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<PERIOD-END> SEP-30-1994
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</TABLE>
<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended September 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 (IRS Employer Identification No.)
jurisdiction of
incorporation or
organization)
100 Sea Horse Drive
Waukegan, Illinois 60085
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 689-6200
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- ------------------------
Common stock, par value
$0.15 per share New York Stock Exchange &
Chicago Stock Exchange
7% Convertible Subordinated
Debentures Due 2002 New York Stock Exchange &
Chicago Stock Exchange
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 registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. ( X )
The aggregate market value of voting stock held by non-affiliates
at November 22, 1994 was $382,373,240.00.
Number of shares of Common Stock of $0.15 par value outstanding
at November 22, 1994 were 19,920,562 shares (not including
239,700 treasury shares).
-1-
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Outboard Marine Corporation's Annual Report to
Shareholders for the year ended September 30, 1994 are
incorporated by reference into Parts I and II of this Form
10-K.
2. Portions of Outboard Marine Corporation's Notice of Annual
Meeting and Proxy Statement prepared in connection with the
January 19, 1995 Annual Meeting of Shareholders are
incorporated by reference into Part III of this Form 10-K.
-2-
<PAGE> 3
TABLE OF CONTENTS
ITEM NO. PART I
- -------- ------
1 Business
2 Properties
3 Legal Proceedings
4 Submission of Matters to a Vote of Security
Holders
Executive Officers of the Registrant
PART II
-------
5 Market for Registrant's Common Equity and
Related Shareholder Matters
6 Selected Financial Data
7 Management's Discussion and Analysis of
Financial Condition and
Results of Operations
8 Financial Statements and Supplementary Data
9 Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure
PART III
--------
10 Directors and Executive Officers of the
Registrant (See Part I, Executive
Officers of the Registrant)
11 Executive Compensation
12 Security Ownership of Certain Beneficial
Owners and Management
13 Certain Relationships and Related
Transactions
PART IV
-------
14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
Signatures
Exhibit Index
-3-
<PAGE> 4
PART I
------
ITEM 1. BUSINESS
- ------------------
Outboard Marine Corporation (the "Company"), which was
incorporated in 1936, is engaged principally in the
manufacturing and marketing of marine engines, boats
and accessories for principally recreational use. Its major
products are as follows:
Evinrude Outboard Motors
Johnson Outboard Motors
OMC Cobra and OMC King Cobra Stern Drives
OMC SysteMatched Parts and Accessories
OMC TurboJet Drive Systems
Chris-Craft Boats
Four Winns Boats
Grumman Boats and Canoes
Haines Hunter Boats
Hydra-Sports Boats
Javelin Boats
Lowe Boats
Princecraft Boats
Quest Boats
Roughneck All-Welded Boats
Ryds Boats
Sea Nymph Boats
Seabird Boats
Seaswirl Boats
Springbok Boats
Stacer Boats
Stratos Boats
Sunbird Boats
Suncruiser Pontoon Boats
The company operates in a single industry segment. Sales to
unaffiliated customers include the following principal
products:
Year Ended September 30
1994 1993 1992
(In Millions)
Engine Products $ 574.3 $ 587.2 $ 652.8
Boats and Packages 504.1 447.4 411.8
--------- --------- ---------
$1,078.4 $1,034.6 $1,064.6
========= ========= =========
Information by geographic area for the three years ended
September 30, 1994 is presented under the heading "Business
Segments" which is Note 19 in the 1994 Annual Report to
Shareholders, which Note is incorporated herein by reference
and included as part of Exhibit 13.
-4-
<PAGE> 5
Most of OMC's principal products are sold throughout the
world. Outboard motors and parts and accessories are
distributed in the United States and Canada through separate
Evinrude and Johnson dealer organizations, the majority of
which operate under direct-from-factory dealerships.
Boats are sold primarily to direct-from-factory dealers.
Distribution outside the United States and Canada is handled
by divisions and subsidiaries, which sell to dealers and
wholesale distributors throughout the world.
All the fields in which OMC is engaged are highly
competitive. OMC believes it is the world's largest producer
of outboard motors and the second largest publicly-held
recreational powerboat manufacturer. It is estimated there
are only three significant manufacturers of outboard
motors and many manufacturers of boats.
OMC's principal competition in the United States outboard
industry is from Brunswick Corporation and Yamaha Motor Co.
Ltd. The outboard motors produced by these companies
together with several other Japanese producers are also the
principal competing outboards in the international market.
There are many manufacturers of boats that compete with OMC,
the largest of which in the United States are Brunswick
Corporation and Genmar Industries, Inc.
OMC and AB Volvo Penta and Volvo Penta of the Americas,
Inc., are partners in a joint venture company to produce gasoline
stern drive and gasoline inboard marine power systems.
Additional information is presented under the heading "Joint
Venture and Investments" which is Note 3 in the 1994 Annual
Report to Shareholders, which Note is incorporated herein by
reference and included as part of Exhibit 13.
Due to the seasonal nature of OMC's business, receivables,
inventory and accompanying short-term borrowing to satisfy
working capital requirements are usually at their highest
levels during the second and third fiscal quarters and
decline thereafter as the Company's various products enter
their peak selling seasons. To reduce the impact of
seasonality, OMC offers various types of extended credit
terms or financed floor planning to qualified customers who
buy the Company's products. Working capital requirements
during the off-season are in part financed by short-term
borrowing. See information presented under the heading
"Short-Term Borrowings and Compensating Balances" which is
Note 7 in the 1994 Annual Report to Shareholders, which Note
is incorporated herein by reference and included as part of
Exhibit 13.
OMC considers its patent portfolio to be of considerable
value even though no single patent or license is deemed to
be material. In OMC's opinion, Chris-Craft, Evinrude, Four
Winns, Grumman, Haines Hunter, Hydra-Sports, Javelin,
Johnson, Lowe, OMC, OMC Cobra, OMC King Cobra, OMC Sea Drive,
Princecraft, Quest, Roughneck, Seabird, Ryds, Sea Horse, Sea
Nymph, Seaswirl, Springbok, Stacer, Stratos, Sunbird and
Suncruiser trademarks are of considerable value and are
important to the conduct of its business. Chris-Craft is a
registered trademark owned by Chris-Craft Industries, Inc.
and is licensed to OMC. Grumman is a registered trademark
owned by Grumman Corporation and is licensed to OMC.
-5-
<PAGE> 6
The company purchases many different raw materials
from various sources. The Company believes its sources
of supply are adequate.
In the fiscal years ended September 30, 1994, 1993, and
1992, OMC spent $36.5 million, $36.0 million, and $36.1
million, respectively, on research and development
activities relating to the development of new products and
improvement of existing products. All of this work was OMC
sponsored.
In the summer of 1994, the Company announced Project LEAP
(Lower Emission Advanced Propulsion), a plan for the next
generation of outboard engines - the engines that will power
the boats of the future. Project LEAP is a sweeping effort
to replace the current Johnson and Evinrude outboard lines
with new models based on new technologies that both
demonstrate a concern for the environment and, at the same
time, deliver dramatically superior fuel economy and
performance. The plan calls for the Company to complete
this transformation of outboard lines within the next ten
years, approximately twice as fast as the average industry
rate for model renewal of outboard engines.
Through Project LEAP, the Company will bring to market
advanced outboard technologies designed to deliver new
levels of environmental quality while providing peak
performance for every application across the Johnson and
Evinrude lines. For the smallest engines, outboards up to
15 horsepower, the Company began introducing an advanced
series of clean, high performance four-cycle engines in the
fall of 1994. These engines offer easier starting and more
ergonomically sound design than competitors' four-cycle
engines in this horsepower segment.
For the largest engines, the big-displacement engines of 200
horsepower and more used on blue water fishing boats and
large cruisers, the Company is developing an air-assisted
direct fuel injection design called the LEAP2 engine.
The LEAP2 engine will be based on technology originated
by Australia's Orbital Engine Company. And for the heart of
the outboard-engine line, engines from 20 to 200 horsepower,
the Company is developing a revolutionary pressure-surge
fuel injection system called the LEAP3 direct-injection
system. The LEAP3 engines will be based on a direct fuel
injection technology pioneered by the German engineering
firm, FICHT, GmbH. LEAP3 will be exclusive to the Company
for marine industry use, and the Company is confident that
it will be the world's most efficient and best-performing
direct fuel-injection system for two-cycle engines.
The LEAP3-injected engines will be approximately 70 to 80
percent cleaner in terms of hydrocarbon emissions than the
cleanest two-stroke engines available today. But they will
be much more than just clean. With this breakthrough,
proprietary technology, the Company will be able to produce
engines that will be smaller, lighter and less complex than
is possible with any other current low-emission technology.
Because the LEAP3 design is simpler, involving fewer parts,
these engines will be easier to manufacture, more depend-
able, and more serviceable than engines based on competing
technologies. The Company expects to bring the first LEAP3
engines to market in the 1996 model year.
-6-
<PAGE> 7
The Company estimates that it will spend approximately $1.8
million and $1.5 million, respectively, during the 1995 and
1996 fiscal years for environmental control facilities.
Certain litigation involving the Company and the United
States and state Environmental Protection Agencies and
others is described under the heading "Commitments and
Contingent Liabilities" which is Note 21 in the 1994 Annual
Report to Shareholders, which Note is incorporated herein
by reference and included as part of Exhibit 13.
As of September 30, 1994, approximately 8,500 people were
employed by OMC and its subsidiaries.
ITEM 2. PROPERTIES
- --------------------
Plants located in Waukegan, Illinois; Milwaukee, Wisconsin;
and Burnsville, Spruce Pine and Andrews, North Carolina,
assemble and/or manufacture parts for the Company's
products, each plant specializing in selected manufacturing
processes. Outboard motors are assembled in Calhoun,
Georgia. The Beloit, Wisconsin facility is engaged
in the worldwide distribution of service parts and
accessories. Boats are manufactured in Cadillac, Michigan;
Lebanon, Missouri; Marathon, New York; Murfreesboro and Old
Hickory, Tennessee; Columbia, South Carolina; Culver,
Oregon; Elkhart and Syracuse, Indiana; and Sarasota,
Florida.
The Company's plants in Juarez, Chihuahua, Mexico;
Dongguan, China; Hong Kong; and Manaus, Brazil all
assemble outboard motors or components and/or engage in
fabrication. Boats are also manufactured and/or assembled
in Altona, Victoria, Australia; Yatala, Queensland,
Australia; Princeville, Quebec, Canada; Vannes, France; and
Ryds, Sweden.
The Company continues to consolidate manufacturing and
distribution operations. The Goshen, Indiana; Manawa,
Wisconsin; as well as the Brugge, Belgium facilities closed
in fiscal 1994. As a result, the following properties are
for sale: Beloit, Wisconsin; Brugge, Belgium; Peterborough,
Ontario, Canada; Moncton, New Brunswick, Canada; Plessisville,
Quebec, Canada; and Swansboro, North Carolina. The
reopening of the Goshen, Indiana; Rutherfordton, North
Carolina; and Manawa, Wisconsin properties is currently
being evaluated.
All of the Company's manufacturing facilities are Company
owned, except the Company's Dongguan, China; Hong Kong; and
Manaus, Brazil plants. The Hong Kong facility is located on
property leased until 2047. The Dongguan facility lease
expires in 1999. The Manaus facility lease expires in 1997.
OMC believes that all of its manufacturing facilities are in
a sound and modern operating condition and are suitable and
adequate for their purposes. The Company also leases
various warehouse and office space.
ITEM 3. LEGAL PROCEEDINGS
- ---------------------------
A description of certain legal proceedings is presented
under the heading "Commitments and Contingent Liabilities"
-7-
<PAGE> 8
which is Note 21 in the 1994 Annual Report to Shareholders,
which Note is incorporated herein by reference and included
as part of Exhibit 13.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
During the fourth quarter of 1994 fiscal year, there were no
matters submitted to a vote of security holders.
-8-
<PAGE> 9
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
Number of
Years as
Executive
Name Age Position Officer
---- --- -------- ---------
James C. Chapman 63 Chairman of the Board,
President & Chief
Executive Officer 16
D. Jeffrey Baddeley 56 Vice President & General Counsel 4
L. Earl Bentz 42 Vice President 1
William J. Ek 58 Vice President 1
John D. Flaig 47 Vice President 2
Ronald J. Jensen 45 Vice President 3
David R. Lumley 40 Vice President less than 1
James R. Maurice 53 Vice President & Controller 5
Richard H. Medland 52 Vice President 3
Howard Malovany 44 Secretary 1
Christopher R. Sachs 42 Treasurer 2
All officers are elected or appointed for terms which expire on
the date of the meeting of the Board of Directors following the
Annual Meeting of Shareholders or until their successors are
elected or appointed and qualify.
A brief account of the experience of the above listed officers
who have served the Company as an officer less than five years is
as follows:
D. Jeffrey Baddeley,
- --------------------
who was elected Vice President in 1994 and General Counsel in
1993 had been employed by OMC as Secretary and Associate General
Counsel since 1990, and had previously been employed as Executive
Vice President, Secretary and General Counsel for Sargent-Welch
Scientific Company.
L. Earl Bentz,
- --------------
who was elected Vice President in 1993, has been
employed by OMC as President of its OMC Fishing
Boat Group, and had previously been employed by OMC in various
executive capacities for at least five years prior thereto.
-9-
<PAGE> 10
William J. Ek,
- --------------
who was elected Vice President in 1993, has been employed by OMC
as President of its OMC Aluminum Boat Group, and had previously
been employed by OMC in various executive capacities for at least
five years prior thereto.
John D. Flaig,
- --------------
who was elected Vice President in 1992 and is currently Vice
President Manufacturing and Engineering, Marine
Power Products Group, had been employed by OMC as Director of
Marine Engineering for OMC's Marine Power Products Group since
1991, and had previously been employed by OMC in various
executive capacities for at least five years prior thereto.
Ronald J. Jensen,
- -----------------
who was elected Vice President in 1991 and is currently Vice
President and President, OMC International Group, and had
previously been employed by OMC in various executive capacities
for at least five years prior thereto.
David R. Lumley,
- ----------------
who was elected Vice President, Sales and Marketing-Marine
Power Products Group in 1994, had been employed as Vice
President, Sales and Marketing-Golf Division, for Wilson
Sporting Goods Company.
Richard H. Medland,
- -------------------
who was elected Vice President, Human Resources in 1991,
had previously been employed as Vice President, Human Resources
of the Tenneco Automotive division of Tenneco, Inc.
Howard Malovany,
- ----------------
who was elected Secretary in 1993, had been previously employed
as Assistant Secretary and Senior Counsel, and had previously
been employed by OMC in various executive capacities for at least
five years prior thereto.
Christopher R. Sachs,
- ---------------------
who was elected Treasurer in 1992, had been employed by OMC as
Assistant Treasurer since 1991 and previously as Director of Tax
for at least five years prior thereto.
-10-
<PAGE> 11
PART II.
--------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
- -----------------------------------------------------------
There were 4,519 record holders of common stock of OMC
at September 30, 1994.
The principle market for the Company's common stock is
the New York Stock Exchange and the Chicago Stock Exchange.
Other material required by this item is presented under
the heading "Quarterly Information (Unaudited)" which
is Note 20 in the 1994 Annual Report to Shareholders,
which Note is incorporated herein by reference and is
included as part of Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
- ---------------------------------
The following summary represents the results of
continuing operations (without including changes in
accounting principles in 1993) for the five years ended
September 30, 1994.
Year-Ended September 30 1994 1993 1992 1991 1990
--------- --------- --------- ------- ---------
(In millions except per share)
Net sales $1,078.4 $1,034.6 $1,064.6 $983.6 $1,145.6
Net earnings (loss) 48.5 (165.0) 1.9 (85.9) (77.3)
Average number of shares of
common stock outstanding and
common stock equivalents,
if applicable 20.0 19.6 19.8 19.4 19.4
Per average share of common
stock--
Net earnings (loss)
Primary 2.42 (8.42) .10 (4.42) (3.98)
Fully diluted 2.22 (8.42) .10 (4.42) (3.98)
Cash dividends .40 .40 .40 .50 .80
Total Assets 817.1 791.8 997.1 957.0 1,104.7
Long-Term Debt 178.2 183.0 198.1 133.1 157.5
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------------------------------
The material required by Item 7 is of this Annual Report on
Form 10K is presented under the heading "Management's
Discussion and Analysis of Results of Operations and Financial
Condition" in the 1994 Annual Report to Shareholders, which is
incorporated herein by reference and is included as part of
Exhibit 13.
-11-
<PAGE> 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
Some material required by Item 8 is listed in Item 14 of this
Annual Report on Form 10-K and is presented in the 1994 Annual
Report to Shareholders which material is incorporated herein
by reference and is included as part of Exhibit 13.
Other material required by this Item 8 is presented under
the heading "Quarterly Information (Unaudited)" which is
Note 20 in the 1994 Annual Report to Shareholders, which
Note is incorporated herein by reference and is included as
part of Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
- -----------------------------------------------------------------
No disclosure is required pursuant to this item.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Certain of the material required by Item 10 is presented
under the heading "Nominees and Directors" in the Company's
Notice of Annual Meeting and Proxy Statement for its Annual
Meeting of Shareholders to be held on January 19, 1995,
which is incorporated herein by reference.
For other information with respect to the executive
officers, reference is made to the information under the
heading "Executive Officers of the Registrant" in Part I of
this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The material required by Item 11 is presented under the
headings "Executive Compensation", "Report of the
Compensation Committee" and "Benefit Plans" in the Company's
Notice of Annual Meeting and Proxy Statement for its Annual
Meeting of Shareholders to be held on January 19, 1995,
which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
- -------------------------------------------------------------
The material required by Item 12 is presented under the
headings "Investor Table" and "Director and Executive
Officer Table" in the Company's Notice of Annual
Meeting and Proxy Statement for its Annual Meeting of
Shareholders to be held on January 19, 1995, which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
No disclosure is required pursuant to this item.
-12-
<PAGE> 13
PART IV
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
- -----------------------------------------------------------------
(a) Documents filed as part of the Annual Report on Form 10-K:
1. Financial Statements from the 1994 Annual Report to
Shareholders (10-K page reference supplied):
Statement of Consolidated Earnings (page 39).
Statement of Consolidated Financial Position (page 40).
Statement of Consolidated Cash Flows (page 41).
Statement of Changes in Consolidated Shareholders'
Investment (page 42).
Notes to Consolidated Financial Statements (pages 43
through 63).
Management's Discussion and Analysis of Results of
Operations and Financial Condition (pages 63
through 66).
Report of Independent Public Accountants (page 69).
2. Financial statement schedules required to be filed
by Item 8 of this Annual Report on Form 10-K (10-K
page reference supplied):
Report of Independent Public Accountants (page 15).
Schedule V - Property and Equipment (page 16).
Schedule VI - Accumulated Depreciation of Property
and Equipment (page 17).
All other schedules are omitted as the information
is not required, is inapplicable or is included in
the Consolidated Financial Statements or Notes
thereto.
Individual financial statements for the Company's
subsidiaries and partnerships have been omitted
because consolidated statements have been prepared
for all of the Company's wholly-owned subsidiaries
and limited partnerships.
3. An exhibit index is included herein (pages 18 through 19).
(b) During the fourth quarter of the year ended September
30, 1994, no reports were filed on Form 8-K.
(c) Exhibits are attached hereto.
(d) Not applicable.
-13-
<PAGE> 14
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.
OUTBOARD MARINE CORPORATION
Date December 19, 1994 By JAMES C. CHAPMAN Chairman of the
----------------- ---------------- Board of Directors,
James C. Chapman President and Chief
Executive Officer
Date December 19, 1994 By JAMES R. MAURICE Vice President and
----------------- ---------------- Controller
James R. Maurice
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following person
on behalf of the registrant and in the capacities and on the
dates indicated.
Date December 19, 1994 By FRANK BORMAN Director
----------------- ------------
Frank Borman
Date December 19, 1994 By WILLIAM C. FRANCE Director
----------------- -----------------
William C. France
Date December 19, 1994 By URBAN T. KUECHLE Director
----------------- ----------------
Urban T. Kuechle
Date December 19, 1994 By RICHARD T. LINDGREN Director
----------------- -------------------
Richard T. Lindgren
Date By Director
----------------- -----------------------
J. Willard Marriott, Jr.
Date By Director
----------------- ---------------------
Richard J. Stegemeier
Date By Director
----------------- -----------------
Charles D. Strang
Date December 19, 1994 By RICHARD F. TEERLINK Director
----------------- -------------------
Richard F. Teerlink
-14-
<PAGE> 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in
Outboard Marine Corporation's Annual Report to Shareholders
incorporated by reference in this Form 10-K, and have issued our
report thereon dated October 28, 1994. Our report on the
consolidated financial statements includes an explanatory
paragraph with respect to the change in the methods of accounting
for postretirment benefits other than pensions and income taxes
as discussed in notes 15 and 18 to the consolidated financial
statements. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedules
listed in the accompanying index are the responsibility of the
Company's management and are presented for purposes of complying
with the Securities and Exchange Commission's rules and are not
part of the basic consolidated financial statements. These
schedules have been subjected to the auditing procedures applied
in the audit of the basic consolidated financial statements and,
in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to
the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
-------------------
Arthur Andersen LLP
Milwaukee, Wisconsin
October 28, 1994
-15-
<PAGE> 16
OUTBOARD MARINE CORPORATION AND SUBSIDIARIES
SCHEDULE V -- PROPERTY AND EQUIPMENT
For the Years Ended September 30, 1994, 1993, 1992
<TABLE>
<CAPTION>
(Dollars in millions)
Balance Trans- Balance
Beginning lation End
of Addit- Retire- Adjust- Other of
Period ions ments ments Reclass* Period
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Year Ended September 30, 1994-
Land and improvements $ 21.6 $ 0.5 $ 0.1 $ 0.1 $ (0.4) $ 21.7
Buildings 147.5 7.8 1.4 1.0 (10.7) 144.2
Machinery and equipment 363.9 17.3 30.9 2.5 (10.9) 341.9
Construction in progress 9.9 17.1 0.2 1.0 -- 27.8
------- ------- ------- ------- ------- -------
$542.9 $ 42.7 $ 32.6 $ 4.6 $(22.0) $535.6
======= ======= ======= ======= ======= =======
Year Ended September 30, 1993-
Land and improvements $ 25.8 $ (0.3) $ 0.7 $ (0.3) $ (2.9) $ 21.6
Buildings 166.3 3.2 2.3 (3.1) (16.6) 147.5
Machinery and equipment 387.3 15.4 14.1 (4.9) (19.8) 363.9
Construction in progress 4.0 7.1 0.5 -- (0.7) 9.9
------- ------- ------- ------- ------- -------
$583.4 $ 25.4 $ 17.6 $ (8.3) $(40.0) $542.9
======= ======= ======= ======= ======= =======
Year Ended September 30, 1992-
Land and improvements $ 25.2 $ 0.7 $ 0.2 $ 0.1 $ -- $ 25.8
Buildings 165.1 1.9 1.5 0.8 -- 166.3
Machinery and equipment 380.5 16.5 12.9 3.2 -- 387.3
Construction in progress 3.1 1.0 0.1 -- -- 4.0
------- ------- ------- ------- ------- -------
$573.9 $ 20.1 $ 14.7 $ 4.1 $ -- $583.4
======= ======= ======= ======= ======= =======
<FN>
* Reclassified to Non-Producing Assets included in Other Assets.
-16-
</TABLE>
<PAGE> 17
OUTBOARD MARINE CORPORATION AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
For the Years Ended September 30, 1994, 1993, 1992
<TABLE>
<CAPTION>
(Dollars in millions)
Balance Trans- Balance
Beginning lation End
of Addit- Retire- Adjust- Other of
Period ions ments ments Reclass* Period
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Year Ended September 30, 1994-
Land and improvements $ 5.6 $ 0.4 $ -- $ -- $ (0.2) $ 5.8
Buildings 70.8 4.7 0.5 1.0 (8.8) 67.2
Machinery and equipment 256.2 23.3 26.2 2.0 (9.8) 245.5
------- ------- ------- ------- ------- -------
$332.6 $ 28.4 $ 26.7 $ 3.0 $(18.8) $318.5
======= ======= ======= ======= ======= =======
Year Ended September 30, 1993-
Land and improvements $ 5.6 $ 0.4 $ -- $ -- $ (0.4) $ 5.6
Buildings 76.0 5.9 0.9 (2.1) (8.1) 70.8
Machinery and equipment 259.0 24.9 11.9 (3.9) (11.9) 256.2
------- ------- ------- ------- ------- -------
$340.6 $ 31.2 $ 12.8 $ (6.0) $(20.4) $332.6
======= ======= ======= ======= ======= =======
Year Ended September 30, 1992-
Land and improvements $ 5.2 $ 0.4 $ -- $ -- $ -- $ 5.6
Buildings 69.8 5.7 0.6 1.1 -- 76.0
Machinery and equipment 240.2 26.4 10.6 3.0 -- 259.0
------- ------- ------- ------- ------- -------
$315.2 $ 32.5 $ 11.2 $ 4.1 $ -- $340.6
======= ======= ======= ======= ======= =======
<FN>
* Reclassified to Non-Producing Assets included in Other Assets.
-17-
</TABLE>
<PAGE> 18
OUTBOARD MARINE CORPORATION
EXHIBIT INDEX
Exhibit 3: Articles of incorporation and bylaws:
- ----------
(A) With respect to the Registrant's Certificate of
Incorporation, reference is made to Exhibit 4 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1984; to Exhibit 4 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1987 and to Exhibit 4 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1988, all of which are
incorporated herein by reference.
(B) With respect to the Registrant's Bylaws, a copy thereof
is attached hereto as Exhibit 3(B).
Exhibit 4: Instruments defining the rights of security holders,
- ---------- including indentures:
(A) Agreement of Outboard Marine Corporation, attached hereto
as Exhibit 4(A).
(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.
-18-
<PAGE> 19
(D) With respect to the OMC 1994 Long-Term Incentive Plan, reference
is made to Exhibit C, to Outboard Marine Corporation's Notice of
Annual Meeting and Proxy Statement prepared in connection with
the January 20, 1994 Annual Meeting of Shareholders, which is
incorporated herein by reference.
(E) 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.
(F) 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.
(G) 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 by
reference. With respect to Amendment No. 2 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 12: Statements regarding computation of ratios:
- -----------
A statement regarding the computation of the ratio of
earnings to fixed charges is attached hereto as Exhibit 12.
Exhibit 13: Annual report to security holders:
- -----------
The Registrant's Annual Report to Shareholders is attached
hereto as Exhibit 13.
Exhibit 21: Subsidiaries of the registrant:
- -----------
A list of the Company's subsidiaries and limited
partnerships is attached hereto as Exhibit 21.
Exhibit 23: Consents of expert:
- -----------
A copy of the consent of the Company's independent public
accountants is attached hereto as Exhibit 23.
Exhibit 27: Financial data schedules:
- -----------
This information is filed only in the electronic filing.
-19-
<PAGE> 20
EXHIBIT 3 (A)
BYLAWS
of
Outboard Marine Corporation
(As amended to and including September 7, 1994)
ARTICLE I
---------
Location
Section 1. The principal office of the Corporation shall be
located in the City of Wilmington, New Castle County, Delaware.
Section 2. The Corporation shall have such other offices, either
in or outside of the State of Delaware, as the Board of
Directors, the Chief Executive Officer or the Chief Operating
Officer shall from time to time direct.
ARTICLE II
----------
Stockholders
Section 1. The Board of Directors shall determine the place,
which may be in or outside of the State of Delaware, for holding
any meeting of the stockholders of the Corporation.
Section 2. No change of the time or place for the annual meeting
for the election of Directors shall be made within 60 days of the
day on which such election is to be held unless required by law.
If any change is required, notice of such change shall be given
by the Secretary of the Corporation to each stockholder entitled
to notice thereof no less than 20 days before such election is to
be held.
Section 3. The annual meeting of stockholders shall be held on
the third Thursday in January in each year, if not a holiday. If
such day is a holiday, the meeting shall be held on the first day
thereafter that is not a holiday, Saturday or Sunday or at such
time, which shall not be more than 30 days from the date of the
original meeting or the immediately preceding adjournment, as may
be set by the Board of Directors. At the annual meeting, the
stockholders shall elect Directors and transact such other and
proper business as may come before the meeting.
Section 4. Special meetings of stockholders, for any purpose
other than the election of Directors, may be held at such time,
on such date and at such place as shall be specified in the
notice of such meeting. Special meetings of stockholders may be
called by the Chairman of the Board, the President, or by three
quarters of the Board of Directors.
Section 5. The holders of a majority of the shares of common
stock entitled to vote, present in person or by proxy, shall
constitute a quorum at all meetings of stockholders. A majority
of the quorum shall decide any matter properly brought before the
meeting, except as may otherwise be required by these Bylaws, by
the Certificate of Incorporation or by statute. If a quorum is
not present at any such meeting, a majority of those stockholders
-20-
<PAGE> 21
present, in person or by proxy, shall have the power to adjourn
the meeting from time to time without notice, other than
announcement at the meeting, until a quorum shall be present. At
any adjourned meeting, any business may be transacted which might
have been transacted at the original or immediately preceding
adjourned meeting.
Section 6. At each meeting of the stockholders, every
stockholder having the right to vote shall be entitled to vote in
person or by proxy or other writing, duly executed by a
stockholder, provided such proxy or other writing is not dated
more than 3 years prior to said meeting, unless such proxy
specifically provides for a longer period. Execution of such
proxy or other writing may be accomplished by the stockholder or
his authorized officer, director, employee or agent signing such
proxy or other writing or causing his or her signature to be
affixed to such proxy or other writing by any reasonable means
including, but not limited to, by facsimile signature. A
stockholder may authorized another person(s) to act for him as
proxy or other writing by transmitting or authorizing the
transmission of a telegram, cablegram, or other means of
electronic transmission to the person who will be the holder of
the proxy or other writing or to a proxy or other writing
solicitation firm, proxy or other writing support service
organization or like agent duly authorized by the person who will
be the holder of the proxy or other writing to receive such
transmission, provided that any such telegram, cablegram or other
means of electronic transmission must either set forth or be
submitted with information from which it can be determined that
the telegram, cablegram or other electronic transmission was
authorized by the stockholder. If it is determined that such
telegrams, cablegrams or other electronic transmissions are
valid, the inspectors or, if there are no inspectors, such other
persons making that determination shall specify the information
upon which they relied. Any copy, facsimile telecommunication or
other reliable reproduction of the proxy or other writing or
transmission created pursuant to the above may be substituted or
used in lieu of the original writing or transmission for any and
all purposes for which the original proxy or other writing or
transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete
reproduction of the entire original proxy or other writing or
transmission.
Section 7. Written notice of each annual or special meeting
of stockholders shall be prepared and mailed by or shall be
caused to be prepared and mailed by the Secretary of the
Corporation. These notices shall be mailed to the address of
each stockholder as it appears on the books and records of the
Corporation as of the record date for such meeting. The notice
for any annual meeting shall be mailed no less than 10 days and
no more than 60 days before the meeting. The notice for any
special meeting shall be mailed no less than 10 days and no more
than 60 days before such special meeting, and shall state the
purpose or purposes of such meeting. In no event shall any
irregularity in such notice affect the validity of any annual
meeting of stockholders or any proceeding at any such meeting
duly constituted.
-21-
<PAGE> 22
Section 8. The Chairman of the Board shall act as chairman at
all meetings of stockholders. In the absence of the Chairman of
the Board, the President shall preside. In the absence of the
President, a Vice President, as designated by the Board of
Directors, shall preside and, in the absence of any such
designation, a Vice President, in the order of seniority as Vice
President, shall preside. In the absence of any Vice President,
the Board of Directors shall designate any other Director,
officer or employee of the Corporation to preside at such
meetings. The Secretary shall act as secretary at all
stockholders and Directors meetings, and, upon request, at the
meetings of the committees of the Board of Directors. In the
absence of the Secretary, the Board of Directors may designate an
Assistant Secretary to act as secretary at such meetings and, in
the absence of any such designation, an Assistant Secretary, in
order of seniority as Assistant Secretary, shall act as secretary
at such meetings.
Section 9. The Board of Directors, in advance of any meeting of
stockholders, shall appoint one or more Inspectors of Election
("Inspectors") to act at the meeting and make a written report
thereof. If Inspectors are not so appointed or if any person so
appointed fails to appear, the Chairman of the meeting shall
appoint one or more Inspectors to act at the meeting. Each
Inspector shall, before undertaking to perform the duties of an
Inspector, take and sign an oath to execute the duties of
Inspector faithfully, honestly and impartially, according to the
best of such Inspector's skill and ability. The date and time of
the opening and the closing of the polls for each matter upon
which the stockholders will vote at a meeting shall be announced
at the meeting. No ballot, proxies, votes or other writings
purporting to vote, nor any revocations thereof or changes
thereto, shall be accepted by the Inspectors after the closing of
the polls. The Inspectors shall determine the number of shares
outstanding and the voting power of each, the shares represented
at the meeting, the existence of a quorum and the validity and
effect of proxies, shall receive vote, ballots or consents, shall
hear and determine all challenges and questions arising in
connection with the right to vote, shall count and tabulate all
votes, ballots or consents, certify their determination of the
number of shares represented at the meeting and perform such acts
as are proper to conduct the election or vote with fairness to
all stockholders and. In determining the validity and counting
of proxies and ballots, the inspectors shall be limited to an
examination of the proxies, any envelopes submitted with those
proxies, and information provided in accordance with Article II,
Section 6 of these Bylaws, ballots and the regular books and
records of the Company, except that the Inspectors may consider
other reliable information for the limited purpose of reconciling
proxies and ballots submitted by or on behalf of banks, brokers,
their nominees or similar persons which represent more votes than
the holder of a proxy is authorized by the record owner to cast
or more votes than the stockholder holds of record. If the
Inspectors consider other reliable information for the limited
purpose permitted herein, the Inspectors at the time they make
their certification pursuant to this Section 9 shall specify the
precise information considered by them including the person or
persons from whom they obtained the information, when the
information was obtained, the means by which the information was
obtained and the basis for the Inspectors belief that such
information is accurate and reliable.
-22-
<PAGE> 23
Section 10. At any annual meeting of stockholders, only that
business which is properly brought before the meeting shall be
conducted. To be properly brought before the meeting, such
business must be specified in the notice of the meeting (or any
supplement thereto) given by or at the direction of the Board of
Directors or otherwise properly brought before the meeting by the
Board of Directors or by a stockholder. For a stockholder to
properly bring business before the meeting, the stockholder must
have given written notice thereof; such notice to be received by
the Secretary, Outboard Marine Corporation, at the Corporation's
principal executive offices, no less than 60 days prior to the
date one year from the date of the immediately preceding annual
meeting of stockholders. The notice must contain a brief
description of the business intended to be brought before the
meeting, the stockholder's name and address, the class and number
of shares the stockholder beneficially owns and a description of
any material interest the stockholder has in the Corporation. If
the Corporation provides less than 30 days notice or prior public
disclosure of the date of the meeting is given or made to
stockholders, to be timely received the stockholders' notice must
be received by the Secretary no later than the close of business
on the tenth day after that notice was mailed to stockholders or
public disclosure of the notice was made.
Section 11. In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days
after the date upon which the resolution fixing the record date
is adopted by the Board of Directors. Any stockholders of record
seeking to have the stockholders authorize or take corporate
action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date.
The Board of Directors shall promptly, but in all events within
ten (10) days after the date on which such a request is received,
adopt a resolution fixing the record date. If no record date has
been fixed by the Board of Directors within ten (10) days
following the receipt of such a request, the record date for
determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board
of Directors is required by applicable law, shall be the first
date on which a signed written consent setting forth the action
taken or proposed to be taken is delivered to the Corporation by
delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of
stockholders meetings are recorded, to the attention of the
Secretary of the Corporation. Delivery shall be by hand or by
certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by applicable law,
the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the
close of business on the date on which the Board of Directors
adopts the resolution taking such prior action.
-23-
<PAGE> 24
ARTICLE III
-----------
Directors
Section 1. The general management and control of the business
and property of the Corporation shall be vested in the Board of
Directors, subject to any restrictions imposed upon them by these
Bylaws, by the Certificate of Incorporation or by statute.
Section 2. The Board of Directors shall have the power to fix
the compensation of its members and shall provide for the payment
of the expenses of the Directors attending meetings of the Board
of Directors and of any committee of the Board.
Section 3. There shall be nine (9) members on the Board of
Directors. The election and term of office of each Director
shall be in accordance with the provisions of Article FOURTEENTH
of the Certificate of Incorporation.
Section 4. A majority of the Board of Directors then in office
shall constitute a quorum for the transaction of business at any
meeting of Directors. If a quorum is not present, a majority of
those present may adjourn the meeting. The act of a majority of
the Directors present at any meeting shall be the act of the
Board of Directors, except as provided by these Bylaws, by the
Certificate of Incorporation or by statute.
Section 5. Any action required or permitted to be taken at any
meeting of the Board of Directors or committee of the Board may
be taken without a meeting, if all members of the Board of
Directors or the committee, as the case may be, shall consent in
writing, and such writing is filed with the minutes of the Board
of Directors or the committee, as the case may be.
Section 6. In the event of any vacancy in the Board of Directors
for any reason other than an increase in the number of Directors,
a majority of the Directors then in office, or if only one
director remains, that director, may elect a successor to fill
any such vacancy. In the case of any vacancy due to an increase
in the number of Directors, a majority of the Directors then in
office may elect to fill such vacancy. The successor Director
shall serve for the unexpired term of the vacant directorship.
Section 7. The Board of Directors shall meet to elect the
officers of the Corporation as promptly as practical after the
adjournment of the annual meeting of stockholders. Other
meetings of the Directors may be held at such time, on such date
and in such place as the Board of Directors may from time to time
direct. Special meetings of the Directors may be called at any
time by the Chairman of the Board, the President or the written
request of two-thirds of the Directors then in office. The
Secretary shall give notice to the Directors of the time, date
and place of each such meeting no less than 3 days prior to any
such meeting. The notice shall be sent to the last known address
-24-
<PAGE> 25
of each such director as shown on the Corporation's books and
records. Any Director may waive, before or after any meeting,
notice of such meeting.
Section 8. The Board of Directors may, by a resolution passed by
a majority of the entire Board of Directors, designate such
committee or committees of the Board as it deems necessary or
appropriate. Each committee shall consist of two or more
Directors. In the absence or disqualification of a member of any
committee, the member or members present at any meeting and not
disqualified from voting may unanimously appoint another director
to act at the meeting in place of such absent or disqualified
member. Each committee shall have such power and authority as
may be provided in a resolution of the Board of Directors, except
that no committee shall have the power or authority to amend the
Certificate of Incorporation or the Bylaws, adopt an agreement of
merger or consolidation, recommend to the stockholders the sale,
lease or exchange of all or substantially all of the
Corporation's property or assets or recommend to the stockholders
a dissolution of the Corporation or revocation of a dissolution;
and, unless the resolution, Bylaws or Certificate of
Incorporation expressly so provides, no such committee shall have
the power or authority to declare a dividend, to authorize the
issuance of shares of stock (except that a committee may, to the
extent authorized in the resolution or resolutions providing for
the issuance of stock adopted by the Board of Directors as
provided in Section 151(a) of the Delaware General Corporation
Law ("DGCL"), as amended, fix the designations and any of the
preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other
series of the same or any other class or classes of the stock of
the Corporation, or fix the number of shares of any series of
stock or authorize the increase or decrease of the shares of any
series) or to adopt a certificate of ownership and merger.
Section 9. Only persons who are nominated in accordance with the
following procedures shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of
the Corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors, by any nominating
committee or person appointed by the Board of Directors, or by
any stockholder of the Corporation entitled to vote for the
election of Directors at the meeting who complies with the notice
procedures set forth in this Section 9. Such nominations, other
than those made by or at the direction of the Board of Directors,
shall be made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received by the
Secretary of the Corporation at the principal executive offices
of the Corporation not less than 60 days prior to the date one
year from the date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that less than
30 days notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received no later than the
close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public
disclosure was made. Such stockholder's notice shall set forth:
(a) as to each person who the stockholder proposes to nominate
-25-
<PAGE> 26
for election or re-election as a Director, (i) the name, age,
business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class
and number of shares of stock of the Corporation which are
beneficially owned by the person and (iv) any other information
relating to the person that is required to be disclosed in
solicitations for proxies for election of Directors pursuant to
Rule 14a under the Securities Exchange Act of 1934 or any
successor rule thereto; and (b) as to the stockholder giving the
notice, (i) the name and record address of the stockholder and
(ii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder as of the record date for
such meeting. The Corporation may require any proposed nominee
to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of such proposed
nominee to serve as a Director of the Corporation.
Section 10. The Chairman of the Board shall preside at all
meetings of the Board of Directors. In the absence of the
Chairman of the Board, the presiding officer at such meetings
shall be chosen pursuant to Article II, Section 8 of these
Bylaws.
Section 11. Members of the Board of Directors or any Committee
designated by the Board may participate in a meeting of the Board
or such Committee by means of telephone or similar communications
equipment provided that all Directors participating in such
meeting can hear each other. Participation in such a telephone
meeting shall constitute presence in person at such meeting.
ARTICLE IV
----------
Officers
Section 1. The Board of Directors shall elect a Chairman of the
Board, a Chief Executive Officer, a Chief Operating Officer, a
President, one or more Vice Presidents, a General Counsel, a
Secretary and a Treasurer or such other officers as may be
designated by the Board of Directors, and may appoint certain
other officers of the Corporation. Each officer shall have such
power and authority as may be prescribed by the Board of
Directors or as may be specified by these Bylaws, by the
Certificate of Incorporation or by statute. Any 2 offices,
except that of President and Vice President, may be held by the
same person at the same time.
Section 2. Except where otherwise expressly provided in a
contract duly authorized by a majority of the Board of Directors,
all officers elected or appointed by the Board shall hold office
until the annual meeting of stockholders held next after such
election or appointment and until his successor shall have been
duly chosen and qualified or until such officer shall have
resigned or shall have been removed. All appointed officers and
agents of the Corporation shall be subject to removal at any time
by a majority of the Board of Directors with or without cause.
All officers elected by the Board of Directors shall be subject
to removal with or without cause at any time by two-thirds of the
Directors then in office. Any vacancy occurring in any office
shall be filled by the vote of a majority of the Directors then
in office. Notwithstanding the foregoing, any such removal shall
-26-
<PAGE> 27
be without prejudice to such officer's contractual rights.
Section 3. The Chairman of the Board of Directors may be the
Chief Executive Officer. The Chairman of the Board shall preside
at all meetings of the stockholders and of the Board of
Directors. The Chairman of the Board shall have such other
powers, authority and duties as the Board of Directors may assign
to such office.
Section 4. The Chief Executive Officer of the Corporation shall
be primarily responsible for formulating and carrying into effect
the Corporation's missions, goals, objectives and strategies and
for managing the Corporation's financial condition and results of
operations. The Chief Executive Officer shall have such other
powers, authority and duties as the Board of Directors may assign
to such office.
Section 5. The President may be the Chief Operating Officer.
The President shall ensure that all orders and resolutions of the
Board of Directors are carried into effect, except with respect
to any specific authority as the Board of Directors may grant to
any other officer or agent of the Corporation. The President
shall have such other powers, authority and duties as the Board
of Directors or the Chief Executive Officer may assign to such
office.
Section 6. The Chief Operating Officer shall be primarily
responsible for the day-to-day operation of the Corporation. The
Chief Operating Officer shall have such other powers, authority
and duties as the Board of Directors or the Chief Executive
Officer may assign to such office.
Section 7. The Chief Administrative Officer shall be primarily
responsible for the day-to-day administrative operation of the
Corporation. The Chief Administrative Officer shall have such
other powers, authority and duties as the Board of Directors or
the Chief Executive Officer may assign such office.
Section 8. The Chief Financial Officer shall be responsible for
the day-to-day financial affairs of the Corporation, shall be
responsible for the financial structure and financial controls of
the Corporation and shall have such other powers and duties as
the Board of Directors or the Chief Executive Officer may assign
to such office.
Section 9. The Vice President, or any one of them as may be
designated by the Board of Directors, shall, in the absence of
the President, have the power and perform the duties of the
President, as long as such absence continues. The Vice
President, or Vice Presidents, shall have such other powers and
duties as the Board of Directors may assign to such office.
Section 10. The General Counsel shall be the chief legal officer
of the Corporation. He shall have active overall management and
oversight of and have responsibility for, and manage, all of the
legal affairs of the Corporation and, to the extent such General
-27-
<PAGE> 28
Counsel deems appropriate, its subsidiaries. It shall be the
General Counsel's duty to employ all other counsel on behalf of
the Corporation and to provide the Corporation with counsel and
advice on all legal matters affecting the Corporation. The
General Counsel shall supervise the activities of the Secretary
and shall have such other powers and duties as may be assigned by
the Board of Directors or the Chief Executive Officer. In the
absence of the Secretary, the General Counsel shall affix the
seal of the Corporation to any instrument requiring same.
Section 11. The Secretary shall attend all meetings of the Board
of Directors and the stockholders, and of the committees upon
request, and shall act as clerk of such meetings. The Secretary
shall give, or cause to be given, notice of all meetings of the
stockholders and the Board of Directors, as required by the
Chairman of the Board, the President or these Bylaws. The
Secretary shall have such other powers and duties as may be
assigned by the Board of Directors or the General Counsel. The
Secretary shall keep the seal of the Corporation in safe custody
and he shall affix said seal to any instrument requiring same.
Section 12. The Treasurer shall be the custodian of all of the
funds and securities of the Corporation. The Treasurer shall
have the power, in the regular performance of the duties of the
Treasurer, to endorse for collection, on behalf of the
Corporation, checks, notes and other obligations, and shall
deposit or shall cause to be deposited, all such checks, notes or
other obligations in such bank or banks or depository or
depositories as the Board of Directors may designate. The
Treasurer shall have such other powers and duties as the Board of
Directors may assign to such office.
Section 13. The Controller shall be the principal accounting
officer of the Corporation. He shall enter regularly in the
books of the Corporation, to be kept by him for that purpose, a
full and accurate account of all monies received and paid by or
for the account of the Corporation, and all other financial and
related transactions of the Corporation. The Controller shall at
all reasonable times exhibit his books and accounts to any
Director of the Corporation upon application at the offices of
the Corporation during business hours. Whenever required by the
Board of Directors, the Controller shall render a statement of
his accounts, and he shall have such other powers and duties
specified by the Board of Directors as it may from time to time
deem necessary or appropriate.
Section 14. The Board may appoint one or more Assistant
Secretaries and prescribe such powers and duties as it may deem
necessary and appropriate. In the absence of the Secretary, the
Board of Directors may designate an Assistant Secretary or a
Secretary pro tempore to assume the powers and duties of the
Secretary so long as such absence continues.
Section 15. The Board may appoint one or more Assistant
Treasurers, with such powers and duties then specified, and as it
may from time to time deem necessary or appropriate.
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<PAGE> 29
Section 16. The Board may appoint one or more Assistant
Controllers, with such powers and duties then specified, and as
it may from time to time deem necessary or appropriate.
Section 17. The Board of Directors may appoint such other
assistant officers, with such powers and duties then specified,
as it may from time to time deem necessary or appropriate.
Section 18. The Board of Directors may, by resolution, require
any and all of the officers of the Corporation, and any and all
employees of the Corporation, to give bond in such sum and with
such sureties as shall be satisfactory to the Board of Directors
for faithful performance of the duties of their respective
offices of employment.
Section 19. Officers of the Corporation are not required to be
employees of the Corporation.
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<PAGE> 30
ARTICLE V
---------
Stock
Section 1. Certificates for shares or certificates representing
rights with respect to the capital stock of the Corporation shall
be in such form as shall be approved by the Board of Directors.
Each certificate shall be numbered in order of its issue, and
shall be signed by the Chairman of the Board, the President or a
Vice President and by the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer, or by a printed or engraved
facsimile of such signatures and may be sealed with the seal of
the Corporation or by a printed or engraved facsimile of such
seal. The certificate shall be countersigned by a Transfer Agent
and registered by a Registrar, both of which shall be designated
by the Board of Directors. The countersignature of the Transfer
Agent may be a printed or engraved facsimile of such
countersignature. The stock records shall be kept by a Transfer
Agent or by Transfer Agents or by the Secretary or by such other
agent as may be designated by the Board of Directors.
Section 2. The shares of the capital stock of the Corporation
shall be transferable on the records of the Corporation only by
the person in whose name such shares appear or by such person's
duly authorized attorney, upon surrender of the certificate
representing such transferred shares, properly endorsed. The
Board of Directors may make such additional rules and regulations
with respect to the issue, transfer or registration of the shares
of the capital stock of the Corporation as it deems necessary or
appropriate.
Section 3. In case of loss or destruction of a certificate of
the capital stock of the Corporation, a new certificate replacing
such lost or destroyed certificate shall be issued provided the
Secretary, or the Secretary's agent, after receiving satisfactory
proof of loss or destruction and of the posting of satisfactory
indemnity bond or otherwise, has approved such replacement.
Section 4. The Corporation shall be entitled to treat the holder
of record of any share of its capital stock as the holder in fact
thereof and shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any
other person, whether or not it shall have express or other
notice thereof.
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<PAGE> 31
ARTICLE VI
----------
Execution of Instruments
Section 1. All documents, instruments or other writings to be
signed on behalf of the Corporation shall be signed, executed,
verified or acknowledged by such officer, employee or agent of
the Corporation as may be authorized by the Board of Directors.
Section 2. All certificates made on behalf of the Corporation
shall be made by the Secretary or an Assistant Secretary or such
other officer or officers or person as the Board of Directors may
from time to time designate.
ARTICLE VII
-----------
Indemnification
Section 1. Each person who was or is made a party or is
threatened to be made a party to or is involved in or called as a
witness in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, and any appeal
therefrom (hereinafter, collectively a "proceeding"), by reason
of the fact that he or she, or a person of whom he or she is the
legal representative, is, was or had agreed to become a director
of the Corporation or was or had agreed to become an officer of
the Corporation (but with respect to such officers and persons
agreeing to become officer only as to proceedings occurring after
a Change of Control, as defined herein, arising out of acts,
events or omissions occurring prior to such Change of Control) or
is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation or of
a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, shall
be indemnified and held harmless by the Corporation to the
fullest extent permitted under DGCL, as the same now exists or
may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the DGCL permitted
the Corporation to provide prior to such amendment), against all
expenses, liabilities and losses (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered
by such person in connection therewith; provided, that except as
explicitly provided herein, the Corporation shall indemnify any
such person seeking indemnity in connection with a proceeding (or
part thereof) initiated by such person only if authorization for
such proceeding (or part thereof) was not denied by the Board of
Directors of the Corporation prior to the earlier of (i) 30 days
after receipt of notice thereof from such person of (ii) a Change
of Control, as defined herein. For purposes of this Article, a
"Change in Control of the Corporation" shall be deemed to have
occurred if (i) any "Person" (as is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or
becomes (except in a transaction approved in advance by the Board
of Directors of the Corporation) the beneficial owner (as defined
in Rule 13d-3 under such Act), directly or indirectly, of
securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then
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<PAGE> 32
outstanding securities, or (ii) during any period of two
consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Corporation cease
for any reason to constitute at least a majority thereof unless
the election of each director who was not a director at the
beginning of the period was approved by a vote of at least
two-thirds of the directors then still in office who were
directors at the beginning of the period.
Unless a court interpreting Delaware law shall rule otherwise,
this paragraph shall be deemed to entitle all persons described
herein requesting indemnification covered hereby to such
indemnification without the determination provided for below,
provided that if such a determination is required, such a
determination shall be deemed to have occurred unless within 60
days of a request for indemnification by the Corporation a
determination is made as provided below that such indemnification
is not proper in the circumstances because such person has not
met the necessary standard of conduct. If a determination is
required and one of the three parties listed below shall make a
determination that a person is entitled to indemnification under
these bylaws, then a later decision by another party of the
parties listed below that such person is not so entitled shall be
of no effect and shall not work to deny such person
indemnification. A determination shall be made, if required
hereunder or by law, (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to
such proceeding, or (ii) if such quorum is not obtainable, or
even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel (who may be the regular
counsel of the Corporation) in a written opinion or (iii) by the
stockholders. If there is a Change in Control of the Corporation
(as defined above), then with respect to all matters thereafter
arising out of acts, omissions or events prior to the Change of
Control of the Corporation concerning the rights of any director
or officer seeking indemnification under this Article whose
request for indemnification has been denied by one of the parties
listed above, such person shall be entitled to have such decision
redetermined as provided below if such person so requests within
120 days of his or her being informed of the initial denial of
indemnification by the Corporation (unless the initial
determination had been by the procedure outlined below), and the
Corporation shall have the issue redetermined by special,
independent counsel selected by such person and approved by the
Corporation (which approval shall not be unreasonably withheld),
which counsel has not otherwise performed services (other than in
connection with similar matters) within the five years preceding
its engagement to render such opinion for such person or for the
Corporation or any affiliates (as such term is defined in Rule
405 under the Securities Act of 1933, as amended) of the
Corporation (whether or not they were affiliates when services
were so performed) ("Independent Counsel"). Unless such person
has theretofore selected Independent Counsel pursuant to this
Section 1 and such Independent Counsel has been approved by the
Corporation, the firms approved by a resolution or resolutions of
the Board of Directors prior to a Change in Control of the
Corporation shall be deemed to have been approved by the
Corporation as required. Such Independent Counsel shall
determine within 60 days whether and to what extent such person
would be permitted to be indemnified under applicable law and
shall render its written opinion to the Corporation and such
person to such effect. If such Independent Counsel is engaged by
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<PAGE> 33
the Corporation, the Corporation agrees to pay the reasonable
fees of the Independent Counsel referred to above and to fully
indemnify such Independent Counsel against any and all expenses,
claims, liabilities and damages arising out of or relating to
this Article or its engagement pursuant hereto.
Section 2. Expenses--Expenses, including attorneys' fees,
incurred by a person referred to in Section 1 of this Article in
defending or otherwise being involved in a proceeding shall be
paid by the Corporation in advance of the final disposition of
such proceeding, including any appeal therefrom, upon receipt of
an undertaking (the "Undertaking") by or on behalf of such
person to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the
Corporation. Such undertaking shall provide that if the person
to whom the expenses were advanced has commenced proceedings in a
court of competent jurisdiction to secure a determination that he
or she should be indemnified by the Corporation, such person
shall not be obligated to repay the Corporation during the
pendency of such proceeding.
Section 3. Right of Claimant to Bring Suit--If a claim under
Section 1 hereof is not paid in full by the Corporation within 60
days after a written claim has been received by the Corporation
or if expenses pursuant to Section 2 hereof have not been
advanced within 10 days after a written request for such
advancement accompanied by the Undertaking has been received by
the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the
claim or the advancement of expenses. (If the claimant is
successful in such suit or any other suit to enforce a right for
expenses or indemnification against the Corporation or any other
party under any other agreements, in whole or in part, such
claimant shall also be entitled to be paid the reasonable expense
of prosecuting such claim.) It shall be a defense to any such
action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its
final disposition where the required Undertaking has been
tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the DGCL for
the Corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including
its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination, if required, prior to
the commencement of such action that indemnification of the
claimant is proper in the circumstances because he or she has met
the applicable standard of conduct required under the DGCL, nor
an actual determination by the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders)
that the claimant had not met such applicable standard of
conduct, shall be a defense to the action or create a presumption
that claimant had not met the applicable standard of conduct.
Section 4. Non-Exclusivity of Rights--The rights conferred on
any person by this Article shall not be exclusive of any other
right which such person may have or hereafter acquire under any
statue, provision of the Certificate of Incorporation, Bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise. The Board of Directors shall have the authority, by
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<PAGE> 34
resolution, to provide for such other indemnification of
directors, officers, employees or agents as it shall deem
appropriate.
Section 5. Insurance--The Corporation may maintain insurance, at
its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another Corporation,
partnership, joint venture, trust or other enterprise against any
expenses, liabilities or losses, whether or not the Corporation
would have the power to indemnify such person against such
expenses, liabilities or losses under the DGCL.
Section 6. Contractual Nature--The provisions of this Article
shall be applicable to all proceedings commenced after its
adoption, whether such arise out of events, acts or omissions
which occurred prior or subsequent to such adoption, and shall
continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors
and administrators of such person. This Article shall be deemed
to be a contract between the Corporation and each person who, at
any time that this Article is in effect, serves or agrees to
serve in any capacity which entitles him to indemnification
hereunder and any repeal or other modification of this Article or
any repeal of modification of the DGCL or any other applicable
law shall not limit any rights of indemnification then existing
or arising out of events, acts or omissions occurring prior
to such repeal or modification, including, without limitation, the
right to indemnification for proceedings commenced after such
repeal or modification to enforce this Article with regard to
acts, omissions or events arising prior to such repeal or
modification.
Section 7. Severability--If this Article or any portion hereof
shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify
each director and officer of the Corporation as to costs, charges
and expenses (including attorney's fees), judgements, fines and
amounts paid in settlement with respect to any proceeding,
whether civil, criminal, administrative or investigative,
including an action by or in the right of the Corporation, to the
full extent permitted by any applicable portion of this Article
that shall not have been invalidated and to the full extent
permitted by applicable law.
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<PAGE> 35
ARTICLE VIII
------------
Amendments
Section 1. The power to adopt, make, amend, alter, change or
repeal the Bylaws of the Corporation, including the power to
increase or decrease the number of directors, may, except as
otherwise provided by these Bylaws, the Certificate of
Incorporation or by statute, be exercised by a majority of
stockholders or by a majority of the Board of Directors, and the
stockholders shall have the right to amend, alter, change or
repeal any Bylaw which may be adopted by the Board of Directors.
Section 2. The power to amend, alter, change or repeal Article
II, Sections 4 and 10, Article III, Sections 3, 7 and 9, Article
VII and this Article VIII may be exercised only by two-thirds of
the stockholders or by two-thirds of the then current Board of
Directors.
ARTICLE IX
----------
Miscellaneous
Section 1. The corporate seal of this Corporation shall be in
such form as may be designated by the Board of Directors.
Section 2. The fiscal year of the Corporation shall begin on the
first day of October of each year.
Section 3. The Board of Directors shall have the power to, from
time to time, amend, alter, repeal or otherwise change the
pension or welfare benefit plans of the Corporation, in part or
in their entirety, including, but not limited to, increasing the
benefits paid or payable to the participants therein upon a
Change in control of the Corporation. For purposes of this
Article, a "Change in Control of the Corporation" shall be as
defined in Section 1 of Article VII.
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<PAGE> 36
Exhibit 4 (A)
AGREEMENT OF OUTBOARD MARINE CORPORATION
With respect to Exhibit 4 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended September 30, 1994, the
Registrant hereby avers that, except for the Registrant's 7%
convertible subordinated debentures due 2002, 9-1/8% sinking fund
debentures due 2017, and Medium-Term Notes, Series A, no single
issue of long-term debt not being registered herein is more than
10 percent of the total assets of the Registrant and the
Registrant hereby agrees to furnish to the Securities and
Exchange Commission, upon request, copies of instruments with
respect to such long-term debt.
OUTBOARD MARINE CORPORATION
BY: JAMES R. MAURICE
----------------------------
James R. Maurice
Vice President and Controller
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<PAGE> 37
EXHIBIT 11
OUTBOARD MARINE CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In millions except amounts per share)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
September 30 September 30
-------------------- --------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary Earnings Per Share:
Net earnings (loss) $ 10.7 $ (43.0) $ 48.5 $(282.5)
======== ======== ======== ========
Weighted average number of shares 19.9 19.7 19.8 19.6
Common stock equivalents (stock options) 0.2 * 0.2 *
-------- -------- -------- --------
Average shares outstanding 20.1 19.7 20.0 19.6
======== ======== ======== ========
Primary earnings (loss) per share $ 0.53 $ (2.19) $ 2.42 $(14.42)
======== ======== ======== ========
Fully Diluted Earnings per Share:
Net earnings (loss) $ 10.7 $ (43.0) $ 48.5 $(282.5)
Add: After-tax interest and
related expense amortiza-
tion on 7% convertible
subordinated debentures 0.8 0.8 3.4 3.4
-------- -------- -------- --------
Net earnings (loss) adjusted $ 11.5 $ (42.2) $ 51.9 $(279.1)
======== ======== ======== ========
Weighted average number of shares 19.9 19.7 19.8 19.6
Common stock equivalents (stock options) 0.2 0.1 0.2 0.1
Weighted average common
shares assuming
conversion of 7% convertible
subordinated debentures 3.4 3.4 3.4 3.4
-------- -------- -------- --------
Average shares outstanding 23.5 23.2 23.4 23.1
======== ======== ======== ========
Fully diluted earnings (loss) per share $ 0.49 $ ** $ 2.22 $ **
======== ======== ======== ========
<FN>
* The computation of primary earnings per share of common stock
is computed without common stock equivalents because inclusion
of common stock equivalents is antidilutive.
<FN>
** 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.
-37-
</TABLE>
<PAGE> 38
EXHIBIT 12
OUTBOARD MARINE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions except ratios)
<TABLE>
<CAPTION>
Twelve Months Ended September 30
--------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
Earnings (loss) before provision for
income taxes and cumulative effect
of changes in accounting principles $ 53.4 $(159.9) $ 12.5 $(105.9) $(123.0)
Interest expense 15.1 19.8 19.0 31.1 29.8
Interest portion of rent expense 1.3 1.0 1.0 1.1 1.2
-------- -------- -------- -------- --------
Earnings $ 69.8 $(139.1) $ 32.5 $ (73.7) $ (92.0)
======== ======== ======== ======== ========
Fixed Charges:
Interest expense $ 15.1 $ 19.8 $ 19.0 $ 31.1 $ 29.8
Interest portion of rent expense 1.3 1.0 1.0 1.1 1.2
-------- -------- -------- -------- --------
Fixed Charges $ 16.4 $ 20.8 $ 20.0 $ 32.2 $ 31.0
======== ======== ======== ======== ========
Ratio of earnings to fixed charge 4.3 1.6
======== ========
Excess of fixed charges over earnings $ 159.9 $ 105.9 $ 123.0
======== ========= ========
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</TABLE>
<PAGE> 39
Exhibit 13
Statement of Consolidated Earnings
- ----------------------------------
Years ended September 30 (Dollars in millions except amounts per share)
1994 1993 1992
--------- --------- ---------
Net Sales $1,078.4 $1,034.6 $1,064.6
Cost of Goods Sold 826.4 816.6 817.0
--------- --------- ---------
Gross earnings 252.0 218.0 247.6
Selling, General and Administrative
Expense 206.0 226.1 216.6
Restructuring Charges -- 144.8 --
--------- --------- ---------
Earnings (Loss) from operations 46.0 (152.9) 31.0
--------- --------- ---------
Non-Operating Expense (Income):
Interest expense 15.1 19.8 19.0
Special refund for
environmental contingency (1.5) (12.5) --
Other, net (21.0) (.3) (.5)
--------- --------- ---------
(7.4) 7.0 18.5
--------- --------- ---------
Earnings (Loss) before provision
for income taxes, and
cumulative effect of changes in
accounting principles 53.4 (159.9) 12.5
Provision for Income Taxes 4.9 5.1 10.6
--------- --------- ---------
Net earnings (loss) before
cumulative effect of changes
in accounting principles 48.5 (165.0) 1.9
Cumulative effect on prior years of
changes in accounting principles:
Income taxes -- (10.0) --
Postretirement benefits other
than pensions -- (107.5) --
--------- --------- ---------
Net earnings (loss)
for the year $ 48.5 $ (282.5) $ 1.9
========= ========= =========
Net Earnings (Loss) Per Share of
Common Stock:
Primary;
Before accounting changes $ 2.42 $ (8.42) $ .10
Cumulative effect of changes
in accounting principles -- (6.00) --
-------- ---------- ---------
Primary $ 2.42 $ (14.42) $ .10
======== ========== =========
Fully diluted $ 2.22 $ (14.42) $ .10
======== ========== =========
The accompanying notes are an integral part of these statements.
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<PAGE> 40
Statement of Consolidated Financial Position
- --------------------------------------------
September 30 (Dollars in millions)
1994 1993
Assets -------- --------
Current Assets:
Cash and cash equivalents $ 80.3 $ 104.4
Receivables (less reserve for doubtful
receivables of $13.9 in 1994 and
$14.7 in 1993) 150.5 136.3
Inventories 163.7 154.1
Deferred income tax benefits 10.4 6.7
Other current assets 24.9 23.8
-------- --------
Total current assets 429.8 425.3
Product Tooling, net 48.3 36.2
Plant and Equipment, net 217.1 210.3
Intangibles 32.1 33.3
Other Assets 89.8 86.7
-------- --------
Total assets $ 817.1 $ 791.8
======== ========
Liabilities and Shareholders' Investment
Current Liabilities:
Accounts payable $ 102.9 $ 76.6
Accrued liabilities 128.8 161.8
Accrued income taxes 1.7 2.8
Current maturities and sinking fund
requirements of long-term debt .2 10.2
-------- --------
Total current liabilities 233.6 251.4
Long-Term Debt 178.2 183.0
Postretirement Benefits Other than Pensions 102.3 106.1
Other Non-Current Liabilities 94.0 90.4
-------- --------
Shareholders' Investment:
Common stock-- 90 million shares authorized
at $.15 par value each 3.0 3.0
Capital in excess of par value of common
stock 110.7 107.4
Accumulated earnings employed in the
business 106.3 65.7
Cumulative translation adjustments (6.6) (10.8)
Treasury stock at cost, .2 million shares (4.4) (4.4)
-------- --------
Total shareholders' investment 209.0 160.9
-------- --------
Total liabilities and shareholders'
investment $ 817.1 $ 791.8
======== ========
The accompanying notes are an integral part of these statements.
-40-
<PAGE> 41
Statement of Consolidated Cash Flows
- ------------------------------------
Years ended September 30 (Dollars in millions)
1994 1993 1992
-------- -------- -------
Cash Flows from Operating Activities
Net earnings (loss) $ 48.5 $(282.5) $ 1.9
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 -- 78.2 --
Depreciation and amortization 44.0 55.6 60.7
Changes in current accounts excluding
the effects of acquisitions and
noncash transactions:
Decrease (increase) in receivables (10.4) 10.8 11.6
Decrease (increase) in inventories (8.5) 18.6 8.4
Decrease (increase) in other current
assets (12.2) 30.2 4.8
Increase (decrease) in accounts payable,
accrued liabilities and income taxes (3.7) 36.0 7.4
Increase (decrease) in deferred items .2 (25.8) (2.3)
Other, net (.6) 1.0 (1.5)
-------- ------- --------
Net cash provided by
operating activities 57.3 39.6 91.0
-------- ------- --------
Cash Flows from Investing Activities
Acquisitions (excluding cash acquired) -- (14.9) --
Expenditures for plant and equipment,
and tooling (68.2) (50.0) (40.6)
Proceeds from sale of plant and equipment 6.8 3.8 4.8
Other, net (1.6) 9.2 --
-------- ------- --------
Net cash used for investing
activities (63.0) (51.9) (35.8)
-------- ------- --------
Cash Flows from Financing Activities
Net (decrease) in short-term debt -- -- (47.0)
Proceeds from long-term debt issued -- -- 72.7
Payments of long-term debt, including
current maturities (15.1) (15.3) (10.9)
Cash dividends paid (7.9) (7.9) (7.9)
Other, net 3.3 (1.5) --
-------- ------- --------
Net cash provided by (used for)
financing activities (19.7) (24.7) 6.9
-------- ------- --------
Exchange rate effect on cash 1.3 (1.2) .9
-------- ------- --------
Net increase (decrease) in cash and
cash equivalents (24.1) (38.2) 63.0
Cash and cash equivalents at beginning of year 104.4 142.6 79.6
-------- -------- --------
Cash and cash equivalents at end of year $ 80.3 $ 104.4 $ 142.6
======== ======== ========
Supplemental Cash Flow Disclosures
Interest paid $ 17.1 $ 21.3 $ 27.1
Income taxes paid (refunded) 7.4 9.1 (2.6)
======== ======== ========
The accompanying notes are an integral part of these statements.
-41-
<PAGE> 42
Statement of Changes in Consolidated Shareholders' Investment
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Years ended September 30 (In millions except amounts per share)
Capital Cumula-
in Excess Accumulated tive
Issued of Par Earnings Trans-
Common Stock Value of Employed lation
----------------- Common in the Adjust- Treasury
Shares Amount Stock Business ments Stock
------ ------ -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance--September 30, 1991 19.6* $ 2.9 $ 105.3 $ 362.1 $ (2.6) $(4.4)
Net earnings -- -- -- 1.9 -- --
Dividends--$.40 per share -- -- -- (7.9) -- --
Shares issued under stock
plans .1 .1 .6 -- -- --
Translation adjustments -- -- -- -- (3.5) --
----- ----- ------- -------- ------- ------
Balance--September 30, 1992 19.7* $ 3.0 $ 105.9 $ 356.1 $ (6.1) $(4.4)
Net loss -- -- -- (282.5) -- --
Dividends--$.40 per share -- -- -- (7.9) -- --
Shares issued under stock
plans .3 -- 1.5 -- -- --
Translation adjustments -- -- -- -- (4.7) --
----- ----- ------- -------- ------- ------
Balance--September 30, 1993 20.0* $ 3.0 $ 107.4 $ 65.7 $(10.8) $(4.4)
Net earnings -- -- -- 48.5 -- --
Dividends--$.40 per share -- -- -- (7.9) -- --
Shares issued under stock
plans .2 -- 3.3 -- -- --
Translation adjustments -- -- -- -- 4.2 --
----- ----- -------- -------- ------- ------
Balance--September 30, 1994 20.2* $ 3.0 $ 110.7 $ 106.3 $ (6.6) $(4.4)
====== ===== ======== ======== ======= ======
<FN>
* Includes .2 million shares of treasury stock.
<FN>
The accompanying notes are an integral part of these statements.
-42-
</TABLE>
<PAGE> 43
Notes to Consolidated Financial Statements
Note 1 Accounting Policies
The major accounting policies followed by the company are
described in the accompanying notes:
Note
----
Basis of Consolidation 2
Earnings Per Share of Common Stock 2
Equity Method 3
Translation of Non-U.S. Subsidiary Financial Statements 5
Cash and Cash Equivalents 6
Inventories 9
Depreciation of Plant and Equipment 10
Maintenance and Repair 10
Intangibles 11
Stock Options 14
Retirement Benefit and Incentive Compensation Programs 15
Product Tooling 16
Deferred Income Taxes 18
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<PAGE> 43
Note 2 Basis of Consolidation and Earnings Per Share
of Common Stock
The accounts of all subsidiaries were included in the consolidated
financial statements. Intercompany accounts, transactions and
earnings have been eliminated in consolidation. At September 30,
1994, all companies which were significant subsidiaries were wholly
owned. With respect to the joint venture, see note 3.
Primary earnings (loss) per share of common stock were computed
based on the weighted average number of shares and common stock
equivalents (stock options, if applicable) outstanding of 20.0
million, 19.6 million and 19.8 million for the years ended September
30, 1994, 1993 and 1992, respectively. The computation of fully
diluted earnings (loss) per share of common stock assumed
conversion of the 7 percent convertible subordinated debentures
due 2002; accordingly, net earnings (loss) were increased by
after-tax interest and related expense amortization on the
debentures. For the 1994 fully diluted earnings per share
computation, shares were computed to be 23.4 million. For 1993
and 1992, the computations of fully diluted earnings (loss) per
share were antidilutive; therefore, the amounts reported for
primary and fully diluted earnings (loss) per share were the same.
Note 3 Joint Venture and Investments
In July 1993, the company and AB Volvo Penta and Volvo Penta of
the Americas, Inc., formed a joint venture company to produce
gasoline stern drive and gasoline inboard marine power systems.
The joint venture is 60% owned by Volvo Penta of the Americas,
Inc. (Volvo Penta), and 40% owned by the company. The jointly
produced marine power systems are marketed by Volvo Penta to
independent boat builders, worldwide, and are used in boats
manufactured by subsidiaries of the company. The units carry the
Volvo Penta or OMC brand names as appropriate.
The equity method of accounting is used for the joint venture.
At September 30, 1994 and 1993, the company's investment,
including current net accounts receivable was $18.8 million
and $15.4 million, respectively. The joint venture is a
manufacturing and after market joint venture. The company
recognizes gross profit relating to certain parts sales and
expenses for product development that are part of the joint
venture. The company's share of the joint venture's earnings
were $4.1 million and $.4 million in 1994 and 1993,
respectively, which were included in other expenses (income)
in the statement of consolidated earnings.
In May 1993, the company purchased, for $14.9 million, approximately
a 6% equity interest in IJ Holdings, Inc., the ultimate parent
company of boat manufacturer Genmar Industries, Inc. and affiliated
companies. In 1994, through a series of related transactions, the
company's interest in IJ Holdings, Inc., became an approximate 4%
interest in Genmar Holdings, Inc. This investment is a long-term
asset included with other assets at original cost. It is not
practicable to estimate the fair value of the investment in Genmar
Holdings, Inc.
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<PAGE> 44
Note 4 Restructuring Charges
During fiscal year 1993, the company recorded $144.8 million in res-
tructuring charges designed to reduce costs, improve long-term profits
and record assets at net realizable value. The restructuring included
$69.0 million for closings and transfers of manufacturing and
distribution operations including severance costs resulting from staff
reduction programs. The restructuring also included a write-off of the
remaining goodwill and intangibles of $75.8 million primarily related
to the recreational boat group. The recreational boat group segment had
not realized the improvements that the other boat segments had
experienced. Therefore, in fiscal year 1993, these companies were
restructured including the consolidation of manufacturing and engineering
operations, a plant closing, the elimination of selected product lines
and the reorganization of marketing functions. This write-off of
intangibles recognized the fundamental change in the operating profit
margins and growth characteristics of this segment of the company's
business today as compared with the time of purchase.
Note 5 Translation of Non-U.S. Subsidiary Financial Statements
The financial statements of non-U.S. subsidiaries are translated to
U.S. dollars substantially as follows: all assets and liabilities at
year-end exchange rates; sales and expenses at average exchange rates;
shareholders' investment at historical exchange rates. Gains and losses
from translating non-U.S. subsidiaries' financial statements are
recorded directly in shareholders' investment. The statement of con-
solidated earnings for 1994, 1993 and 1992 includes foreign exchange
losses of $2.6 million, $3.6 million and $10.5 million, respectively,
which resulted primarily from commercial transactions and forward
exchange contracts.
In order to limit fluctuations in future foreign currency denominated
receipts, the company entered into a number of currency hedging tran-
sactions. As of September 30, 1994, the company had entered into
foreign currency forward exchange contracts to receive $12.5 million
in U.S. dollars in exchange for 17.0 million Canadian dollars. Con-
tracts mature on dates through March 31, 1995. A $.2 million loss has
been recorded based on quoted market prices for foreign exchange
contracts at September 30, 1994.
Note 6 Cash and Cash Equivalents
For purposes of the statement of consolidated cash flows, marketable
securities purchased with an original maturity of three months or
less are considered cash equivalents. The carrying amount of these
marketable securities approximates fair value because of the short
maturity of these instruments.
The company's domestic banking system provides for the daily replenish-
ment of major bank accounts for check clearing requirements. According-
ly, outstanding checks of $26.4 million and $17.9 million that had not
yet been paid by the banks on September 30, 1994, and 1993, respective-
ly, were reflected in trade accounts payable in the statement of con-
solidated financial position.
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<PAGE> 45
Note 7 Short-Term Borrowings and Compensating Balances
A summary of short-term borrowing activity follows:
(Dollars in millions)
1994 1993 1992
------ ------ -------
Outstanding at September 30-
Bank borrowing $ -- $ -- $ --
Average interest rate -- -- --
Average for the year-
Borrowing $ 7.6 $10.0 $ 27.1
Interest rate 6.4% 7.1% 9.5%
Maximum month end borrowing $40.0 $37.7 $45.2
====== ====== ======
The company has a revolving credit agreement which provides for
loans of up to $175 million. The agreement expires not later than
October 1, 1995. As set forth in note 8 to consolidated financial
statements, the company is required to meet certain financial
covenants throughout the year. A facility fee is payable under the
revolving credit agreement.
The company's non-U.S. subsidiaries had additional noncommitted
lines of credit of approximately $15.6 million on September 30,
1994. As of September 30, 1994, the company and non-U.S. subsidiaries
together had unused lines of credit of $166.1 million (net of
outstanding letters of credit of $24.5 million).
The carrying amount for short-term borrowings approximates fair
value because of the short maturity of these instruments.
Note 8 Long-Term Debt
Long-term debt on September 30, 1994 and 1993, net of current
maturities and sinking fund requirements included in current
liabilities, consisted of the following:
(Dollars in millions)
1994 1993
----- -----
7% convertible subordinated debentures due 2002 $ 74.8 $ 74.8
9-1/8% sinking fund debentures due through 2017 65.7 65.7
Medium-term notes due 1998 through 2001 with rates
ranging from 8.16% to 8.625% 24.1 28.8
Industrial revenue bonds with rates ranging from
6.0% to 12.22% and other debt 13.6 13.7
------ ------
$178.2 $183.0
====== ======
On September 30, 1994, the company held $33.8 million of its 9-1/8
percent sinking fund debentures, which will be used to meet
sinking fund requirements of $5.0 million per year in the years
1998 through 2004. Amounts are recorded as a reduction of
outstanding debt and are available to meet future sinking fund
requirements.
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<PAGE> 46
The agreements covering the significant debt instruments contain,
among other things, requirements for the maintenance of tangible
net worth, interest coverage ratios, capitalization ratios and
limits the redemption or retirement of shares of common stock. At
September 30, 1994, the company was in compliance with these
financial covenants.
The fair value of long-term debt of $181.1 million was based on
quoted market prices where available or discounted cash flows
using market rates available for similar debt of the same
remaining maturities.
Maturities and sinking fund requirements of long-term debt for
each of the next five years are as follows:
(Dollars in millions)
---------------------
1995 $ .2
-----
1996 $ .2
-----
1997 $ .2
-----
1998 $ 5.2
-----
1999 $11.2
-----
The company has entered into several interest rate swap agreements
as a means of managing its proportion of fixed to variable interest
rate exposure and to lower the overall cost of borrowings. The
agreements are with major financial institutions which are expected
to fully perform under the terms, thereby mitigating the credit risk
from the transactions. The differential to be paid or received is
accrued consistent with the terms of the agreements and market
interest rates.
At September 30, 1994, the company had outstanding fixed to floating
interest rate swap agreements having a total notional principle
amount of $100 million expiring November 25, 1996. These agreements
effectively swap a fixed interest rate (company receives) for a
floating rate (company pays) based on the London Interbank Offered
Rate (LIBOR), which is reset every six months in arrears.
The fair value of the interest rate swap agreements at September 30,
1994, is an estimated termination liability of $5.0 million. This
potential expense has not yet been reflected in net earnings as it
represents the hedging of long-term activities to be amortized in
future reporting periods. The fair value is the estimated amount
the company would have paid to terminate the swap agreements at
September 30, 1994.
Note 9 Inventories
The company's domestic inventory is carried at the lower of cost
or market using principally the last-in, first-out (LIFO) cost
method. All other inventory (28% in 1994 and 1993) is carried at
the lower of first-in, first-out (FIFO) cost or market.
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<PAGE> 47
During 1993, the liquidation of LIFO inventory quantities acquired
at lower costs prevailing in prior years as compared with the
costs of 1993 purchases, increased earnings before tax by $5.7
million. There were no material liquidations of LIFO inventory
quantities in 1994.
The various components of inventory were as follows:
(Dollars in millions)
September 30 1994 1993
----------------------------- ------- -------
Finished product $ 65.8 $ 75.1
Raw material, work in process
and service parts 131.5 114.3
------- -------
Inventory at current cost
which is less than
market 197.3 189.4
Excess of current cost over
LIFO cost 33.6 35.3
------- -------
Net inventory $163.7 $154.1
======= =======
Note 10 Plant and Equipment
Plant and equipment components were as follows:
(Dollars in millions)
September 30 1994 1993
------------------------ ------- -------
Land and improvements $ 21.7 $ 21.6
Buildings 144.2 147.5
Machinery and equipment 341.9 363.9
Construction in progress 27.8 9.9
------- -------
535.6 542.9
Accumulated depreciation 318.5 332.6
------- -------
Plant and equipment, net $217.1 $210.3
======= =======
Plant and equipment are recorded at cost and depreciated
substantially on a straight-line basis over their estimated useful
lives as follows: buildings, 10 to 40 years; machinery and equipment,
4 to 12 1/2 years. Depreciation is not provided on construction in
progress until the related assets are placed
into service.
Depreciation of plant and equipment was $28.4 million, $31.1 million
and $32.7 million for the years ended September 30, 1994, 1993 and
1992, respectively.
When plant and equipment is retired or sold, its costs and related
accumulated depreciation is written off and the resulting gain or
loss is included in net earnings.
Maintenance and repair costs are charged directly to earnings as
incurred. Major rebuilding costs that substantially extend the
useful life of an asset are capitalized and depreciated.
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<PAGE> 48
Note 11 Intangibles
The statement of consolidated financial position included net
amounts for intangibles, including goodwill, of $32.1 million on
September 30, 1994, as compared with net intangibles of $33.3
million on September 30, 1993. Goodwill is amortized over 40 years.
Amortization of intangibles for 1994, 1993 and 1992, was $1.3
million, $5.6 million and $6.4 million, respectively. A write-off
of intangibles of $75.8 million was included in restructuring
charges in 1993.
Note 12 Accrued Liabilities
Accrued liabilities were as follows:
(Dollars in millions)
September 30 1994 1993
--------------------------------- ------- -------
Compensation and pension programs $ 22.6 $ 16.5
Postretirement medical (current) 8.2 6.2
Warranty 20.8 22.7
Marketing program 19.0 21.6
Restructuring 20.0 50.9
Other 38.2 43.9
------- -------
Accrued liabilities $128.8 $161.8
======= =======
Note 13 Preferred Stock and Stockholder Rights Plan
The company has 3,000,000 shares of $10 par value preferred stock
authorized. None has been issued. The board of directors has the
authority to establish certain rights, preferences and limitations
of the preferred stock prior to its issuance.
On June 12, 1986, the company adopted a stockholder rights plan.
All shareholders of record today have one right per share of the
company common stock held. The rights will expire on June 23, 1996.
Each right will entitle its holder to buy 1/100 of a newly-issued
share of company preferred stock at an exercise price of $95. The
rights will be exercisable only if a person or group acquires
beneficial ownership of 15% or more of the company's common stock
or commences a tender or exchange offer that would, if successful,
result in such person or group owning beneficially 15% or more of
the company's common stock.
If a 15%-or-more shareholder ("15% holder") engages in certain
transactions in which the company survives, each right not owned
by the 15% holder or related parties will entitle its holder to
purchase, at the right's then current exercise price, shares of
the company common stock having a value of twice the right's then
current exercise price. In addition, if after any person has become
a 15% holder, the company is involved in certain transactions with
another person, after which the company ceases to exist, each
right will entitle its holder to purchase, at the right's then
current exercise price, shares of common stock of such other
person having a value of twice the right's then current exercise
price.
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<PAGE> 49
The company will generally be entitled to redeem the rights at
$.05 per right at any time until 20 days (subject to extension)
following a public announcement that a 15% position has been
acquired.
Under the stockholder rights plan, there have been reserved for
issuance 900,000 shares of the companys' preferred stock.
Note 14 Common Stock
Under the provisions of the 1987 Stock Option and Performance
Unit Plan, as amended, 800,000 shares of common stock were
reserved for options and stock appreciation rights granted
or to be granted to executive employees at not less than 85%
of the fair market value at the date of grant. Incentive stock
options are exercisable not later than ten years after the date
of grant. Non-incentive stock options and stock appreciation
rights are exercisable not later than eleven years after the
date of grant. Certain non-incentive stock options are accompanied
by in-tandem limited stock appreciation rights exercisable
only upon a change in control. The plan also reserved 1,200,000
shares for the award of performance units. The 1987 plan
terminated in January 1990.
Under the provisions of the OMC Executive Equity Incentive
Plan which was adopted in 1989, 1,200,000 shares of common stock
were reserved for non-incentive and incentive stock options and
stock appreciation rights granted, or to be granted to executive
employees at not less than 85% of the fair market value at the
date of grant. Non-incentive stock options and stock appreciation
rights are exercisable not later than fifteen years after the
date of grant. The plan also reserved 250,000 shares of common
stock for issuance as restricted stock. On November 7, 1990,
under the provisions of the company's 1982 and 1987 Stock Option
and Performance Unit Plans and the OMC Executive Equity Incentive
Plan, the stock option committee of the board of directors
determined to cancel, with respect to each optionee currently
employed by the company and subject to obtaining such optionees'
consent, all currently outstanding stock options held by such
optionees and grant new options at an exercise price of $10.00 on
a one for two basis. There were 1,150,146 outstanding stock options
held by then current employees. Under agreements executed by such
optionees, 1,098,611 options were cancelled, and 325,100 options
were issued to begin vesting on May 7, 1992 and 471,200 options
were issued to begin vesting on November 7, 1991. All new options
have a ten-year-and-one-day term which began on November 7, 1990.
Under the provisions of the OMC Executive Equity Incentive Plan,
126,100 shares of restricted stock were granted on September 8,
1993. The market value of these shares of $2.3 million is recorded
as part of capital in excess of par value of common stock and
amortized over the five-year period during which the transfer
of stock is restricted.
Under the provisions of the 1987 Stock and Performance Unit
Plan and the OMC Executive Equity Incentive Plan, the board of
directors extended from two years to five years the period in
which stock options can be exercisable after optionees'
retirement. This change resulted in $.2 million and $1.7 million
of expense in 1994 and 1993, respectively.
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<PAGE> 50
In 1992, the company issued $74.75 million principal amount of
7% subordinated convertible debentures. The debentures are
convertible into 3,359,550 shares of common stock which have
been reserved.
Under the provisions of the 1994 OMC Long-Term Incentive Plan,
1,000,000 shares of common stock were reserved for non-incentive
stock options and stock appreciation rights granted or to be
granted to executive employees at not less than 100% of the fair
market value at the date of grant and for restricted stock,
performance shares or units and limited stock appreciation
rights. Non-incentive stock options and stock appreciation rights
are exercisable not later than 15 years after the date of grant.
A summary of option data follows:
Number of Option Exercise
Option Shares Price Per Share
------------- -----------------
Options outstanding and unexercised
at September 30, 1992 863,603 $ 10.00- $ 31.25
Options activity for the fiscal
year ended September 30, 1993
Options granted 273,100 $ 19.375
Options exercised (153,860) $ 10.00- $ 21.375
Options cancelled (58,543) $ 10.00- $ 31.25
-----------
Options outstanding and unexercised
at September 30, 1993 924,300 $ 10.00- $ 23.00
Options activity for the fiscal
year ended September 30, 1994
Options granted 457,000 $ 18.50- $ 24.625
Options exercised (181,855) $ 10.00- $ 21.375
Options cancelled (87,225) $ 10.00- $ 21.375
-----------
Options outstanding and unexercised
at September 30, 1994 1,112,220 $ 10.00- $ 24.625
=========== =================
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<PAGE> 51
Note 15 Retirement Benefit and Incentive Compensation Programs
The company and its subsidiaries have retirement benefit plans
covering a majority of employees. Worldwide pension calculations
resulted in income of $ .3 million, $1.4 million, and $3.8 million
in 1994, 1993, and 1992, respectively.
The following schedule of pension income (expense) presents
amounts relating to the company's material pension plans (United
States and Canadian plans):
(Dollars in millions)
Years ended September 30 1994 1993 1992
---------------------------------- ------- ------- -------
Benefits earned during the period $ (6.2) $ (5.8) $ (5.2)
Interest cost on projected benefit
obligation (23.3) (22.7) (22.0)
Actual return on assets (2.6) 43.2 26.4
Net amortization and deferral 34.0 (12.1) 4.8
------- ------- -------
Net periodic pension income $ 1.9 $ 2.6 $ 4.0
======= ======= =======
Actuarial assumptions used for the company's principal defined
benefit plans:
September 30 1994 1993 1992
--------------------------------------- ------ ------ ------
Discount rates 8-1/4% 7-1/4% 8-1/4%
Rate of increase in compensation levels
(salaried employee plans) 5% 5% 5%
Expected long-term rate of return on
assets 9-1/2% 9-1/2% 9-1/2%
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<PAGE> 52
The funded status and pension liability were as follows:
(Dollars in millions)
Plans Whose Plans Whose
Assets Exceed Accumulated
Accumulated Benefits Benefits
Exceed Assets
September 30 1994 1993 1994 1993
-------------------------- -------- -------- ------- -------
Actuarial present value
of benefit obligation:
Vested $ 245.2 $ 256.2 $ 9.5 $ 8.9
Nonvested 26.1 33.2 .8 1.2
-------- -------- ------- -------
Accumulated benefit
obligation 271.3 289.4 10.3 10.1
Effect of projected future
compensation increases 20.5 23.6 .8 1.3
-------- -------- ------- -------
Projected benefit
obligation 291.8 313.0 11.1 11.4
Plan assets at fair market
value 317.2 343.5 -- --
-------- -------- ------ -------
Plan assets (more than) less
than projected benefit
obligation (25.4) (30.5) 11.1 11.4
Unrecognized net loss (29.7) (26.2) (1.4) (1.7)
Prior service cost not yet
recognized in net
periodic pension expense (10.7) (9.1) (.4) (1.1)
Remaining unrecognized net
asset (obligation)
arising from the initial
application of SFAS No. 87 24.6 28.2 (.9) (1.2)
Adjustment required to
recognize minimum liability -- -- 1.9 2.7
-------- -------- ------- -------
Pension liability (asset)
recognized in the
Statement of Consolidated
Financial Position $ (41.2) $ (37.6) $ 10.3 $ 10.1
======== ======== ======= =======
One of the company's major defined benefit plans provides that
upon a change in control of the company and upon certain other
actions by the acquiror, all participants of this plan would
become vested in any excess of plan assets over total accumulated
benefit obligations.
Effective October 1, 1992, the company adopted Statement of
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS No. 106).
The statement requires the cost of such benefits to be recognized
in the financial statements during the period employees provide
service to the company, rather than the company's past practice
of recognizing these costs as claims were incurred. The cumulative
effect of this change in accounting principle of $107.5 million,
($5.49) per share, was recorded as of October 1, 1992. See note
18 of notes to the consolidated financial statements concerning
deferred income taxes on this accounting change. Although the
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<PAGE> 53
adoption of SFAS No. 106 unfavorably impacts net earnings,
adoption does not impact the company's cash flow since the company
plans to continue paying these costs when incurred. In addition
to the cumulative effect, adopting the new standard increased
the company's postretirement healthcare and life insurance costs
by approximately $3.6 million (before tax) for fiscal year 1993.
The company provides certain healthcare and life insurance
benefits for eligible retired employees, primarily employees of
the Milwaukee, Wisconsin; Waukegan, Illinois; and former Galesburg,
Illinois plants as well as the Corporate office. Employees at
these locations become eligible if they have fulfilled specific
age and service requirements. These benefits are subject to
deductible, co-payment provisions and other limitations, which
are amended periodically. The company reserves the right to make
additional changes or terminate these benefits in the future.
Effective January 1, 1994, the company introduced a cap tied to
the Consumer Price Index for the employer-paid portion of medical
costs beginning in 1998 for non-union active employees. This
plan change was reflected in the accumulated postretirement
benefit obligation in fiscal 1993.
The net cost of providing postretirement healthcare and life
insurance benefits included the following components:
(Dollars in millions)
Years ended September 30 1994 1993
-------------------------------- ------ -------
Service cost-benefits attributed
to service during the period $ 1.3 $ 2.0
Interest cost on accumulated
postretirement benefit
obligation 7.0 8.3
Net amortization and deferral (1.8) (.2)
------ -------
Net periodic postretirement
benefit cost $ 6.5 $ 10.1
====== =======
The amounts recognized in the company's statement of consolidated
financial position included:
(Dollars in millions)
September 30 1994 1993
--------------------------- ------- -------
Accumulated postretirement
benefit obligation:
Retirees $ 70.6 $ 74.1
Fully eligible active plan
participants 7.6 10.1
Other active plan
participants 23.3 22.1
Prior service credit 14.2 16.0
Unrecognized net loss (6.9) (10.0)
------- -------
Net obligation $108.8 $112.3
======= =======
The accumulated postretirement benefit obligation was determined
using an 8.25% and 7.25% weighted average discount rate at
September 30, 1994 and 1993, respectively. The healthcare cost
trend rate was assumed to be 11% in fiscal year 1994, gradually
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<PAGE> 54
declining to 7% over four years and remaining constant thereafter.
In fiscal year 1993, the healthcare cost trend rate was assumed
to be 12%, gradually declining to 7% over five years and remaining
constant thereafter. A one percentage point increase of annual
trend rate would increase the accumulated post retirement benefit
obligation at October 1, 1993 by approximately $8.2 million and
the net periodic cost by $.9 million for the year.
Under the OMC Executive Bonus Plan, the compensation committee
of the board of directors, which administers the plan and whose
members are not participants in the plan, has authority to
determine the extent to which the company meets, for any fiscal
year, the performance targets for that fiscal year which are set
by the committee no later than the third month of the fiscal
year. In fiscal years 1994 and 1992, $3.9 million and $5.1 million,
respectively, was charged to earnings under this plan. In 1993,
no incentive compensation was paid or provided under this plan.
The 1987 Stock Option and Performance Unit Plan and the OMC
Executive Equity Incentive Plan authorize the awarding of
performance units, each with a value equal to the value of a share
of common stock at the time of award. Performance units will be
earned and paid in cash or shares, or both, based upon the judgment
of the committee whose members are not participants in the plans,
as to the achievement of various goals over multi-year award cycles.
In 1994, 1993 and 1992, respectively, $1.4 million, $.6 million
and $(.5) million were charged (credited) to earnings for the
estimated cost of performance units earned under the 1987 Stock
Option and Performance Unit Plans and the OMC Executive Equity
Incentive Plan.
Note 16 Supplementary Consolidated Earnings Information
The statement of consolidated earnings included the following items
of expense:
(Dollars in millions)
Years ended September 30 1994 1993 1992
----------------------------- ------- ------- -------
Product tooling cost $ 13.6 $ 17.8 $ 19.7
Research and development cost 36.5 36.0 36.1
Maintenance and repairs 28.0 27.0 29.1
Advertising 29.3 28.3 25.0
Product tooling costs are amortized over a period not exceeding
five years, beginning the first year the related product is sold.
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<PAGE> 55
Note 17 Other Expense (Income), Net
Other non-operating expense (income) in the Statement of
Consolidated Earnings consisted of the following items:
(Dollars in millions)
Years ended September 30 1994 1993 1992
----------------------------- ------- ------- -------
Expense (Income)--
Interest earned $ (3.6) $ (3.6) $ (5.4)
Foreign exchange losses 2.6 3.6 10.5
(Gain) loss on disposition
of plant and equipment (.6) 1.0 (1.5)
Transfer of Hong Kong
land rights (10.5) -- --
Joint venture earnings (4.1) (.4) --
Miscellaneous, net (4.8) (.9) (4.1)
------- ------- -------
$(21.0) $ (.3) $ (.5)
======= ======= =======
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<PAGE> 56
Note 18 Income Taxes
The company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS No. 109), beginning
with its fiscal year ended September 30, 1993. The adoption of
SFAS No. 109 changed the company's method of accounting for
income taxes to a liability method from the previous deferred
method. The liability method requires that deferred assets and
liabilities be recognized for the expected future tax effects
of the temporary differences between the tax and book bases of
the assets and liabilities. The cumulative effect of this change
in accounting principle decreased net income by $10 million
($.51 per share) in fiscal year 1993.
The provision (credit) for income taxes consisted of the following
components:
(Dollars in millions)
Years ended September 30 1994 1993 1992
--------------------------------------------- ------- ------ -------
Provision (credit) for current income taxes -
Federal $ 12.5 $ 1.1 $ (.2)
State 2.4 1.2 1.3
Non-U.S. 5.7 2.8 4.5
------- ------ -------
Total current 20.6 5.1 5.6
Reversal of valuation allowance (15.7) -- --
Provision for deferred income taxes -- -- 5.0
------- ------ -------
Total provision $ 4.9 $ 5.1 $ 10.6
======= ====== =======
The significant short-term and long-term deferred tax assets and liabilities
after having given effect to SFAS No. 109 were as follows:
(Dollars in millions)
September 30 1994 1993
----------------------------------- -------- --------
Deferred tax assets
Litigation and claims $ 14.6 $ 16.5
Product warranty 9.0 9.4
Marketing programs 7.7 8.3
Postretirement medical benefits 43.1 43.8
Restructuring 12.9 38.8
Loss carryforwards 39.7 25.6
Other 38.2 33.3
Valuation allowance (113.9) (130.0)
-------- --------
Total deferred tax assets $ 51.3 $ 45.7
======== ========
Deferred tax liabilities
Depreciation and amortization $ (14.0) (19.1)
Employee benefits (10.5) (9.9)
Other (13.5) (8.8)
-------- --------
Total deferred tax liabilities (38.0) (37.8)
-------- --------
Net deferred tax assets $ 13.3 $ 7.9
======== ========
The company believes the recorded net deferred assets of $13.3
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million, of which $2.9 million is reflected as a long-term asset,
will be realized either through the allowed carryback of certain
deferred assets or through the reduction of future taxable income.
The change in the valuation allowance from 1993 to 1994 is
primarily due to deductible deferred tax assets which reduced
income tax expense for the current year. As required by SFAS No.
109, a valuation allowance of $113.9 million has been recorded
at September 30, 1994, to reduce the deferred tax assets to their
current net realizable value. Of this valuation allowance, $39.7
million relates to deferred tax assets established for foreign,
federal, and state loss carryforwards.
As of September 30, 1994, certain non-U.S. subsidiaries of the
company had net operating loss carryforwards for income tax
purposes of $47.0 million. Of this amount, $13.7 million will
expire by 1999, with the remaining balance being unlimited. In
addition, the company has $50.8 million of federal net operating
loss carryforward expiring in 2009 as well as $88.1 million of
state net operating loss carryforwards expiring between 1995
and 2009. No benefit for these carryforwards has been
recognized in the financial statements.
Future profitability will allow the company to realize the tax
benefit of the deferred tax assets that cannot be recognized
currently.
The provision (credit) for deferred income taxes reflects the
following timing differences:
(Dollars in millions)
Year ended September 30 1992
--------------------------------------- ------
Environmental contingency accrual $ .8
Difference between book/tax
depreciation and tooling amortization (.4)
Non-deductible reserves and
non-current asset write-downs 3.1
Other-U.S. 1.5
------
Provision for deferred income taxes $ 5.0
======
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The following summarizes the major differences between the actual
provision for income taxes on earnings (loss) and the provision
(credit) based on the statutory United States Federal income tax rate:
% to pretax earnings
Years ended September 30 1994 1993 1992
---------------------------------- ------- ------- -------
At statutory rate 35.0% (34.7)% 34.0%
State income taxes, net of
Federal Tax deduction 3.0 .5 6.9
Tax effect of non-U.S.
subsidiary earnings (loss) taxed
at other than the U.S. rate (6.2) .5 .7
Tax benefit not provided on
foreign operating losses -- 1.7 32.1
Tax effect of goodwill
amortization and write-offs 5.4 7.1 14.1
U.S. tax benefit not realized -- 27.7 --
Reversal of valuation allowance (29.2) -- --
Federal benefit of prior years
state income taxes paid .6 (.1) (4.6)
Other .6 .5 1.6
------- ------- -------
Actual provision 9.2% N.M. 84.8%
======= ======= =======
Domestic and non-U.S. earnings before provision (credit) for income
taxes consisted of the following:
(Dollars in millions)
Years ended September 30 1994 1993 1992
---------------------------------- ------- --------- -------
Earnings (Loss) before provision
for income taxes
and accounting changes
United States $ 33.2 $ (119.1) $ (7.0)
Non-U.S. 20.2 (40.8) 19.5
------- --------- -------
Total $ 53.4 $ (159.9) $ 12.5
======= ========= =======
Due to the integrated nature of the company's operations, any attempt
to interpret the above pretax earnings (loss) as resulting from stand-
alone operations could be misleading.
No U.S. deferred taxes have been provided on $45.4 million of
undistributed non-U.S. subsidiary earnings. The company has no plans
to repatriate these earnings and, as such, they are considered to be
permanently invested. While no detailed calculations have been made
of the potential U.S. income tax liability should such repatriation
occur, the company believes that it would not be material in relation
to the company's consolidated financial position.
In September 1994, the Internal Revenue Service completed its
determination of the company's liability for interest on federal
taxes for the fiscal years 1971 through 1984 currently under the
jurisdiction of the United States Tax Court. As a result of this final
determination, previously recorded interest expense of $5.3 million
(before applicable income taxes) was reversed. The tax amounts for the
Tax Court years 1971 to 1984 were previously finalized.
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Note 19 Business Segments
The company, which operates in a single business segment, is a
manufacturer of boats, marine engines and related products. The
company markets its products primarily through dealers in the
United States, Europe and Canada and through distributors in the
rest of the world.
Information by geographic area follows:
(Dollars in millions)
Years ended September 30 1994 1993 1992
-------------------------- ---------- ---------- ---------
Net sales:
United States $ 805.5 $ 753.4 $ 735.2
Europe 86.7 108.2 154.4
Other 186.2 173.0 175.0
---------- ---------- ----------
Total $ 1,078.4 $ 1,034.6 $ 1,064.6
========== ========== ==========
Sales between geographic
areas--from:
United States $ 145.5 $ 133.4 $ 146.6
Europe 18.2 17.3 19.2
Other 47.6 40.5 38.4
---------- ---------- ----------
Total $ 211.3 $ 191.2 $ 204.2
========== ========== ==========
Total revenue:
United States $ 951.0 $ 886.8 $ 881.8
Europe 104.9 125.5 173.6
Other 233.8 213.5 213.4
Eliminations (211.3) (191.2) (204.2)
---------- ---------- ----------
Total $ 1,078.4 $ 1,034.6 $ 1,064.6
========== ========== ==========
Earnings (Loss)
from operations
United States $ 56.0 $ (92.2) $ 20.9
Europe (6.3) (43.6) 18.7
Other 22.9 11.8 20.8
Corporate expenses (26.6) (28.9) (29.4)
---------- ---------- ----------
Total $ 46.0 $ (152.9) $ 31.0
========== ========== ==========
Total assets at September 30:
United States $ 547.8 $ 537.6 $ 638.4
Europe 76.4 68.5 127.0
Other 135.6 105.4 111.7
Corporate assets 57.3 80.3 120.0
---------- ---------- ----------
Total $ 817.1 $ 791.8 $ 997.1
========== ========== ==========
Sales between geographic areas reflect the basis used by the
company to price intercompany sales. Corporate assets consist of
cash, securities and property. Due to the integrated nature of
the company's operations, any attempt to interpret the above
geographic area data as resulting from unique or stand-alone
types of operations could be misleading.
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Note 20 Quarterly Information (Unaudited)
A summary of pertinent quarterly data for the 1994 and 1993
fiscal years follows:
(Dollars in millions except amounts per share)
Quarter ended Dec. 31 March 31 June 30 Sept.30
------------------------ -------- -------- -------- --------
Fiscal 1994-
Net sales $ 190.8 $ 263.5 $ 318.8 $ 305.3
Gross earnings 36.4 64.6 85.0 66.0
Net earnings (loss) (9.3) 19.1 28.0 10.7
======== ======== ======== ========
Net earnings (loss) per share:
Primary $ (.47) $ .95 $ 1.40 $ .53
======== ======== ======== ========
Fully diluted $ (.47) $ .85 $ 1.23 $ .49
======== ======== ======== ========
Fiscal 1993-
Net sales $ 178.3 $ 274.5 $ 295.4 $ 286.4
Gross earnings 19.8 60.5 65.8 71.9
Net earnings (loss)
before accounting
changes (18.9) 1.0 (104.1) (43.0)
Accounting changes (117.5) -- -- --
-------- -------- -------- --------
Net earnings (loss) $(136.4) $ 1.0 $(104.1) $ (43.0)
======== ======== ======== ========
Net earnings (loss) per share:
Primary
Before accounting
changes $ (.97) $ .05 $ (5.31) $ (2.19)
Accounting changes (6.02) -- -- --
-------- -------- ------- -------
Net primary $ (6.99) $ .05 $ (5.31) $ (2.19)
======== ======== ======== ========
Fully diluted $ (6.99) $ .05 $ (5.31) $ (2.19)
======== ======== ======== ========
The 1993 quarterly financial results have been restated to reflect the
adoption of SFAS No. 106, and SFAS No. 109, which were adopted
effective October 1, 1992.
Earnings per share amounts for each quarter are required to be computed
independently and, therefore, may not equal the amount computed for the
total year.
Due to the seasonal nature of the company's business, it is not
appropriate to compare the results of operations of different fiscal
quarters.
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The price range at which the company's common stock traded on the New
York Stock Exchange and the dividends paid per share during the last
eight fiscal quarters were as follows:
Market Price Dividend
Quarter ended High Low Paid
------------------ ----- ------- -------
September 30, 1994 $ 25.25 $ 19.00 $ .10
June 30, 1994 23.38 17.50 .10
March 31, 1994 25.88 19.00 .10
December 31, 1993 22.75 17.38 .10
September 30, 1993 19.88 16.00 .10
June 30, 1993 20.38 15.25 .10
March 31, 1993 25.25 17.75 .10
December 31, 1992 23.88 15.13 .10
Note 21 Commitments and Contingent Liabilities
As a normal business practice, certain subsidiaries have made
arrangements by which qualified retail dealers may obtain
inventory financing. Under these arrangements, the company will
repurchase its products in the event of repossession upon a
retail dealer's default. These arrangements contain provisions
which limit the company's annual repurchase obligation. The
maximum potential repurchase commitment on September 30, 1994,
was approximately $43 million. The company resells any
repurchased products. Losses incurred under this program have
not been material. The company accrues for losses that are
anticipated in connection with expected repurchases.
Minimum commitments under operating leases having initial or
remaining terms greater than one year are $6.7 million, $5.4
million, $3.9 million, $3.3 million, $1.6 million and $.9
million for the years ending September 30, 1995, 1996, 1997,
1998, 1999 and after 2000, respectively.
The company is engaged in a substantial number of legal
proceedings arising in the ordinary course of business. While
the result of these proceedings cannot be predicted with any
certainty, based upon the information presently available,
management is of the opinion that the final outcome of all
such proceedings should not have a material effect upon the
results of operations of the company.
Under the requirements of Superfund and certain other laws,
the company is potentially liable for the cost of clean-up
at various contaminated sites identified by the USEPA and
other agencies. The company has been notified that it is a
named PRP for study and clean-up costs at a number of sites
including the Fisher-Calo site in Kingsbury, Indiana and a
formerly permitted facility in Greer, South Carolina, which
the company no longer believe to be material, as well as the
sites discussed in more detail below. In some cases there are
several named PRPs and in others there are hundreds. The
company generally participates in the investigation or
clean-up of these sites through cost sharing agreements with
terms that vary from site to site. Costs are typically
allocated based upon the volume and nature of the materials
sent to the site and/or the amount of time the site was owned
or operated. However, under Superfund, and certain other laws,
as a PRP the company can be held jointly and severally liable
for all environmental costs associated with the site. Except
as described below the company is currently not in
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possession of sufficient information to confirm the existence
of liability or make any judgment as to the amount thereof.
The company is also engaged in the following legal proceedings:
A. The company has substantially completed PCB remediation of
the biota and sediment of certain waterways adjacent to the
company's Waukegan, Illinois lakefront facility and in the
groundwater underlying and adjacent to and on certain land of
that facility as agreed to with the USEPA and the Illinois
Environmental Protection Agency ("IEPA") under a 1989 Consent
Decree. The total cost for the remediation was approximately
$24 million, which was charged against prior years earnings
and has been fully reserved or funded through a trust
established to accomplish the remediation. To date the company
has recovered approximately $14 million through settlements with
insurance companies as partial reimbursement for costs of
defense and remediation. The company is currently pursuing
litigation against several additional insurance companies.
B. In 1988 and 1989 the company received from the USEPA notices
of potential liability and information requests regarding
alleged releases of hazardous substances at the Cadillac
Industrial Park in Cadillac, Michigan. The company complied with
the information requests. In 1990 the USEPA issued a unilateral
administrative order requiring the company and eight other
potentially responsible parties to prepare a remedial design
for the site. The company complied with this request. In 1993
the United States Department of Justice notified the company
that it intended to file suit on account of the company's
failure to submit a good faith offer with regard to the remedial
design and submitted a pre-filing settlement demand to the company.
In 1994 the company received a request from the USEPA to submit a
good faith offer to implement the remedial action at the Cadillac
Industrial Park. The company has submitted a response to the USEPA
including the company's offer to implement remedial measures.
In 1991 the company was one of seven defendants named by the
Michigan Department of Natural Resources (MDNR) in a lawsuit
involving the same site. The lawsuit seeks to recover past and
future costs expended by the state in the investigation and clean
up of groundwater contamination at the site. In 1992 the MDNR
amended its complaint seeking to compel all potentially
responsible parties to remediate the site. All PRPs, except the
company, have settled with the MDNR.
C. In 1989 thirty-nine PRPs, including the company, were served
with a notice pursuant to section 4(q) of the Illinois Environmental
Protection Act with respect to alleged contamination of a stream-bed
and lake located in Galesburg, Illinois. The company has cooperated
with the State of Illinois in response to the notice. In 1994 the
company received a request to contribute to the stream-bed
investigation. The company has complied with that request.
D. In 1989 and 1990 the company received notices of potential
liability and information requests from the USEPA regarding
alleged hazardous waste contamination of the Yeoman Creek
Landfill/Edwards Field site in Waukegan, Illinois. In 1991 the
company and four other parties agreed to an administrative order
issued by the USEPA to perform a remedial investigation and
feasibility study at the site and a work plan was subsequently
approved by the USEPA and the Illinois EPA. The parties are
implementing the approved work plan. The company and other
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participating PRPs have filed a cost recovery action against
non-participating PRPs. That suit is pending.
E. In 1990 the company received from the USEPA a notice of
potential liability and information request regarding a possible
contamination of certain land located in Waukegan, Illinois
currently owned by the company on which two former owners
conducted coking operations. The company complied with the
information request. One of the former owners and operators of
the coke plant is performing the remedial investigation and
feasibility study at this site.
The company regularly conducts environmental reviews of its properties
around the world utilizing internal and external resources as
appropriate. As a general rule, the company accrues remediation costs
for continuing operations on an undiscounted basis and does not accrue
for normal operating and maintenance costs for site monitoring and
compliance requirements. However, the company does accrue for
environmental close down costs associated with discontinued operations
or facilities, including the environmental costs of operation and
maintenance until disposition. The company has accrued approximately
$13 million for costs related to remediation at continuing and closed
down operations as well as the proceedings discussed above. The possible
recovery of additional insurance proceeds has not been considered in
estimating contingent environmental liabilities.
While the results of the proceedings discussed above cannot be
predicted with any certainty, based upon the information presently
available, management is of the opinion that the final outcome of
such proceedings, after giving consideration to the amounts accrued,
should not have a material effect on the company's financial position.
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Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations 1994
- --------------------------
Earnings before tax were $53.4 million in 1994 and were benefitted
from $17.3 million of non-operating income including $10.5 million
from a transfer of land rights in Hong Kong, $5.3 million from a
tax interest adjustment on past tax liabilities and a $1.5 million
special refund for environmental expense. Excluding these benefits,
earnings before tax were $36.1 million in 1994. A loss before tax
of $159.9 million was incurred in 1993 prior to the cumulative
effect of changes in accounting principles. This loss included
charges of $144.8 million for restructuring and a $12.5 million
benefit for a special refund for environmental expense. Excluding
the restructuring and the special refund, the 1993 loss before
provision for income taxes and cumulative effect of changes in
accounting principles was $27.6 million. After adjustments for
benefits and charges for both years, earnings before tax have
improved to $36.1 million in 1994 from a loss of $27.6 million
in 1993 or an improvement of $63.7 million.
Sales were $1,078.4 million in 1994 compared to $1,034.6 million
in 1993 which resulted in a $43.8 million or 4.2 percent increase
in sales. Sales in the United States were $805.5 million in 1994
and $753.4 million in 1993 resulting in a $52.1 million or 6.9
percent improvement. U.S. boat sales increases more than offset
a small decline in U.S. marine power sales which was due primarily
to the termination of the Tracker Marine contract and to
production issues that constrained sales of outboard engines.
International sales were $272.9 million in 1994 and $281.2
million in 1993, a decline of $8.3 million or 3.0 percent.
Canadian and European operations had sales declines primarily
as a result of the company's decision announced in 1993 to
terminate its lawn care products distribution business in Canada
and to shift European sales of U.S. built boats to the U.S.
recreational boat group rather than as a part of the European
sales organization. Double digit sales gains were achieved in
our Asian, Australian and Latin American operations. The company
believes that its market share increased in these markets.
Gross earnings improved $34 million to $252 million in 1994
compared to $218 million in 1993 resulting in a margin improvement
of 2.4 percent. This was due to an improvement in core efficiency
and profitability resulting from restructuring.
Selling, general and administrative expenses decreased $20.1
million to $206 million in 1994 from $226.1 million in 1993.
The majority of the decrease can be attributed to planned cost
reductions. Also the decrease was due to an $8.8 million
reduction of bad debt provisions mostly from write-offs in
European operations in 1993, primarily in France.
Earnings from operations, excluding restructuring charges in
1993, improved $54.1 million to $46.0 million in 1994, from a
loss of $8.1 million in 1993. Improved sales, improvements in
core efficiencies, cost reductions and reduction of bad debt
provisions were the primary reasons for this improvement.
Interest expense declined $4.7 million because previously
recorded interest expense of $5.3 million was reversed when
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the Internal Revenue Service completed its determination of
the company's liability for interest on federal taxes for
prior years.
Other income and expense improved $20.7 million to $21.0
million income in 1994 from $.3 million income in 1993. The
improvement came from the transfer of land rights held by
the company in Hong Kong for $10.5 million, net proceeds
related to the company's joint venture, improvement on
translation and favorable gains on disposal of assets.
Provision for income tax was $4.9 million in 1994 and $5.1
million in 1993 and are explained in note 18 to the consolidated
financial statements.
The net income for 1994 was $48.5 million or $2.42 per share
(fully diluted $2.22 per share). The net loss for 1993
including restructuring and the adoption of SFAS 106 and
109 was $282.5 million or $14.42 per share.
Results of Operations 1993
- --------------------------
Worldwide sales declined $30 million dollars to $1,034.6 million
in 1993 from $1,064.6 million in 1992. U.S. sales increased $18.2
million or 2.5 percent in 1993 over 1992. The company's sales
were hurt by continued softness for stern drive boats and
outboard motors, and the expiration of an agreement with Tracker
Marine in June 1993. This was offset by a 55 percent growth in
outboard packaged boat units compared to 1992. International
sales deteriorated $48.1 million or 14.6 percent compared to
1992, almost all attributed to recessionary conditions in Europe
and a stronger U.S. dollar. Sales in our European markets
deteriorated 30 percent compared to 1992.
The company incurred an earnings before tax loss of $159.9
million prior to the cumulative effect of changes in accounting
principles. This included a comprehensive restructuring plan that
was implemented in the third and fourth quarters resulting in
pre-tax charges of $144.8 million dollars.
The restructuring was undertaken to reduce fixed costs, improve
operating efficiencies and provide reasonable profitability at
current market levels. The restructuring plan included $69
million for the write-off of assets and streamlining of
management organizations including severance costs related to
reductions in workforce. The restructuring also included a $75.8
million write-off of goodwill and other intangibles related to
the acquisition of certain boat brands primarily in the
recreational boat group. The write-off of goodwill and
intangibles recognizes the fundamental change in operating
margins and growth characteristics of the recreational boat group
today as compared with the time of purchase. The recreational
boat companies were acquired in 1986 through 1989 in a period
when the marine industry was enjoying a number of years of
continuous unprecedented growth. Acquisition prices reflected
then realistic forecasts assuming a continuation of marine
industry growth and favorable demographics that had been
experienced during the 1980's. Since completion of the purchase
of these companies in 1989, the marine industry significantly
contracted and was now in its fourth year of reduced volumes from
the 1988-1989 peak.
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Gross earnings declined to $218 million in 1993 from $247.6
million in 1992, with a corresponding reduction in gross margin
percent to sales to 21.1 percent from 23.3 percent, respectively.
Selling, general and administrative expenses increased $9.5
million to $226.1 million in 1993 from $216.6 million in 1992,
mostly due to increased provisions for doubtful accounts of $6
million, attributed to Europe.
Excluding the restructuring plan costs, the pre-tax loss prior to
changes in accounting principles was $15.1 million in 1993
compared to earnings in 1992 of $12.5 million. The 1993 results
also included a benefit of $12.5 million from a favorable
insurance settlement related to the Waukegan lakefront
remediation conducted by the company. Earnings deterioration was
attributed to lost gross profit and higher unabsorbed
manufacturing overhead with lower sales, principally because of
Europe, reduced profit margins on packaged outboards because of
strong price competition and from higher selling, general and
administrative costs.
Excluding the $12.5 million environmental settlement,
non-operating expenses was $19.5 million in 1993 and $18.5
million in 1992.
The company elected to adopt SFAS No. 106, "Employers Accounting
for Postretirement" and SFAS No. 109, "Accounting for Income Taxes"
as explained in notes 15 and 18. The company took a noncash
charge of $107.5 million to implement SFAS No. 106 and a $10
million charge to eliminate deferred tax assets from our balance
sheet to implement SFAS No. 109.
Provision for income taxes were $5.1 million in 1993 and $10.6
million in 1992 and are explained in note 18 to the consolidated
financial statements.
The net loss for 1993, including restructuring and the adoption
of SFAS 106 and 109, was $282.5 million or $14.42 per share
compared to $1.9 million earnings or $.10 per share in 1992.
Financial Condition
- -------------------
The company's ratio of current assets to current liabilities was
1.8 at September 30, 1994 as compared with 1.7 at September 30,
1993. Current assets were up $4.5 million. Cash and cash
equivalents decreased $24.1 million due to higher capital
expenditures and increased working capital requirements.
Receivables increased $14.2 million primarily due to timing of
dealer deferred payment programs and a miscellaneous receivable
in 1994 of $5.3 million on a tax interest adjustment. Inventories
increased $9.6 million due primarily to higher manufacturing
activity. Deferred income tax benefits increased $3.7 million
as explained in note 18 to consolidated financial statements.
Product tooling and plant and equipment increased $12.1 million
and $6.8 million, respectively, due to the introduction of new
outboard motor models. The $26.3 million increase in accounts
payable resulted primarily from increased manufacturing activity.
The decrease in accrued liabilities-other resulted from higher
restructuring expenses at September 30, 1993.
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The company has a revolving credit agreement with its banks
that expires October 1, 1995. This agreement provides for
borrowings of up to $175 million. The company's non-U.S.
subsidiaries had additional noncommitted lines of credit of
approximately $15.6 million as of September 30, 1994. The
total available unused lines of credit were $166.1 million
as of September 30, 1994.
Long-term debt decreased to $178.2 million in 1994 from $183.0
million in 1993. Debt as a percent to total capitalization
decreased to 46 percent in 1994 from 55 percent in 1993. Total
shareholders' investment increased $48.1 million.
Liquidity and Capital Resources
- -------------------------------
Due to the seasonal nature of OMC's business, receivables,
inventory and accompanying short-term borrowing to satisfy
working capital requirements 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. Short-term borrowings averaged $7.6 million and $10.0
million in 1994 and 1993, respectively, with month-end peak
borrowings of $40.0 million and $37.7 million in February
1994 and March 1993, respectively.
Cash provided by operations was $57.3 million in 1994 compared
with $39.6 million in 1993 and $91.0 million in 1992.
Expenditures for plant and equipment, and tooling were $68.2
million in 1994, $50.0 million in 1993 and $40.6 million in 1992.
The company believes with the current capital structure and
the use of 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.
Trends and Forward-Looking Factors
- ----------------------------------
In 1994 operating results improved significantly because of
higher sales, improvements in core efficiencies and from other
cost reductions. The company believes that, based on prior
marine industry cycles, the current growth cycle that began in
1994 will continue at least through 1996 although at a somewhat
slower rate if the broader U.S. economy slows. Additional cost
savings originally anticipated for 1995 and 1996 due to
restructuring will largely be deferred or offset by additional
expenses as the company positions itself to maximize its sales
growth in the marine industry's current upturn. Likewise, a
boost in new product development and tooling spending is
anticipated to accelerate the production of a new generation
of marine products and other products.
The company is postured to improve sales and profitability,
however, to the extent that the marine industry growth is less
than anticipated, continued financial improvement may be hindered.
The U.S. Environmental Protection Agency has issued proposed
regulations governing emissions from marine engines. As proposed,
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the rule would phase in over 9 years, beginning in model year
1998 and concluding in model year 2006. Marine engine manufacturers
would be required to reduce hydrocarbon emissions from outboard
motors and personal watercraft, on average, by 8.3 percent per
year beginning with the 1998 model year. The final rule is expected
before November 22, 1995.
The company has announced Project LEAP (Low Emission Advanced
Propulsion), a $100 million project to convert its entire
outboard product line to low emission products within the next
decade. The company believes these technologies, in some
combination will provide reduced emissions, better fuel economy
and improved performance, and will meet the proposed regulation
on or before the required dates for compliance.
These technologies will add cost to the product. However, this
situation is not seen as a major deterrent to sales since value
will be added to the product at the same time and the entire
industry is faced with developing solutions to the same regulatory
requirements. The company does not believe that this situation
will have a material negative impact on future results of operations
or the financial condition of the company.
In 1994, the chief operating officer (COO) and chief financial
officer (CFO) positions were vacated. The company is currently in
the process of filling those positions with an emphasis on the COO
position as this person will most likely succeed Mr. Chapman as
president and chief executive officer. The board has established a
search committee for the sole purpose of accomplishing this task.
The company expects to fill both positions in 1995.
Under the requirements of the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("Superfund") and
certain other laws, the company is potentially liable for the cost
of clean-up at various contaminated sites identified by the United
States Environmental Protection Agency ("USEPA") and other agencies.
The company has been notified that it is a potentially responsible
party ("PRP") for study and clean-up costs at a number of sites. In
some cases there are several named PRPs and in others there are
hundreds. The company generally participates in the investigation
or clean-up of these sites through cost sharing agreements with
terms that vary from site to site. Costs are typically allocated
based upon the volume and nature of the materials sent to the site
and/or the amount of time the site was owned or operated. However,
under Superfund and certain other laws, as a PRP the company can be
held jointly and severally liable for all environmental costs associated
with the site. Although unable to determine its liability for clean-up
and remediation costs in connection with all of these sites, management
believes that appropriate accruals have been recorded. While the
results of the proceedings discussed above cannot be predicted with
any certainty, based upon the information presently available,
management is of the opinion that the final outcome of such
proceedings, in the aggregate, after giving consideration to the
amounts accrued, should not have a material impact on the company's
financial position. For further information see note 21 to the
consolidated financial statements.
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<PAGE> 69
Report of Independent Public Accountants
To the Stockholders of Outboard Marine Corporation:
We have audited the accompanying statements of consolidated
financial position of Outboard Marine Corporation (a Delaware
corporation) and subsidiaries as of September 30, 1994 and 1993,
and the related statements of consolidated earnings, cash flows
and changes in consolidated shareholders' investment for each of
the three years in the period ended September 30, 1994. 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 Outboard Marine Corporation and subsidiaries as of September
30, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended in
September 30, 1994, in conformity with generally accepted
accounting principles.
As discussed in notes 15 and 18 to consolidated financial
statements, effective October 1, 1992, the company changed its
methods of accounting for postretirement benefits other than
pensions and income taxes.
ARTHUR ANDERSEN LLP
-------------------
Milwaukee, Wisconsin Arthur Andersen LLP
October 28, 1994
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<PAGE> 70
EXHIBIT 21
Domestic Subsidiaries
-----------------------
(As of December 15, 1994)
Jurisdiction of
Subsidiary and Address Incorporation Ownership
- ---------------------- -------------- ---------
DNZI, Inc. Florida 100%
(Inactive)
OMC Aluminum Boat Group, Inc. Delaware 100%
(formerly OMCGB, Inc.)
Syracuse Transportation, Inc. Indiana 100%
OMC Dealer Development Inc. Delaware 100%
OMC Development Inc. Delaware 100%
(Inactive)
OMC Distributors, Inc.-Fort Wayne Delaware 100%
4515 Merchant Road
P. O. Box 8328
Fort Wayne, IN 46898
OMC Distributors, Inc.-Minneapolis Delaware 100%
3070 Lunar Lane
P. O. Box 21038
Eagen, MN 55121
OMC Distributors, Inc.-San Francisco California 100%
OMC Europe, Inc. Delaware 100%
(Inactive)
OMC & Co. Delaware 100%
(Inactive)
OMCEMA, Inc. Delaware 100%
100 Sea-Horse Drive
Waukegan, IL 60085
OMC Fishing Boat Group, Inc. Delaware 100%
(formerly Stratos Boats, Inc.)
931 Industrial Road
Old Hickory, TN 37138
OMC Holdings, Inc. Delaware 100%
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<PAGE> 71
Jurisdiction of
Subsidiary and Address Incorporation Ownership
- ---------------------- -------------- ---------
OMC Latin America/Caribbean, Inc. Delaware 100%
403 Sawgrass Corporate Pkwy.
Sunrise, FL 33325
OMC Partners, Inc.
(Inactive) Delaware 100%
OMC Venture, Inc. (formerly Lawn-Boy Delaware 100%
Distributors, Inc.-New England)
(Inactive)
OMC Recreational Boat Group, Inc. Delaware 100%
100 Sea-Horse Drive
Waukegan, IL 60085
Recreational Boat Group Limited 1
Partnership Delaware 62.2%
Outboard Marine Acceptance Corporation Delaware 100%
Outboard Marine Holdings, Inc. Delaware 100%
(Inactive)
Outboard Marine Venture Capital Delaware 100%
Corporation
100 Sea-Horse Drive
Waukegan, IL 60085
Phoenix Marine Inc. Arizona 100%
2
Skipper Bud's of Illinois, Inc. Illinois 75%
- -----------------------------------------------------------------
1 Outboard Marine Corporation owns the other 37.8%
2 Skipper Bud's of Illinois, Inc. is owned 75% by OMC and 25%
by Skipper Bud's of Wisconsin, Inc., a company unaffiliated
with OMC.
-71-
<PAGE> 72
International Subsidiaries
--------------------------
Jurisdiction of
Subsidiary and Address Incorporation Ownership
- ---------------------- -------------- ---------
Outboard Marine Corporation Hong Kong 100%
Asia Limited
35.47 Tsing Yi Road
Tsing Yi Island, N.T.
Hong Kong
Outboard Marine Corporation Australia 100%
(Australia), PTY, Ltd.
84 Canterbury Road
Bankstown 2200
New South Wales, Australia
OMC Europe, V.O.F. Belgium 100%
Pathoekeweg, 120
8000 Brugge 1
Belgium
OMC Holdings France, S.N.C. France 100%
14, Rue Bois du Pont
Z.A. Les Bethunes
F. 95310 St. Quen D'Aumone
OMC Power Boats S.A.R.L. France France 100%
14, Rue Bois du Pont
Z.A. Les Bethunes
F. 95310 St. Quen D'Aumone
OMC France, S.N.C. France 100%
14, Rue Bois du Pont
Z.A. Les Bethunes
F. 95310 St. Quen D'Aumone
Kelt, S.A France 100%
Outboard Marine International S.A. Switzerland 100%
(Inactive)
OMC (Deutschland) G.M.B.H. Germany 100%
Neckavorlandstrabe 97
Postfach 10 23 40
D. 6800 Mannheim 1
West Germany
Outboard Marine Foreign Inter- Hong Kong 100%
national Sales Corporation
(Inactive)
Outboard Marine Nederland B.V. Netherlands 100%
P. O. Box 237
NL. 1380 AE WEESP
Nederlands
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<PAGE> 73
Jurisdiction of
Subsidiary and Address Incorporation Ownership
- ---------------------- -------------- ---------
OMC Norge AS Norway 100%
Bjornstjerne Bjornsonsgt. 92
N. 3000 Drammen
Norway
OMC Outboard Marine (Switzerland) AG Switzerland 100%
SCHWARZACKERSTRASSE 11
CH - 8304 WALLISELLEN
Switzerland
OMC Sverige Aktiebolag Sweden 100%
Krossgatan 26-28
S-16226 Vallingby
Sweden
Outboard Marine Corporation Ontario 100%
of Canada, Ltd.
910 Monoghan Road
Peterborough
Ontario, Canada K97 7B6
Altra Marine Products, Inc. Quebec 100%
65 St. Henri Street
Princeville, Quebec
Canada G0P 1E0
Outboard Marine Danmark A/S Denmark 100%
RINGAGER 4A, 2.50l
2605 Brandby
Danmark
Outboard Marine Foreign Sales U.S. Virgin Islands 100%
Corporation
P. O. Box 12270
18-13 Smith Bay
St. Thomas, U.S. Virgin Islands 00801
Outboard Marine de Mexico, Mexico 100%
S.A. de C.V.
Parque Industrial
Antonio J. Bermudez
Cuidad Juarez,
Chihuahua, Mexico
Outboard Marine Motors Amazonia LTDA Brazil 100%
RUA 44, #1025 Terreo
Conjunto 31 De Mareo
Bairro. JAPIIM
Mauzus, Amazonia, Brazil
Outboard Marine (UK) Ltd. United Kingdom 100%
8 Harrowden Road
Blackmills,
Northhampton
NN4 OPD
United Kingdom
-73-
<PAGE> 74
Jurisdiction of
Subsidiary and Address Incorporation Ownership
- ---------------------- -------------- ---------
OMC Finland Oy Finland 100%
Nahkahousuntie 4
S.F. 00210 Helsinki 21
Finland
Ryds Batindustri Aktiebolag Sweden 100%
Box 60
S-360 10 RYD
Sweden
-74-
<PAGE> 75
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports incorporated by reference and
included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 (File Nos. 2-52729, 2-79743,
33-19141, 33-37557, 33-55751, 33-55883, 33-55889, 33-56031 and
33-56033) and Form S-3 (File Nos. 33-12759 and 33-47354).
BY: ARTHUR ANDERSEN LLP
-------------------
Arthur Andersen LLP
Milwaukee, Wisconsin
December 19, 1994
-75-
