Certain statements in Management's Discussion and Analysis are based on non-GAAP financial measures. Specifically, the discussion of the Company's cash flows includes an analysis of free cash flows. GAAP refers to generally accepted accounting principles in the United States. A "non-GAAP financial measure" is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the Statement of operations, balance sheet or statement of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Operating and statistical measures are not non-GAAP financial measures.

The Company includes non-GAAP financial measures in Management's Discussion and Analysis, as Brunswick's management believes that these measures and the information they provide are useful to investors because they permit investors to view Brunswick's performance using the same tools that management uses and to better evaluate the Company's ongoing business performance.

Certain other 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 in Item 1A of this Annual Report on Form 10-K.

Overview and Outlook

General

In 2008, Brunswick significantly restructured its business in order to operate effectively in light of a difficult economic climate, while maintaining its strategic objective to solidify its leadership position in the marine, fitness and bowling & billiards industries, by:

• Maintaining strong liquidity during difficult economic times;

• Focusing on cost reduction initiatives across the organization through the resizing and realignment of Brunswick's manufacturing operations and organizational structure;

• Shrinking and consolidating its manufacturing footprint to a level that allows each facility to produce at higher volumes and lower costs;

• Lowering its marine production levels to achieve reductions in pipeline inventories held by its dealers in order to maintain the health of the Company's many dealers in a difficult retail environment; and

• Distributing products through a model that benefits the Company's dealers and distributors by providing additional products and services that will make them more successful, improve the customer experience and, in turn, make Brunswick more successful.

Accomplishments in support of the Company's strategic objectives in 2008 include:

- Amended its revolving credit facility, which provides the Company with an option to borrow for operating cash requirements, if necessary; and

- Ended the year with $317.5 million of cash, compared with $331.4 million at the end of 2007, despite a difficult economy.

- Adjustments to the manufacturing footprint to streamline operations, including permanent closure of eight facilities and the temporary closure of another three facilities;

- Several boat manufacturing plants are now manufacturing multiple brands, rather than dedicated facilities for single brands; and

- Reduced the number of models being manufactured in order to better utilize the new footprint and to reduce complexity and costs.

Cost Reduction Initiatives:

- Reduced total Company work force by 27 percent;

- Consolidated functions throughout the organization and removed layers of management; and

- Exited or sold non-strategic businesses and assets.

Dealer Health:

- Removed approximately 6,700 boats, or approximately 22 percent, from dealer pipeline inventories; and

- Extended its Brunswick Acceptance Company, LLC (BAC) joint venture agreement with CDF Ventures, LLC, a subsidiary of GE Capital Corporation, through 2014, providing Brunswick's boat and engine dealers secured wholesale inventory floor-plan financing.

- Increased its focus in Latin America and the Middle East. International sales now represent approximately 44 percent of net sales from continuing operations.

Despite its success in executing these objectives, Brunswick saw a decline in its financial performance due to difficult marine market conditions and contracting global credit markets. Net sales from continuing operations in 2008 decreased to $4,708.7 million from $5,671.2 million in 2007. The overall decrease in sales was primarily due to the continued reduction in marine industry demand as a result of a weak global economy, soft housing markets and the contraction of liquidity in global credit markets. The reduction in marine industry demand is evidenced by the declining number of retail unit sales of powerboats in the United States since 2005, with the rate of decline accelerating during 2008. Industry retail unit sales were down significantly during 2008 compared with the already low retail unit sales during 2007. In 2008, the Company reported higher sales in the Bowling & Billiards segments, as well as higher sales outside the United States for the Boat, Fitness and Bowling & Billiards segments. These increases were more than offset by a reduction in the Boat, Marine Engine and Fitness segments' sales in the United States.

Operating losses from continuing operations for 2008 were $611.6 million, with negative operating margins of 13.0 percent. Operating earnings from continuing operations for 2007 were $107.2 million, with operating margins of 1.9 percent. The 2008 results included goodwill and trade name impairment charges of $511.1 million and $177.3 million of restructuring, exit and other impairment charges, while the 2007 results included trade name impairment charges of $66.4 million and $22.2 million of restructuring, exit and other impairment charges. The operating losses during 2008 primarily resulted from higher goodwill and trade name impairment charges, lower sales from marine operations, reduced fixed-cost absorption due to reduced production rates in the Company's marine businesses in an effort to achieve appropriate levels of dealer pipeline inventories and higher restructuring, exit and other impairment charges. These factors were partially offset by successful cost-reduction initiatives, as discussed in Note
2 - Restructuring Activities in the Notes to Consolidated Financial Statements.

In March 2008, Brunswick sold its interest in its bowling joint venture in Japan for $40.4 million gross cash proceeds, $37.4 million net of cash paid for taxes and other costs. The sale resulted in a $20.9 million pretax gain, $9.9 million after-tax, and was recorded in Investment sale gains in the Consolidated Statements of Operations.

Restructuring Activities

In November 2006, Brunswick announced restructuring initiatives to improve the Company's cost structure, better utilize overall capacity and improve general operating efficiencies. These initiatives reflected the Company's response to a difficult marine market. As the marine market has continued to decline, Brunswick expanded its restructuring activities during 2006, 2007 and 2008 in order to improve performance and better position the Company to address current market conditions and enable long-term profitable growth.

The Company has reported its restructuring initiatives into three classifications: exit activities; restructuring activities; and definite-lived asset impairments. The Company considers employee termination costs, lease exit costs, inventory write-downs and facility shutdown costs related to the sale of certain Baja boat business assets, the closure of its bowling pin manufacturing facility, the potential sale of the Valley-Dynamo coin-operated commercial billiards business and the divestiture of MotoTron to be exit activities. Other employee termination costs, costs to retain and relocate employees, consulting costs and costs to consolidate the manufacturing footprint are considered restructuring activities. Definite-lived impairments are costs related to the write-downs of fixed assets, tooling, patents and proprietary technology, and customer relationships.

Total restructuring, exit and other impairment charges in 2008 were $177.3 million, which include $19.3 million of gains recognized on the sales of non-strategic assets. The $177.3 million consists of $101.7 million in the Boat segment, $29.4 million in the Marine Engine segment, $3.3 million in the Fitness segment, $21.7 million in the Bowling & Billiards segment and $21.2 million at Corporate. See Note 2 - Restructuring Activities in the Notes to Consolidated Financial Statements for further details.

The actions taken under these initiatives are expected to benefit future operations by removing fixed costs of approximately $60 million from Cost of sales and approximately $300 million from Selling, general and administrative in the Consolidated Statements of Operations by the end of 2009 compared with 2007 spending levels. The majority of these costs are expected to be cash savings once all restructuring initiatives are complete. The Company has begun to see savings related to these initiatives in 2008 and expects all savings to be realized by the end of 2009.

Goodwill and Trade Name Impairments

Brunswick accounts for goodwill and identifiable intangible assets in accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," (SFAS 142). Under this standard, Brunswick assesses the impairment of goodwill and indefinite-lived intangible assets at least annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

During the third quarter of 2008, Brunswick encountered a significant adverse change in the business climate. A weak U.S. economy, soft housing markets and the contraction of liquidity in global credit markets contributed to the continued reduction in demand for certain Brunswick products and, consequently, the reduced wholesale production rates for those affected products. As a result of this reduced demand, along with lower-than-projected profits across certain Brunswick brands and lower commitments received from its dealer network in the third quarter, management revised its future cash flow expectations in the third quarter of 2008, which lowered the fair value estimates of certain businesses.

As a result of the lower fair value estimates, Brunswick concluded that the carrying amounts of its Boat segment and bowling retail and billiards reporting units within the Bowling & Billiards segment exceeded their respective fair values. The Company compared the implied fair value of the goodwill in each reporting unit with the carrying value and concluded that a $374.0 million pretax impairment charge needed to be recognized in the third quarter of 2008. Of this amount, $361.3 million relates to the Boat segment reporting unit, $1.7 million relates to the bowling retail reporting unit within the Bowling & Billiards segment and $11.0 million relates to the billiards reporting unit within the Bowling & Billiards segment. The Company also recognized goodwill impairment charges of $1.5 million in the Boat segment reporting unit and $1.7 million related to the billiards reporting unit within the Bowling & Billiards segment earlier in 2008 as a result of deciding to exit certain businesses. As a result of the $377.2 million of impairments, all goodwill at these respective reporting units has been written down to zero.

In conjunction with the goodwill impairment testing, the Company analyzed the valuation of its other indefinite-lived intangibles, consisting exclusively of acquired trade names. Brunswick estimated the fair value of trade names by performing a discounted cash flow analysis based on the relief-from-royalty approach. This approach treats the trade name as if it were licensed by the Company rather than owned, and calculates its value based on the discounted cash flow of the projected license payments. The analysis resulted in a pretax trade name impairment charge of $121.1 million in the third quarter of 2008, representing the excess of the carrying cost of the trade names over the calculated fair value. Of this amount, $115.7 million relates to the Boat segment reporting unit, $4.5 million relates to the Marine Engine segment reporting unit and $0.9 million relates to the billiards reporting unit within the Bowling & Billiards segment. The Company also recognized trade name impairment charges of $5.2 million in the Boat segment reporting unit and $7.6 million related to the billiards reporting unit within the Bowling & Billiards segment earlier in 2008 as a result of deciding to exit certain businesses.

Discontinued Operations

As discussed in Note 20 - Discontinued Operations in the Notes to Consolidated Financial Statements, on April 27, 2006, the Company announced its intention to sell the majority of the Brunswick New Technologies (BNT) business unit, consisting of the Company's marine electronics, portable navigation device (PND) and wireless fleet tracking businesses. During the second quarter of 2006, Brunswick began reporting the results of these BNT businesses, which were previously reported in the Marine Engine segment, as discontinued operations for all periods presented. The Company's results, as discussed in Management's Discussion and Analysis, reflect continuing operations only, unless otherwise noted. The Company completed the divestiture of the BNT discontinued operations in 2007.

Outlook for 2009

Looking ahead to 2009, the Company expects 2009 revenues to be lower when compared with 2008, with higher relative percentage declines occurring in the first half of the year. The expectation of lower revenues reflects the view that marine retail demand will continue to decline, at least through the first six months of the year, and that the Company is planning to sell product at wholesale and manufacture at levels below marine retail demand.

Operating earnings and margins for 2009 are expected to be adversely affected by the reduction in production and wholesale shipments, as discussed above. These actions are expected to have an unfavorable effect on margins due to reduced gross margins on lower sales volumes and lower fixed-cost absorption on reduced production. These reductions in sales demand and production volumes, along with incremental pension-related expenses of approximately $75 million pretax and the possible resumption of variable compensation, are expected to lead to lower earnings and margins in 2009 when compared with 2008 earnings and margins before goodwill and trade name impairments. Partially offsetting these factors are expected to be nearly $200 million of net cost reductions resulting from the full-year effect of actions taken in 2008 and further cost reduction activities implemented and planned in 2009. Also partially mitigating the impact of lower sales and production is the effect of lower restructuring charges of approximately $125 million in 2009 versus 2008. More significant reductions in demand for the Company's products may necessitate additional restructuring or exit charges in 2009. Excluding the effect of any special tax items that may occur or any changes to tax legislation, Brunswick is expecting to record a tax provision on operating losses in 2009. This is primarily the result of the expected inability to recognize tax benefits on projected domestic net operating losses and a projected tax provision on foreign earnings.

Matters Affecting Comparability

The following events have occurred during 2008, 2007 and 2006, which the Company believes affect the comparability of the results of operations:

Goodwill impairment charges. As a result of the continued reduction in demand for certain Brunswick products, along with lower-than-projected profits across certain Brunswick brands, management revised its future cash flow expectations in the third quarter of 2008. The revised future cash flow expectations resulted in the Company lowering its estimate of fair value of certain businesses and required the Company to take a $374.0 million pretax goodwill impairment charge during the third quarter of 2008, as prescribed by SFAS 142.

In 2008, the Company incurred $377.2 million of goodwill impairment charges, which include the aforementioned $374.0 million, along with impairments related to the analyses of its Baja boat business and its Valley-Dynamo coin-operated commercial billiards business in the second quarter of 2008. There were no comparable charges recognized in 2007 or 2006. See Note 3 - Goodwill and Trade Name Impairments in the Notes to Consolidated Financial Statements for further details.

Trade name impairment charges. In conjunction with the goodwill impairment testing, the Company analyzed the valuation of its trade names in accordance with SFAS 142. The analysis resulted in a pretax trade name impairment charge of $121.1 million during the third quarter of 2008, representing the excess of the carrying cost of the trade names over the calculated fair value. This compares with a $66.4 million pretax trade name impairment charge taken in the third quarter of 2007 as a result of a valuation analysis performed on certain outboard boat company trade names.

In 2008, the Company has taken $133.9 million of trade name impairment charges, which include the aforementioned $121.1 million and additional impairments related to the previous analyses of its Bluewater Marine boat business and its Valley-Dynamo coin-operated commercial billiards business in the second quarter of 2008. This charge compares with the $66.4 million trade name impairment charge taken in 2007, related to the impairment of certain outboard boat trade names. There were no comparable charges recognized in 2006. See Note 3 - Goodwill and Trade Name Impairments in the Notes to Consolidated Financial Statements for further details.

Restructuring, exit and other impairment charges. Brunswick announced initiatives to improve the Company's cost structure, better utilize overall capacity and improve general operating efficiencies. During 2008, the Company recorded a charge of $177.3 million related to these restructuring activities as compared with $22.2 million during 2007 and $17.1 million during 2006. See Note
2 - Restructuring Activities in the Notes to Consolidated Financial Statements for further details.

Investment sale gains. In March 2008, Brunswick sold its interest in its bowling joint venture in Japan for $40.4 million gross cash proceeds, $37.4 million net of cash paid for taxes and other costs. The sale resulted in a $20.9 million pretax gain, $9.9 million after-tax, and was recorded in Investment sale gains in the Consolidated Statements of Operations.

In September 2008, Brunswick sold its investment in a foundry located in Mexico for $5.1 million gross cash proceeds. The sale resulted in a $2.1 million pretax gain and was recorded in Investment sale gains in the Consolidated Statements of Operations.

Tax Items. During 2008, the Company recognized a tax provision of $155.9 million on operating losses from continuing operations of $632.2 million for an effective tax rate of (24.7) percent. Typically, the Company would recognize a tax benefit on operating losses; however, due to the uncertainty of the realization of certain net deferred tax assets, a provision of $338.3 million was recognized to increase the deferred tax asset valuation allowance. See Note
10 - Income Taxes in the Notes to Consolidated Financial Statements for further details.

During 2007, the Company recognized special tax benefits of $9.8 million, primarily as a result of favorable tax reassessments and its election to apply the indefinite reversal criterion of APB 23 to the undistributed net earnings of certain foreign subsidiaries, as discussed in Note 10 - Income Taxes in the Notes to Consolidated Financial Statements. These benefits were partially offset by expense related to changes in estimates of prior years' tax return filings and the impact of a foreign jurisdiction tax rate reduction on the underlying net deferred tax asset.

During 2006, the Company reduced its tax provision primarily due to $47.0 million of tax benefits, consisting mostly of $40.2 million of tax reserve reassessments of underlying exposures. Refer to Note 11 - Commitments and Contingencies in the Notes to Consolidated Financial Statements for further detail.

Results of Operations

Consolidated

The following table sets forth certain amounts, ratios and relationships
calculated from the Consolidated Statements of Operations for the years ended
December 31, 2008, 2007 and 2006:

                                                                                        2008 vs. 2007                    2007 vs. 2006
                                                                                     Increase/(Decrease)              Increase/(Decrease)
(in millions, except per share
data)                                   2008            2007           2006              $              %                 $              %

Net sales                             $ 4,708.7       $ 5,671.2      $ 5,665.0      $    (962.5 )     (17.0 )%       $       6.2         0.1 %
Gross margin (A)                          867.4         1,157.8        1,233.3           (290.4 )     (25.1 )%             (75.5 )      (6.1 )%
Goodwill impairment charges               377.2               -              -            377.2          NM                    -           -
Trade name impairment charges             133.9            66.4              -             67.5          NM                 66.4          NM
Restructuring, exit and other
impairment charges                        177.3            22.2           17.1            155.1          NM                  5.1        29.8 %
Operating earnings (loss)                (611.6 )         107.2          341.2           (718.8 )        NM               (234.0 )     (68.6 )%
Net earnings (loss) from
continuing operations                    (788.1 )          79.6          263.2           (867.7 )        NM               (183.6 )     (69.8 )%

Diluted earnings per share            $   (8.93 )     $    0.88      $    2.78      $     (9.81 )        NM          $     (1.90 )     (68.3 )%

Expressed as a percentage of Net
sales
Gross margin                               18.4 %          20.4 %         21.7 %                       (200 )bpts                       (130 )bpts
Selling, general and
administrative expense                     14.2 %          14.5 %         13.1 %                        (30 )bpts                        140  bpts
Research & development expense              2.6 %           2.4 %          2.3 %                         20  bpts                         10  bpts
Goodwill impairment charges                 8.0 %             - %            - %                        800  bpts                          -
Trade name impairment charges               2.8 %           1.2 %            - %                        160  bpts                        120  bpts
Restructuring, exit and other
impairment charges                          3.8 %           0.4 %          0.3 %                        340  bpts                         10  bpts
Operating margin                          (13.0 )%          1.9 %          6.0 %                         NM                             (410 )bpts


  __________

bpts = basis points
NM = not meaningful

(A) Gross margin is defined as Net sales less Cost of sales as presented in the Consolidated Statements of Operations.

2008 vs. 2007

The decrease in net sales was primarily due to reduced marine industry demand compared with 2007 as a result of uncertainty in the global economy and the related contraction of liquidity in global credit markets. Weakness in marine retail demand was previously isolated to the United States; however, the recent uncertainty in the global economy has had an adverse effect on worldwide retail demand. As a result of the prolonged decline in marine retail demand and tighter credit markets, a large dealer filed for bankruptcy in 2008. If additional dealers file for bankruptcy, Brunswick's net sales and earnings from continuing operations may be unfavorably affected through lower market exposure and the associated decline in sales and the potential for the repurchase of Brunswick products or recourse payments on customers' debt obligations.

Although net sales in 2008 were down 17 percent from 2007, the Company saw strong sales of commercial fitness equipment and bowling products and experienced increases in revenue from Brunswick Zone XL centers.

Sales outside the United States increased $42.1 million to $2,058.5 million in 2008, with the largest increase in contributions coming from the Latin American region, which increased $51.2 million to $247.8 million, and the Africa & Middle East region, which increased $23.7 million to $121.8 million. The total growth outside the United States was largely attributable to higher sales from the Boat, Bowling & Billiards and Fitness segments.

Brunswick's gross margin percentage decreased 200 basis points in 2008 to 18.4 percent from 20.4 percent in 2007. The decrease was primarily due to lower fixed-cost absorption and inefficiencies due to reduced production rates, as a result of the Company's efforts to achieve appropriate levels of marine customer pipeline inventories in light of lower retail demand, and higher raw material and component costs. This decrease was partially offset by price increases at certain businesses, successful cost-reduction efforts and lower variable compensation expense.

Operating expenses decreased by $171.4 million to $790.6 million in 2008. The decrease was primarily driven by successful cost reduction initiatives and lower variable compensation expense, but was partially offset by the effect of unfavorable foreign currency translation.

During 2008, the Company incurred $511.1 million of impairment charges related to its goodwill and trade names. These charges compare with the $66.4 million impairment charge taken on certain trade names during the comparable 2007 period. See Note 3 - Goodwill and Trade Name Impairments in the Notes to Consolidated Financial Statements for further details.

During 2008, the Company announced additional restructuring activities including the closing of its bowling pin manufacturing facility in Antigo, Wisconsin; closing of its boat plant in Bucyrus, Ohio, in connection with the divestiture of its Baja boat business; closing of its Swansboro, North Carolina, boat plant; closing its production facility in Newberry, South Carolina; the cessation of boat manufacturing at one of its facilities in Merritt Island, Florida; the write-down of certain assets of the Valley-Dynamo coin-operated commercial billiards business; the closing of its production facilities in Pipestone, Minnesota; Roseburg, Oregon; and Arlington, Washington; mothballing its Navassa, North Carolina, boat plant; and the reduction of its employee workforce across the Company. See Note 2 - Restructuring Activities in the Notes to Consolidated Financial Statements for further details.

The decrease in operating earnings was mainly due to reduced sales volumes, along with lower fixed-cost absorption, goodwill and trade name impairments taken during 2008 and the restructuring activities discussed above.

Equity earnings decreased $14.8 million to $6.5 million in 2008. The decrease in equity earnings was mainly the result of lower earnings from the Company's marine joint ventures and the absence of earnings from its bowling joint venture in Japan, as the joint venture was sold in the first quarter of 2008.

During 2008, Brunswick sold its interest in its bowling joint venture in Japan for $40.4 million gross cash proceeds and its investment in a foundry located in Mexico for $5.1 million gross cash proceeds. These sales resulted in $23.0 million of pretax gains.

. . .