10-K 1 form10_k.htm FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________

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, 2005, or
[   ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission file number 1-1043
_______________
 
Brunswick Logo
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:

 
Title of each class 
  
Name of each exchange
on which registered 
Common Stock ($0.75 par value)
  
New York, Chicago, Pacific
Preferred Stock Purchase Rights
  
and London Stock Exchanges

Securities registered Pursuant to Section 12(g) of the Act:
None
______________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
 
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. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [X] Accelerated filer [   ] Non-accelerated filer [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of July 1, 2005, the aggregate market value of the voting stock of the registrant held by non-affiliates was $4,282,184,888. 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 February 24, 2006, was 95,021,811.

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 of Shareholders scheduled to be held on May 3, 2006.
 
ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

 
 
Page 
Part I
    
Item 1.
Business
1
Item 1A.
Risk Factors
8
Item 1B.
Unresolved Staff Comments
10
Item 2.
Properties
10
Item 3.
Legal Proceedings
11
Item 4.
Submission of Matters to a Vote of Security Holders
12
     
Part II
    
Item 5.
Market for Registrant’s Common Equity, Related Stockholder
  
 
Matters and Issuer Purchases of Equity Securities
14
Item 6.
Selected Financial Data
15
Item 7.
Management’s Discussion and Analysis of Financial Condition
  
 
and Results of Operations
17
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
35
Item 8.
Financial Statements and Supplementary Data
37
Item 9.
Changes in and Disagreements with Accountants on Accounting
 
 
and Financial Disclosure
37
Item 9A.
Controls and Procedures
37
     
Part III
    
Item 10.
Directors and Executive Officers of the Registrant
38
Item 11.
Executive Compensation
38
Item 12.
Security Ownership of Certain Beneficial Owners and
  
 
Management and Related Stockholder Matters
38
Item 13.
Certain Relationships and Related Transactions
38
Item 14.
Principal Accountant Fees and Services
38
     
Part IV
    
Item 15.
Exhibits and Financial Statement Schedules
39
 
PART I

Item 1. Business

Brunswick Corporation (the Company) is a leading global manufacturer and marketer of boats, including fiberglass pleasure boats; luxury sportfishing convertibles and motoryachts; high-performance boats; offshore fishing boats; aluminum fishing, deck and pontoon boats; rigid inflatable boats; and marine parts and accessories; of outboard, sterndrive and inboard engines; trolling motors; propellers; marine dealer management systems; engine control systems; global positioning systems products and marine electronics and navigation systems; of fitness equipment; and of bowling products, including capital equipment and consumer products; billiards tables and accessories; and Air Hockey and foosball tables. The Company also owns and operates Brunswick bowling centers in the United States and internationally, and retail billiards stores in the United States.

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, improving the efficiency of its supply chain and leveraging core competencies. In addition, growth will come from expansion of existing businesses and from acquisitions. 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.

See Note 4. Segment Information in the Notes to Consolidated Financial Statements for additional information, including operating earnings and total assets by segment for 2005, 2004 and 2003.

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, pontoon and deck boats, and manufactures and distributes marine parts and accessories. The Company believes its Boat Group, which had net sales of $2,769.8 million during 2005, has the largest dollar sales and unit volume of pleasure boats in the world.

The Boat Group manages most of the Company’s boat brands, evaluates and increases the Company’s boat portfolio by acquiring recreational boat companies that serve product segments in which the Company is not participating, expands the Company’s involvement in recreational boating services and activities to enhance the consumer experience and dealer profitability, speeds the introduction of new technologies into boat manufacturing processes and the Company’s boat products, and leverages the Company’s extensive knowledge and involvement in boat design, manufacturing and distribution.

The Boat Group is headquartered in Knoxville, Tennessee, and is comprised of the following boat brands: Albemarle, Cabo and Hatteras luxury sportfishing convertibles and motoryachts; Sea Ray and Sealine yachts, sport yachts, cruisers and runabouts; Bayliner and Maxum cruisers and runabouts; Meridian motoryachts; Boston Whaler, Sea Pro, Sea Boss, Palmetto, Triton and Trophy fishing boats; Baja high-performance boats; and Crestliner, Harris, Kayot, Lowe, Lund and Princecraft aluminum fishing, pontoon and deck 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. The Boat Group procures most of its outboard engines, gasoline sterndrive engines and gasoline inboard engines from the Company’s Marine Engine segment.  The Boat Group also purchases a portion of its diesel engines from Cummins MerCruiser Diesel Marine LLC (CMD), a joint venture of the Company’s Mercury Marine division with Cummins Marine, a division of Cummins Inc.

The Boat Group has manufacturing facilities in California, Florida, Indiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, North Carolina, Ohio, Oregon, South Carolina, Tennessee and Washington, as well as international manufacturing facilities in Canada, Mexico and the United Kingdom. The Boat Group also utilizes contract manufacturing facilities in Eastern Europe. In 2005, the Company acquired a facility to manufacture sportfishing convertibles and motoryachts in Swansboro, North Carolina. Since 2002, the Company has been manufacturing entry-level runabouts at a new facility in Reynosa, Mexico. In 2005, the Company expanded this facility, which doubled its capacity, allowing the Company to increase production of its Bayliner and Maxum runabouts. Also in 2005, the Company expanded its Vonore, Tennessee, facility to increase capacity for its closed-mold operations. Closed molding is an improved manufacturing process that limits emissions more effectively when compared with the traditional open mold process, allows for increased capacity and produces more precise and consistent fiberglass parts, hulls and decks.
 
1
In 2005, the Company purchased the Albemarle, Triton, Harris and Kayot boat brands. Albemarle produces offshore sportfishing boats ranging in length from 24 to 41 feet. The acquisition of Albemarle provides the Company with the opportunity to offer a more complete range of offshore sportfishing boats and complements the sportfishing convertibles offered by Hatteras, where products start at 50 feet. Triton is a manufacturer of fiberglass bass and saltwater fishing boats, and aluminum fishing boats ranging in length from 12 to 35 feet. The acquisition of Triton adds bass boats to the Company’s product lineup, as well as a broader range of saltwater fishing and aluminum fishing boats. The acquisition of Harris Kayot, a builder of pontoon boats, fiberglass runabouts and deckboats ranging in length from 20 to 26 feet, will advance the Company’s position in the pontoon market and complement the Company’s existing boat portfolio with premium runabout and deckboat product lines.
 
The Company’s 2003 acquisitions of Land ‘N’ Sea Corporation (a marine parts and accessories distributor) and Attwood Corporation (a manufacturer of marine hardware and accessories) form the backbone of the Company’s initiative to develop its boat parts and accessories business to better serve boat dealers and consumers. In 2005, the Company purchased Kellogg Marine, a leading marine parts and accessories dealer in the northeastern United States, and certain assets of Benrock, Inc., a distributor of marine parts serving the central and southern United States markets. Working with its boat dealer network, the Company will continue to strive to improve quality, distribution and delivery of parts and accessories to enhance the boating customers’ experience.

In February 2006, the Company purchased Cabo Yachts, which builds offshore sportfishing boats ranging in length from 31 to 52 feet. The acquisition of Cabo complements the Company’s previous acquisitions of Albemarle and Hatteras. Also in February 2006, the Company acquired Great American Marina, a 95-slip marina near St. Petersburg, Florida, in partnership with MarineMax, Inc. (MarineMax), which will operate the service portion of the property.

The Boat Group’s products are sold to end users through a global network of approximately 2,300 dealers and distributors, each of which carries one or more of the Company’s boat brands. Sales to the Boat Group’s largest dealer, MarineMax, which has multiple locations and carries a number of the Boat Group’s product lines, represented approximately 18 percent of Boat Group sales in 2005.

Domestic retail demand for pleasure boats is seasonal, with sales generally highest in the second quarter.

Marine Engine Segment

The Marine Engine segment, which had net sales of $2,638.7 million in 2005, 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 sterndrive engines, inboard engines, outboard engines and water-jet propulsion systems under the Mercury, Mercury MerCruiser, Mariner, Mercury Racing, Mercury SportJet and Mercury Jet Drive brand names. Mercury Marine’s sterndrives, inboard engines, water-jet propulsion systems and a substantial number of its outboard engines are sold either to independent boatbuilders or to the Company’s Brunswick Boat Group. In addition, Mercury Marine’s outboard engines and parts and accessories, including marine electronics and control integration systems, steering systems, instruments, controls, propellers, trolling motors, service aids and marine lubricants, are sold to end-users through a global network of approximately 7,000 marine dealers and distributors, specialty marine retailers and marine service centers. Mercury Marine, through CMD, supplies integrated diesel propulsion systems to the worldwide recreational and commercial marine markets, including the Brunswick Boat Group.

Mercury Marine manufactures two-stroke OptiMax outboard engines, ranging from 75 to 250 horsepower, all of which feature Mercury’s direct fuel injection (DFI) technology. DFI is part of Mercury’s plan to comply with U.S. Environmental Protection Agency (EPA) requirements and reduce outboard engine emissions by 75 percent over a nine-year period, beginning with the 1998 model year and ending with the 2006 model year. Mercury’s product line of low-emission engines includes four-stroke outboard engine models ranging from 2.5 to 275 horsepower. In 2004, Mercury Marine introduced Verado, a new series of high-horsepower outboard engines to complement its existing four-stroke product line. Mercury currently offers Verado engines ranging from 135 to 275 horsepower, and introduced naturally aspirated 75, 90 and 115 horsepower outboard engines based on Verado technology in February 2006. Mercury’s OptiMax and four-stroke outboards already achieve the EPA’s mandated 2006 emission levels.

Mercury Marine’s sterndrive and outboard engines are produced primarily in Oklahoma and Wisconsin, respectively. Certain small outboard engines are manufactured in Japan by a Mercury Marine joint venture. Mercury and its joint venture partner, Tohatsu Corporation, expanded this manufacturing facility in 2004, completing a new plant that began production in early 2005. Mercury opened a new four-stroke engine plant in Suzhou, China in March 2005 that will produce 40 to 60 horsepower outboard engines when fully operational.  In addition, Mercury Marine sources some engine components from Asian suppliers. Mercury Marine also manufactures engine component parts at plants in Florida and Mexico, and has a facility in Belgium that customizes engines for sale into Europe. Diesel marine propulsion systems are manufactured in South Carolina by CMD.

2
 
In addition to its marine engine operations, Mercury Marine offers international markets a wide range of aluminum, fiberglass and inflatable boats produced either by, or for, Mercury in Australia, China, Poland, Portugal, Russia and Sweden. These boats, which are marketed under the brand names Armor, Arvor, Bermuda, Legend, Mercury, Örnvik, 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. In January 2006, the Company began manufacturing boats at a new facility in Zhuhai, China, that the Company has established initially to serve the Asia-Pacific region. Mercury Marine also has equity ownership interests in companies that manufacture boats under the brand names Aquador, Bella and Flipper in Finland; Askeladden in Norway; and Legend, Protector and Rayglass in New Zealand. Mercury Marine also manufactures custom and standard propellers and underwater stern gear for inboard-powered vessels, under the name Teignbridge, in the United Kingdom.

The Company established Brunswick New Technologies (BNT) during 2002 to develop 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. BNT is comprised of Navman, a New Zealand-based producer of global positioning systems-based products and marine electronics; MotoTron, which leverages the Company’s expertise in engine controls to non-marine markets; BNT Marine Electronics, a leader in premium aftermarket and commercial marine navigation electronics sold under the Northstar, Navman and MX Marine brands; Monolith Corporation/Integrated Dealer Systems, a leading developer of management systems for dealers of marine products and recreational vehicles; and BNT Asia, a development center focusing on wireless and embedded sensor technologies for applications primarily in the sports and wellness markets. In 2005, the Company purchased certain assets of MX Marine, a manufacturer of global-positioning systems, navigation systems and other marine electronics for the commercial market, and the stock of TechArt, a German provider of customized aftermarket infotainment products to the automotive industry.

Domestic retail demand for the Marine Engine segment’s products is seasonal, with sales generally highest in the second quarter for Mercury Marine and the fourth quarter for BNT.

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 its Fitness segment, which had net sales of $551.3 million during 2005, 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 to customers either directly, through domestic dealers or through international distributors.

The Fitness segment’s principal manufacturing facilities are located in Illinois, Kentucky, Minnesota and Hungary.

During 2005, Life Fitness introduced a number of new fitness products, including new commercial or consumer elliptical cross trainers, treadmills, stationary bikes and home gym products, as well as additional commercial selectorized and core strength training equipment.

The Company distributes fitness products worldwide from regional warehouses and factory stocks of merchandise.
 
Domestic retail demand for Life Fitness' products is seasonal, with sales generally highest in the first and fourth quarters.

Bowling & Billiards Segment

The Bowling & Billiards segment is comprised of the Brunswick Bowling & Billiards division (BB&B), which had net sales of $464.5 million during 2005. BB&B is the leading full-line designer and producer of bowling products, including bowling balls and bowling pins, aftermarket products and parts, and capital equipment, which includes bowling lanes and related equipment, automatic pinsetters, ball returns, furniture units, and scoring and center management systems. Through licensing arrangements, BB&B also offers an array of bowling consumer products, including bowling shoes, bags and accessories. BB&B also designs, manufactures and markets a full line of high-quality consumer and commercial billiards tables, Air Hockey table games, foosball tables and related accessories.

3
 
BB&B operates 113 bowling centers in the United States, Canada and Europe, and with its joint venture partner operates 15 additional centers in Japan. These bowling centers offer bowling and, depending on size and location, the following activities and services: billiards, video games, pro shops, meeting and party rooms, 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. To date, 46 of BB&B’s centers have been converted into Brunswick Zones, which are 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 broad audience, including families and other recreational bowlers, as well as traditional league bowlers. In 2005 and 2004, BB&B further enhanced the Brunswick Zone concept with the opening of three additional showcase Brunswick Zones in the Chicago, Denver and Minneapolis markets. Brunswick’s four showcase Brunswick Zones are approximately 50 percent larger than typical Brunswick Zones and feature multiple-venue entertainment offerings such as laser tag games and expanded game rooms. BB&B intends to continue to use this enhanced model for many of its new centers.

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, balls and cues, as well as billiards furniture and related accessories, under the Brunswick and Contender by Brunswick brands. These products are sold worldwide into both commercial and consumer billiards markets. The Company also owns Valley-Dynamo, a leading manufacturer of commercial and consumer billiards, Air Hockey table games and foosball tables. The Company believes it has the largest dollar sales volume of billiards tables in the world. In 2003, BB&B opened Brunswick Home & Billiard, its first retail store, in a northern suburb of Chicago, and, in 2005, BB&B expanded this concept by opening three new stores in the Boston and Denver markets. These stores feature billiards products and other products for the home, and utilize marketing and merchandising concepts targeted to both women and men. Brunswick Home & Billiard provides opportunities to enhance the retail experience of billiards customers and to share those learnings with BB&B’s retail billiards dealers nationwide. Additional stores are planned for 2006.

BB&B’s primary manufacturing and distribution locations are in Michigan, Texas, Wisconsin and Hungary. In June 2005, the Company announced plans to move bowling ball production from Muskegon, Michigan, to Reynosa, Mexico, where the Company expects to begin production in late 2006.

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.
 
Domestic retail demand for BB&B's products is seasonal, with sales generally highest in the first and fourth quarters.

Financial Services

The Company has a 49 percent ownership interest in a joint venture, Brunswick Acceptance Company, LLC (BAC) with GE Commercial Finance, which provides secured wholesale floor-plan financing to the Company’s boat and engine dealers. BAC also purchases and services a portion of Mercury Marine’s domestic accounts receivable relating to its boatbuilder and dealer customers. See Note 7. Financial Services in the Notes to Consolidated Financial Statements for more information about BAC.

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 7,000 Dealers serving its business segments worldwide. The Company’s marine Dealers typically carry boats, engines and related parts and accessories.

The Company’s Dealers are independent companies or 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 competitors’ products.

In 2005, the Company sold its minority interest in MarineMax, the Boat Group’s largest dealer, which has multiple locations and carries a number of the Boat Group’s product lines, as part of a registered public offering by MarineMax. See Note 6. Investments in the Notes to Consolidated Financial Statements for more information about the sale of this investment.

4
The Company owns Land ‘N’ Sea and Kellogg Marine, parts and accessories distribution platforms for the Brunswick Boat Group. The Boat Group, with 19 distribution centers throughout North America, is the largest wholesale distributor of marine parts and accessories in the world and provides the ability to move parts quickly and accurately to dealers, repair shops and the do-it-yourself consumer.
 
Demand for a significant portion of the Company’s products is seasonal, and a number of the Company’s Dealers are relatively small or often highly leveraged. As a result, many of the Company’s Dealers require financial assistance to support their business and provide a stable channel for the Company’s products. In addition to BAC, the Company provides its Dealers with assistance, including incentive programs, loans, loan guarantees and inventory repurchase commitments, under which the Company is obligated to repurchase inventory from a finance company in the event of a Dealer’s default. The Company believes that these arrangements are in the Company’s best interest, but its financial support of its Dealers does expose the Company to credit and business risk. 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 9. Commitments and Contingencies in the Notes to Consolidated Financial Statements for further discussion of these arrangements.

International Operations

The Company’s sales to customers in international markets were $2,049.2 million (35 percent of net sales) and $1,689.2 million (32 percent of net sales) in 2005 and 2004, respectively. The Company transacts most of its sales in international markets in local currencies, and the costs of its products are generally denominated in U.S. dollars. Future strengthening or weakening of the U.S. dollar can affect the revenues of the Company’s international operations.

The Company’s international sales are set forth in Note 4. Segment 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 2005, 2004 and 2003:

   
2005
  
2004
  
2003
  
(In millions)
              
Europe
  
$
1,154.3
  
$
945.5
  
$
700.4
  
Pacific Rim
    
372.6
    
313.1
    
220.7
  
Canada
    
312.3
    
273.8
    
200.5
  
Latin America
    
134.6
    
102.0
    
79.2
  
Other
    
75.4
    
54.8
    
41.4
  
                     
   
$
2,049.2
  
$
1,689.2
  
$
1,242.2
  

Boat segment sales comprised approximately 29 percent of the Company’s total international sales in 2005. The Boat Group’s products are manufactured or assembled in the United States, Canada, Mexico, Poland and the United Kingdom, and are sold worldwide through dealers.  The Boat Group has international sales offices in France and the Netherlands.

Marine Engine segment sales represented approximately 52 percent of the Company’s total international sales in 2005. The segment’s primary international operations include the following:
 
–  
A marine engine product customization plant and distribution center in Belgium serving Europe, Africa and the Middle East;
 
–  
A propeller and underwater stern-gear manufacturing plant in the 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, Italy, the Netherlands, Norway, Sweden, Switzerland and the United Kingdom;
 
–  
Boat manufacturing plants in Australia, China, Portugal and Sweden;
 
–  
A research and development office in Singapore and New Zealand and a manufacturing plant in New Zealand;
 
–  
An outboard engine assembly plant in Suzhou, China; and
 
–  
A marina-boat club in Suzhou, China, on Lake Tai.
 
Fitness segment sales comprised approximately 12 percent of the Company’s total international sales in 2005. 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. The Fitness segment also manufactures strength training equipment and select lines of cardiovascular equipment in Hungary for the European market.

5
Bowling & Billiards segment sales comprised approximately 7 percent of the Company’s total international sales in 2005. BB&B sells its products worldwide, has sales offices in Germany, Hong Kong and the United Kingdom, and has a plant that manufactures pinsetters in Hungary. BB&B expects its Reynosa, Mexico, bowling ball plant to begin operations in late 2006. 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

The Company purchases raw materials from various sources. The Company is not currently experiencing any critical raw material shortages, nor does the Company anticipate any. General Motors Corporation is the sole supplier of engine blocks used in the manufacture of the Company’s gasoline sterndrive and inboard engines.  The Company has experienced increases in the cost of aluminum, steel and resins used in its manufacturing processes during 2005.  The Company continues to expand its global procurement operations to leverage the Company’s purchasing power across its divisions and improve supply chain and cost efficiencies.

Intellectual Property

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. The Company believes that its patent rights are important to its competitive position.

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 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; fuel and oil injection systems; supercharged engines; outboard mid-section structures; segmented cowls; hydraulic trim, tilt and steering; screw compressor charge air cooling systems; and airflow silencers. The patent rights of the Marine Engine segment also relate to electronic devices that utilize global positioning system technology.

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.

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

The following are among the Company’s primary trademarks:

Boat Segment: Albemarle, Attwood, Baja, Bayliner, Boston Whaler, Crestliner, Harris, Hatteras, Kayot, Kellogg, Land ‘N’ Sea, Lowe, Lund, Master Dealer, Maxum, Meridian, Palmetto, Princecraft, Sea Boss, Sea Pro, Sea Ray, Seachoice, Sealine, Swivl-Eze, Triton and Trophy.

Marine Engine Segment: Integrated Dealer Systems, Mariner, MercNet, MerCruiser, Mercury, MercuryCare, Mercury Marine, Mercury Parts Express, Mercury Precision Parts, Mercury Propellers, Mercury Racing, MotorGuide, MotoTron, MX Marine, Navman, Northstar, OptiMax, Pinpoint, Quicksilver, SeaPro, SmartCraft, SportJet, Teignbridge Propellers, Valiant and Verado.

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

Bowling & Billiards Segment: Air Hockey, Anvilane Pro Lane, Brunswick, Brunswick Billiards, Brunswick Pavilion, Brunswick Zone, Centennial, Contender by Brunswick, Cosmic Bowling, DBA Products, Dynamo, Gold Crown, Inferno, Lane Shield, Lightworx, Throbot, Tornado, U.S. Play by Brunswick, Valley, Vector, Viz-A-Ball, Zone and Brunswick Home and Billiard.
 
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.

6
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; effective marketing, advertising and sales efforts; providing high-quality products at competitive prices; and offering extensive after-market services.
 
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:

Boat Segment: The Company believes it has the largest dollar sales and unit volume of pleasure boats in the world with the broadest array of product offerings. 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 10 to 100 feet, along with a parts and accessories business. 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.

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. Brunswick New Technologies faces many competitors in the marine accessories, electronics, engine controls, navigation systems and global positioning systems-based land navigation businesses, especially new entrants to global positioning systems-based businesses throughout the world. Competitive advantage in this segment is a function of product features, technological leadership, quality, service, performance and durability, 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. There are a few large manufacturers of fitness equipment and hundreds of small manufacturers, which create a highly fragmented competitive landscape. 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.

Bowling & Billiards Segment: The Company believes it is the world’s leading full-line designer and producer of bowling products and billiards tables. There are several large manufacturers of bowling products, whereas the bowling retail market is highly fragmented. Competitive emphasis is placed on product innovation, quality, service, marketing activities and pricing. The Company also operates 128 retail bowling centers worldwide, including those operated by the Company’s joint venture in Japan, 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 to drive innovation in its products and manufacturing technologies. 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:

   
2005
  
2004
  
2003
  
(In millions)
              
Boat
  
$
34.7
  
$
27.2
  
$
25.6
  
Marine Engine
    
89.9
    
82.0
    
70.0
  
Fitness
    
14.2
    
16.0
    
16.9
  
Bowling & Billiards
    
5.9
    
5.9
    
5.7
  
                     
Total
  
$
144.7
  
$
131.1
  
$
118.2
  

7
Number of Employees

The approximate number of employees as of December 31, 2005, is shown below by segment:

Boat
    
13,000
  
Marine Engine
    
8,250
  
Fitness
    
1,250
  
Bowling & Billiards
    
4,700
  
Corporate
    
300
  
         
Total
    
27,500
  
 
 
As of December 31, 2005, there were 61 employees in the Boat segment, 1,982 employees in the Marine Engine segment, 137 employees in the Fitness segment, and 247 employees in the Bowling & Billiards segment represented by labor unions. The Company believes that it has good relations with these labor unions. The Boat segment renewed its existing labor union contracts with employees at its Lowell, Michigan, and Princeville, Quebec, Canada, facilities in November of 2005.

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 (SEC Reports). The SEC 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 1A.  Risk Factors
 
General economic conditions, particularly in the United States and Europe, may adversely affect the Company’s results. The Company’s revenues may be affected by U.S. and international market conditions and consumer confidence. In particular, the Company’s marine businesses are cyclical and are dependent upon economic conditions and the overall level of consumer confidence. Any substantial deterioration in general economic conditions that diminishes consumer confidence in any of the regions in which the Company competes could reduce the Company’s sales and adversely affect its business and financial results.

The Company’s profitability may suffer as a result of competitive product offerings and pricing pressures. Across all the Company’s businesses, the introduction of lower-priced alternative products by other companies can hurt the Company’s competitive position. The Company is constantly subject to competitive pressures, particularly from Asian competitors in the outboard marine engine market worldwide and in Brunswick New Technologies’ land-based navigation electronics business. Such competitive pricing pressures may limit the Company’s ability to increase prices in response to raw material and other cost increases.
 
The Company’s growth depends on the successful introduction of new product offerings. The Company’s ability to grow may be adversely affected by difficulties or delays in product development, such as an inability to develop viable new products, gain market acceptance of new products or obtain adequate intellectual property protection for new products. To meet ever-changing consumer demands, the timing of market entry and pricing of the Company’s new products are critical, especially for Brunswick New Technologies’ land-based navagation products, which generally have short product life cycles.
 
Managing the transition to lower-margin products, particularly in its Marine Engine segment, is critical to the Company’s operating and financial results. The Company has historically derived a significant portion of its earnings from sales of higher-margin products, especially in its Marine Engine business. The Marine Engine segment is now completing a transition to manufacturing primarily low-emission four-stroke engines, which have lower margins. The Company is addressing this margin pressure by relocating some manufacturing to lower-cost areas. The Company’s inability to achieve lower-cost manufacturing, as well as increased competition in the product lines affected, could adversely impact the Company’s future operating and financial results.
 
The Company’s financial results may be adversely affected if the Company is unable to maintain effective distribution. Because the Company sells the majority of its products through third parties such as dealers and distributors, the financial health of these dealers and distributors is critical to the Company’s continued success. The Company’s results can be negatively affected if dealers and distributors experience higher operating costs that can result from rising interest rates, higher rents, labor costs and taxes, and compliance with regulations. In addition, a substantial portion of the Company’s marine engine sales are made to independent boatbuilders. Accordingly, the results of the Company’s Marine Engine segment can be influenced by the financial health of these independent boatbuilders, which can depend on the boatbuilders’ access to capital, ability to develop new products and ability to compete effectively in the marketplace.
 
8
 
Inventory adjustments by the Company’s major dealers, retailers and independent boatbuilders adversely affect the Company’s operating margins. If the Company’s dealers and retailers, as well as independent boatbuilders who purchase the Company’s marine engine products, adjust their inventories downward in response to weakness in retail demand, wholesale demand for the Company’s products diminishes. In turn, the Company must reduce production, which results in lower rates of absorption of fixed costs and thus lower margins. Inventory reduction by dealers and customers can hurt the Company’s short-term sales and results of operations and limit the Company’s ability to meet increased demand when economic conditions improve.
 
Adverse weather conditions can have a negative impact on marine and retail bowling center revenues. Weather conditions can have a significant impact on the Company’s operating and financial results, especially in the marine and bowling retail businesses. Sales of the Company’s marine products are generally stronger just before and during spring and summer, and favorable weather during these months generally has a positive effect on consumer demand. Conversely, unseasonably cool weather, excessive rainfall or drought conditions during these periods can reduce demand. Hurricanes and other storms can result in the disruption of the Company’s distribution channel, as occurred in 2004 and 2005 on the U.S. Atlantic and Gulf coasts. Since many of the Company’s boats are used extensively on reservoirs, the viability of reservoirs for boating is important to the Boat segment. In addition, severely inclement weather on weekends and holidays, particularly during the winter months, can adversely affect patronage of the Company’s bowling centers and, therefore, revenues in the bowling retail business.
 
The Company's ability to integrate acquisitions successfully may affect its financial results. Since 2001, the Company has acquired a number of new businesses and entered into joint ventures, and it intends to continue to acquire additional businesses to complement its existing product portfolio. The Company’s success in effectively integrating these operations, including their financial, operational and distribution practices and systems, will affect the contribution of these businesses to the Company’s consolidated results. There can be no assurance that any future acquisitions or joint ventures will be beneficial to the Company.
 
Limited access to water can inhibit the Company’s ability to grow.  For various reasons, including environmental restrictions, permitting and zoning requirements, and the increasing cost of and competition for waterfront property, access to water for boating, as well as marina and storage space, is limited in some regions. The Boat and Marine Engine segments can be adversely affected in areas that do not have sufficient marina and storage capacity to satisfy demand.
 
The Company’s marine engines may be subject to more stringent environmental regulations. The State of California has adopted regulations requiring catalytic converters on the Company’s sterndrive and inboard engines by January 1, 2008. The Company expects to comply fully with these regulations, but compliance will increase the cost of these products. Other environmental regulatory bodies in the United States or other countries also may impose higher emissions standards in the future for the Company’s engines. These standards could require catalytic converters, which would increase the cost of the Company's engines. Any increase in the cost of the Company’s engines or unforeseen delays in compliance with environmental regulations affecting these products could have an adverse effect on the Company’s results of operations.
 
Higher energy costs can adversely affect the Company’s results and can hurt demand for the Company’s products, especially in the marine and bowling center businesses. Higher energy costs increase the Company’s operating costs at its manufacturing facilities and the cost of shipping its products to customers. In addition, products in the Company’s Marine Engine segment are powered by gasoline or diesel fuel, and products in the Company’s Boat segment have gasoline or diesel engines. Any increase in the price of petroleum-based fuel, or the imposition of taxes or an interruption of supply, could reduce demand for the Company’s marine products. Finally, because heating, air conditioning and electricity comprise a significant part of the cost of operating a bowling center, any increase in the price of energy could adversely affect the operating margins of Brunswick bowling centers.

Higher interest rates can reduce demand, especially for marine products. The Company’s marine products, particularly boats, are often financed. Rising interest rates can have an adverse effect on dealers’ and consumers’ ability to finance boat purchases, which can adversely affect the Company’s ability to sell its products and impact the profitability of the Company’s finance activities, including Brunswick Acceptance Company.
 
Changes in currency exchange rates can adversely affect the Company’s growth rate. Because the Company derives approximately 35 percent of its revenues from sales outside the United States, its ability to realize projected growth rates can be adversely affected when the U.S. dollar strengthens against other currencies. The Company manufactures its products primarily in the United States, and the costs of its products are generally denominated in U.S. dollars, although manufacturing and sourcing outside the United States are increasing. A strong U.S. dollar can make the Company’s products less price-competitive relative to local products in international markets.
 
9
The Company’s business is vulnerable to adverse international conditions. As the Company continues to focus on international growth, including in developing countries, and on lower-cost manufacturing outside the United States, it will become increasingly vulnerable to the effects of political instability, adverse economic conditions and the possibility of terrorism, insurrection and military conflict around the world.
 
Item 1B. Unresolved Staff Comments
 
None.
 
Item 2.  Properties

The Company’s headquarters are located in Lake Forest, Illinois. The Company also maintains administrative offices in Chicago and Vernon Hills, 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 also believes 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 believes its manufacturing facilities have the capacity to meet current and anticipated demand. 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:

Boat Segment: Adelanto, California; Old Lyme, Connecticut; Edgewater, Merritt Island, Palm Coast, Pompano Beach and St. Petersburg, Florida; Fort Wayne, Indiana; Cumberland and Salisbury, Maryland; Lowell, Michigan; Little Falls, New York Mills and Pipestone, Minnesota; Aberdeen, Mississippi; Lebanon, Missouri; Edenton, New Bern and Swansboro, North Carolina; Bucyrus, Ohio; Roseburg, Oregon; Newberry, South Carolina; Ashland City, Knoxville and Vonore, Tennessee; Lancaster, Texas; Arlington, Washington; Princeville, Quebec, Canada; Steinbach, Manitoba, Canada; Reynosa, Mexico; and Kidderminster, United Kingdom. All of these facilities are owned by the Company with the exception of the Pompano Beach, Florida; Lowell, Michigan; Aberdeen, Mississippi; and Lancaster, Texas, facilities, which are leased.

Marine Engine Segment: Torrance, Califorina; Miramar, Panama City and St. Cloud, Florida; Acton, Massachusetts; Stillwater and Tulsa, Oklahoma; Fond du Lac, Brookfield and Oshkosh, Wisconsin; Raleigh, North Carolina; Melbourne and Sydney, Australia; Petit Rechain and Wavre, Belgium; Pickering, Ontario, Canada; Suzhou and Zhuhai, Peoples Republic of China; Juarez, Mexico; Auckland and Christchurch, New Zealand; Vila Nova de Cerveira, Portugal; Illsfeld and Hannover, Germany; Singapore; and Newton Abbot and Horley, United Kingdom. The Acton, Massachusetts; Raleigh, North Carolina; Lake Forest, Illinois; Auckland and Christchurch, New Zealand; Horley, United Kingdom; Illsfeld and Hannover, Germany; Sydney, Australia; and Pickering, Ontario, Canada facilities are leased. The remaining facilities are owned by the Company.

Fitness Segment: Franklin Park and Schiller Park, Illinois; Falmouth, Kentucky; Ramsey, Minnesota; and Kiskoros and Szekesfehervar, Hungary. The Schiller Park office and a portion of the Franklin Park, Illinois, facility are leased. The remaining facilities are owned by the Company or, in the case of the Kiskoros, Hungary, facility, by a company in which the Company is the majority owner.

Bowling & Billiards Segment: Lake Forest, Illinois; Muskegon, Michigan; Richland Hills, Texas; Antigo and Bristol, Wisconsin; Szekesfehervar, Hungary; and Reynosa, Mexico; 113 Company-operated bowling recreation centers in the United States, Canada and Europe, and retail billiard stores in the suburbs of Chicago, Denver and Boston. Approximately 50 percent of BB&B’s bowling centers, as well as the Richland Hills, Texas, manufacturing facility and the retail billiard stores are leased. The remaining facilities are owned by the Company.
 
10
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.

Telephone Consumer Protection Act

The Company continues to defend itself against a 2004 lawsuit brought by plaintiffs who allegedly received unsolicited faxes from a vendor of the Company’s Bowling & Billiards segment in violation of the Federal Telephone Consumer Protection Act. The Company does not believe the resolution of this lawsuit will have a material adverse effect on the Company's consolidated financial position or results of operations.

Tax Case

In February 2003, the United States Tax Court issued a ruling upholding the disallowance by the Internal Revenue Service (IRS) of capital losses and other expenses for 1990 and 1991 related to two partnership investments entered into by the Company. In April 2003, the Company elected to pay the IRS $62 million (approximately $50 million after-tax), and in April 2004, the Company elected to pay the IRS an additional $10 million (approximately $8 million after-tax), in connection with this matter pending settlement negotiations. The payments were comprised of $33 million in taxes due and $39 million of pre-tax interest (approximately $25 million after-tax). The Company elected to make these payments to avoid future interest costs.

On March 9, 2005, the Company and the IRS reached a preliminary settlement of the issues involved in, and related to, this case, in which the Company agreed to withdraw its appeal of the tax ruling. All amounts due as a result of the settlement are covered by the payments previously made to the IRS. In addition, all tax computations related to taxable years 1986 through 2001 have been calculated and agreed to with the IRS at the examination level. The Company is awaiting final determination of tax and interest for these taxable years. If there are no changes to the tax amounts agreed to with the IRS examination team for taxable years 1986 through 2001, the Company expects to generate a tax benefit in future periods between $7 million and $16 million plus interest. The interest amount is being computed by the IRS and is dependent upon the final tax assessed for sixteen tax years, 1986 through 2001, taking into account carryback and carryforward of various tax credits, alternative minimum tax calculations and net operating loss carrybacks, and, therefore, is not quantifiable at this time. The final tax amount for these tax years is expected to be completed in the first half of 2006, while the final interest amount is not expected to be quantified until late in 2006.

Environmental Matters

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 cost estimates for all known claims.

The environmental remediation and clean-up projects in which the Company is involved have an aggregate estimated range of exposure of approximately $42 million to $63 million as of December 31, 2005. At December 31, 2005 and 2004, the Company had reserves for environmental liabilities of $51.5 million and $54.1 million, respectively. There were environmental provisions of $1.5 million, $0.0 million and $0.1 million for the years ended December 31, 2005, 2004 and 2003, respectively.

The Company accrues for environmental remediation related activities for which commitments or clean-up plans have been developed and for which costs can be reasonably estimated. All accrued amounts are generally determined in coordination with third-party experts on an undiscounted basis and do not consider recoveries from third parties until such recoveries are realized. In light of existing reserves, the Company’s environmental claims, when finally resolved, will not, in the opinion of management, have a material adverse effect on the Company’s consolidated financial position or results of operations.

11
Asbestos Class Actions

The Company has been named in a number of asbestos-related lawsuits, the majority of which involve Vapor Corporation, a former subsidiary that 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.

Australia Trade Practices Investigation

In January 2005, the Company received a notice to furnish information to the Australian Competition and Consumer Commission (ACCC). The ACCC has sought information regarding a subsidiary of the Company, Navman Australia Pty Limited, with respect to sales practices from January 2001 through January 2005 and compliance with the Trade Practices Act of 1974. The Company has complied with the request of the ACCC for information and is cooperating with the investigation by the ACCC. The Company does not believe that the resolution of this matter with the ACCC will have a material adverse effect on the Company's consolidated financial position or results of operations.

Chinese Supplier Dispute

The Company's Bowling & Billiards segment is involved in an arbitration proceeding in Hong Kong arising out of a commercial dispute with a former Chinese contract manufacturer, Shanghai Zhonglu Industrial Company Limited (Zhonglu). The Company filed the arbitration seeking damages based on Zhonglu's breach of a supply and distribution agreement pursuant to which Zhonglu agreed to manufacture bowling equipment for the Company. Zhonglu has asserted counterclaims seeking damages for alleged breach of contract and the resolution of other claims. The arbitration tribunal heard final arguments in the matter in August 2005. The Company does not believe that this dispute will have a material adverse effect on the Company's consolidated financial condition or results of operations.

See Note 9. Commitments and Contingencies in the Notes to Consolidated Financial Statements for disclosure of the potential cash requirements of environmental proceedings and other legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2005.

Executive Officers of the Registrant

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

Officer
  
Present Position
  
Age
         
Dustan E. McCoy
  
Chairman and Chief Executive Officer
  
56
Peter B. Hamilton
  
Vice Chairman and President - Brunswick Boat Group
  
59
Peter G. Leemputte
  
Senior Vice President and Chief Financial Officer
  
48
Kathryn J. Chieger
  
Vice President - Corporate and Investor Relations
  
57
Tzau J. Chung
  
Vice President and President - Brunswick New Technologies
  
42
William J. Gress
  
Vice President - Supply Chain Management and President - Brunswick Latin America Group
  
51
Warren N. Hardie    President - Brunswick Bowling & Billiards  
55
B. Russell Lockridge
  
Vice President and Chief Human Resources Officer
  
56
Alan L. Lowe
  
Vice President and Controller
  
54
Patrick C. Mackey
  
Vice President and President - Mercury Marine Group
  
59
William L. Metzger
  
Vice President and Treasurer
  
45
Victoria J. Reich
  
Vice President and President - Brunswick European Group
  
48
Marschall I. Smith
  
Vice President, General Counsel and Secretary
  
61
John E. Stransky
  
Vice President and President - Life Fitness Division
  
54
Dale B. Tompkins
  
Vice President - Strategy and Corporate Development
  
44
Stephen M. Wolpert
  
Vice President and President - US Marine Division
  
51
Judith P. Zelisko
  
Vice President - Tax
  
55

12
 
There are no familial relationships among these officers. The term of office of all elected officers expires May 3, 2006. The Group and Division Presidents are appointed from time to time at the discretion of the Chief Executive Officer.

Dustan E. McCoy was named Chairman and Chief Executive Officer of the Company in December 2005. He was Vice President of the Company and President - Brunswick Boat Group from 2000 to 2005. From 1999 to 2000, he was Vice President, General Counsel and Secretary of the Company.

Peter B. Hamilton has been Vice Chairman of the Company since 2000. He was President of Brunswick Bowling & Billiards from 2000 to February 2005, President, Life Fitness Division, from February 2005 to February 2006 and was named President - Brunswick Boat Group in February 2006.

Peter G. Leemputte has been Senior Vice President and Chief Financial Officer of the Company since August 2003. He was Vice President and Controller of the Company from 2001 to 2003.

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

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 was named President - Brunswick Latin America Group in June 2005. He also remains Vice President - Supply Chain Management of the Company, which he has been 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.
 
Warren N. Hardie was named  President - Brunswick Bowling & Billiards in February 2006.  Previously, he was President - Bowling Retail from 1998 to February 2006.
 
B. Russell Lockridge has been Vice President and Chief Human Resources Officer of the Company since 1999.

Alan L. Lowe has been Vice President and Controller of the Company since September 2003. Prior to joining Brunswick, he held a number of senior financial positions with FMC Technologies, Inc., including, most recently, Director - Financial Control.

Patrick C. Mackey has been Vice President of the Company and President of its Mercury Marine Group since 2000.
 
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.

Victoria J. Reich has been Vice President and President - Brunswick European Group since August 2003. She was Senior Vice President and Chief Financial Officer of the Company from 2000 to 2003, and Vice President and Controller of the Company from 1996 to 2000.

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, where he was General Counsel.

John E. Stransky was named Vice President and President - Life Fitness Division in February 2006.  He was President of the Billiards division from 1998 to 2005 and President - Brunswick Bowling & Billiards from February 2005 to February 2006.

Dale B. Tompkins has been Vice President - Strategy and Corporate Development since January 2003. He joined the Company in 2000 as Vice President - Strategy and Business Development for the Mercury Marine Group.

Stephen M. Wolpert has been Vice President and President - US Marine Division since October 2003. From 2001 to 2003, he held a number of positions with US Marine, including, most recently, Chief Operating Officer. Prior to joining Brunswick, he was Vice President - Manufacturing Strategies and Industrial Automation for Emerson Electric Company.

Judith P. Zelisko has been Vice President - Tax of the Company since 1998. She was Staff Vice President - Tax from 1996 to 1998.
 
13
PART II

Item 5. Market for Registrant’s Common Equity; Related Stockholder Matters and Issuer Purchases of Equity Securities

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 19. Quarterly Data in the Notes to Consolidated Financial Statements. As of February 24, 2006, there were 14,143 shareholders of record of the Company’s common stock.

In October 2005, the Company announced its annual dividend on its common stock of $0.60 per share, payable in December 2005. The Company intends to continue to pay annual dividends at the discretion of the Board of Directors, subject to continued capital availability and a determination that cash dividends continue to be in the best interest of the Company’s stockholders. The Company’s dividend policy may be affected by, among other things, the Company’s views on potential future capital requirements, including those relating to investments and acquisitions.

On May 4, 2005, the Company’s Board of Directors authorized a $200 million share repurchase program, which will be funded with available cash. The Company expects to repurchase shares on the open market or in private transactions from time to time, depending on market conditions. The Company repurchased approximately 1.9 million shares under this program during the second half of 2005 for $76.0 million as discussed in Note 18. Share Repurchase Program in the Notes to the Consolidated Financial Statements.

The Company’s 1996 Preferred Share Purchase Right Plan will expire by its terms on April 1, 2006. See Note 16. Preferred Share Purchase Rights in the Notes to Consolidated Financial Statements for more details.


   
Issuer Purchases of Equity Securities
   
Total Number of Shares (or Units) Purchased 
  
Average
Price Paid
per Share (or
Unit)
  
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs 
  
Maximum Number (or
Approximate Dollar
Value) that May Yet Be
Purchased Under the
Plans or Programs (A)
(amounts in thousands)
Period
              
                 
10/1/05 - 10/31/05
  
1,000,000
  
$                           37.77
  
1,000,000
  
$                                        146,518
11/1/05 - 11/30/05
  
567,700
 
39.64
  
567,700
  
124,013
12/1/05 - 12/31/05
  
—
  
—
  
—
  
124,013
                 
Total Stock Repurchases
  
1,567,700
  
 $                          38.45
  
1,567,700
  
$                                      124,013
                 

(A)  On May 4, 2005, the Company’s Board of Directors authorized a $200 million share repurchase program, to be funded with available cash. The Company expects to repurchase shares on the open market or in private transactions from time to time, depending on market conditions. The Company repurchased approximately 1.9 million shares under this program during the second half of 2005 for $76.0 million as discussed in Note 18. Share Repurchase Program in the Notes to the Consolidated Financial Statements. 
 
14
Item 6. Selected Financial Data

The selected historical financial data presented below as of and for the years ended December 31, 2005, 2004 and 2003, 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 of Financial Condition and Results of Operations, including the Matters Affecting Comparability section. The selected historical financial data presented below as of and for the years ended December 31, 2002, 2001 and 2000, 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 (APB) Opinion 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.”

(In millions, except per share data)
  
2005 
  
2004 
  
2003 
  
2002 
  
2001 
  
2000 
  
Results of operations data
                         
Net sales
  
$
5,923.8
  
$
5,229.3
  
$
4,128.7
  
$
3,711.9
  
$
3,370.8
  
$
3,811.9
  
Unusual charges
  
$
—
  
$
—
  
$
—
  
$
—
  
$
—
  
$
55.1
  
Operating earnings
  
$
478.6
  
$
400.7
  
$
221.4
  
$
196.6
  
$
191.1
  
$
397.1
  
Earnings before interest and taxes
  
$
534.0
  
$
413.6
  
$
230.7
  
$
199.9
  
$
179.5
  
$
384.5
  
Earnings before income taxes
  
$
495.8
  
$
378.5
  
$
201.1
  
$
161.6
  
$
132.2
  
$
323.3
  
Earnings from continuing operations before
accounting change
  
$
385.4
  
$
269.8
  
$
135.2
  
$
103.5
  
$
84.7
  
$
202.2
  
Discontinued operations:
                                      
Loss from discontinued
operations, net of tax
    
—
    
—
    
—
    
—
    
—
    
(68.4
)
Loss from disposal of discontinued
operations, net of tax
    
—
    
—
    
—
    
—
    
—
    
(229.6
)
Cumulative effect of changes in accounting
principle, net of tax (A)
    
—
    
—
    
—
    
(25.1
)
  
(2.9
)
  
—
  
                                       
Net earnings (loss)
  
$
385.4
  
$
269.8
  
$
135.2
  
$
78.4
  
$
81.8
  
$
(95.8
)
Basic earnings (loss) per common share:
                                      
Earnings from continuing operations before
accounting change
  
$
3.95
  
$
2.82
  
$
1.48
  
$
1.15
  
$
0.96
  
$
2.28
  
Discontinued operations:
                                      
Loss from discontinued
operations, net of tax
    
—
    
—
    
—
    
—
    
—
    
(0.77
)
Loss from disposal of discontinued
operations, net of tax
    
—
    
—
    
—
    
—
    
—
    
(2.59
)
Cumulative effect of changes in accounting
principle, net of tax (A)
    
—
    
—
    
—
    
(0.28
)
  
(0.03
)
  
—
  
                                       
Net earnings (loss)
  
$
3.95
  
$
2.82
  
$
1.48
  
$
0.87
  
$
0.93
  
$
(1.08
)
Average shares used for computation of
basic earnings per share
    
97.6
    
95.6
    
91.2
    
90.0
    
87.8
    
88.7
  
Diluted earnings (loss) per common share:
                                      
Earnings from continuing operations before
accounting change
  
$
3.90
  
$
2.77
  
$
1.47
  
$
1.14
  
$
0.96
  
$
2.28
  
Discontinued operations:
                                      
Loss from discontinued
operations, net of tax
    
—
    
—
    
—
    
—
    
—
    
(0.77
)
Loss from disposal of discontinued
operations, net of tax
    
—
    
—
    
—
    
—
    
—
    
(2.59
)
Cumulative effect of changes in accounting
principle, net of tax (A)
    
—
    
—
    
—
    
(0.28
)
  
(0.03
)
  
—
  
                                       
Net earnings (loss)
  
$
3.90
  
$
2.77
  
$
1.47
  
$
0.86
  
$
0.93
  
$
(1.08
)
Average shares used for computation of
diluted earnings per share
    
98.8
    
97.3
    
91.9
    
90.7
    
88.1
    
88.7
  


(A)   In 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, which resulted in a $25.1 million ($0.28 per share) charge as the cumulative effect of the change in accounting principle. In 2001, the Company adopted SFAS No. 133, Accounting for Derivatives and Hedging Activities, which resulted in a $2.9 million ($0.03 per share) charge as the cumulative effect of the change in accounting principle.
 
15

(In millions, except per share and other data)
  
2005
  
2004
  
2003
  
2002
  
2001
  
2000
  
Balance sheet data
                          
Total assets
  
$
4,621.5
  
$
4,346.4
  
$
3,602.5
  
$
3,314.7
  
$
3,157.5
  
$
3,396.5
  
Debt
Short-term
  
$
1.1
  
$
10.7
  
$
23.8
  
$
28.9
  
$
40.0
  
$
172.7
  
Long-term
    
723.7
    
728.4
    
583.8
    
589.5
    
600.2
    
601.8
  
Total debt
    
724.8
    
739.1
    
607.6
    
618.4
    
640.2
    
774.5
  
Common shareholders’ equity
    
1,978.8
    
1,712.3
    
1,323.0
    
1,101.8
    
1,110.9
    
1,067.1
  
                                       
Total capitalization
  
$
2,703.6
  
$
2,451.4
  
$
1,930.6
  
$
1,720.2
  
$
1,751.1
  
$
1,841.6
  
Cash flow data
Net cash provided by operating activities of
continuing operations
  
$
432.9
  
$
415.2
  
$
395.1
  
$
413.0
  
$
299.3
  
$
251.0
  
Depreciation and amortization
    
162.2
    
157.5
    
150.6
    
148.4
    
160.4
    
148.8
  
Capital expenditures
    
233.6
    
171.3
    
159.8
    
112.6
    
111.4
    
156.0
  
Acquisitions of businesses
    
135.5
    
267.8
    
177.3
    
21.2
    
134.4
    
—
  
Investments
    
23.3
    
16.2
    
39.3
    
8.9
    
—
    
38.1
  
Stock repurchases
    
76.0
    
—
    
—
    
—
    
—
    
87.1
  
Cash dividends paid
    
57.3
    
58.1
    
45.9
    
45.1
    
43.8
    
44.3
  
Other data
Dividends declared per share
  
$
0.60
  
$