Kathryn Chieger - VP - Corporate and IR Dustan E. McCoy - Chairman and CEO Peter G.

Leemputte - Sr. VP and CFO

Michael Savner - Banc Of America Securities Edward Aaron - RBC Capital Markets Steven Rees - JP Morgan Joseph D. Hovorka - Raymond James Timothy Conder - Wachovia Capital Markets Hakan Ipekci - Merrill Lynch Laura Richardson - BB&T Capital Markets Hayley Wolff - Rochdale Securities Justin Boisseau - Gates Capital Management

Good morning and thank you for joining us for our year-end 2007 conference call. With me today are Dustan McCoy, Brunswick's Chairman and CEO; and Pete Leemputte, our CFO.

Before we begin our remarks, let me remind everyone that during this call our comments will include certain forward-looking statements about our future results. Please keep in mind that our actual results could differ materially from expectations as of today.

For the details on the factors to consider please look at our 10-K for 2006, our September 2007 10-Q and our earnings release issued this morning. All are available upon request or by going to our website at Brunswick.com.

We appreciate you're taking time to be with us this morning. Given that we are in the busy earnings reported [ph] season, we'll try to keep our remarks free and wrap up the call in about 45 minutes.

With that I'd like to turn the call over to Dusty.

Thank you Kathryn. Good morning and thank all of you for joining us today.

You also can't see Kathryn, Kathryn had rotator cuff surgery on her right shoulder, she is decidedly [ph] right handed, so we're having great fun watching Kathryn seems to be a left hander.

Thanks Dusty.

So if coffee spills on me or something during this meeting, we'll know who is playing. As you've seen from our release, we ended the fourth quarter of 2007 in the year as we'd expected.

Given the volatile economic conditions in the quarter, we're satisfied we did well in lot of the circumstances. Fourth quarter earnings were $0.09 per share and the year came in at $1.23 per share.

In each case excluding special tax benefits and for the full year the trade impairment charge. I want to thank my fellow employees for an outstanding level of commitment and performance in 2007.

They should be very proud and I am extremely proud now. I'll take just a few minutes of your time to speak about our marine, fitness and bowling businesses in turn, before I turn the call over to Pete.

2007 was to say the least a very tough year for the marine industry. We saw total industry boat retail demand, aluminum and fiberglass, decline 11% in the first quarter, 12% in the second quarter and 6% in the third quarter.

Preliminary fourth quarter results, as the industry down as much as 14%. The fiberglass boats are down about 18% and aluminum also about 7%.

The fourth quarter is a very small off season quarter with less than 10% of the annual volume retail. Now we shouldn't draw too many conclusions from these preliminary numbers.

However, we cannot ignore the continued downturn in the quarter. In the context of the overall slowing of retail growth in the United States, by any measure 2007 was a difficult year.

And while I know we sound a bit like a broken record on call after call in terms such as these, we must keep our product pipeline as thin as possible to ensure the continued health and future prospects of our dealers. As a result, we have been producing product at levels below retail demand for several quarters now.

We ended 2007 with a fiberglass unit pipeline at 34 weeks of 10 and 12 months sales down one week versus 2006. But the number of fiberglass units in the pipeline is down over 10% versus 2006.

And we are now back to 2004 levels. The aluminum pipeline is at 33 weeks up one week since 2006.

The number of aluminum units in the pipeline is down 5% versus 2006. We have done a good job of managing the pipeline that obviously it comes at the expense of earnings.

As we enter 2008, the picture remains cloudy, we are early into the Boat Show season and there is no clear message emerging from both share results. If they can ever be inaccurate predictor of the market.

On a show by show basis, some brands some brands are up and others are down in the changes from show to show. That said, buyers are still showing up a good brand with new innovative products and features also by good dealers are selling.

Our Fitness business had a great fourth quarter, which is the most important quarter for that business. Sales were up 11% and operating earnings were up 12%.

We've been steadily investing in this business and we are beginning to see the impact of new product, global focus and the benefit of higher volumes on fixed cost absorption. For the year, both sales and earnings were up for the business, but most of the improvements occurred in the fourth quarter.

Our Bowling & Billiards business also had a nice fourth quarter. Our small portion of our total business, our Brunswick Zone XLs an important part of our business moving forward.

And we've been investing in the business processes and infrastructure to accelerate growth of our new XL centers with the goal of opening a new center each month at the end of 2011. Before I turn the call over to Pete, I should also mention our global growth.

Our sales outside the United State s continue to grow and that constitute 36% of our total sales, up in 32% in 2006. 2007, domestic sales for the company were down 5% but sales outside the U.S.

were up 12%. Our engine, boat and fitness businesses, all posted double digit percentage growth versus 2006 for sales outside the United States.

While the dollars relationship does a currency it is clearly helping our international sale. Our employees are highly focused and becoming global and their efforts are really having an impact.

With that I'll turn the call over to Pete.

Thanks Dusty. Good morning everyone.

As you saw in our press release, we reported fourth quarter earnings from continuing operations of $0.09 per share excluding $0.05 tax benefit associated with prior fiscal years. That's down 59% versus the $0.22 we reported in the fourth quarter of 2006 also excluding special tax items.

I want to quickly point out the impact of restructuring charges on the quarter-over-quarter comparison. In November of 2006, we announced a number of restructuring action including elimination of hourly and salary position, the closure of two bulk plans and a realignment of bowling product distribution in selective international markets.

Both actions led to a total of $90 million or $0.14 per share in restructuring charges in the fourth quarter of 2006. Throughout 2007, we took additional steps including the closure of two more boat plans and the transfer of some Bayliner and Maxum cruiser productions to a newly purchased facility in Nevada and North Carolina.

That plant also gives us East Coast capacity to produce Meridian models 50 feet larger. We incurred additional restructuring charges of $22 million during 2007.

Of this full year amount $9 million or $0.07 per share is in the fourth quarter. Our restructuring charges by themselves were lower in the quarter-over-quarter comparison by about $0.07 per share.

The net benefit of our restructuring activity was $32 million reduction in expenses during 2007. The overall benefit was not readily apparent because the U.S.

Marine market downturn was so pronounced. Last week, we announced that Hatteras will mothball the Swansboro plant and transfer production to our New Bern facility.

Both plans are in North Carolina. This action was not driven by an anticipated sales drop at Hatteras in fact we expect Hatteras sales to increase during 2008.

Instead, the New Bern plant has made some great strides in productivity in the recent past and as a result we can reduce overhead costs without limiting sales. We will have Swansboro's capacity available for luxury yacht production as we launch new models in the years ahead.

Since, we have a solid manufacturing presence in North Carolina; we have tried to maintain some flexibility by transferring production workers to both New Bern and Navassa wherever possible. So, we can restart Swansboro when we are ready.

Given continuing declines in the U.S. market you can expect that the pace of restructuring should tick off as we move through 2008.

Additional restructuring charges are likely and further asset impairments are also possible. Let me offer a quick overview on the fourth quarter results, our sales grew by 5% to $1.4 billion led by an 11% growth at Life Fitness, 7% at Mercury and 3% at Bowling & Billiards.

Sales at our Boat Group were down by 3%. The Company sale increase came almost entirely from our international operation.

Although we did post mid single and low single digit growth in the United States at Fitness and Bowling & Billiards respectively. The disconnect in fourth quarter sales growth at Mercury, compared with the decline at our Boat Group is almost entirely due to the mix of U.S.

versus international sales. In the fourth quarter 45% of Mercury sales came from outside the U.S., compared with 24% for boats.

Both our boat and marine engine segments posted near identical low single digit decline in their U.S. operations.

Our consolidating operating margin in the quarter came in at 1%, a decline of 120 basis points versus the prior year. Lower restructuring costs improved margins by about 60 basis points.

But the effect was more than offset by the impact of several factors. First, we reduced production line rates across our marine operations in the quarter as compared to the prior year and took extended shutdowns around the Thanksgiving and New Year holidays to help in our efforts to reduce dealer pipeline in our own backyard inventory.

Production at some of our key fiberglass boat brands was down by 26% versus the fourth quarter of 2006. Next we continue to offer higher discounts most notably at fee rate to move nine current products at retail and help dealers reduce their pipeline inventories.

While our margins were adversely affected, the efforts have been successful. The remaining margin decline comes from the effect of replacing Sealine's largest dealer who went bankrupt as we've noted over the last two conference calls along with warranty issues at one of our smaller boat brands.

I should note that the operating margin decline came entirely from gross margins. Operating expenses for the quarter were up slightly with the usual number of puts and takes while our restructuring cost and bonus accruals were offset by higher spending at fitness for new product development and marketing cost.

In a translation effect of the weaker dollar on international expenses. Let me quickly offer a few comments on how these factors affect the operating margins in each of our segments during the fourth quarter.

The Boat Group posted a 4.6% operating margin loss. A drop of 600 basis points from the 1.4% operating margin reported in the fourth quarter of 2006.

Lower sale, reduced fixed cost absorption from lower production, higher discounts, higher restructuring expenses and the effect from Sealine and warranty expenses drove the decline. At the Marine Engine segment operating margins improved by 320 basis points to 3.9% led by the absence of $9.5 million of restructuring costs seen in 2006.

International sales growth and the benefit from cost reduction in outboard engine manufacturing offsetting lower fixed cost absorption were also at work. Life Fitness's operating margin in the quarter were 15.1%, up slightly from the 15% seen in 2006 as a benefit from impressive sales growth largely on the commercial equipment side of the business.

This partially offsets by the higher expenses for the development and launch of new products, I just mentioned. Finally, at Bowling & Billiard, fourth quarter operating margins came in at 9%, up 430 basis points.

Cost reduction improved performance from our two manufacturing plants in Mexico for bowling balls and coin-operated pool tables. Along with contributions from our New Brunswick Zone XL were the biggest drivers.

Before turning on to the balance sheet, let me point out that our consolidated equity earnings were favorable in the quarter by $4.7 million versus 2006. Once again stronger performance from CMD, a 50-50 joint venture between Cummins and MerCruiser for diesel engine the contributor.

In addition the absence of restructuring activity which occurred last year at our Japanese bowling joint venture impacted the quarter-over-quarter result. Turning to the balance sheet, we ended the year with $331 million in cash, up slightly from the $328 million we held at the end of September even after a $53 million dividend payment during the fourth quarter.

Free cash flow from continuing operation, which we defined as cash from operating and investing activity before spending on acquisition and equity investment. Totaled $172 million during 2007 that's up from the $153 million in 2006.

The significant drop in earnings was offset by favorable working capital requirements amongst some other items. During 2006, we built working capital by $93 million, compared with the $4 million reduction in 2007.

The biggest contributor to the working capital decline in 2007 was reduced bonus payout. Our inventory balance which stood at $1.7 billion at the end of September fell to $907 million at year-end.

The significant production cuts kicked in at the Boat group which account for almost two-thirds of the $100 million inventory decline. Mercury accounts for most of the reminder.

Looking forward we will continue to maintain reduced production level so we achieve lower inventory for both Brunswick and for our dealers. Keep in mind, however, that we are now building inventory in advance of the Marine season.

As a result you will see inventories increase not following the first quarter. But inventories will grow at a slower pace than in 2007.

Accounts receivable of $572 million at year-end were up 16%, compared with the year ago. This may seem out of line the sales for the full were basically flat.

But the growth is all attributable to strong international sales at Mercury, which carry longer payment term and a revenue increase seen at Life Fitness particularly in the fourth quarter. On the capital expenditure front, 2007 spending came in at $208 million below the $220 million we had expected.

We cut back on our spending plans as part of our effort to further built cash balances due to the high level of uncertainty in the U.S. economy.

Of the $208 million, $42 million or 20% was invested in our Bowling retail business. We continued Brunswick Zone XLs in 2007 and had plans for at least for more, already finalized at this early point in the year.

With this component of our capital spending, they actually increased during 2008 to $50 million or so. We do expect, however, to fund $20 million to $40 million of the spending through sale or leaseback or other financing option during the year.

We own all but two of our eight current Zone XLs the remainder of our Bowling centers are half owned half leased and we want to move toward a higher ratio for the XL as well. We intend to reduce the remaining $166 million of 2007 capital spending from our Marine and Fitness businesses to about $125 million in 2008.

We are not cutting back on bringing new and innovative products to the market, but we are more focused on privatizing our spend across the product portfolio. The total capital spending in 2008 is currently targeted at $175 million, although again $20 million to 40 million of that will be funded from external sources.

Depreciation and amortization expense is forecast to run about $190 million this year. On the tax front I want to point out that our effective tax rate could be higher as we enter 2008.

Our effective rates stood at 30% for 2007, excluding the special tax benefit throughout the year. As you are likely aware, Congress did not extend the research and development tax credit for the year ended and it is not been included in the economic stimulus package now before the Senate.

While until Congress extends this important credit we will likely see higher tax rates in 2008 maybe into the mid 30% range. The R&D tax credit extension was also delayed in 2006, but eventually came through in the fourth quarter.

During the fourth quarter, we bought 500,000 shares of stock, bringing the full year total to 4.1 million shares, when couple with a $53 million dividend pay in December we returned a total of $178 million to shareholders during the year. In our mid-December Investor Meeting, I indicated that our highest priority is the need to maintain a strong balance sheet and liquidity.

That remains the case today particularly with the height and volatility seen in financial markets since the year began. As we use significant cash in the first quarter, for the seasonal build and working capital you should not expect us to repurchase any stock through the end of the March.

We will wait on the side lines until we see how the 2008 Marine season unfolds, then move forward only if we have maintained a healthy cash position. With that let me turn the call back over to Dusty.

Thanks Pete. As we said at our December Investor Meeting we are not giving earnings guidance for 2008.

As we entered the year, it's difficult to get any meaningful read on the U.S. Marine market.

Consumer uneasiness, the housing market, tightening credit availability, regional economic variances in many of the key boating markets such as the North East, Florida and California excessive talk of a recession and the like are all cause for concern and indicate potential continued decline in marine markets. On the other hand, however, the impact of an economic stimulus package, lower interest rates and several other factors could enable marine markets to stabilize.

However for our planning purposes we're not counting on that as we had planned for 2008. We're still several weeks away from the beginning of the boating season and under these circumstances it would be imprudent for me to offer a prediction on the U.S.

economy, its impact on the marine industry and the flow through to our results. I can tell you though what we're going to do to responsibly run our business in these times.

In our planning for 2008, we have developed production schedules at levels below those of 2007. However the number of boats and engines we ultimately produce is going to be gathered by developing retail demand over the coming months.

The key for us is to remain nimble and be prepared to bay out production schedules as required from was market needs. We will continue to take actions to reduce costs or cost of broad range of activities.

Over the past several years, we have lowered cost by tens of millions of dollars through plant consolidations and efficiencies, sourcing savings, quality improvements, headcount reductions, product rationalization, lean six sigma projects, and countless other activities. Unfortunately these savings have been masked by the volume reductions we've undergone.

Put the magnitude in important of the improvement in our cost positioning in context. In 2007 we sold 30% fewer of our high margin cruisers, sport yachts and yachts than in 2001.

We manufactured 35% fewer outboards in 2007 versus 2001. And to 2001, our transition to four-stroke outboard product and entry into outboard boat businesses has significantly lowered our overall margin potential.

Yet even in these segments we have generated earnings of $1.23 per share this year. Reducing our cost and improving our productivity continue to be a necessity in this weak marine market.

We expect that as we take action to lower our cost in 2008, we will incur charges from time to time. These actions, however, will position us well when the industry comes back.

We did a great job in generating cash in 2007 and good working capital management and cash generation our important focuses in 2008. So its hard work in markets such as these, and our businesses will continue to stay focused on aggressive working capital targets.

Our planning for less capital spending in 2008 and 2007 with one materially lowered our spending from new product and innovation. Our dealers and consumers will continue to be impressed with the volume of new products and dazzling innovations in them.

The fact we have a very ambitious product brand for 2008 and 2009, one designed to ensure we build upon our industry leading install base, build into larger boats, new technology to bring people in the boating. We will talk to you about all this down at the Miami Boat Show in a couple of weeks.

We are also going to continuing to work on the important strategic initiatives we've discussed many times. Systems engineering, platform and development, design and manufacture, dealer certification, Brunswick dealer advantage, large boat offerings in access to water are examples of strategic activities, we continue to advance.

As they are going to service well in the future. When we out a wrap on all this we see 2008 as another tough year.

It is year continuing opportunities for us and our dealers to improve. Our experience tells us that when economic fundamentals improve the corresponding marine market turnaround produces dramatic upside for us.

Although, we cannot just wait for economic fair weather and we will continue to improve our operating cadence and potential in 2008. Thank you for your time, and now we will take your questions.

Can we have the questions queued up please. Question And Answer

: Thanks. Good morning.

Couple of questions. First, can you give us a little bit more color on your comment about further potential impairment charges going forward?

Because obviously that's somewhat of a... its al most like a black hole there, because you've made so many acquisitions over the last few years, there is so much to drill on the balance sheet debt, that has the potential to be a material event and as we try to think about, trying to assess what current book value is, whether your seeing something that's eminent but small or eminent and large, really has a...

an important role, can you give us anymore color on how you are thinking about evaluating that?

Sure. I would say, Michael that in terms of the potential for and it is the potential only, its going to be very dependent on how the year unfolds that we are sitting here in January, and quite honestly, its not until were into second quarter, I think that will have a better sense of it, but if we are likely to be associated with, our outboard boats operation.

More than anything else, if you look at the book value of those in total, its around $300 million and I wouldn't say at this point that we would expect anything to be large but, it depends on how the year unfolds?

Thanks. That's helpful.

And then may be just one other big macro question, as we look back, I look at our model and we look back at 2001, when you generated, I think when you were on $0.95 or $0.96 of earnings and operating margins were down, mid to low single digits, 07 kind of has now eclipsed that in terms of a low watermark on margin for the business has changed, you got a much bigger fixed infrastructure, you have got the Marine, the Mercury business which, is gone through some changes for the margins, It will never be as high as they were before. Kind of a long-winded way of asking, how do we think about the bottom and your ability to kind of cut cost but, can operating margins dip negative here before we see a move out of the trough on an annual?

I'll start and then Pete can add to it. There obviously, is a level at which marine markets could go or our marine businesses and potential get into negative operating margins.

I actually believe though it would be a reduced level in the U.S. market, I use this word a difficult proportion.

First in the negative operating margins across our marine businesses. And I don't see that coming.

While 2008 is not going to be a piece of cake, we've been doing a lot of planning and attempting to structure our company so that we can grow through these source of plans and we win very hard at work on getting cost out. We have plans, discussions, books full of other things we can do on a continuing basis as we watch this market.

To work on calls and to improve our position. So we are attempting and the picture I probably didn't do a very good job of painting in my discussion is that we are going to be nimble.

We are going to do what we have to do. And the one thing now we cannot do is lose our competitive positioning in and around product and having places to go great plans with great people with good product coming in the pipeline.

Because this is going to turn at some point. And I want this to accelerate out of this much better than we've ever done.

So that's all the work that we do, Michael, everyday here. And if I had a real clear view of the market then our planning would be a heck a lot easier in this company.

But with the market in the flux is our goal and key here is to be nimble and be prepared to do what we have to go do, when we have to go do it.

I think just to add to that for the Boat Group, actually we did lose money in 2007 on a full year basis, up roughly $15 million when you pull out the, just the impairment charge from the third quarter. One of the real reasons and this is the single biggest reason for the margin decline, even year-over-year, has been the very high level of discounts that we put in place.

Now, its been a very tough market. We honestly had too much inventory out there, that was non-incurring and that by itself is probably reduced margins for the group overall by near 200...

two full percentage points or 200 basis points. And moving forward, we would obviously hope that that would be diminished.

We also had a number of issues, as I've mentioned the Sealine here now for a couple of quarters, we can't just miss that, we though that was $0.09 a share and earnings impact versus the prior year and the second half alone. But once we get beyond those operational issues should also help and I think on Mercury, it's a bit tougher to see that in a loss position to be honest, because even though the margins are down, and down probably significantly versus 2001 and earlier time, it still have very sound business with P&A and also with the sterndrive [ph] business.

And international as well to it, some of the bigger pieces there, overall business as I mentioned. So, it would be pretty challenging and probably worse than biblical proportions as Dusty said for that business.

Thank you very much.

You're welcome.

Thanks. Good morning, guys.

Hi, Ed.

Hi Ed.

Kathryn are you going to do a left handed Zeus demo in Miami?

Absolutely. I hope you are there for it.

Looking forward to it. Wanted to actually focus mainly on the engine business.

Did you give an engine pipeline inventory number on the call that I missed?

We didn't and the engine pipeline was at 26 weeks Ed, at the end of December of this year, compared to 23 weeks a year ago. Goes up 3 weeks.

Okay.

A little bit better trend than what we saw in the third quarter where it was up 5.

Right and did you see, in the third quarter you mentioned some kind of buying forward in California ahead of the new mission requirements? Did you see any more of that in the fourth quarter?

Yes, there was probably some impact there and I think when you look at how much MerCruiser is down year-over-year compared to our sterndrive boat brand, it didn't seem the same level of decline and that was one factor that probably drove it. So there is a little bit of that in the fourth quarter.

Okay, thank you. And then just on the international business, I guess it supplies to the company as a whole, but I guess more than anything to this, the engine business because of the percentage of revenue that's derived from international markets clearly you had a lot of momentum there.

But I'm just trying to think about the impact of some of the potential impact of some of the comparisons that you are up against and if you were to sort of presumably there's basically three reasons why your international business is very strong right now. One is currency, two is the international economies are generally better than U.S., and then three is that you've got your own business and development initiatives that are helping there.

How do you... how much weight would you give to each of those three factors and sort of thinking about the momentum in that business right now?

Well when we sit back and look at our international sales growth, particularly in Mercury, this is actually a company number but we reported growth for the full year, 12% internationally and we estimate roughly, a third of that is driven by translation, 4% or so and the rest would be volume mix, sorts of factors going on. So, we does have the...

so I think, the translation impact, you would expect that to falloff unless there is just significant further weakening of the dollar on a full year basis, 2008 versus 2007.

I think the real driver once you get past the translation impact, actually is the focus on the organization. We are much better structured outside the Untied States to go, the tax business.

We spend a lot of time supplementing the great talent road we already had outside the U.S. with new talent and what we are beginning to see are new dealers coming on board in many countries.

I think, we at the December, Analyst Meeting gave you an example of what's going on down in Mexico as one example. So, once you get past the translation impact from my perspective, the biggest driver is focus, having the real plan and having everybody in the business out their trying to move it forward.

And our guys have been doing an absolutely fabulous job.

At the industry level, internationally are you seeing any slowing of demand, just for economy reasons?

No, no. Again, that the best indicator we have, boy its not a good one and I want to be very clear are things like boat shows and we have actually done quite well outside the United States in boat show so far this year in certain of our brands, so lets...

I am quite pleased and comfortable.

And like the U.S. a little off season at this point of the year, so it is hard to draw conclusions right now.

Understandable, thanks guys.

Pete can I just make one of those comments as we look at aging pipelines, we need to keep talking about our Tohatsu joint venture ahead from operating issues in 2006 that has been cured. We had an enormous backlog of orders or small engines which the Mercury folks have done a great job of filling and taking care of and that has had an usually driver of any uptick in the outboard pipeline.

Thank you.

You are welcome.

: Hi, Thank you, so cost reduction and if this continue to be a major focus for the company and I think you said you reduced expenses by about $32 million this year in 07 obviously masked by the softer revenue requirement, but I was wondering as you look into 2008, do you think you have opportunity to reduce expenses those sort of levels or at this point do you see great opportunity to cut cost?

Greater.

Okay. And then as you look out into 2008 in a promotional environment I mean do you expect discounting to be sort of in line with 07, greater than 07 or do you potentially see less given better inventory pipeline.

Less.

Okay, great. Thank you.

Well Steve that's a great way to ask questions.

: Hi, thanks couple quick questions, looking at you full year engine business your domestics sterndrive was down 5%, domestic outboard down 2%, and you said that it looks like the overall boat industry is down maybe low single digit or low double digits for the year, how do you reconcile the two difference there. Why would engines be declining that much slower than the boat business?

Sales outside the U.S.?

No, I know but I'm just looking at the domestic ones, your domestic?

Yes. This was the point there is, first of all those are dollars, who I talked about the industry being down both are generally units and there is a difference there.

In part of it to a big part of it where you will see outboards down, 2% that you mentioned Joe, the reason is that their pipeline wasn't very, very good shape by the end of 2006. But we didn't have to take as drastic a curtain production in order to meet the market.

We'll also point out that for both of these, for our engine businesses it really is driven by the production schedule of our customers. And our visibility maybe into what's going on for them at retail could be a bit more difficult but its based on order from them.

There is an extra step in the value chain between the end consumer and Mercury.

You're saying the OEM customers are giving... is that you are referring to?

Hello, are you there?

Yes.

I'm sorry. How much of that the domestic businesses OEM as opposed to replacement demand?

Probably about 85% of Mercury's business today is OEM 15% is the replacement.

Right, okay. And then your marine eliminations number was actually down pretty big in the fourth quarter much more so than it was in the first three quarters as a percentage of the overall marine business...

what's driving that and why would that be the case?

We reduced our inventory, we were not shipping as much to our sister companies as we... there was a smaller mix of the overall sale.

And so you had a lot fewer intercompany sales to get our own backyard inventory in line. What that line represents that elimination is sales of engines largely to our sister boat companies.

Right, right.

And so we wanted to reduce our own backyard inventory of both dimensions. We took more production cuts in the fourth quarter.

We shipped less, but we shipped a lot less to the sister company.

Okay, so I understand that part, but I guess what's kind of confusing me, your both sales are down about 3% in the fourth quarter. And your eliminations were down 19%, and then if I go back, and look at let's say the third quarter, you were down 10% on both sales, but down 6% on eliminations.

What... you're just saying it's an inventory issue.

Okay. So, inventory your factoring inventory that would show up on your balance sheet?

Yes.

Okay, great. All right.

Thank you.

Thank you. A few questions here.

Pete could you give us the international sales in total for the company both in the fourth quarter and in 2007?

Sure. In the fourth quarter, international sales for 2007 were $536 million, and for the company on a full year basis were $2 billion.

Okay and then looking at P&A, I know you broke it out somewhat little bit in the press release, but just maybe looking at P&A collective globally for boats, and for engines in 07, if you would have those numbers

We do not give a global number for Mercury. That's domestic P&A, and so we don't disclose that and for our domestic boat P&A business, the total sales in 2007 for the full year were $340 million.

Okay then, may be to follow up on a previous question, so basically what your seeing in engines is we may see a little bit of a follow-up here, because the Tohatsu joint venture, the catch-up you did there on outboards, and then the California mission, so that potentially at least in early going here of 08, that may hurt a little bit. Is that fair to say?

It could have some impact. It's difficult to say how much of the...

to be honest it's difficult to say how much of the engines sales to an OEM were specifically driven by that factor, but it could have some impact. We don't think it very large if you will.

Okay.

Actually, the biggest issue for that business, that really rush through Mercury, so which has much higher margins on the outboard side, is getting that pipeline in good shape.

Okay. And then I apologize if I missed this, heading into that, and on the engine inventories.

You gave the pipeline number 26 versus 23 weeks, and then you gave a little bit, I thought I heard regarding outboard versus inboard sterndrive, and you said that was may be skewed a little towards the outboard, or the outboard accounted for all the increase year-over-year?

No, what I said is that we entered 2007, Tim, with lower pipeline for the outboard engine business, than we did for Mercury reserve. So, you didn't see as much of a wholesale shipment decline for that business, as you would with the rest of our marine business.

When you look at the numbers that I gave the 26 weeks of pipeline inventory for engines in total at the end of this year versus the 23 weeks that we had at the end of 2006, it is skewed that three-week increase is actually larger for MerCruiser than its for outboard, outboard is down a little.

Okay. And then just a couple of more clarification.

You said that the Cummins JV profit was up year-over-year in the fourth quarter and for the year?

Yes.

Great. Okay and then discount fee you said for the full year was around 200 basis points?

That's for the Boat Group.

For the Boat Group, okay.

200 basis points of the margin degradation.

Okay, okay. And then ForEx collectively for the company benefit of sales, EBITs, however you want to say it for the quarter, and the year?

So the translation affects from foreign exchange for the quarter were up $0.04 a share, and for the full year, we estimated it was about $0.11, that was for translation impact.

Okay. One more housekeeping shares outstanding at 12-31, and then Dusty, just a follow up on the question I asked last quarter.

Do you feel the issues regarding the change with the Bowling down to Mexico and all that, all those startup issues are now resolved?

They are 85% resolved, and my judgment is we'll finish the last 15% here in the first six months of this year Tim.

Okay great.

And in terms of the number of shares outstanding as of 12-31, if you look at the press release on average for the fourth quarter was $88.6 fully diluted. At the end of the year, it was $88.3 million shares fully diluted, 8 shares were $88.2 million.

Okay. Thank you gentlemen and Kathryn take care of the arm.

Thanks Tim.

Thanks Tim.

Yes thank you, Tim.

Thank you. The first question is you mentioned decelerating sales in the fourth quarter and your key dealer, MarineMax came out and indicated softening condition.

I understand that you don't want to make comments for '08, at this point, but in the near term is there any chance to reverse these trends?

I had a bit of trouble understanding the question. Can you try one more time Hakan?

Sure, absolutely. You mentioned some decelerating retail trends in the fourth quarter plus your key retailer, MarineMax indicated softening conditions as well.

I understand you don't want to talk about too much about '08, but is there anything in the near term that could reverse this trend?

Well, we alone are not going to reverse the trend for the industry. I can tell you though that internally we have several new products, marketing plans, and activities at a dealer level all around United States, that we believe will continue to keep us at above market levels.

And we're a big part of the market so we help the market when we do that.

But in terms of the market itself, it's a two early to call, and as Dusty decided it's difficult to extrapolate off a quarter when the retail volume in the fourth quarter only comes for 7% or 8% of the full year. So, we really won't know Hakan in terms of anything reversing until we get into 2008 [ph].

Okay the other question on the modeling. When I look at the sales numbers, I mean for the year, it was up slightly, yet there was a substantial drop in operating income.

Assuming that most of the promotions would be reflected in the sales numbers, I'm still having a little hard time understanding why the margins are so much lower, is it because the international margins are lower than the U.S. or can you help me understand a little better.

What, what... are you talking about the boat business?

I mean both business saw some revenue decline, but overall for the company we saw some revenue increases actually in the year despite all the cuts, and everything, and I would assume that all the promotional activity would be reflected there. So, the other thing I can think of is the international sales, which are growing probably at the lower margins than the overall company.

Is that fair?

I would say that's probably not fair. There is slightly higher and you're getting this simpler.

They're slightly higher for the marine side of the business, and really what you're seeing, the sales numbers basically reflect dollars. They don't give you a good picture of what's going on with the units, which in the domestic market are down significantly in the high single digit for the full year and the fixed cost absorption hit that comes with that is extremely noticeable.

After the discount, that's the next biggest factor for the company. And we did have, as I said, to some hopefully unique challenges particularly at fee line with the dealer going bankrupt our key dealer, and having replaced some couple of issues like that that actually came through to the year and all that impacted us.

Okay one last question. Can you quantify the amount the importance of California engine sales?

Can you provide a percentage?

Okay, I would say for the out of the sterndrive polled in the United States roughly 10% is for California. It goes in the California markets.

Okay, Great. Thank you.

Thank you.

Thanks. I just wanted to dig into a couple of numbers that you guys mentioned and one was, the industry sales Dusty you quoted earlier in the call down 14% in the quarter, but your boat sales were down only 3%, and I want to make sure, I understand the factors behind that, and magnitude as much as you can tell each.

So, international was one, market share had to be one?

: Well first of all they are down 14% in units.

Okay.

: What you are looking at then at the top line are dollars.

Okay.

So, the 3% down is the dollars for our business.

Okay. And what was the 14% in units, what would that have translated to?

That was for the...

That was for the industry.

Right, right.

And its units only and its retail activity at the fourth quarter, so 3% is dollars, and wholesale shutdown.

Okay.

: And we give you the 14%, again, we're looking at the domestic markets.

Right.

: We look at our sales for the quarter would include international.

Right, okay.

That's true.

So auctioning factors are units international?

: D&A?

That your pipeline is in better shape, so you are not going... you don't need to cut as much as retailers down?

No, we are actually cutting more than what's going out at retail right now to get that pipeline down.

Okay.

Dollars are down 3 % for us because of... there is mix issues that obviously go through there but it is also international, which we said was up for our businesses, boat business and engine by double digits for the year.

We have the impact of P&A and that's roughly at $340 million or $350 million dollar business for boats and engines that has an impact and you also have the impact of price increases coming through as well, before the list price increases that we have for our product.

Okay and then just follow upon that, for your sales to be down 10% that might be the Armageddon that does the... was mentioning.

We have not given a number for both our sales.

Yes... no I realize that digits I am trying to back into what it could be just saying it down but it sounds like it could be hard for it to be down 10%.

So probably its going be in the neighborhood of what it has been in Q4, Q3, less than 10%.

We were mixing units and dollars.

Right.

I just am not going get in... I really am not to try to predict what's going happen in 2008.

No, that's fair and okay. And let me just ask about SG&A too because this $32 million you cut as a run rate in '07 is it...

can we assume that your SG&A dollars we take the 07 number minus $32 million or some fraction of that, that's what your SG&A dollar should be for '08?

We have... it reflected in our 2007 spending, its $32 million of saving.

In 2008, you will get the full run rate under fiscal, it might be closer to $40 million, overall and not all of that number is in SG&A, keep that in mind.

Okay.

A good thing to that was efficiency improvements that came out of the actions that we took on the production floor, particularly for outboard engines. So, it is hard, we would expect the overall savings dollars to be higher in 2008, then the 32 year-over-year, it's not going to be very significant and a quick portion of that would show off in cost of sales, not in SG&A.

Okay. So is it fair to assume that, with all that things like SG&A dollars could be kind of flat in 08 to 07?

We are not giving guidance on that.

Yes, okay, done.

And I will point out to one of the drivers here as we are not paying any significant dollars again this year. We'll see how 2000 incomes, that could be a factor.

Yes, I am sure you all hope 08 will be better than that.

We got more room for additional savings coming.

Okay. Thank you.

Okay. Thank you.

Hi, guys. I have a couple of questions.

First on international, could you just discuss the correction that you made in the Sealine distribution and also international, can you dwell a little bit deeper into, where you are seeing success, whether its by brand, product or region?

I will take the Sealine dealer issue. What we fundamentally had was a large dealer who acted as not only a dealer but a distributor to our sub-dealers, primarily in UK and Spain.

Upon the failure of that dealer we then... we first replaced the dealer activity by that...

of that bankrupt dealer with a new dealer, he is doing quite well. And then we were able to going in and maintain that dealer, sub-dealers as direct dealers for us.

We are incredibly happy with the entire replacement, set of dealers that we now have in place. And they really began to show us how success they can be after originally completed London Boat Show.

So we are quite pleased with that. In terms of brands and places in the globe, our U.S.

Marine activity and our Sea Way activity and Boston Whaler are all doing very well globally. If we do look into certain regions for instance the Mexico area where fast fishing and smaller boats can play a big role in activity we are seeing a nice pick up there.

So it is that regional, as we look at the Mid East that clearly is larger boats not smaller boats in view of the boating activity there. So the deals right actually happens in each region, Hayley.

Okay. And then you talked about cost savings the $32 million, can I add that when I think about sort of ongoing theoretical margin does that get added to the $26 million that you took out in '06 in terms of thinking about long term or didn't?

I think really when we mentioned the $26 million that was what we expected to see from all the restructuring actions taken at the end of last year. And that was going to be the benefit seen in calendar year 2007.

Okay.

Okay, so that's really part of the 32 that we delivered.

Okay, thanks for clarifying that. Next question you've talked in the past a little bit about brand rationalizations any update on that.

We are working on it.

Okay and then the comment about goodwill and impairment charges, in terms of thinking about the magnitude, can we just look out recent acquisitions from the 04-06 period and try to ascertain a number or do we need to go back further on that?

Now, most them have... have been in that period.

Okay, and then one last question I promise. Joe Hovorka asked a question about the dislocation between engines and boat sales and the drop in intercompany sales, explain you know why should not that...

why can't that be interpreted as perhaps the independent boat builders seeing some better trends in their business right now.

Just go look into the SSI market share numbers.

Alright. And you are comfortable with those numbers are accurate.

Probably got to work on right.

Okay.

We actually over time.., you got to be careful interpreting quarter by quarter but over kind of a year, look at yearly trends.

Alright, could they be easily interpreted as market share erosion. So that's just what I want to know now.

We don't believe that's the case, not year-over-year.

That's it.

My question has been answered, thanks.

Okay. Thank you.

I see we've got no more questions in the queue. We would like to thank all of you for participating in our call and hope that some of you will be able to make it down to Miami in the next couple of weeks and attend our Investor event there.

Thank you everyone.

Take care.