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UNITED STATES

Form 10-K

Brunswick Corporation

Securities Registered pursuant to Section 12(b) of the Act:

Securities registered Pursuant to Section 12(g) of the Act:

          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 o

          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 an accelerated filer (as defined in Exchange Act Rule 12b-2).          Yes x          No o

          As of June 28, 2003, the aggregate market value of the voting stock of the registrant held by non-affiliates was $2,256,834,986. 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 27, 2004, was 93,644,941.

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 April 28, 2004.

ANNUAL REPORT ON FORM 10-K

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PART I

      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; Teignbridge propellers; 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; Attwood marine parts and accessories; Seachoice marine parts and accessories; 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; Navman global positioning systems-based products and marine electronics; Northstar marine navigation systems; Life Fitness, Hammer Strength and ParaBody fitness equipment; Brunswick bowling products, including capital equipment, parts, supplies and consumer products; Brunswick billiards tables and accessories; and Valley-Dynamo billiards, Air Hockey and foosball tables. The Company also owns and operates: Brunswick bowling centers across the United States and internationally; Land ‘N’ Sea, a distributor of marine parts and accessories; and Omni Fitness, a chain of specialty fitness equipment 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.

Marine Engine Segment

      The Marine Engine segment, which had net sales of $1,908.9 million in 2003, 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 operations that comprise the 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 12,000 marine dealers and distributors, specialty marine retailers, and marine service centers. Mercury Marine, through Cummins MerCruiser Diesel Marine LLC (CMD), its joint venture with Cummins Marine, a division of Cummins Inc., supplies integrated diesel propulsion systems to the worldwide recreational and commercial marine markets, including the Company’s Brunswick Boat Group.

      Mercury Marine manufactures nine 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 75 percent over a nine-year period beginning with the 1998 model year and ending in 2006. Mercury’s product line of low-emission engines includes 13 four-stroke outboard engine models ranging from 4 to 115 horsepower and one 225-horsepower model. In 2004, Mercury Marine introduced Verado, a new series of high-horsepower outboard engines to complement its existing four-stroke product line. Mercury’s OptiMax and four-stroke outboards already achieve the EPA’s mandated 2006 emission levels.

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      Mercury Marine’s sterndrive engines 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. In addition, Mercury Marine sources some outboard engines and some key 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.

      In addition to its marine engine operations, Mercury Marine’s product offerings in international markets include a wide range of aluminum, fiberglass and inflatable boats produced either by, or for, Mercury in Australia, Poland and Sweden. These boats are marketed under the brand names Armor, Arvor, Bermuda, Legend, Mercury, Örnvik, Protector, Quicksilver, Savage and Uttern and are typically equipped with engines manufactured by Mercury Marine and often include other parts and accessories supplied by Mercury Marine. Mercury Marine has an equity ownership interest in companies that manufacture boats under the brand names Askeladden, Bella, Rayglass and Valiant, which are produced in Norway, Finland, New Zealand and Portugal, respectively. Mercury Marine also manufactures custom and standard propellers and underwater stern gear for inboard-powered vessels, under the name Teignbridge, in the United Kingdom.

      During 2003, Mercury Marine continued to grow its aluminum metal castings business, which sells custom products to a variety of industries, including the motorcycle, agricultural implement and off-road recreational vehicle businesses. 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.

      Mercury Marine’s SmartCraft system, a total marine electronics and controls integration system, 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 advances in communications, entertainment and navigation electronics by providing a platform to integrate these technologies to enhance the boating experience.

      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. BNT is comprised of: MotoTron, which leverages the Company’s expertise in engine controls to non-marine markets; Northstar Technologies, a world leader in premium marine navigation electronics; and Monolith Corporation/Integrated Dealer Systems, a leading developer of dealer management systems for dealers of marine products and recreational vehicles. To complement BNT’s expertise, the Company acquired 70 percent of the stock of Navman NZ Limited, a New Zealand-based leader in global positioning systems-based products and marine electronics, in the second quarter of 2003. BNT also acquired New Eagle Software and Accelerate Performance Products, both software development companies for marine and non-marine markets, in 2003 to further enhance BNT’s product and service offerings in engine controls.

      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 and global positioning systems-based products and marine electronics;
	•	Competitive pricing pressures;
	•	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 boat operations;
	•	The ability to offer products of sufficient technological and quality level to meet customer needs and demands;

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	•	The ability to develop product technologies that comply with regulatory requirements, including emissions reductions;
	•	The ability to develop and market competitive products;
	•	Consumer demand for the Company’s boat offerings and those of other major boatbuilders and dealers;
	•	Changes in currency exchange rates;
	•	Fuel costs and fuel availability;
	•	Access to water and marina facilities;
	•	Prevailing interest rates and availability of financing for boatbuilders and dealers; and
	•	Level of consumer participation 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, pontoon and deck boats, and manufactures and distributes marine parts and accessories. The Company believes its Boat Group, which had net sales of $1,616.9 million during 2003, has the largest dollar sales volume of pleasure boats in the world.

      The Boat Group manages many of the Company’s boat brands, evaluates and increases the Company’s boat portfolio by acquiring recreational boat 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 provides shared services to the following Company boat brands: 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 and Trophy offshore fishing boats; Baja high-performance boats; 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 for military, law enforcement and other activities, 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 Mercury Marine, and diesel engines from CMD.

      The Boat Group has manufacturing facilities in Florida, Maryland, Michigan, Minnesota, North Carolina, Ohio, Oregon and Tennessee, as well as international manufacturing facilities in Canada, Mexico and the United Kingdom. The Boat Group also utilizes contract manufacturing facilities in Bulgaria and Poland. Since 2002, the Company has been manufacturing entry-level runabouts at a new facility in Reynosa, Mexico, where it intends to expand operations in 2004.

      In late 2002, the Company launched an initiative to develop its boat parts and accessories business to better serve dealers and consumers of the Company’s boat products. The Company furthered this initiative by acquiring, in June 2003, Land ‘N’ Sea Corporation, a marine parts and accessories distributor, and, in September 2003, Attwood Corporation, a manufacturer of marine hardware and accessories. The acquisitions of Land ‘N’ Sea and Attwood enhance and strengthen the Company’s manufacturing and distribution capabilities and infrastructure to develop and expand its marine parts and accessories business. 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.

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      The Boat Group’s products are sold to end users through a global network of approximately 750 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 2003. 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;
	•	Product quality and pricing;
	•	Competition from other boatbuilders and other marine parts and accessories manufacturers and distributors;
	•	Fuel costs and fuel availability;
	•	Effectiveness of distribution;
	•	Changes in currency exchange rates;
	•	Prevailing interest rates and availability of financing for consumers and boat dealers;
	•	Level of consumer participation in recreational boating; and
	•	Access to water and marina facilities.

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 $486.6 million during 2003, 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 dealers or through distributors.

      Life Fitness also sells its products into the high-end consumer markets. Approximately 10 percent of the Fitness segment’s 2003 sales were made through Omni Fitness, a chain of specialty fitness equipment retail stores owned and operated by the Company since 2001. Omni Fitness sells consumer products for Life Fitness, as well as fitness products manufactured by other companies. Most of Life Fitness’ remaining consumer sales are to other specialty fitness retailers, including chains in which the Company has minority ownership interests.

      The Fitness segment’s principal manufacturing facilities are located in Illinois, Kentucky, Minnesota and Hungary. The Fitness segment also operates 45 Omni Fitness specialty fitness retail stores located primarily in the Northeast region of the United States.

      During 2002 and 2003, Life Fitness introduced more than 90 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 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;
	•	Changes in consumer demand for health clubs and other exercise facilities;

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	•	Availability of effective product distribution;
	•	Consumer participation in fitness activities;
	•	Demand from owners and operators of fitness centers for new equipment;
	•	Competition from other manufacturers and alternative forms of recreation;
	•	Product quality, pricing, and customer service; and
	•	Changes in currency exchange rates.

Bowling & Billiards Segment

      The Bowling & Billiards segment is comprised of the Brunswick Bowling & Billiards division (BB&B), which had net sales of $392.4 million during 2003. 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, manufactures and markets a full line of high-quality consumer and commercial billiards tables, Air Hockey tables, foosball tables and related accessories.

      BB&B operates approximately 116 bowling centers in the United States, Canada and Europe, and with its joint venture partner operates 14 additional centers in Japan. 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. To date, 39 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. BB&B intends to convert eight additional centers in 2004 into Brunswick Zones and open two new centers, supporting the Company’s strategy to increase market share. Approximately half 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 14 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. In June 2003, the Company acquired Valley-Dynamo, LP, a leading manufacturer of commercial and consumer billiards, Air Hockey and foosball tables. In 2003, BB&B opened a retail billiards store in a northern suburb of Chicago as a means of expanding distribution and testing retail concepts.

      BB&B’s primary manufacturing and distribution locations are in Michigan, Texas, Wisconsin and Hungary.

      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;
	•	The ability to develop and market competitive products;
	•	Prevailing interest rates and availability of financing for purchasers of bowling capital equipment;
	•	Changes in currency exchange rates;
	•	Duties, tariffs and import restrictions relating to sales and shipments overseas;
	•	Product innovation;
	•	Availability of effective product distribution;

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	•	Consumer participation in bowling and billiards;
	•	Demand from owners and operators of recreation centers for new equipment;
	•	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.

Financial Services

      In 2002, the Company established a joint venture, Brunswick Acceptance Company, LLC (BAC), with Transamerica Commercial Finance Corporation (TCFC). In January of 2004, GE Commercial Finance, the business-to-business financial service unit of General Electric Company, acquired the commercial finance business of Transamerica, including TCFC. Under the terms of the joint venture agreement, BAC 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. The Company increased its 15 percent ownership in BAC to 49 percent in July 2003. 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 14,000 Dealers serving its business segments worldwide. The Company’s marine Dealers typically carry boats, engines or related parts and accessories.

      Most of 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. The Company owns a minority interest in certain marine Dealers and a 100 percent ownership interest in Omni Fitness, an exercise equipment retailer operated by the Company’s Life Fitness division.

      In 2003, the Company acquired Land ‘N’ Sea, establishing a parts and accessories distribution platform for the Brunswick Boat Group. Land ‘N’ Sea, with its 11 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 and often highly leveraged. As a result, many of the Company’s Dealers require financial assistance to support their business and provide a stable outlet for the Company’s products. In addition to the Company’s interest in 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 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 9, Commitments and Contingencies, in the Notes to Consolidated Financial Statements.

International Operations

      The Company’s sales to customers in international markets were $1,242.2 million (30.1 percent of net sales) and $1,004.7 million (27.1 percent of net sales) in 2003 and 2002, respectively. The Company generally transacts its sales in international markets in local currencies, and its costs of products manufactured or

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      Marine Engine segment sales comprised approximately 53 percent of the Company’s total international sales in 2003. 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 and Sweden; and
	•	A research and development office in Singapore and New Zealand and a manufacturing plant in New Zealand.

      Boat segment sales comprised approximately 24 percent of the Company’s total international sales in 2003. 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 England, France, the Netherlands and Spain, and a product display location in the Netherlands.

      Fitness segment sales comprised approximately 16 percent of the Company’s total international sales in 2003. 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 in Hungary.

      Bowling & Billiards segment sales comprised approximately 7 percent of the Company’s total international sales in 2003. 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 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

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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 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.

      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.

      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.

      The following are among the Company’s primary trademarks:

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

      Boat Segment: Attwood, Baja, Bayliner, Boston Whaler, Hatteras, Land ‘N’ Sea, Master Dealer, Maxum, Meridian, Princecraft, Sea Ray, Seachoice, 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, Dynamo, Frameworx, Fuze, Gold Crown, Inferno, IQ, Lane Shield, Lightworx, Monster, Throbot, Tornado, U.S. Play by Brunswick, Valley, Valley-Dynamo, Vector, 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; effective marketing, advertising and sales efforts; providing high-quality products at competitive prices; and good after-market services.

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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, navigation systems and global positioning system-based businesses. Competitive advantage in these 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. There are a few large manufacturers of fitness equipment and hundreds of small manufacturers, which creates 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. The Company also operates Omni Fitness, a chain of 45 specialty fitness equipment 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. There are several large manufacturers of bowling products whereas the bowling retail market is highly fragmented. Competitive emphasis is placed on product innovation, quality, marketing activities, pricing and service. The Company also operates 130 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:

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Number of Employees

      The approximate number of employees as of December 31, 2003, is shown below by segment:

      As of December 31, 2003, there were approximately 1,900 employees in the Marine Engine segment, 260 employees in the Boat segment, 140 employees in the Fitness segment, and 160 employees in the Bowling & Billiards segment represented by labor unions. The Company believes that it has good relations with these labor unions. Certain U.S. labor union contracts for the Fitness and Marine Engine segments expire in March and June of 2004, respectively. Certain international labor union contracts for the Boat segment expire in March and October 2004.

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.

      Also available at http://www.brunswick.com is information relating to the Company’s ethics program and corporate governance. This includes (i) the Company’s Code of Ethics for Senior Financial Officers, which applies to the Company’s Chief Executive Officer, Chief Financial Officer, principal accounting officer or controller and other Company employees designated by the Board, (ii) Making the Right Choice, the Brunswick Guide to Conduct in the Workplace, which applies to all employees, (iii) Principles and Practices, the corporate governance principles that have been adopted by the Company’s Board and (iv) charters for each of the Board’s committees. This information is also available in print to any shareholder who requests it by writing to Shareholder Services, Brunswick Corporation, 1 N. Field Ct., Lake Forest, IL 60045.

      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 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’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.

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

      Marine Engine Segment: Miramar, Florida; Acton, Massachusetts; Stillwater and Tulsa, Oklahoma; Fond du Lac, Milwaukee and Oshkosh, Wisconsin; Melbourne, Australia; Petit Rechain, Belgium; Pickering, Ontario, Canada; Juarez, Mexico; Auckland, New Zealand; and Newton Abbot, United Kingdom. The Acton, Massachusetts; Auckland, New Zealand; and Pickering, Ontario, Canada facilities are leased. The remaining facilities are owned by the Company.

      Boat Segment: Edgewater, Merritt Island, Palm Coast, and Pompano Beach, Florida; Cumberland and Salisbury, Maryland; Lowell, Michigan; Pipestone, Minnesota; New Bern, North Carolina; Bucyrus, Ohio; Roseburg, Oregon; Knoxville and Vonore, Tennessee; Lancaster, Texas; Arlington, Washington; Princeville, Quebec, 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; and Lancaster, Texas facilities, which are leased.

      Fitness Segment: Franklin Park, Illinois; Falmouth, Kentucky; Ramsey, Minnesota; Kiskoros, Hungary; and 45 Omni Fitness retail stores in the United States. All of the Omni Fitness stores 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; Richland Hills, Texas; Bristol, Wisconsin; Szekesfehervar, Hungary; and 116 Company-operated bowling recreation centers in the United States, Canada and Europe. Approximately 50 percent of BB&B’s bowling centers and the Richland Hills, Texas facility are leased. The remaining facilities are owned by the Company.

      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.

      In January 2004, the Company filed a petition with the U.S. Department of Commerce and the U.S. International Trade Commission asserting that Japanese manufacturers of outboard engines have violated U.S. anti-dumping laws by selling outboard engines in the United States at prices well below their sale price in Japan. If Japanese manufacturers are determined to be in violation of U.S. law, the U.S. government could impose duties on Japanese-manufactured outboards sold in the United States.

      Since 2002, the Company has been defending itself against a lawsuit brought against Leiserv, Inc. (Leiserv), a Company subsidiary operated by the Bowling & Billiards segment, for alleged violations of the Federal Telephone Consumer Protection Act. The lawsuit was brought by plaintiffs seeking class action status and monetary damages on behalf of all plaintiffs who allegedly received unsolicited faxes from a service provider retained by Leiserv. 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.

      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.

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      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. Although the Company has filed a notice of appeal of the Tax Court decision to the United States Court of Appeals for the District of Columbia, the Company is in settlement negotiations with the IRS to resolve this matter. The amount of tax and interest associated with the two partnership investments is approximately $135 million, consisting of $60 million in taxes due plus $75 million of interest, net of tax. The Company expects the $135 million to be reduced to approximately $50 million, consisting of $28 million in taxes due and $22 million in interest, net of tax, as a result of the settlement of a number of issues and favorable adjustments with the IRS on open tax years 1989 through 1994. In April 2003, the Company elected to pay the IRS $62 million (approximately $50 million after-tax) in connection with this matter while the appeal is pending and settlement negotiations are continuing. The payment was comprised of $28 million in taxes due and $34 million of pre-tax interest ($22 million after-tax). The Company elected to make this payment to avoid future interest costs. No penalties have been formally asserted by the IRS to date. The Company believes, based on currently available information, that any penalties and accrued interest would not have a material adverse effect on the Company’s consolidated financial position or results of operations.

      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 its best estimate within a range of losses for all known claims.

      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.

      No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2003.

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Executive Officers of the Company

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

      There are no familial relationships among these officers. The term of office of all elected officers expires April 30, 2004. 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.

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

      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 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

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      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.

      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.

      Alan L. Lowe was named Vice President and Controller of the Company in 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. 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.

      Victoria J. Reich was named Vice President and President — Brunswick European Group in 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. 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.

      Stephen M. Wolpert was named Vice President and President — US Marine Division in 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.

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PART II

      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 27, 2004, there were approximately 15,174 shareholders of record of the Company’s common stock.

      Future dividends, which are declared at the discretion of the Board of Directors, will be paid annually in December.

      The selected historical financial data presented below as of and for the years ended December 31, 2003, 2002 and 2001, 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. The selected historical financial data presented below as of and for the years ended December 31, 2000, 1999 and 1998, 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.”

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(A)	Operating earnings include a $25.0 million litigation charge recorded in 2003 in connection with a patent infringement lawsuit relating to the design of a cross trainer. Refer to Note 9, Commitments and Contingencies, in the Notes to Consolidated Financial Statements.

(B)	Refer to Note 1, Significant Accounting Policies, in the Notes to Consolidated Financial Statements for a discussion on Goodwill and Other Intangibles.

(C)	Refer to Note 1, Significant Accounting Policies, in the Notes to Consolidated Financial Statements for a discussion on Derivatives.

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

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      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 and elsewhere in this Annual Report.

Overview and Outlook

      In 2003, we made significant progress towards achieving our strategic objective to solidify our leadership position in the marine, fitness, bowling and billiards industries by:

	•	Introducing innovative products in all our market segments;
	•	Focusing on cost reduction initiatives through global sourcing and realignment of our manufacturing footprint;
	•	Acquiring and investing in businesses that will expand and enhance our product offerings particularly in the areas of boat parts and accessories, marine electronics and billiards;
	•	Strengthening our relationships with our dealers by providing additional products and services that will make them more successful, improve the customer experience and, in turn, make Brunswick more successful; and
	•	Attracting and retaining talented individuals who are responsible for executing and delivering on our commitment to enhance value for our shareholders.

      While these activities are ongoing, we have begun to see results from our efforts reflected in our financial performance. Sales in 2003 increased 11.2 percent to $4,128.7 million, primarily due to growth in boat, marine engine and fitness equipment businesses, additional sales associated with acquisitions and the impact of a weaker U.S. dollar. In addition, we benefited from improved demand for marine products in the second half of the year. Operating earnings for 2003 increased 12.6 percent to $221.4 million, primarily due to the same factors that drove the sales gain, as well as effective cost management efforts. These factors helped offset higher pension, health care and insurance costs; a litigation charge recorded in connection with a cross trainer patent infringement lawsuit; and increased research and development expenses. Non-operating income increased to $20.7 million, up from $8.3 million in 2002, largely as a result of higher earnings from joint ventures and equity investments and interest income. In 2003, the Company reduced its effective tax rate to 32.75 percent, down from 36.0 percent in 2002, as a result of a prepayment of $50 million after-tax with respect to an outstanding tax case and higher foreign and state earnings generated in lower effective-tax-rate jurisdictions. See the Results of Operations section below for further discussion.

      Accomplishments in support of our strategic objectives in 2003 include:

	•	New products:

	—	Completion of the development of Verado, a family of supercharged four-stroke outboard engines;
	—	Continued roll-out of the Bayliner 175, a boat, motor, and trailer package with a manufacturers suggested retail price of $9,995, and the launch of the Bayliner 185 at a suggested retail price of $11,995;
	—	Introduction of 50 new fitness products, including the Signature line of fitness equipment; and
	—	Introduction of Vector, a bowling center management system.

	•	Manufacturing realignment:

	—	Start of the phased shut down of our Paso Robles, California, fitness equipment manufacturing plant (scheduled for completion in Spring 2004) and the consolidation of the production from this facility into our Ramsey, Minnesota, plant; and

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	–	Acquired a majority equity interest in a manufacturing operation in Kiskoros, Hungary, which allows us to manufacture strength training equipment closer to our European customers.

	•	Acquisitions:

	–	Purchase of Attwood Corporation and Land ‘N’ Sea Corporation as the platform for establishing a boat parts and accessories business;
	–	Acquisition of 70 percent of the stock of Navman NZ Limited, a leader in global positioning systems-based products, to further our offerings of marine electronics; and
	–	Acquisition of Valley-Dynamo, LP, a leading manufacturer of commercial and consumer billiards, Air Hockey and foosball tables, which moves us into the coin-operated market segment.

	•	Dealer services:

	–	Introduced Brunswick Acceptance Company, a joint venture that provides wholesale financing to our marine dealers.

      Looking ahead to 2004, we expect retail demand for marine products to increase in the range of 5 to 7 percent, which would be the first annual improvement in retail demand since 2000. We estimate that industry growth, coupled with market share gains, success of new products, improved pricing and the full-year impact of acquisitions completed in 2003, would result in an 11 to 13 percent increase in our marine sales in 2004. Fitness and Bowling & Billiards segment sales are expected to increase in the high single digits, again due to new product introductions and the incremental sales from acquisitions. Overall, sales are expected to increase 11 to 13 percent. Operating earnings are expected to improve in 2004, benefiting from higher volumes as well as our ongoing focus on effective cost management. While we expect pension expense to be down compared with 2003, higher health care and insurance spending will substantially offset this benefit. We will also incur costs relating to the opening of a second boat manufacturing plant in Mexico and an outboard engine plant in China as part of our manufacturing footprint realignment efforts. The Company expects 2004 non-operating income to decrease as a result of a reduction in interest income. Our effective tax rate in 2004 is expected to remain at approximately the same level as 2003.

          Matters Affecting Comparability

      Acquisitions. The Company’s operating results for 2003 include the operating results for its acquisitions completed in 2003. Approximately one-third of the increase in 2003 sales, when compared with 2002, can be attributed to the following acquisitions: Valley-Dynamo, LP (Valley-Dynamo), a manufacturer of commercial and consumer billiards, Air Hockey and foosball tables; Land ‘N’ Sea Corporation (Land ‘N’ Sea), a distributor of marine parts and accessories; Navman NZ Limited (Navman), a manufacturer of marine electronics and global positioning systems-based products; Attwood Corporation (Attwood), a manufacturer of marine hardware and accessories; and Protokon LLC (Protokon), a Hungarian steel fabricator and electronic equipment manufacturer. These transactions were completed as of June 10, 2003, June 23, 2003, June 23, 2003, September 2, 2003, and September 15, 2003, respectively. The acquisition of Valley-Dynamo adds new products and distribution channels to the Company’s billiards operations, while the acquisitions of Land ‘N’ Sea and Attwood provide the Company with the distribution network, manufacturing capabilities and infrastructure to develop and expand a boat parts and accessories business. The acquisition of Navman complements the Company’s expansion into marine-based electronics and integration. The acquisition of Protokon will allow the Company to reduce costs and increase manufacturing capacity of fitness equipment, while better serving its fitness customers in Europe.

      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, Inc. (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

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      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 aluminum fishing, pontoon and deck boats; Sealine International (Sealine), a leading manufacturer of luxury sport cruisers and motoryachts; and Hatteras Yachts, Inc. (Hatteras), a leading manufacturer of luxury sportfishing convertibles and motoryachts, from the acquisition dates of February 28, 2001, March 7, 2001, July 3, 2001, and November 30, 2001, respectively. The acquisitions of Princecraft, Sealine and Hatteras presented new international opportunities, and the ability to leverage core competencies and achieve growth by pursuing aggressive marketing and brand-building activities.

      Litigation charge and changes in accounting principle. Comparisons of net earnings per diluted share between 2003, 2002 and 2001, are affected by a litigation charge and changes in accounting principle, which are listed and described below. The effect of these items on diluted earnings per share is as follows:

	•	Litigation Charge: In September of 2003, the Company’s Life Fitness division settled a cross trainer patent infringement lawsuit with Precor Incorporated for $25.0 million and future royalty payments. The Company recorded a $25.0 million pre-tax litigation charge ($0.18 per diluted share) to operating earnings in the first quarter of 2003. In September of 2003, the Company paid $12.5 million related to the settlement and the Company expects to pay an additional $12.5 million in June 2004. Management believes that presentation of operating earnings excluding this charge provides a more meaningful comparison to 2002 because there was no comparable litigation charge that impacted 2002 operating earnings.
	•	Changes 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-lived intangible assets would have been $0.12 per diluted share for 2001. In connection with the adoption 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, for further discussion.

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 pre-tax 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 10, Financial Instruments, in the Notes to Consolidated Financial Statements, for further discussion.

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Results of Operations

          Consolidated

      The following table sets forth certain ratios and relationships calculated from the Consolidated Statements of Income for the years ended December 31, 2003, 2002 and 2001: