Good morning and welcome to the Brunswick Corporation 2010 Fourth 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. 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'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 will 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 McCoy

Thanks, Bruce and good morning, everyone. By now I hope everyone has had the opportunity to review our fourth quarter earnings release. 2010 was an important transitional year for us. We continue to make significant strides in rationalizing our manufacturing footprint and executing against strategies that allowed us to operate our businesses more efficiently. These actions enabled us to demonstrate strong levels of operating earnings leverage in 2010 putting us in an excellent position to return to profitability in 2011. Our full year 2010 results reflect revenue growth of 23% and a loss of $1.25 per share, including $0.70 of restructuring charges and $0.03 per share of charges from special tax items. This compares to the 2009 loss of $6.63 per share which included a $1.95 per share restructuring charges and $1.09 per share from special tax items. Our full-year operating earnings, excluding restructuring, exit and impairment charges were $79 million, an improvement of $477 million as compared to the loss experienced in prior year period. Our operating margin, ex-restructuring charges was 2.3% in 2010, representing our highest annual consolidated and operating margins since 2007, when U.S. marine retail boat market was twice the size it was in 2010. In the fourth quarter, a quarter in which less than 10% of annual marine industry retail sales occurred, we reported a net loss of $1.17 per share on a sales increase of 11%. The quarterly EPS includes $0.21 per share restructuring charges and a $0.02 per share charge for special tax items. Our quarterly operating loss, excluding restructuring, exit and impairment charges were $56 million, an improvement of $63 million as compared to a loss experienced in the prior-year period. Increases in wholesale unit shipments in both our Marine Engine and Boat segments, combined with double-digit growth in our Fitness segment…

Thanks Dusty. I would like to begin with an overview of certain items included in our fourth quarter P&L, and will also comment on certain forward-looking data points. Let me start with restructuring exit and impairment charges, which were $18.5 million or $0.21 a share in the quarter. For the full year charges were $62.3 million, or $0.70 per share. The fourth quarter charges primarily reflect actions of a Marine operations, including those related to consolidation of production of our Cabo Yacht brand into our existing Hatteras manufacturing facility and the plant consolidation actions at Mercury. Since the consolidation activities at Hatteras and Mercury will continue beyond 2010, we will continue to incur restructuring charges in 2011 with the full year estimates of $15 million. Net interest expense was $22 million in the quarter decrease of $3 million versus the same period in 2009. During the fourth quarter of 2010, we recorded a debt extinguishment loss of approximately $200,000 on a retirement of approximately $1.4 million of 11.75%, 2013 notes, which were retired in the premium versus their book value. This compares to a debt extinguishment loss of $13 million in the fourth quarter 2009. The total principal amount of the 11.75% notes retired during 2010 was $36 million. As we look forward, absent any additional retirement of debt, we expect net interest expense to be approximately $22 million for the quarter in 2011. During the quarter, foreign currency had a negligible effect on our 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 that currency exchange rate fluctuations have on our year-to-year earnings comparisons. Changes in foreign currency had a slightly unfavorable effect on our sales…

Thanks Peter. I’ll conclude by reviewing our 2011 outlook. As in 2010, we will continue in 2011 to remain disciplined to generate positive free cash flow. Perform better than the market and demonstrate outstanding operating leverage. We stated many times in 2010, our objective to return to profitability in 2011 subject to state of economic and marine market conditions. And although our visibility into these conditions remains limited; we plan for Brunswick to return positive earnings in 2011, beginning in the first quarter. We believe the significant decline in the industry marine retail demand has bottomed in 2010. But at this early point in the marine market season we are unable to determine if 2011 marine retail demand will remain consistent with 2010 or improve. But also remains a bit unclear to us at this point in time is the specific timing of when such a improvement will occur in 2011 and how each boat category will perform versus 2011 levels. Our current view is that smaller boats as they did in 2010 will continue to outperform larger ones. Lacking a clear view of marine demand we are planning for modest consolidated revenue growth for the company and our marine segments, wholesale shipments and productions will closely match retail demand on an annual basis. Therefore the level of 2011 revenue and earnings growth will be significantly affected by marine retail demand. Our marine growth will also be a function of our ability to gain market share, product mix and our success in pursing specific regional opportunities throughout the global marketplace. Our current manufacturing footprint and cost structure should allow us to report strong future earnings leverage. Without considering the effects of changes to our fixed manufacturing cost structure, our operating expense, our leverage on incremental revenues should approximate 30%. So…

Thank you. [Operator Instructions] And our first question comes from the line of Ed Aaron representing RBC Capital Markets. Please proceed.

Great, and thanks. Good morning, everybody.

Hi, Ed.

So, Dusty, correct me if I just into false conclusions about your view of industry retail sales 2011, but you seem to have developed a bit more confidence that bottom compare to what you what your thoughts seem to be a few months ago. Is that a fair statement? And if so, would that be a reflection of just your perception of the macro environment, or is it because of some trends that you are seeing within the business?

Well, first, I hope I have stated clearly enough that we do believe we hit bottom in 2011, and the real issues then, I mean, '10. The real issue for 2011 is that we're going to bounce along the bottom, or we're going to continue to see some improvement. Ed, we are looking at primarily three things. First, we never have said boat shows are good indicator of future sales, and boat shows are up and we say that when boat shows are up or down. But what’s more important is we are hearing from our dealers have boat shows and from the showing floors, the traffic has increased and the level of discussion; the quality of the questions and the true interest in potential buying in town of people coming to boat shows and going to showing floors is significantly different than it has been in past years. That’s first thing. Second thing, as we look at macroeconomic conditions, they are clearly improving, and lift are clearly improving macroeconomic condition. We believe of which the a lot of pent-up demand for new boats will gradually begin to come to fore. We've seen used boat had declined significantly less than new boats. The number of used boats available has declined significantly, the level of discounting of new boats has declined significantly and ultimately this pent up demand will turn to new product and we think we’ll begun to feel that in 2011. And then lastly, we've done as well as the entire industry a lot of work with the dealer network, and I believe fundamentally the dealer network throughout the industry is healthier than it’s been in the last three years. Dealers have available floor-plan financing capacity and they are now beginning to focus on meeting consumer needs rather than survival. So, when we had always, so we think we've seen the bottom. The question is when is the upturn going to really kick in, but I'm tickled to death that we found the bottom, because this gives us now lots of opportunities, which we haven’t had for a while.

Okay. It's a very thorough answer, so thanks for that. Just one quick follow-up just in elaborating on Q4 retail sales. It looked to us like to get that minus 10% number for the industry in the quarter, there was a pretty big bump up in the month of December. Is that consistent with what you see?

No. I don't think so. I think December was fundamentally consistent to me, but with the rest of the quarter. So, we must be looking at different numbers. The real help in bringing the client to minus 10 versus minus 17 as aluminum product in general and in particular pontoon, and as we are looking the boat shows the interest level for pontoon. And as we are looking at boat shows, the interest levels for pontoon continues to be up quite dramatically in shows.

Great. Thank you.

You’re welcome.

And our next question comes from the line of James Hardiman, representing Longbow Research. Please proceed.

Good morning. Thanks for taking my call. I was hoping you could give us some sort of color around the leverage of your business. Obviously, you've given us the 30% leverage number. But in the past, and I am sure and know you get this question since you've been in the past, but you've given us sort of earnings levels based on different industry assumptions. Do you care to that again, and conversely, I guess is it safe to say, I mean, you've talked about, I think the industry is going to be flat in 2011. The lower end of your guidance is $0.05. Are those two scenarios equivalent to one another? And if so, sort of the $0.40 high end of your guidance, what sort of the best case from an industry standpoint?

First, I want to make one slight correction in case I have miss communicated in that. We're not really saying our views that the market is going to be flat. We are saying our view is that the market has hit bottom and it is unclear whether it will bounce along that bottom or begin to improve. So, then to take that to the nickel, clearly, we believe that we can earn a nickel in a flat market. And we believe that nickel represents any reasonable set of circumstances that could be flawless both through 2011 and we are pretty comfortable with that. In terms of our earnings potential going forward, we've talked about, least to say, we thought we could do well at 150, well now I think we’re saying, we’re going to hang in there, we think quite respectively, respectively with the market of 132,000 -- 133,000 -- 135,000 units. We then I think have been saying at 170, our margin percentage would equal or exceed what the market, what we were able to obtain in the markets of 300,000 units and at 200 margin dollars would equal or exceed what we were able to obtain from markets of 300. And those are all still in place and we haven’t done a ton of work on updating those numbers. My suspicion is the units might move down a little because we’ve moved down our ability to make money at lower unit level of gains, but we haven’t done anymore math on that in a while.

Okay. That makes sense and drilling down a little bit further to the point that you made about fourth quarter coming in a little bit worse than you expected in the Boat segment. I think you were looking for high teens to low 20s and it came in at 7%. With that said the industry did about what you expected and I think you commented on in the prepared remarks that that was the results of -- the industry overall did what you expected but the mix of the industry was tilted against you so to speak, the higher end boats that you guys really have a significant mix of, didn’t do as well. As I look to 2011, what industry mix assumptions, should I be making. I guess in other words if the industry are flat in 2011, but fiberglass, inboard were still down 20%. Could you make your guidance or you’re assuming that fiberglass is going to comeback as well?

First looking at fourth quarter, here the way you deduced what we’ve said in numbers is exactly correct and one of the reasons we didn’t sell as many large boats as we’ve initially planned is we’ve been very intent on working with the dealers, to keep our minimum stocking levels positioned well so that they can do well going into 2011, so we just backed out wholesale sales. As we look at mix in 2011, fundamentally our judgment is that the 2011mix will not be a lot different than the 2010 mix when the year ends at wholesale sales. So if you look at 2010 mix, aluminum has done well and we’re seeing improvement in smaller fiberglass products, but when the dust settles, we think the overall mix should be about the same from a dollar perspective

And so does that imply that if the mix is the same, then the growth rates are the same right, so does that imply that the fiberglass, the growth rate in fiberglass is comparable to the growth rate in aluminum in 2010 and 2011 I should say? Or am I thinking about that the wrong way?

No I think you’re thinking about it correctly and the growth rate will be better for smaller fiberglass in our margins.

Okay that makes sense and then I guess the last question, you talked about your minimum stocking levels and I guess that’s about 15,000 boats, but inventory actually built a little bit in 2011 at least towards the end of the year because retail wasn’t great in certain types of boats. Do that then mean that there is going to be any sort of drag if 15,000 boats is your minimum level and you begin to, growth resumes, is there a little bit of a drag while you sort of get that inventory, I don’t want to say the inventory is high because that’s clearly not the case, but is there any sort of drag as a result of getting ahead on weeks of inventory basis of where you were previously?

First just to make sure James, you and I are speaking from the same basis, the number of units actually declined. And what went up was the trailing 12 months retail and of course retail was down. Interestingly, we will have to watch going forward with the 15,000 units in the pipeline is enough to meet dealer stocking levels. We are getting some pressure from some dealers that were -- we may not have enough boats out there for the year. So, the import of that thing is we have no worry about the number of units out there being a drag on the ability to accelerate if the markets began to improve.

Excellent, very helpful, as usual. Thanks guys.

Thank you, James.

And your next question comes from the line of Carla Casella representing JPMorgan. Please proceed.

Hi, this is [Minnie Fioni] here for Carla. Can you talk about whether you bought back any debt in the quarter?

The question was debt reduction in the quarter?

Yes, debt

Yes, we’re actually looking at the full year, we reduced our debt by buying back 2011 and 2013 notes by $36 million. At the same time we had some increases in debt associated with the planned consolidation activities at Mercury and the state incentives that were a part of that whole program. So, that our debt actually went from at the end of 2009, $850 million to $830 million at the end of 2010.

Thank you. And now that you believe the boat industry is beginning to stabilize, what is your view on your strong cash balance? Do you still feel you will need to keep $500 million cash on hand?

Yes, we have as you said, a very strong cash balance. We will continue to maintain that. There would be a substantial call on that cash balance as a result of the seasonal first quarter working capital needs, which we will experience in 2011 as we had in other years. And we will continue. So, we will use our cash balances to deal with that temporary outflow of cash in the first quarter. And we will also use our cash balances to selectively buyback predominantly our 2013 which is our closest in that. And of course, as I said in my remarks, we are increasing our capital investing and so those would be the main falls on our going on cash balances in 2011. We continue to maintain a very, very conservative balance sheet, a very, very conservative cash position until we start to see some significant improvement in the boat retail market.

Thank you.

Welcome.

And our next question comes from the line of Richard Whiting representing Broadview Advisors. Please proceed.

Thank you. Dusty, of the 132,000 units, that was the industry volume last year?

Yeah, sure.

How many units would have been Brunswick's share that -- what was your market share, if you can give that?

I can’t. I'm sitting here debating. Well, I want to, I just assume not but –

Would it be fair to say that you are gaining share. There have been some marginal manufacturers have gone by the wayside.

No. In fact, we lost a little share in 2010 and Richard, we have said we felt we would lose a little share. And that’s driven by a couple of things. First, no manufacturer has really -- no brand has really gone by the wayside. We did retire some brands and a couple of other folks retire something, when we get all the brands retire, it’s a less than ten, and there remains well over a thousand brands selling boats in this market. And then as we sell brands get into trouble and these would go through bankruptcies, restructurings or reorganizations, then a lot of people who have made investments in those situations need to get volume moving and get their plans aloud. Though we’ve seen a bunch of deals, if you will coming to the marketplace for the dealer networks as people try to get up and running and we expected that that would happen and therefore we did suffer not a significant but enough that we felt it, market share loss in 2010 and so in 2011 with our great dealer network one of our priorities now its begin to rebuild that share.

So would it be fair to say then, as you look at your strategy for dealers incentives, customer incentives in 2011, on the one hand you can balance a leaner dealer inventory and less distressed merchandise which would tend to make you -- would lead to a decline in incentives but you have to balance that against sort of what’s coming out of the other manufacturers who are probably more volume oriented and probably incentivizing the market to keep volume up.

That’s an absolute fair statement but I will say, we believe that our incentives in the boat business will drop slightly under 10% of gross sales. We’ve run in 2009, Richard, at about 25%, and was around 11 and we think 11-- 2011, will go little bit under 10.

Excellent. Thank you, Dusty

You’re welcome.

And our next question comes from the line of Joe Hovorka representing Raymond James. Please proceed.

Question on the bottom in the boat market, I am struggling with this a little bit. If look at your -- you get the category for fiberglass and when we obviously that’s more weighted towards fiberglass, if I weigh that roughly what your percent of revenue is, it doesn’t look like there has been any improvement. In fact as you go to the year, it looks like things have weakened. I struggle how you translate that to a one to a bottom and two to a flatter and better industry in 2011.

Well, our sales in at times don’t bear complete relationship with what’s going on in the industry, but clearly the industry was going down and we’ve been focused as we worked our way through this to get in the minimum stocking levels, correct, Joe. So, the real question begins to become for all of us in the industry as we cleaned out inventory, we made the dealer network healthy, we've got new product coming in the market. We got consumers who I believe have had pent up demands beginning to show up again, as all of this together going to cause some market to flatten. So my comments there were directed to the market and following our sales versus the market in 2010 probably wasn’t the right thing to do. So, that’s wholesale versus retail comparison.

Thanks. But where -- I guess, I’m trying to figure out because obviously you are getting much closer or tied in 2011, right? Retail goes up, wholesale goes up and the ops that will probably occur also in ’11. That’s if you catch up in '10, and when I look at the, like I said, in weighting the numbers it looks like we ended the year down about 21.5%, we exited the year down just a shade under 30. And that’s where I struggle seeing how those numbers suggest the bottom for one.

That would not be our view. We think we exited the year down about 14.

But that’s …

That’s the industry.

Right, but what I am saying I am weighting it for instance the fiberglass obviously is much more important to you than aluminum is and fiberglass sterndrive is more important than fiberglass onboard. So the fact that aluminum is up 2% in the fourth quarter is good, I guess its more good for the industry than it is for Brunswick, if that makes sense, right? Because it’s a lower percent of your sales than it is for the industry.

Yes. But then I guess, Joe, as a general statement, that’s true.

Right. So, when I look at it -- when I take those industry segments and weight them from where Brunswick participates, as fiberglass turns out to be your biggest sport, it doesn’t look like there has been any improvement. In fact, it looks like it's actually weakened a bit.

And I think that’s clearly the case in 2010.

Right?

But, now, we are -- so what you are questioning, Joe, is our look forward, and with our outlook forward is in any way rational?

Well, yeah. I am just trying to understand how we go from, lets say, minus 25% or minus 30% to a flatter or slightly up, with the flip of a switch. We turn the calendar from '10 to '11 and the trend completely changes. I am not saying your view is wrong. I am just trying to saying how to get there.

And the only thing I can go back to answer I gave in, to begin the question part of this call, Joe, in this, our view of being out in the market place and working with our dealer network, working the shows, understanding new boat dynamics and understanding the overhang of old inventory, and the consistent demand and we are pretty comfortable and we've hit the bottom. Now, on a quarter-by-quarter basis, I want to be clear. We may not see it exactly, for instance, in the first quarter. Could see it in the second quarter, could see in the third quarter, I am bit unclear right now on timing. But I am also pretty comfortable that when the year ends, 2011 will then be flat.

Okay. Very good. Thanks guys.

You are welcome.

And our next question comes from the line of John Harloe representing Barrow Hanley. Please proceed.

Well, first thing, I want to congratulate you for goodness whole to the point where we are now. That was a hell of a clear.

Well, thank you and it was a fund ride.

Well, let's not do it again.

I'm not up to it, John.

I'm not either. I saw a new story the other day of a private equity money in Hinckley, which I was just curious whether this is the beginning of the trend of some different kind of consolidation or the financial engineering of the business are seeing to date, or whether it's just sort of a one-off transaction? Did I lose you?

Thank you for your patience, your conference will resume momentarily. Once again thank you for your patience and please continue to standby.

We are back, Brunswick. John, I hope you're still on the line.

Yeah. What did you do? Pull the lever on the trap door and let me through?

Well, this is the second time I have done this. I was going to -- I hit the volume button and I hit the on and off button. So, I am not as technologically challenged as I appear to be, but I sure came across that way today. So, can you go back again?

I am sorry we missed your question, John.

Okay. My question was the private equity money has found itself into the Hinckley Boat Company, and I was curious whether something is beginning or whether it's just not one-off kind of deal or whether it's private equity money that's going around trying to recapitalize and take advantage of -- whenever in the industry.

I think its real, Platinum ended up with a good portion of the Gemar assets. And as we go through several of the other smaller companies, and I won't go through their names. A lot of them now have private equity either complete or partial ownership. So a lot of private equity folks have thought that it's a good place to come.

Do you think the changes have competitive decisions are made -- forward and may in those companies, but it might be so small it really doesn't effect the way the business, competition is applied in the future. I was thinking that private equity is little smarter owner -- little more disciplined. That once occurred in the past, might be wrong.

Could be. I’ll tell you. A lot of owners of boats companies and they are great customers at Mercury, are really clever business people and perform exceptionally well in the market, John. So, our view is that we are likely not to see any change. And more importantly, we will just have to stay very focus on our strategy and keep doing what we know how to do.

Okay. Thanks.

You are welcome.

And our next question comes from the line of Laura Starr, representing Nuveen Asset Management. Please proceed.

Yes, I got roughing up with other calls being drops. So, I don’t know if you have answered this question. Did you get the breakdown for the Europe, international versus domestic sales? And can you talk a little bit more about international opportunities -- improving global economy?

So, for the year 2010, 41% of our sales came from outside the United States and that’s versus 42, Laura and in 2009. If we went by segment, we continued in 2010 with more than half of our Life Fitness segment sales to be outside the U.S. and then Mercury Marine and the 44%, 45% or 46%. The lowest would be Bowling and Billiards. There is, in Marine -- real growth opportunity outside the United States, but we need to be very careful as we said expectations. We do very well in Canada and we do very well in Europe and we do very well in Australia and these are mature markets. So, there is share growth and some relative market growth in those markets. But on a percentage basis, the percentage of growth will not be dramatic. And growing markets, for instance, Brazil, Argentina, Mexico, the Middle-East, Russia and other such markets. The percentage of growth should be dramatic as we continue to stay better focused there, but the overall size of the growth and its impact on our Marine business will accumulate overtime and will not be dramatic write-off.

Is that the same picture for Mercury or is the growth there faster?

I think it’s the same picture from Mercury with an opportunity for a little faster growth in the business and perhaps the Boat business, yes.

That’s all I had.

Okay, thanks Laura.

Okay.

With no further questions in the queue, I would now like to turn the call back over to Dusty McCoy for closing remarks. You may proceed.

I thank everyone for participating, I know for many of you today was a very busy earnings call day. So we appreciate you interest in Brunswick. If you have further questions, please contact us. We’ll do our best to answer all your questions. I think we’re going to be attending many conferences this year, perhaps more than normal and I think for many of you who are our shareholders, we have got meeting schedule with you over the spring. So we look forward to the continuing dialog and watching this Marine market. Thank you very much.

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