Good day and welcome to Brunswick Corporation's 2010 first quarter earnings conference call. All participants will be in a listen-only mode until the question-and-answer period. Today's meeting will be recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Bruce Byots, Vice President Corporate and Investor Relations. Please proceed.

Good morning and thank you for joining us. On the call this morning is Dusty McCoy, Brunswick's Chairman and CEO and Peter Hamilton, our CFO. Before we begin with our prepared remarks, I would like to remind everyone that, during this call our comments will include certain forward-looking statements about future results. Please keep in mind that our actual results could differ materially from these expectations. For the details on the factors to consider, please refer to our recent SEC filings and today's press release. All of these documents are available on our website at Brunswick.com. Also, during our call, we will be referring to a chart containing boat pipeline information. If you have not yet retrieved the chart, you may do so by going to the Investor Relations section of our website. I would now like to turn the call over to Dusty.

Thank you, Bruce. Good morning, everyone. By now, I'm sure you've had the opportunity to review our first quarter earnings release. The first quarter results reflect an important early milestone for our organization, as we transition from a company primarily focused on building liquidity to one focused on continuous improvement in financial results and strength, relative to the competition in all of our business segments. Behind our much improved results is the hard work of our employees, dealers and suppliers which has allowed us to begin to take advantage of our historically low marine inventories as well as the significant fixed cost reductions achieved during 2008 and 2009. These factors have enabled us to report today an operating profit, as well as our first quarterly year-over-year growth in net sales since the fourth quarter of 2007. We reported a net loss in the quarter of $0.15 per share on a sales increase of 15%. The net loss includes $0.08 per share of restructuring charges and $0.02 per share of benefits from special tax items. Our quarterly operating earnings, excluding restructuring, exit and impairment charges were $18 million, an improvement of about $106 million compared to the loss experienced in the prior year. In response to [ph] the increases in production in wholesale units in our Engine in Boat segments were the primary drivers of our overall 15% topline growth, which generated a significant improvement in fixed cost absorption in our marine businesses. Further contributing to the strong operating leverage demonstrated in these businesses were about $20 million of fixed cost reductions pertaining to actions taken in the second quarter of 2009 through the first quarter of 2010, lower discounts of approximately $6 million required to facilitate boat retail sales and about $12 million resulting from lower bad debt provisions and…

Thanks, Dusty. I would like to begin with an overview of certain items included in our first quarter P&L and will also comment on some 2010 data points. Let me start with restructuring exit impairment charges which were $7.4 million or $0.08 a share, in the quarter. This amount primarily reflects charges at our Marine operations, more specifically the consolidation of a portion of our aluminum boat production, as well as our plant consolidation actions at Mercury. Our estimate of 2010 restructuring charges remains at approximately $30 million with the vast majority of the charges being cash. Interest expense totaled $24 million in the quarter, an increase of $6 million versus the same period in 2009. This increase reflects greater debt levels, along with a higher cost of debt resulting from the refinancing activities completed in the second half of 2009. The first quarter of 2010 also includes about a $300,000 loss incurred on the retirement of approximately $3 million of 2013 notes which were retired at a premium versus recorded book value. For 2010, we continue to expect interest expense to be approximately $24 million per quarter. In the first quarter, we recorded a small tax provision, which is consistent with our previously stated expectations of no domestic tax benefits from our 2010 pretax book loss. This provision reflects the modest amounts provided for both foreign and state taxes that should approximate about $5 million to $7 million per quarter for the remainder of this year. In the quarter, we recorded $0.02 per diluted share benefits related to settled tax liabilities provided for in prior periods. Now, let's turn to a review of our cash flow statement, which supports our 2010 objective of maintaining strong liquidity by generating positive free cash flow. Our cash balance at the end of…

Thanks, Peter. Before I do my concluding comments, I want to thank Peter for working two full time jobs. It's about a month ago; he was only the CFO, which to the best I could tell was a 60 hour week. He is now taking care of Life Fitness on an interim basis for us. That's another 60 hour week and he seems to be holding up pretty well. We'll watch him more in the future.

My pleasure, Dusty.

I will conclude the call today by updating you on some of our 2010 planning assumptions. We entered 2010 with the assumption for our production and wholesale shipment plans that retail boat demand would be down in the 10% range. And as I mentioned in my earlier remarks, based on preliminary first quarter industry data, retail demand in the first quarter was down about 20%. However, the monthly plans switching in January and March improved and the preliminary data for the month of March shows retail only slightly worse than our down 10% planning assumption. However, if the full first quarter retail results as opposed to the month of March results were to continue into some or all of the remaining year, it would put pressure on our current retail planning assumption. As we head into the heart of the marine selling season, we will monitor retail demand closely and be prepared to adjust production and wholesale to maintain appropriate levels of dealer inventories. We continue to believe that our wholesale shipments will increase throughout the year as we gradually return to a more normal relationship between wholesale and retail demand. The pipeline chart that we've been providing you is available on our website. The chart depicts two illustrations, one with retail down 10%, our current planning assumption and the other down 20%, which is the Q1 industry preliminary retail experience. We included the latter illustration only to give a mathematical perspective on what the potential effect would be on our wholesale shipments and any pipelines if Q1 results were to continue throughout the year. I ought to make one quick additional note on this pipeline chart. We added some more units to this analysis to reflect some international boats that were previously not included. Our plan also reflects the…

(Operator Instructions) Your first question comes from the line of Ed Aaron with RBC Capital. Ed Aaron – RBC Capital: Thanks. Good morning and great job on the quarter, everybody.

Thanks Ed, we appreciated. Ed Aaron – RBC Capital: You know, Dusty, I've got a lot of appreciation for the leverage in your model, but I'm not sure I've ever seen a company grow 15% top line and only have COGS up 3%. Can you just help me better understand just what makes that possible in a quarter like this?

I'm going to have to work through a couple of things. But it's primarily, Ed, you're seeing the benefit of the cost reduction activities we took you through. We said, on a fixed cost basis, that was $420 million. We've been able to keep it stuck, if you will. We've got some more coming, by the way and we've also got pension and bad debt, to some extent layered into the cost of goods. Ed Aaron – RBC Capital: Okay. And then the…

Can I give you one more? There's another big one coming. It was $6 million we disclosed in this quarter and it will be larger in subsequent quarters and that's gross to net. That's the way we report our discounting. Ed Aaron – RBC Capital: And that number, on a full-year basis, what would be a reasonable assumption there?

Let me give you a percentage basis because I think we've talked about that. In 2009, our discounts were about 25% of boat sales. In 2010, we're anticipating they will be 11% to 12% range of boat sales, so a 10% to 13% reduction. Ed Aaron – RBC Capital: And historical average is somewhere more like mid single digit, is that correct?

No. It's more like high single digit and slightly below 10%. We're within range of normal, but as we've said, we think there is still some old product out there, so we've left ourselves a little room, Ed. Ed Aaron – RBC Capital: Okay. And then the commentary about potential for profitability in 201, can you just confirm that is on a net income basis? And can you also tell us what level of retail sales you think that would require from an industry perspective?

That's on the net income basis and we think we can get our chin over the bar if the industry were at 2009 levels. Ed Aaron – RBC Capital: Okay. And then I guess my last question, we've heard some chatter out there about more kind of Brunswick exclusive types of dealers where you might have Sea Ray and Bayliner sold in the same dealership. Can you talk just about the strategic thinking on that issue and whether that's something that we might hear more about going forward?

Well, it has been occurring and it first occurred with a great dealer we have out in the Seattle area who was a Sea Ray dealer, who came in and took over a great portion of the Olympic assets, which had been primarily a Bayliner dealer. And that dealer, although we've had a couple of small dealers who have done well carrying both brands, that dealer showed us how really powerful boat brands are in a single channel, because the Sea Ray brand, frankly is more of an upsell than the Bayliner brand gives the dealer the ability to cover two customer types. So then as this downturn has progressed, remember, that was the first big activity we saw in terms of dealer failures. More and more dealers have come to us and said, we think we would like to try this, we support it. But it is something that we are not pushing on dealers and we’re letting dealers make the choice as to what they think they can sell effectively. And I think one of the things driving dealers coming to us for the combination of Sea Ray and Bayliner is, with the decreased market size they had, everybody is suffering a bit, no matter what brands they carried from revenue growth and the ability to obtained an absolute revenue and these are nice revenue enhancers. But I suspect we will see more as we go forward and I think dealers who do it are going to be very successful. Ed Aaron – RBC Capital Markets: Thank you very much.

You’re welcome.

Your next question comes from the line of Tim Conder with Wells Fargo. Please proceed. Tim Conder – Wells Fargo Securities: Thank you. And while I guess we could maybe have the gentleman from the office commercial say his comments on the quarter and the operating leverage, I’ll just say congratulations here.

Thank you, Tim. We really appreciate it. Tim Conder – Wells Fargo Securities: A couple of things as always here, Dusty and Peter, if you – you've already commented here a little bit about the breakeven level, so you are realistically, Dusty, you said that '09 levels, you said, 145 to 150. So you were just sort of saying, if you hit the '09 levels, obviously you will be profitable, just to clarify that?

Let me add a caveat that we all keep saying. '09 running at what I would call steady state, which has wholesale and retail in balance, we've been able to get our discounts down to more normal levels, so 11 to 12 this year to maybe slightly under 10 or 10 next year, those are the parameters that we use in order to be breakeven. Tim Conder – Wells Fargo Securities: Okay, okay. That helps, sir. Thank you. From the standpoint of, you commented that your shipments in retail appear to be, if I heard you correctly, skewed towards smaller boats here on the early going?

That was shipment of wholesale in the first quarter, yes. Tim Conder – Wells Fargo Securities: The wholesale? Okay, okay. And then on the other side, you made a comment that your engine that were skewed towards sterndrive. And how should we think about that and it sounds like that's part of your commentary going forward pickup rate. If boats skew a little higher, obviously that will help but engines skew a little bit lower that will hurt. Is that also what you're seeing as far as your pickup rate on a go-forward basis for the balance of the year?

No. The sterndrives go into small boats. Tim Conder – Wells Fargo Securities: Okay. Sterndrive for smaller boats, okay.

For instance, the 3 liters are what primarily go, 3 liters to 4.1, Tim, are what I would call much smaller sterndrives. And they're the predominant engines 18, 19, 20-foot boats. Although we are introducing in the Bayliner brand two outboard models, a 16 and an 18, which are really doing very well. But, no, I would not read into what we've been saying that you'll see any decline in the pickup in new engine business. And as we've said, Q2 in terms of growth rate ought to look like Q1. Tim Conder – Wells Fargo Securities: Okay. On a year-over-year basis is what you're saying there?

Yes. Tim Conder – Wells Fargo Securities: Okay, okay. And then also, should we still – your commentary, as you made in the past that somewhere I think you said in the industry in around the 175,000-ish area in units, you potentially could get back to where your marine operating margins were at the peak in '05. Is that still the reasonable range on that?

Yes. What we've said is about 170,000 industry units. We think we can get to similar levels the EBIT margins, compared to when the industry was at 300,000. Tim Conder – Wells Fargo Securities: Okay, okay. And then finally, I don't know if you can answer this question, but it is sort of out there, without leaning too far into the political spectrum one way or the other. The increases in taxes that are coming next year with the expiration of the Bush tax cuts and Obama-care being passed and so forth, especially on the $200,000-plus crowd customer. How will that impact or do you have any idea how it could potentially impact the 35-foot plus segment of the market for the industry?

Well, look. Anything that gives money out of people's pockets is not good and that's a going-in position. On the other hand, there is some level and our dealers tell us some maybe substantial level, I don't want to characterize it, there is some level of pent-up demand. Dealers are starting to see people show up, begin the discussion about a boat. The website is being hit but they are not because of general economic conditions right now, quite ready to pull the trigger. My judgment is, Tim, that improvement in the economy will outweigh the downside of additional taxes because a boat purchase is a bit of an emotional purchase. It is something people aspire to. Nobody needs one in order to live, if we are all realistic. And that aspiration always has underpinning it feeling good about oneself, one's ability to work, one's ability to continue to maintain or accumulate wealth. And that all revolves around having a job or running a small business in an economy that feels healthier. So my judgment, this is one man's judgment on this call, is that it will have an impact but I won't see it driving that market's dry-up. Tim Conder – Wells Fargo Securities:

Thank you.

Your next question comes from the line of Carla Casella with J.P. Morgan. Carla Casella – J.P. Morgan: Hi. It’s Carla Casella. You mentioned that in Mercury, you'll have another $10 million classified as debt for the incentive for the plan that you're building. It was my understanding that can be relieved at some point. It may not be debt that you have to pay back. At what point would you know or what criteria would you have to meet for that debt to be relieved?

It will be a couple of years before we know exactly how much of the debt is forgiven. Carla Casella – J.P. Morgan: And it's based on what employment levels or production at the plant?

Yes. It's based on employment levels. Carla Casella – J.P. Morgan: Okay. And then you mentioned the loss in retirement the 2000 – some of the 2013 notes. What's the outstanding balance on that or can you say how many you bought back during the quarter?

It's around $150 – around $150 million, a round number, $150 million. Carla Casella – J.P. Morgan: Outstanding?

Yes. Carla Casella – J.P. Morgan: Okay. And on the Bowling segment, can you talk about bowling? Have you seen anything or heard anything on the participation rates? And do you think that it actually could weaken if it is somewhat countercyclical?

Well, the retail bowling which is a participation rate to which you refer, has been the least affected of all of our businesses when you look across the board from boats to exercise equipment to bowling. And it is down somewhat as Dusty said, as we said in our comments, low single digits, compared to this time last year and it was down somewhat last year. But it is only down low single digits and we believe that will be among the first things to return to normalcy in our business, because it’s frankly the least expensive of the leisure products and services that we sell. Carla Casella – J.P. Morgan: Okay. And then one finance question on working capital. Can you just talk about your outlook for the costs in the back half of the year? You mentioned it was a bit of, steel costs were a bit of a benefit in the first quarter. Are you expecting working capital to be a larger use of cash this year on both the ramp up in production as well as raw material costs?

Well, in terms of steel costs, as we said, they did benefit particularly the Life Fitness segment because, compared to this time last year, there was a significant reduction in steel costs. Looking at working capital for Brunswick as a whole, we did, as we said, use approximately $112 million from working capital in the first quarter. And we would target to be breakeven working capital in the second quarter as our receivables convert to cash and by the second half of the year to have good cash generation from working capital in each of the two quarters. Carla Casella – J.P. Morgan: Okay. Great. Thanks a lot.

For a net, for a target of a net positive cash from working capital for the full year. Carla Casella – J.P. Morgan: Okay. Great. Thanks.

Thank you, Carla.

Your next question comes from the line of Joe Hovorka with Raymond James. Please proceed. Joe Hovorka – Raymond James: Thanks, guys. Just a couple of questions in regards to your comments on retail sales. I'm sure you're aware MarineMax reported yesterday. And they commented that March actually decelerated for them in the markets that they participated in. I guess what you're seeing on your data is that the opposite has occurred? Then they also talked about April actually starting off as slow as March was. Granted, that's getting better as we've gone through the month. But can you, two things, one, maybe reconcile what you're seeing in March versus what they are talking about and then secondly, if you have anything you could share on how April has started?

Sure. First, what we reported was preliminary industry statistics. Now, if you go tear that apart a bit, let's do outboards first. Some really big outboard states that is in unit sales, are Texas, Louisiana and Florida and all of those were down double digits in the first quarter. In the sterndrive inboard business, Florida is a big state and it was down double digits in the second quarter. So if we look at the MarineMax mix and their geographic concentration, it looks to me like they're being impacted by the combination of both. As we see and I would also say that, if you look at those statistics, northern states, which had been leading us into this, seem to be coming back a little quicker. By that I mean Michigan, Minnesota, Wisconsin, even New York, places like that, as we look across the industry in the first quarter, seem to be the most improved and in fact are up on a year-over-year basis. So this thing right now and it feels normal to us, is geographically different and is type of boat different. As we look at April and now focusing a bit on our businesses and lining up with MarineMax, our aluminum outboard type businesses are doing really well in April but our larger boats, inboard businesses where MarineMax has a great concentration are still going through difficult times. So, while we talk about industry overall and we talk about Brunswick boats overall, if you really begin to break it down, there are dramatic differences in type of boat and geography. What we are reporting is just a rolled up number, Joe. Joe Hovorka – Raymond James: Right. And that makes sense. What was interesting to me about MarineMax yesterday, though, they actually commented that and I'm sure you are aware of this, but their Florida comps are actually up and they had increasing sales. So it sounds like Florida may be still a laggard, particularly in what you’re seeing in the outboards and the sterndrive segments?

I think it is, but you know what? They are a really strong dealer. And if we need to be looking at anybody to do well in those markets, it's those guys. Joe Hovorka – Raymond James: Sure.

I'm confident they're going to do just fine. Joe Hovorka – Raymond James: Right. Okay. Great. Thanks, guys.

You’re welcome.

Your next question comes from the line of Ed Aaron with RBC Capital. Please proceed. Ed Aaron – RBC Capital: I know you have to bring some costs back online at some point. But it seems like it could potentially be a little bit better than that when you consider the changes in the growth to nets over the rest of the year as well as probably a bit of a better mix since it sounds like you over ship the smaller boats relative to larger boats a bit in Q1. So I'm just looking for a little more help there, if I could?

Yeah. I tried to be careful in the comments and obviously, I muddled about it. We said 35% to 40% for the remainder of the year, excluding gross to net, pension and bad debt. The actual is going to be somewhere between 40 and 75 bet, which is where we were this quarter. And we’re are not predicting, but it's going to be definitely higher than 40 and less than 75. Ed Aaron – RBC Capital: Okay. Fair enough. And then my other follow-up, I hate to get too carried away with monthly sales numbers and such, but it's a pretty important time of year. Do you have a sense, the March trends that you were referring to, do you have a sense of whether April is running at about that rate or whether it might be even a bit better than what you saw in March, just from a retail perspective?

Yeah. I tried to handle that on previous questions. Let me make sure I'm clear. In our outboard aluminum businesses, April is actually quite strong today. In our fiberglass sterndrive inboard businesses, especially in the larger product, it's not as strong and maybe staying in line with the first quarter results but the aluminum outboard business is doing much better. So, again, as I was talking, Ed, regionally and type of boat, there is beginning to be quite a bit of separation in performance. But again, in my judgment, that's very consistent with the beginning of a recovery. Ed Aaron – RBC Capital: Right. And then my last one for you, Dusty, I heard you say somewhat recently that you hadn't seen a big change in kind of the used boat activity relative to new. Is that still the case or…

No. I don't think it's any longer the case. Here's what I think is happening. And there are a lot of great dealers out there who know this a heck of a lot better than me, so I want to be clear. I'm just parroting what a lot of those guys are telling us. As the industry has ramped up, everybody, fundamentally a lot of great boat dealers got their inventories very low. As we're all ramping up, we are not quite getting it out there perhaps as fast as dealers would like. And so we’re all playing this balancing dance, Ed, of how fast we go wholesale versus what retail is doing. But fundamentally we are all a bit slower, I suspect than our dealers would like. And what dealers are telling me that they are having buyers show up who would like product, the new is not there but if there is a quality used product available, they’re making a sale and they’re making nice margin on it. Ed Aaron – RBC Capital: Okay. Thank you.

So I think that's just a bit driven by just the circumstances of where the industry is right now in coming back. Ed Aaron – RBC Capital: Makes sense. Thank you.

Thank you.

(Operator Instructions) Your next question comes from the line of John Emrich with Ironworks Capital. Please proceed. John Emrich – Ironworks Capital: Thank you. A couple of questions regarding the pension fund. It's still underfunded by, what was it, $462 million at year end?

$419 million to be specific. John Emrich – Ironworks Capital: $419 million. So what is the expected return assumption you're using for 2010?

7%, 7.5% John Emrich – Ironworks Capital: 7.5%? Okay. And the depreciation and amortization that you see in the cash flow statement. How much of that is in cost of good sales versus SG&A?

Probably 85% or so. John Emrich – Ironworks Capital: Okay. And a similar relationship in the pension expense?

No. That's a little different. John Emrich – Ironworks Capital: That's a little more…

The pension expense is more like 60%, 40%. John Emrich – Ironworks Capital: Okay. So those, I know what the last question was. Was there any – in your part of your restructuring over the last however many months and quarters and years, were there any inventory charges that took place? And the follow-on to that is was any of the written down inventory, is it passing through the P&L this quarter or this year?

No, no. Not in this quarter. John Emrich – Ironworks Capital: Not in this quarter, but in previous quarters or in future quarters?

Very, very small. John Emrich – Ironworks Capital: Okay. And then lastly, what is the, you've got the $13.5 million profit improvement from the lower pension expense and $6.5 million profit improvement from the lower D&A. I understand the pension expense now. What was the cause of the lower D&A that make – write downs of values of facilities?

No. We just have – we’re just spending less on capital now than we were in past years. John Emrich – Ironworks Capital: Your use, that short a life, if you will, that it has that dramatic an impact?

No. It's not so much that. It's that our capital expenditures were a couple hundred million dollars a year only recently. John Emrich – Ironworks Capital: Okay.

And now they are $30 and this year is $60 and that results in that kind of burn-off that you see. John Emrich – Ironworks Capital: Right. Okay. Great. Thank you very much.

Yes. John, we probably ought to release John's question to make sure we reiterate a point going forward about our use of cash. It is our view that going forward, we want to be investment-grade and we’re going to be paying down long-term debt. And it is important to us that we get our pension obligations fully funded. We’ll get a little help from the market in an improvement in discount rates but it's going to require cash. And that will be – those will be important aspects of our cash usage in subsequent quarters and years.

Your next question comes from the line Tim Conder with Wells Fargo. Please proceed. Tim Conder – Wells Fargo Securities: Thank you. And Dusty or Peter, I just wanted to clarify. Do you kind of see the cycle unfolding pretty similar to last cycles with the smaller boats which, again, you've already said you're already starting to see that's where the most strength in. And then progressing on up sort of the length of boat as the cycle unfolds? Is that still your anticipation or I guess the other piece of that question is it would seem like the industry had been the heaviest in that 25 to 40-foot segment. With all that getting cleaned up, do you anticipate, again, that progression would just sort of march up the length of boat after we get the whole industry mopped up this year?

Tim, we would hope so. I have gotten burned so much when predicting a downturn and what's going to happen. I’m gun shy as heck. That still continues to make sense to us that folks who buy smaller boats are the people who work every day, somebody else pays them. And as they become more and more comfortable about their job and their income level and stability working, they come back. They feed the small business owner, the doctor, the lawyer, the accountant, et cetera. And those are the folks who buy the cruiser-type boats. And then ultimately the folks who buy the yachts are people who have a different level of income and investment and they watch the market and come back. Now, having said that, that and everything I just told you won't get you much in a prediction but that's generally what has happened. Tim Conder – Wells Fargo Securities: Okay, okay. Again, thank you.

You’re welcome.

You next question comes from the line of Laura Starr with FAF Advisors. Please proceed. Laura Starr – FAF Advisors: Hi. Can you talk a little bit maybe about the difference in what you're seeing in the international consumer versus the domestic consumer as we're beginning to see this recovery? Do you expect them to act differently, sort of following up on that last question?

Well, first, we are seeing a faster rebound in the international markets in both our fitness business and our marine business than we have in the U.S. But even that Laura, when you begin to look at different regions of the world, has a different feel. We highlighted, in the fitness business, that Asia was a nice driver of the international improvement in fitness, which drove – which was the area where fitness actually had revenue growth. On the boating side, Australia continues to do quite well and that economy feels a bit different than Europe than the U.S. On the other hand, we're seeing nice growth in Europe, but that's at wholesale. I think it's a little bit early to tell what the consumer is actually doing yet in Europe, there's a lot of boat sales, especially for smaller and midsized boats occur in Scandinavia and that market hasn't opened up yet a lot in northern Europe, in Germany and places like that. As we look in southern Europe, things seem to feel pretty good right now and the consumer is at least as active as in the U.S. and maybe a little more. Laura Starr – FAF Advisors: Even in Greece?

Nope.

With no further questions, I'll turn the call over to Mr. McCoy for closing remarks.

Thanks, everyone, for being on the call. As always, the questions are great and we're going to roll up our sleeves and go back to work. And the real key to driving this company over the next couple of quarters is going to be what's really going to go on at retail. But we're quite comfortable that we've positioned ourselves to do well and certainly enormously better than we have in previous years, almost no matter what the retail turns out to be and we're prepared to adjust as we need to and move forward. Thank you very much. And we enjoyed speaking with all of you. Good bye.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect and have a wonderful day.