Good morning, and welcome to the Brunswick Corporation's 2013 Fourth Quarter Earnings Conference Call. [Operator Instructions] 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.

Good morning, and thank you for joining us. On the call this morning is Dusty McCoy, Brunswick's Chairman and CEO; and Bill Metzger, 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 these documents are available on the website at brunswick.com. During our presentation today, we are using certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP financial measures are provided in this presentation, as well as in the supplemental information section of the consolidated financial statements accompanying today's release. I would also like to remind you that as a result of our decision to exit and then the subsequent sale of Hatteras and CABO on August 5, the results of these businesses and the impact of that sale are reflected in discontinued operation. The figures in this presentation reflect continuing operations only, unless otherwise noted. I would now like to turn the call over to Dusty.

Thanks, Bruce. Good morning, everyone. I'll start with an overview of our 2013 results. Our revenue in 2013 increased 5%. We experienced growth in sales of outboard boats and engines, fitness equipment and marine parts and accessories, partially offset by revenue declines of sales of fiberglass sterndrive/inboard boats, sterndrive engines, bowling products and retail bowling centers. Our gross margin increased by 70 basis points compared to the prior year. This outstanding improvement represents the highest annual gross margin since 2000 and further reflects our ability to execute against our strategy in generating operating efficiencies and leverage. Operating expenses increased by 5%, including a 13% increase in research and development expenses as we continue to invest in our numerous strategic initiatives. Our operating expenses as a percentage of sales were 17.7%, which is comparable to 2012 levels and consistent with our previously stated guidance for 2013. Adjusted operating earnings increased by 12% versus prior year. And in spite of increased spending on growth, operating leverage was 21%. Continuing down the P&L, net interest expense was reduced by $22.8 million, we're talking our debt reduction activities, which was enabled by our strong free cash flow performance. Adjusted pretax earnings increased by 27% and diluted EPS, as adjusted, increased by 31% to $2.73 for the year. As I mentioned, for the full year, our sales increased by 5%. Consolidated U.S. sales increased by 6%. Sales to Europe were up 5%, and Rest of World sales were up 1% versus the prior year. Operating earnings, excluding restructuring, exit and impairment charges, were $325.6 million in 2013, an increase of 12% compared to 2012. In 2013, corporate expenses increased by $10.5 million, reflecting a number of factors,, including spending on strategic growth initiatives and mark-to-market adjustments on stock appreciation. Operating margins, excluding charges, increased 60…

Thanks, Dusty. I'll start with the Marine Engine segment. From a geographic perspective, fourth quarter sales to U.S. markets were up 11%, led by growth in outboard engine and parts and accessories. For the full year, U.S. sales increased by 8%. Sales to Mercury's European customers decreased 1%, with growth in parts and accessories more than offset by a decrease in engines. For the full year, sales to Europe increased by 3%. Rest of the World sales decreased in all major product categories and were down 5%. Combined, sales growth in these regions was flat for the full year. From a product category perspective, our U.S. outboard engine business sales increased in the fourth quarter of 2013, reflecting continued strong outboard demand, especially for the 150-horsepower FourStroke, as well as for the Verado engine family and engines in the 75-, 90- and 115-horsepower range. Outboard sales in Europe and Rest of World markets declined modestly in the quarter. Sterndrive engine sales continued to be affected by unfavorable global retail demand trends. Mercury's parts and accessories businesses reported solid sales increases in the quarter and full year, reflecting new product launches, market share gains and stable boating participation. Growth was led by our U.S. and European operations. Record sales were achieved by Attwood and Land 'N' Sea in 2013. Attwood, the award-winning portable and integrated fuel systems, continued to be an important contributor to Mercury's P&A business. Attwood also launched several new exciting motor guide trolling motor products in the fourth quarter, including a new wireless trolling motor, which can be paired with a pinpoint GPS technology for precise operations. Land 'N' Sea also continued to grow through product line and distribution expansion. Mercury's adjusted operating earnings were up slightly compared to last year's fourth quarter. For the full year, operating…

Thanks, Bill. Our outlook on financial targets for 2014 are consistent with the 3-year strategic plan outlined in November of 2013 at our New York Investor Day event. The details of our plan can be found on the slides used during this event, which are currently located on our website. We expect 2014 to be another year of strong earnings growth with outstanding cash flow generation. And as exciting as those results are in and of themselves, 2014 is even more exciting as important -- I'm sorry, it's even more exciting and important as a year as we're investing at new and higher levels in our future growth. Our strong operating results, cost control and reduction and cash flow generation and debt reduction have combined to produce strong and steady earnings growth over the past 4 years. With these actions and results behind us, we're now focused on revenue growth. And [indiscernible] in the financial metrics Bill outlined are increased investments and organic growth as we increase investment spending in R&D, marketing, sales, IT, talent and capacity. We will also invest in new adjacent business opportunities and explore small acquisitions, which bolt on to our existing businesses. In 2014, we're targeting 5% to 7% sales growth. This improvement in our top line growth rate results from our increasing investment in growth initiatives in all of our businesses and is supported by the continuation of the solid growth demonstrated in 2013. Our 2014 targets and plans are based on global economic conditions that are generally comparable to 2013 with weakness continuing in certain regions in Europe. As a result, we expect to benefit from the continuation of the modest recovery in the global marine market, with solid growth in outboard boat and engine products, as well as in the global parts…

[Operator Instructions] Our first question comes from the line of Mike Schwartz with SunTrust.

Just wanted to touch on gross margin. I know you put in the press release and you talked about solid improvement. But I guess, digging into that a little bit and maybe getting a little more granularity, how should we think of, I guess, the major drivers, maybe any negatives to that outlook? And then -- I mean, should we thinking -- should we be thinking about a same kind of rate of growth in '14 as we saw in '13?

Yes. Mike, I would say that that's exactly what you should be thinking. I mean, I think the numbers that we laid out in New York were kind of operating leverage in the mid-20s. And if you start to plug in the SG&A spending levels that we've guided to, you get pretty close to where '13 was.

In terms of improvement.

In terms of improvement.

And then just some of the major factors behind the improvement in gross margin going forward. I mean, will there be anything kind of new or different than the major drivers in '13?

No. I would say it's more of the same themes. We continue to get great leverage at the gross margin line, leveraging fixed cost, and we continue to get some benefits from new products.

Okay. And then if I can ask another question, just in terms of some of the new boat products coming to market and I guess how we think about the cadence or timing of when they reach market. I mean, what was -- I guess as we look at this fourth quarter revenue, up 16%, I mean, what types of products are really driving that and what should we expect kind of as we move through '14?

Well, those -- the drivers there, first, were interestingly -- let's put it in 3 buckets. Smaller new product introductions is we really focused more on this day boat market and focused on stopping the share loss that we've been experiencing there. Secondly, we are anticipating our outboard boat brands and businesses will continue to show improvement in 2014, and we need to get the pipeline position to support that improvement. And then there was continued benefit from the uptick in our -- well, not really the uptick, but maybe in our Brazil operations really beginning to come online and run well. As we think about 2014, let's think of it in 2 big buckets. First, we will continue to focus on this day boat market and we'll be bringing new products to market there. Secondly, we'll see growth in all of our outboard segments. And then thirdly, in the larger fiberglass product. And fundamentally, what we've done, we talked about this before, is we -- and you really see it here in the first quarter, we've stopped making the older models of this new product. And I'm talking product 50 feet and above. And we're now transitioning our production facilities to the new product, and it takes a while to get the facilities up and running, get the product built and begin to get it into the marketplace. And as I said in my prepared remarks, we'll see that begin to happen in the second half of the year. And we'll reach full production rates because we'll have all the new product in the market, et cetera, at the end of 2014 going into 2015.

Okay. And just in terms of the day boat product that's new. I mean, would the 350 SLX by Sea Ray fit in that smaller day boat segment you're talking about?

Not really, because we've actually not -- we only begun to get those to the marketplace, Mike. As you know, we're sold out, trying to figure out how to double, triple production and staying sold out. But very few of those have come to the marketplace yet. And you'll start to see those come here in mid first quarter, but we'll really get a nice pickup in rate in the second quarter and beyond for that particular boat.

Our next question comes from the line of James Hardiman with Longbow Research.

I guess, my questions are more along the lines of the industry color that you gave. I think you said that aluminum and outboard up, smaller fiberglass, down, bigger fiberglass, stable is kind of how you're terming things. I guess it's the last point that -- Dusty, you and I go back and forth on all the time, but talk a little bit about that in the context of the most recent industry data that seems to be pretty positive, at least, in terms of the U.S. It actually seems like the cruisers and the yachts are outperforming the broader market or, at least, it did during 2013. And then maybe it is a little bit unfair as the second boat company to report in the last 2 hours, but MarineMax seems really excited about big boats in general and your big boats in particular. So I guess all that is to say that it seems like it's doing a little bit better than stable, but maybe -- obviously, you guys have a lot more visibility than we do.

Well, first, what -- we can probably wrestle around with the word stable. Stable, from my perspective, can mean up some, and that's our view of the market. If we -- and if we subdivide it, yes, there's clearly in boats above 40 feet, at least, in the fourth quarter, perhaps in the third quarter, some building momentum, but they are also very small numbers, James. We obviously believe that's a segment that has a real opportunity for us, and that's where we're bringing, and I think we've been very open about it, 6 new models to the marketplace and we'll begin to have all of them in the marketplace about '15. So we're pretty comfortable about that segment. In terms of the smaller boats, I think if you add up everything in the day boat category and forget the small just fiberglass boats, there's nice improvement in the day boat category, but it's happening across a broad lines of product. So we're -- and as we do our planning, we have to make some market assumptions and this is where we put stake in the ground. Now if the markets are better, of course, our results get better and we love it. But as we do our planning, we have to start somewhere. Because again, the biggest thing we can do wrong as an industry, and actually I heard some criticism on swap box this morning by some people talking about the car industry, is overpopulate the pipeline. Let's be very discipline in managing the pipeline. The market's better. Great, let's move on it. And if it's not, we're all still going to make money and be healthy is the way we think about it.

That makes a lot of sense. I guess along those lines though, to the extent that -- certainly, the bigger boats outperform your expectations. It sounds like you may not necessarily be able to keep up with that increased demand, just given some of the transition from a production perspective. How much upside could you capture if you're pleasantly surprised this year?

We would certainly catch some more in '15 than we would in '14. But I'd like not to go into any more details, James, because that starts to talk about what our ability to flex and production of these large boats. But there is some ability to flex.

Okay. And then just last question here, and maybe this is just repackaging what you've already told us. But the dealer inventories within the channel, last couple of years, you had increased those inventors in the fourth quarter to prepare for the spring selling season. I think I heard you said you did that again with aluminum and outboard, but that the smaller fiberglass was up and the bigger fiberglass was down. Just remind us what you said there. And I guess just fundamentally, as I think about the first quarter and, I guess, the year, wholesale versus retail, are there some rules of thumb we should be keeping in mind there sort of seasonally?

Yes. First, you very actively summarized, James, but I probably was not very articulate in saying it's how we managed pipeline in the fourth quarter: up in the outboard boats; also up in small sterndrive fiberglass boats, because we have some new models; and managing down the larger boats getting ready for the new product. As we look at the big picture across 2014, we're going to begin to come more in equality with wholesale and retail as we finish up 2014.

Okay. And nothing to call out in the first quarter with respect to the difference between the 2?

Yes. The only thing I've tried to call out in the first quarter is we're going to sell a fair bit fewer in terms of dollar and units, the large boats than the previous quarter. So we've got this odd dynamic going on in the first quarter, continued up nicely in outboard product. Remember, they are sales in dollars. We're not talking about units. But as we get ready for these new models, we're going to sell substantially fewer dollar value of the large boats, and that's why we think the quarter in dollars will be flat compared to same quarter last year.

Our next question comes from the line of Rommel Dionisio with Wedbush Securities.

In the past, I think you've -- in the past, I think you guys have talked about your sterndrive engine business and about how you might not rely on GM blocks necessarily in the future and come up with some of your own engine blocks. Could you just give us an update on how that -- how the technology pursuit is going and if you're still sort of on track to be rolling that out soon and perhaps what the impact might be on margins longer term as that business sort of takes over?

First, on track, great engines. I said a couple of calls ago, a couple of technology features and all my friends up at Mercury called and screamed at me, for getting ahead of the marketplace. But the engines, we're really happy with it and on track to bring them to market this year, most likely in the second half of the year. In terms of margin improvement, there was slight margin improvement on a per engine basis and a real margin pickup that would occur is -- if the sterndrive market begin to improve.

Our next question comes from the line of Greg Badishkanian with Citigroup.

Two questions. First is just with respect to weather impacting the first quarter. Did you -- you saw that in December and the fourth quarter as well. So would you say how much of it -- of an impact would you say that had on retail sales?

Well, I'm focusing a bit more on wholesale sales, Greg.

Okay.

And if you look at our Boat business and, even to some extent, our engine business, pretty slow production quarter. And therefore, as we see bad weather hitting us, it wasn't much of an impact. I'm not predicting, but if this mess continues, I think it'll affect our bowling retail business. Atlanta, I think, is still shutdown there for the third day and we have some high-volume centers down there as an example. I could go on and on and on about that stuff. In many regions, where both we and our suppliers manufacture, we've had employees just having a tough time getting to work or the weather is so cold, the schools are out, it disrupts everybody's schedule. So those are just the sort of things we're living with right now. And if there's any impact, we'll figure it out and make it up as the year goes on. But I just wanted to caution everyone, there is a possibility or perhaps even a potential that we'll see some impact in the first quarter comparisons.

Right. It feels like in -- Europe seems to be picking up a little bit for some of the other major companies. And just wondering why you have a pretty conservative outlook on Europe.

Because fundamentally, we don't see anything changing in the overall economic situation in Europe. And we think of Europe as pretty broad category -- I mean, a pretty broad geographic area. And our judgment was as we planned what we should be doing there, we just plan conservatively and be prepared for any upside that might occur.

Our next question comes from the line of Jimmy Baker with B. Riley and Company.

Just a quick follow-up to the commentary on Europe. Can you maybe just give us an overview of what you're expecting from the nonmarine markets outside of North America, both in terms of new boats sales, but also what you're seeing on the P&A front from Mercury?

To make sure I understand the question, Jimmy, talk about nonmarine and then P&A, is that what you're looking for?

Excuse me, marine markets outside of North America.

Okay. Let's do it this way. We think Europe is still going to be a tough place to be. We'll again see in our view, however, P&A growth in Europe because people are still boating there. They're just not buying new boats. When you begin to chunk that up in Europe, country by country, region by region, it is wildly, this is the best way I can say it, different. Italy, Spain, even maybe beginning to see a little bit in France, are tough places to be. Germany, Belgium, Netherlands are good place to be and improving in Scandinavia. But of course, Italy, France is -- was, by far, the largest boating country. So that's how we see all that shaping up. But we think P&A will continue to grow, generally, a little slower than perhaps the rates in the United States. I mean, a lot of our P&A growth here in United States, and we called it out in Bill's part of the prepared comments, has been really great work at Attwood and Land 'N' Sea, and we don't quite have those equivalent businesses today in Europe. Therefore, it's hard to get that sort of benefit from those businesses. As we go to Asia, still, when we do Rest of the World -- let's think of Asia Pacific and Australia, generally flattish. We're in a -- of course, in the boating season over in Australia, a little better. But again, it's not big enough to give us a big pickup outside United States. Brazil's going to be interesting in 2014. We made a big investment down there. The operation's up and running on the boat side. We've always had a good engine business there. A lot now is going to depend among what happens economically down there. And they've got a couple of things that are going to be, in our view, a bit of distractions, the first of which is the new election or an election for a new leader there. That, as you know, has had people in the streets and whatever. So we're going to have to watch how that plays out. And the World Cup, well, it's probably have been a great thing for the economy, as a country, and the infrastructure building could be a bit of a distraction as we work our way through '14. So we think there's going to be improvement in Brazil, but we're a bit cautious about how much, even though we continue to believe it's a place we want to be. And longer term, it's going to be a real good place to do business.

All that color is very helpful. And then I just have a very high-level question for you, Dusty. As you think about allocating investment dollars on the marine side, it seems as if the real dilemma right now from a product planning standpoint, where you have this baby boomer demographic that's seeing a real increase in wealth from rising asset values and that core boating demographic has the financial wherewithal for -- to pay for some of these higher value add, higher priced offerings, but at the same time, you have the younger demographic, a lower net worth demographic that seems to be kind of continually getting price out of the fiberglass new boat market here. So can you talk a little bit about what you can do at the manufacturer level to kind of address that dichotomy, either on the boat or the engine side?

Sure. And it's a great question, Jimmy. And the first thing we -- let me jump in to it with -- backing up to a little earlier in '13. We asked ourselves, is the boating industry in some sort of overall secular decline, or is it going to bump along here where it is. And we decided we really needed to understand consumers all around the world. And we conducted what we believe is the largest consumer survey done in the industry, in Europe, Canada, Brazil and United States, being a large boating markets where we could find consumers and get good information. And we survey -- we were very careful to stay statistically correct as we surveyed across age and income gaps or units. We found 2 things, both of which really made us happy. The first was there is absolutely no question that people understand that boating is a wonderful recreation activity and there still remains a high desire to participate in boating as an activity. The second thing we found then was that, however, that is not translating into increased sales of new boats because the cost versus the benefit of new boats is still not in line with what consumers expect. That really ranked through to us because when we look at used boat sales in United States, you know how the new boat market declined, say, round numbers, half, the used boat market never declined in the double digits in any particular year. And now the last good statistics we have were 2012, and I suspect 2013 will continue to be in the same case. Used boat transaction, that is used boats that changed hands, were higher in 2012 than they were in the prerecession years. So it tells us people are really focused --…

Your next question comes from the line of Craig Kennison with Robert W. Baird. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: I'll start on the credit side. I recognized you're not directly involved in any lending. But I'm wondering whether you're seeing any changes to credit availability across the various tiers that you serve.

Craig, this is Bill. The intelligence I get from my guys who are involved in this is that it is improving modestly. We're still better than we were at kind of the depths of the recession, but we're still not back to where we were prerecession. But we are starting to see a little bit greater availability and accessibility for consumers. Craig R. Kennison - Robert W. Baird & Co. Incorporated, Research Division: Great. And then lastly, in dealer count. Are you satisfied with where you're at with respect to your dealer footprint, or do you see any opportunities to maybe grow that base as the market recovers?

We have been growing our dealer base fairly steadily the last couple of years. And it's generally, Craig, brand or segment specific, as we feel want to represent it in certain markets, have the ability to get product there, et cetera. We've been fairly steadily increasing the dealer count, and we'll continue to do so.

Our final question comes from the line of Gerrick Johnson with BMO Capital Markets.

In Fitness, can you just talk about Fitness a little bit? You had nice top line improvement but a deterioration in profitability. And it looks like you expect those trends to continue. So just talk a little bit about those trends in Fitness a little bit more detail.

Thanks, Gerrick. Two things, we are investing heavily in this business. And on a percentage basis, we're investing more heavily in this business than we are on any other business. We talked in the past about the revival of some of the competitors and our desire to continue to beat them with a great product, better service, et cetera, and that requires investment. Secondly, we began to signal in the first quarter of 2012, with our big analyst presentation down in Miami, that has some of the competitors in the fitness industry began to get their footing under them from a business perspective, we anticipated that in order to move volume to their plants, et cetera, there would be pricing pressures. And what we saw in the fourth quarter is that coming to fruition. As we look for the year, there will be a little pressure on Fitness margins. But I think we're pretty well in line for the -- for 2014 as we were in 2013, and the margins are going to be continue to be outstanding there.

And the only other point I'd make is that fourth quarter last year, margins were up substantially in the period. So we got -- so we're facing top tough comps in Q4. Those relationships are much more balanced when you look at the full year.

Okay, okay. And then to close out, I heard you mention the word acquisition. If you guys were to do something, albeit small, what kind of things would you be looking to buy?

I'll say this, we believe the opportunities revolve primarily around our P&A business.

Our next question comes from the line of Tim Conder with Wells Fargo Securities.

A couple of things. If you could just -- Bill, on the pension discount rate, can you give us an update what that went from and to?

Yes, I sure can. I think it increased -- let me get my piece of paper here, my cheat sheet. We went up about 85 basis points, so from 4% to 4.85% is what we're using at year end.

Okay, okay. And then, Dusty, can you maybe give us a little more color about -- I think maybe some plans as far as your duties and position may have been extended over the last several months? Just a little more color there. And then a thing that you all alluded to -- and I'm saying it was a bad thing either, Dusty, so don't take that wrong. But a thing you alluded to at the analyst presentation and any additional color you may want to give or the opportunity, magnitude with some licensing potential around your aluminum technology at Mercury, so any additional color there.

Sure. Well, in duties and position, I still have the same duties. And some have asked me how long I was going to continue to work, and I've said, "When I was 50, I never dreamed I'd be working at this age." And I've agreed to work a fair bit longer with the board. So you guys try and put up with me while. In terms of licensing, here's -- first, to answer the question directly and give a bit of color on it, we are continuing in testing with customers of the alloys and intellectual property protected, metalworking that we bring to the market. We're encouraged by the requirements by CAFE standards to reduce weight. And of course, what we thought of and worked in for a very, very long time is aluminum as a metal. And secondly, we're watching with great interest Ford with their new F150, as they introduced a product with much more aluminum in it to reduce weight, smaller engine, take cost out, increase or decrease fuel usage. We think all of that bodes well for stern [ph], and we're paving the way on this, I guess, is the best way I can put it. And these things had start out with a great technologist talking to great technologist from a cross-business perspective, and then it eventually has stand up at an executive decision-making level. And I'd say we're somewhere in between the 2 right now on our track to get this business mature.

I guess one clarification there. How much of that potential, if any, is baked into the guidance that you outlined in -- to your New York meeting?

Peanut.

I'm sorry?

Peanut.

Small amount.

Very small amount.

I would now like to turn the conference back over to Mr. Dusty McCoy. Please proceed, sir.

Well, thank you very much. First, I want to thank everybody for getting on the call with us. Today was a very busy day, and I know many folks here on the call cover people who had release earlier than us and had calls. So we appreciate your interest very, very much. I'll just close by saying we're pleased as punch with 2013. We're really excited about 2014. As we look at our guidance and take care of the tax rate and shares outstanding and all that, we're staying right on course with what many of you in the market have been judging we were going to do. But the thing we wanted to convey heavily in this call, and it sounds like we were half successful, is we -- this is a year in which we're really ramping up and upping the rate -- I mean, investments we're making on our business just for growth. And this is incurring in every business. And in every single business segment we have, we got lots, lots coming to the market at various times in '14 and as we look ahead in '15. So in my career here, I'm more excited about our potential going forward than in any time. And as a management team, we're enjoying all this because we had to do a lot around cost cutting, reducing debt, et cetera. Now we're going to get to do what we're paid to do, which is understand what the market needs, make investments so that we can meet the market and then go the top line in earnings. So we look forward to '14. We look forward to seeing many of you as we move around to the rest of the year. Thanks so much.

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