<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
(X) Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1994.
or
( ) Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 1-2883
OUTBOARD MARINE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-1589715
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
100 Sea-Horse Drive
Waukegan, Illinois 60085
(Address or principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 708-689-6200
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
Number of shares of Common Stock of $0.15 par value outstanding
at July 29, 1994 were 19,887,377 shares.
Exhibit Index Page 11.
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<PAGE> 2
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART I, ITEM 1
FINANCIAL INFORMATION
FINANCIAL STATEMENTS
June 30, 1994
Financial statements required by this form:
Page
----
Statement of Consolidated Earnings 3
Condensed Statement of Consolidated Financial Position 4
Statement of Consolidated Cash Flows 5
In the opinion of management, the information furnished reflects
all adjustments necessary to a fair statement of the results of
the interim periods and all such adjustments are of a normal
recurring nature. These financial statements should be read in
conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year
ended September 30, 1993.
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<PAGE> 3
<TABLE>
OUTBOARD MARINE CORPORATION
STATEMENT OF CONSOLIDATED EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
-------------------- --------------------
(In millions except amounts per share) 1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $ 318.8 $ 295.4 $ 773.1 $ 748.2
COST OF GOODS SOLD 233.8 229.6 587.1 602.1
-------- -------- -------- --------
Gross earnings 85.0 65.8 186.0 146.1
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 53.5 55.0 146.6 156.5
RESTRUCTURING CHARGES - 107.4 - 107.4
-------- -------- -------- --------
Earnings (loss) from operations 31.5 (96.6) 39.4 (117.8)
NON-OPERATING EXPENSE (INCOME):
Interest expense 5.1 5.4 15.2 16.6
Special refund for environmental expense - (12.5) - (12.5)
Other, net (3.8) ( .9) (17.4) (2.4)
-------- -------- -------- --------
1.3 (8.0) (2.2) 1.7
-------- -------- -------- --------
Earnings (loss) before provision for income
taxes and cumulative effect of changes in
accounting principles 30.2 (88.6) 41.6 (119.5)
PROVISION FOR INCOME TAXES 2.2 15.5 3.8 2.5
-------- -------- -------- --------
Net earnings (loss) before cumulative effect
of changes in accounting principles 28.0 (104.1) 37.8 (122.0)
CUMULATIVE EFFECT ON PRIOR YEARS
OF CHANGES IN ACCOUNTING PRINCIPLES
Income taxes - - - (10.0)
Postretirement benefits other than pensions - - - (107.5)
-------- -------- -------- --------
Net earnings (loss) $ 28.0 $(104.1) $ 37.8 $(239.5)
======== ======== ======== ========
NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK
based on weighted average common shares and
common stock equivalents outstanding:
Primary
Before cumulative effect of changes in
accounting principles $ 1.40 $ (5.31) $ 1.89 $ (6.23)
Cumulative effect of changes in
accounting principles - - - (6.01)
-------- -------- -------- --------
Net primary $ 1.40 $ (5.31) $ 1.89 $(12.24)
======== ======== ======== ========
Fully diluted $ 1.23 $ (5.31) $ 1.73 $(12.24)
======== ======== ======== ========
DIVIDENDS PAID PER SHARE $ .10 $ .10 $ .30 $ .30
======== ======== ======== ========
AVERAGE SHARES OF COMMON STOCK AND COMMON
STOCK EQUIVALENTS OUTSTANDING (if applicable) 20.0 19.6 20.0 19.6
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</TABLE>
<PAGE> 4
<TABLE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(UNAUDITED)
<CAPTION>
(In millions) June 30 September 30
1994 1993 1993
-------- -------- --------
<S> <C> <C> <C>
ASSETS
- - ------
CURRENT ASSETS:
Cash and cash equivalents $ 63.1 $ 55.0 $ 104.4
Receivables 169.8 153.5 136.3
Inventories-
Finished products 62.3 83.4 64.1
Raw material, work in process
and service parts 112.4 108.2 90.0
-------- -------- --------
Total inventory 174.7 191.6 154.1
Other current assets 29.0 46.7 30.5
-------- -------- --------
Total current assets 436.6 446.8 425.3
PRODUCT TOOLING, net 48.2 36.2 36.2
GOODWILL AND INTANGIBLES, net 32.3 33.9 33.3
OTHER ASSETS 86.8 70.5 86.7
PLANT AND EQUIPMENT, at cost 549.5 586.6 542.9
Less-Accumulated depreciation 336.0 353.4 332.6
-------- -------- --------
213.5 233.2 210.3
-------- -------- --------
$ 817.4 $ 820.6 $ 791.8
======== ======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- - ----------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 82.2 $ 59.3 $ 76.6
Accrued and other 164.0 159.2 174.8
-------- -------- --------
Total current liabilities 246.2 218.5 251.4
LONG-TERM DEBT 178.1 196.5 183.0
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 102.9 102.7 106.1
OTHER NON-CURRENT LIABILITIES 92.2 95.7 90.4
STOCKHOLDERS' INVESTMENT:
Common stock and capital surplus 108.6 105.8 106.0
Retained earnings 97.6 110.8 65.7
Cumulative translation adjustments (8.2) (9.4) (10.8)
-------- -------- --------
Total stockholders' investment 198.0 207.2 160.9
-------- -------- --------
$ 817.4 $ 820.6 $ 791.8
======== ======== ========
SHARES OF COMMON STOCK OUTSTANDING 19.9 19.6 19.8
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</TABLE>
<PAGE> 5
<TABLE>
OUTBOARD MARINE CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<CAPTION>
(In millions) Nine Months Ended
June 30
------------------------
1994 1993
------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 37.8 $ (239.5)
Adjustments to reconcile net earnings (loss) to net cash
provided by operations:
Cumulative effect of changes in accounting principles - 117.5
Non-current asset write downs - 75.9
Depreciation and amortization 29.0 42.1
Gain on transfer of land rights (10.5) -
Changes in current accounts excluding the effects
of noncash transactions:
(Increase) in accounts receivable (30.9) (6.7)
(Increase) in inventory (21.4) (18.2)
Decrease in other current assets 2.7 14.6
(Decrease) in accounts payable and accrued liabilities (8.5) (5.3)
Other, net (6.4) (5.0)
------- --------
Net cash used for operating activities (8.2) (24.6)
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for plant and equipment, and tooling (45.9) (36.0)
Net proceeds on transfer of land rights 10.5 -
Proceeds from sale of plant and equipment 5.7 3.0
Other, net 3.9 (15.0)
------- --------
Net cash used for investing activities (25.8) (48.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt, including current maturities (5.1) (10.0)
Cash dividends paid (5.9) (5.8)
Other, net 2.7 1.3
------- --------
Net cash used for financing activities (8.3) (14.5)
EXCHANGE RATE EFFECT ON CASH 1.0 (.5)
------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (41.3) (87.6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 104.4 142.6
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 63.1 $ 55.0
======= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 11.8 $ 15.7
Income taxes paid 5.7 7.4
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<PAGE> 6
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART I, ITEM 2
FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1994
RESULTS OF OPERATIONS
The company (OMC) achieved strong earnings growth for the
quarter ended June 30, 1994, and the results show the company
participating in the recovery taking place in the U.S. marine
products marketplace.
The company achieved net earnings of $28 million, or $1.40
per share ($1.23 per share, fully-diluted), in this year's third
quarter. That compares with a net loss of $104.1 million, or
$5.31 per share, in the same quarter last year.
Last year's third quarter results included some one-time
charges and gains. Looking at the pre-tax line on the income
statement to get a better comparison, the company achieved pre-
tax earnings of $30.2 million for this year's third quarter,
compared with a pre-tax loss of $88.6 million for last year's
third quarter. Excluding $107.4 million in restructuring charges
and a $12.5 million insurance benefit from last year's results,
the company achieved a $23.9 million, positive, pre-tax earnings
swing this year.
Increased sales accounted for part of the improvement.
Sales increased 8 percent to $318.8 million from $295.4 million
for the same quarter last year.
In the United States, the world's largest marine products
market, sales jumped 14 percent. Companywide sales were
depressed by sales declines in Europe, where the company is still
dealing with serious recession in some of the most important
marine products markets, and in Canada. Those sales declines
were somewhat offset by sales growth in other markets outside the
United States. But the end result was a 7 percent decline in non-
U.S. sales.
Last year's restructuring is producing real cost reduction
throughout the company. Results in this year's third quarter
benefitted from $9 million in cost savings. For the year to date,
the company has achieved $21 million in cost savings. The company
is making progress in its program to improve the efficiency and
competitiveness of the company's European organization.
For the first nine months of 1994, the company achieved net
earnings of $37.8 million, or $1.89 per share ($1.73 per share,
fully-diluted), compared with a net loss of $239.5 million, or
$12.24 per share for the same period last year. Net earnings last
year were depressed by charges totalling $117.5 million to
implement new Accounting Standards No. 106, "Accounting for Post-
retirement Benefits Other Than Pensions" (SFAS 106) and
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109).
-6-
<PAGE> 7
The company achieved pre-tax earnings of $41.6 million for
the first nine months of this year, compared with pre-tax loss of
$119.5 million for the same period last year. This year's pre-
tax results for the first nine months included a $10.5 million
gain from the transfer of land rights held in Hong Kong, while
last year's included the $107.4 million in restructuring charges
and $12.5 million insurance settlement benefit. Again,
eliminating the charges and benefits, would show a positive,
$55.7 million pre-tax earnings swing in the first nine months of
this year.
In mid-July 1994, the company introduced its new Project
LEAP (for Low Emission Advanced Propulsion) outboard technologies
to the news media and to its dealer organization. Project LEAP
is a program to replace the entire current, 130-model, outboard
line with a line of new, low-emission outboards that also deliver
higher performance, greater fuel economy and other important
consumer benefits.
Very important among the new technologies is LEAP3, a
dramatically superior technology that is proprietary to OMC for
marine industry applications and that will position OMC to
capture additional sales and market share in the 20 to 200-
horsepower segment of the outboard market, the segment that
accounts for the bulk of outboard sales.
Project LEAP and the new engines that will come from it
demonstrate OMC's determination and ability to develop,
manufacture and aggressively market products that are
demonstrably superior to the competition's. These products will
provide the basis for long-term growth.
The provision for income taxes of $2.2 million and $3.8
million for the three and nine months ended June 30, 1994,
respectively, resulted from expected taxes payable relating to
certain international subsidiaries. The company's return to
profitability places it in a favorable tax position. In the
current year, certain deferred tax benefits from the adoption
last year of accounting standards SFAS 106 and 109, and from
restructuring expenses, were recognized because of the profits.
To the extent there are additional profits for the year,
additional deferred tax benefits will be recognized to reduce the
income tax provision.
It is not appropriate to compare the results of operations
for the current quarter with those of the preceding quarter
because of the seasonal nature of the company's business.
-7-
<PAGE> 8
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART I, ITEM 2
FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1994
FINANCIAL CONDITION
Due to the seasonal nature of the company's business,
receivables, inventories and accompanying short-term borrowings
are usually at their highest levels in the second and third
fiscal quarters and decline thereafter as the company's products
enter their peak selling seasons. The company's ratio of current
assets to current liabilities at June 30, 1994 was 1.8 as
compared with 2.0 at June 30, 1993. Current assets of $436.6
million at June 30, 1994 decreased $10.2 million as compared to
current assets of $446.8 million at June 30, 1993. Receivables
increased $16.3 million due primarily to higher U.S. sales in the
current quarter. Inventories decreased $16.9 million due largely
to efficiencies gained in Europe, Canada and the United States
including those gained from the establishment of the stern drive
manufacturing joint venture with Volvo Penta. Other current
assets decreased $17.7 million due primarily to lower deferred
tax benefits resulting from the adoption of SFAS 109.
Other assets increased $16.3 million due primarily to the
adoption of SFAS 109 and increased pension assets. Product
tooling increased $12.0 million due primarily to new outboard
motor models. Plant and equipment decreased due primarily to a
contribution to the joint venture with Volvo Penta and to lower
capital expenditures in relationship to depreciation.
Current liabilities increased by $27.7 million to $246.2
million as of June 30, 1994 compared to $218.5 million at June
30, 1993 due primarily to a change in the timing of traditional
summer shut-downs in conjunction with model changeovers and
physical inventories and also due to an $8.2 million increase in
current maturity of long-term debt.
The company's total debt to total capitalization at June
30, 1994 was 48.7 percent compared to 48.9 percent at June 30,
1993. Long-term debt decreased $18.4 million and current
maturities of long-term debt increased $8.2 million from the
previous year.
The company believes that with the current capital
structure plus funds to be generated by operating activities,
existing cash and marketable securities, additional funds
available from existing worldwide credit lines, and long-term
debt and equity sources, it has sufficient resources to meet
future capital requirements.
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<PAGE> 9
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The first paragragh of Item B. of Note 21. Commitments and Contingent
Liabilities contained in the company's 1993 Annual Report to
shareholders, which is incorporated by reference herein, is amended
to read as follows:
In 1988, the company received from the United States
Environmental Protection Agency, a notice of potential
liability and an information request regarding potential
groundmwater contamination at the Cadillac Industrial
Park in Cadillac, Michigan. The company complied with
the information request. In 1994, the company received
a request from the United States Environmental
Protection Agency to submit a good faith offer to
implement the remedial action at the Cadillac Industrial
Park. The company is evaluating this request.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits reference is made to the Exhibit Index on Page
11.
(b) Reports on Form 8-K. The Registrant did not file any
reports on Form 8-K for the fiscal quarter ended June
30, 1994.
-9-
<PAGE> 10
S I G N A T U R E
Pursuant to the requirements 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.
OUTBOARD MARINE CORPORATION
Signature Title Date
_________________________ _________________ _________________
Vice President &
By /s/ James R. Maurice Controller August 9, 1994
_________________________ __________________ _________________
JAMES R. MAURICE
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<PAGE> 11
OUTBOARD MARINE CORPORATION
EXHIBIT INDEX
Exhibit 4: Instruments defining the rights of security holders
including indentures:
(A) With respect to the Agreement of Outboard Marine
Corporation, reference is made to Exhibit 4(A) to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended September 30, 1993, which is
incorporated herein by reference.
(B) With respect to rights of Series A, Junior
Participating Preferred Stock, reference is made to
the Registrant's report on Form 8-K filed on
October 17, 1990, which is incorporated herein by
reference.
(C) With respect to rights of holders of the
Registrant's 9-1/8% sinking fund debentures due
2017, reference is made to Exhibit 4(A) in the
Registrant's Registration Statement Number 33-12759
filed on March 20, 1987, which is incorporated
herein by reference.
(D) With respect to rights of holders of Registrant's
7% convertible subordinated debentures due 2002,
reference is made to Registrant's Registration
Statement Number 33-47354 filed on April 28, 1992,
which is incorporated herein by reference.
Exhibit 10: Material contracts:
(A) With respect to the Registrant's 1987 Stock Option
and Performance Unit Plan, reference is made to
Exhibit 10(D) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended September 30,
1987, which is incorporated herein by reference.
(B) With respect to the OMC Executive Bonus Plan,
reference is made to Exhibit 10(C) to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended September 30, 1990, which is
incorporated herein by reference.
(C) With respect to the OMC Executive Equity Incentive
Plan, reference is made to Exhibit 10(D) to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended September 30, 1990, which is
incorporated herein by reference.
(D) With respect to Severance Agreements for all
elected officers of the Registrant (except Mr.
Chapman), reference is made to Exhibit 10(E) of the
Registrant's Annual Report on Form 10-K for the
fiscal year ended September 30, 1988, which is
incorporated herein by reference.
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<PAGE> 12
(E) With respect to the Severance Agreement for
Mr. Chapman, reference is made to Exhibit 10(F) of
the Registrant's Annual Report on Form 10-K for the
fiscal year ended September 30, 1988, which is
incorporated herein by reference.
(F) With respect to the Registrant's Revolving Credit
Agreement, reference is made to Exhibit 10 (H) to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended September 30, 1992, which is
incorporated herein by reference. With respect to
Amendment No. 1 and No. 3 to such Credit Agreement
reference is made to Exhibit 10 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993, which is incorporated herein by
reference. With respect to Amendment No. 2 to such
Credit Agreement, reference is made to Exhibit 10
(F) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993, which
is incorporated herein by reference. With respect
to Amendment No. 4 to such Credit Agreement,
reference is made to Exhibit 10 (F) to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994, which is incorporated
herein by reference.
Exhibit 11: Statements regarding computation of per share
earnings:
A statement regarding the computation of per share
earnings is attached hereto as Exhibit 11.
Exhibit 19: Report furnished to security holders:
A copy of the Registrant's Shareholders Report for
the fiscal quarter ended June 30, 1994, is attached
hereto as Exhibit 19.
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<PAGE> 13
</TABLE>
<TABLE>
EXHIBIT 11
OUTBOARD MARINE CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(Dollars in millions except amounts per share)
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
-------------------- --------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary Earnings Per Share:
Net earnings (loss) $ 28.0 $(104.1) $ 37.8 $(239.5)
======== ======== ======== ========
Weighted average number of shares 19.9 19.6 19.8 19.6
Common stock equivalents (stock options) .1 * .2 *
-------- -------- -------- --------
Average shares outstanding 20.0 19.6 20.0 19.6
======== ======== ======== ========
Primary earnings (loss) per share $ 1.40 $ (5.31) $ 1.89 $(12.24)
======== ======== ======== ========
Fully Diluted Earnings per Share:
Net earnings (loss) $ 28.0 $(104.1) $ 37.8 $(239.5)
Add: After-tax interest and
related expense amortiza-
tion on 7% convertible
subordinated debentures .8 .9 2.5 2.6
-------- -------- -------- --------
Net earnings (loss) adjusted $ 28.8 $(103.2) $ 40.3 $(236.9)
======== ======== ======== ========
Weighted average number of shares 19.8 19.6 19.8 19.6
Common stock equivalents (stock options) .2 .1 .2 .1
Weighted average common
shares assuming
conversion of 7% convertible
subordinated debentures 3.4 3.4 3.4 3.4
-------- -------- -------- --------
Average shares outstanding 23.4 23.1 23.4 23.1
======== ======== ======== ========
Fully diluted earnings (loss) per share $ 1.23 $ ** $ 1.73 $ **
======== ======== ======== ========
* The computation of primary earnings per share of common stock
is computed without common stock equivalents because inclusion
of common stock equivalents is antidilutive.
** The computation of fully diluted earnings per share of
common stock is antidilutive; therefore, the amount reported
for primary and fully diluted earnings per share is the same.
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</TABLE>
<PAGE> 14
EXHIBIT 19
July 21, 1994
To Our Shareholders:
I'm pleased to tell you that our company has just completed a very
solid quarter. We achieved strong earnings growth, and our results
show we are participating in the recovery taking place in the U.S.
marine products marketplace.
We achieved net earnings of $28 million, or $1.40 per share ($1.23
per share, fully-diluted), in this year's third quarter. That
compares with a net loss of $104.1 million, or $5.31 per share, in
the same quarter last year.
Last year's third quarter results included some one-time charges
and gains. But if you look at the pre-tax line on our income
statement to get an apples-to-apples comparison, you'll see that we
achieved pre-tax earnings of $30.2 million for this year's third
quarter, compared with a pre-tax loss of $88.6 million for last
year's third quarter. Excluding $107.4 million in restructuring
charges and a $12.5 million insurance benefit from last year's
results, you can see we achieved a $23.9 million, positive, pre-tax
earnings swing this year.
Increased sales accounted for part of our improvement. Our sales
increased 8 percent to $318.8 million from $295.4 million for the
same quarter last year. But that 8 percent sales increase tells
only part of the story of our growth in the quarter.
In the United States, the world's largest marine products market,
our sales jumped 14 percent. Our companywide sales were depressed
by sales declines in Europe, where we are still dealing with
serious recession in some of our most important marine products
markets, and in Canada. Those sales declines were somewhat offset
by sales growth in our other markets outside the United States.
But the end result was a 7 percent decline in our non-U.S. sales.
We are making progress in our program to improve the efficiency and
competitiveness of our European organization. More generally, last
year's restructuring is producing real cost reduction throughout
our company. Our results in this year's third quarter benefitted
from $9 million in cost savings. For the year to date, we've
achieved $21 million in cost savings, and we are confident of our
ability to deliver $32 million in cost savings for fiscal 1994 as,
last year, we told you we would.
For the first nine months of 1994, we achieved net earnings of
$37.8 million, or $1.89 per share ($1.73 per share, fully diluted),
compared with a net loss of $239.5 million, or $12.24 per share for
the same period last year. Our net earnings last year were
depressed by charges totalling $117.5 million to implement new
accounting rules.
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<PAGE> 15
We achieved pre-tax earnings of $41.6 million for the first nine
months of this year, compared with pre-tax loss of $119.5 million
for the same period last year. This year's pre-tax results for the
first nine months included a $10.5 million gain from the transfer
of land rights we held in Hong Kong, while last year's included the
$107.4 million in restructuring charges and $12.5 million insurance
settlement benefit. Again, an apples-to-apples comparison,
eliminating the charges and benefits, would show a positive, $55.7
million pre-tax earnings swing in the first nine months of this
year.
Clearly, we are on the right course today in our effort to return
OMC to consistent profitability.
We also are on the right course in preparing our company to win in
tomorrow's marketplace. In mid-July, we introduced our new Project
LEAP outboard technologies to the news media and to our dealer
organization. Project LEAP is our program to replace our entire
current, 130-model, outboard line with a line of new, low-emission
outboards that also deliver higher performance, greater fuel
economy and other important consumer benefits.
The enclosed news release provides information on the rainbow of
outboard technologies that will be developed by Project LEAP. Very
important among the three technologies is LEAP3, a dramatically
superior technology that is proprietary to OMC for marine industry
applications and that will position us to capture additional sales
and market share in the 20 to 200-horsepower segment of the
outboard market, the segment that accounts for the bulk of outboard
sales.
Project LEAP and the new engines that will come from it demonstrate
our determination and ability to develop, manufacture and
aggressively market products that are demonstrably superior to the
competition's. These products will provide the basis for our long-
term growth.
We are confident in our strategy and in its ability to deliver
increased value to our shareholders. In a statement of its
continuing confidence, our board of directors declared a cash
dividend of 10 cents per share payable Aug. 26, 1994, to
shareholders of record Aug. 12, 1994.
JAMES C. CHAPMAN
James C. Chapman
Chairman, President and
Chief Executive Officer
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<PAGE> 16
OMC REPORTS STRONG EARNINGS GROWTH
WAUKEGAN, Ill., July 21--Outboard Marine Corporation (OM-NYSE)
today reported strong earnings growth on increased sales for its
1994 fiscal third quarter, which ended June 30.
The company reported net earnings of $28 million, or $1.40 per
share ($1.23 per share, fully diluted) for this year's third
quarter compared with a net loss of $104.1 million, or $5.31 per
share, for the same quarter last year.
OMC achieved pre-tax earnings of $30.2 million for this year's
third quarter compared with a pre-tax loss of $88.6 million for the
same quarter last year. Last year's pre-tax results included
restructuring charges totalling $107.4 million and a benefit from
a favorable insurance settlement totalling $12.5 million.
Excluding the charges and benefits from the comparison, OMC
achieved a $23.9 million pre-tax earnings improvement in this
year's third quarter.
OMC's 1994 third quarter sales increased to $318.8 million from
$295.4 million for the same quarter last year. The company said
its U.S. sales increased 14 percent in this year's third quarter,
and all of its U.S. operating groups contributed to the growth.
The OMC Fishing Boat Group reported strong sales growth, as did the
OMC Recreational Boat Group, where sales of mini-jet boats
contributed importantly to the group's gains. Outboard sales in
the U.S. benefitted from a higher average horsepower of units sold
in the quarter.
"We're reaping the benefits of a U.S. marine industry recovery,"
said OMC Chairman, President and Chief Executive Officer James C.
Chapman.
Sales outside the U.S. fell 7 percent in the 1994 third quarter.
Sales declines in Europe, where the marine products market is in a
deep recession, and in Canada were partially offset by gains in
other international markets.
OMC said its bottom line was strengthened by cost savings from the
restructuring begun last year. "We achieved $9 million in cost
savings in this year's third quarter, bringing us to $21 million
for the year to date," Chapman said. "We expect to achieve $32
million in cost savings by year-end, and we're on track to deliver
a solidly profitable performance for the year."
For the first nine months of 1994, OMC reported net earnings of
$37.8 million, or $1.89 per share ($1.73 per share, fully diluted),
compared with a net loss of $239.5 million, or $12.24 per share for
the same period last year. Net earnings last year were depressed
by charges totalling $117.5 million to implement new accounting
rules.
OMC achieved pre-tax earnings of $41.6 million in the first nine
months of 1994, compared with a pre-tax loss of $119.5 million for
the same period last year. This year's pre-tax results included a
gain of $10.5 million from the transfer of land rights in Hong
Kong. Last year's pre-tax results included the $107.4 million in
restructuring charges and $12.5 million insurance settlement
benefit. Eliminating the charges and benefits from both periods,
the company achieved a $55.7 million pre-tax earnings improvement
in the first nine months of 1994.
-16-
<PAGE> 17
Sales for the first nine months of 1994 increased to $773.1 million
from $748.2 million for the same period in 1993. OMC's U.S. sales
for the first nine months of this year increased 7 percent, while
sales outside the U.S. decreased 6 percent.
OMC's board of directors declared a cash dividend of 10 cents per
share for the third quarter payable Aug. 26, 1994, to shareholders
of record Aug. 12, 1994.
Outboard Marine Corporation is a leading marketer of marine
engines, boats, accessories and services.
# # #
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<PAGE> 18
<TABLE>
OUTBOARD MARINE CORPORATION
STATEMENT OF CONSOLIDATED EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
-------------------- --------------------
(In millions except amounts per share) 1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $ 318.8 $ 295.4 $ 773.1 $ 748.2
COST OF GOODS SOLD 233.8 229.6 587.1 602.1
-------- -------- -------- --------
Gross earnings 85.0 65.8 186.0 146.1
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 53.5 55.0 146.6 156.5
RESTRUCTURING CHARGES - 107.4 - 107.4
-------- -------- -------- --------
Earnings (loss) from operations 31.5 (96.6) 39.4 (117.8)
NON-OPERATING EXPENSE (INCOME):
Interest expense 5.1 5.4 15.2 16.6
Special refund for environmental expense - (12.5) - (12.5)
Other, net (3.8) ( .9) (17.4) (2.4)
-------- -------- -------- --------
1.3 (8.0) (2.2) 1.7
-------- -------- -------- --------
Earnings (loss) before provision for income
taxes and cumulative effect of changes in
accounting principles 30.2 (88.6) 41.6 (119.5)
PROVISION FOR INCOME TAXES 2.2 15.5 3.8 2.5
-------- -------- -------- --------
Net earnings (loss) before cumulative effect
of changes in accounting principles 28.0 (104.1) 37.8 (122.0)
CUMULATIVE EFFECT ON PRIOR YEARS
OF CHANGES IN ACCOUNTING PRINCIPLES
Income taxes - - - (10.0)
Postretirement benefits other than pensions - - - (107.5)
-------- -------- -------- --------
Net earnings (loss) $ 28.0 $(104.1) $ 37.8 $(239.5)
======== ======== ======== ========
NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK
based on weighted average common shares and
common stock equivalents outstanding:
Primary
Before cumulative effect of changes in
accounting principles $ 1.40 $ (5.31) $ 1.89 $ (6.23)
Cumulative effect of changes in
accounting principles - - - (6.01)
-------- -------- -------- --------
Net primary $ 1.40 $ (5.31) $ 1.89 $(12.24)
======== ======== ======== ========
Fully diluted $ 1.23 $ (5.31) $ 1.73 $(12.24)
======== ======== ======== ========
DIVIDENDS PAID PER SHARE $ .10 $ .10 $ .30 $ .30
======== ======== ======== ========
AVERAGE SHARES OF COMMON STOCK AND COMMON
STOCK EQUIVALENTS OUTSTANDING (if applicable) 20.0 19.6 20.0 19.6
-18-
</TABLE>
<PAGE> 19
<TABLE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL POSITION
(UNAUDITED)
<CAPTION>
(In millions) June 30 September 30
1994 1993 1993
-------- -------- --------
<S> <C> <C> <C>
ASSETS
- - ------
CURRENT ASSETS:
Cash and cash equivalents $ 63.1 $ 55.0 $ 104.4
Receivables 169.8 153.5 136.3
Inventories-
Finished products 62.3 83.4 64.1
Raw material, work in process
and service parts 112.4 108.2 90.0
-------- -------- --------
Total inventory 174.7 191.6 154.1
Other current assets 29.0 46.7 30.5
-------- -------- --------
Total current assets 436.6 446.8 425.3
PRODUCT TOOLING, net 48.2 36.2 36.2
GOODWILL AND INTANGIBLES, net 32.3 33.9 33.3
OTHER ASSETS 86.8 70.5 86.7
PLANT AND EQUIPMENT, at cost 549.5 586.6 542.9
Less-Accumulated depreciation 336.0 353.4 332.6
-------- -------- --------
213.5 233.2 210.3
-------- -------- --------
$ 817.4 $ 820.6 $ 791.8
======== ======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- - ----------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 82.2 $ 59.3 $ 76.6
Accrued and other 164.0 159.2 174.8
-------- -------- --------
Total current liabilities 246.2 218.5 251.4
LONG-TERM DEBT 178.1 196.5 183.0
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 102.9 102.7 106.1
OTHER NON-CURRENT LIABILITIES 92.2 95.7 90.4
STOCKHOLDERS' INVESTMENT:
Common stock and capital surplus 108.6 105.8 106.0
Retained earnings 97.6 110.8 65.7
Cumulative translation adjustments (8.2) (9.4) (10.8)
-------- -------- --------
Total stockholders' investment 198.0 207.2 160.9
-------- -------- --------
$ 817.4 $ 820.6 $ 791.8
======== ======== ========
SHARES OF COMMON STOCK OUTSTANDING 19.9 19.6 19.8
-19-
<PAGE> 20
OMC INTRODUCES NEW GENERATION OF ENVIRONMENTALLY CLEANER,
HIGH PERFORMANCE OUTBOARD ENGINES
WAUKEGAN, Ill., July 19--Outboard Marine Corporation (OM-NYSE)
today announced a $100 million program to develop a new generation
of high-performance, environmentally cleaner outboard engines
including one new design called LEAP3 that represents the biggest
advance in recreational boating since the invention of the original
outboard by OMC's founder.
OMC Chairman, President and Chief Executive Officer James C.
Chapman said the program, when fully implemented throughout OMC's
130-model Johnson and Evinrude outboard lines, will reduce total
hydrocarbon emissions from the outboards by 70 to 80 percent and
boost fuel economy by more than 35 percent. The program is called
Project LEAP (for Low Emission Advanced Propulsion).
Besides reducing emissions and increasing fuel economy, Chapman
said the new engines will significantly improve performance "in
every category that counts to boaters," including better throttle
response, faster and smoother acceleration, smoother idling and
reduced engine noise. OMC is the world's largest manufacturer of
outboard engines.
"In re-engineering our entire outboard line, we will be re-
engineering our company's future, positioning us to compete
effectively in a changing, more environmentally conscious
marketplace," Chapman said. "And, most importantly, our LEAP3
engines will give us a proprietary and plainly superior technology
that we expect to leverage into a major sales advantage in the big
20 to 200-horsepower category of the world outboard market. We
believe that advantage will help us secure and expand our leading
position well into the 21st Century." Chapman said 20 to 200-
horsepower outboards account for 60 percent of the $2 billion U.S.
outboard market.
OMC's new engine line will be based on three different
technological approaches. But the mainstays of OMC's line, its 20
to 200-horsepower outboards, will be two-cycle units equipped with
the proprietary, direct fuel-injection system LEAP3, based on a
technology pioneered by the German engineering firm FICHT, GmbH.
The first LEAP3 engines will be introduced late next year.
LEAP3 direct-injection engines will use a high-pressure pump to
blast precisely timed bursts of fuel directly into the engines'
combustion chambers at pressures exceeding 200 pounds per square
inch, atomizing and positioning each fuel charge for an
exceptionally complete, clean burn. The computer-controlled
direct-injection technology is far more sophisticated than any fuel
injection system in use, including those on today's most advanced
automobiles.
In addition to providing environmental and performance benefits,
LEAP3 engines are simpler than any other low-emission engine
designs in development in the marine industry today. With fewer
components and systems, they are smaller, lighter, more easily
serviceable and more durable -- features OMC believes will impress
consumers and win market share. Their simplicity also should allow
them to be manufactured at lower cost, OMC said.
-20-
<PAGE> 21
"The combination of a simpler but technologically superior system
that offers more consumer benefits, can be more easily manufactured
and will be available only from OMC is a winning formula that we
believe will strengthen both our sales and our bottom line,"
Chapman said.
For engines of 200 horsepower and more (engines of this size
account for about 6 percent of the U.S. market), OMC is developing
LEAP2, another two-cycle, direct-injection system based on
technology developed by Australia's Orbital Engine Corporation. In
its basic concept, this design is similar to LEAP3. However, it
requires two pressurized injection systems -- one for fuel and one
for air -- to inject and atomize each fuel charge. The first LEAP2
engines also are planned for introduction in the 1996 model year.
For portable engines up to 15 horsepower, OMC this fall will
introduce a new series of high-performance four-cycle engines.
Engines of 15 horsepower and less account for about a third of U.S.
industry outboard sales and a greater portion of sales in Europe,
an important market for OMC.
OMC said it will convert its entire outboard line to low emission
designs within 10 years, approximately twice as fast as the average
industry rate for model renewal of outboard engines.
"With the rainbow of technologies involved in Project LEAP, we're
addressing the emissions issue to both deliver new levels of
environmental quality and raise the bar on outboard performance,"
Chapman said.
Outboard Marine Corporation is a leading marketer of marine
engines, boats, accessories and services. The company traces its
origin to 1909 when Ole Evinrude invented the first outboard engine
in Milwaukee, Wis.
# # #
-21-
</TABLE>
