BRUNSWICK CORP - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002, OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-1043

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BRUNSWICK CORPORATION
(Exact name of registrant in its charter)

DELAWARE 36-0848180
(State of incorporation) (I.R.S. Employer Identification No.)

1 N. FIELD CT., LAKE FOREST, ILLINOIS 60045-4811
(Address of principal executive offices) (zip code)

(847) 735-4700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]

As of JUNE 28, 2002, the aggregate market value of the voting stock of the
registrant held by non-affiliates was $2,506,325,164. Such number excludes stock
beneficially owned by officers and directors. This does not constitute an
admission that they are affiliates.

The number of shares of Common Stock ($0.75 par value) of the registrant
outstanding as of MARCH 6, 2003, was 90,247,722.

DOCUMENTS INCORPORATED BY REFERENCE

PART III OF THIS REPORT ON FORM 10-K INCORPORATES BY REFERENCE CERTAIN
INFORMATION THAT WILL BE SET FORTH IN THE COMPANY'S DEFINITIVE PROXY STATEMENT
FOR THE ANNUAL MEETING SCHEDULED TO BE HELD ON APRIL 30, 2003.
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ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

Brunswick Corporation (the Company) is a manufacturer and marketer of
leading consumer brands, including Mercury and Mariner outboard engines; Mercury
MerCruiser sterndrive and inboard engines; Sea Ray, Bayliner, Maxum, Meridian,
and Sealine pleasure boats; Hatteras luxury sportfishing convertibles and
motoryachts; Baja high-performance boats; Boston Whaler and Trophy offshore
fishing boats; Princecraft fishing, deck and pontoon boats; MotorGuide trolling
motors; Mercury Precision Parts; Quicksilver and Swivl-Eze marine-related
components and accessories; Integrated Dealer Systems dealer management systems;
MotoTron engine control systems; Northstar marine navigation systems; Life
Fitness, Hammer Strength and ParaBody fitness equipment; Brunswick bowling
products, including capital equipment, parts, supplies and consumer products;
and Brunswick billiards tables and accessories. The Company also owns and
operates Brunswick bowling centers across the United States and internationally,
and Omni Fitness, a chain of specialty fitness retail stores.

The Company's strategy is to achieve growth by developing innovative
products, identifying and deploying leading-edge technologies, pursuing
aggressive marketing and brand-building activities, enhancing its distribution
channels, seizing international opportunities and leveraging core competencies.
Further, the Company focuses on enhancing its operating margins through
effective cost management and investments in technology. The Company's objective
is to enhance shareholder value by achieving returns on investments that exceed
its cost of capital.

CHANGE IN SEGMENT REPORTING

The Company previously reported its Life Fitness and Brunswick Bowling &
Billiards divisions as a single segment, the Recreation segment. During the
fourth quarter of 2002, the Company re-evaluated the composition of its
reportable segments to account for the anticipated divergence in the future
growth trends and economic characteristics of these operating units. The Company
determined that its reportable segments are Marine Engine, Boat, Fitness and
Bowling & Billiards. The financial information for these segments has been
reclassified for all periods presented under the new basis of segmentation. See
NOTE 3, SEGMENT INFORMATION, in the Notes to Consolidated Financial Statements
for financial information about these segments.

MARINE ENGINE SEGMENT

The Marine Engine segment, which had net sales of $1,705.2 million in 2002,
consists of the Mercury Marine Group and Brunswick New Technologies. The Company
believes its Marine Engine segment has the largest dollar sales volume of
recreational marine engines in the world.

Mercury Marine manufactures and markets a full range of outboard engines,
sterndrive engines, inboard engines and water-jet propulsion systems under the
Mercury, Mariner, Mercury MerCruiser, Mercury Racing, Mercury SportJet and
Mercury Jet Drive brand names. A portion of Mercury Marine's outboard engines
and parts and accessories, including marine electronics and control integration
systems, steering systems, instruments, controls, propellers, service aids and
marine lubricants, are sold to end-users through a global network of
approximately 12,000 marine dealers and distributors, specialty marine
retailers, and marine service centers. The remaining outboard engines and a
substantial number of the sterndrives, inboard engines and water-jet propulsion
systems are sold either to independent boatbuilders or to the Company's
operations that comprise the Brunswick Boat Group.

Mercury Marine has six two-stroke OptiMax outboard engines ranging from 135
to 250 horsepower, all of which feature Mercury's direct fuel injection (DFI)
technology. DFI is part of Mercury's plan to reduce outboard engine emissions 75
percent over a nine-year period beginning with the 1998 model year and ending in
2006. These emissions reductions were implemented to comply with U.S.
Environmental Protection Agency (EPA) requirements. Mercury's product line of
low-emission engines includes 13 four-stroke

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outboard engine models ranging from 4 to 115 horsepower and one 225-horsepower
model. These OptiMax and four-stroke outboards already achieve the EPA's
mandated 2006 emission levels. The California Air Resources Board (CARB)
mandated that EPA's 2006 emission levels be met by 2001 with further emission
reductions scheduled for 2004 and 2008. CARB has instituted a rating system for
emissions reduction that establishes ratings of either one star (75 percent
reduction), two stars (82 percent reduction) or three stars (91 percent
reduction). Mercury believes that its 135-horsepower OptiMax is the only
two-stroke engine in the world with a three-star rating from CARB. All Mercury
four-stroke outboards from 50 to 225 horsepower are also three-star rated.

Mercury Marine's outboard engines and sterndrive engines are produced
primarily in Fond du Lac, Wisconsin, and Stillwater, Oklahoma, respectively.
Certain small outboard engines are manufactured in Asia by a Mercury Marine
joint venture. Mercury Marine also manufactures engine component parts at plants
in St. Cloud, Florida, and Juarez, Mexico, and has a facility in Petit Rechain,
Belgium, which customizes engines for sales into Europe.

In addition to its marine engine operations, Mercury's product offerings in
international markets include a wide range of aluminum, fiberglass and
inflatable boats produced either by, or for, Mercury in Australia, Finland,
France, Norway, Poland, Portugal and Sweden. These boats, which are marketed
under the brand names Armor, Arvor, Askaladden, Bermuda, Mercury, Ornvik,
Quicksilver, Savage, Uttern and Valiant, are typically equipped with engines
manufactured by Mercury Marine and often include other parts and accessories
supplied by Mercury Marine.

During 2002, Mercury Marine continued to leverage its core competency in
aluminum metal castings by expanding the markets served by this business. The
effort to expand Mercury's castings business began in 1999, and by 2002 Mercury
had secured business in a variety of industries and applications, including
motorcycles, agricultural implements and off-road recreational vehicles. The
Company anticipates that Mercury's castings business will continue to grow, and
intends to identify other areas of expertise across its businesses that can be
similarly leveraged in industries beyond the Company's core businesses.

On February 14, 2002, Mercury Marine established a joint venture with
Cummins Marine, a division of Cummins Inc., to supply integrated diesel
propulsion systems to the worldwide recreational and commercial marine markets.
The Company and Cummins each own 50 percent of the joint venture, Cummins
MerCruiser Diesel Marine LLC, which is headquartered in Charleston, South
Carolina. Through the joint venture, Mercury is able to offer a full range of
diesel marine propulsion systems.

In February 2002, Mercury Marine acquired Teignbridge Propellers, Ltd.
(Teignbridge), a manufacturer of custom and standard propellers and underwater
stern gear for inboard-powered vessels. Located in Newton Abbot, United Kingdom,
Teignbridge has allowed Mercury to extend its product offerings to include a
full line of propellers and related accessories.

Mercury's SmartCraft system, a total marine electronics and controls
integration system, was introduced in 2000. SmartCraft leverages Mercury's
advanced engine technology by linking all essential boat functions, including
power, controls, and internal and external sensors, to provide synchronized data
and control over all essential boat functions. SmartCraft systems also allow
Mercury and its customers to take advantage of advancements in communications,
entertainment and navigation electronics by providing a platform to integrate
these technologies to enhance the boating experience. SmartCraft was introduced
on a number of Mercury engine offerings beginning in 2000 and 2001, and is now
offered on a wide range of Mercury, Mercury MerCruiser and Cummins MerCruiser
Diesel engines.

The Company established Brunswick New Technologies (BNT) during 2002 to
expand the Company's product offerings in marine electronics, engine controls,
navigation systems, dealer management systems and related equipment for use in
both marine and non-marine applications. The genesis for BNT was Mercury
Marine's MotoTron operation, which leverages the Company's expertise in engine
controls. BNT represents the Company's commitment to expand its business and
expertise in electronics, controls and systems. As part of BNT's expansion in
these areas, during the fourth quarter of 2002 the Company acquired Northstar
Technologies, Inc., a world leader in premium marine navigation electronics, and
Monolith Corporation/

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Integrated Dealer Systems (IDS), a leading developer of dealer management
systems for dealers of marine products and recreational vehicles. Earlier in
2002, the Company established a joint venture between BNT's MotoTron business
and Woodward Governor Company to develop and produce engine and vehicle control
systems, and opened a research and testing facility in Singapore to support
BNT's various development activities.

Domestic retail demand for the Marine Engine segment's products is
seasonal, with sales generally highest in the second quarter. A number of
factors can influence demand for the Marine Engine segment's products,
including, but not limited to:

- Economic conditions and consumer confidence in the United States and
certain international regions;
- Competition from other manufacturers of marine engines;
- Adverse weather in key geographic areas, including excessive rain,
prolonged below-average temperatures and severe heat or drought,
particularly during the key selling season;
- The level of inventories maintained by Mercury Marine's independent
boatbuilders, dealers and the Company's own boat operations;
- The segment's ability to make technological and quality advancements to
meet customer demands;
- The segment's ability to develop and market competitive products;
- Consumer demand for the Company's boat offerings and those of other major
boatbuilders;
- Fuel costs;
- Prevailing interest rates; and
- Consumer interest in recreational boating.

BOAT SEGMENT

The Boat segment consists of the Brunswick Boat Group (Boat Group), which
markets and manufactures fiberglass pleasure boats, high-performance boats,
offshore fishing boats, and aluminum fishing, deck and pontoon boats. The
Company believes its Boat Group, which had net sales of $1,405.3 million during
2002, has the largest dollar sales volume of pleasure boats in the world.

The Boat Group was formed in 2000 to manage the Company's boat brands;
increase the Company's boat portfolio by identifying recreational boat product
segments in which the Company was not participating; expand the Company's
involvement in recreational boating services and activities to enhance the
consumer experience and dealer profitability; speed the introduction of new
technologies into boat manufacturing processes and the Company's boat products;
and leverage the Company's extensive knowledge and involvement in boat design,
manufacturing and distribution.

During 2002, the Boat Group established offices in Knoxville, Tennessee, to
provide shared services to the Company's boat brands, which include Hatteras
luxury sportfishing convertibles and motoryachts; Sea Ray, Maxum and Sealine
yachts, sport yachts, cruisers and runabouts; Bayliner cruisers and runabouts;
Meridian motoryachts; Boston Whaler and Trophy offshore fishing boats; Baja
high-performance boats; and Princecraft aluminum fishing, deck and pontoon
boats. The Boat Group also operates a commercial and governmental sales unit
that sells products to the United States Government and state, local and foreign
governments for military, law enforcement and other governmental uses, and to
commercial customers for use in a variety of applications. Sales of Boston
Whaler, Baja and various inflatable boats represent the majority of the Boat
Group's governmental and commercial sales. The Boat Group procures most of its
outboard motors, gasoline sterndrives and gasoline inboard engines from the
Mercury Marine Group, and diesel engines from Cummins MerCruiser Diesel Marine
LLC, the Company's joint venture with Cummins Inc.

During 2002, the Company began manufacturing entry-level runabouts at a new
facility opened in Reynosa, Mexico. The Company believes the initial model
manufactured at this facility, a 17.5-foot Bayliner, is the lowest-cost new boat
in its class, due in large part to the Company's procurement and operational
efficiencies.

During the fourth quarter of 2002, the Company launched an initiative to
develop its marine parts and accessories business to better serve dealers and
consumers of the Company's boat products. Working with its
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existing boat dealer network, the Company will strive to improve quality,
distribution and delivery of parts and accessories to enhance the boating
experience.

The Boat Group's products are sold to end users through a global network of
approximately 950 dealers and distributors, each of which carries one or more of
the Company's boat brands. Sales to the Boat Group's largest dealer, which has
multiple locations and carries a number of the Boat Group's product lines,
comprised approximately 21 percent of Boat Group sales in 2002. Domestic retail
demand for pleasure boats is seasonal, with sales generally highest in the
second quarter. A number of factors can influence demand for the Boat Group's
products, including, but not limited to:

- Economic conditions, consumer confidence and the strength of equity
markets;
- Adverse weather in key geographic areas, including excessive rain,
prolonged below-average temperatures and severe heat or drought,
particularly during the key selling season;
- The Boat Group's ability to develop and market competitive products;
- Competition from other boatbuilders;
- Fuel costs;
- Effectiveness of distribution;
- Prevailing interest rates and availability of financing for consumers and
boat dealers;
- Consumer interest in recreational boating; and
- Access to water and marina facilities in urban areas.

FITNESS SEGMENT

The Company's Fitness segment is comprised of the Life Fitness division,
which designs, markets and manufactures a full line of reliable, high-quality
cardiovascular fitness equipment (including treadmills, total body cross
trainers, stair climbers and stationary exercise bicycles) and strength-training
equipment under the Life Fitness, Hammer Strength and ParaBody brands.

The Company believes that the Fitness segment, which had net sales of
$456.7 million during 2002, has the largest dollar sales volume of commercial
fitness equipment in the world. Life Fitness' commercial sales are primarily to
private health clubs and fitness facilities operated by professional sports
teams, the military, governmental agencies, corporations, hotels, schools and
universities. Commercial sales are made directly to certain commercial customers
as well as through dealers and distributors.

Life Fitness also sells its products into the high-end consumer markets.
Approximately 15 percent of the Fitness segment's 2002 sales were made through
Omni Fitness, a chain of specialty fitness retail stores owned and operated by
the Company since 2001. Omni Fitness sells Life Fitness products as well as
complementary products manufactured by other companies. Most of Life Fitness'
remaining consumer sales are sold to other specialty retailers, including other
chains in which the Company has ownership interests.

The Fitness segment's principal manufacturing facilities are located in
California, Illinois, Kentucky and Minnesota. The Fitness segment also operates
63 Omni Fitness specialty fitness retail stores located primarily in the
Northeast and Pacific Northwest regions of the United States.

During 2002, Life Fitness introduced more than 40 new fitness products,
including new elliptical cross trainers, treadmills, stationary bikes,
stairclimbers, home gym products, commercial selectorized strength training
equipment and a series of cable motion machines.

Fitness products are distributed worldwide from regional warehouses, sales
offices and factory stocks of merchandise. Demand for fitness products is
seasonal, with sales generally highest in the first and fourth quarters, and is
influenced by a number of factors, including, but not limited to:

- Economic conditions and consumer confidence in the United States and
certain international regions;
- Product innovation;
- Consumer demand for health clubs and other exercise facilities;
- Availability of effective product distribution;
- Consumer participation in fitness activities;
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- Demand from owners and operators of fitness centers for new equipment;
- Competition from other manufacturers and alternative forms of recreation;
and
- Product quality, pricing, and customer service.

BOWLING & BILLIARDS SEGMENT

The Bowling & Billiards segment is comprised of the Brunswick Bowling &
Billiards division (BB&B), which had net sales of $377.7 million during 2002.
BB&B is the leading full-line designer and producer of bowling products,
including bowling balls, after-market products and parts, and capital equipment,
which includes bowling lanes, automatic pinsetters, ball returns, furniture
units, and scoring and center-management systems. BB&B also designs and markets
a full line of high-quality billiards tables and accessories.

BB&B operates 118 bowling centers in the United States, Canada and Europe,
and its joint ventures operate 18 additional centers in Asia. Bowling centers
offer bowling and, depending on size and location, the following activities and
services: billiards, video games, pro shops, children's playrooms, restaurants
and cocktail lounges. All of the North American centers offer Cosmic Bowling, an
enhanced form of bowling with integrated sound systems and glow-in-the-dark
effects. A number of BB&B's centers have been converted into Brunswick Zones,
modernized bowling centers that offer a full array of family-oriented
entertainment activities. The entertainment offerings available at Brunswick
Zones are designed to appeal to a broader audience, including both recreational
bowlers and non-traditional league bowlers. BB&B intends to convert additional
centers into Brunswick Zones, supporting the Company's strategy to increase
market share. Approximately 50 percent of BB&B's bowling center facilities are
owned by the Company and the other half are leased.

BB&B has a 50 percent ownership interest in Nippon Brunswick K. K., which
sells bowling equipment and operates bowling centers in Japan. In addition, BB&B
has a 50 percent ownership interest in Vulcan-Brunswick Bowling Pin Company,
which manufactures bowling pins in Antigo, Wisconsin.

BB&B's billiards business was established in 1845, and is the oldest
business operated by the Company. BB&B designs and markets billiards tables,
billiards balls, cues and related accessories under the Brunswick brand, and
serves the domestic and international commercial and consumer billiards markets.
The Company believes it has the largest dollar sales volume of billiards tables
in the world.

The Company's bowling and billiards products are sold through a variety of
channels, including distributors, dealers, mass merchandisers, bowling centers
and retailers, and directly to consumers. BB&B products are distributed
worldwide from regional warehouses, sales offices and factory stocks of
merchandise. Demand for the Bowling & Billiards segment's products is influenced
by a number of factors, including, but not limited to:

- Economic conditions in the United States and key international regions,
particularly Asia, Canada and Europe;
- The segment's ability to develop and market competitive products;
- Prevailing interest rates and availability of financing for purchasers of
bowling capital equipment;
- Product innovation;
- Availability of effective product distribution;
- Consumer participation in bowling and billiards;
- Demand from owners and operators of recreation centers for new equipment
from the segment;
- Competition from other manufacturers as well as alternative forms of
recreation;
- Product and facility quality, pricing, and customer service; and
- Adverse weather in key geographical areas, including excessive snow and
summers with prolonged periods of below-average rain.

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FINANCIAL SERVICES

The Company established a joint venture in 2002 with Transamerica
Distribution Finance to provide financial products and services to customers of
the Company's domestic marine businesses. The venture, Brunswick Acceptance
Company, LLC (BAC), will provide secured wholesale floor-plan financing to the
Company's boat dealers and may provide other financial services in support of
the Company's marine businesses. In addition, the parties contemplate that BAC
will purchase and service a portion of Mercury Marine's domestic accounts
receivable for its boatbuilder customers. The Company owns a 15 percent interest
in the joint venture initially, but will increase its ownership to 49 percent by
July 15, 2003. BAC became operational in January 2003.

DISTRIBUTION

The Company depends on distributors, dealers and retailers (Dealers) for
the majority of its recreational boat sales, and significant portions of its
marine engine, fitness and bowling and billiards products. The Company has
approximately 14,000 Dealers serving its business segments worldwide. The
Company's marine Dealers typically carry boats, engines and related parts and
accessories from the Company's Marine Engine and Boat segments.

Most of the Company's Dealers consist of independent companies and
proprietors that range in size from small, family-owned dealerships to large,
publicly traded organizations with substantial revenues and multiple locations.
Some of the Company's Dealers sell the Company's products exclusively, while
others also carry competing products. In some cases, the Company owns equity in
select Dealers, including minority interests in certain marine Dealers and 100
percent ownership of Omni Fitness, an exercise equipment retailer that is
operated by the Company's Life Fitness division.

A significant portion of the Company's products are seasonal, and a number
of the Company's Dealers are relatively small and often highly leveraged. As a
result, many of the Company's Dealers require financial support to remain in
business and provide a stable outlet for the Company's products. To ensure the
stability of its distribution channels, the Company provides various financial
incentives and support to its Dealers from time to time. This support includes
loans, loan guarantees and inventory repurchase commitments, under which the
Company is obligated to repurchase inventory in the event of a Dealer's default.
The Company believes that these investments and obligations are in the Company's
best interest, but its financial support of its Dealers does expose the Company
to credit risks and business risks. The Company's business units maintain active
credit operations to manage this financial exposure on an ongoing basis, and the
Company continues to seek opportunities to improve and sustain its various
distribution channels. See NOTE 7, COMMITMENTS AND CONTINGENCIES, in the Notes
to Consolidated Financial Statements.

DISCONTINUED OPERATIONS

During 2001, the Company substantially completed the divestiture of its
outdoor recreation segment, originally announced in June of 2000, with the sale
of its North American fishing, hunting sports accessories and cooler businesses.
See NOTE 11, DISCONTINUED OPERATIONS, in the Notes to Consolidated Financial
Statements, for a description of the Company's discontinued operations.

INTERNATIONAL OPERATIONS

The Company's sales to customers in international markets were $1,004.7
million (27.1 percent of net sales) and $859.2 million (25.5 percent of net
sales) in 2002 and 2001, respectively. The Company generally transacts its sales
in international markets in local currencies, and denominates its costs of
products manufactured or sourced in U.S. dollars. The Company's international
sales are set forth in NOTE 3, SEGMENT

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INFORMATION, in the Notes to Consolidated Financial Statements, and are also
included in the table below, which details the Company's international sales by
region for 2002, 2001 and 2000:

Mercury Marine sales comprised approximately 50 percent of the Company's
total international sales in 2002. Mercury Marine's primary international
operations include the following:

- A product customization plant and distribution center in Belgium;
- A propeller and underwater stern-gear manufacturing plant in Newton
Abbot, United Kingdom;
- Sales offices and distribution centers in Australia, Brazil, Canada,
China, Japan, Malaysia, Mexico, New Zealand and Singapore;
- Sales offices in Belgium, Denmark, France, Germany, Indonesia, Italy, the
Netherlands, Norway, Russia, Sweden and Switzerland;
- Boat assembly plants in Australia, Mexico and Sweden; and
- A marina and club in China.

The Brunswick Boat Group's sales comprised approximately 24 percent of the
Company's total international sales in 2002. The Boat Group's products are
manufactured or assembled in the United States, Bulgaria, Canada, Mexico, Poland
and the United Kingdom, and are sold worldwide through dealers. The Boat Group
also sells kits for certain runabout boat models to approved manufacturers
outside the United States who then manufacture boats to specification and sell
the boats under certain Boat Group brand names. The Boat Group has sales offices
in Brazil, England, France, the Netherlands and Spain, and product display
locations in Australia and the Netherlands.

Fitness segment sales comprised approximately 18 percent of the Company's
total international sales in 2002. Life Fitness sells its products worldwide and
has sales and distribution centers in Brazil, Germany, Hong Kong, Japan, the
Netherlands, Spain and the United Kingdom, as well as sales offices in Austria
and Italy.

Bowling & Billiards segment sales comprised approximately 8 percent of the
Company's total international sales in 2002. BB&B sells its products worldwide,
has sales offices in Germany, Hong Kong and the United Kingdom, and has a plant
that assembles pinsetters in Hungary. BB&B operates bowling centers in Austria,
Canada and Germany, and holds a 50 percent interest in an entity that sells
bowling equipment and operates bowling centers in Japan.

RAW MATERIALS

Raw materials are purchased from various sources. At present, the Company
is not experiencing any critical raw material shortages, nor are any currently
anticipated. General Motors Corporation is the sole supplier of engine blocks
used to manufacture the Company's gasoline sterndrive engines.

During 2002, the Company expanded its global procurement operations to
leverage the Company's purchasing power across its divisions and improve supply
chain efficiencies. In conjunction with the Brunswick Boat Group, in 2002 the
Company's global procurement team helped establish a boat manufacturing facility
in Reynosa, Mexico, using the Company's proprietary PRO(TM) (Process Resource
Optimization) System. The PRO System consists of three key elements: global
manufacturing, global sourcing of high-quality parts and components, and
institutionalizing a world-class quality assurance system. The PRO System allows
the Company to take advantage of local sourcing, labor and logistical
efficiencies to manufacture quality products

7

at lower costs, and the Company intends to deploy the system in additional
locations to continue to improve its cost advantages.

PATENTS, TRADEMARKS AND LICENSES

The Company has, and continues to obtain, patent rights covering certain
features of the Company's products and processes. By law, the Company's patent
rights, which consist of patents and patent licenses, have limited lives and
expire periodically.

In the Marine Engine segment, patent rights principally relate to features
of outboard engines and inboard-outboard drives, including die-cast powerheads;
cooling and exhaust systems; drive train, clutch and gearshift mechanisms;
boat/engine mountings; shock absorbing tilt mechanisms; ignition systems;
propellers; marine vessel control systems; and fuel and oil injection systems.

In the Boat segment, patent rights principally relate to processes for
manufacturing fiberglass hulls, decks and components for the Company's boat
products, as well as patent rights related to boat seats, interiors and other
boat features and components.

In the Fitness segment, patent rights principally relate to fitness
equipment designs and components, including patents covering internal processes,
programming functions, displays, design features and styling. See ITEM 3, LEGAL
PROCEEDINGS, for a description of certain litigation involving fitness equipment
patents.

In the Bowling & Billiards segment, patent rights principally relate to
computerized bowling scorers and bowling center management systems, bowling
lanes and related equipment, bowling balls, and billiards table designs and
components.

While the Company believes that its patent rights are important to its
competitive position, the Company also believes that future success in all of
its businesses is mainly dependent upon its engineering, manufacturing and
marketing capabilities, its cost advantages, its ability to continue to develop
and manufacture high-quality, innovative, and competitive products, and the
effectiveness of its distribution channels.

The following are among the Company's primary trademarks or registered
trademarks:

Marine Engine Segment: Arvor, Astra, Bermuda, Chartus, IDS, Mariner,
MercNet, MerCruiser, Mercury, MercuryCare, Mercury Marine, Mercury Parts
Express, Mercury Precision Parts, Mercury Propellers, Mercury Racing,
MotorGuide, MotoTron, OptiMax, Northstar, Ornvik, Pinpoint, ProMax, QuickFit,
Quicksilver, Savage, SeaPro, SmartCraft, SportJet, Teignbridge Propellers,
Typhoon, Uttern and WaterMouse.

Boat Segment: Baja, Bayliner, Boston Whaler, Capri, Ciera, Hatteras,
Master Dealer, Maxum, Meridian, Precision Piloting, Princecraft, Sea Ray,
Sealine, Swivl-Eze and Trophy.

Fitness Segment: Flex Deck, Hammer Strength, Lifecycle, Life Fitness, Omni
Fitness and ParaBody.

Bowling & Billiards Segment: Air-Hockey, Anvilane Pro Lane, Ball Wall,
Brunswick, Brunswick Billiards, Brunswick Pavilion, Brunswick Zone, Centennial,
CenterMaster, Cosmic Bowling, DBA Products, Dominion, Frameworx, Fuze, Gold
Crown, Inferno, IQ, Lane Shield, Lightworx, Monster, Throbot, U.S. Play by
Brunswick, Viz-A-Ball and Zone.

The Company's trademarks have indefinite lives, and many of these
trademarks are well known to the public and are considered valuable assets of
the Company.

COMPETITIVE CONDITIONS AND POSITION

The Company believes that it has a reputation for quality in its highly
competitive lines of business. The Company competes in its various markets by
utilizing efficient production techniques, innovative technological advancements
and effective marketing, advertising and sales efforts, and by providing
high-quality products at competitive prices.

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Strong competition exists with respect to each of the Company's product
groups, but no single manufacturer competes with the Company in all product
groups. In each product area, competitors range in size from large, highly
diversified companies to small, single-product businesses.

The following summarizes the Company's competitive position in each
segment.

Marine Engine Segment: The Company believes it has the largest dollar
sales volume of recreational marine engines in the world. The marine engine
market is highly competitive among several major international companies that
comprise the majority of the market, and several smaller companies. There are
also many competitors in the marine accessories, electronics, engine controls
and navigation systems businesses. Competitive advantage in the marine engine
and accessories markets is a function of product features, technological
leadership, quality, service, performance and durability, along with effective
promotion, distribution and pricing.

Boat Segment: The Company believes it has the largest dollar sales volume
of pleasure boats in the world. There are several major manufacturers of
pleasure and offshore fishing boats, along with hundreds of smaller
manufacturers. Consequently, this business is both highly competitive and highly
fragmented. The Company believes it has the broadest range of boat product
offerings in the world, with boats ranging from 12 to 100 feet. In all of its
boat operations, the Company competes on the basis of product features,
technology, quality, dealer service, performance, value, durability and styling,
along with effective promotion, distribution and pricing.

Fitness Segment: The Company believes it is the world's largest
manufacturer of commercial fitness equipment and a leading manufacturer of
high-quality consumer fitness equipment. Many of the Company's fitness equipment
products feature industry-leading product innovations, and the Company places
significant emphasis on new product introductions. Competitive emphasis is also
placed on product quality, marketing activities, pricing and service. The
Company also operates Omni Fitness, a chain of 63 specialty retail stores, where
emphasis is placed on providing excellent customer service and offering
competitive products.

Bowling & Billiards Segment: The Company believes it is the world's
leading full-line designer and producer of bowling products and billiards
tables. Competitive emphasis is placed on product innovation, quality, marketing
activities, pricing and service. The Company also operates 136 retail bowling
centers worldwide, including those operated by the Company's joint ventures,
where emphasis is placed on enhancing the bowling and entertainment experience,
maintaining quality facilities and providing excellent customer service.

RESEARCH AND DEVELOPMENT

The Company strives to bolster its competitive position in all of its
segments by continuously investing in research and development. The Company's
research and development investments support the introduction of new products
and enhancements to existing products. The Company's research and development
investments are shown below:

9

NUMBER OF EMPLOYEES

The approximate number of employees as of March 1, 2003, is shown below by
segment:

Marine Engine............................................... 6,400
Boat........................................................ 7,400
Fitness..................................................... 1,780
Bowling & Billiards......................................... 5,250
Corporate................................................... 185
------
Total....................................................... 21,015
======

As of March 1, 2003, there were approximately 2,200 employees in the Marine
Engine segment, 400 employees in the Boat segment, 140 employees in the Fitness
segment, and 200 employees in the Bowling & Billiards segment represented by
labor unions. The Company believes that it has good relations with these labor
unions.

ENVIRONMENTAL REQUIREMENTS

See ITEM 3, LEGAL PROCEEDINGS, for a description of certain environmental
proceedings in which the Company is involved.

AVAILABLE INFORMATION

The Company maintains an Internet web site at http://www.brunswick.com that
includes links to the Company's Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports.
These reports are available without charge as soon as reasonably practicable
following the time that they are filed with or furnished to the SEC.
Shareholders and other interested parties may request email notification of the
posting of these documents through the Investor Information section of the
Company's web site.

ITEM 2. PROPERTIES

The Company's headquarters are located in Lake Forest, Illinois. The
Company also maintains administrative offices in Chicago, Illinois. The Company
has numerous manufacturing plants, distribution warehouses, retail stores, sales
offices and test sites located throughout the world. Research and development
facilities are decentralized within the Company's operating segments, and most
are located at individual manufacturing sites.

The Company believes its facilities are suitable and adequate for its
current needs. The Company believes that all of its properties are well
maintained and in good operating condition. Most plants and warehouses are of
modern, single-story construction, providing efficient manufacturing and
distribution operations. The Company's manufacturing facilities are operating at
approximately 75 percent of current capacity. The Company's headquarters and
most of its principal plants are owned by the Company.

The Company's primary facilities are in the following locations:

Marine Engine Segment: St. Cloud, Florida; Chicago, Illinois; Acton,
Massachusetts; Raleigh, North Carolina; Stillwater and Tulsa, Oklahoma; Fond du
Lac, Milwaukee and Oshkosh, Wisconsin; Melbourne, Australia; Petit Rechain,
Belgium; Mississauga and Pickering, Ontario, Canada; Saint Cast, France; Juarez,
Mexico; Singapore; Skellefthamn, Sweden; and Newton Abbot, United Kingdom. The
Chicago, Illinois; Acton, Massachusetts; Raleigh, North Carolina; Pickering,
Ontario, Canada; Saint Cast, France; and Skellefthamn, Sweden, facilities are
leased. The remaining facilities are owned by the Company.

Boat Segment: Edgewater, Merritt Island and Palm Coast, Florida;
Cumberland and Salisbury, Maryland; Pipestone, Minnesota; New Bern, North
Carolina; Bucyrus, Ohio; Roseburg, Oregon; Knoxville and Vonore, Tennessee;
Lancaster, Texas; Arlington, Washington; Princeville, Quebec, Canada; Reynosa,

10

Mexico; and Kidderminster, United Kingdom. All of these facilities are owned by
the Company with the exception of the Lancaster, Texas, facility, which is
leased.

Fitness Segment: Paso Robles, California; Franklin Park, Illinois;
Falmouth, Kentucky; Ramsey, Minnesota; and 63 Omni Fitness retail stores in the
United States. All of the Omni Fitness stores, the Paso Robles, California,
facility and a portion of the Franklin Park, Illinois, facility are leased. The
remaining facilities are owned by the Company.

Bowling & Billiards Segment: Lake Forest, Illinois; Muskegon, Michigan;
Bristol, Wisconsin; Szekesfehervar, Hungary; and 118 Company-operated bowling
recreation centers in the United States, Canada and Europe. Approximately 50
percent of BB&B's bowling centers are leased. The remaining facilities are owned
by the Company.

ITEM 3. LEGAL PROCEEDINGS

The Company accrues for litigation exposure based upon its assessment, made
in consultation with counsel, of the likely range of exposure stemming from the
claim. In light of existing reserves, the Company's litigation claims, when
finally resolved, will not, in the opinion of management, have a material
adverse effect on the Company's consolidated financial position. If current
estimates for the cost of resolving any claims are later determined to be
inadequate, results of operations could be adversely affected in the period in
which additional provisions are required.

On April 18, 2002, the Company, in cooperation with the United States
Consumer Products Safety Commission (CPSC), announced a recall of approximately
103,000 bicycles that were sold by the Company's former bicycle division. The
bicycles had been equipped with suspension forks that were purchased from a
third party supplier. Some of the forks were found to have been defectively
manufactured and were involved in approximately 55 reported incidents. The 2002
recall was an expansion of a prior recall involving the suspension forks, and
allows consumers who purchased bicycles with an affected fork to return the fork
in exchange for $65 or a replacement bicycle. In addition to the costs of
administering the recall, the Company anticipates that it will incur additional
costs to resolve litigation stemming from the sale of the bike forks, and faces
a potential fine from the CPSC based on inadvertent delays in reporting several
of the incidents involving the forks. The Company does not believe that the
resolution of this matter will have a material adverse effect on the Company's
consolidated financial position or results of operations.

On April 22, 2002, a federal court in Seattle lifted a stay in a lawsuit
filed against Life Fitness by Precor Incorporated (Precor). The suit, which
alleges that certain of Life Fitness' cross trainer exercise machines infringe
Precor's Miller '829 patent, was stayed by the court pending re-examination of
the patent by the U.S. Patent and Trademark Office (PTO). The PTO issued a
modified Miller '829 patent to Precor on March 5, 2002, which led to the lifting
of the stay. Trial is scheduled for July 14, 2003. This matter was initiated in
January 2000 and seeks monetary damages and injunctive relief. The Company does
not believe that its machines infringe the patent, as modified, but is unable to
predict the outcome of this matter.

In a separate lawsuit between the Company and Precor, a federal court in
Seattle awarded Precor approximately $230,000 in attorneys' fees on June 14,
2002. The award was reduced from $5.3 million in light of an appellate court
ruling in the case. This matter was originally filed in 1994 and sought monetary
damages and injunctive relief. The Company believes that this matter has been
finally concluded.

During the fourth quarter of 2002, the Company settled a patent
infringement lawsuit filed against it by CCS Fitness, Inc. (CCS). CCS had
alleged that a front-drive cross trainer manufactured by Life Fitness infringed
a patent held by CCS. This matter was initiated in 1998 and sought monetary
damages and injunctive relief. In light of the settlement, the matter was
dismissed with prejudice.

On May 30, 2002, Leiserv, Inc. (Leiserv), a Company subsidiary operated by
the Bowling & Billiards segment, was sued in the Circuit Court of St. Louis
County, Missouri, for alleged violations of the federal Telephone Consumer
Protection Act. The lawsuit was brought as a putative class action seeking
monetary damages on behalf of all people and entities within two area codes in
the St. Louis area who allegedly received unsolicited faxes from a service
provider retained by Leiserv. Because this case remains in the early stages of
11

litigation and raises legal issues that have not yet been fully resolved by the
courts, the Company is unable to predict the outcome of this matter.

On December 3, 2002, the United States Supreme Court reversed an Illinois
Supreme Court decision that had been entered in the Company's favor in Sprietsma
vs. Mercury Marine, a "propeller guard" case. In its decision, the U.S. Supreme
Court rejected one of the defenses the Company had successfully asserted in
Sprietsma and other cases based on federal preemption of state law. The case,
which was initiated in July 1996 and sought monetary damages, was remanded to
the Illinois court for further consideration. The Company believes that it has a
number of other valid defenses to the claims asserted in Sprietsma, and does not
believe that the resolution of this matter will have a material adverse effect
on the Company's consolidated financial position or results of operations.

The Company has been named in a number of asbestos-related lawsuits, the
majority of which involve Vapor Corporation, a former subsidiary which the
Company divested in 1990. Virtually all of the asbestos suits against the
Company involve numerous other defendants. The claims generally allege that the
Company sold products that contained components, such as gaskets, that included
asbestos, and seek monetary damages from the Company. Neither the Company nor
Vapor is alleged to have manufactured asbestos. The Company's insurers have
settled a number of asbestos claims for nominal amounts, while a number of other
claims have been dismissed. No suit has yet gone to trial. The Company does not
believe that the resolution of these lawsuits will have a material adverse
effect on the Company's consolidated financial position or results of
operations.

In 1999, the United States Tax Court upheld an Internal Revenue Service
(IRS) determination that resulted in the disallowance of capital losses and
other expenses from two partnership investments for 1990 and 1991. In 2000, the
Company appealed the Tax Court ruling to the United States Court of Appeals for
the District of Columbia and posted a $79.8 million surety bond to secure
payment of tax deficiencies plus accrued interest related to the appeal. In late
2001, the Court of Appeals rendered a decision vacating the Tax Court's opinion
and remanded the case to the Tax Court for reconsideration. In February 2003,
the Tax Court on remand ruled that the Company did not have a non-tax business
purpose for forming the two partnerships and that they were therefore not valid
for tax purposes. The Company will appeal this decision to the United States
Court of Appeals for the District of Columbia. If, on appeal, the Company does
not prevail, the Company will owe approximately $135 million, consisting of $60
million in taxes due plus $75 million of interest, net of tax. The Company has
previously settled a number of other issues with the IRS on open tax years 1989
through 1994 and anticipates favorable adjustments that would reduce the
liability associated with the two partnership investments to approximately $53
million, consisting of $27 million in taxes due and $26 million in interest, net
of tax. The Company has established an adequate reserve for this contingency and
does not anticipate any material adverse effects on its consolidated financial
position or results of operations in the event of an unfavorable resolution of
this matter. No penalties have been asserted by the IRS to date, and the Company
has not provided for any penalties or interest on such penalties.

The Company is involved in certain legal and administrative proceedings
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 and other federal and state legislation governing the generation and
disposal of certain hazardous wastes. These proceedings, which involve both on-
and off-site waste disposal or other contamination, in many instances seek
compensation or remedial action from the Company as a waste generator under
Superfund legislation, which authorizes action regardless of fault, legality of
original disposition or ownership of a disposal site. The Company has
established reserves based on a range of current cost estimates for all known
claims.

In its Marine Engine segment, the Company will continue to develop engine
technologies to reduce engine emissions to comply with present and future
emissions requirements. The costs associated with these activities and the
introduction of low-emission engines will have an adverse effect on Marine
Engine segment operating margins and may affect short-term operating results.
The Boat segment continues to pursue fiberglass boat manufacturing technologies
and techniques to reduce air emissions at its boat manufacturing facilities.

12

The Company does not believe that compliance with federal, state and local
environmental laws will have a material adverse effect on the Company's
competitive position. See NOTE 7, COMMITMENTS AND CONTINGENCIES, in the Notes to
Consolidated Financial Statements, for disclosure of the potential cash
requirements of environmental proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

EXECUTIVE OFFICERS OF THE COMPANY

The Company's executive officers are listed in the following table:

*Members of the Operating Committee

There are no familial relationships among these officers. The term of
office of all elected officers expires April 30, 2003. The Group and Division
Presidents are appointed from time to time at the discretion of the Chief
Executive Officer.

George W. Buckley has been Chairman and Chief Executive Officer of the
Company since 2000. From May to June 2000 he was President and Chief Operating
Officer of the Company. He was President of the Mercury Marine Group from 1997
to 2000, and during that period was also an officer of the Company, holding the
following positions: Executive Vice President, February to May 2000; Senior Vice
President, 1998 to 2000; and Vice President, 1997 to 1998.

Peter B. Hamilton has been Vice Chairman of the Company and President of
Brunswick Bowling & Billiards since 2000. He was Executive Vice President and
Chief Financial Officer of the Company from 1998 to 2000. He was Senior Vice
President and Chief Financial Officer of the Company from 1995 to 1998.

Victoria J. Reich has been Senior Vice President and Chief Financial
Officer of the Company since 2000. She was Vice President and Controller of the
Company from 1996 to 2000.

Kathryn J. Chieger has been Vice President--Corporate and Investor
Relations of the Company since 1996.

13

Tzau J. Chung has been a Vice President of the Company since 2000 and was
named President--Brunswick New Technologies, in February 2002. Prior to that he
was Vice President--Strategic Planning of the Company from 2000 to 2002, and was
Senior Vice President--Strategy and IT, for the Company's Mercury Marine Group
from 1997 to 2000.

William J. Gress has been Vice President--Supply Chain Management of the
Company since 2001. From February 2000 to January 2001, he was Executive Vice
President of the Company's Igloo business. Prior to that he was employed by
Mercury Marine, where he was Vice President of its MerCruiser Diesel business
from 1999 to 2000, Vice President of Business Development from 1998 to 1999,
Senior Director of Strategic Sourcing during 1997, and Director of Materials
Management from 1993 to 1997. From November 1997 to August 1998, he was Vice
President of Supplier Relations for Goss Graphics, Inc., a printing equipment
manufacturer.

Kevin S. Grodzki has been Vice President of the Company and President of
its Life Fitness Division since 2000. Prior to that, he was Vice President of
Witco Corporation, a specialty chemical company, from 1997 to 2000.

Peter G. Leemputte has been Vice President and Controller of the Company
since 2001. From 1998 to 2000, he was Executive Vice President, Chief Financial
and Administrative Officer for Chicago Title Corporation, a national title
insurance and real estate related products company. He was Vice President and a
partner of Mercer Management Consulting, an international management consulting
firm, from 1996 to 1998.

B. Russell Lockridge has been Vice President and Chief Human Resources
Officer of the Company since 1999. From 1996 to 1999, he was Senior Vice
President--Human Resources of IMC Global, Inc., a company that produces crop
nutrients, animal feed ingredients and salt.

Patrick C. Mackey has been Vice President of the Company and President of
its Mercury Marine Group since 2000. Prior to that, he was Executive Vice
President of Witco Corporation, a specialty chemical company, from 1998 to 1999.

Dustan E. McCoy has been Vice President of the Company and
President--Brunswick Boat Group since 2000. From 1999 to 2000, he was Vice
President, General Counsel and Secretary of the Company. He was previously an
officer of Witco Corporation, a specialty chemical company, where he was
Executive Vice President in 1999; Senior Vice President from 1998 to 1999; and
Senior Vice President, General Counsel and Corporate Secretary from 1996 to
1998.

William L. Metzger has been Vice President and Treasurer of the Company
since 2001. From 2000 to 2001, he was Assistant Vice President--Corporate
Finance. From 1996 to 2000, he was Director--Corporate Accounting.

Clifford M. Sladnick has been Vice President--Acquisitions of the Company
since 2001. He joined the Company in 2000 as Assistant General Counsel. From
1990 to 1999, he was Senior Vice President, General Counsel and Corporate
Secretary of St. Paul Bancorp, Inc.

Marschall I. Smith has been Vice President, General Counsel and Secretary
of the Company since 2001. He joined Brunswick from Digitas Inc., a leading
e-commerce integrator. Prior to that assignment, he spent five years as Senior
Vice President and General Counsel of IMC Global Inc.

Dale B. Tompkins was named Vice President--Strategy and Corporate
Development in January 2003. He joined the Company in 2000 as Vice
President--Strategy and Business Development for the Mercury Marine Group.
Previously, he was employed by Giddings & Lewis LLC, where he was Vice
President--Planning and Development from 1999 to 2000, and Director--Strategic
Planning from 1997 to 1999.

Cynthia Trudell has been Vice President and President--Sea Ray Division
since 2001. Prior to joining Brunswick, she held a number of positions with
various divisions of General Motors, including Chairman and President--Saturn
Corporation from 1999 to 2001, and President--IBC Vehicles, from 1996 to 1999.

Judith P. Zelisko has been Vice President--Tax of the Company since 1998.
She was Staff Vice President--Tax from 1996 to 1998.
14

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's common stock is traded on the New York, Chicago, Pacific and
London Stock Exchanges. Quarterly information with respect to the high and low
prices for the common stock and the dividends declared on the common stock is
set forth in NOTE 21, QUARTERLY DATA, in the Notes to Consolidated Financial
Statements. As of March 3, 2003, there were approximately 16,580 shareholders of
record of the Company's common stock.

The Company announced in 2001 that, beginning in 2002, it would convert to
an annual dividend rather than pay dividends quarterly to reduce administrative
costs. Future dividends, declared at the discretion of the Board of Directors,
will be paid in December.

ITEM 6. SELECTED FINANCIAL DATA

The selected historical financial data presented below as of and for the
years ended December 31, 2002, 2001 and 2000, have been derived from, and should
be read in conjunction with, the historical consolidated financial statements of
the Company, including the notes thereto, and ITEM 7, MANAGEMENT'S DISCUSSION
AND ANALYSIS, including the MATTERS AFFECTING COMPARABILITY section, contained
elsewhere within this Annual Report on Form 10-K. The selected historical
financial data presented below as of and for the years ended December 31, 1999,
1998 and 1997, have been derived from the consolidated financial statements of
the Company that are not included herein. The financial data presented below
have been restated to present the discontinued operations in accordance with
Accounting Principles Board Opinion (APB) No. 30, "Reporting the Results of
Operations -- Reporting the Effects of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions."

- ---------------

(1) Refer to NOTE 1, SIGNIFICANT ACCOUNTING POLICIES, in the Notes to
Consolidated Financial Statements for a discussion on Goodwill and Other
Intangibles.

(2) Refer to NOTE 1, SIGNIFICANT ACCOUNTING POLICIES, in the Notes to
Consolidated Financial Statements for a discussion on Derivatives.

(3) In 1997, the Company adopted the provisions of Emerging Issues Task Force
No. 97-13, "Accounting for Costs Incurred in Connection with a Consulting
Contract or an Internal Project that Combines Business Process
Re-engineering and Information Technology Transformation." This resulted in
a one-time charge for the cumulative effect of a change in accounting
principle totaling $0.7 million after-tax, ($1.1 million pre-tax).

The Notes to Consolidated Financial Statements should be read in conjunction
with the above summary.
16

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Certain statements in Management's Discussion and Analysis are
forward-looking as defined in the Private Securities Litigation Reform Act of
1995. These statements are based on current expectations that are subject to
risks and uncertainties. Actual results may differ materially from expectations
as of the date of this filing because of factors discussed below under the
FORWARD-LOOKING STATEMENTS section.

OVERVIEW

GENERAL

Brunswick Corporation (the Company) is a manufacturer and marketer of
leading consumer brands including Mercury and Mariner outboard engines; Mercury
MerCruiser sterndrive and inboard engines; Sea Ray, Bayliner, Maxum, Meridian,
and Sealine pleasure boats; Hatteras luxury sportfishing convertibles and
motoryachts; Baja high-performance boats; Boston Whaler and Trophy offshore
fishing boats; Princecraft fishing, deck and pontoon boats; MotorGuide trolling
motors; Mercury Precision Parts; Quicksilver and Swivl-Eze marine-related
components and accessories; Integrated Dealer Systems, dealer management
systems; MotoTron engine control systems; Northstar marine navigation systems;
Life Fitness, Hammer Strength and ParaBody fitness equipment; Brunswick bowling
products, including capital equipment, parts and supplies; and Brunswick
billiards tables and accessories. The Company also owns and operates Brunswick
bowling centers across the United States and internationally, and Omni Fitness,
a chain of specialty fitness retail stores.

The Company's strategy is to achieve growth by developing innovative
products, identifying and deploying leading-edge technologies, pursuing
aggressive marketing and brand-building activities, enhancing its distribution
channels, seizing international opportunities and leveraging core competencies.
Further, the Company focuses on enhancing its operating margins through
effective cost management and investments in technology. The Company's objective
is to enhance shareholder value by achieving returns on investments that exceed
its cost of capital.

During the fourth quarter of 2002, the Company re-evaluated the composition
of its reportable segments to account for the anticipated divergence in the
future growth trends and economic characteristics of the operating units within
what was formerly known as the Recreation segment. The Company determined that
its reportable segments are Marine Engine, Boat, Fitness and Bowling &
Billiards. The segment information for all periods presented has been
reclassified for consistent presentation.

Sales in 2002 increased 10.1 percent to $3,711.9 million primarily due to
additional growth in the marine engine and exercise equipment businesses and the
incremental sales associated with the acquisitions of boat companies completed
in 2001. Operating earnings increased 2.9 percent to $196.6 million, primarily
attributable to the increase in product sales, the incremental sales associated
with the acquisitions completed in 2001 and cost reduction improvements
partially offset by higher variable compensation and pension costs. See the
MATTERS AFFECTING COMPARABILITY section below.

MATTERS AFFECTING COMPARABILITY

The Company's operating results for 2002 include the operating results of
Teignbridge Propellers, Ltd. (Teignbridge), a manufacturer of custom and
standard propellers and underwater stern gear for inboard-powered vessels;
Monolith Corporation/Integrated Dealer Systems (IDS), a developer of dealer
management systems for dealers of marine products and recreational vehicles; and
Northstar Technologies, Inc. (Northstar), a supplier of premium marine
navigation electronics, from the acquisition dates of February 10, 2002, October
1, 2002, and December 16, 2002, respectively.

The Company's operating results for 2001 include the operating results of
Omni Fitness Equipment Inc. (Omni Fitness), a domestic retailer of fitness
equipment; Princecraft Boats Inc. (Princecraft), a manufacturer of deck and
pontoon boats; Sealine International (Sealine), a leading manufacturer of luxury
sport cruisers and motoryachts; and Hatteras Yachts, Inc. (Hatteras), a leading
manufacturer of luxury sportfishing

17

convertibles and motoryachts, from the acquisition dates of February 28, 2001,
March 7, 2001, July 3, 2001, and November 30, 2001, respectively.

Net earnings per diluted share totaled $0.86 in 2002 compared with net
earnings per diluted share of $0.93 in 2001 and a net loss per diluted share of
$1.08 in 2000. Comparisons of net earnings per diluted share are affected by
changes in accounting principles, unusual charges and discontinued operations,
which are listed below. The effect of these items on diluted earnings per share
is as follows:

There are a number of matters that affect the comparability of results
between 2002, 2001 and 2000. These matters include:

- Change in Accounting Principle: Effective January 1, 2002, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 142 requires that
goodwill and certain other intangible assets deemed to have indefinite
useful lives are no longer amortized but are reviewed annually for
impairment. SFAS No. 142 does not require retroactive restatement for all
periods presented; however, it does require the disclosure of prior year
effects adjusted for the elimination of amortization of goodwill and
indefinite-lived intangible assets. The effect on diluted earnings per
share for the elimination of amortization of goodwill and indefinite-
live intangible assets would have been $0.12 and $0.11 per diluted share
for 2001 and 2000, respectively. In connection with the adoptions of SFAS
No. 142, the Company completed its impairment testing and recorded the
cumulative effect of the change in accounting principle as a one-time,
non-cash charge of $29.8 million pre-tax ($25.1 million after-tax or
$0.28 per diluted share) to reduce its carrying amount of goodwill. Refer
to NOTE 1, SIGNIFICANT ACCOUNTING POLICIES, in the Notes to Consolidated
Financial Statements.

Effective January 1, 2001, the Company adopted SFAS Nos. 133/138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities." Under SFAS Nos. 133/138, all derivative instruments are
recognized on the balance sheet at their fair values. As a result of the
adoption of this standard in 2001, the Company recorded a $4.7 million
loss ($2.9 million after-tax or $0.03 per diluted share) as a cumulative
effect of a change in accounting principle, primarily resulting from
interest rate swaps. Refer to NOTE 8, FINANCIAL INSTRUMENTS, in the Notes
to Consolidated Financial Statements.

- Unusual Charges: In 2000, the Company recorded a $55.1 million charge to
operating earnings ($40.0 million after-tax or $0.45 per diluted share)
to increase environmental reserves related to the cleanup of
contamination from a former manufacturing facility and to account for the
write-down of investments in certain Internet-related businesses. Refer
to NOTE 4, UNUSUAL CHARGES, in the Notes to Consolidated Financial
Statements.

- Discontinued Operations: During 2000, the Company announced its
intention to divest the businesses that comprised the former outdoor
recreation segment. In 2000, losses from the disposition of the
businesses, which were based on estimates, totaled $229.6 million
after-tax, or $2.59 per diluted share. The discontinued operations
generated after-tax losses of $68.4 million in 2000, or $0.77 per diluted
share. See the DISCONTINUED OPERATIONS section for a more detailed
discussion of the operations that were discontinued in 2000.

18

RESULTS OF OPERATIONS

CONSOLIDATED

The following table sets forth certain ratios and relationships calculated
from the consolidated statements of income:

Results for 2000 include a $55.1 million pre-tax unusual charge to
operating earnings ($40.0 million after-tax or $0.45 per diluted share) to
increase environmental reserves related to the cleanup of contamination from a
former manufacturing facility and to account for the write-down of investments
in certain Internet-related businesses. Excluding these items, the amounts are
as follows:

In 2002, net sales increased $341.1 million to $3,711.9 million when
compared with 2001. Excluding acquisitions completed in 2002 and 2001, sales
increased 4.4 percent in 2002. The sales increase, excluding acquisitions, was
mainly attributable to an increase in sales in the Marine Engine, Fitness and
Bowling & Billiards segments partially offset by a decline in sales in the Boat
segment. Marine Engine segment sales increased due to higher domestic outboard
and sterndrive engine sales, improved pricing, and higher revenues from
international markets due in part to favorable currency trends. Fitness segment
sales increased primarily due to higher sales of consumer and commercial fitness
equipment in domestic and international markets. Bowling & Billiards segment
sales increased due to higher volumes of consumer products and after-market
parts and supplies. Boat segment sales, excluding acquisitions, decreased due to
lower sales of larger cruisers and yachts.

International sales increased $145.5 million to $1,004.7 million in 2002
compared with $859.2 million in 2001. The increase in sales was experienced
across all reportable segments. Sales in Europe increased

19

$104.1 million, or 23.2 percent, to $552.1 million, primarily due to the
incremental sales associated with the Sealine acquisition, the benefit of a
weakening dollar that resulted in favorable currency trends in the Marine Engine
and Fitness segments and increased sales of commercial fitness equipment. Marine
engine product sales comprised the largest share of international sales in 2002
and 2001.

In 2001, net sales of $3,370.8 million declined $441.1 million, or 11.6
percent, from 2000. Excluding the boat acquisitions completed in 2001, sales
decreased 14.1 percent for the year-over-year comparison. The reduction in
sales, excluding acquisitions, was experienced across all reportable segments
but was mainly attributed to lower sales in the Boat and Marine Engine segments.
Throughout 2001, weakened market conditions adversely affected domestic marine
sales, particularly small boats and engines. Fitness segment sales benefited
from growth in the fitness equipment business internationally, but was partially
offset by lower sales of consumer and commercial fitness equipment in the United
States. The Bowling & Billiards segment sales were affected by the decrease in
the sales of bowling capital equipment due to the economic recession.

International sales increased $20.8 million to $859.2 million in 2001
compared with $838.4 million in 2000. Sales in Europe increased $15.9 million,
or 3.7 percent, to $448.0 million in 2001, reflecting stronger sales of marine
engine products and fitness equipment, which were partially offset by reduced
sales of boats and bowling capital equipment. Unfavorable currency trends also
adversely affected international revenue comparisons. Marine engine product
sales comprised the largest share of international sales in 2001 and 2000.

Gross margin percentage of 23.2 percent in 2002 was unchanged from 2001. In
2002, gross margin percentages were affected by favorable pricing, cost
reductions and favorable currency trends, offset by a shift to lower-margin
products in the Marine Engine and Boat segments and an increase in variable
compensation and pension costs.

The Company's gross margin percentage decreased 540 basis points to 23.2
percent in 2001 from 28.6 percent in 2000, principally due to the impact of
lower production rates, plant closures and extended shutdowns. Production rates
were cut to bring production in line with demand and reduce the Company's
inventory levels. Gross margins also declined as a result of a shift in sales
mix in the marine businesses toward international markets and lower-margin
products, as well as unfavorable currency trends.

Selling, general and administrative (SG&A) expenses, as a percentage of net
sales, increased 40 basis points to 15.1 percent in 2002 compared with 14.7
percent in 2001. Excluding acquisitions completed in 2002 and 2001, SG&A
expenses as a percentage of net sales were 15.2 percent and 14.7 percent in 2002
and 2001, respectively. The 50 basis point increase in SG&A expenses compared
with 2001 is a result of higher variable compensation, pension and insurance
costs.

SG&A expenses, as a percentage of net sales, increased 70 basis points to
14.7 percent in 2001 compared with 14.0 percent in 2000. SG&A expenses increased
due to the Company's overall reduction in sales, offset by cost-containment
efforts, including workforce reductions, hiring and wage freezes, and reductions
in performance-based compensation, as well as a $10.6 million gain on the sale
of a testing facility.

Operating earnings in 2002 totaled $196.6 million versus $191.1 million in
2001 and $397.1 million in 2000. Operating earnings in 2000 included the
previously mentioned $55.1 million pre-tax unusual charge. Excluding this
charge, operating earnings were $452.2 million in 2000. Operating margins,
excluding unusual charges, were 5.3 percent in 2002, 5.7 percent in 2001 and
11.9 percent in 2000. The decline in operating margins between 2002 and 2001 was
mainly due to higher SG&A expenses, as a percentage of net sales, partially
offset by increased leverage from higher product sales and the elimination of
amortization of goodwill and indefinite-lived intangible assets as a result of
the adoption of SFAS No. 142.

Interest expense was $43.3 million in 2002, $52.9 million in 2001 and $67.6
million in 2000. The decrease in 2002 and 2001 was primarily attributable to a
decline in the average outstanding debt levels and a lower interest rate
environment. The weighted-average interest rate on short-term borrowings was
2.45 percent in 2002, 4.76 percent in 2001 and 6.58 percent in 2000.

Other income totaled $8.3 million in 2002 compared with other expense of
$6.0 million and $6.2 million in 2001 and 2000, respectively. The increase in
other income in 2002 compared with other expense in 2001 is

20

due to improved results from joint venture investments and favorable currency
adjustments from a weakening U.S. dollar. Contributing to the other expenses in
2001 and 2000 were joint venture losses, the write-down of certain investments,
unfavorable currency adjustments and start-up costs incurred in 2000 in
connection with an equity investment.

The Company's effective tax rate was 36.0 percent in 2002, 36.0 percent in
2001 and 37.5 percent in 2000. Excluding the 2000 unusual charge, the effective
tax rate was 36.0 percent in all three years.

Average common shares outstanding used to calculate diluted earnings per
share were 90.7 million, 88.1 million and 88.7 million in 2002, 2001 and 2000,
respectively. The increase in average shares outstanding in 2002 was due
primarily to the effects of stock options exercised, as well as an increase in
common stock equivalents related to unexercised employee stock options driven by
an increase in the Company's average stock price. The decrease in average shares
outstanding in 2001 compared to 2000 was primarily due to the share repurchase
program that was principally completed in the first half of 2000. See the CASH
FLOW, LIQUIDITY AND CAPITAL RESOURCES section below for additional discussion of
share repurchase program activity.

MARINE ENGINE SEGMENT

The following table sets forth Marine Engine segment results:

Marine Engine segment sales increased $143.6 million, or 9.2 percent, to
$1,705.2 million in 2002, compared with 2001. The increase in sales was
primarily due to an increase in unit shipments of sterndrive and outboard
engines in the domestic market. These higher shipments in 2002 were largely due
to a change in the rate at which dealers and boatbuilders adjusted their engine
inventories, rather than higher retail sales. In 2001, dealers and boatbuilders
significantly reduced their wholesale purchases to lower their inventory levels.
Reductions in dealer and boatbuilder inventories during 2002 occurred at a much
lower rate. Improved pricing in the domestic market, increased parts and
accessories sales, and an increase in international sales, due in part to
favorable currency trends from a weakening U.S. dollar, also helped drive sales
growth in the Marine Engine segment in 2002.

Operating earnings for the segment decreased $2.1 million, or 1.2 percent,
to $170.9 million in 2002, compared with 2001. Operating margins as a percentage
of sales fell 110 basis points to 10.0 percent when compared with 2001. The
decline in operating earnings and margins in 2002 was primarily due to higher
variable compensation, pension and insurance costs, and a change in the mix of
product sold toward low-emission two-stroke and four-stroke outboard engines,
which carry lower profit margins. Increased SG&A expenses associated with the
formation and operation of Brunswick New Technologies, which is included in the
Marine Engine segment, also reduced operating earnings. Items partially
offsetting these unfavorable trends include the increase in sales in 2002,
improved pricing and favorable currency trends from a weakening U.S. dollar.

Marine Engine segment sales declined 11.3 percent to $1,561.6 million in
2001 compared with 2000, primarily due to weak U.S. market conditions,
especially for small boats. Domestic retail sales of sterndrive and outboard
engines declined compared with the prior year due to a weakening economy. As
discussed above, efforts by dealers and boatbuilders to reduce their inventory
levels in 2001 also contributed to the decline in wholesale shipments.
International sales were up 13.3 percent for the year, despite adverse currency

21

fluctuations, reflecting more favorable economic conditions than in the domestic
market and increased market share, due in part to the bankruptcy of a
competitor.

In 2001, operating earnings for the segment decreased to $173.0 million
from $276.0 million, and operating margins fell 460 basis points to 11.1
percent, compared with 2000. Lower shipments combined with the lower absorption
of fixed costs from reduced production rates and extended plant shutdowns were
the primary driver for this decline in operating earnings. An unfavorable shift
in sales mix from higher-margin sterndrive engines to lower-margin outboard
engines, along with an increase in lower margin international sales, also
accounted for some of the margin pressure. Benefits from cost-containment
efforts, including reductions in performance based incentives and a reduction in
salaried headcount, partially mitigated these factors.

BOAT SEGMENT

The following table sets forth Boat segment results:

Sales in the Boat segment increased $154.0 million, or 12.3 percent, to
$1,405.3 million in 2002 compared with 2001. The increase in sales was primarily
due to a full year of sales from the acquisitions of Princecraft, Sealine and
Hatteras, which were completed in 2001. Excluding these acquisitions, sales
declined 2.0 percent. This sales decline was driven by weak retail demand, most
notably for larger cruisers and yachts. In addition, boat dealers continued to
lower their inventories, further reducing wholesale demand for the Boat
segment's products.

Boat segment operating earnings increased $0.9 million to $19.0 million
compared with 2001. Earnings contributions from acquisitions completed in 2001
and a reduction in operating losses from the Boat segment's US Marine division,
discussed below, were largely offset by the reduction in sales of larger
cruisers and yachts in 2002. Operating margins in 2002 were adversely affected
by the mix shift toward smaller boats, which carry lower margins.

In 2001, Boat segment sales totaled $1,251.3 million, a decrease of 20.5
percent from 2000. Excluding the acquisition of Princecraft, Sealine and
Hatteras, sales declined 24.3 percent. Significantly reduced retail demand for
smaller boats was a leading cause of the decline, although demand for larger
cruisers and yachts also weakened in the second half of the year. As retail
sales of boats weakened, dealers started to lower their own inventories, further
reducing wholesale demand.

Boat segment operating earnings totaled $18.1 million in 2001, declining
$130.1 million from the prior year. Operating margins also declined, falling 800
basis points to 1.4 percent in 2001. The decline in operating earnings was
primarily attributable to reduced sales and the operating losses experienced at
the Company's US Marine division. Reduced absorption of fixed costs due to lower
production and temporary shutdowns at the boat plants also impacted operating
earnings. A portion of the operating earnings decline was offset by efforts to
enhance operating effectiveness, as well as reduced costs and decreased
headcount.

The overall performance of the Boat Segment was adversely affected in both
2002 and 2001 by operations at the Company's US Marine division, which
manufactures Bayliner, Maxum and Meridian pleasure boats and Trophy offshore
fishing boats. Operating losses for the division were $29.0 million and $37.3
million for the years ended 2002 and 2001, respectively, compared with operating
earnings of $38.0 million in 2000. In 2002 and 2001, losses at US Marine were
primarily due to sales reductions, operating inefficiencies associated

22

with shifting boat production from five facilities closed throughout 2001 to
remaining manufacturing plants, the launch of the Meridian yacht brand, and the
start up of a new plant in Mexico to manufacture small boats. The decrease in
the operating loss for 2002 is due to reduced discounting and higher sales.

FITNESS SEGMENT

The following table sets forth Fitness segment results:

In 2002, Fitness segment sales increased 14.8 percent to $456.7 million
compared with 2001. Domestic sales increased 18.3 percent in 2002 compared with
2001. This increase was primarily due to increased commercial sales to health
club chains, governmental agencies and the military, as well as increased sales
of consumer products. International sales increased 9.8 percent in 2002 compared
with 2001, driven by higher commercial fitness equipment sales into Europe and
the benefit of favorable currency trends from a weakening U.S. dollar. Both
domestic and international business benefited from share gains attributable in
part to the success of new product launches in treadmills, cross trainers, and
stationary bikes.

Fitness segment operating earnings increased 58.1 percent to $44.9 million
in 2002 relative to 2001, and operating margins increased 270 basis points to
9.8 percent. Operating earnings increased primarily due to the impact of higher
sales and the elimination of amortization of goodwill and indefinite-lived
intangible assets as a result of the adoption of SFAS No. 142, partially offset
by higher variable compensation expenses.

In 2001, Fitness segment sales increased 14.2 percent to $397.7 million
compared with 2000. Domestic sales increased 8.8 percent in 2001 compared with
2000, primarily due to the acquisition of Omni Fitness, a specialty fitness
equipment retailer. Excluding the acquisition of Omni Fitness, domestic sales
decreased 7.6 percent. This decrease was a result of reduced sales of consumer
and commercial products as health club chains delayed expansion and upgrade
projects due to the weakening economy. International sales increased 23.2
percent in 2001 compared with 2000. This increase related primarily to improved
sales of commercial and consumer products despite adverse currency fluctuations.

The Fitness segment reported operating earnings of $28.4 million in 2001
compared with $31.2 million in 2000. Operating margins declined 190 basis points
to 7.1 percent in 2001. The reduction in operating earnings reflected the lower
absorption of fixed costs that resulted from temporary plant shutdowns necessary
to adjust production rates. Increased distribution expenses, higher warranty
costs and adverse foreign currency trends also contributed to lower operating
earnings, but these factors were partially mitigated by other cost-containment
efforts. In addition, Omni Fitness, whose results are included after the
acquisition on February 28, 2001, reported a slight operating loss for the year.

23

BOWLING & BILLIARDS SEGMENT

The following table sets forth Bowling & Billiards segment results:

In 2002, Bowling & Billiards segment sales increased 2.6 percent to $377.7
million compared with 2001. Sales of bowling products increased 3.5 percent in
2002 due to improved volumes in consumer products and after-market parts and
supplies, and favorable pricing associated with capital equipment. Sales of
billiards tables and accessories increased 8.9 percent in 2002 largely due to
market share gains. Sales at bowling retail centers were essentially flat
between 2002 and 2001.

Operating earnings for the Bowling & Billiards segment increased $14.1
million in 2002 to $21.4 million, and operating margins increased 370 basis
points to 5.7 percent. The increase in operating earnings primarily related to
the segment's bowling products business. Key drivers included significant
efforts to reduce costs through global sourcing initiatives, and headcount and
other expense reductions, as well as reduced bad debt expense from the level
seen in 2001.

In 2001, Bowling & Billiards segment sales decreased 12.9 percent to $368.1
million compared with 2000. Retail bowling center results were flat between 2001
and 2000. Billiards sales were modestly higher comparing 2001 with 2000. Bowling
product sales, including capital equipment, balls, supplies and other
accessories, declined due to a reduction in demand as bowling center proprietors
deferred investments in new lane packages and upgrades of existing facilities as
a result of the recession in both domestic and international markets. Sales of
bowling equipment were also down as a result of supply chain efforts to reduce
wholesale inventories.

The Bowling & Billiards segment reported operating earnings of $7.3 million
in 2001 compared with $41.9 million in 2000. Operating margins declined 790
basis points to 2.0 percent for 2001. Operating earnings declined in 2001
compared with 2000 due to the decline in sales volume, lower absorption of fixed
costs due to lower production, increased bad debt expenses associated with the
weakened international economy, and severance expenses from a workforce
reduction, as well as reduced gains related to the divestiture of certain retail
bowling centers.

DISCONTINUED OPERATIONS

During 2000, the Company announced its intention to divest the following
businesses that comprised its former outdoor recreation segment: fishing,
camping, bicycle, cooler, hunting sports accessories and marine accessories.
These businesses have been accounted for as discontinued operations and the
consolidated financial statements for all periods have been restated to present
these businesses as discontinued operations in accordance with APB Opinion No.
30.

The Company substantially completed the disposal of its discontinued
operations as of December 31, 2001. The sale of the hunting sports accessories,
cooler and North American fishing businesses was completed in 2001, and the sale
of the bicycle and camping businesses was completed in 2000. Cash generated from
these dispositions, including cash proceeds, net of costs to sell, cash required
to fund operations through disposition and related tax benefits realized in
connection with the divestitures, was approximately $275 million after-tax
through December 31, 2001. On December 31, 2002, the Company decided to retain
its marine accessories businesses after efforts to sell these operations proved
unsuccessful. The financial results of these businesses,

24

operating under the brand names MotorGuide, Pinpoint and Swivl-Eze, were not
material to the Company's consolidated financial statements.

Discontinued operations experienced losses of $68.4 million in 2000. Losses
from discontinued operations included the results of operations from the cooler,
hunting sports accessories and marine accessories businesses through September
30, 2000, and from the fishing, camping and bicycle businesses through June 30,
2000. Losses relating to these businesses subsequent to these dates were
estimated and provided for in the loss on the disposition of these businesses.

The 2000 loss from discontinued operations of $68.4 million included the
write-off of goodwill and other long-term assets related to the camping business
($76.0 million pre-tax, $50.0 million after-tax) that was recorded in the second
quarter of 2000. The write-off was necessary as the Company determined that
additional actions would not improve operating performance to levels sufficient
to recover its investment in these assets. Also included were asset write-downs
and restructuring costs, consisting primarily of severance in the fishing and
camping businesses, necessitated by a change in business conditions and the
decision to outsource the manufacture of fishing reels that were previously
produced in-house.

The loss from disposal recorded in 2000 totaled $305.3 million pre-tax and
$229.6 million after-tax. The losses associated with the disposition of these
businesses were based on an estimate of cash proceeds, net of costs to sell,
along with an estimate of results of operations for these businesses from the
date the decision was made to dispose of the businesses through the actual
disposition date. The tax benefits associated with the disposal reflect the
non-deductibility of losses on the sale of the cooler business.

CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth an analysis of cash flow for the years ended
December 31, 2002, 2001 and 2000 (in millions):

* EBITDA is defined as net earnings, adjusted for the effect of changes in
accounting principles, unusual charges and discontinued operations (as
previously described), and before interest, taxes, depreciation and
amortization. EBITDA is presented to assist in the analysis of cash from
operations. However, it is not intended as an alternative measure of
operating results or cash flow from operations, as determined in accordance
with generally accepted accounting principles.

** Comprised principally of capital expenditures and excludes acquisition and
disposition activities.

*** Free cash flow is defined as cash flow from operating and investing
activities of continuing operations, excluding acquisition, disposition and
financing activities.

The Company's major sources of funds for investments and dividend payments
are cash generated from operating activities, available cash balances and
selected borrowings.

Net cash provided by operating activities of continuing operations totaled
$413.0 million in 2002 compared with $299.3 million in 2001 and $251.0 million
in 2000. The $113.7 million increase in net cash provided by operating
activities of continuing operations in 2002 versus the prior year was generated

25

principally from a decrease in working capital. Cash provided from operating
activities included changes in working capital that generated cash of $90.8
million in 2002 compared with a use of cash of $10.9 million and $163.2 million
in 2001 and 2000, respectively.

The change in working capital was the result of an increase in accounts
payable and accrued expenses, as well as a reduction in inventories. Accounts
payable increased to $291.2 million at December 31, 2002, from $214.5 million at
December 31, 2001, which can be attributed to the increased production levels in
the fourth quarter of 2002 compared with 2001, as well as efforts to improve
cash management. Accrued expenses increased to $685.5 million in 2002 from
$648.2 million in 2001, as a result of recording accruals for variable
compensation plans in 2002, whereas the Company did not accrue any significant
bonuses based on 2001 performance. Inventories, excluding acquisitions,
decreased $35.1 million in 2002 compared with 2001. The decrease in inventories
was driven primarily by the Boat segment's inventory reduction program.