BRUNSWICK CORP, 10-K405/A, 1999-02-08

BRUNSWICK CORP
10-K405/A, 1999-02-08
ENGINES & TURBINES

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

FORM 10-K/A

(AMENDMENT NO. 1)

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER 1-1043
------------------------

BRUNSWICK CORPORATION

(Exact name of registrant in its charter)

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

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

(847) 735-4700
(Registrant's telephone number, including area code)

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

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
---------------------------------------- ---------------------------------
Common Stock ($.75 par value) New York, Chicago, Pacific,
and London Stock Exchanges

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
------------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

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

As of January 29, 1999 the aggregate market value of the voting stock of the
registrant held by non-affiliates was $2,268,249,901. 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 ($.75 par value) of the registrant
outstanding as of January 29, 1999, was 91,878,477.

DOCUMENTS INCORPORATED BY REFERENCE

PART III OF THIS REPORT ON FORM 10-K INCORPORATES BY REFERENCE CERTAIN
INFORMATION FROM THE COMPANY'S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL MEETING
SCHEDULED TO BE HELD ON APRIL 22, 1998.

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This Form 10-K/A amends Item I, Management's Discussion and Analysis,
Consolidated Statements of Income, and Notes 1, 4, 6, 7 and 18 to Consolidated
Financial Statements and restates the remaining items and Financial Statements
and Notes as originally filed.

PART I

ITEM 1. BUSINESS

Brunswick Corporation (the "Company") is a multinational, branded consumer
products company serving the outdoor and indoor active recreation markets. Its
major brands include Zebco-Registered Trademark-, Quantum-Registered Trademark-,
Browning-Registered Trademark-, Martin-Registered Trademark- and
Lew's-Registered Trademark- fishing reels and reel/rod combinations;
MotorGuide-Registered Trademark- and Thruster-Registered Trademark- trolling
motors; Swivl-Eze-Registered Trademark- marine accessories; American
Camper-Registered Trademark- and Remington-Registered Trademark- camping gear;
Igloo-Registered Trademark- coolers, ice chests and thermoelectric cooler/warmer
products; Hoppe's-Registered Trademark- shooting sports accessories;
Mongoose-Registered Trademark-, Roadmaster-Registered Trademark- and Ride
Hard-Registered Trademark- bicycles; Flexible Flyer-Registered Trademark-
bicycles, wagons and sleds; Brunswick Recreation Centers-Registered Trademark-
and Brunswick-Registered Trademark- bowling capital equipment, supplies and
consumer products; Brunswick-Registered Trademark- billiards tables; Life
Fitness-Registered Trademark-, ParaBody-Registered Trademark- and Hammer
Strength-Registered Trademark- exercise equipment; Sea
Ray-Registered Trademark-, Bayliner-Registered Trademark- and
Maxum-Registered Trademark- pleasure boats; Baja-Registered Trademark-
high-performance boats; Boston Whaler and Robalo-Registered Trademark- offshore
fishing boats; Quicksilver-Registered Trademark- marine parts and accessories;
Mercury-Registered Trademark-, Mariner-Registered Trademark- and
Force-Registered Trademark- outboard engines and
MerCruiser-Registered Trademark- sterndrives and inboard engines.

Since mid-1995, the Company has been implementing three core growth
strategies:

- Building its businesses via product innovation, line extensions and
acquisitions;

- Strengthening its customer connection through aggressive marketing; and

- Improving operating margins through synergies and effective cost
management.

The Company operates in two business segments: Recreation and Marine. See
Note 5 to consolidated financial statements on pages 32 to 33 for financial
information about the Recreation and Marine segments.

RECREATION

The Recreation segment consists of the Brunswick Outdoor Recreation Group
("BORG"), the Life Fitness Division and the Brunswick Indoor Recreation Group
("BIRG").

BORG markets and manufactures fishing and camping equipment, coolers, ice
chests, bicycles, wagons and sleds. The Company believes that it holds the
leading domestic market share of fishing reels and reel/rod combinations. BORG
also manufactures and sells fishing pedestals, ski tows, pylons and electric
trolling motors for anglers and for use by boat manufacturers including the
Company's boat units. BORG camping products include sleeping bags, tents,
backpacks, canvas bags, foul-weather gear, waders, hunting apparel, propane
lanterns and stoves, cookware, utensils, and shooting sports accessories. The
Company believes it is the domestic market leader in ice chests, beverage
coolers and thermoelectric cooler/warmer products.

The Life Fitness Division designs, markets and manufactures leading domestic
and global brands of computerized cardiovascular and strength training fitness
equipment serving the commercial (health clubs, gyms, professional sports teams,
military, government, corporate and university facilities) and high-end consumer
markets. Life Fitness was purchased for approximately $314.9 million in July
1997. Life Fitness expanded its product offerings with the acquisition in
November 1997 of Hammer Strength, which pioneered and leads the plate-loaded
category of strength training, and the purchase in February 1998 of ParaBody,
Inc., the leader in multi-station gyms and benches and racks. The Company has
financed these acquisitions through long-term and short-term borrowings and
internally generated funds.

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BIRG is the leading manufacturer of bowling products including bowling balls
and capital equipment such as bowling lanes, automatic pinsetters, ball returns,
computerized scoring equipment and seating and locker units.

BIRG operates 126 recreation centers worldwide, and its joint ventures
operate 30 recreation centers. Recreation centers offer bowling and, depending
on size and location, the following activities and services: billiards, video
games, children's playrooms, restaurants and cocktail lounges. The Company also
operates five family entertainment centers, which in addition to the above
activities, also offer more extensive recreation alternatives such as basketball
courts, and in-line skating rinks. Almost all of the centers offer Cosmic
Bowling-Registered Trademark-, a glow-in-the-dark bowling experience that
transforms bowling into a new and different form of recreation. Most of the
recreation center facilities are owned by the Company.

BIRG has a 50 percent interest in Nippon Brunswick K. K., which sells
bowling equipment and operates bowling centers in Japan. The Group has other
joint ventures to (i) build, own and operate bowling centers and family
entertainment centers, which include bowling, billiards and many other games, in
China and Thailand; (ii) sell bowling equipment in China and Thailand and (iii)
manufacture pinsetters in China.

The Company's recreation products are distributed through mass merchants,
distributors, dealers, bowling centers and retailers by Company sales personnel
and manufacturers' representatives. The Company also sells certain products
directly to customers. Recreation products are distributed worldwide from
regional warehouses, sales offices and factory stocks of merchandise.

MARINE

The Marine segment consists of the Mercury Marine Group, Sea Ray Group and
US Marine Division. The Company believes its Marine segment has the largest
dollar sales volume of recreational marine engines and pleasure boats in the
world.

The Mercury Marine Group markets and manufactures a full range of outboard
engines, sterndrives and inboard engines, and propless water-jet systems under
the familiar Mercury, Mariner, Force, MerCruiser and
SportJet-Registered Trademark- brand names. A portion of Mercury Marine's
outboards and its Quicksilver parts and accessories, including steering systems,
instruments, controls, propellers, service aids and marine lubricants, are sold
directly to end-users through dealers. The remaining outboards and virtually all
of the sterndrive and inboard engines and the water-jet systems are sold to boat
builders, including the Company's boat units.

In 1996 and 1997, Mercury introduced four OptiMax-Registered Trademark-
outboard engines ranging from 135-horsepower to 225-horsepower and featuring
Mercury's new direct fuel injection ("DFI") technology. DFI is part of Mercury's
plan to reduce engine emissions by 75 percent by 2006 to comply with
Environmental Protection Agency requirements. Mercury's line of low-emission
engines also includes four-cycle versions of its smaller two-cycle outboards,
and these four-cycle outboards require no modification to meet reduced emission
levels.

Mercury Marine products are manufactured in the United States for global
distribution. International assembly facilities are located in Belgium and
Mexico, and there are distribution centers throughout the world.

The boat units consist of Sea Ray and US Marine, marketers and manufacturers
of fiberglass pleasure and offshore fishing boats.

The Sea Ray Group, best recognized for its luxury yachts, cabin cruisers,
sport fishing boats, sport boats and jet powered boats marketed and manufactured
under the same name, also manufactures and markets Baja high-performance boats
and Boston Whaler offshore boats. The Group purchases its

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outboard motors and most of its sterndrives and gasoline inboard engines from
the Mercury Marine Group.

US Marine Division, known for its Bayliner brand of motor yachts, cabin
cruisers, runabouts and jet powered boats, also markets and manufactures Maxum
runabouts and cabin cruisers, and Robalo sport fishing boats. US Marine is
vertically integrated, producing many of the parts and accessories which make up
the boats. Escort boat trailers also are produced by the Division and are sold
with smaller boats as part of boat-motor-trailer packages. Outboard motors and
sterndrives are purchased from the Mercury Marine Group.

Sea Ray and US Marine boats are sold worldwide through dealers.

The Company has a minority interest in Tracker Marine, L.P., a limited
partnership, which manufactures and markets boats, motors, trailers and
accessories. The Company has various agreements with Tracker Marine, L.P. and
its affiliates, including contracts to supply outboard motors, trolling motors
and various other Brunswick products for Tracker Marine boats.

The Company's Marine segment sales to unaffiliated customers include sales
of the following principal products for the three years ended December 31, 1997,
1996 and 1995:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN MILLIONS, UNAUDITED)
<S> <C> <C> <C>
Boats...................................................... $ 1,254.1 $ 1,175.2 $ 978.4
Engines.................................................... 1,132.7 1,112.1 1,168.7
--------- --------- ---------
$ 2,386.8 $ 2,287.3 $ 2,147.1
--------- --------- ---------
--------- --------- ---------
</TABLE>

Boat sales include the value of engines when such engines are sold as a
component of a finished boat. Engine sales include sales to boat manufacturers
that are not Company-owned, marine dealers and others, when the engine is not
sold with a Company-manufactured boat.

INTERNATIONAL OPERATIONS

Sea Ray and US Marine boats and Mercury Marine engines are sold worldwide
through dealers.

Mercury Marine has an assembly plant and distribution center in Belgium, an
assembly plant in Mexico and sales and distribution centers in Europe, Asia and
North and South America.

BIRG sells its products worldwide and has sales offices in various
countries. BIRG has a plant that manufactures pinsetters in Hungary and
pinsetter plants in Germany and China that the Company is in the process of
closing. BIRG operates recreation centers in Canada, Germany and Brazil. BIRG
has joint ventures in Asia that sell bowling equipment and/or operate bowling
centers. On October 1, 1998, the Company announced that it is exiting its joint
venture in China that operates bowling centers and exiting its bowling centers
in Brazil.

BORG sells its products worldwide and has sales and distribution centers in
France, Germany and the United Kingdom and a distribution center in Canada. It
also has a plant that manufactures bicycles in Mexico.

The Life Fitness Division sells its products worldwide and has sales and
distribution centers in Holland and the United Kingdom as well as sales offices
in Austria, Germany, Italy, Hong Kong and Brazil.

The Company's foreign sales and export sales are set forth in Note 5 to
consolidated financial statements on pages 32 to 33. In 1997, sales to Europe
and the Pacific Rim were 40 percent and 31 percent, respectively, of total
export and foreign sales. Most of the European sales were sales of marine
products, and most of the Pacific Rim sales were sales of bowling products.

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RAW MATERIALS

Many different raw materials are purchased from various sources. At the
present time, no critical raw material shortages are anticipated. General Motors
Corporation is a significant supplier of the engine blocks used to manufacture
the Company's gasoline sterndrives.

PATENTS, TRADEMARKS AND LICENSES

The Company has and continues to obtain patent rights, consisting of patents
and patent licenses, covering certain features of the Company's products and
processes. The Company's patents, by law, have a limited life, and rights expire
periodically.

In the Recreation segment, patent rights principally relate to computerized
bowling scorers and business information systems, bowling lanes and related
equipment, bowling balls, game tables, fishing reels, electric trolling motors,
camping equipment, bicycles, ice chests, coolers, thermoelectric cooler/ warmer
products, and exercise equipment.

In the Marine segment, patent rights principally relate to boats and
features of outboard motors 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, spark plugs, and fuel and oil injection systems.

The Company does not believe that any of its patents are material to segment
results of operations, and the Company believes that its success is mainly
dependent upon its engineering, manufacturing and marketing capabilities.

The Company owns the material trademarks associated with its various
divisions and applied to its products. These trademarks have indefinite lives,
and many of these trademarks are well known to the public and are considered
valuable assets of the Company.

ORDER BACKLOG

Order backlog is not considered to be a significant factor in the businesses
of the Company, except for bowling capital equipment. The backlog of bowling
capital equipment at December 31, 1997, was $20.0 million, and the Company
expects to fill all such orders during 1998. The backlog of bowling capital
equipment at December 31, 1996, was $22.6 million.

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 and innovative marketing, advertising
and sales efforts, and by providing high-quality products at competitive prices.

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 producers. The following paragraphs summarize
what the Company believes its position is in each area.

RECREATION. The Company competes directly with many manufacturers of
recreation products. In view of the diversity of its recreation products, the
Company cannot identify the number of its competitors. The Company believes,
however, that in the United States, it is one of the largest manufacturers of
fishing reels, bicycles, sleeping bags, ice chests, beverage coolers,
thermoelectric cooler/warmer products, and commercial fitness equipment. For
these recreation products, competitive emphasis is placed on product innovation,
quality, marketing activities, pricing and the ability to meet delivery and
performance requirements.

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The Company believes it is the world's largest manufacturer of bowling
capital equipment. Certain bowling products, such as automatic scorers and
computerized management systems, represent innovative developments in the
market. For other bowling products competitive emphasis is placed on quality,
marketing activities and pricing. The Company operates 126 recreation centers
and five family entertainment centers worldwide. Each center competes directly
with centers owned by other parties in its immediate geographic area.
Competitive emphasis is, therefore, placed on customer service, quality
facilities and personnel, and prices.

MARINE. The Company believes it has the largest dollar sales volume of
recreational marine engines and pleasure boats in the world. The marine engine
market is highly competitive among several major companies and many smaller
ones. There are also many competitors in the highly competitive marine
accessories business. Competitive advantage in the marine engine and accessories
markets is a function of product features, technology leadership, service,
effective distribution and pricing.

There are many manufacturers of pleasure and offshore fishing boats;
consequently, this business is highly competitive. The Company competes on the
basis of product features and technology, quality, value, performance,
durability, styling and price. Demand for pleasure boats and marine engines is
influenced by a number of factors, including consumer education about boating,
economic conditions and, to some extent, prevailing interest rates and consumer
confidence.

RESEARCH AND DEVELOPMENT

Company-sponsored research activities, relating to the development of new
products or to the improvement of existing products, are shown below:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Recreation....................................... $ 14.5 $ 11.1 $ 13.9
Marine........................................... 74.9 75.4 74.0
--------- --------- ---------
$ 89.4 $ 86.5 $ 87.9
--------- --------- ---------
--------- --------- ---------
</TABLE>

NUMBER OF EMPLOYEES

The number of employees at December 31, 1997 is shown below by industry
segment:

<TABLE>
<S> <C>
Recreation.......................................... 11,150
Marine.............................................. 14,000
Corporate........................................... 150
---------
25,300
---------
---------
</TABLE>

There are approximately 1,650 employees in the Recreation segment and 2,300
employees in the Marine segment who are represented by labor unions. The Company
believes that relations with these labor unions are good.

ENVIRONMENTAL REQUIREMENTS

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
disposition of certain hazardous wastes. These proceedings, which involve both
on- and off-site waste disposal, in many instances seek compensation 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 believes that it has established adequate reserves

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to cover all known claims. The Company believes that the effects of compliance
with federal, state and local environmental laws will not have a material effect
on the Company's capital expenditures, earnings or competitive position.

ITEM 2. PROPERTIES

The Company's headquarters are located in Lake Forest, Illinois. The Company
has numerous manufacturing plants, distribution warehouses, sales offices and
test sites. Research and development facilities are division-related, and most
are located at individual manufacturing sites.

The Company's plants are deemed to be suitable and adequate for the
Company's present needs. The Company believes that all of its properties are
well maintained and in good operating condition. Most plants and warehouses are
of modern, single-story construction, providing efficient manufacturing and
distribution operations.

The Company's plants are operating at approximately 76 percent of current
capacity.

The Company's headquarters and most of its principal plants are owned by the
Company.

The two Texas plants, where Igloo coolers, ice chests and thermoelectric
cooler/warmer products are manufactured, are leased. One of these leases expires
in 2003; the other expires in 2004 and has renewal terms extending to 2029 with
an option to purchase.

Three plants where bicycles are manufactured are leased. The bicycle plant
in Effingham, Illinois is leased until 2003 with renewal terms extending to 2013
and with an option to purchase. The plant in Olney, Illinois is leased until
2001 with renewal terms extending to 2026. The plant in Ojinaga, Mexico is
leased until 2007 with renewal options to 2017 and an option to purchase.

The offices and warehouse for the American Camper business in Lenexa, Kansas
are leased until 2004 with renewal options to 2014. Two plants which manufacture
sleeping bags are leased. The sleeping bag plant in Haleyville, Alabama is
leased until 2007 with renewal options to 2017 and an option to purchase. The
plant in St. George, Utah is leased until 1999, with a renewal option until
2002.

The principal warehouse for the Life Fitness Division in Franklin Park,
Illinois is leased through 2011 with an option to purchase in December of 1998,
1999 and 2000. Some bowling recreation centers, four small plants, two test
facilities and an overseas distribution center are also leased.

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

MERCURY MARINE GROUP

Placida and St. Cloud, Florida; Stillwater, Oklahoma; Fond du Lac, Hartford
and Milwaukee, Wisconsin; Juarez, Mexico; and Petit Rechain, Belgium.

US MARINE DIVISION

Tallahassee, Florida; Valdosta, Georgia; Cumberland and Salisbury, Maryland;
Pipestone, Minnesota; Miami and Claremore, Oklahoma; Roseburg, Oregon;
Dandridge, Tennessee; and Arlington and Spokane, Washington.

SEA RAY GROUP

Phoenix, Arizona; Edgewater, Merritt Island, Sykes Creek and Palm Coast,
Florida; Bucyrus, Ohio; and Knoxville, Riverview and Vonore, Tennessee.

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BRUNSWICK OUTDOOR RECREATION GROUP

Haleyville, Alabama; Olney and Effingham, Illinois; Lenexa, Kansas;
Starkville, Mississippi; Tulsa, Oklahoma; Coatesville, Pennsylvania; Houston,
Katy and Lancaster, Texas; St. George, Utah; Delavan, Wisconsin; and Ojinaga,
Mexico.

BRUNSWICK INDOOR RECREATION GROUP

Lake Bluff, Illinois; Des Moines, Iowa; Muskegon, Michigan; Bristol,
Wisconsin; Stockach, Germany; and 126 bowling centers and five family
entertainment centers in the United States, Canada, Europe and Brazil.

LIFE FITNESS DIVISION

Paso Robles, California; Franklin Park, Illinois; Falmouth, Kentucky; and
Ramsey, Minnesota.

ITEM 3. LEGAL PROCEEDINGS

CONCORD BOAT CORPORATION, ET AL. V. BRUNSWICK CORPORATION. In December 1995,
Independent Boat Builders, Inc., a boat materials buying group, and 24 of its
boat building members, brought suit against the Company in the United States
District Court for the Eastern District of Arkansas. As amended, the Complaint
alleges that the Company has, as a result of boat company acquisitions and
various business practices, unlawfully acquired and maintained a monopoly in the
domestic sterndrive marine engine market, and has attempted to monopolize the
domestic outboard engine market and sterndrive and outboard recreational boat
markets. The Plaintiffs also allege that the Company breached a sterndrive
engine purchasing contract with Plaintiffs, and the implied covenant of good
faith and fair dealing, and engaged in fraudulent misrepresentations. The
Plaintiffs seek an injunction requiring the Company to divest its boat
manufacturing operations and to cease the alleged unlawful business practices,
as well as actual and treble damages, punitive damages, attorneys' fees and
costs. Although no amount of damages is specified in the complaint, Plaintiffs
have recently asserted that actual damages are approximately $78 million.

The Company has answered the Complaint denying liability and asserting
various defenses. In addition, the Company has asserted a counterclaim against
the Plaintiffs alleging that the Plaintiffs have conspired to restrain trade in
violation of Federal antitrust laws by, among other things, engaging in an
illegal group boycott of the Company's products and that several of the
Plaintiffs have engaged in fraudulent conduct with respect to their purchases of
sterndrive engines. The counterclaim seeks injunctive relief, actual and treble
damages, attorneys' fees and costs.

Discovery has been completed and trial is set to commence April 13, 1998.
The Company believes, based upon its assessment of the Complaint as amended and
in consultation with counsel, that this litigation is without merit and intends
to defend itself and pursue its counterclaim vigorously.

In December 1996, the Internal Revenue Service notified the Company that it
allocated $190.0 million in short-term capital gains and $18.1 million in
ordinary income to the Company and its subsidiaries for 1990 and 1991 in
connection with two partnership investments by the Company. The IRS alleges that
these investments lacked economic substance, were prearranged and predetermined,
and had no legitimate business purpose. The Company strongly disagrees with the
IRS position, and on January 23, 1997, the Company filed petitions in the United
States Tax Court contesting the IRS allocations. This case has been scheduled
for trial in September 1998. If the IRS were to prevail, the Company would owe
the IRS approximately $60 million in taxes, plus accrued interest. The Company
intends to defend itself vigorously and does not believe that this case will
have an unfavorable impact on the Company's results of operations.

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

None.

EXECUTIVE OFFICERS OF THE COMPANY

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

<TABLE>
<CAPTION>
OFFICER PRESENT POSITION AGE
- ------------------------------------------------------------------------------------------------- ---
<S> <C> <C>
P. N. Larson*.............. Chairman and Chief Executive Officer 58
P. B. Hamilton*............ Senior Vice President and Chief Financial Officer 51
M. D. Allen................ Vice President, General Counsel and Secretary 52
G. W. Buckley*............. Corporate Vice President and President--Mercury Marine Group 50
K. J. Chieger.............. Vice President--Corporate and Investor Relations 49
J. W. Dawson*.............. Corporate Vice President and President--Brunswick Outdoor Recreation 63
Group
F. J. Florjancic, Jr.* .... Corporate Vice President and President--Brunswick Indoor Recreation 51
Group
D. E. Lyons*............... Vice President--Strategic Business Development 57
R. S. O'Brien.............. Vice President and Treasurer 48
V. J. Reich................ Vice President and Controller 40
J. A. Schenk............... Vice President--Acquisitions 55
R. L. Sell................. Vice President and Chief Information Officer 47
K. B. Zeigler.............. Vice President and Chief Human Resources Officer 49
J. P. Zelisko.............. Vice President--Tax 47
W. J. Barrington*.......... President--Sea Ray Group 47
A. L. Nieto................ President--Life Fitness Division 40
J. R. Patterson*........... President--US Marine Division 50
</TABLE>

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* Members of the Operating Committee

There are no family relationships among these officers. The term of office
of all elected officers expires April 22, 1998. The Group and Division
Presidents are appointed from time to time at the discretion of the Chief
Executive Officer.

PETER N. LARSON has been Chairman and Chief Executive Officer of the Company
since 1995. He was Executive Officer, Johnson & Johnson, a leading health care
company, from 1991 to 1995, where he served as Chairman of the Worldwide
Consumer and Personal Care Group and was a member of the Executive Committee and
the Board of Directors.

PETER B. HAMILTON has been Senior Vice President and Chief Financial Officer
since 1995. He was Vice President and Chief Financial Officer, Cummins Engine
Company, Inc., a leading worldwide designer and manufacturer of diesel engines
and related products, from 1988 to 1995.

MARY D. ALLEN has been Vice President, General Counsel and Secretary since
1997. She was Executive Vice President, General Counsel and Secretary, Hartmarx
Corporation, a clothing manufacturer, from 1994 to 1997, and Senior Vice
President, JMB Realty Corp., a real estate investment firm, from 1987 to 1994.

GEORGE W. BUCKLEY has been Corporate Vice President and President--Mercury
Marine Group since 1997. He was President of the U.S. Electrical Motors Division
of Emerson Electric Co., a manufacturer of electrical, electronic, and
electromagnetic products ("Emerson"), from 1996 to 1997, and he was President

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of Emerson's Automotive and Precision Motors Division from 1994 to 1996. He was
Emerson's Chief Technology Officer for Motors, Drives and Appliance Components
from 1993 to 1994.

KATHRYN J. CHIEGER has been Vice President--Corporate and Investor Relations
of the Company since 1996. She was Vice President--Corporate Affairs of Gaylord
Container Corporation, a paper manufacturer ("Gaylord"), from 1994 to 1996 and
Director of Corporate Affairs of Gaylord from 1989 to 1994.

JIM W. DAWSON has been Corporate Vice President since 1994, and
President--Brunswick Outdoor Recreation Group since 1996. He was
President--Zebco Division from 1989 to 1996.

FREDERICK J. FLORJANCIC, JR. has been Corporate Vice President since 1988,
and President--Brunswick Indoor Recreation Group since 1995. He was
President--Brunswick Division from 1988 to 1995.

DUDLEY E. LYONS has been Vice President--Strategic Business Development
since 1997. From 1992 to 1997 he was President of the Management Consulting
Group of Marketing Corporation of America, a management consulting, sales
promotion and market research firm.

RICHARD S. O'BRIEN has been Vice President of the Company since 1996 and
Treasurer of the Company since 1988.

VICTORIA J. REICH has been Vice President and Controller of the Company
since 1996. She was Finance Manager of the General Electric Company's Wiring
Devices business from 1994 to 1996, Manager of the G.E. Plastics Customer
Financial Services Operation from 1993 to 1994 and Manager of the G.E. Plastics
Commercial Finance Unit from 1990 to 1993.

JAMES A. SCHENK has been Vice President--Acquisitions since 1998. He was
Staff Vice President-- Acquisitions and Alliances from 1997 to 1998 and Staff
Vice President--Corporate Planning from 1996 to 1997. He was Corporate Director
of Planning and Development of the Company from 1988 to 1996.

ROBERT L. SELL has been Vice President and Chief Information Officer of the
Company since 1998. From 1996 to 1997 he was Vice President--Information
Technology of Coors Brewing Company, a manufacturer and distributor of beer and
other malt beverages ("Coors"), and from 1989 to 1996 he was Director of
Applications for Information Technology of Coors.

KENNETH B. ZEIGLER has been Vice President and Chief Human Resources Officer
of the Company since 1995. He was Senior Vice President, The Continental
Corporation, a property and casualty insurance holding company, from 1992 to
1995.

JUDITH P. ZELISKO has been Vice President--Tax since 1998. She was Staff
Vice President--Tax from 1996 to 1998 and was Director of Tax and Assistant Vice
President from 1983 to 1996.

WILLIAM J. BARRINGTON has been President--Sea Ray Group since 1989.

AUGUSTINE L. NIETO has been President--Life Fitness Division since the
Company acquired it in 1997. He co-founded Life Fitness in 1977 and had been its
President since 1987.

J. ROGER PATTERSON has been President--US Marine Division since 1997. From
1992 to 1997 he was General Manager of the Outboard Business Unit of the Mercury
Marine Group.

9
<PAGE>
PART II

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

The Company's common stock is traded on the New York, Chicago, Pacific, and
London Stock Exchanges. Quarterly information with respect to the high and low
prices for the common stock and the dividends declared on the common stock is
set forth in Note 18 on pages 51 and 52. As of December 31, 1997, there were
approximately 16,200 shareholders of record of the Company's common stock.

ITEM 6. SELECTED FINANCIAL DATA

Net sales, net earnings, basic and diluted earnings per common share, cash
dividends declared per common share, assets of continuing operations, long-term
debt and other financial data are shown in the Six-Year Financial Summary on
pages 53 and 54.

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

Management's Discussion and Analysis is presented on pages 15 to 23.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's Consolidated Financial Statements are set forth on pages 25 to
54 and are listed in the index on page 15.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to the directors of the Company is set forth on
pages 2-4 of the Company's definitive Proxy Statement dated March 24, 1998, (the
"Proxy Statement") for the Annual Meeting of Stockholders to be held on April
22, 1998. All of the foregoing information is hereby incorporated by reference.
The Company's executive officers are listed herein on pages 8 and 9.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to executive compensation is set forth on pages
5-20 of the Proxy Statement and is hereby incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information with respect to the securities of the Company owned by the
directors and certain officers of the Company, by the directors and officers of
the Company as a group and by the only persons known to the Company to own
beneficially more than 5 percent of the outstanding voting securities of the
Company is set forth on pages 6 and 7 of the Proxy Statement, and such
information is hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

10
<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

A) FINANCIAL STATEMENTS AND EXHIBITS

FINANCIAL STATEMENTS

Financial statements and schedules are incorporated in this Annual Report on
Form 10-K, as indicated in the index on page 15.

EXHIBITS

<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of the Company filed as Exhibit 19.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1987, and hereby incorporated by reference.

3.2 Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock
filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for 1995, and hereby incorporated by
reference.

3.3 By-Laws of the Company.

4.1 Indenture dated as of March 15, 1987, between the Company and Continental Illinois National Bank and
Trust Company of Chicago filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1987, and hereby incorporated by reference.

4.2 Officers' Certificate setting forth terms of the Company's $125,000,000 principal amount of 7 3/8%
Debentures due September 1, 2023 filed as Exhibit 4.3 to the Company's Annual Report on Form 10-K for
1993, and hereby incorporated by reference.

4.3 Form of the Company's $250,000,000 principal amount of 6 3/4% Notes due December 15, 2006, filed as
Exhibit 4.1 to the Company's Current Report on Form 8-K dated December 10, 1996, and hereby incorporated
by reference.

4.4 The Company's agreement to furnish additional debt instruments upon request by the Securities and
Exchange Commission filed as Exhibit 4.10 to the Company's Annual Report on Form 10-K for 1980, and
hereby incorporated by reference.

4.5 Rights Agreement dated as of February 5, 1996, between the Company and Harris Trust and Savings Bank
filed as Exhibit 1 to the Company's Registration Statement for Preferred Share Purchase Rights on Form
8-A dated March 13, 1996, and hereby incorporated by reference.

10.1* Third Amended and Restated Employment Agreement entered as of December 30, 1986, between the Company and
Jack F. Reichert filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for 1986 and hereby
incorporated by reference.

10.2* Amendment dated October 24, 1989, to Employment Agreement by and between the Company and Jack F.
Reichert filed as Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989, and hereby incorporated by reference

10.3* Supplemental Agreement to Employment Agreement dated December 30, 1986, by and between the Company and
Jack F. Reichert filed as Exhibit 19.3 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1989, and hereby incorporated by reference.
</TABLE>

11
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <S>
10.4* Amendment dated February 12, 1991, to Employment Agreement by and between the Company and Jack F.
Reichert filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for 1990 and hereby
incorporated by reference.

10.5* Amendment dated March 20, 1992, to Employment Agreement by and between the Company and Jack F. Reichert
filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for 1992 and hereby incorporated by
reference.

10.6* Amendment dated December 15, 1992, to Employment Agreement by and between the Company and Jack F.
Reichert filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for 1992 and hereby
incorporated by reference.

10.7* Amended and Restated Employment Agreement dated February 3, 1997, by and between the Company and Peter
N. Larson filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for 1996 and hereby
incorporated by reference.

10.8* Employment Agreement dated December 1, 1995, by and between the Company and Peter B. Hamilton filed as
Exhibit 10.8 to the Company's Annual Report on Form 10-K for 1995 and hereby incorporated by reference.

10.9* Form of Employment Agreement by and between the Company and each of M. D. Allen, W. J. Barrington, K. J.
Chieger, J. W. Dawson, F. J. Florjancic, Jr., P. B. Hamilton, R. S. O'Brien, V. J. Reich, J. A. Schenk,
and K. B. Zeigler, filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for 1995 and hereby
incorporated by reference.

10.10* 1994 Stock Option Plan for Non-Employee Directors filed as Exhibit A to the Company's definitive Proxy
Statement dated March 25, 1994, for the Annual Meeting of Stockholders on April 27, 1994, and hereby
incorporated by reference.

10.11* 1995 Stock Plan for Non-Employee Directors filed as Exhibit B to the Company's definitive Proxy
Statement dated March 19, 1996, for the Annual Meeting of Stockholders on April 24, 1996, and hereby
incorporated by reference.

10.12* Supplemental Pension Plan filed as Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989, and hereby incorporated by reference.

10.13* Form of insurance policy issued for the life of each of the Company's officers, together with the
specifications for each of these policies, filed as Exhibit 10.21 to the Company's Annual Report on Form
10-K for 1980 and hereby incorporated by reference. The Company pays the premiums for these policies and
will recover these premiums, with some exceptions, from the policy proceeds.

10.14* Insurance policy issued by The Prudential Insurance Company of America insuring all of the Company's
officers and certain other senior management employees for medical expenses filed as Exhibit 10.23 to
the Company's Annual Report on Form 10-K for 1980 and hereby incorporated by reference.

10.15* Form of Indemnification Agreement by and between the Company and each of N. D. Archibald, J. L.
Bleustein, M. J. Callahan, M. A. Fernandez, P. Harf, G. D. Kennedy, J. W. Lorsch, R. P. Mark, B. Martin
Musham, K. Roman and R. W. Schipke filed as Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1986, and hereby incorporated by reference.

10.16* Indemnification Agreement dated September 16, 1986, by and between the Company and J. F. Reichert filed
as Exhibit 19.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1986,
and hereby incorporated by reference.
</TABLE>

12
<PAGE>

<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <S>
10.17* Indemnification Agreement dated April 1, 1995, by and between the Company and P. N. Larson filed as
Exhibit 10.17 to the Company's Annual Report on Form 10-K for 1995 and hereby incorporated by reference.

10.18* Indemnification Agreement by and between the Company and each of M. D. Allen, W. J. Barrington, K. J.
Chieger, J. W. Dawson, F. J. Florjancic, Jr., P. B. Hamilton, R. S. O'Brien, V. J. Reich, J. A. Schenk,
and K. B. Zeigler filed as Exhibit 19.4 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1986, and hereby incorporated by reference.

10.19* 1991 Stock Plan filed as Exhibit A to the Company's definitive Proxy Statement dated March 19, 1996, for
the Annual Meeting of Stockholders on April 24, 1996 and hereby incorporated by reference.

10.20* Change in Control Severance Plan filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for
1989 and hereby incorporated by reference.

10.21* Brunswick Performance Plan for 1997 filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K
for 1996 and hereby incorporated by reference.

10.22* Brunswick Performance Plan for 1998.

10.23* Brunswick Strategic Incentive Plan for 1995-1997 filed as Exhibit 10.23 to the Company's Annual Report
on form 10-K for 1993 and hereby incorporated by reference.

10.24* Brunswick Strategic Incentive Plan for 1996-1997 filed as Exhibit 10.24 to the Company's Annual Report
on form 10-K for 1995 and hereby incorporated by reference.

10.25* Brunswick Strategic Incentive Plan for 1997-1998 filed as Exhibit 10.25 to the Company's Annual Report
on form 10-K for 1996 and hereby incorporated by reference.

10.26* Brunswick Strategic Incentive Plan for 1998-1999.

10.27* 1997 Stock Plan for Non-Employee Directors.

10.28* Elective Deferred Compensation Plan.

10.29* Automatic Deferred Compensation Plan.

10.30* Employment Agreement dated July 1, 1997 by and between the Company and Augustine Nieto

12 Statement regarding computation of ratio of earnings to fixed charges.

21.1 Subsidiaries of the Company.

23.1 Consent of Independent Public Accountants is on page 55 of this Report.

24.1 Powers of Attorney.

27.1 Financial Data Schedule.

27.2 Restated Financial Data Schedule.
</TABLE>

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

* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c) of
this Report.

B) REPORTS ON FORM 8-K

The Company filed no reports on Form 8-K during the three months ended
December 31, 1997.

13
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

BRUNSWICK CORPORATION

February 8, 1999 By: Victoria J. Reich
VICE PRESIDENT AND CONTROLLER

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

NAME TITLE
- ------------------------------ --------------------------
PETER N. LARSON Chairman and Chief
Executive Officer
(Principal Executive
Officer) and Director

PETER B. HAMILTON Senior Vice President and
Chief Financial Officer
(Principal Financial
Officer)

VICTORIA J. REICH Vice President and
Controller (Principal
Accounting Officer)

NOLAN D. ARCHIBALD Director

JEFFREY L. BLEUSTEIN Director

MICHAEL J. CALLAHAN Director

MANUEL A. FERNANDEZ Director

PETER HARF Director

JAY W. LORSCH Director

REBECCA P. MARK Director

BETTYE MARTIN MUSHAM Director

KENNETH ROMAN Director

ROGER W. SCHIPKE Director

Victoria J. Reich, as Principal Accounting Officer and pursuant to a Power
of Attorney (executed by each of the other officers and directors listed above
and filed with the Securities and Exchange Commission, Washington, D.C.), by
signing her name hereto does hereby sign and execute this report of Brunswick
Corporation on behalf of each of the officers and directors named above in the
capacities in which the names of each appear above.

February 8, 1999 Victoria J. Reich

14
<PAGE>
BRUNSWICK CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Discussion and Analysis............................................ 16
Report of Management............................................................ 24
Report of Independent Public Accountants........................................ 24
Consolidated Statements of Income 1997, 1996 and 1995........................... 25
Consolidated Balance Sheets December 31, 1997 and 1996.......................... 26
Consolidated Statements of Cash Flows 1997, 1996 and 1995....................... 28
Notes to Consolidated Financial Statements 1997, 1996 and 1995.................. 29
Six-Year Financial Summary...................................................... 53
Consent of Independent Public Accountants....................................... 55
Schedule II--Valuation and Qualifying Accounts 1997, 1996 and 1995.............. 56
</TABLE>

All other schedules are not submitted because they are not applicable or not
required or because the required information is included in the consolidated
financial statements or in the notes thereto. These notes should be read in
conjunction with these schedules.

The separate financial statements of Brunswick Corporation (the parent
company Registrant) are omitted because consolidated financial statements of
Brunswick Corporation and its subsidiaries are included. The parent company is
primarily an operating company, and all consolidated subsidiaries are wholly
owned and do not have any indebtedness (which is not guaranteed by the parent
company) to any person other than the parent or the consolidated subsidiaries in
an amount that is material in relation to consolidated assets.

15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

Financial results for 1997 reflect successful implementation of the
Company's growth strategies: building its businesses through product innovation,
line extensions and acquisitions; strengthening its customer connection through
aggressive marketing; and improving its operating margins through synergies and
effective cost management.

In 1997, the Company achieved net earnings of $150.5 million. Excluding the
strategic charge and the cumulative effect of an accounting change, net earnings
totaled $214.2 million or $2.14 per share. This performance resulted from sales
growth of 15.7 percent to an all-time high of $3.66 billion and improved
operating efficiency. Recreation segment sales comprised 35 percent of the
Company's total sales in 1997 versus 28 percent in 1996 and 26 percent in 1995.

INVESTMENTS

Acquisitions have played a significant role in the Company's strategic
growth. With the purchase of Life Fitness cardiovascular and strength training
equipment on July 9, 1997, and Hammer Strength plate-loaded strength training
equipment on November 13, 1997, the Company entered the growing commercial and
high-end consumer fitness equipment markets. Subsequent to year end, the Company
added ParaBody multistation gyms, benches and racks to its other leading
exercise equipment brands.

In the Brunswick Outdoor Recreation Group, the Company expanded the scope of
its product offerings and added leading brands through the acquisition of Igloo
coolers and ice chests on January 3, 1997, Hoppe's hunting accessories on March
7, 1997, and Mongoose bicycles on April 28, 1997. In the Brunswick Indoor
Recreation Group, the Company acquired DBA Products bowling lane supplies on
November 20, 1997, to expand its offerings in this category.

Other acquisitions completed in 1996 affect the comparability of the 1997
results with 1996 and 1995. In the Recreation segment, these transactions
consisted of American Camper acquired on March 8, 1996, and Roadmaster bicycles
acquired on September 6, 1996. In the Marine segment, the Company acquired
Boston Whaler offshore fishing boats on May 31, 1996.

During 1997, the Company continued to increase its capital spending to drive
new product development, expand existing product lines and improve production
efficiencies. The Company's capital expenditures over the past three years were
$190.5 million in 1997, $169.9 million in 1996 and $118.0 million in 1995.

The benefits of increased capital investment and a continued focus on cost
management have yielded improved operating efficiency. The Company's operating
margins in 1997 were adversely affected by the strategic charge discussed below.
Excluding unusual charges, operating margins reached 10.1 percent in 1997, the
sixth consecutive year of improvement. A portion of the savings generated from
cost management actions were used to increase marketing and promotional
activities and invest in research and development spending which helped drive
demand for the Company's products.

The Company continues to actively pursue cost management opportunities and
in 1997 initiated strategic actions which are expected to contribute to future
margin improvement.

STRATEGIC CHARGE

16
<PAGE>
fishing reel manufacturing; and other actions directed at manufacturing
rationalization, product profitability improvements and general and
administrative expense efficiencies. Management anticipates that these actions
will be substantially completed by the end of 1998.

Included in the Company's financial results for the third quarter and full
year 1997 was a $98.5 million ($63.0 million after tax) charge to operating
earnings to cover exit costs related to the strategic initiative. The charge
consisted of $74.7 million recorded in the Marine segment and $23.8 million
recorded in the Recreation segment.

The benefits from the above actions did not have a material effect on the
Company's 1997 financial results. The Company expects that the aggregate pretax
savings will total approximately $15 million in 1998 with amounts increasing to
approximately $20 million per year thereafter. These savings are the result of
reduced depreciation expense, lease expense, operating, administrative and sales
overhead resulting in approximately 35 percent of the annual savings, the
elimination of losses from development of the personal watercraft product and
under-performing bowling center assets resulting in approximately 35 percent of
the annual savings and more efficient manufacturing operations achieved through
reduced administrative and manufacturing personnel resulting in approximately 30
percent of the annual savings. Except for the expected pretax savings, the
actions taken in the strategic charge will not have a significant impact on the
Company's revenue or income.

RESULTS OF OPERATIONS

CONSOLIDATED

The following table sets forth certain information from the consolidated
statements of income:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net sales...................................................................... $ 3,657.4 $ 3,160.3 $ 2,906.3
Percent increase............................................................... 15.7% 8.7% 12.1%
Gross margin................................................................... 27.9% 27.7% 27.8%
Operating earnings(1).......................................................... $ 270.8 $ 304.8 $ 218.3
Percent (decrease) increase.................................................... (11.2%) 39.6% 5.5%
Diluted earnings per share from continuing operations, before cumulative effect
of accounting changes(1)..................................................... 1.51 1.88 1.38
</TABLE>

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

(1) Includes the effects of a $98.5 million pretax ($63.0 million after tax)
strategic charge recorded in 1997 and a $40.0 million pretax ($24.4 million
after tax) restructuring charge recorded in 1995.

On a pro forma basis, excluding these charges, the amounts are as follows:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Pro Forma--excluding strategic/restructuring charges
Operating earnings........................................................... $ 369.3 $ 304.8 $ 258.3
Percent increase............................................................. 21.2% 18.0% 24.8%
Operating margin............................................................. 10.1% 9.6% 8.9%
Diluted earnings per share from continuing operations, before restructuring
charges and cumulative effect of accounting changes........................ 2.14 1.88 1.64
Percent increase............................................................. 13.8% 14.6% 23.3%
</TABLE>

Sales increased 15.7 percent or $497.1 million in 1997, of which $417.5
million was from companies acquired during 1996 and 1997 in the Recreation
segment. Sales increased 8.7 percent or $254.0 million in 1996, of which $154.0
million was from companies acquired during 1996 in the Recreation segment. In

17
<PAGE>

1997, the Recreation segment added $397.6 million, a 45.5 percent increase, and
the Marine segment recorded a 4.4 percent sales increase of $99.5 million. These
increases reflect the effect of revenues from the companies acquired in 1996 and
1997, growth in marine and fishing equipment sales and an increase in bowling
center revenues. In 1996, the Recreation segment added $113.8 million, a 15.0
percent increase, and the Marine segment recorded a 6.5 percent sales increase
of $140.2 million. These increases reflect the effect of revenues from the
companies acquired in 1996 and growth in sales of higher-priced large boats.

The Company's 1997 international sales increased 10.1 percent versus 1996 to
$863.1 million. Several factors favorably influenced this growth including the
acquisitions noted above. The comparison of 1997 sales levels to 1996 was
negatively impacted by the strengthening of the U.S. dollar versus the
currencies of key international markets. Sales to Europe and the Pacific Rim
were 40 percent and 31 percent, respectively, of total 1997 international sales.
Sales of marine products and bowling equipment continue to comprise the majority
of international sales. In 1996, sales into international markets declined 1.7
percent to $784.2 million in 1996 from $797.4 million in 1995.

The Company's gross margin percentage improved to 27.9 percent in 1997 from
27.7 percent in 1996 and 27.8 percent in 1995. The results in 1997 include a
strategic charge of $15.6 million. Excluding the charge, the gross margin
percentage improved to 28.3 percent in 1997 from 27.7 percent in 1996. The gains
in 1997 reflect productivity enhancements, an improved sales mix and the impact
of the newly acquired Life Fitness business. The slight decline in 1996 includes
the effects of cost increases, which offset the benefits of productivity
enhancements and product innovations.

Acquired businesses comprised substantially all of the $92.3 million
increase in selling, general and administrative expenses in 1997. Selling,
general and administrative expenses as a percentage of sales was 15.8 percent in
1997, 15.3 percent in 1996 and 15.9 percent in 1995. The increase in 1997 was
the result of normal operating expense levels of acquired businesses and
increased investments in marketing activities, while cost management activities
favorably impacted the comparisons of both 1997 and 1996 to the prior years.

In 1997, operating earnings totaled $270.8 million versus $304.8 million in
1996 and $218.3 million in 1995. The results in 1997 and 1995 include a
strategic charge of $98.5 million and a restructuring charge of $40.0 million,
respectively. Excluding the charges, a 21.2 percent increase in operating
earnings in 1997 was achieved on a 15.7 percent sales gain improving operating
margins on a pro forma basis to 10.1 percent versus 9.6 percent in 1996 and 8.9
percent in 1995.

Earnings from continuing operations totaled $151.2 million in 1997, $185.8
million in 1996, and $133.6 million in 1995. Excluding the aforementioned
strategic and restructuring charges in 1997 and 1995, earnings from continuing
operations increased 15.3 percent in 1997, 17.6 percent in 1996 and 24.3 percent
in 1995.

The Company's effective tax rate was 36.0 percent in 1997 and 1996 versus
35.5 percent in 1995. Between 1997, 1996 and 1995, weighted-average common
shares outstanding used to calculate basic earnings per share increased to 99.2
million from 98.3 million and 95.9 million, respectively, reflecting stock
issued under compensation plans and stock purchased by the Company's defined
benefit plan in 1995. In the same periods, weighted-average common shares used
to calculate diluted earnings per share increased to 100.3 million from 98.8
million and 96.2 million, respectively, primarily due to the aforementioned
issuances of Company stock along with the effect of stock appreciation on
employee stock options.

Net earnings per diluted share were $1.50 in 1997 compared with $1.88 in
1996 and $1.32 in 1995. Excluding the strategic/restructuring charges and the
cumulative effect of the accounting change, diluted earnings per share from
continuing operations were $2.14, $1.88 and $1.64 in 1997, 1996 and 1995,
respectively, and reflect gains versus the prior year of 13.8 percent, 14.6
percent and 23.3 percent, respectively.

18
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS--In the fourth quarter of 1997, the Company
adopted the provisions of Financial Accounting Standards Board Statement No.
128, "Earnings Per Share," which replaces the presentation of primary earnings
per share with basic earnings per share and requires the presentation of diluted
earnings per share. The Company's historical results have been restated to
conform with this presentation.

In the fourth quarter of 1997, the Company adopted the provisions of EITF
97-13 which requires that all previously capitalized business process
re-engineering costs associated with internal-use software development be
expensed in the period. The adoption of this principle resulted in a charge for
the cumulative effect of a change in accounting principle in the fourth quarter
of 1997 totaling $0.7 million relating to prior years and the recognition of
$2.5 million of operating expense in the Marine segment for amounts capitalized
in the first three quarters of 1997.

OTHER--Other items affecting the results of operations of the Company for
the past three years include a $40.0 million restructuring charge recorded in
the second quarter of 1995 that reduced earnings from continuing operations by
$24.4 million and diluted earnings per share by $0.26. The charge included $25.8
million recorded in the Recreation segment relating to the divestitures of the
Circus World and golf shaft businesses, and $14.2 million for management
transition costs included in Corporate expenses.

The Company accounted for its divested freshwater fishing boat units and the
Technical segment as discontinued operations. In 1995, the Company recorded an
after-tax charge of $7.0 million, or $0.07 per diluted share, relating to the
disposition of the Technical Group.

RECREATION SEGMENT

The following table sets forth Recreation segment results:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net sales........................................................................ $ 1,270.6 $ 873.0 $ 759.2
Percentage increase.............................................................. 45.5% 15.0% 7.0%
--------- --------- ---------
Operating earnings(1)............................................................ $ 116.8 $ 86.1 $ 50.6
Percentage increase (decrease)(1)................................................ 35.7% 70.2% (61.1)%
Capital expenditures............................................................. $ 62.4 $ 52.7 $ 31.1
--------- --------- ---------
</TABLE>

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

(1) Includes the effects of a $23.8 million strategic charge recorded in 1997
and a $25.8 million restructuring charge recorded in 1995. Excluding these
charges the amounts were as follows:

In 1997, Recreation segment sales increased 45.5 percent to $1,270.6 million
compared with 1996. These gains primarily reflect the contribution of the
aforementioned businesses acquired in 1996 and 1997, along with higher revenues
in the fishing tackle and bowling center businesses. Results for 1997 include
lower than expected sales for the bicycle and camping businesses as the Company
experienced softness in demand for these products. The Company continues to
focus on cost reduction along with marketing and promotion activities to improve
sales volumes and the profitability of these businesses.

Including the strategic charge of $23.8 million, the Recreation segment
reported a 35.7 percent increase in operating earnings to $116.8 million in 1997
compared with $86.1 million in 1996. Excluding the

19
<PAGE>

effects of the strategic charge as previously described, operating earnings
increased 63.3 percent to $140.6 million. These gains reflect the contribution
of the acquisitions discussed previously along with operating margin
improvements. Operating margins for the segment, excluding the effects of the
strategic charge, increased 1.2 points to 11.1 percent due to the benefits from
effective cost management and acquisition integration.

Recreation segment sales increased 15.0 percent to $873.0 million in 1996
while operating earnings, excluding the effects of the 1995 restructuring
charge, increased 12.7 percent to $86.1 million. These gains reflect the
contribution of the acquisitions discussed previously, partially offset by a
decline in the sale of bowling capital equipment into East Asian markets.
Operating margins for the segment declined slightly to 9.9 percent in 1996 from
10.1 percent in 1995, excluding the 1995 restructuring charge, reflecting the
effects of retail inventory reductions in fishing tackle and lower margins
experienced in acquired businesses as full benefits of integration activities
had not yet been realized.

MARINE SEGMENT

The following table sets forth Marine segment results:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net sales...................................................................... $ 2,386.8 $ 2,287.3 $ 2,147.1
Percentage increase............................................................ 4.4% 6.5% 14.0%
Operating earnings(1).......................................................... $ 194.2 $ 260.5 $ 229.6
Percentage (decrease) increase(1).............................................. (25.5)% 13.5% 33.1%
Capital expenditures........................................................... $ 120.1 $ 105.2 $ 85.2
</TABLE>

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

(1) Includes the effect of a $74.7 million strategic charge recorded in 1997.
Excluding these charges the amounts were as follows:

The Marine segment posted sales gains of 4.4 percent in 1997 as a result of
successful marketing programs; an improved sales mix of larger, higher-margin
cruisers and yachts; and increased sales of sterndrive and high-performance
engines and marine parts and accessories. The Company's strong position in
high-end boats has helped offset the weaker markets for smaller boats and
outboard engines.

Operating earnings for the segment, including the $74.7 million strategic
charge recorded in 1997, were $194.2 million in 1997, $260.5 million in 1996 and
$229.6 million in 1995. Excluding the impact of the strategic charge, operating
earnings in 1997 increased 3.2 percent to $268.9 million reflecting the benefits
of effective cost management and an improved sales mix. Operating margins,
excluding the strategic charge, were 11.3 percent in 1997 compared to 11.4
percent in 1996. The slight decline in operating margins in 1997 resulted from
increased marketing spending along with process re-engineering costs associated
with the systems development projects previously capitalized during 1997, which
were expensed, and higher costs associated with the introduction of low-emission
outboard engines. Additionally, lower small-boat sales volumes and new product
start-up costs adversely affected margins in the Company's boat operations.

20
<PAGE>
In 1996, the segment's sales improved 6.5 percent as a result of effective
marketing programs, investment in new products and acquisitions. The increase
was partially offset by a decline in outboard engine sales, as inclement weather
dampened retail and wholesale activity, and field inventories were adjusted in
the first half of 1996 versus 1995. The improvement in operating margins between
1996 and 1995 resulted from effective cost management and increased investments
in product and process improvements.

CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES

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

Cash and cash equivalents totaled $85.6 million at the end of 1997 down from
$238.5 million in 1996. In 1997, net cash provided by operating activities of
$261.7 million and net cash provided by financing activities of $147.9 million
were more than offset by net cash used for investing activities of $562.5
million primarily for acquisitions and capital expenditures.

Net cash provided by operating activities totaled $261.7 million in 1997
compared with $395.8 million in 1996 and $278.4 million in 1995. The primary
components of net cash provided by operating activities include the Company's
net earnings adjusted for noncash revenues and expenses; the timing of cash
flows relating to operating expenses, sales and income taxes; and the management
of inventory levels. The change in net cash provided by operating activities
between 1997 and 1996 reflected investments in working capital by newly acquired
businesses for seasonal needs and new product introductions, partially offset by
stronger operating results. Cash spending associated with the strategic charge
totaled $16.1 million in 1997. Cash spending in 1995 included $42.2 million of
contributions to the Company's defined benefit plans.

During 1997, the Company invested $190.5 million in capital expenditures,
compared with $169.9 million in 1996 and $118.0 million in 1995. The $20.6
million increase between 1997 and 1996 reflects the Company's continued emphasis
on investing to achieve improved production efficiencies and product quality,
growth from new products and expansion of existing product lines. The 1998
capital expenditures budget is approximately $200 million, principally for
growth and productivity initiatives. A significant portion of the 1998 capital
expenditures budget is dedicated to substantially upgrading information systems
capabilities company wide.

The Company invested $515.4 million in 1997 to acquire various businesses
including Igloo coolers and ice chests, Mongoose bicycles, Hoppe's hunting
accessories, Life Fitness and Hammer Strength exercise equipment, and DBA
Products bowling lane supplies. In 1996, the Company invested $360.6 million to
acquire various businesses including Roadmaster bicycles, American Camper and
the Boston Whaler line of boats. Management continues to evaluate acquisition
opportunities to build the Company's active recreation business.

Total debt at year-end 1997 was $754.8 million versus $568.0 million at the
end of 1996, with debt-to-capitalization ratios at those dates of 36.5 percent
and 32.2 percent, respectively. On April 1, 1997, the Company used cash to
retire $100.0 million of 8.125 percent notes maturing on that date. On July 9,
1997, the Company used proceeds from commercial paper borrowings along with cash
from operations to pay for the acquisition of Life Fitness. On August 4, 1997,
the Company sold $200.0 million of 7.125 percent notes due August 1, 2027. The
proceeds from the sale of the notes were used to retire a portion of the
commercial paper issued to finance the acquisition of Life Fitness.

On October 21, 1997, the Company announced a program to repurchase
systematically up to five million shares of common stock in open market
transactions to offset shares the Company expects to issue under its stock
option and other compensation plans. These repurchases will be funded with cash

21
<PAGE>
generated from operations and short-term borrowings as required. The Company
repurchased 0.3 million shares for $8.4 million in 1997.

The Company's financial flexibility and access to capital markets results
from its strong balance sheet, investment-grade credit ratings and ability to
generate significant cash from operating activities. The Company has $400.0
million available under a long-term credit agreement with a group of banks (see
Note 9-Debt) and $150.0 million under a universal shelf registration filed in
1996 with the Securities and Exchange Commission for the issuance of equity
and/or debt securities. Management believes that these factors provide adequate
sources of liquidity to meet the Company's long-term and short-term needs.

Under the terms of the long-term credit agreement, the Company has multiple
borrowing options, and if utilized, the borrowing rate, as calculated in
accordance with the terms described in Note 9 to consolidated financial
statements, would have been 8.5% at December 31, 1997.

Refer to Note 6 to consolidated financial statements for disclosure of the
potential cash requirements of the legal and administrative proceedings.

The Company uses its cash balances and other sources of liquidity to invest
in its current businesses to promote innovation and new product lines and to
acquire complementary businesses. These investments, along with other actions
taken to improve the profit margins of current businesses, are designed to
continue improvement in the Company's financial performance and enhance
shareholder value.

LOOKING TO THE FUTURE

The Company's future performance will be influenced by a number of factors.
Revenues and earnings may be affected by changes in domestic and international
market conditions in active recreation including the effect of economic
conditions in Asia on the Company's businesses. The Company will emphasize
product innovation, line extensions and acquisitions, marketing initiatives and
cost management efforts to further enhance its financial performance. The
Company will continue to benefit from the acquisitions completed in 1996 and
1997.

ENGINE EMISSIONS REGULATIONS. U.S. Environmental Protection Agency (EPA)
regulations require that certain exhaust emissions from two-cycle, gasoline
marine outboard engines be reduced by 8.3 percent each year for nine years
beginning with the 1998 model year. The Company is implementing a plan that
meets the EPA compliance schedule. It includes both modifying automotive fuel
injection technology for marine use and converting certain two-cycle engines to
four-cycle engines. Costs associated with the introduction of low-emission
engines will continue to have an adverse effect on the Company's Marine segment
operating margins.

YEAR 2000. The Company continues to assess and address the impact of the
Year 2000 issue on its businesses. This issue affects computer systems that have
date-sensitive programs that may not properly recognize the year 2000. The
Company uses software and related technologies throughout its businesses and in
its products that will be affected by this issue. The Company has completed its
review of the information systems used in its internal business operations and
its production processes. An assessment of the technology incorporated into the
Company's products, and of the information systems of its customers and
suppliers, is scheduled to be substantially completed by mid-1998. If changes
addressing the Year 2000 issue are not made on a timely basis prior to the year
2000, the Company's internal financial and production operations may be hindered
by the miscalculation of information and certain products may not function
properly. This could have a material adverse effect on the Company's results of
operations and financial condition.

The Company is aggressively pursuing a Year 2000 compliance plan that
combines fixing existing software and replacing systems as part of a
company-wide systems upgrade project. A Year 2000 Project Office has been
established to lead the initiatives that address areas with the potential of
major business impact. The total cost of modifying existing software and related
technologies has not been determined;

22
<PAGE>
however, based on preliminary information, the cost is currently not expected to
be material to the Company's results of operations or financial condition. Costs
associated with the company-wide systems upgrade are included in the Company's
capital expenditures budget.

NEW ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED. In 1997, the Financial
Accounting Standards Board issued Statements No. 130, "Reporting Comprehensive
Income," and No. 131, "Disclosures About Segments of an Enterprise and Related
Information," which require adoption in 1998. Statement No. 130 requires
companies to report certain transactions that result in a change in equity, such
as foreign currency translation, unrealized gains and losses and minimum pension
liability adjustments, as components of comprehensive income as part of the
financial statements. Statement No. 131 requires companies to report segment
information based on how management disaggregates its businesses for evaluating
performance and making operating decisions. The Company intends to adopt these
statements by December 31, 1998.

FORWARD LOOKING STATEMENTS

Certain statements in this Annual Report are forward looking as defined in
the Private Securities Litigation Reform Act of 1995. These statements involve
certain risks and uncertainties that may cause actual results to differ
materially from expectations as of the date of this Report. These risks include,
but are not limited to, the ability to complete the planned strategic
initiatives, Year 2000 actions and information systems initiatives within the
time and cost estimated, economic conditions in Asia, adverse weather conditions
retarding sales, inventory adjustments by major retailers, competitive pricing
pressures, the ability to integrate acquisitions, the success of marketing and
cost-management programs, and shifts in market demand for the Company's
products.

23
<PAGE>
BRUNSWICK CORPORATION
REPORTS OF MANAGEMENT AND INDEPENDENT PUBLIC ACCOUNTANTS
REPORT OF MANAGEMENT

The Company's management is responsible for the preparation, integrity and
objectivity of the financial statements and other financial information
presented in this report. The financial statements have been prepared in
conformity with generally accepted accounting principles and reflect the effects
of certain estimates and judgments made by management.

The Company's management maintains a system of internal controls that is
designed to provide reasonable assurance, at reasonable cost, that assets are
safeguarded and that transactions and events are recorded properly. The
Company's internal audit program includes periodic reviews of these systems and
controls and compliance therewith.

The Audit and Finance Committee of the Board of Directors, comprised
entirely of outside directors, meets regularly with the independent public
accountants, management and internal auditors to review accounting, reporting
and internal control matters. The Committee has direct and private access to
both the internal and external auditors.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Brunswick Corporation:

We have audited the accompanying consolidated balance sheets of Brunswick
Corporation (a Delaware Corporation) and Subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of income and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brunswick Corporation and
Subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Chicago, Illinois
January 29, 1998

24
<PAGE>
BRUNSWICK CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
1997 1996 1995
--------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
NET SALES...................................................................... $ 3,657.4 $ 3,160.3 $ 2,906.3
Cost of sales.................................................................. 2,622.4 2,285.0 2,099.2
Cost of sales--strategic charge................................................ 15.6 -- --
Selling, general and administrative expense.................................... 576.3 484.0 460.9
Research and development expense............................................... 89.4 86.5 87.9
Strategic/restructuring charges................................................ 82.9 -- 40.0
--------- --------- ---------
OPERATING EARNINGS............................................................. 270.8 304.8 218.3
--------- --------- ---------
Interest expense............................................................... (51.3) (33.4) (32.5)
Other income and expense....................................................... 16.7 18.9 21.0
--------- --------- ---------
EARNINGS BEFORE INCOME TAXES................................................... 236.2 290.3 206.8
Income tax provision........................................................... 85.0 104.5 73.2
--------- --------- ---------
EARNINGS FROM CONTINUING OPERATIONS BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE....................................................................... 151.2 185.8 133.6
Cumulative effect on prior years of change in accounting principle............. (0.7) -- --
Loss on disposition of Technical segment....................................... -- -- (7.0)
Earnings from discontinued operations.......................................... -- -- 0.6
--------- --------- ---------
NET EARNINGS............................................................... $ 150.5 $ 185.8 $ 127.2
--------- --------- ---------
--------- --------- ---------
BASIC EARNINGS PER COMMON SHARE
Continuing operations before cumulative effect of accounting change............ $ 1.52 $ 1.89 $ 1.39
Cumulative effect on prior years of change in accounting principle............. (.01) -- --
Loss on disposition of Technical segment....................................... -- -- (.07)
Earnings from discontinued operations.......................................... -- -- .01
--------- --------- ---------
Net earnings............................................................... $ 1.52 $ 1.89 $ 1.33
--------- --------- ---------
--------- --------- ---------
AVERAGE SHARES USED FOR COMPUTATION OF BASIC EARNINGS PER SHARE................ 99.2 98.3 95.9
DILUTED EARNINGS PER COMMON SHARE
Continuing operations before cumulative effect of accounting change............ $ 1.51 $ 1.88 $ 1.38
Cumulative effect on prior years of change in accounting principle............. (.01) -- --
Loss on disposition of Technical segment....................................... -- -- (.07)
Earnings from discontinued operations.......................................... -- -- .01
--------- --------- ---------
Net earnings............................................................... $ 1.50 $ 1.88 $ 1.32
--------- --------- ---------
--------- --------- ---------
AVERAGE SHARES USED FOR COMPUTATION OF DILUTED EARNINGS PER SHARE.............. 100.3 98.8 96.2
</TABLE>

The notes are an integral part of these consolidated statements

25
<PAGE>
BRUNSWICK CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
AS OF DECEMBER 31
--------------------
1997 1996
--------- ---------
(IN MILLIONS, EXCEPT
SHARE DATA)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents, at cost, which approximates market.............................. $ 85.6 $ 238.5
Marketable securities...................................................................... -- 3.6
Accounts and notes receivable, less allowances of $20.7 and $17.2.......................... 434.9 326.9
Inventories
Finished goods........................................................................... 313.4 225.3
Work-in-process.......................................................................... 139.4 137.2
Raw materials............................................................................ 113.5 82.4
--------- ---------
Net inventories.......................................................................... 566.3 444.9
--------- ---------
Prepaid income taxes....................................................................... 210.7 184.4
Prepaid expenses........................................................................... 46.0 33.6
Income tax refunds receivable.............................................................. 22.5 9.9
--------- ---------
Current assets......................................................................... 1,366.0 1,241.8
--------- ---------
PROPERTY
Land....................................................................................... 68.7 65.0
Buildings.................................................................................. 425.8 404.6
Equipment.................................................................................. 830.8 744.6
--------- ---------
Total land, buildings and equipment.................................................... 1,325.3 1,214.2
Accumulated depreciation................................................................... (656.7) (620.9)
--------- ---------
Net land, buildings and equipment...................................................... 668.6 593.3
Unamortized product tooling costs.......................................................... 114.4 92.1
--------- ---------
Net property........................................................................... 783.0 685.4
--------- ---------
OTHER ASSETS
Unrestricted cash held for acquisition of Igloo Holdings, Inc.............................. -- 143.0
Goodwill................................................................................... 726.4 352.4
Other intangibles.......................................................................... 115.8 137.9
Investments................................................................................ 87.5 87.5
Other long-term assets..................................................................... 162.7 154.4
--------- ---------
Other assets........................................................................... 1,092.4 875.2
--------- ---------
Total assets........................................................................... $ 3,241.4 $ 2,802.4
--------- ---------
--------- ---------
</TABLE>

The notes are an integral part of these consolidated statements.

26
<PAGE>
BRUNSWICK CORPORATION

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
AS OF DECEMBER 31
--------------------
1997 1996
--------- ---------
(IN MILLIONS, EXCEPT
SHARE DATA)
<S> <C> <C>
CURRENT LIABILITIES
Short-term debt, including current maturities of long-term debt............................ $ 109.3 $ 112.6
Accounts payable........................................................................... 252.9 202.4
Accrued expenses........................................................................... 586.0 516.1
--------- ---------
Current liabilities.................................................................... 948.2 831.1
--------- ---------
LONG-TERM DEBT
Notes, mortgages and debentures............................................................ 645.5 455.4
--------- ---------
DEFERRED ITEMS
Income taxes............................................................................... 144.3 155.6
Postretirement and postemployment benefits................................................. 137.3 131.7
Compensation and other..................................................................... 51.1 30.9
--------- ---------
Deferred items......................................................................... 332.7 318.2
--------- ---------
COMMON SHAREHOLDERS' EQUITY
Common stock; authorized: 200,000,000 shares, $.75 par value;
issued: 102,538,000 shares............................................................... 76.9 76.9
Additional paid-in capital................................................................. 308.2 302.0
Retained earnings.......................................................................... 1,052.2 951.3
Treasury stock, at cost: 3,057,000 shares and 4,072,000 shares............................. (59.0) (75.4)
Cumulative translation adjustments......................................................... 0.1 11.2
Unamortized ESOP expense and other......................................................... (63.4) (68.3)
--------- ---------
Common shareholders' equity............................................................ 1,315.0 1,197.7
--------- ---------
Total liabilities and shareholders' equity............................................. $ 3,241.4 $ 2,802.4
--------- ---------
--------- ---------
</TABLE>

The notes are an integral part of these consolidated statements.

27
<PAGE>
BRUNSWICK CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
1997 1996 1995
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................................................................ $ 150.5 $ 185.8 $ 127.2
Depreciation and amortization....................................................... 156.9 129.7 118.0
Changes in noncash current assets and current liabilities of continuing operations:
Change in accounts and notes receivable........................................... (57.1) (26.9) (34.6)
Change in inventories............................................................. (55.6) 24.2 2.7
Change in prepaid expenses........................................................ (11.9) 2.4 (1.1)
Change in accounts payable........................................................ 25.9 11.7 (2.5)
Change in accrued expenses........................................................ (40.9) 3.6 6.0
Income taxes........................................................................ (1.5) 35.2 25.6
Dividends received from equity investments.......................................... 6.3 24.5 6.4
Strategic/restructuring charges..................................................... 98.5 -- 40.0
Pension funding less than (in excess of) provision.................................. 1.8 5.0 (33.3)
Other, net.......................................................................... (11.2) 0.6 12.5
Loss on discontinued operations..................................................... -- -- 11.5
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................................... 261.7 395.8 278.4
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses.......................................................... (515.4) (360.6) (10.3)
Unrestricted cash held for acquisition of Igloo Holdings, Inc....................... 143.0 (143.0) --
Capital expenditures................................................................ (190.5) (169.9) (118.0)
Proceeds from businesses disposed................................................... -- 24.1 22.0
Investments in marketable securities................................................ 3.6 7.6 7.0
Payments advanced for long-term supply arrangements................................. (12.3) (44.9) --
Other, net.......................................................................... 9.1 (12.3) (5.7)
--------- --------- ---------
NET CASH USED FOR INVESTING ACTIVITIES.............................................. (562.5) (699.0) (105.0)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuances of short-term commercial paper and other short-term
debt.............................................................................. 94.9 -- --
Net proceeds from issuances of long-term debt....................................... 198.6 248.2 --
Payments of long-term debt.......................................................... (107.4) (5.8) (6.0)
Cash dividends paid................................................................. (49.6) (49.3) (47.9)
Net proceeds from equity issuance to pension plan................................... -- -- 40.0
Stock repurchases................................................................... (8.4) -- --
Stock options exercised............................................................. 19.3 4.3 1.7
Other, net.......................................................................... 0.5 -- (2.1)
--------- --------- ---------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES................................ 147.9 197.4 (14.3)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents................................ (152.9) (105.8) 159.1
Cash and cash equivalents at beginning of year...................................... 238.5 344.3 185.2
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR............................................ $ 85.6 $ 238.5 $ 344.3
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid....................................................................... $ 44.9 $ 32.7 $ 34.2
Income taxes paid, net.............................................................. 86.6 69.3 43.8
Treasury stock issued for compensation plans and other.............................. 30.6 11.8 11.9
</TABLE>

The notes are an integral part of these consolidated statements.

28
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION. The Company's consolidated financial
statements include the accounts of its significant domestic and foreign
subsidiaries, after eliminating transactions between Brunswick Corporation and
such subsidiaries. Investments in certain affiliates are reported using the
equity method. Additionally, certain previously reported amounts have been
reclassified to conform with current year presentations.

USE OF ESTIMATES IN THE FINANCIAL STATEMENTS. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect reported amounts and
related disclosures. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.

INVENTORIES. Approximately 62 percent of the Company's inventories are
valued at the lower of first-in, first-out (FIFO) cost or market (replacement
cost or net realizable value). Inventories valued at last-in, first-out (LIFO)
cost were $83.7 million and $83.6 million lower than the FIFO cost of
inventories at December 31, 1997 and 1996, respectively. Inventory cost includes
material, labor and manufacturing overhead.

PROPERTY. Property, including major improvements and product tooling costs,
is recorded at cost. Maintenance and repair costs are charged against results of
operations as incurred. Depreciation is charged against results of operations
over the estimated service lives of the related assets principally using the
straight-line method.

INTANGIBLES. The excess of cost over net assets of businesses acquired is
recorded as goodwill and amortized using the straight-line method, principally
over 40 years. Accumulated amortization was $59.4 million and $42.8 million at
December 31, 1997 and 1996, respectively. The costs of other intangible assets
are amortized over their expected useful lives using the straight-line method.
Accumulated amortization was $317.0 million and $293.2 million at December 31,
1997 and 1996, respectively.

LONG-LIVED ASSETS. The Company continually evaluates whether events and
circumstances have occurred that indicate the remaining estimated useful lives
of its intangible and other long-lived assets may warrant revision or that the
remaining balance of such assets may not be recoverable. The Company uses an
estimate of the related undiscounted cash flows or, in the case of goodwill,
undiscounted operating earnings, over the remaining life of the asset in
measuring whether the asset is recoverable.

ADVERTISING AND MARKETING COSTS. Advertising and marketing costs are
generally expensed as incurred.

CHANGE IN ACCOUNTING PRINCIPLE. Effective January 1, 1997, the Company
adopted the consensus reached in the Financial Accounting Standards Board's
Emerging Issues Task Force Issue No. 97-13 that the cost of business process
re-engineering associated with internal-use software development activities be
expensed as incurred. The remaining unamortized portion of previously
capitalized costs for these activities of $1.1 million ($0.7 million after tax)
has been written off and reported as a cumulative effect on prior years of
change in accounting principle.

DERIVATIVES. The Company uses derivative financial instruments to manage
its risk associated with movements in foreign currency exchange rates, interest
rates and commodity prices. These instruments are

29
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

used in accordance with guidelines established by the Board of Directors and are
not used for trading or speculative purposes.

Forward exchange contracts generally are not accounted for as hedges, and as
such, realized and unrealized gains and losses are recognized and included in
net earnings. The interest rate differential to be paid or received under
interest rate swap agreements is recognized over the lives of the agreements in
earnings. Under commodity swap agreements which are accounted for as hedges, the
Company receives or makes payments based on the differential between a specified
price and the market price of the commodity. The Company records the payments
when received or made against cost of sales and does not have a carrying value
recorded.

The Company has terminated financial instruments in the past as a result of
a change in the volume or characteristics of the transaction being hedged. If,
subsequent to entering into a forward contract the underlying transaction is no
longer likely to occur, the Company may terminate the forward contract and any
gain or loss on the terminated contract is included in net earnings. Gains and
losses on commodity swaps that are terminated prior to the execution of the
inventory purchase are recorded in inventory until the inventory is sold. Gains
and losses on terminated interest rate swap agreements are recognized or
deferred, as appropriate.

2. EARNINGS PER COMMON SHARE

Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share," which requires presentation
of basic and diluted earnings per common share. There is no difference in the
earnings used to compute the Company's basic and diluted earnings per share. The
difference in the weighted-average number of shares of common stock outstanding
used to compute basic and diluted earnings per share is caused by potential
common stock relating to employee stock options. The weighted-average number of
shares of potential common stock was 1.1 million, 0.5 million and 0.3 million in
1997, 1996 and 1995, respectively.

3. ACQUISITIONS

On January 3, 1997, the Company acquired the stock of Igloo Holdings, Inc.,
the leading manufacturer and marketer of coolers and ice chests for
approximately $152.1 million in cash which includes $9.8 million paid to certain
management employees under stock option arrangements that existed prior to
acquisition. On April 28, 1997, the Company purchased for approximately $20.9
million the inventory and trademarks of the Mongoose bicycle and parts business
of Bell Sports Corp. and a three-year option to acquire up to 600,000 shares of
Bell common stock for $7.50 per share. These operations have been included as
part of the Brunswick Outdoor Recreation Group of the Recreation segment.

On July 9, 1997, the Company purchased substantially all of the facilities,
equipment, inventory and other assets of Life Fitness, a designer, manufacturer
and marketer of the leading global brand of computerized cardiovascular and
strength training fitness equipment for commercial use. The purchase price was
approximately $314.9 million after post-closing adjustments, of which $12.8
million has been deferred pursuant to an incentive compensation plan in
connection with the waiver of employee stock options granted by Life Fitness.
Life Fitness has been included as part of the Recreation segment.

In January 1997, the Company received an $8.2 million payment from
Roadmaster Industries, Inc. in settlement of the final purchase price adjustment
on the bicycle business purchased in September 1996, which reduced the final
cash consideration paid for the business to $190.2 million.

30
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Other acquisitions in 1996 included the purchase of the Nelson/Weather-Rite
camping division (now American Camper) of Roadmaster Industries, Inc. on March
8, 1996, for $119.2 million and the Boston Whaler line of boats from Meridian
Sports on May 31, 1996, for $26.6 million.

Cash consideration paid for other acquisitions totaled $48.5 million in
1997, $16.4 million in 1996 and $10.3 million in 1995.

In addition to the cash consideration paid in 1997 and 1996 for these
businesses, the Company assumed certain liabilities. The acquisitions were
accounted for as purchases and resulted in goodwill of $388.5 million and $241.6
million in 1997 and 1996, respectively, that will be amortized using the
straight-line method over 40 years. The assets and liabilities of the acquired
companies have been recorded in the Company's consolidated financial statements
at their estimated fair values at the acquisition dates. These estimates of fair
value are subject to change when final information concerning asset and
liability valuations is obtained. The operating results of each acquisition are
included in the Company's results of operations since the date of acquisition.

On a pro forma basis, the net sales (unaudited) of the Company would have
been $3,759.9 million in 1997 and $3,671.9 million in 1996. These pro forma
sales amounts assume that the acquisitions of Igloo, Life Fitness, Mongoose,
Roadmaster, American Camper and Boston Whaler occurred at the beginning of each
period presented. On a pro forma basis, the results of operations of the
companies acquired would not have had a material effect on the Company's net
earnings and earnings per share in 1997 or 1996.

4. STRATEGIC/RESTRUCTURING CHARGES

During the third quarter of 1997, the Company announced a strategic
initiative to streamline its operations and improve global manufacturing costs.
The initiative includes the termination of development efforts on a line of
personal watercraft; closing boat plant manufacturing facilities in Cork,
Ireland and Miami, Oklahoma; centralizing European marketing and customer
service in the Marine segment; outsourcing the manufacture of certain components
in the Company's bowling division; consolidating fishing reel manufacturing; and
other actions directed at manufacturing rationalization, product profitability
improvements and general and administrative expense efficiencies. Management
anticipates that these actions will be substantially completed by the end of
1998. In the third quarter of 1997, the Company recorded a pretax charge of
$98.5 million ($63.0 million after tax) to cover exit costs related to these
actions. The charge consisted of $74.7 million recorded in the Marine segment
and $23.8 million recorded in the Recreation segment.

It is anticipated that these actions will result in the termination of
approximately 900 hourly and salaried employees and will result in severance and
related benefits totaling $32.6 million. During 1997, the Company completed
severance actions covering approximately 600 of these employees. Spending
related to these actions was $9.4 million in 1997, with some of the payments
relating to the 1997 terminations to be made in 1998. Other components of the
charge included asset disposition costs totaling $26.4 million. At the time the
Company announced the strategic initiative, these assets had a carrying value of
approximately $30.1 million. The Company has estimated the sales value of these
assets, net of related costs to sell, at approximately $3.7 million. Other
incremental costs related to exit activities were $23.9 million. In 1997, the
Company's spending related to these activities totaled $6.7 million.

In the second quarter of 1995, the Company recorded a restructuring charge
of $40.0 million ($24.4 million after tax). The charge consisted of losses of
$25.8 million recorded in the Recreation segment on the divestitures of the golf
club shaft business, completed in the second quarter of 1996, and Circus World
Pizza operations, completed in 1995. Also included were $14.2 million of
management

31
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. STRATEGIC/RESTRUCTURING CHARGES (CONTINUED)
transition expenses including the costs of an early retirement and selective
separation program at the Company's corporate office which was completed in
1995.

The net sales and operating earnings (losses) (excluding divestiture
provisions) of the divested golf club shaft and Circus World businesses for each
of the two years ended December 31, 1996, were as follows:

<TABLE>
<CAPTION>
1996 1995
----------- -----------
(IN MILLIONS)
<S> <C> <C>
Net sales.................................................... $ 10.2 $ 21.0
Operating earnings (loss).................................... $ 1.4 $ (7.6)
</TABLE>

5. SEGMENT INFORMATION

The Company is a multinational marketer and manufacturer of branded consumer
products designed for outdoor and indoor active recreation participants,
primarily in fishing, camping, biking, bowling, billiards, exercise equipment
and pleasure boating. The Company's business segments are Recreation and Marine.

Within the Recreation segment, the Company markets fishing products,
including fishing reels and reel/rod combinations, trolling motors and other
fishing accessories; camping products, including tents, sleeping bags,
backpacks, cookware and other accessories; a complete line of ice chests,
beverage coolers and thermoelectric cooler/warmer products; bicycles; hunting
accessories; bowling capital equipment, including lanes, pinsetters, and
automatic scorers; bowling balls and other accessories; billiards tables and
accessories; and fitness equipment. These products are primarily manufactured in
plants throughout the United States and in some cases sourced from or
manufactured in foreign locations. Fishing, camping, and cooler products, along
with bicycles, bowling balls and billiards equipment are predominantly sold in
the United States and are distributed primarily through mass merchants, sporting
goods stores and specialty shops. Bowling capital equipment is sold through a
direct sales force into the United States and foreign markets. Fitness equipment
is sold primarily in the United States and Europe to health clubs; military,
government, corporate and university facilities; and high-end consumer markets.
The segment also includes a chain of bowling and family entertainment centers,
primarily located in the United States.

The Marine segment includes a complete line of pleasure boats including
runabouts, cruisers, yachts, high-performance boats and offshore fishing boats,
which are marketed worldwide through dealers. The Company also manufactures
outboard, sterndrive and inboard engines, and marine parts and accessories,
which are sold directly to boat builders or worldwide through dealers. The
Company's boat and engine manufacturing plants are located primarily in the
United States. The sales of this segment are primarily in the United States.

Operating earnings of segments do not include the expenses of corporate
administration, other expenses and income of a nonoperating nature, and
provisions for income taxes. Corporate assets consist primarily of cash and
marketable securities, prepaid income taxes, pension assets, and investments in
unconsolidated affiliates.

32
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SUPPLEMENTAL SALES INFORMATION

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Intersegment sales
U.S. to foreign................................ $ 238.2 $ 209.2 $ 237.1
Foreign to U.S................................. 42.0 43.7 38.5
Export sales..................................... 357.1 346.2 288.2
Sales to unconsolidated affiliates............... 200.1 186.8 125.0
</TABLE>

INDUSTRY SEGMENTS

<TABLE>
<CAPTION>
SALES TO CUSTOMERS OPERATING EARNINGS ASSETS OF CONTINUING OPERATIONS
------------------------------- ------------------------------------- -------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
--------- --------- --------- ----------- ----------- ----------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Marine............. $ 2,386.8 $ 2,287.3 $ 2,147.1 $ 194.2 $ 260.5 $ 229.6 $ 1,207.2 $ 1,195.3 $ 1,086.8
Recreation......... 1,270.6 873.0 759.2 116.8 86.1 50.6 1,520.7 826.8 464.2
Corporate.......... -- -- -- (40.2) (41.8) (61.9) 513.5 780.3 759.6
--------- --------- --------- ----------- ----------- ----------- --------- --------- ---------
Total.......... $ 3,657.4 $ 3,160.3 $ 2,906.3 $ 270.8 $ 304.8 $ 218.3 $ 3,241.4 $ 2,802.4 $ 2,310.6
--------- --------- --------- ----------- ----------- ----------- --------- --------- ---------
--------- --------- --------- ----------- ----------- ----------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
RESEARCH AND DEVELOPMENT
CAPITAL EXPENDITURES DEPRECIATION AND AMORTIZATION EXPENSE
------------------------------------- ------------------------------------- ------------------------
1997 1996 1995 1997 1996 1995 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marine............. $ 120.1 $ 105.2 $ 85.2 $ 102.5 $ 95.3 $ 87.7 $ 74.9 $ 75.4
Recreation......... 62.4 52.7 31.1 52.0 32.0 28.2 14.5 11.1
Corporate.......... 8.0 12.0 1.7 2.4 2.4 2.1 -- --
----------- ----------- ----------- ----------- ----------- ----------- ----- -----
Total.......... $ 190.5 $ 169.9 $ 118.0 $ 156.9 $ 129.7 $ 118.0 $ 89.4 $ 86.5
----------- ----------- ----------- ----------- ----------- ----------- ----- -----
----------- ----------- ----------- ----------- ----------- ----------- ----- -----

1995
-----------

<S> <C>
Marine............. $ 74.0
Recreation......... 13.9
Corporate.......... --
-----
Total.......... $ 87.9
-----
-----
</TABLE>

GEOGRAPHIC SEGMENTS

Operating earnings for 1997 included a $98.5 million strategic charge
consisting of $74.7 million in the Marine segment and $23.8 million in the
Recreation segment for costs associated with streamlining operations and
improving global manufacturing costs. The Recreation segment's 1995 operating
earnings include a $25.8 million charge for the losses on the divestitures of
the golf club shaft business and Circus World Pizza operations. The Corporate
operating expenses for 1995 included $14.2 million of management transition
expenses and costs associated with an early retirement and selective separation
program at the Company's corporate office.

33
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. COMMITMENTS AND CONTINGENCIES

FINANCIAL COMMITMENTS. The Company has entered into agreements, which are
customary in the marine industry, that provide for the repurchase of its
products from a financial institution in the event of repossession upon a
dealer's default. Repurchases and losses incurred under these agreements have
not had and are not expected to have a significant impact on the Company's
results of operations. The maximum potential repurchase commitments at December
31, 1997 and 1996, were approximately $221.0 million and $186.0 million,
respectively.

The Company also has various agreements with financial institutions that
provide limited recourse on marine and bowling capital equipment sales. Recourse
losses have not had and are not expected to have a significant impact on the
Company's results of operations. The maximum potential recourse liabilities
outstanding under these programs were approximately $42.0 million at December
31, 1997, and $39.0 million at December 31, 1996.

The Company had outstanding standby letters of credit and financial
guarantees of approximately $25.0 million and $35.2 million at December 31, 1997
and 1996, respectively, representing conditional commitments whereby the Company
guarantees performance to a third party. The majority of these commitments
include guarantees of premium payment under certain of the Company's insurance
programs and other guarantees issued in the ordinary course of business.

LEGAL AND ENVIRONMENTAL. The Company is subject to certain legal and
environmental proceedings and claims which have arisen in the ordinary course of
its business.

In December 1995, Independent Boat Builders, Inc., a boat materials buying
group, and 24 of its boat building members, brought suit against the Company in
the United States District Court for the Eastern District of Arkansas. As
amended, the Complaint alleges that the Company has, as a result of boat company
acquisitions and various business practices, unlawfully acquired and maintained
a monopoly in the domestic sterndrive marine engine market, and has attempted to
monopolize the domestic outboard engine market and sterndrive and outboard
recreational boat markets. The Plaintiffs also allege that the Company breached
a sterndrive engine purchasing contract with Plaintiffs, and the implied
covenant of good faith and fair dealing, and engaged in fraudulent
misrepresentations. The Plaintiffs seek an injunction requiring the Company to
divest its boat manufacturing operations and to cease the alleged unlawful
business practices, as well as actual and treble damages, punitive damages,
attorneys' fees and costs. Although no amount of damages is specified in the
complaint, Plaintiffs have recently asserted that actual damages are
approximately $78 million.

The Federal Trade Commission ("FTC") began an investigation in 1993 of
whether the formation or operations of Tracker Marine, L.P. and the Company's
contracts with Tracker Marine, L.P. violate antitrust

34
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

laws. On March 18, 1997, the Company received notification from the FTC that the
investigation had been concluded, with no action warranted by the Commission.

In October 1997, the Company was notified by the FTC that it is
investigating certain of the Company's marketing practices related to the sale
of sterndrive marine engines to boat builders and dealers. The Company believes
such practices were lawful; however, they were discontinued for business reasons
prior to the initiation of the FTC's investigation.

The Company is involved in numerous environmental remediation and clean-up
projects with an aggregate estimated range of exposure of approximately $24.0 to
$42.0 million as of December 31, 1997. At December 31, 1997 and 1996, the
Company had reserves for environmental liabilities of $26.3 and $28.9 million,
with environmental provisions of $4.4, $6.1 and $6.6 million for the years ended
December 31, 1997, 1996 and 1995, respectively. The Company accrues for
environmental remediation-related activities for which commitments or clean-up
plans have been developed and for which costs can be reasonably estimated. All
accrued amounts are generally determined in coordination with third party
experts on an undiscounted basis and do not consider recoveries from third
parties until such recoveries are realized.

In light of existing reserves, the Company's litigation and environmental
claims, including those discussed, when finally resolved, will not, in the
opinion of management, have a material adverse effect on the Company's
consolidated financial position and results of operations.

7. FINANCIAL INSTRUMENTS

The Company enters into various financial instruments in the normal course
of business and in connection with the management of its assets and liabilities.
The Company does not hold or issue financial instruments for trading purposes.
The Company prepares periodic analyses of its positions in derivatives to assess
the current and projected status of these agreements.

The Company monitors and controls market risk from financial instrument
activities by utilizing floating rates that historically have moved in tandem
with each other, matching positions and limiting the terms of contracts to short
durations.

The fair market value of the financial instruments is determined through
dealer quotes and may not be representative of the actual gains or losses that
will be recorded when these instruments mature due to the volatility of the
markets in which they are traded. The impact of financial instruments
transactions is not material to the Company's results of operations.

The carrying values of the Company's short-term financial instruments,
including cash and cash equivalents, marketable securities, accounts and notes
receivable, and short-term debt approximate their fair values because of the
short maturity of these instruments.

INTEREST RATE SWAPS. The Company has entered into interest rate swap
agreements to reduce the impact of changes in interest rates on the Company's
investments and borrowings.

35
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At December 31, 1997 and 1996, the Company had three outstanding
floating-to-floating interest rate swap agreements each with a notional
principal amount of $260.0 million that expire in September 2003. The estimated
aggregate market value of these three agreements was a gain of $3.9 million and
a loss of $2.5 million at December 31, 1997 and 1996, respectively, and
represent the costs to settle outstanding agreements.

FORWARD EXCHANGE CONTRACTS. The Company enters into forward exchange
contracts and options to manage foreign exchange exposure related to
transactions, assets and liabilities that are subject to risk from foreign
currency rate changes. These include product costs, revenues and expenses;
associated receivables and payables; intercompany obligations and receivables;
and other related cash flows. Forward exchange contracts outstanding at December
31, 1997 and 1996, had contract values of $106.4 million and $17.1 million,
respectively. The contracts outstanding at December 31, 1997, mature during 1998
and relate primarily to the Canadian dollar, German mark, and Australian dollar.
At December 31, 1997 the fair value of forward exchange contracts was
approximately $3.3 million.

COMMODITY SWAPS. The Company uses commodity swap agreements to hedge
anticipated purchases of key raw materials. Commodity swap contracts outstanding
at December 31, 1997 and 1996, had a notional amount of $23.4 million and $24.0
million. At December 31, 1997, the fair value of the commodity swaps was ($0.3)
million. The contracts outstanding at December 31, 1997, mature through 1999.

CREDIT RISK. The Company enters into financial instruments with banks and
investment firms with which the Company has continuing business relationships
and regularly monitors the credit ratings of its counterparties. The Company
sells a broad range of active recreation products to a worldwide customer base
and extends credit to its customers based upon an ongoing credit evaluation
program and security is obtained if required. Concentrations of credit risk with
respect to trade receivables are limited due to the large number of customers
comprising the Company's customer base; however, periodic concentrations can
occur due to the seasonality of the Company's businesses. The Company has one
mass merchant customer that comprised 10 percent and 11 percent of its net
receivable balances at December 31, 1997 and 1996, respectively.

8. ACCRUED EXPENSES

Accrued expenses at December 31 were as follows:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
(IN MILLIONS)
<S> <C> <C>
Payroll and other compensation............................... $ 114.0 $ 94.1
Product warranties........................................... 98.6 92.7
Dealer allowances and discounts.............................. 84.5 79.9
Insurance reserves........................................... 53.9 59.4
Strategic charge reserve..................................... 40.4 --
Other........................................................ 194.6 190.0
----------- -----------
Accrued expenses............................................. $ 586.0 $ 516.1
----------- -----------
----------- -----------
</TABLE>

36
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. DEBT

Short-term debt at December 31 consisted of the following:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
(IN MILLIONS)
<S> <C> <C>
Commercial paper............................................. $ 86.3 $ --
Notes payable................................................ 7.9 0.3
Current maturities of long-term debt......................... 15.1 112.3
----------- -----------
Short-term debt.............................................. $ 109.3 $ 112.6
----------- -----------
----------- -----------
</TABLE>

The weighted-average interest rate for commercial paper borrowings during
1997 and 1996 was 5.83 percent and 5.53 percent, respectively.

Long-term debt at December 31 consisted of the following:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
(IN MILLIONS)
<S> <C> <C>
Mortgage notes and other, 1% to 10% payable through 2003..... $ 34.0 $ 33.7
Notes, 6.75% due 2006, net of discount of $1.9 and $2.2...... 248.1 247.8
Notes, 7.125% due 2027, net of discount of $1.4.............. 198.6 --
Debentures, 7.375% due 2023, net of discount of $0.8......... 124.2 124.2
Guaranteed ESOP debt, 8.13% payable through 2004............. 55.7 62.0
Notes, 8.125% due 1997....................................... -- 100.0
----------- -----------
660.6 567.7
----------- -----------
Current maturities........................................... (15.1) (112.3)
----------- -----------
Long-term debt............................................... $ 645.5 $ 455.4
----------- -----------
Scheduled maturities
1999....................................................... $ 10.6
2000....................................................... 8.4
2001....................................................... 10.7
2002....................................................... 9.4
Thereafter................................................. 606.4
-----------
Total.................................................... $ 645.5
-----------
-----------
</TABLE>

The Company has a $400.0 million long-term credit agreement with a group of
banks that terminates on May 22, 2002. Under terms of the agreement, the Company
has multiple borrowing options, including borrowing at the greater of the prime
rate as announced by The Chase Manhattan Bank, or the federal funds effective
rate plus 0.5 percent, or a rate tied to the Eurodollar rate. The Company must
pay a facility fee of 0.08 percent per annum. Under the terms of the agreement,
the Company is subject to a leverage test, as well as a restriction on secured
debt. The Company was in compliance with these covenants at December 31, 1997.
There were no borrowings under the revolving credit agreement during 1997, and
the agreement continues to serve as support for commercial paper borrowings when
commercial paper is outstanding.

37
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On August 4, 1997, the Company sold $200.0 million of 7.125 percent notes
due August 1, 2027. The proceeds from the sale of the notes were used to retire
a portion of the commercial paper issued to finance the acquisition of Life
Fitness.

On December 10, 1996, the Company sold $250.0 million of 6.75 percent notes
due December 15, 2006. The proceeds from the sale of the notes were used to
finance the purchase of Igloo Holdings, Inc. on January 3, 1997, and to repay
the aforementioned $100.0 million principal amount of 8.125 percent notes due
April 1, 1997.

At December 31, 1997 and 1996, the fair value of the Company's long-term
debt was $664.2 million and $450.0 million, respectively, as estimated using
quoted market prices or discounted cash flows based on market rates for similar
types of debt.

10. DISCONTINUED OPERATIONS

In April 1996, the Company announced its intention to divest its freshwater
fishing boat operations, which comprised substantially all of the assets and
certain liabilities of the discontinued Fishing Boat Division in the Marine
segment and included the Starcraft, Fisher, MonArk, Spectrum, Astro and Procraft
brands. Certain assets and liabilities of discontinued operations, which are
being retained by the Company, are reflected in the Company's continuing
operations in 1996 and are adequately covered by existing reserves. These
disposition transactions, which were completed in the third quarter of 1996, did
not have a significant effect upon the Company's consolidated results of
operations.

The net sales of the freshwater fishing boat unit for the years ended
December 31, 1996 and 1995, were $82.5 million and $200.2 million, respectively.
Intercompany sales between the continuing and discontinued operations that were
previously eliminated in consolidation have been included in continuing
operations.

In April 1995, the Company completed the sale of substantially all of the
assets of its Technical Group, which was in the discontinued Technical segment,
with the final disposition of remaining assets occurring in June 1996. Certain
liabilities of discontinued operations were retained by the Company. In the
second quarter of 1995, the Company recorded a provision of $11.5 million ($7.0
million after tax) reflecting a lower-than-anticipated selling price for the
Technical Group. The net sales of the Technical Group were $7.6 million and
$35.1 million for the years 1996 and 1995, respectively. Operating results of
the Technical Group for 1996 and 1995 have been recorded against the divestiture
reserve.

11. STOCK PLANS AND MANAGEMENT COMPENSATION

Under the 1991 Stock Plan, the Company may grant stock options, stock
appreciation rights, restricted stock and other various types of awards to
executives and other management employees. Issuances under the plan may be from
either authorized, but unissued shares or treasury shares. The plan provides for
the issuance of a maximum of 11,200,000 shares. The option price per share has
not been less than the fair market value at the date of grant. The stock options
are generally exercisable over a period of 10 years or as determined by the
Human Resource and Compensation Committee of the Board of Directors. Options
vest over three or five years, although the Company provides for accelerated
vesting should certain earnings per share or stock price levels be attained, or
immediately in the event of a change in control.

38
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company has additional stock and stock option plans to provide for
compensation of nonemployee directors. Stock option activity for all plans for
the three years ending December 31, 1997, was as follows:

<TABLE>
<CAPTION>
STOCK OPTIONS WEIGHTED AVERAGE
OUTSTANDING EXERCISE PRICE
------------- -----------------
(SHARES IN THOUSANDS)
<S> <C> <C>
AT JANUARY 1, 1995................................. 2,120 $ 16.34
------ ------
Granted............................................ 1,420 $ 19.45
Exercised.......................................... (114) $ 15.04
Forfeited.......................................... (46) $ 17.91
------ ------
AT DECEMBER 31, 1995............................... 3,380 $ 17.67
------ ------
Granted............................................ 3,082 $ 21.41
Exercised.......................................... (262) $ 16.33
Forfeited.......................................... (184) $ 22.18
------ ------
AT DECEMBER 31, 1996............................... 6,016 $ 19.51
------ ------
Granted............................................ 1,752 $ 31.30
Exercised.......................................... (1,099) $ 17.92
Forfeited.......................................... (171) $ 21.72
------ ------
AT DECEMBER 31, 1997............................... 6,498 $ 22.89
------ ------
</TABLE>

<TABLE>
<CAPTION>
EXERCISABLE
STOCK OPTIONS WEIGHTED AVERAGE SHARES AVAILABLE
OUTSTANDING EXERCISE PRICE FOR GRANT
--------------- ----------------- -----------------
(OPTIONS AND SHARES IN THOUSANDS)
<S> <C> <C> <C>
At December 31, 1995.................................. 1,433 $ 16.08 1,050
At December 31, 1996.................................. 2,036 $ 17.08 4,272
At December 31, 1997.................................. 3,759 $ 20.71 2,687
</TABLE>

The following tables summarize information about stock options outstanding
at December 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------------------
NUMBER OUTSTANDING
AT DECEMBER 31, WEIGHTED AVERAGE WEIGHTED AVERAGE
RANGE OF EXERCISE PRICE 1997 CONTRACTUAL LIFE EXERCISE PRICE
- ------------------------------------------------- ------------------- ---------------- -----------------
(OPTIONS IN THOUSANDS)
<S> <C> <C> <C>
$13.88 to 16.75.................................. 676 4.6 years $ 15.46
$16.75 to 20.25.................................. 2,500 7.6 years $ 18.83
$20.25 to 25.50.................................. 1,723 8.1 years $ 23.44
$25.50 to 35.44.................................. 1,599 9.6 years $ 31.81
</TABLE>

39
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
-------------------------------------
NUMBER EXERCISABLE
AT DECEMBER 31, WEIGHTED AVERAGE
RANGE OF EXERCISE PRICE 1997 EXERCISE PRICE
- ------------------------------------------------------------------- ------------------- ----------------
(OPTIONS IN THOUSANDS)
<S> <C> <C>
$13.88 to 16.75.................................................... 676 $15.46
$16.75 to 20.25.................................................... 1,736 $18.89
$20.25 to 25.50.................................................... 988 $23.34
$25.50 to 35.44.................................................... 359 $32.19
</TABLE>

The Company adopted the disclosure-only provision under Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for
Stock-Based Compensation," as of December 31, 1996, while continuing to measure
compensation cost under APB Opinion No. 25, "Accounting for Stock Issued to
Employees." If the accounting provisions of SFAS No. 123 had been adopted as of
the beginning of 1995, the Company's net income and earnings per share would
have been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Earnings from continuing operations(1)
As reported.................................... $ 151.2 $ 185.8 $ 133.6
Pro forma...................................... 141.3 180.6 132.3
----------- ----------- -----------
Basic earnings per common share from continuing
operations(1)
As reported.................................... $ 1.52 $ 1.89 $ 1.39
Pro forma...................................... 1.42 1.84 1.38
----------- ----------- -----------
Diluted earnings per common share from continuing
operations(1)
As reported.................................... $ 1.51 $ 1.88 $ 1.38
Pro forma...................................... 1.41 1.83 1.38
----------- ----------- -----------
Weighted average grant date fair value of options
granted during the year........................ $ 16.6 $ 20.8 $ 10.0
----------- ----------- -----------
</TABLE>

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

(1) Before cumulative effect of accounting change.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for 1997, 1996 and 1995, respectively.

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Risk-free interest rate.......................... 6.0% 5.9% 7.5%
Dividend Yield................................... 1.6% 2.3% 2.4%
Volatility factor................................ 27.3% 32.4% 35.5%
----------- ----------- -----------
Weighted-average expected life................... 5 years 5 years 5 years
</TABLE>

The Company maintains a leveraged employee stock ownership plan (ESOP). In
April 1989, the ESOP borrowed $100 million to purchase 5,095,542 shares of the
Company's common stock at $19.625 per

40
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

share. The debt of the ESOP is guaranteed by the Company and is recorded in the
Company's financial statements.

The ESOP shares are maintained in a suspense account until released and
allocated to participants' accounts. Shares committed-to-be-released, allocated
and remaining in suspense at December 31 were as follows:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
(SHARES IN THOUSANDS)
<S> <C> <C>
Committed-to-be-released..................................... 289 301
Allocated.................................................... 1,741 1,542
Suspense..................................................... 2,133 2,461
</TABLE>

All ESOP shares are considered outstanding for earnings per share purposes.

Under the grandfather provisions of SOP 93-6, the expense recorded by the
Company is based on cash contributed or committed to be contributed by the
Company to the ESOP during the year, net of dividends received which are
primarily used by the ESOP to pay down debt. The Company's contributions to the
ESOP were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Compensation expense............................. $ 4.2 $ 4.1 $ 3.1
Interest expense................................. 4.9 5.3 5.8
Dividends........................................ 2.1 1.8 2.3
----- ----- -----
Total debt service payments...................... $ 11.2 $ 11.2 $ 11.2
----- ----- -----
----- ----- -----
</TABLE>

The Company has certain employment agreements and a severance plan that
become effective upon a change in control of the Company which will result in
compensation expense in the period that a change in control occurs.

12. RETIREMENT AND EMPLOYEE BENEFIT COSTS

The Company has pension and retirement plans covering substantially all of
its employees, including certain employees in foreign countries. Plan benefits
are based on years of service, and for some plans, the average compensation
prior to retirement. Pension costs, which are primarily computed using the
projected unit credit method, are generally funded based on the legal
requirements, tax considerations and investment opportunities for the Company's
domestic pension plans and in accordance with local laws and income tax
regulations for foreign plans. Plan assets generally consist of debt and equity
securities, real estate and investments in insurance contracts.

41
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pension costs of continuing operations for 1997, 1996 and 1995, included the
following components:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost-benefits earned during the period... $ 14.7 $ 16.0 $ 11.6
Interest cost on projected benefit obligation.... 45.5 43.1 34.2
Actual return on assets.......................... (112.2) (91.9) (90.8)
Net amortization and deferral.................... 57.6 41.9 57.7
----------- ----------- -----------
Net pension cost................................. $ 5.6 $ 9.1 $ 12.7
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The projected benefit obligations were determined primarily using assumed
weighted average discount rates of 7.25 percent in 1997 and 7.75 percent in
1996, and an assumed compensation increase of 5.5 percent in 1997 and 1996. The
assumed weighted average long-term rate of return on plan assets was primarily
9.5 percent in 1997 and 9.0 percent in 1996.

Two of the Company's salaried pension plans provide that in the event of a
termination, merger or transfer of assets of the plans during the five years
following a change in control of the Company occurring on or before April 1,
2001, benefits would be increased so that there would be no excess net assets.
The Company's supplemental pension plan provides for a lump sum payout to plan
participants equal to the present value of accumulated benefits upon a change in
control of the Company.

The Company also sponsors other defined contribution retirement plans whose
costs are not material.

In addition to providing benefits to present employees, the Company
currently provides certain health care and life insurance benefits for eligible
retired employees that have fulfilled specific age and service requirements. The
Company monitors the cost of these plans and reserves the right to make
additional changes or terminate these benefits in the future. The plans contain
requirements for retiree contributions generally based on years of service as
well as other cost sharing features such as deductibles and copayments. The
Company's plans are not funded; claims are paid as incurred.

42
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The funded status of the plans and the amounts recognized in the Company's
balance sheets at December 31 were as follows:

<TABLE>
<CAPTION>
1997 1996
----------------------------- -----------------------------
PLANS WHOSE PLANS WHOSE
ASSETS PLANS WHOSE ASSETS PLANS WHOSE
EXCEED ACCUMULATED EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED ACCUMULATED BENEFITS EXCEED
BENEFITS ASSETS BENEFITS ASSETS
------------ --------------- ------------ ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation................ $ (531.3) $ (29.2) $ (461.4) $ (26.1)
Nonvested benefit obligation............. (32.5) (0.3) (29.7) (0.3)
------------ ------ ------------ ------
Accumulated benefit obligation............. (563.8) (29.5) (491.1) (26.4)
Effects of anticipated future compensation
levels and other events.................. (69.0) (8.0) (60.9) (8.0)
------------ ------ ------------ ------
Projected benefit obligation............... (632.8) (37.5) (552.0) (34.4)
Plan assets at fair value.................. 692.4 3.3 616.9 2.5
------------ ------ ------------ ------
Plan assets in excess of (less than)
projected benefit obligation............. 59.6 (34.2) 64.9 (31.9)
Unrecognized net transition obligation
(asset).................................. (0.5) 1.0 (0.7) 1.3
Unrecognized prior service cost............ 30.0 (0.2) 17.7 (0.3)
Net unrecognized (gain) loss from past
experience different from assumed and
effects of changes in assumptions........ (11.9) 6.2 (2.9) 5.0
Adjustment to recognize minimum
liability................................ -- (0.5) -- (0.5)
------------ ------ ------------ ------
Pension asset (liability) recognized in
financial statements..................... $ 77.2 $ (27.7) $ 79.0 $ (26.4)
------------ ------ ------------ ------
------------ ------ ------------ ------
</TABLE>

Net periodic postretirement benefit cost of continuing operations for 1997,
1996 and 1995 included the following components:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost-benefits attributed to service
during the period.............................. $ 1.5 $ 1.7 $ 1.2
Interest cost on accumulated postretirement
benefit obligation............................. 4.1 4.0 4.3
Net amortization and deferral.................... (0.9) (0.7) (1.0)
----- ----- -----
Net periodic postretirement benefit cost......... $ 4.7 $ 5.0 $ 4.5
----- ----- -----
----- ----- -----
</TABLE>

43
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The postretirement benefit amounts recognized in the Company's balance
sheets at December 31 were as follows:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................... $ 37.3 $ 33.9
Fully eligible active plan participants.................... 7.0 5.7
Other active plan participants............................. 31.0 28.5
----- -----
Total.................................................... 75.3 68.1
----- -----
Unrecognized prior service cost.............................. 2.8 3.1
Unrecognized net gains....................................... 11.1 14.7
----- -----
Postretirement liability recognized in financial
statements................................................. $ 89.2 $ 85.9
----- -----
----- -----
</TABLE>

The accumulated postretirement benefit obligation was determined using
weighted-average discount rates of 7.25 percent in 1997 and 7.75 percent in
1996, and an assumed compensation increase of 5.5 percent in 1997 and 1996. The
health care cost trend rates for pre-65 benefits were assumed to be 8 percent
and 9 percent in 1998 and 1997, respectively, gradually declining to 5 percent
by 2002 and remaining at that level thereafter. The health care cost trend rates
for post-65 benefits were assumed to be 5 percent and 6 percent in 1998 and
1997, respectively, and remain at the 5 percent level thereafter. The health
care cost trend rate assumption has a significant effect on the amounts
reported. For example, a 1 percent increase in the health care trend rate would
increase the accumulated postretirement benefit obligation by $9.1 million at
December 31, 1997, and the net periodic cost by $1.0 million for the year then
ended.

The Company also provides postemployment benefits to qualified former or
inactive employees. The liability for these benefits has been recognized in the
financial statements. The cost of providing these benefits is not material. The
Company does not fund these benefits and has the right to modify or terminate
these plans in the future.

13. INCOME TAXES

The sources of earnings before income taxes are presented as follows:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
United States.................................... $ 233.6 $ 284.9 $ 195.8
Foreign.......................................... 2.6 5.4 11.0
----------- ----------- -----------
Earnings before income taxes..................... $ 236.2 $ 290.3 $ 206.8
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

44
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The income tax provision (benefit) consisted of the following:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
CURRENT TAX EXPENSE
U.S. Federal..................................... $ 69.9 $ 73.4 $ 56.4
State and local.................................. 4.4 3.4 8.5
Foreign.......................................... 8.6 8.8 7.7
----- ----------- -----
Total current.................................. 82.9 85.6 72.6
----- ----------- -----
DEFERRED TAX EXPENSE
U.S. Federal..................................... (1.9) 11.1 2.0
State and local.................................. 3.9 6.9 (2.4)
Foreign.......................................... 0.1 0.9 1.0
----- ----------- -----
Total deferred................................. 2.1 18.9 0.6
----- ----------- -----
Total provision................................ $ 85.0 $ 104.5 $ 73.2
----- ----------- -----
----- ----------- -----
</TABLE>

Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities at December 31 are as follows:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
(IN MILLIONS)
<S> <C> <C>
DEFERRED TAX ASSETS
Litigation and claims........................................ $ 10.7 $ 14.2
Product warranties........................................... 40.9 37.2
Dealer allowances and discounts.............................. 20.2 16.5
Sales of businesses.......................................... 13.1 10.2
Insurance reserves........................................... 29.8 31.3
Strategic charge reserve..................................... 28.7 --
Loss carry forwards and carry backs.......................... 10.8 12.3
Compensation and benefits.................................... 10.7 10.7
Other........................................................ 46.1 52.3
Valuation allowance.......................................... (0.3) (0.3)
----------- -----------
Total deferred tax assets.................................. $ 210.7 $ 184.4
----------- -----------
DEFERRED TAX LIABILITIES (ASSETS)
Depreciation and amortization................................ $ 42.4 $ 28.7
Postretirement and postemployment benefits................... (26.1) (24.2)
Other assets and investments................................. 90.7 87.7
Other........................................................ 37.3 63.4
----------- -----------
Total deferred tax liabilities............................. $ 144.3 $ 155.6
----------- -----------
----------- -----------
</TABLE>

No other valuation allowances were deemed necessary as all deductible
temporary differences will be utilized primarily by carry back to prior years'
taxable income or as charges against reversals of future taxable temporary
differences. Based upon prior earnings history, it is expected that future
taxable income will be more than sufficient to utilize the remaining deductible
temporary differences. Deferred taxes have been provided, as required, on the
undistributed earnings of foreign subsidiaries and unconsolidated affiliates.

45
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The difference between the actual income tax provision and the tax provision
computed by applying the statutory Federal income tax rate to earnings before
taxes is attributable to the following:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Income tax provision at 35%...................... $ 82.7 $ 101.6 $ 72.4
State and local income taxes, net of Federal
income tax effect.............................. 5.4 6.7 4.0
Foreign sales corporation benefit................ (3.3) (2.5) (1.7)
Taxes related to foreign income, net of
credits........................................ 5.2 1.2 0.8
Goodwill and other amortization.................. 2.1 0.9 0.8
Other............................................ (7.1) (3.4) (3.1)
----- ----------- -----
Actual income tax provision...................... $ 85.0 $ 104.5 $ 73.2
----- ----------- -----
----- ----------- -----
Effective tax rate............................... 36.0% 36.0% 35.5%
----- ----------- -----
----- ----------- -----
</TABLE>

In December 1996, the Company received notification that the income
allocation and tax basis of assets distributed from two partnership investments
in 1990 and 1991 are being challenged by the IRS. Should the IRS prevail, it may
result in a cash payment of up to approximately $60 million for taxes due, plus
accrued interest. The Company strongly disagrees with the IRS position and filed
petitions in the United States Tax Court in January 1997 to contest the IRS
position. A trial has been scheduled for September 1998. Although the outcome
cannot be predicted with certainty, it is not expected to have an unfavorable
impact on the Company's results of operations.

46
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. CONSOLIDATED COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE UNAMORTIZED
COMMON PAID-IN RETAINED TREASURY TRANSLATION ESOP EXPENSE
STOCK CAPITAL EARNINGS STOCK ADJUSTMENTS AND OTHER
----------- ----------- ---------- ----------- ------------ ---------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994................... $ 75.5 $ 261.5 $ 735.5 $ (98.3) $ 11.8 $ (75.3)
----- ----------- ---------- ----------- ------ ------
1995
Net earnings................................. -- -- 127.2 -- -- --
Dividends declared ($.50 per common share)... -- -- (47.9) -- -- --
Compensation plans and other................. -- (0.7) -- 13.3 -- (6.6)
Deferred compensation--ESOP.................. -- -- -- -- -- 5.2
Purchase of stock by pension plan master
trust...................................... 1.4 38.6 -- -- -- --
Currency translation......................... -- -- -- -- 1.9 --
----- ----------- ---------- ----------- ------ ------
Balance, December 31, 1995................... $ 76.9 $ 299.4 $ 814.8 $ (85.0) $ 13.7 $ (76.7)
----- ----------- ---------- ----------- ------ ------
1996
Net earnings................................. -- -- 185.8 -- -- --
Dividends declared ($.50 per common share)... -- -- (49.3) -- -- --
Compensation plans and other................. -- 2.6 -- 9.6 -- 2.5
Deferred compensation--ESOP.................. -- -- -- -- -- 5.9
Currency translation......................... -- -- -- -- (2.5) --
----- ----------- ---------- ----------- ------ ------
Balance, December 31, 1996................... $ 76.9 $ 302.0 $ 951.3 $ (75.4) $ 11.2 $ (68.3)
----- ----------- ---------- ----------- ------ ------
1997
Net earnings................................. -- -- 150.5 -- -- --
Dividends declared ($.50 per common share)... -- -- (49.6) -- -- --
Compensation plans and other................. -- 6.2 -- 24.8 -- (1.5)
Deferred compensation--ESOP.................. -- -- -- -- -- 6.4
Stock repurchase............................. -- -- -- (8.4) -- --
Currency translation......................... -- -- -- -- (11.1) --
----- ----------- ---------- ----------- ------ ------
Balance, December 31, 1997................... $ 76.9 $ 308.2 $ 1,052.2 $ (59.0) $ 0.1 $ (63.4)
----- ----------- ---------- ----------- ------ ------
----- ----------- ---------- ----------- ------ ------

TOTAL
----------

<S> <C>
Balance, December 31, 1994................... $ 910.7
----------
1995
Net earnings................................. 127.2
Dividends declared ($.50 per common share)... (47.9)
Compensation plans and other................. 6.0
Deferred compensation--ESOP.................. 5.2
Purchase of stock by pension plan master
trust...................................... 40.0
Currency translation......................... 1.9
----------
Balance, December 31, 1995................... $ 1,043.1
----------
1996
Net earnings................................. 185.8
Dividends declared ($.50 per common share)... (49.3)
Compensation plans and other................. 14.7
Deferred compensation--ESOP.................. 5.9
Currency translation......................... (2.5)
----------
Balance, December 31, 1996................... $ 1,197.7
----------
1997
Net earnings................................. 150.5
Dividends declared ($.50 per common share)... (49.6)
Compensation plans and other................. 29.5
Deferred compensation--ESOP.................. 6.4
Stock repurchase............................. (8.4)
Currency translation......................... (11.1)
----------
Balance, December 31, 1997................... $ 1,315.0
----------
----------
</TABLE>

At December 31, 1997, 1996 and 1995, the Company had no preferred stock
outstanding (authorized: 12.5 million shares, $.75 par value at December 31,
1997).

47
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Common and treasury stock activities were as follows:

<TABLE>
<CAPTION>
COMMON TREASURY
STOCK STOCK
---------- ---------
(SHARES IN THOUSANDS)
<S> <C> <C>
Balance, December 31, 1994................................... 100,688 (5,237)
---------- ---------
1995
Compensation plans and other................................. -- 604
Purchase of stock by pension plan master trust............... 1,850 --
---------- ---------
Balance, December 31, 1995................................... 102,538 (4,633)
---------- ---------
1996
Compensation plans and other................................. -- 561
---------- ---------
Balance, December 31, 1996................................... 102,538 (4,072)
---------- ---------
1997
Compensation plans and other................................. -- 1,324
Stock repurchases............................................ -- (309)
---------- ---------
Balance, December 31, 1997................................... 102,538 (3,057)
---------- ---------
---------- ---------
</TABLE>

15. LEASES

The Company has various lease agreements for offices, branches, factories,
distribution and service facilities, certain Company-operated bowling centers,
and certain personal property. These obligations extend through 2032.

Most leases contain renewal options and some contain purchase options. Many
leases for Company-operated bowling centers contain escalation clauses, and many
provide for contingent rentals based on percentages of gross revenue. No leases
contain restrictions on the Company's activities concerning dividends,
additional debt or further leasing.

Rent expense consisted of the following:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Basic expense.......................................... $ 35.2 $ 29.6 $ 21.5
Contingent expense..................................... 1.1 0.4 0.5
Sublease income........................................ (0.9) (1.1) (1.9)
----- ----- -----
Rent expense, net...................................... $ 35.4 $ 28.9 $ 20.1
----- ----- -----
----- ----- -----
</TABLE>

48
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Future minimum rental payments at December 31, 1997, under agreements
classified as operating leases with non-cancelable terms in excess of one year,
are as follows:

<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
1998................................................................... $ 23.7
1999................................................................... 21.7
2000................................................................... 18.1
2001................................................................... 15.8
2002................................................................... 13.8
Thereafter............................................................. 28.1
------
Total (not reduced by minimum sublease rentals of $5.6 million)........ $ 121.2
------
------
</TABLE>

16. PREFERRED SHARE PURCHASE RIGHTS

In February 1996, the Board of Directors declared a dividend of one
Preferred Share Purchase Right (Right) on each outstanding share of the
Company's common stock. Under certain conditions, each holder of Rights may
purchase one one-thousandth of a share of a new series of junior participating
preferred stock at an exercise price of $85 for each Right held. The Rights
expire on April 1, 2006.

The Rights become exercisable at the earlier of (1) a public announcement
that a person or group acquired or obtained the right to acquire 15 percent or
more of the Company's common stock or (2) fifteen days (or such later time as
determined by the Board of Directors) after commencement or public announcement
of an offer for more than 15 percent of the Company's common stock. After a
person or group acquires 15 percent or more of the common stock of the Company,
other shareholders may purchase additional shares of the Company at 50 percent
of the current market price. These Rights may cause substantial ownership
dilution to a person or group who attempts to acquire the Company without
approval of the Company's Board of Directors.

The Rights, which do not have any voting rights, may be redeemed by the
Company at a price of $.01 per Right at any time prior to a person's or group's
acquisition of 15 percent or more of the Company's common stock. A Right also
will be issued with each share of the Company's common stock that becomes
outstanding prior to the time the Rights become exercisable or expire.

In the event that the Company is acquired in a merger or other business
combination transaction, provision will be made so that each holder of Rights
will be entitled to buy the number of shares of common stock of the surviving
Company, that at the time of such transaction would have a market value of two
times the exercise price of the Rights.

49
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. UNCONSOLIDATED AFFILIATES AND SUBSIDIARIES

The Company has certain unconsolidated foreign and domestic affiliates that
are accounted for using the equity method.

Summary financial information of the unconsolidated affiliates is presented
below:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Net sales........................................... $ 483.3 $ 489.5 $ 414.4
--------- --------- ---------
Gross margin........................................ $ 80.9 $ 83.8 $ 62.9
--------- --------- ---------
Net earnings........................................ $ 10.9 $ 26.2 $ 24.3
--------- --------- ---------
Company's share of net earnings..................... $ 6.8 $ 14.7 $ 11.5
--------- --------- ---------
Current assets...................................... $ 212.5 $ 199.3 $ 200.1
Noncurrent assets................................... 157.5 153.0 123.5
--------- --------- ---------
Total assets........................................ 370.0 352.3 323.6
Current liabilities................................. (182.3) (170.1) (157.4)
Noncurrent liabilities.............................. (36.0) (27.7) (17.8)
--------- --------- ---------
Net assets.......................................... $ 151.7 $ 154.5 $ 148.4
--------- --------- ---------
--------- --------- ---------
</TABLE>

The Company's sales to and purchases from the above investments along with
the corresponding receivables and payables were not material to the Company's
overall results of operations for the three years ended December 31, 1997, and
its financial position as of December 31, 1997 and 1996.

The Company has made cash advances to the majority partner of a boat company
partnership, in which the Company has a minority interest, in connection with
long-term engine supply arrangements. These transactions have occurred in the
ordinary course of business and are backed by notes receivable that are reduced
as purchases of qualifying products are made. The notes receivable are secured
by the majority partner's interest in the boat company partnership and are
included in other long-term assets. Amounts outstanding related to these
arrangements as of December 31, 1997 and 1996, totaled $44.3 million and $44.7
million, respectively. Total assets as of December 31, 1997 and 1996, directly
or indirectly related to this boat company partnership, including trade
receivables, the Company's investment and the aforementioned supply agreement
assets were $64.2 million and $73.8 million, respectively.

50
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
QUARTER
-----------------------------------
1ST 2ND 3RD 4TH YEAR
------ -------- ------ ------ --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1997
Net sales..................... $841.6 $1,008.2 $876.5 $931.1 $3,657.4
Gross margin.................. 240.6 302.2 233.3 243.3 1,019.4
------ -------- ------ ------ --------
Earnings (loss) before
cumulative effect of
accounting change........... $ 52.7 $ 82.9 $(17.1) $ 32.7 $ 151.2
Cumulative effect on prior
years of change in
accounting principle........ -- -- -- (0.7) (0.7)
------ -------- ------ ------ --------
Net earnings (loss)........... $ 52.7 $ 82.9 $(17.1) $ 32.0 $ 150.5
------ -------- ------ ------ --------
PER COMMON SHARE DATA
Basic earnings (loss) per
common share:
Earnings (loss) before
cumulative effect of
accounting change......... $ .53 $ .84 $ (.17) $ .33 $ 1.52
Cumulative effect on prior
years of change in
accounting principle...... -- -- -- (.01) (.01)
------ -------- ------ ------ --------
Net earnings (loss)....... $ .53 $ .84 $ (.17) $ .32 $ 1.52
------ -------- ------ ------ --------
Diluted earnings (loss) per
common share:
Earnings (loss) before
cumulative effect of
accounting change......... $ .53 $ .83 $ (.17) $ .32 $ 1.51
Cumulative effect on prior
years of change in
accounting principle...... -- -- -- (.01) (.01)
------ -------- ------ ------ --------
Net earnings (loss)....... $ .53 $ .83 $ (.17) $ .32 $ 1.50
------ -------- ------ ------ --------
Dividends declared............ $ .125 $ .125 $ .125 $ .125 $ .50
------ -------- ------ ------ --------
</TABLE>

<TABLE>
<CAPTION>
COMMON STOCK PRICE (NYSE)
<S> <C> <C> <C> <C> <C>
High.......................... $29 3/8 $31 7/16 $35 11/16 $36 1/2 $36 1/2
Low........................... 23 5/8 26 1/4 30 1/8 27 9/16 23 5/8
</TABLE>

Third quarter net earnings in 1997 include a strategic charge of $63.0
million after tax.

51
<PAGE>
BRUNSWICK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
QUARTER
------------------------------------------
1ST 2ND 3RD 4TH YEAR
--------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1996
Net sales..................................... $ 738.9 $ 858.3 $ 763.6 $ 799.5 $ 3,160.3
Gross margin.................................. 214.9 256.4 207.5 196.5 875.3
--------- --------- --------- --------- ---------
Earnings from continuing operations........... $ 46.4 $ 69.8 $ 40.5 $ 29.1 $ 185.8
Earnings (loss) from discontinued
operations.................................. (1.0) 1.0 -- -- --
--------- --------- --------- --------- ---------
Net earnings.................................. $ 45.4 $ 70.8 $ 40.5 $ 29.1 $ 185.8
--------- --------- --------- --------- ---------
PER COMMON SHARE DATA
Basic earnings per common share:
Continuing operations....................... $ .47 $ .71 $ .41 $ .30 $ 1.89
Earnings (loss) from discontinued
operations................................ (.01) .01 -- -- --
--------- --------- --------- --------- ---------
Net earnings.............................. $ .46 $ .72 $ .41 $ .30 $ 1.89
--------- --------- --------- --------- ---------
Diluted earnings per common share:
Continuing operations....................... $ .47 $ .71 $ .41 $ .29 $ 1.88
Earnings (loss) from discontinued
operations................................ (.01) .01 -- -- --
--------- --------- --------- --------- ---------
Net earnings.............................. $ .46 $ .72 $ .41 $ .29 $ 1.88
--------- --------- --------- --------- ---------
Dividends declared............................ $ .125 $ .125 $ .125 $ .125 $ .50
--------- --------- --------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
COMMON STOCK PRICE (NYSE)
<S> <C> <C> <C> <C> <C>
High........................................... $24 5/8 $23 3/4 $24 5/8 $25 3/4 $25 3/4
Low............................................ 21 1/4 20 18 1/8 23 1/2 18 1/8
</TABLE>

52
<PAGE>
BRUNSWICK CORPORATION

SIX-YEAR FINANCIAL SUMMARY

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA
Net sales........................................ $ 3,657.4 $ 3,160.3 $ 2,906.3 $ 2,592.0 $ 2,125.0 $ 1,980.5
Strategic/restructuring charges.................. 98.5 -- 40.0 -- -- --
Operating earnings............................... 270.8 304.8 218.3 206.9 98.7 80.4
Earnings before income taxes..................... 236.2 290.3 206.8 195.3 85.4 62.6
--------- --------- --------- --------- --------- ---------
Earnings from continuing operations before
cumulative effect of accounting changes and
extraordinary item............................. $ 151.2 $ 185.8 $ 133.6 $ 127.1 $ 53.8 $ 40.1
Cumulative effect on prior years of changes in
accounting principles.......................... (0.7) -- -- -- (14.6) (38.3)
Extraordinary loss from retirement of debt....... -- -- -- -- (4.6) --
Discontinued operations:
Loss on disposition of Technical segment....... -- -- (7.0) -- (12.2) (26.0)
Earnings (loss) from discontinued operations... -- -- 0.6 1.9 0.7 (2.1)
--------- --------- --------- --------- --------- ---------
Net earnings (loss).............................. $ 150.5 $ 185.8 $ 127.2 $ 129.0 $ 23.1 $ (26.3)
--------- --------- --------- --------- --------- ---------
BASIC EARNINGS PER COMMON SHARE
Earnings from continuing operations before
cumulative effect of accounting changes and
extraordinary item............................. $ 1.52 $ 1.89 $ 1.39 $ 1.33 $ .57 $ .43
Cumulative effect on prior years of changes in
accounting principles.......................... (.01) -- -- -- (.15) (.41)
Extraordinary loss from retirement of debt....... -- -- -- -- (.05) --
Discontinued operations:
Loss on disposition of Technical segment....... -- -- (.07) -- (.13) (.28)
Earnings (loss) from discontinued operations... -- -- .01 .02 .01 (.02)
--------- --------- --------- --------- --------- ---------
Net earnings (loss).............................. $ 1.52 $ 1.89 $ 1.33 $ 1.35 $ .25 $ (.28)
--------- --------- --------- --------- --------- ---------
Average shares used for computation of basic
earnings per share............................. 99.2 98.3 95.9 95.4 95.2 92.6
--------- --------- --------- --------- --------- ---------
DILUTED EARNINGS PER COMMON SHARE
Earnings from continuing operations before
cumulative effect of accounting changes and
extraordinary item............................. $ 1.51 $ 1.88 $ 1.38 $ 1.33 $ .56 $ .43
Cumulative effect on prior years of changes in
accounting principles.......................... (.01) -- -- -- (.15) (.41)
Extraordinary loss from retirement of debt....... -- -- -- -- (.05) --
Discontinued operations:
Loss on disposition of Technical segment....... -- -- (.07) -- (.13) (.28)
Earnings (loss) from discontinued operations... -- -- .01 .02 .01 (.02)
--------- --------- --------- --------- --------- ---------
Net earnings (loss)............................ $ 1.50 $ 1.88 $ 1.32 $ 1.35 $ .24 $ (.28)
--------- --------- --------- --------- --------- ---------
Average shares used for computation of diluted
earnings per share........................... 100.3 98.8 96.2 95.7 95.3 92.7
</TABLE>

53
<PAGE>
BRUNSWICK CORPORATION

SIX-YEAR FINANCIAL SUMMARY (CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Assets of continuing
operations.................. $ 3,241.4 $ 2,802.4 $ 2,310.6 $ 2,048.3 $ 1,922.0 $ 1,829.4
Debt
Short-term.................. $ 109.3 $ 112.6 $ 6.1 $ 8.2 $ 11.9 $ 10.4
Long-term................... 645.5 455.4 312.8 318.8 324.5 310.1
---------- ---------- ---------- ---------- ---------- ----------
Total debt.................... 754.8 568.0 318.9 327.0 336.4 320.5
Common shareholders' equity... 1,315.0 1,197.7 1,043.1 910.7 804.4 822.5
---------- ---------- ---------- ---------- ---------- ----------
Total capitalization.......... $ 2,069.8 $ 1,765.7 $ 1,362.0 $ 1,237.7 $ 1,140.8 $ 1,143.0
---------- ---------- ---------- ---------- ---------- ----------
CASH FLOW DATA
Net cash provided by operating
activities.................. $ 261.7 $ 395.8 $ 278.4 $ 121.2 $ 188.9 $ 169.0
Depreciation and
amortization................ 156.9 129.7 118.0 118.0 116.0 113.8
Capital expenditures.......... 190.5 169.9 118.0 101.1 94.2 87.6
Cash dividends paid........... 49.6 49.3 47.9 42.0 41.9 41.1
---------- ---------- ---------- ---------- ---------- ----------
OTHER DATA
Dividends declared per
share....................... $ .50 $ .50 $ .50 $ .44 $ .44 $ .44
Book value per share.......... 13.22 12.16 10.66 9.55 8.44 8.65
Return on beginning
shareholders' equity........ 12.6% 17.8% 14.7% 15.8% 6.5% 5.1%
Effective tax rate............ 36.0% 36.0% 35.5% 35.0% 37.0% 36.0%
Debt-to-capitalization rate... 36.5% 32.2% 23.4% 26.4% 29.5% 28.0%
Number of employees........... 25,300 22,800 19,800 19,800 17,100 16,300
Number of shareholders of
record...................... 16,200 18,400 22,400 25,800 27,900 29,600
---------- ---------- ---------- ---------- ---------- ----------

<CAPTION>
COMMON STOCK PRICE (NYSE)
<S> <C> <C> <C> <C> <C> <C>
High.......................... $36 1/2 $25 3/4 $24 $25 1/8 $18 1/2 $17 3/4
Low........................... 23 5/8 18 1/8 16 3/8 17 12 1/2 12 1/4
Close......................... 30 5/16 24 24 18 7/8 18 16 1/4
</TABLE>

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

54
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of
our report dated January 29, 1998, included in this Form 10-K, into the
Company's previously filed registration statements on Form S-8 (File No.
33-4683), Form S-8 (File No. 33-55022), Form S-8 (File No. 33-56193), Form S-8
(File No. 33-61835), Form S-8 (File No. 33-65217), Form S-8 (File No.
333-04289), Form S-3 (File No. 333-9997) and Form S-8 (File No. 333-27157).

Chicago, Illinois
March 25, 1998

55
<PAGE>
BRUNSWICK CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)

<TABLE>
<CAPTION>
ALLOWANCES FOR BALANCE AT CHARGES TO BALANCE AT
POSSIBLE LOSSES BEGINNING PROFIT AND END OF
ON RECEIVABLES OF PERIOD LOSS WRITE-OFFS RECOVERIES OTHER PERIOD
- ------------------------------------------------ ----------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
1997............................................ $ 17.2 $ 7.6 $ (6.5) $ 0.7 $ 1.7* $ 20.7
----- --- ----- ----- --------- -----
----- --- ----- ----- --------- -----
1996............................................ $ 16.9 $ 5.3 $ (7.0) $ 0.4 $ 1.6* $ 17.2
----- --- ----- ----- --------- -----
----- --- ----- ----- --------- -----
1995............................................ $ 18.1 $ 5.1 $ (6.4) $ 0.4 $ (0.3) $ 16.9
----- --- ----- ----- --------- -----
----- --- ----- ----- --------- -----
</TABLE>

* Includes $3.6 million and $2.1 million in 1997 and 1996, respectively,
relating to acquisitions

This schedule reflects only the financial information of continuing operations.

<TABLE>
<CAPTION>
DEFERRED TAX
ASSET VALUATION
ALLOWANCE
- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997............................................ $ 0.3 $ -- $ -- $ -- $ -- $ 0.3
----- --- ----- ----- --------- -----
----- --- ----- ----- --------- -----
1996............................................ $ 3.2 $ -- $ -- $ (2.9) $ -- $ 0.3
----- --- ----- ----- --------- -----
----- --- ----- ----- --------- -----
1995............................................ $ 3.2 $ -- $ -- $ -- $ -- $ 3.2
----- --- ----- ----- --------- -----
----- --- ----- ----- --------- -----
</TABLE>

This account reflects the adoption of SFAS No. 109, "Accounting for Income
Taxes," which was adopted effective January 1, 1992. The Company utilized $2.9
million of capital loss carryforwards in 1996 to reduce income tax expense for
the year.

This schedule reflects only the financial information of continuing
operations.