are included in net appreciation in fair value of investments in the accompanying statements of changes in net assets available for benefits. Since July 2011, participants have not been charged recordkeeping fees. Participants are charged an administrative fee of $700 to accounts requiring a qualified domestic relations order split. The Plan also charges an administrative fee of $30 to initiate a loan via the automated touch-tone customer service system or $80 to initiate a loan through a representative. There is an annual loan maintenance fee of $25 for the life of the loan.
Interplan Transfers
At various times during the year, employees may transfer positions within Brunswick Corporation. If an employee transfers to a Brunswick entity that is covered by a different plan, then an interplan transfer occurs to move that employee’s assets into another Brunswick plan. Among all Brunswick-sponsored plans, the interplan transfers net to zero. During the year ended December 31, 2012, $2,836,923 was transferred from the Plan into the Brunswick Rewards Plan as a result of employee transfers within Brunswick Corporation.
5
Brunswick Retirement Savings Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
1. Description of the Plan (continued)
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event that the Plan is terminated, the Benefits Administration Committee can direct that all accounts be distributed to its participants or continued in trust for their benefit.
2. Significant Accounting Policies
Basis of Accounting
The accompanying financial statements of the Plan have been prepared under the accrual basis of accounting.
Payment of Benefits
Benefit payments are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
Investments held by the Plan are stated at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). See Note 4 for further discussion of fair value measurements.
The Brunswick ESOP Company Stock Fund is a fund composed principally of Brunswick stock. Dividends received on shares held in the Brunswick ESOP Company Stock Fund may be reinvested in the Plan or, if elected by the participant, received as cash.
Purchases and sales of investments are recorded on a trade-date basis. Interest income is accrued when earned. Dividend income is recorded on the ex-dividend date. Capital gain distributions are included in dividend income.
Notes Receivable From Participants
Notes receivable from participants represent participant loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2012 or 2011 as repayments of principal and interest are received through payroll deductions and the notes are collateralized by the participants' account balances. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.
6
Brunswick Retirement Savings Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
3. Investments
During 2012, the Plan’s investments (including gains and losses on investments purchased, sold, as well as held during the year) appreciated in fair value as follows:
Year Ended December 31, | |||
2012 | |||
Common stock | $ | 6,185,500 | |
Mutual funds | 8,767,045 | ||
Total appreciation | $ | 14,952,545 | |
The fair value of individual investments that represent 5% or more of the net assets available for benefits at fair value is as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
Brunswick ESOP Company Stock Fund | $ | 14,023,671 | $ | 11,511,585 | ||||
MainStay Large Cap Growth Fund | 12,324,015 | 13,440,828 | ||||||
Royce Premier Fund | 7,298,933 | 7,976,862 | ||||||
Vanguard 500 Index Fund | 19,072,484 | 19,987,602 | ||||||
Vanguard Prime Money Market Fund | 22,275,586 | 27,736,484 | ||||||
Vanguard Target Retirement 2015 | 16,738,626 | 17,404,995 | ||||||
Vanguard Target Retirement 2025 | 7,848,122 | 7,822,067 | ||||||
Vanguard Total Bond Market Index Fund | 7,291,171 | 8,272,718 | ||||||
4. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.
Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
• | Quoted prices for similar assets and liabilities in active markets; |
• | Quoted prices for identical or similar assets or liabilities in markets that are not active; |
• | Observable inputs other than quoted prices that are used in the valuation of the assets or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals); and |
• | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
Level 3 – Unobservable inputs for the asset or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumption about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
7
Brunswick Retirement Savings Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
4. Fair Value Measurements (continued)
The level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level of input that is significant to the fair value measurement in its entirety.
The following is a description of the valuation techniques and inputs used for assets measured at fair value:
Common stock: Valued at the quoted market price held by the Plan at year-end.
Mutual funds: Valued at quoted market prices, which represent the net asset value (NAV) of shares held by the Plan at year-end.
The following table sets forth, by level within the fair value hierarchy, the Plan’s investment assets measured at fair value on a recurring basis as of December 31, 2012:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Brunswick Corporation common stock | $ | 14,023,671 | $ | — | $ | — | $ | 14,023,671 | ||||||||
Mutual funds: | ||||||||||||||||
Money market funds | 22,275,586 | — | — | 22,275,586 | ||||||||||||
Bond funds | 11,645,892 | — | — | 11,645,892 | ||||||||||||
Target-date funds | 30,250,727 | — | — | 30,250,727 | ||||||||||||
Domestic stock funds | 44,793,190 | — | — | 44,793,190 | ||||||||||||
International stock funds | 5,544,544 | — | — | 5,544,544 | ||||||||||||
Total investments | $ | 128,533,610 | $ | — | $ | — | $ | 128,533,610 | ||||||||
The following table sets forth, by level within the fair value hierarchy, the Plan’s investment assets measured at fair value on a recurring basis as of December 31, 2011:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Brunswick Corporation common stock | $ | 11,511,585 | $ | — | $ | — | $ | 11,511,585 | ||||||||
Mutual funds: | ||||||||||||||||
Money market funds | 27,736,484 | — | — | 27,736,484 | ||||||||||||
Bond funds | 10,862,563 | — | — | 10,862,563 | ||||||||||||
Target-date funds | 30,447,944 | — | — | 30,447,944 | ||||||||||||
Domestic stock funds | 47,123,827 | — | — | 47,123,827 | ||||||||||||
International stock funds | 5,216,351 | — | — | 5,216,351 | ||||||||||||
Total investments | $ | 132,898,754 | $ | — | $ | — | $ | 132,898,754 | ||||||||
8
Brunswick Retirement Savings Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
5. Reconciliation to Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
December 31, | ||||||||
2012 | 2011 | |||||||
Net assets available for benefits per the financial statements | $ | 129,854,141 | $ | 134,959,635 | ||||
Adjustment for certain deemed distributions of participant loans | (31,003 | ) | (64,274 | ) | ||||
Net assets available for benefits per Form 5500 | $ | 129,823,138 | $ | 134,895,361 | ||||
The following is a reconciliation of the net decrease in net assets available for benefits per the financial statements to the Form 5500:
Year Ended December 31, | |||
2012 | |||
Net decrease in net assets available for benefits per the financial statements | $ | 5,105,494 | |
Adjustment for certain deemed distributions of participant loans | (33,271 | ) | |
Transfer of assets from this Plan | (2,836,923 | ) | |
Net loss per Form 5500 | $ | 2,235,300 | |
6. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, liquidity, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the fair value of certain investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.
7. Party-In-Interest Transactions
Parties in interest are defined under Department of Labor regulations as any fiduciary of the Plan, any party rendering service to the Plan, the employer, and certain others. The Plan holds units of mutual funds managed by The Vanguard Group, Inc. The Vanguard Group, Inc. is an affiliate of Vanguard Fiduciary Trust Company, the Plan Trustee; therefore, these transactions and the Plan's payment of trustee fees to Vanguard qualify as party-in-interest transactions. The Plan also holds shares of Brunswick Corporation common stock and recognized dividend income of $25,001 on such stock during 2012. At December 31, 2012 and 2011, the Plan held Brunswick Corporation common stock with fair values of $14,023,671 and $11,511,585, respectively. Notes receivable from participants also reflect party-in-interest transactions. Certain administrative functions are performed by officers or employees of the Company. No such officer or employee receives compensation from the Plan.
8. Income Tax Status
The Internal Revenue Service (IRS) has determined and informed the Company by a letter dated June 17, 2002 that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). Although the Plan has been amended since receiving the determination letter, Plan management believes that the Plan is designed and being operated in compliance with the applicable requirements of the IRC. Therefore, Plan management believes that the Plan was qualified and the related trust was tax-exempt as of the financial statement date. On January 25, 2011, an application was submitted to the IRS to
re-affirm that the Plan is and continues to be designated in accordance with applicable sections of the IRC. The IRS has not yet responded to the application.
9
Brunswick Retirement Savings Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
9. Subsequent Events
Effective July 1, 2013, Attwood Union employees will be transferred into the Brunswick Retirement Savings Plan. Total assets transferred into the Plan will be approximately $1.3 million.
Effective July 1, 2013, the following changes will be made to the Plan: (1) Certain investment options will be replaced by investment options with lower expense ratios (cost of running the investment expressed as a percentage of the investment's assets), however, the underlying investment portfolio for each of these investments will remain the same: (a) the Vanguard Target Retirement Funds will be replaced by corresponding Vanguard Target Retirement Trusts; (b) the Vanguard Total Bond Market Index Fund Investor Shares will be replaced by the Vanguard Total Bond Market Index Fund Institutional Shares; (c) the Vanguard 500 Index Fund will be replaced by the Vanguard Institutional Index Fund; (d) the Vanguard Extended Market Index Fund Investor Shares will be replaced by the Vanguard Extended Market Index Fund Institutional Shares; (e) the Vanguard Total International Stock Index Fund Investor Shares will be replaced by the Vanguard Total International Stock Index Fund Institutional Shares; (f) the Vanguard Prime Money Market Fund will be replaced by the Vanguard Prime Money Market Fund Institutional Shares; (g) the Vanguard Windsor II Fund Investor Shares will be replaced by the Vanguard Windsor II Fund Admiral Shares; and (h) the MainStay Large Cap Growth Fund Class I will be replaced by the MainStay Large Cap Growth Fund R6 Shares. (2) The Wells Fargo Advantage Common Stock I will be added as an investment option and the Royce Premier Fund Investment Class will close in the Plan on September 30, 2013. All balances in, and contributions to, Royce Premier Fund Investment Class will be moved automatically to the Wells Fargo Advantage Common Stock Fund as of September 30, 2013; and (3) an annual plan recordkeeping fee of $50 will be deducted from Plan participant's accounts in quarterly increments of $12.50.
10
Brunswick Retirement Savings Plan | ||||
Schedule H, Line 4i – Schedule of Assets (Held at End of Year) | ||||
EIN 36-0848180 Plan #154 | ||||
December 31, 2012 | ||||
Current | ||||
Identity of Issuer | Description of Investment | Value | ||
Brunswick Corporation* | Brunswick ESOP Company Stock Fund | $ | 14,023,671 | |
MainStay Investments | Large Cap Growth Fund Institutional Shares | 12,324,015 | ||
PIMCO Investments LLC | Total Return Fund II Institutional Class | 4,354,721 | ||
The Royce Funds | Premier Fund | 7,298,933 | ||
Templeton Institutional Funds, Inc. | Foreign Equity Series | 829,255 | ||
The Vanguard Group, Inc.* | 500 Index Fund | 19,072,484 | ||
Extended Market Index Fund | 662,857 | |||
Prime Money Market Fund | 22,275,586 | |||
Target Retirement 2015 | 16,738,626 | |||
Target Retirement 2025 | 7,848,122 | |||
Target Retirement 2035 | 2,562,103 | |||
Target Retirement 2045 | 319,820 | |||
Target Retirement 2055 | 9,018 | |||
Target Retirement Inc | 2,773,038 | |||
Total Bond Market Index Fund | 7,291,171 | |||
Total International Stock Index Fund | 4,715,289 | |||
Windsor II Fund Investor Shares | 5,434,901 | |||
128,533,610 | ||||
Participant Loans* | Loans to participants, bearing interest from 3.25% to 8.25%, with varying maturities | 1,300,739 | ||
$ | 129,834,349 | |||
*Represents a party-in-interest to the Plan. | ||||
11
Financial Statements and Supplemental Schedule
Brunswick Rewards Plan
December 31, 2012 and 2011, and
Year Ended December 31, 2012
With Report of Independent Registered Public Accounting Firm
Brunswick Rewards Plan
Financial Statements and Supplemental Schedule
December 31, 2012 and 2011, and Year Ended December 31, 2012
Contents
Page | |
Audited Financial Statements | |
Supplemental Schedule | |
Report of Independent Registered Public Accounting Firm
To the Benefits Administration Committee
of the Brunswick Rewards Plan
Lake Forest, Illinois
We have audited the accompanying statements of net assets available for benefits of the Brunswick Rewards Plan (Plan) as of December 31, 2012 and 2011, and the related statement of changes in net assets available for benefits for the year ended December 31, 2012. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2012 and 2011, and the changes in net assets available for benefits for the year ended December 31, 2012 in conformity with U.S. generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule, Schedule H, Line 4i - Schedule of Assets (Held at End of Year), is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic 2012 financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic 2012 financial statements taken as a whole.
/s/ Crowe Horwath LLP
Oak Brook, Illinois
June 27, 2013
1
Brunswick Rewards Plan | ||||||||
Statements of Net Assets Available for Benefits | ||||||||
December 31, | ||||||||
2012 | 2011 | |||||||
Assets | ||||||||
Investments at fair value | $ | 775,881,662 | $ | 676,712,493 | ||||
Receivables: | ||||||||
Employer contribution | 24,893,175 | 23,242,838 | ||||||
Notes receivable from participants | 13,713,440 | 15,445,361 | ||||||
Total receivables | 38,606,615 | 38,688,199 | ||||||
Total assets and Net assets available for benefits | $ | 814,488,277 | $ | 715,400,692 | ||||
The notes to financial statements are an integral part of these statements. | ||||||||
2
Brunswick Rewards Plan | |||
Statement of Changes in Net Assets Available for Benefits | |||
Year Ended December 31, 2012 | |||
Additions | |||
Income: | |||
Net appreciation in fair value of investments | $ | 75,881,656 | |
Interest and dividends from investments | 16,822,704 | ||
Interest income on notes receivable from participants | 479,401 | ||
93,183,761 | |||
Contributions: | |||
Participants | 29,391,877 | ||
Rollovers | 1,451,422 | ||
Employer | 39,197,813 | ||
Total contributions | 70,041,112 | ||
Other income | 28,333 | ||
Total additions | 163,253,206 | ||
Deductions | |||
Distributions and withdrawals to participants | 66,777,449 | ||
Administrative expenses | 225,095 | ||
Total deductions | 67,002,544 | ||
Interplan transfers in | 2,836,923 | ||
Net increase in net assets available for benefits | 99,087,585 | ||
Net assets available for benefits: | |||
Beginning of year | 715,400,692 | ||
End of year | $ | 814,488,277 | |
The notes to financial statements are an integral part of these statements. | |||
3
Brunswick Rewards Plan
Notes to Financial Statements
December 31, 2012 and 2011
1. Description of the Plan
The following description of the Brunswick Rewards Plan (the Plan) provides only general information. Brunswick Corporation (the Company) is the Plan's sponsor. Participants should refer to the plan document and summary plan description for a more complete description of the Plan’s provisions.
General
The Plan, established by the Company effective April 1, 1999, is a defined-contribution plan subject to the requirements of the Employee Retirement Income Security Act of 1974 (ERISA). Any related company, as defined in the Plan, may, with the Company’s consent, adopt the Plan. The Plan is administered by the Benefits Administration Committee, consisting of at least three members appointed for indefinite terms by the Company’s Board of Directors. Vanguard Fiduciary Trust Company (the Trustee) is the Trustee of the Plan under a trust agreement with the Company.
Participation
Eligible employees include all groups as identified by the Benefits Administration Committee.
Employees working at least 24 hours per week are eligible to participate in the Plan on the first day of the month following or coinciding with 60 days of employment. Employees working less than 24 hours per week are eligible to participate on the first day of the month following or coinciding with 12 months of employment. Employees are eligible to participate in the Plan provided they are employed as members of a group of employees of an employer to which the Plan has been extended and are at least 18 years old.
Newly eligible employees are automatically enrolled in the Plan at a deferral rate of 3% of eligible compensation. Employees have a window of 60 days from the date their demographic data is received at the Trustee in which to opt out of the Plan before automatic enrollment. Employees can generally increase, decrease, or cancel their deferrals at any time.
Participant Accounts
Each participant’s account is credited with the participant’s contributions and allocations of: (a) the Company’s contributions, and (b) the Plan’s earnings (losses). Allocations are based on participant earnings or account balances as defined in the Plan. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account balances.
Participants may direct their own contributions and related Company contributions into any of the Plan’s fund options. Participants may generally change their elections and transfer balances between funds at any time.
Contributions
Participants may make pretax contributions from 1% to 40% of compensation as defined in the Plan. Contributions are made via payroll deductions and are remitted to the Trustee on the earliest date on which funds can be segregated from the Company’s funds. Participants who have attained age 50 before the end of the year are eligible to make catch-up contributions. Participant pretax and catch-up contributions were subject to the Internal Revenue Service (IRS) limit of $17,000 and $5,500, respectively, in 2012, and these combined contributions cannot exceed 40% of the participant’s compensation. The Plan also contains an automatic contribution increase feature for certain eligible employees. Specifically, the Plan increases each eligible participant's pretax contribution by 1% (up to a maximum of 10%) in April of each year.
Subject to certain limitations, the Company makes a basic biweekly matching contribution equal to 100% of the first 3% of participant contributions plus 50% of the next 2% of contributions. These contributions are invested in accordance with the participant’s investment elections. Employee catch-up contributions are ineligible for Company match.
4
Brunswick Rewards Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
1. Description of the Plan (continued)
The Company may make an annual variable retirement contribution of up to 9% of eligible compensation to the accounts of participants employed by the Company as of December 31 of the current plan year. Variable retirement contributions are invested in accordance with the participant’s investment elections. Variable retirement contributions for the year ended December 31, 2012 were $23,999,356, and were included as employer contributions receivable in the accompanying statements of net assets available for benefits.
The Plan provides a true-up feature, which allows the Company to make up for any missed match that may have occurred due to unequal deferrals. The true-up is performed during the first quarter of the following plan year. It takes into account the maximum matching contribution that could have been received and makes up for any difference in comparison to the matching contributions that were actually made.
For the year ended December 31, 2012, $893,819 relating to the true-ups of certain participant accounts was contributed to the Plan. The true-up balance is reflected as a component of employer contributions receivable in the accompanying statements of net assets available for benefits.
Vesting
Participants are fully vested in the balance of all of their accounts at all times.
Notes Receivable From Participants
Active participants may borrow from their interest in the funds held by the Trustee. The minimum loan amount is $1,000. Beginning January 1, 2006, a participant was not permitted to have more than one loan outstanding at any one time with the exception of certain grandfathered loans outstanding. After these grandfathered loans are paid off, only one loan is allowed at a time, with the exception of any temporary amendments whereby the Plan may be amended to temporarily allow active participants to request up to two outstanding loans at a time.
Participant loans bear interest, are secured by the participants’ accounts, and are payable over a period not to exceed five years unless the loan is for the purchase of a home, in which case, the loan term may be up to 10 years. The interest rate on loans is fixed at the prime rate reported by Reuters at the initiation of the loan.
Payment of Benefits
In-service distributions are allowed for certain cases of financial hardship or upon the participant's attainment of age 59-1/2. Upon termination of employment, participants may elect to roll over account balances into another qualified retirement vehicle or receive a lump-sum distribution. Terminated participants with balances exceeding $1,000 may elect to remain in the Plan and defer payment until such time the participant attains age 70-1/2 and becomes subject to required minimum distributions. Account balances less than $1,000 are distributed as soon as administratively possible following termination of employment.
Administrative Expenses
Investment management fees, recordkeeping fees, agent fees, and brokerage commissions are paid by the Plan’s participants and are included in net appreciation in fair value of investments in the accompanying statements of changes in net assets available for benefits. Since July 2011, participants have not been charged recordkeeping fees. Participants are charged an administrative fee of $700 to accounts requiring a qualified domestic relations order split. The Plan also charges an administrative fee of $30 to initiate a loan via the automated touch-tone customer service system or $80 to initiate a loan through a representative. There is an annual loan maintenance fee of $25 for the life of the loan.
5
Brunswick Rewards Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
1. Description of the Plan (continued)
Interplan Transfers
At various times during the year, employees may transfer positions within Brunswick Corporation. If an employee transfers to a Brunswick entity that is covered by a different plan, an interplan transfer occurs to move that employee’s assets into another Brunswick plan. Among all Brunswick-sponsored plans, the interplan transfers net to zero. During the year ended December 31, 2012, $2,836,923 was transferred from the Brunswick Retirement Savings Plan into the Plan as a result of employee transfers within Brunswick Corporation.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event that the Plan is terminated, the Benefits Administration Committee can direct that all accounts be distributed to its participants or continued in trust for their benefit.
2. Significant Accounting Policies
Basis of Accounting
The accompanying financial statements of the Plan have been prepared under the accrual basis of accounting.
Payment of Benefits
Benefit payments are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
Investments held by the Plan are stated at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). See Note 4 for further discussion of fair value measurements.
The Brunswick ESOP Company Stock Fund is a fund composed principally of Brunswick stock. Dividends received on shares held in the Brunswick ESOP Company Stock Fund may be reinvested in the Plan or, if elected by the participant, received as cash.
Purchases and sales of investments are recorded on a trade-date basis. Interest income is accrued when earned. Dividend income is recorded on the ex-dividend date. Capital gain distributions are included in dividend income.
Notes Receivable from Participants
Notes receivable from participants represent participant loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2012 or 2011 as repayments of principal and interest are received through payroll deductions and the notes are collateralized by the participants' account balances. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.
6
Brunswick Rewards Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
3. Investments
During 2012, the Plan’s investments (including gains and losses on investments purchased, sold, as well as held during the year) appreciated in fair value as follows:
Year Ended December 31, | |||
2012 | |||
Common stock | $ | 22,189,944 | |
Mutual funds | 53,691,712 | ||
Total appreciation | $ | 75,881,656 | |
The fair value of individual investments that represent 5% or more of the net assets available for benefits at fair value is as follows:
December 31, | ||||||||
2012 | 2011 | |||||||
Brunswick ESOP Company Stock Fund | $ | 47,066,458 | $ | 41,193,640 | ||||
MainStay Large Cap Growth Fund | 72,884,933 | 66,742,155 | ||||||
Royce Premier Fund | 58,294,295 | 55,433,549 | ||||||
Vanguard 500 Index Fund | 106,740,004 | 92,895,408 | ||||||
Vanguard Prime Money Market Fund | 105,351,665 | 100,292,133 | ||||||
Vanguard Target Retirement 2015 | 48,596,022 | 44,630,969 | ||||||
Vanguard Target Retirement 2025 | 82,945,873 | 69,502,152 | ||||||
Vanguard Target Retirement 2035 | 45,670,272 | 35,137,624 | ||||||
Vanguard Total Bond Market Index Fund | 60,413,345 | 55,372,531 | ||||||
Vanguard Total International Stock Index Fund | 44,524,986 | 38,865,196 | ||||||
4. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.
Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
• | Quoted prices for similar assets and liabilities in active markets; |
• | Quoted prices for identical or similar assets or liabilities in markets that are not active; |
• | Observable inputs other than quoted prices that are used in the valuation of the assets or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals); and |
• | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
7
Brunswick Rewards Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
4. Fair Value Measurements (continued)
Level 3 – Unobservable inputs for the asset or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumption about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
The level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level of input that is significant to the fair value measurement in its entirety.
The following is a description of the valuation techniques and inputs used for assets measured at fair value:
Common stock: Valued at the quoted market price held by the Plan at year-end.
Mutual funds: Valued at quoted market prices, which represent the net asset value (NAV) of shares held by the Plan at year-end.
The following table sets forth, by level within the fair value hierarchy, the Plan’s investment assets measured at fair value on a recurring basis as of December 31, 2012:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Brunswick Corporation common stock | $ | 47,066,458 | $ | — | $ | — | $ | 47,066,458 | ||||||||
Mutual funds: | ||||||||||||||||
Money market funds | 105,351,665 | — | — | 105,351,665 | ||||||||||||
Bond funds | 79,484,150 | — | — | 79,484,150 | ||||||||||||
Target-date funds | 214,692,849 | — | — | 214,692,849 | ||||||||||||
Domestic stock funds | 281,216,962 | — | — | 281,216,962 | ||||||||||||
International stock funds | 48,069,578 | — | — | 48,069,578 | ||||||||||||
Total investments | $ | 775,881,662 | $ | — | $ | — | $ | 775,881,662 | ||||||||
The following table sets forth, by level within the fair value hierarchy, the Plan’s investment assets measured at fair value on a recurring basis as of December 31, 2011:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Brunswick Corporation common stock | $ | 41,193,640 | $ | — | $ | — | $ | 41,193,640 | ||||||||
Mutual funds: | ||||||||||||||||
Money market funds | 100,292,133 | — | — | 100,292,133 | ||||||||||||
Bond funds | 67,165,828 | — | — | 67,165,828 | ||||||||||||
Target-date funds | 176,226,909 | — | — | 176,226,909 | ||||||||||||
Domestic stock funds | 250,695,463 | — | — | 250,695,463 | ||||||||||||
International stock funds | 41,138,520 | — | — | 41,138,520 | ||||||||||||
Total investments | $ | 676,712,493 | $ | — | $ | — | $ | 676,712,493 | ||||||||
8
Brunswick Rewards Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
5. Reconciliation to Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
December 31, | ||||||||
2012 | 2011 | |||||||
Net assets available for benefits per the financial statements | $ | 814,488,277 | $ | 715,400,692 | ||||
Adjustment for certain deemed distributions of participant loans | (230,789 | ) | (233,895 | ) | ||||
Net assets available for benefits per Form 5500 | $ | 814,257,488 | $ | 715,166,797 | ||||
The following is a reconciliation of the net decrease in net assets available for benefits per the financial statements to the Form 5500:
Year Ended December 31, | |||
2012 | |||
Net increase in net assets available for benefits per the financial statements | $ | 99,087,585 | |
Adjustment for certain deemed distributions of participant loans | 3,106 | ||
Transfer of assets to this Plan | (2,836,923 | ) | |
Net income per Form 5500 | $ | 96,253,768 | |
6. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, liquidity, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the fair value of certain investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.
7. Party-In-Interest Transactions
Parties in interest are defined under Department of Labor regulations as any fiduciary of the Plan, any party rendering service to the Plan, the employer, and certain others. The Plan holds units of mutual funds managed by The Vanguard Group, Inc. The Vanguard Group, Inc. is an affiliate of Vanguard Fiduciary Trust Company, the Plan Trustee; therefore, these transactions and the Plan's payment of trustee fees to Vanguard qualify as party-in-interest transactions. The Plan also holds shares of Brunswick Corporation common stock, and recognized dividend income of $82,841 on such stock during 2012. At December 31, 2012 and 2011, the Plan held Brunswick Corporation common stock with fair values of $47,066,458 and $41,193,640, respectively. Notes receivable from participants also reflect party-in-interest transactions. Certain administrative functions are performed by officers or employees of the Company. No such officer or employee receives compensation from the Plan.
8. Income Tax Status
The Internal Revenue Service (IRS) has determined and informed the Company by a letter dated June 17, 2002 that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). Although the Plan has been amended since receiving the determination letter, Plan management believes that the Plan is designed and being operated in compliance with the applicable requirements of the IRC. Therefore, Plan management believes that the Plan was qualified and the related trust was tax-exempt as of the financial statement date. On January 25, 2011, an application was submitted to the IRS to re-affirm that the Plan is and continues to be designated in accordance with applicable sections of the IRC. The IRS has not yet responded to the application.
9
Brunswick Rewards Plan
Notes to Financial Statements (continued)
December 31, 2012 and 2011
9. Subsequent Events
Effective July 1, 2013, the following changes will be made to the Plan: (1) Certain investment options will be replaced by investment options with lower expense ratios (cost of running the investment expressed as a percentage of the investment's assets), however, the underlying investment portfolio for each of these investments will remain the same: (a) the Vanguard Target Retirement Funds will be replaced by corresponding Vanguard Target Retirement Trusts; (b) the Vanguard Total Bond Market Index Fund Investor Shares will be replaced by the Vanguard Total Bond Market Index Fund Institutional Shares; (c) the Vanguard 500 Index Fund will be replaced by the Vanguard Institutional Index Fund; (d) the Vanguard Extended Market Index Fund Investor Shares will be replaced by the Vanguard Extended Market Index Fund Institutional Shares; (e) the Vanguard Total International Stock Index Fund Investor Shares will be replaced by the Vanguard Total International Stock Index Fund Institutional Shares; (f) the Vanguard Prime Money Market Fund will be replaced by the Vanguard Prime Money Market Fund Institutional Shares; (g) the Vanguard Windsor II Fund Investor Shares will be replaced by the Vanguard Windsor II Fund Admiral Shares; and (h) the MainStay Large Cap Growth Fund Class I will be replaced by the MainStay Large Cap Growth Fund R6 Shares. (2) The Wells Fargo Advantage Common Stock I will be added as an investment option and the Royce Premier Fund Investment Class will close in the Plan on September 30, 2013. All balances in, and contributions to, Royce Premier Fund Investment Class will be moved automatically to the Wells Fargo Advantage Common Stock Fund as of September 30, 2013; and (3) an annual plan recordkeeping fee of $50 will be deducted from Plan participant's accounts in quarterly increments of $12.50.
10
Brunswick Rewards Plan | ||||
Schedule H, Line 4i – Schedule of Assets (Held at End of Year) | ||||
EIN 36-0848180 Plan #170 | ||||
December 31, 2012 | ||||
Current | ||||
Identity of Issuer | Description of Investment | Value | ||
Brunswick Corporation* | Brunswick ESOP Company Stock Fund | $ | 47,066,458 | |
MainStay Investments | Large Cap Growth Fund Institutional Shares | 72,884,933 | ||
PIMCO Investments LLC | Total Return Fund II Institutional Class | 19,070,805 | ||
The Royce Funds | Premier Fund | 58,294,295 | ||
Templeton Institutional Funds, Inc. | Foreign Equity Series | 3,544,592 | ||
The Vanguard Group, Inc.* | 500 Index Fund | 106,740,004 | ||
Extended Market Index Fund | 7,509,483 | |||
Prime Money Market Fund | 105,351,665 | |||
Target Retirement 2015 | 48,596,022 | |||
Target Retirement 2025 | 82,945,873 | |||
Target Retirement 2035 | 45,670,272 | |||
Target Retirement 2045 | 30,159,288 | |||
Target Retirement 2055 | 455,116 | |||
Target Retirement Inc | 6,866,278 | |||
Total Bond Market Index Fund | 60,413,345 | |||
Total International Stock Index Fund | 44,524,986 | |||
Windsor II Fund Investor Shares | 35,788,247 | |||
775,881,662 | ||||
Participant Loans* | Loans to participants, bearing interest from 3.25% to 8.25%, with varying maturities | 13,713,440 | ||
$ | 789,595,102 | |||
*Represents a party-in-interest to the Plan. | ||||
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustee (or other persons who administer the employee benefit plans) has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
Brunswick Retirement Savings Plan | |||
Brunswick Rewards Plan | |||
By: BRUNSWICK CORPORATION | |||
as Administrator of the Plans | |||
Date: June 27, 2013 | By: /s/ B. RUSSELL LOCKRIDGE | ||
B. Russell Lockridge | |||
Benefits Administration Committee | |||
EXHIBIT INDEX
Exhibit No. | Description of Exhibit |
23.1 | Consent of Independent Registered Public Accounting Firm |