Welcome to Brunswick Corporation's 2010 Third 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 of Corporate and Investor Relations.

Good morning and thank you for joining us. On the call this mornings is Dusty McCoy, Brunswick's Chairman and CEO and Peter Hamilton, our Chief Financial Officer. Before we begin with our prepared remarks, I'd like to remind everyone that during this call, our comments will include certain forward-looking statements about future results. Please keep in my 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. I would now like to turn the call over to Dusty.

Thanks Bruce and good morning, everyone. By now I hope you had the opportunity to review our third quarter earnings release. Our strong results for the past three quarters continues to reflect the hard work of our employees, customers and suppliers, which has allowed us to take advantage of our historically low and well managed Marine inventories as well as the significant fixed cost reductions achieved during the past two plus years. We reported a net loss in the quarter of $0.08 per share on a sales increase of 22%. The quarterly EPS includes $0.14 per share of restructuring charges. Our quarterly operating earnings, excluding restructuring, exit and impairment charges were $37 million, an improvement of about $118 million as compared to the loss experienced in the prior year period. Our operating margin, excluding our ex-restructuring charges were slightly less than 5% in the quarter, representing our highest third quarter consolidated operating margins since 2006. Significant increases in wholesale units in both our Marine, Engine and Boat segments were the primary drivers of our 22% top-line 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 approximately $30 million of lower discounts with prior to facilitate retail boat sales and about $6 million of reduced bad debt provisions primarily in the Engine segment. Lower pension expense of approximately $17 million also had a favorable effect on the Marine Engine and Bowling & Billiards segments, as well as on corporate expenses. A portion of the reduction in pension expense, lower bad debt expense and a reduction of variable compensation were the primary factors that reduced our third quarter SG&A by 10%. Partially offsetting these positive factors were gains from favorable settlements reached during the prior-year…

Thanks very much, Dusty. I would like to begin with an overview of certain items included in our third quarter P&L and will also comment on certain forward-looking data points. Let me start with restructuring exit and impairment charges, which were at $12.2 million or $0.14 a share in the quarter. This amount primarily reflects our charges at our Marine operations including actions relating to consolidation of production of our Cabo Yacht brand into our existing Hatteras manufacturing facility and the plant consolidation actions at Mercury. These actions demonstrate our ongoing efforts to further reduce fixed costs and manufacturing footprint. Our estimate of restructuring charges for the fourth quarter is in the range of $16 million to $18 million. Since the restructuring activities in Hatteras and Mercury will continue beyond the 2010 calendar year, we will continue to incur charges in 2011 with our current annual estimates of $10 million. Interest expense was $23 million in the quarter, a decrease of $1 million versus the same period in 2009. Also during the third quarter 2010 we recorded a $1.1 million loss incurred on the retirement of approximately $7 million of 11.75% 2013 notes, which were retired at a premium versus their book value. As we look forward, absent any additional retirement of debt, we expect interest expense to be approximately $22 million per quarter. During the quarter, foreign currency had a very modest, unfavorable effect on operating earnings as compared to the prior year, which reflected a mix of favorable and unfavorable exchange rate movements. This includes the impact of hedging activity, which helps to moderate the impact of currency exchange rate fluctuations have on year-over-year earnings comparisons. Changes in foreign currency also had a negligible unfavorable effect on our sales growth in the quarter. In the third quarter, we…

Thanks Peter. I will conclude the call today by updating you on some of our business assumptions for the remainder of 2010 and some view beyond 2010. There is limited visibility regarding retail demand for our Marine segment, as we enter the off-season and transition to the s new model year. We note several factors relating to the US new boat retail demand. [The planned] stability of the aluminum boat market specifically the pontoon segment. The continuing solid growth in our P&A business, strong market for pre-owned boats, the early stage tightening of the supply of these boats and the growing confidence the economy is now heading in to a double-[digit]. The timing and shape of any rebound in marine segment retail demand will be strongly influenced by the strength of changes in the real GDP in the US and elsewhere, consumer confidence and unemployment statistics. Therefore, as we’ve continually demonstrated, we will continue to manage our pipeline costs and overall liquidity in a very consistent, disciplined and prudent manner. Let me share with you some of our areas of focus that have been and will continue to be front and center for our organization, areas that you’ve had discuss countless times. It’s imperative that we continue to take actions then ensure the health of our dealer network. As previously stated, we have been on a dealer-by-dealer basis, identifying minimum stocking levels. As you can see on the supplemental chart that we’ve been providing with our quarterly earnings releases, we’re now targeting end of year levels to be closer to 15,000 units. This assessment is inherently a dynamic process and we continue to refine this numbers as we gaining greater insight into the appropriate minimum stocking requirements for our dealers. In certain cases, we’ve increased the inventory levels especially in…

(Operator Instruction) Your first question comes from the line of Ed Aaron from RBC Capital Markets.

Dusty could you maybe just start by giving us some update with that from the pricing environment, there seems to be and certainly quite a bit of affirming of use boat pricing, but it hasn’t yet translated into a better new boat demand and just and do you think after next year , how do you think about that relationship in terms of your ability to sell boats at what you may consider normal pricing?

Sure. Well first its clear that used boat pricing, the cost of used boat for folks buying them in order to sell them is increasing very significantly, based upon our conversation with the dealer network that is out doing that and therefore the price of those boats to the consumers have cost increasing and we are understanding from dealers, they are beginning to feel a little margin declination in their sale of use boats. The new boat market overall is has been experiencing some discounting year as we had other manufactures rather than ourselves, who had a little more inventory to get rid of. If I could give you a percentage on the spread, I would, but my sense its closing and perhaps closing quickly, I think many of us are planning in 2011 to keep price increases to a minimum and I suspect with the increasing of cost of used boat therefore the sales price of used boats. We all are working hard to control price increases in 2011 We are not going to begin to see that gap narrow, but I think bottom line is none of us in the industry know the true elasticity breakpoint here, so we are just going to have to continue to work to do the best we can and as I said, I think the dealer market is going to be driven some more about change in GDP, unemployment and consumer confidence than any other factors.

Do you have a sense directionally or where that the price spread between you and use currently stands versus historical norms?

You know I don’t Ed. I am sorry, I don’t. I can give you my thoughts but I don’t have any statistical evidence surrounded. I think they were wider than normal. Late 2008-2009 early 2010, in my sense and that’s even with all the discounting that was going on at retail. And the reason I think that Ed is as we’ve looked at the used boats that were being traded boat older than 10 years and being traded has actually going up, while boats less than 10 years of age have going down. And so we even though there was discounting in newer boats we saw the boats actually getting sold being more of the older product. And all reflective over price sensitive consumer. I think now as the supply of those boats beings to tighten we’ll began to see us comeback in the more normal range. That’s my thinking and not supported by any statistical evidence.

Fair enough and then one follow up and then I will pass it on. I am just trying to get a better handle on what your quarterly SG&A, and your rate going to look like in dollars going forwarded? It was quite a bit lower than we had at this quarter. I think the portion of that was variable comp but I don’t know quite the extended of that so. Just in terms of…?

I would be happy to give it to you, its 14 million.

14 million lower year-over-year.

Yes.

Your next question come from the line of James Hardiman from Longbow Research.

Good morning and thanks for taking my call and I think we all certainly appreciate all the colors you give us around an industry. It’s really difficult to characterize by along those lines. Can you talk a little bit, you’ve been giving sort of a breakeven point for 2011, is it safe to say that you’re still on that, I believed what you’ve talked about last time, 135,000 boat range. And then beyond that, when I start to think about mix and the fact that the aluminum boats are the ones that would bounce back, the fiberglass boats have not done as well. And it’s like that you guys are over expose the fiberglass boats. Do I need to get beyond just sort of the overall industry numbers, should I need to start thinking about things in terms of which portions of the boat market have done what next year to actually have any idea what you guys are going to do from the profitability standpoint?

First, we’re not moving off our prior guidance so that we can be profitable at 135,000 units. And when we made that call, James, we have done the best we can to factor in, changing mix. So I think as you look at 2011, we will not move off that guidance with even the big spread we’re seeing between a decline in a fiberglass and the decline in some and we’ll were comfortable with that guidance going into 2011.

And so, does that assume to a certain degree that the gap between the fiberglass and aluminum does narrow as we get into 2011?

No, no. We’ve not made any assumptions and when I call on the market at all right now. But we are not saying we’ve made no assumption obviously we’ll say 135,000 units we can be profitable. We assume that when we say that there remains a significant gap. We are not calling what we think is going to happen yet.

Okay, fair enough, and then I think you may have touched on this a bit but I was hoping you could summarized or clarify one more time why the weeks on hand that retail are going up obviously you worked a long time to get those numbers to finally go down but it seems like they have gone up this quarter and they expect them to be up at the end of the year I guess what’s the right number for that? What’s the number that you feel comfortable and that you would like to get to?

Well, first of all, let’s explain why the weeks on hand going up. First we have to start with the absolute number of those, they continue to be down and third quarter this year versus third quarter of last year they are down. The absolute number is down 5%. We have been working very hard and you have followed us a long time and this is been a dream of ours for a long time that we have a pure [pull] system from the dealer network out of our plans. For now what we have been aiming to is get to a point where reduction in wholesale of very closely around with retail. Now we have got the total number of both so low, so we looked down for the past year to talk about one other concept and that is the minimum stocking level in dealership. Because for a dealer to be successful he or she needs a certain number of vote of a certain type and that varies by state region in United States around the world. The way we have done now that we have began the focus with our dealer network what is the minimum stocking level as you need. And it will be different depending upon the time of year but our view is there for minimum stocking level, so walking out of 2010 is 15000. 15000 units is a really low number compared to anything we ever had but because of the very low retail demand now it does make it the arithmetic say that weeks on hand will increase. But we are very comfortable with the 15000 units which as a minimum stocking level. In order to insure that our dealers remain competitive going forward. Now what happened to us, and we talked about this, we have been fairly open as we went to this model we probably wouldn’t get it right for the first couple of years. I think the learning we had in 2010 is we didn’t have enough small boats. Our position in dealerships as the selling season began for us. So what you are seeing is what we are doing you are not seeing, as we are ending 2010 and as we are going to 2011 we are putting more smaller boats into the system. So that the consumer who walks into the dealers says, I want a boat and I want to buy it now and this is apparently a small boat buyer but the dealers have them as they get into the selling season. And only that’s one we just made a mistake on as we went into ‘10 so that’s a correction we are making as we going in ’11. Is that helpful?

That’s very helpful. And just to follow-up a little bit, how should I think about that 15000 unit level giving affect its flat and I am assuming your dealer base is down year-over-year correct me if I am wrong on that point?

At dealer basis its actually flat.

Okay. flat ,so that’s fairly basically the per dealer ending expected inventories about the same coming out of 2010 you would expect that it was coming out 2009?

Yes. Next we’ll be a deferring out a little.

And your next question comes from the line of Joe Hovorka from Raymond James.

Thanks, guys. Couple questions. One, just housekeeping. You said you had 22 weeks of inventory last year and I think last year you reported 21 weeks. Is that just an adjustment for the brands that are no longer there or is there something else going on?

Yes that would be. First to that a little bit you we’re almost in rounding now actually we’re at 21 weeks so we have called it 22.

And in the third quarter, did you ship in more or less than was sold at retail? That is, I guess, was the second quarter ending inventory in the dealers, was it down 700 units or more or less?

We actually hold sale less than retail.

Do you pull down inventory in the third quarter?

Yes. Joe Hovorka – Raymond James: Okay, and then you built it by about 1000 units, if my math is right, through the fourth quarter?

That’s correct.

Okay, and then have you wrapped up all your dealer meetings now?

Well, Joe we’re not having the classic dealer meeting anymore. We’re having dealer’s forums, which we do regionally.

Yes.

We are generally done, we have got a few more and I am going to anticipate where you are going so let me jump into this. We are not into the classic anymore, go to the dealer meeting and you probably hardly joke about this before where we and the dealer get in a room and we want to take X number of boats and they wanted to take X minus boats and then we agreed with something those days over right. We have now inventories right down in the bare minimum. So now the real discussion is we have a minimum stock in level as if we do now. The question is where do we think retail could be in your particular market and how do we need to think about gearing up for next year as we build our productions plans. And as you can imagine those discussion are really difficult right now because its hard for the dealers as well as us, to begin to talk about what we think retail will be next year so we are all agreeing to be flexible hold hands have great communication and be prepared to move.

So your last order date would've been, I think it is the first of September; is that how it works? Would they have given indications?

Well I am not going to go there because I know where kind of to takes us but we are not at all to satisfied with what dealers think they may want.

And then maybe just one question, too, regarding the 135,000 units next year for breakeven. That would imply we do need to see retail growth in the industry, correct, to get to that number given the pace that we are currently on? I guess what I'm saying is we will finish 2010 below the 135,000 unit level at retail?

Yes, we were at 153 something if you assume that the industry is going to be down around 15 and do better probably.

You’re at like 130.

A little over 130.

Yes.

I want to again get into this call, let me just go and say it. Actually we think it’s the market, next year is flat while this year, we could be slightly profitable.

So, the breakeven would be less than 135, is what you’re saying?

Yes. I keep on putting that breakeven down but our focused are really doing some great work in operations. If we can get this market flat now, we’ll be okay.

Your next question comes from the line of Tim Conder from Wells Fargo. Please proceed.

Thank you, and apologize gentlemen. We got disconnected somehow there. But a couple follow-ups to that. So Dusty, you had mentioned, I think, in other earlier conversations that you were looking to potentially bring that breakeven down. Now you are saying roughly the 130,000 units. Can we revisit the other piece of that, where you would equal your 2005 corporate operating margins, at what level does that come down also roughly 5000 units?

Tim, we have not done that math yet. We’re first working real hard on meeting our goal to be profit on the next year. Even if the markets would be flat. But I think it would be fair to assume the other number we could drag down.

Okay. And then, again, just more clarification here, Dusty. But it sounds like from the fourth quarter on or maybe at minimum the first quarter. Broadly, you are looking to match retail takeaway to wholesale shipments?

Sure, Yes.

Okay. So fourth quarter probably, it sounds like more realistically, if I interpret your comments correctly.

In the fourth quarter, we were doing a little of both to get folks ready for the sailing season.

Okay, so you will be about that 1000 units then?

Yes.

Okay. And then in the engine commentary, you mentioned that sterndrive were going very well. Were outboards flat to down a little bit? And then at this point, what would you think about next year? You have talked about potentially taking on some competitors in geographic markets where you previously haven't. If you can, give us a little bit of an update there on outboard engines in particular?

Well, first, we do not mean to imply that outboards were down. In fact all we were implying Tim was that the regular increases sterndrive was higher than that in outboards.

Okay.

And as becoming more global in finding areas around a level we can do better. Our engine folks are being in global teams are being very successful. We are taking share in every region actually. In a good way about it is government business and commercial business as if we have not been well focused on before and we are also making penetration in few recreation markets. So we’re quite pleased with what our guys are doing outside the US.

Okay, that's good. Okay. And then, Peter, just a couple of clarifications also here. You said the FX effect on sales was minimal. And also, I think in some of your other commentary, you said that there were some hedging losses. Can you give a little bit more color there, and then maybe FX impact overall on EPS in the quarter?

Well, first, what we have said about the hedging is that it mitigates what would otherwise be the currency effect in the quarter. Probably the biggest currency effect is because we make boats here and sell them in Europe.

Right.

The third quarter of last year the Euro rate was about, you may recall about above 43 and the average rate in this year was about a $1.28, so that dynamic was negative for us but that negative dynamic was offset by positive changes in the Canadian and Australian dollar currencies so that if you will natural offset combine with our hedging activities which mitigates the effect of all this resulted in our commentary that the currency impact in the quarter both on sales and on earning was really Tim, very, very small. And the only reason we raised it was to relay any concerns that given our rather considerable increases in the percentage of sales overseas. As a result of where our costs are and as a result of where our sales are and as a result of the dynamic of the many currency in which we operate and as a result of our hedging activities and that effect of that increase in oversea sales has not had a significantly detrimental effect on us in terms of currency fluctuation.

Okay. And then, gentlemen, just a couple others here. Can you just give us a general update on the Mercury restructuring in Wisconsin and the combination there? Is that ahead of plan, on plan? Just a little color there. And then Peter, anything you can give us on D&A and CapEx expectations at this point for 2011.

Well, the Mercury consolidation activity is highly complex but we are pleased to say its very much owned plan and the financial results of that which we have said in the past that the overall effect overtime with the approximately $40 million as still holds in. We are receiving the benefit of some of that in this year offset by some of the restructuring costs in order to gain it and we will get the remainder of the benefits in the next two years, so that is all very, very much on plan.

And then D&A, CapEx, any thoughts for '10 and '11?

Well for ‘10 the D&A will be I think we said 130, CapEx we said that we have been quoting 60 given that the year is drawing to a close and we are not spending at the reach we expected that we have change that ranged to 50 to 60, and after that, that’s the update on that.

And then anything for '11?

I think as Dusty said we are going to really put our heads together here in the next couple of weeks and months and really figure out our 2011 so that we can achieve our objective of being profitable in what might be in flat market and being cash flow positive in what might be a flat market and those objectives will influence, which intakes of our capital for next year DNA off course will go down from 130 to something less than that. The capital expenditures may well may well go up because as we find ways to generates more cash from operations we are going to start applying that more and more to our capital spending so that over a time it returns more towards historic levels between 3 and 3.5% I suppose to where it is now at about 1.72 %.

Okay. And I apologize. Just one more clarification. You said that SG&A in the fourth quarter, the P&L, SG&A that we would see would be down roughly $14 million year-over-year. Correct?

No that’s 14 million is the amount that is the comparison of the third quarter of last year compare to the third quarter of this and it resulted from taking our expectations of our variable complaints and moving the expectations of the yield from those plans down by $14 million with never the less keeping them or maintaining them (inaudible) about targeted levels and at above the levels that we paid out in ‘09 so net debt on a full year basis can to a full basis ‘09? There won’t be any significant differential in variable comp. Assuming, that our board of directors, which is less supportive of this comes to that conclusion, when they and the comp committee in particular went through these judgments at year end. Our accounting however as anticipating those judgments by releasing some of the variable copies over in the third quarter this year. Now, is that clear because, that’s an important set of data.

Okay, so there was some of that reserve released in the third quarter this year, is what you're saying. And for the fourth quarter, you are saying not much from that perspective should be different year-over-year, in the fourth quarter.

Yes. And that’s correct.

Okay. Thank you.

The bottom line on that one, we had been occurring about targets. And as we’ve look at the year and began to look for our cash position, our view was that we ought to be occurring at targets, and that was the changed we’ve made. And as our expectations is for our employees that incentive compensation for 2010 well we go well we paid in 2009.

But, Tim, I want to make sure that I’ve been clear on one thing which is in the pipeline and wholesale versus the retail discussions. With the quarter and for the year, we have been wholesaling under retail. But if you look at the chart that we’ve attached the earnings release, wholesale equals retail. So, that necessary implies that end of the fourth quarter we will be wholesaling more than we retail and again that’s what’s I have explain earlier so that our dealers will be positioned as the selling seasons starts. This was primarily with smaller votes in order to be able to hit the market as it involves and that’s in the range of adding a couple of thousand votes. To our pipeline, again that’s lead by smaller votes.

Okay, thank you, Dusty. We'd come to that, but thank you very much on that.

I have certainly been less than clear as I listen to myself.

Your next question comes from the line of Carla Casella from JPMorgan.

Thanks for taking all the industry questions. I'm actually going to ask one more on the cap structure. You mentioned that you'd bought back bonds. Which bonds did you buy in the quarter?

Primarily our 2013.

Okay. And with our market being so strong in high yield, are you -- would you consider doing a broader refi of your whole structure, or are you pretty pleased with your debt structure at this point?

We cannot currently plan a refinancing of our debt structure this year we may opportunistically buy back some more bonds primarily the 2013’s but not necessarily and as the next year or two unfold and we get closer to our 2013 time period and our 2016 time period. We would do something more fundamental but we don’t plan to do that this year.

Okay, great. I think that's all I had. Thank you.

All right and I use just as an opportunity to jump in here the runs are extraordinary is not only heavy building to dramatically increase earnings within the top-line increase. By the way, in our top-line increase there is out to be doing better than the market all around the world and not just sitting and waiting on the market. But the second part of our story that will be evolving and we keep talking about it, but it’s really important as one looks at this company. As we got some significant balance sheet work that we want to get done here, on our focus on cash ability and to generate cash flow. If we want to be an investment base company we need to go get that work done and we need to take care of over hanging pension spread between obligations and assets, pension plans have fundamentally been frozen. We know what the obligations are, they are non-increasing. Now we need to get the investments in their plan, on that going forward basis equal to obligations so we can forget about it, know that our employees and former employees will be well taken care off in retirement and take all of that the fluctuation that provides in our earning and cash position and make that just that our just a forgotten part of our balance sheet, where we need to go. If we were investment grade and we have gotten that right we have the opportunities and do a lot more things in Brunswick and we have got several ideas none of which are important to discuss now. The point is that the bigger part is our story will be the increase in earnings will also be the balance sheet work to be one of those yet done and you will see that unfold as we move forward.

Your next question comes from line of Ed Aaron from RBC Capital. Please proceed.

Thanks for taking the follow-up. Obviously, the rate of decline in fiberglass accelerated in Q3 versus Q2. But the industry lapped the period last year where there was some pretty significant discounting and what you might even call fire sale activity. So when you take that into consideration, in your judgment, Dusty, did the industry actually get worse Q3 versus Q2, or did it just optically look that way because with the comparisons involved in the prior year?

I guess lot of uptakes.

Okay. And then one other question for you just from a market share perspective year-to-date, what do your numbers show?

We ere down and we think we were down primarily because we’ve not have to finish out discounting and file sailing we took care of that last year. And our view was all along you probably, as we talked about there, we anticipated that, but we don’t anticipate that continue in 11 and that’s going to be built on the back of strong dealer network that we have maintain and where we positioned our brands and dealer network account.

There are no questions at this time and we’ll turn the call back over to Dustan McCoy CEO for closing remarks

Thanks Jennifer. We appreciate everyone, joining the call, we always appreciate the quality of the questions. We know what we have to do and we are just trying to keep doing it as we go forward and thanks everyone for their interest and if we don’t talk to you before we will talk to you around year end.

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.