Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1999.
or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission file number 1-2883
OUTBOARD MARINE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-1589715
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100 Sea Horse Drive
Waukegan, Illinois 60085
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 847-689-6200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Number of shares of Common Stock of $0.01 par value outstanding at June 30, 1999
was 20,420,000 shares.
<PAGE>
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART 1, ITEM 1
FINANCIAL INFORMATION
FINANCIAL STATEMENTS
June 30, 1999
Financial statements required by this form:
Page(s)
-------
Condensed Statements of Consolidated Operations and Comprehensive
Income 3
Condensed Statements of Consolidated Financial Position 4
Condensed Statements of Consolidated Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-11
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
------- -------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars and Shares in Millions Except per Share Data)
<S> <C> <C> <C> <C>
Net sales $315.6 $282.4 $570.8 $544.6
Cost of goods sold 245.4 214.8 447.3 417.7
------ ------ ------ ------
Gross earnings 70.2 67.6 123.5 126.9
Selling, general and administrative expense 43.3 65.5 100.4 127.9
Restructuring Charge (14.0) - (14.0) -
------ ------ ------ ------
Earnings (loss) from operations 40.9 2.1 37.1 (1.0)
Non-operating expense (income):
Interest expense 7.2 7.5 14.5 13.3
Other, net (1.2) (3.0) (1.5) (4.6)
------ ------ ------ ------
6.0 4.5 13.0 8.7
----- ---- ----- ----
Earnings (loss) before provision for income taxes 34.9 (2.4) 24.1 (9.7)
Provision for income taxes 1.1 1.4 2.2 2.4
----- ----- ----- -----
Net earnings (loss) $ 33.8 $ (3.8) $21.9 $(12.1)
====== ====== ===== ======
Other comprehensive income(loss)
Foreign currency translation
adjustments 0.7 (2.0) (0.9) (2.8)
Minimum pension liability 15.5 0.0 15.5 0.0
---- --- ---- ---
Other comprehensive income (loss) 16.2 (2.0) 14.6 (2.8)
---- ----- ---- -----
Comprehensive income (loss) $50.0 $(5.8) $36.5 $(14.9)
===== ====== ===== =======
Net earnings (loss) per share of common stock:
Basic $1.66 $(0.19) $1.07 $(0.59)
Diluted $1.64 $(0.19) $1.06 $(0.59)
Average shares of common stock
Outstanding, basic 20.4 20.4 20.4 20.4
Outstanding, diluted 20.6 20.4 20.6 20.4
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
<TABLE>
Unaudited)
----------
June 30, December 31,
(Dollars in Millions) 1999 1998
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 30.7 $ 13.6
Receivables, net 126.9 130.5
Inventories, net:
Finished products 47.7 83.5
Raw material, work in process
and service parts 123.6 113.7
------- -------
Total inventories, net 171.3 197.2
Other current assets 23.7 23.8
------- -------
Total current assets 352.6 365.1
Restricted cash 30.0 29.3
Property, plant and equipment at cost 232.4 220.8
Less accumulated depreciation (33.7) (23.7)
------- -------
Property, plant and equipment, net 198.7 197.1
Product tooling, net 30.1 30.0
Goodwill, net 114.0 115.5
Trademarks, patents and other intangibles, net 81.2 80.9
Other assets 102.7 98.3
------- -------
Total assets $ 909.3 $ 916.2
======= =======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Loan payable $ 29.0 $ 32.4
Accounts payable 83.3 90.0
Accrued and other 216.1 185.1
Accrued income taxes 6.7 6.5
Current maturities of long-term debt 7.2 11.2
------- -------
Total current liabilities 342.3 325.2
Long-term debt 241.2 247.0
Postretirement benefits other than pensions 99.9 124.4
Other non-current liabilities 132.2 162.4
Shareholders' investment:
Common stock and capital surplus 277.1 277.1
Accumulated deficit-employed in the business (175.7) (197.6)
Accumulated other comprehensive loss (7.7) (22.3)
------- -------
Total shareholders' investment 93.7 57.2
------- -------
Total liabilities and shareholders' investment $ 909.3 $ 916.2
======= =======
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
Six Months Ended
June 30
(Dollars in Millions) 1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $21.9 $(12.1)
Adjustments to reconcile net earnings (loss) to
net cash provided by operations:
Depreciation and amortization 24.6 25.6
Curtailment gain (7.1) -
Restructuring Charge (14.0) -
Changes in current accounts excluding the effects of
noncash transactions:
Increase in receivables, net (0.3) (22.2)
Decrease in inventories 22.2 22.1
Decrease in other current assets 0.1 14.4
Increase in accounts payable and accrued
liabilities 5.3 23.0
Other, net (0.3) (1.3)
----- -----
Net cash provided by operating activities 52.4 49.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for plant and equipment and tooling (22.1) (17.4)
Proceeds from sale of plant and equipment 1.3 6.5
Other, net - (0.1)
----- -----
Net cash used for investing activities (20.8) (11.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term debt (3.4) (145.7)
(Payments) proceeds of long-term debt,
including current maturities (10.9) 147.7
Change in restricted cash (0.7) (28.6)
Other, net (0.2) 0.1
----- -----
Net cash used for financing activities (15.2) (26.5)
Exchange rate effect on cash 0.7 (0.5)
----- -----
Net increase in cash and cash equivalents 17.1 11.5
Cash and cash equivalents at beginning of period 13.6 24.1
----- -----
Cash and cash equivalents at end of period $ 30.7 $ 35.6
===== =====
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 15.9 $14.6
===== =====
Income taxes paid $ 1.9 $ 3.2
===== =====
The accompanying notes are an integral part of these statements.
</TABLE>
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
present information in accordance with generally accepted accounting principles
for interim financial information and have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Accordingly, they do
not include all information or footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the information furnished reflects all adjustments necessary for a
fair statement of the results of the interim periods and all such adjustments,
except for the curtailment gain, are of a normal recurring nature. These
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
transition period from October 1, 1998 to December 31, 1998. The 1999 interim
results are not necessarily indicative of the results which may be expected for
the remainder of the year.
Change in fiscal year. Effective October 1, 1998, the Company's fiscal year-end
changed from September 30 to December 31.
2. Short-Term Borrowings
The Company entered into an Amended and Restated Loan and Security
Agreement, effective as of January 6, 1998 (as amended, the "Credit
Agreement"), with a syndicate of lenders for which Bank of America, N.A. is
administrative and collateral agent (the "Agent"). The Credit Agreement
provides a revolving credit facility (the "Revolving Credit Facility") of up to
$150.0 million, subject to borrowing base limitations, to finance working
capital with a $50.0 million sublimit for letters of credit. The Revolving
Credit Facility expires on December 31, 2000. The Revolving Credit Facility is
secured by a first and only security interest in all of the Company's existing
and hereafter acquired accounts receivable, inventory, chattel paper,
documents, instruments, deposit accounts, contract rights, patents, trademarks
and general intangibles and is guaranteed by the Company's four principal
domestic operating subsidiaries. In order to meet the Company's capital
requirements, the Company entered into a Sixth Amendment to the Amended and
Restated Loan and Security Agreement effective July 30, 1999, which among other
things (i) extended the termination of the Revolving Credit Facility from
December 31, 2000 to December 31, 2001; (ii) included work-in-process inventory
in the borrowing base calculation until September 30, 1999; and (iii) extended
the duration of the borrowing base capacity for intellectual property through
October 31, 1999. On June 30, 1999, the Company had outstanding borrowings
under the Credit Agreement of $29.0 million, and had $47.3 million of letter of
credit obligations outstanding under the Credit Agreement. At June 30, 1999,
the Company was in compliance with the covenants under the Revolving Credit
Facility.
3. Contingent Liabilities
As a normal business practice, the Company has made arrangements with
financial institutions 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 repurchase obligation to
approximately $32.5 million per model year for a period not to exceed either 18
or 30 months from the date of invoice. This obligation automatically reduces
over the 18 month period. The Company resells any repurchased products. Losses
incurred under this program have not been material. The Company accrues for
losses which are anticipated in connection with expected repurchases. For the
six month period ended June 30, 1999 and for the fiscal year 1998, the Company
repurchased approximately $2.5 million and $4.1 million of products,
respectively, all of which were resold at a discounted price. The Company does
not expect these repurchases to materially affect its results of operations.
6
<PAGE>
The Company is engaged in a substantial number of legal proceedings
arising in the ordinary course of business. While the result of these
proceedings, as well as those discussed below, 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 Company's Condensed Statement of Consolidated Financial
Position or the Condensed Statement of Consolidated Operations and Comprehensive
Income.
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 United States Environmental Protection Agency and other
agencies. The Company has been notified that it is named as a potentially
responsible party ("PRP") at various sites for study and clean-up costs. 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 which vary from site to site. Costs are
typically allocated based upon the volume and nature of the materials sent to
the site. 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 a site.
Once the Company becomes aware of its potential liability at a
particular site, it uses its experience to determine if it is probable that a
liability has been incurred and whether or not the amount of the loss can be
reasonably estimated. Once the Company has sufficient information necessary to
support a reasonable estimate or range of loss for a particular site, an amount
is added to the Company's environmental contingent liability accrual. The amount
added to the accrual for the particular site is determined by analyzing the site
as a whole and reviewing the probable outcome for the remediation of the site.
This is not necessarily the minimum or maximum liability at the site but, based
upon the Company's experience, most accurately reflects the Company's liability
based on the information currently available. The Company takes into account the
number of other participants involved in the site, their experience in the
remediation of sites and the Company's knowledge of their ability to pay.
The Company accrues remediation costs for continuing operations on an
undiscounted basis and accrues for normal operating and maintenance costs for
site monitoring and compliance requirements. The Company also accrues for
environmental close-down costs associated with discontinued operations or
facilities, including the environmental costs of operation and maintenance until
disposition. At June 30, 1999, the Company has accrued approximately $25.0
million for costs related to remediation at contaminated sites and operation and
maintenance for site monitoring and compliance requirements. The possible
recovery of insurance proceeds has not been considered in estimating contingent
environmental liabilities.
Each site, whether or not remediation studies have commenced, is
reviewed on a quarterly basis and the environmental contingent liability accrual
is adjusted accordingly. Because the sites are reviewed and the accrual adjusted
quarterly, the Company is confident that the accrual accurately reflects the
Company's liability based upon the information available at the time.
As a result of correcting certain performance issues with its new
FICHT fuel injection engine technology, the Company increased its warranty
reserve by $7.0 million in fiscal year 1998 and recorded costs for upgrade kits
of $4.3 million and $1.2 million for the quarters ended December 31, 1998 and
March 31, 1999, respectively. The Company believes these upgrade kits will
significantly improve the overall performance of 1998 and 1999 model year FICHT
fuel injected engines. To demonstrate the Company's confidence in the FICHT
fuel injected engines as improved by the upgrade kits, the Company has provided
a limited warranty extension on certain components from two to three years on
all 1999 model FICHT fuel injected engines purchased between January 1, 1999
and March 31, 1999 and also on those purchased by June 30, 1999 and registered
by July 15, 1999.
7
<PAGE>
On May 13, 1999, the Company announced an all-new line of Evinrude
two-stroke direct injection outboards with FICHT Ram Injection technology for
model year 2000. These engines reflect certain further design refinements and
improved methods of production.
In March 1998, the Company received correspondence from Orbital Engine
Corporation Limited ("Orbital") alleging that the Company's FICHT fuel-injected
150-horsepower engines infringed two Australian Orbital patents, which
correspond to three U.S. patents and to a number of foreign patents. In May
1999, the Company entered into a non-assert agreement with Orbital relative to
engines sold by OMC and its licensees which use Ficht fuel injection. Under the
terms of the agreement, the Company will make certain payments to Orbital for
the use of the patents and all foreign counterparts, as well as certain other
patents, identified in the agreement. Under the terms of the agreement, the
Company is not precluded from developing Ficht fuel injection for any
application.
4. Restructuring Charges
During the fiscal quarter ended September 30, 1998, the Company
finalized a restructuring plan for the closure/consolidation of its Milwaukee
and Waukegan engine facilities. The Company announced the closure of the
Milwaukee and Waukegan facilities on September 24, 1998. The Company recorded a
$98.5 million restructuring charge which includes: 1) costs to recognize
severance and benefits for approximately 950 employees to be terminated ($14.0
million), 2) costs to clean and close the facilities ($6.5 million), 3) costs
to ready machinery and equipment for disposal and costs to dispose of machinery
and equipment at the facilities ($3.9 million), 4) costs to write-down certain
replacement parts for machinery and equipment at the facilities to net
realizable value ($2.0 million) and 5) curtailment losses associated with the
acceleration of pension ($42.2 million) and postretirement medical benefits
($29.9 million) for employees at the two facilities. The Company's plan
includes outsourcing substantially all of its sub-assembly production currently
performed in its Milwaukee and Waukegan facilities to third-party vendors and
transferring the balance of production to other facilities of the Company. As
of June 30, 1999, the Company has identified suppliers and begun the transfer
of manufacturing responsibilities for the outsourcing of crankshafts,
propellers, drive shafts, propeller shafts, and numerous investment cast and
service parts to third-party suppliers. The Company anticipates substantial
completion of such plan by the end of year 2000. As of June 30, 1999, the
Company has incurred approximately $0.1 million of costs against the
restructuring accrual established in the prior fiscal year.
In April and May 1999, the Company completed its negotiations of the
closing agreements with the unions representing the Milwaukee and Waukegan
workers, respectively. These negotiations resulted in changes to the
post-retirement medical and pension plans for union employees. The changes
required an adjustment in the previous estimate of the curtailment loss for the
pension and postretirement medical benefits. Specifically, the curtailment loss
related to the postretirement medical benefit obligation was decreased by $19
million and the curtailment loss related to the pension benefit obligation was
increased by $5 million, resulting in a net reduction of the previous
curtailment loss from $72.1 million to $58.1 million. This adjustment has been
reflected in the Condensed Statement of Consolidated Operations and
Comprehensive Income as a $14 million reduction in the previously recorded
Restructuring Charge. The adjusted curtailment loss of $58.1 million represents
the
8
<PAGE>
estimate of the increase in pension and postretirement medical benefit
obligations due to the closure of the Milwaukee and Waukegan facilities. The
cash payment for the pension benefits will be made from the assets of the
pension fund while the payment for the postretirement medical benefits will be
made from the general assets of the Company.
5. Pension and Postretirement Medical Plans
In May 1999, the Company made the decision to change the pension and
post-retirement medical plans for current active employees and current retirees
of the Company. The pension plan changes include merging the Company's union
and non-union pension plans into one consolidated pension plan. In addition,
the Company will freeze the merged pension plan for non-union employees
effective September 30, 1999. Finally, the postretirement medical plan will be
changed to provide new employee contribution rates, changes in benefit levels,
different service providers and the elimination of post-65 retirement medical
coverage for employees who retire on or after January 1, 2000. These changes in
both the pension and postretirement medical plans resulted in a curtailment
gain of $7.1 million which has been reflected in the Company's Condensed
Statement of Consolidated Operations and Comprehensive Income as a reduction of
selling, general and administrative expense.
6. Segment Data
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "Other" column includes primarily
corporate staffing expense and amortization expense on the Company's intangible
assets. In 1999, the "Other" column also includes the curtailment gain as
described in Notes 4 and 5.
Marine
Engines Boats Other Total
------- ----- ----- -----
(Dollars in millions)
Three Months Ended June 30, 1999
Revenues $191.7 $123.9 $ - $315.6
Intersegment revenues 21.5 - - 21.5
Earnings from operations 14.4 3.9 22.6 40.9
Three Months Ended June 30, 1998
Revenues $180.4 $101.9 $ 0.1 $282.4
Intersegment revenues 25.2 0.4 - 25.6
Earnings (loss) from operations 19.7 (3.7) (13.9) 2.1
Six Months Ended June 30, 1999
Revenues $331.9 $238.9 $ - $570.8
Intersegment revenues 43.1 0.2 - 43.3
Earnings from operations 15.8 5.1 16.2 37.1
Six Months Ended June 30, 1998
Revenues $333.1 $211.5 $ - $544.6
Intersegment revenues 53.3 - - 53.3
Earnings (loss) from operations 37.8 (8.8) (30.0) (1.0)
9
<PAGE>
A reconciliation of earnings (loss) from operations for combined
reportable segments to consolidated earnings (loss) before provision for income
taxes is as follows:
Three Months Ended June 30
1999 1998
---- ----
(Dollars in millions)
Earnings from operations for
reportable segments $40.9 $ 2.1
Interest expense 7.2 7.5
Other expense (income), net (1.2) (3.0)
------ -----
Earnings (Loss) before provision for
Income taxes $ 34.9 $ (2.4)
====== ======
Six Months Ended June 30
1999 1998
---- ----
(Dollars in millions)
Earnings (Loss) from operations for
reportable segments $37.1 $ (1.0)
Interest expense 14.5 13.3
Other expense (income), net (1.5) (4.6)
------ -----
Earnings (Loss) before provision for
Income taxes $ 24.1 $ (9.7)
====== ======
7. Subsequent Event
In order to meet the Company's capital requirements, the Company
entered into a Sixth Amendment to the Amended and Restated Loan and Security
Agreement effective July 30, 1999, which among other things (i) extended the
termination of the Revolving Credit Facility from December 31, 2000 to December
31, 2001; (ii) included work-in-process inventory in the borrowing base
calculation until September 30, 1999; and (iii) extended the duration of the
borrowing base capacity for intellectual property through October 31, 1999.
8. Subsidiary Guarantor Information
The Company issued $160,000,000 10 3/4% Senior Notes due 2008
("Notes") on May 27, 1998. The Company's payment obligations under the Notes
are guaranteed by certain of the Company's wholly-owned subsidiaries
("Guarantor Subsidiaries"). Such guarantees are full, unconditional, unsecured
and unsubordinated on a joint and several basis by each of the Guarantor
Subsidiaries. The Credit Agreement and the Indenture governing the Notes
contain certain covenants which, among other things, restrict the ability of
the Company and certain of its subsidiaries to incur additional indebtedness;
pay dividends or make distributions in respect to their capital stock; enter
into certain transactions with shareholders and affiliates; make certain
investments and other restricted payments; create liens; enter into certain
sale and leaseback transactions and sell assets. These covenants are, however,
subject to a number of exceptions and qualifications. Separate financial
statements of the Guarantor Subsidiaries are not presented because management
of the Company has determined that they are not material to investors.
The following condensed consolidating financial data illustrates the
composition of the Company ("Parent Company"), the Guarantor Subsidiaries and
the Company's non-guarantor subsidiaries ("Other Subsidiaries"). Investments in
subsidiaries are accounted for by the Company under the equity method of
accounting for purposes of the supplemental consolidating presentation.
Earnings of
10
<PAGE>
subsidiaries are, therefore, reflected in the Company's investment accounts
and earnings. The Company has not allocated goodwill to the Guarantor
Subsidiaries or the other subsidiaries in association with the acquisition by
and merger with Greenmarine Acquisition Corp. ("Greenmarine").
11
<PAGE>
Outboard Marine Corporation
Condensed Statements of Consolidating Financial Position
June 30, 1999
(Unaudited)
<TABLE>
Parent Guarantor Other Consolidated
(Dollars in Millions) Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
ASSETS
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 12.2 $ 0.3 $ 18.2 $ 0.0 $ 30.7
Receivables , net 58.6 26.3 42.0 0.0 126.9
Intercompany receivables (payables) (22.4) (1.2) 23.6 0.0 0.0
Inventories, net 97.7 40.3 35.9 (2.6) 171.3
Other current assets 15.1 2.1 6.5 0.0 23.7
----- ----- ----- ----- -----
Total current assets 161.2 67.8 126.2 (2.6) 352.6
Restricted cash 30.0 0.0 0.0 0.0 30.0
Property, plant and equipment, net 147.5 32.9 18.4 (0.1) 198.7
Product tooling, net 25.9 3.9 0.3 0.0 30.1
Goodwill and other intangibles, net 189.6 0.0 5.6 0.0 195.2
Other assets 95.6 2.3 4.8 0.0 102.7
Intercompany notes, net (105.1) 0.0 105.1 0.0 0.0
Investment in subsidiaries 277.9 0.0 0.0 (277.9) 0.0
----- ----- ----- ----- -----
Total Assets $ 822.6 $ 106.9 $ 260.4 $ (280.6) $ 909.3
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Loan payable $ 29.0 $ 0.0 $ 0.0 $ 0.0 $ 29.0
Accounts payable 63.0 14.1 6.2 0.0 83.3
Accrued and other 171.2 30.5 22.3 (1.2) 222.8
Current maturities of long-term debt 6.9 0.3 0.0 0.0 7.2
----- ----- ----- ----- -----
Total Current Liabilities 270.1 44.9 28.5 (1.2) 342.3
Intercompany accounts, net 0.0 0.0 0.0 0.0 0.0
Long-term debt 239.1 2.1 0.0 0.0 241.2
Other non-current liabilities 218.2 7.8 6.1 0.0 232.1
Shareholders' investment 95.2 52.1 225.8 (279.4) 93.7
----- ----- ----- ----- -----
Total liabilities and
shareholders' investment $ 822.6 $ 106.9 $ 260.4 $ (280.6) $ 909.3
===== ===== ===== ===== =====
</TABLE>
12
<PAGE>
Outboard Marine Corporation
Condensed Statements of Consolidating Financial Position
December 31, 1998
(Unaudited)
<TABLE>
Parent Guarantor Other Consolidated
(Dollars in Millions) Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
ASSETS
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 2.2 $ 0.1 $ 11.3 $ 0.0 $ 13.6
Receivables , net 71.8 23.3 35.4 0.0 130.5
Intercompany receivables (payables) (93.5) (9.7) 103.2 0.0 0.0
Inventories, net 103.4 47.8 47.8 (1.8) 197.2
Other current assets 14.0 3.2 6.6 0.0 23.8
----- ----- ----- ----- -----
Total current assets 97.9 64.7 204.3 (1.8) 365.1
Restricted cash 29.3 0.0 0.0 0.0 29.3
Property, plant and equipment, net 156.9 23.9 16.5 (0.2) 197.1
Product tooling, net 26.8 2.9 0.3 0.0 30.0
Goodwill and other intangibles, net 189.4 0.0 7.0 0.0 196.4
Other assets 91.3 2.3 4.7 0.0 98.3
Intercompany notes, net (97.4) 0.0 97.4 0.0 0.0
Investment in subsidiaries 339.3 0.0 0.0 (339.3) 0.0
----- ----- ----- ----- -----
Total Assets $ 833.5 $ 93.8 $ 330.2 $ (341.3) $ 916.2
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Loan payable $ 32.4 $ 0.0 $ 0.0 $ 0.0 $ 32.4
Accounts payable 68.1 12.8 9.1 0.0 90.0
Accrued and other 143.0 30.0 19.8 (1.2) 191.6
Current maturities of long-term debt 11.2 0.0 0.0 0.0 11.2
----- ----- ----- ----- -----
Total Current Liabilities 254.7 42.8 28.9 (1.2) 325.2
Intercompany accounts, net 0.0 0.0 0.0 0.0 0.0
Long-term debt 247.0 0.0 0.0 0.0 247.0
Other non-current liabilities 273.8 7.9 5.1 0.0 286.8
Shareholders' investment 58.0 43.1 296.2 (340.1) 57.2
----- ----- ----- ----- -----
Total liabilities and
shareholders' investment $ 833.5 $ 93.8 $ 330.2 $ (341.3) $ 916.2
===== ===== ===== ===== =====
</TABLE>
13
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
Three Months Ended June 30, 1999
(Unaudited)
<TABLE>
Parent Guarantor Other Consolidated
(Dollars in Millions) Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 186.3 $ 119.9 $ 72.1 $ (62.7) $ 315.6
Cost of goods sold 143.6 104.1 60.3 (62.6) 245.4
----- ----- ----- ----- -----
Gross Earnings 42.7 15.8 11.8 (0.1) 70.2
Selling, general and administrative
expense 23.1 12.6 7.6 0.0 43.3
Restructuring Charge (14.0) 0.0 0.0 0.0 (14.0)
----- ----- ----- ----- -----
Earnings (loss) from operations 33.6 3.2 4.2 (0.1) 40.9
Non-operating expense (income) 8.9 0.0 (2.9) 0.0 6.0
Equity earnings (loss) - subsidiaries 9.2 0.0 0.0 (9.2) 0.0
----- ----- ----- ----- -----
Earnings (loss) before provision for
income taxes 33.9 3.2 7.1 (9.3) 34.9
Provision for income taxes 0.0 0.0 1.1 0.0 1.1
----- ----- ----- ----- -----
Net earnings (loss) $ 33.9 $ 3.2 $ 6.0 $ (9.3) $ 33.8
===== ===== ===== ===== =====
Other comprehensive income (expense)
Foreign currency translation
adjustment (0.4) 0.0 1.1 0.0 0.7
Minimum pension liability 15.5 0.0 0.0 0.0 15.5
Other comprehensive income (loss) 15.1 0.0 1.1 0.0 16.2
----- ----- ----- ----- -----
Comprehensive income (loss) 49.0 3.2 7.1 (9.3) 50.0
===== ===== ===== ===== =====
</TABLE>
14
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
Three Months Ended June 30, 1998
(Unaudited)
<TABLE>
Parent Guarantor Other Consolidated
(Dollars in Millions) Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 181.2 $ 100.5 $ 76.6 $ (75.9) $ 282.4
Cost of goods sold 138.7 92.3 61.7 (77.9) 214.8
----- ----- ----- ----- -----
Gross Earnings 42.5 8.2 14.9 2.0 67.6
Selling, general and administrative
expense 44.4 12.4 8.7 0.0 65.5
----- ----- ----- ----- -----
Earnings (loss) from operations (1.9) (4.2) 6.2 2.0 2.1
Non-operating expense (income) 3.1 0.4 1.0 0.0 4.5
Equity earnings (loss) - subsidiaries (0.1) 0.0 0.0 0.1 0.0
----- ----- ----- ----- -----
Earnings (loss) before provision for
income taxes (5.1) (4.6) 5.2 2.1 (2.4)
Provision for income taxes 0.7 0.0 0.7 0.0 1.4
----- ----- ----- ----- -----
Net earnings (loss) $ (5.8) $ (4.6) $ 4.5 $ 2.1 $ (3.8)
===== ===== ===== ===== =====
Other comprehensive income (expense)
Foreign currency translation
adjustment 2.3 0.0 (4.3) 0.0 (2.0)
Minimum pension liability 0.0 0.0 0.0 0.0 0.0
Other comprehensive income (loss) 2.3 0.0 (4.3) 0.0 (2.0)
----- ----- ----- ----- -----
Comprehensive income (loss) (3.5) (4.6) 0.2 2.1 (5.8)
===== ===== ===== ===== =====
</TABLE>
15
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
Six Months Ended June 30, 1999
(Unaudited)
<TABLE>
Parent Guarantor Other Consolidated
(Dollars in Millions) Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 328.0 $ 236.1 $ 140.7 $ (134.0) $ 570.8
Cost of goods sold 257.5 205.3 117.8 (133.3) 447.3
----- ----- ----- ----- -----
Gross Earnings 70.5 30.8 22.9 (0.7) 123.5
Selling, general and administrative
expense 59.4 25.7 15.3 0.0 100.4
Restructuring Charge (14.0) 0.0 0.0 0.0 (14.0)
----- ----- ----- ----- -----
Earnings (loss) from operations 25.1 5.1 7.6 (0.7) 37.1
Non-operating expense (income) 18.7 0.2 (5.9) 0.0 13.0
Equity earnings (loss) - subsidiaries 16.2 0.0 0.0 (16.2) 0.0
----- ----- ----- ----- -----
Earnings (loss) before provision for
income taxes 22.6 4.9 13.5 (16.9) 24.1
Provision for income taxes 0.0 0.0 2.2 0.0 2.2
----- ----- ----- ----- -----
Net earnings (loss) $ 22.6 $ 4.9 $ 11.3 $ (16.9) $ 21.9
===== ===== ===== ===== =====
Other comprehensive income (expense)
Foreign currency translation
adjustment (0.6) 0.0 (0.3) 0.0 (0.9)
Minimum pension liability 15.5 0.0 0.0 0.0 15.5
Other comprehensive income (loss) 14.9 0.0 (0.3) 0.0 14.6
----- ----- ----- ----- -----
Comprehensive income (loss) 37.5 4.9 11.0 (16.9) 36.5
===== ===== ===== ===== =====
</TABLE>
16
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
Six Months Ended June 30, 1998
(Unaudited)
<TABLE>
Parent Guarantor Other Consolidated
(Dollars in Millions) Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 347.2 $ 215.0 $ 146.3 $ (163.9) $ 544.6
Cost of goods sold 268.7 196.2 119.3 (166.5) 417.7
----- ----- ----- ----- -----
Gross Earnings 78.5 18.8 27.0 2.6 126.9
Selling, general and administrative
expense 86.9 24.5 16.5 0.0 127.9
----- ----- ----- ----- -----
Earnings (loss) from operations (8.4) (5.7) 10.5 2.6 (1.0)
Non-operating expense (income) 7.9 0.6 0.2 0.0 8.7
Equity earnings (loss) - subsidiaries 2.5 0.0 0.0 (2.5) 0.0
----- ----- ----- ----- -----
Earnings (loss) before provision for
income taxes (13.8) (6.3) 10.3 0.1 (9.7)
Provision for income taxes 0.9 0.0 1.5 0.0 2.4
----- ----- ----- ----- -----
Net earnings (loss) $ (14.7) $ (6.3) $ 8.8 $ 0.1 $ (12.1)
===== ===== ===== ===== =====
Other comprehensive income (expense)
Foreign currency translation
adjustment (0.2) 0.0 (2.6) 0.0 (2.8)
Minimum pension liability 0.0 0.0 0.0 0.0 0.0
Other comprehensive income (loss) (0.2) 0.0 (2.6) 0.0 (2.8)
----- ----- ----- ----- -----
Comprehensive income (loss) (14.9) (6.3) 6.2 0.1 (14.9)
===== ===== ===== ===== =====
</TABLE>
17
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
<TABLE>
Parent Guarantor Other Consolidated
(Dollars in millions) Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 22.6 $ 4.9 $ 11.3 $ (16.9) $ 21.9
Adjustments to reconcile net earnings (loss) to net cash
provided by operations:
Depreciation and amortization 15.9 7.5 1.2 - 24.6
Curtailment (gain) (7.1) - - - (7.1)
Restructuring Charge (14.0) - - - (14.0)
Changes in current accounts excluding the effects of
acquisitions and noncash transactions:
Decrease (increase) in receivables 12.9 (2.9) (10.3) - (0.3)
Decrease (increase) in intercompany receivables
and payables, and intercompany note receivables
and note payables 11.7 (4.4) (7.3) - (0.0)
Decrease (increase) in inventories 4.9 7.5 9.0 0.8 22.2
Decrease (increase) in other current assets (2.2) 1.1 0.1 1.1 0.1
Increase (decrease) in accounts payable
and accrued liabilities 3.4 1.5 0.5 (0.1) 5.3
Other, net 1.7 (4.1) 3.1 (1.0) (0.3)
------ ------ ------ ------ ------
Net cash provided by (used for) operating
activities 49.8 11.1 7.6 (16.1) 52.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for plant and equipment, and tooling (2.3) (18.3) (1.5) - (22.1)
Proceeds from sale of plant and equipment 0.7 0.4 0.2 - 1.3
Equity earnings (loss) (16.2) - - 16.2 -
Change in subsidiary investment (4.6) - - 4.6 -
Other, net 0.6 0.4 (1.0) - -
------ ------ ------ ------ ------
Net cash provided by (used for) investing
activities (21.8) (17.5) (2.3) 20.8 (20.8)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term debt (3.4) - - - (3.4)
Net change in long-term debt, including current maturities (13.3) 2.4 - - (10.9)
Change in subsidiary capital 0.1 4.2 0.3 (4.6) -
Restricted cash (0.7) - - - (0.7)
Other, net (0.1) - - (0.1) (0.2)
------ ------ ------ ------ ------
Net cash provided by (used for) financing
activities (17.4) 6.6 0.3 (4.7) (15.2)
Exchange Rate Effect on Cash (0.6) - 1.3 - 0.7
------ ------ ------ ------ ------
Net increase in Cash and Cash Equivalents 10.0 0.2 6.9 - 17.1
Cash and Cash Equivalents at Beginning of Period 2.2 0.1 11.3 - 13.6
------ ------ ------ ------ ------
Cash and Cash Equivalents at End of Period $ 12.2 $ 0.3 $ 18.2 $ - $ 30.7
====== ====== ====== ====== ======
</TABLE>
18
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
<TABLE>
Parent Guarantor Other Consolidated
(Dollars in millions) Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (14.8) $ (6.3) $ 8.8 $ 0.2 $ (12.1)
Adjustments to reconcile net earnings (loss) to net cash
provided by operations:
Depreciation and amortization 22.2 2.2 1.2 - 25.6
Curtailment (gain) - - - - -
Changes in current accounts excluding the effects of
acquisitions and noncash transactions:
Decrease (increase) in receivables (8.8) (6.2) (8.3) 1.1 (22.2)
Decrease (increase) in intercompany receivables
and payables, and intercompany note receivables
and note payables 2.5 (9.9) 7.4 - -
Decrease (increase) in inventories (2.3) 25.8 1.3 (2.7) 22.1
Decrease (increase) in other current assets 14.2 0.4 (0.2) - 14.4
Increase (decrease) in accounts payable
and accrued liabilities 23.3 (0.4) 1.2 (1.1) 23.0
Other, net (1.0) (0.1) (0.2) - (1.3)
------ ------ ------ ------ ------
Net cash provided by (used for) operating
activities 35.3 5.5 11.2 (2.5) 49.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for plant and equipment, and tooling (14.2) (1.9) (1.3) - (17.4)
Proceeds from sale of plant and equipment 5.3 - 1.2 - 6.5
Equity earnings (loss) (2.5) - - 2.5 -
Change in subsidiary investment - - - - -
Other, net (0.2) (0.1) 0.2 - (0.1)
------ ------ ------ ------ ------
Net cash provided by (used for) investing
activities (11.6) (2.0) 0.1 2.5 (11.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term debt (145.7) - - - (145.7)
Net change in long-term debt, including current maturities 147.7 - - - 147.7
Change in subsidiary capital - - - - -
Restricted cash (28.6) - - - (28.6)
Other, net (0.1) - 0.2 - 0.1
------ ------ ------ ------ ------
Net cash provided by (used for) financing
activities (26.7) - 0.2 - (26.5)
Exchange Rate Effect on Cash 0.1 - (0.6) - (0.5)
------ ------ ------ ------ ------
Net increase in Cash and Cash Equivalents (2.9) 3.5 10.9 - 11.5
Cash and Cash Equivalents at Beginning of Period 12.1 0.6 11.4 - 24.1
------ ------ ------ ------ ------
Cash and Cash Equivalents at End of Period $ 9.2 $ 4.1 $ 22.3 $ - $ 35.6
====== ====== ====== ====== ======
</TABLE>
19
<PAGE>
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART 1, ITEM 2
FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1999
The following discussion should be read in conjunction with the more
detailed information and Condensed Consolidated Financial Statements of the
Company, together with the notes thereto, included elsewhere herein.
General
Management Announcement. On June 2, 1999, David Jones, President and
Chief Executive Officer was named Chairman of the Company's Board of Directors.
Market Share. As of June 30, 1999, the Company's twelve month rolling
domestic outboard engine retail market share has remained at 33% where it was
as of March 31, 1999, and its domestic boat market share has also remained at
the March 31, 1999 level of 10% as of June 30, 1999.
Results of Operations
Periods Ended June 30, 1999 Compared to Periods Ended June 30, 1998
Net Sales. Net sales increased to $315.6 million in the three months
ended June 30, 1999 from $282.4 million in the three months ended June 30 1998,
an increase of 11.8%. Net sales increased to $570.8 million in the six months
ended June 30, 1999 from $544.6 million in the six months ended June 30, 1998,
an increase of 4.8%. Total engine sales increased 6.3% in the quarter and were
even in the year-to-date period versus the comparable periods in 1998. The
increase was due to higher sales of engine parts and accessories which was
partially offset by the reduction in sales to certain domestic dealers and
lower international sales due to continued economic hardship in Latin America,
Russia, and Central Europe. Boat segment sales increased 21.6% and 12.9% in the
quarter and year-to-date periods versus the comparable periods in the prior
year due to increases in demand for recreational and fishing boats as well as
favorable mix improvements due to new boat model introductions.
Cost of Goods Sold. Cost of goods sold increased to $245.4 million in
the three months ended June 30, 1999 from $214.8 million in the three months
ended June 30, 1998, an increase of $30.6 million or 14.2%. Gross earnings in
the three months ended June 30, 1999 was 22.2% of net sales as compared with
23.9% of net sales for the comparable period in 1998. Cost of goods sold
increased to $447.3 million in the six months ended June 30, 1999 from $417.7
million in the comparable period in 1998, an increase of $29.6 million or 7.1%.
Gross earnings in the six months ended June 30, 1999 was 21.6% of net sales as
compared with 23.3% of net sales for the comparable period in 1998. The
reduction in gross earnings percent for the quarter and year-to-date periods was
due to price allowances offered to dealers due to competitive pricing pressures.
Selling, General and Administrative ("SG&A") Expense. SG&A expense
decreased to $43.3 million in the three months ended June 30, 1999 from $65.5
million in the three months ended June 30, 1998, a decrease of $22.2 million or
33.9%. SG&A expense as a
20
<PAGE>
percentage of net sales decreased to 13.7% in the three months ended June 30,
1999 from 23.2% in the three months ended June 30, 1998. SG&A expense decreased
to $100.4 million in the six months ended June 30, 1999 from $127.9 million in
the six months ended June 30, 1998, a decrease of $27.5 million or 21.5%. SG&A
expense as a percentage of net sales decreased to 17.6% in the six months ended
June 30, 1999 from 23.5% in the six months ended June 30, 1998. SG&A expense
decreased in the three months ended June 30, 1999 due primarily to $6.0 million
in environmental and other contingency costs recorded in the three months ended
June 30, 1998, and due to management's emphasis on lowering discretionary
spending across the Company. Finally, the Company recorded a curtailment gain of
$7.1 million to reflect changes made to the pension and postretirement medical
plans as discussed in Note 5. For the six-month period ended June 30, 1999, SG&A
expense decreased due primarily to the reasons discussed above and due to $2.8
million in compensation expense related to forfeitures resulting from the
termination of an executive's employment agreement with a former employer in
connection with the Company's hiring the executive concurrently with the
acquisition of the Company by Greenmarine, and $2.0 million of costs associated
with implementing the Company's boat group reorganization plan which were
recorded in the prior year.
Restructuring Charge. The Company recorded a $14.0 million reversal of
a previously recorded restructuring charge. See Note 4.
Earnings (Loss) from Operations. Earnings from operations were $40.9
million in the three months ended June 30, 1999 compared with $2.1 million in
the three months ended June 30, 1998, an improvement of $38.8 million. Earnings
from operations increased to $37.1 million for the six months ended June 30,
1999 from a loss of $1.0 million for the six months ended June 30, 1998, an
improvement of $38.1 million. The improvements were attributable to the
curtailment gain recorded for the changes in the pension and postretirement
medical plans (see Notes 4 and 5), increased sales volume, and the prior year
periods inclusion of the expenses discussed above in the SG&A section.
Non-Operating Expense (Income). Interest expense decreased to $7.2
million in the three months ended June 30, 1999 from $7.5 million in the three
months ended June 30, 1998, a decrease of $0.3 million. Interest expense
increased to $14.5 million in the six months ended June 30, 1999 from $13.3
million in the six months ended June 30, 1998, an increase of $1.2 million. The
decrease in interest expense in the three month period ended June 30, 1999
resulted from reduced debt levels versus the comparable prior year period. The
increase in interest expense for the six month period ended June 30, 1999
resulted from higher debt levels in the first three months of the year versus
the comparable period in the prior year. This was slightly offset by lower
comparable debt levels in the three months ended June 30, 1999. Other
non-operating income was $1.2 million in the three months ended June 30, 1999
compared to $3.0 million in the comparable period in the prior year. Other
non-operating income was $1.5 million in the six months ended June 30, 1999
compared to $4.6 million in the six months ended June 30, 1998. The decrease in
non-operating income in the three month period ending June 30, 1999 and the six
month period ending June 30, 1999 was a result of the Company selling its
interest in the joint venture Volvo Penta Marine Products L.P. to Volvo Penta of
the Americas, Inc. ("Volvo") on December 8, 1998.
Provision for Income Taxes. The provision for income taxes was $1.1
million in the three months ended June 30, 1999 and $1.4 million in the three
months ended June 30, 1998. The provision for income taxes was $2.2 million in
the six months ended June 30, 1999 and $2.4 million in the six months ended June
30, 1998. The provision for income taxes for the three and six months ended June
30, 1999 and 1998 resulted from the net of expected taxes payable and benefits
relating to certain international subsidiaries. No tax benefit is allowed for
domestic losses because they are not considered realizable, at this time, under
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
Financial Condition; Liquidity and Capital Resources
The Company's business is seasonal in nature with inventory levels
normally increasing in the Company's fiscal quarter ending December 31 and
peaking in the Company's fiscal quarter ending March 31. Current assets at June
30, 1999 decreased
21
<PAGE>
$12.5 million from December 31, 1998. Receivables at June 30, 1999 decreased
$3.6 million due primarily to collections of receivables owed to the Company in
December 1998 from Volvo as a result of the Company selling its interest in the
joint venture Volvo Penta Marine Products L.P. to Volvo on December 8, 1998.
This was partially offset by the seasonal increase in receivables due to higher
sales volume during the summer season. Inventories at June 30, 1999 decreased
$25.9 million from December 31, 1998 as inventory levels, which increased at
December 1998 for seasonal inventory buildup, were sold to dealers in the
subsequent six month period ended June 30, 1999. In addition, continued focus on
effective inventory management also reduced inventory levels. Accounts payable
decreased $6.7 million from December 31, 1998 due to the seasonal nature of the
Company's business. The Company also had $30.0 million in "Restricted Cash" at
June 30, 1999, which cash is held in interest reserve accounts for the benefit
of the Company's senior lenders (as discussed below). Cash provided by
operations was $52.4 million for the six months ended June 30, 1999 compared
with $49.5 million for the six months ended June 30, 1998.
Expenditures for plant and equipment and tooling were $22.1 million for
the six months ended June 30, 1999 compared to $17.4 million for the six months
ended June 30, 1998. The higher level of expenditures is primarily related to
continued expenditures for product quality improvements, upgrades to the
Company's hardware and software, and other general capital improvements.
Loans payable was $29.0 million at June 30, 1999 comprising borrowings
under the Company's Revolving Credit Facility. These borrowings were used to
fund operations, pay $10.0 million of the Company's Medium-Term Notes Series A,
which came due in March 1999, as well as funding capital expenditures. Current
maturities of long-term debt decreased $4.0 million from December 31, 1998 due
to the payment of the Company's Medium-Term Notes Series A offset partially by
the reclassification of certain long-term debt to current maturities for debt
that is payable within the next twelve months.
The Company entered into an Amended and Restated Loan and Security
Agreement, effective as of January 6, 1998 (as amended, the "Credit Agreement"),
with a syndicate of lenders for which Bank of America, N.A. is administrative
and collateral agent (the "Agent"). The Credit Agreement provides a revolving
credit facility (the "Revolving Credit Facility") of up to $150.0 million,
subject to borrowing base limitations, to finance working capital with a $50.0
million sublimit for letters of credit. The Revolving Credit Facility expires on
December 31, 2000. The Revolving Credit Facility is secured by a first and only
security interest in all of the Company's existing and hereafter acquired
accounts receivable, inventory, chattel paper, documents, instruments, deposit
accounts, contract rights, patents, trademarks and general intangibles and is
guaranteed by the Company's four principal domestic operating subsidiaries. In
order to meet the Company's capital requirements, the Company entered into a
Sixth Amendment to the Amended and Restated Loan and Security Agreement
effective July 30, 1999, which among other things (i) extended the termination
of the Revolving Credit Facility from December 31, 2000 to December 31, 2001;
(ii) included work-in-process inventory in the borrowing base calculation until
September 30, 1999; and (iii) extended the duration of the borrowing base
capacity for intellectual property through October 31, 1999. On June 30, 1999,
the Company had outstanding borrowings under the Credit Agreement of $29.0
million, and had $47.3 million of letter of credit obligations outstanding under
the Credit Agreement. At June 30, 1999, the Company was in compliance with the
covenants under the Revolving Credit Facility.
On May 27, 1998, the Company issued $160.0 million of 10 3/4% Senior
Notes due 2008 ("Senior Notes"), with interest payable semiannually on June 1
and December 1 of each year. The net proceeds from the issuance of the Senior
Notes totaled $155.2 million, of which $150.0 million was used to repay the debt
assumed by the Company as a result of the acquisition of the company by
Greenmarine. The Senior Notes will be redeemable at the option of the Company,
in whole or in part, at any time on or after June 1, 2003 in cash at prescribed
redemption prices set forth in the indenture governing the Senior Notes. In
addition, at any time prior to June 1, 2001, the Company may on any one or more
occasions redeem up to an aggregate of 35% of the original principal amount of
the Senior Notes at a redemption price of 110.750% of the principal amount
thereof, plus accrued and unpaid interest, with the net proceeds
22
<PAGE>
of one or more equity public offerings, provided that at least 65% of the
aggregate principal amount of Senior Notes originally issued remains outstanding
immediately after the occurrence of any such redemption. The Senior Notes are
guaranteed on a joint and several basis by each of the Company's principal
domestic operating subsidiaries. The Indenture governing the Senior Notes
contains certain covenants that limit, among other things, the ability of the
Company and its restricted subsidiaries to (i) pay dividends, redeem capital
stock or make certain other restricted payments or investments; (ii) incur
additional indebtedness or issue certain preferred equity interests; (iii) merge
or consolidate with any other person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets; (iv) create liens
on assets; and (v) enter into certain transactions with affiliates or related
persons.
Concurrently with the issuance of the Senior Notes, the Company entered
into a depositary agreement which provided for the establishment and maintenance
of an interest reserve account for the benefit of the holders of the Senior
Notes and an interest reserve account for the benefit of the other senior
creditors of the Company. An aggregate amount of cash equal to one year's
interest due to these lenders was deposited into these interest reserve
accounts. The "Restricted Cash" must remain in such accounts until at least May
27, 2001.
On April 14, 1999, the Company completed an exchange of all of the
Senior Notes for Series B Notes which are registered under the Securities Act of
1933, pursuant to a Registration Statement on Form S-4 and an accompanying
Prospectus.
At June 30, 1999, $65.2 million principal amount of the Company's 9
1/8% Debentures due 2017 (the "9 1/8% Debentures") was outstanding. The 9 1/8%
Debentures mature on April 15, 2017, and interest thereon is payable
semi-annually on April 15 and October 15 of each year. The 9 1/8% Debentures are
redeemable through the operation of a sinking fund beginning on April 15, 1998,
and each year thereafter to and including April 15, 2016 at a sinking fund
redemption price equal to 100% of the principal amount thereof plus accrued
interest to the redemption date. On or prior to April 15 in each of the years
1999 to 2016 inclusive, the Company is required to make a mandatory sinking fund
payment in cash in an amount sufficient to redeem 9 1/8% Debentures in the
aggregate principal amount of $5,000,000 plus accrued interest thereon. However,
9 1/8% Debentures reacquired or redeemed by the Company may be used at the
principal amount thereof to reduce the amount of any one or more mandatory
Sinking Fund payments. As of June 30, 1999, the Company had repurchased and
deposited with the trustee for the 9 1/8% Debentures $34.8 million principal
amount of 9 1/8% Debentures, which will be used to satisfy its mandatory sinking
fund obligations through April 15, 2004. The Company at its option may make an
optional sinking fund payment in cash in each year from 1999 to 2016 inclusive
in an amount sufficient to redeem up to an additional $10,000,000 principal
amount of 9 1/8% Debentures.
At June 30, 1999, an aggregate of approximately $10.8 million principal
amount of the Company's Medium-Term Notes Series A (the "Medium-Term Notes") was
outstanding. Interest rates on the Medium-Term Notes range from 8.550 % to
8.625%. The maturity dates of the Medium-Term Notes include March 15, 2000 and
March 15, 2001. Interest on each of the outstanding Medium-Term Notes is payable
semi-annually each March 30 and September 30 and at maturity.
At June 30, 1999, $7.1 million principal amount of the Company's 7%
Convertible Subordinated Debentures due 2002 (the "Convertible Debentures") was
outstanding. Following the Merger, the Company was required to offer to purchase
for cash any and all of the then outstanding Convertible Debentures at a
purchase price equal to 100% of the outstanding principal amount of each
Convertible Debenture plus any accrued and unpaid interest thereon. On November
12, 1997, the Company consummated such offer to purchase and, as a result
thereof, purchased $67.7 million principal amount of Convertible Debentures.
Immediately prior to the Merger, the Convertible Debentures were convertible
into shares of common stock of the Company at the conversion price of $22.25 per
share. As a result of the Merger, the remaining $7.1 million principal amount of
outstanding Convertible Debentures are no longer convertible into shares of
common stock of the Company. Each holder of the remaining outstanding
Convertible Debentures now has the right to convert (at what was $22.25 per
share) such holder's Convertible Debentures and receive cash in an amount equal
to what each holder would
23
<PAGE>
have received had they converted the Convertible Debentures into common stock
immediately prior to the Merger ($18.00 per share). Accordingly, the remaining
outstanding Convertible Debentures are convertible into the right to receive a
cash payment equal to $809 for each $1,000 principal amount of Convertible
Debentures so converted (i.e., ($18.00/$22.25) x $1,000). The outstanding
Convertible Debentures are convertible at any time prior to their maturity on
July 1, 2002.
The Company has various Industrial Revenue Bonds outstanding in an
aggregate principal amount of approximately $11.8 million. The Industrial
Revenue Bonds have various maturity dates between 2002 and 2007. Interest rates
on the Industrial Revenue Bonds range from 6% to 12.037%.
In the remaining periods in fiscal year 1999, the Company will be
required to pay approximately $1.2 million in cash to satisfy obligations that
will become due at various times under certain of its Industrial Revenue Bonds.
As a normal business practice, the Company has made arrangements with
financial institutions by which qualified retail dealers may obtain inventory
financing. Under certain arrangements, the Company will repurchase products in
the event of repossession upon a retail dealer's default. These arrangements
contain provisions which limit the Company's repurchase obligation to
approximately $32.5 million per model year for a period not to exceed either 18
or 30 months from the date of invoice. The Company resells any repurchased
products. Losses incurred under this program have not been material. For the six
month period ended June 30, 1999 and for the fiscal year 1998, the Company
repurchased approximately $2.5 million and $4.1 million of products,
respectively, all of which were resold at a discounted price. The Company
accrues for losses that are anticipated in connection with expected repurchases.
The Company does not expect these repurchases to materially affect its results
of operations.
Based upon the current level of operations and anticipated cost
savings, the Company believes that its cash flow from operations, together with
borrowings under the Credit Agreement, the interest reserve accounts and its
other sources of liquidity, will be adequate to meet its presently anticipated
requirements for working capital and accrued liabilities, capital expenditures,
interest payments and scheduled principal payments over the next several years.
There can be no assurance, however, that the Company's business will continue to
generate cash flow at or above current levels or that anticipated costs savings
can be fully achieved. If the Company is unable to generate sufficient cash flow
from operations in the future to service its debt and accrued liabilities and
make necessary capital expenditures, or if its future earnings growth is
insufficient to amortize all required principal payments out of internally
generated funds, the Company may be required to refinance all or a portion of
its existing debt, sell assets or obtain additional financing. There can be no
assurance that any such refinancing or asset sales would be possible or that any
additional financing could be obtained on attractive terms, particularly in view
of the Company's high level of debt.
Restructuring Charge
On September 24, 1998, the Company announced that it would be closing
its Milwaukee, Wisconsin and Waukegan, Illinois facilities by the end of the
year 2000. A restructuring charge of $98.5 million was recognized in the fiscal
quarter ended September 30, 1998 and includes charges for the costs associated
with closing these two facilities, and the related employee termination benefits
for approximately 950 employees. The Company plans to outsource substantially
all of the manufacturing of parts currently produced by these two facilities to
third party vendors with the balance being relocated to other facilities of the
Company. As of June 30, 1999, the Company has identified suppliers and begun the
transfer of manufacturing responsibilities for the outsourcing of crankshafts,
propellers, drive shafts, propeller shafts, and numerous investment cast and
service parts to third-party suppliers and continues to obtain and review
proposals from vendors in anticipation of outsourcing the remainder of
production. The Company anticipates substantial completion of such plan by the
end of year 2000. As of June 30, 1999, the Company has incurred $0.1 million in
costs against the restructuring accrual established in the prior fiscal year.
In April and May 1999, the Company completed its negotiations of the
closing agreements with the unions representing the Waukegan and Milwaukee
employees, respectively. These negotiations resulted in modifications to the
post-retirement medical and pension plans for union employees. The changes
24
<PAGE>
required an adjustment in the previous estimate of the curtailment loss for the
pension and postretirement medical benefits. Specifically, the curtailment loss
relating to the postretirement benefit obligation was decreased by $19 million
and the curtailment loss related to the pension benefit obligation was increased
by $5 million, resulting in a net reduction of the previously reported
curtailment loss of $14 million. This adjustment has been reflected in the
Condensed Statement of Consolidated Operations and Comprehensive Income as a $14
million reduction in the previously recorded Restructuring Charge. The adjusted
curtailment loss of $58.1 million represents the estimate of the increase in
pension benefit obligations due to the closure of the Milwaukee and Waukegan
facilities. The cash payment for the pension benefits will be made from the
Company's pension fund while the payment for the postretirement medical benefits
will be made from the general assets of the Company.
FICHT Technology
As a result of correcting certain performance issues with its new
FICHT fuel injection engine technology, the Company increased its warranty
reserve by $7.0 million in fiscal year 1998 and recorded costs for upgrade kits
of $4.3 million and $1.2 million for the quarters ended December 31, 1998 and
March 31, 1999, respectively. The Company believes these upgrade kits will
significantly improve the overall performance of 1998 and 1999 model year FICHT
fuel injected engines. To demonstrate the Company's confidence in the FICHT
fuel injected engines as improved by the upgrade kits, the Company has provided
a limited warranty extension on certain components from two to three years on
all 1999 model FICHT fuel injected engines purchased between January 1, 1999
and March 31, 1999 and also on those purchased by June 30, 1999 and registered
by July 15, 1999.
On May 13, 1999, the Company announced an all-new line of Evinrude
two-stroke direct injection outboards with FICHT Ram Injection technology for
model year 2000. These engines reflect certain further design refinements and
improved methods of production.
In March 1998, the Company received correspondence from Orbital Engine
Corporation Limited ("Orbital") alleging that the Company's FICHT fuel-injected
150-horsepower engines infringed two Australian Orbital patents, which
correspond to three U.S. patents and to a number of foreign patents. In May,
1999, the Company entered into a non-assert agreement with Orbital relative to
engines sold by OMC and its licensees which use Ficht fuel injection. Under the
terms of the agreement, the Company will make certain payments to Orbital for
the use of the patents and all foreign counterparts, as well as certain other
patents, identified in the correspondence. Under the terms of the agreement, the
Company is not precluded from developing Ficht fuel injection for any
application.
25
<PAGE>
Reduction in Force
In May 1999, the Company announced a headcount reduction of approximately 200
employees at both its Corporate and North American Engine Operations in
Waukegan, Illinois. Approximately one third of these reductions will be
accomplished through attrition and retirements. The Company has recorded an
expense approximating $1.3 million for severance and related benefits for the
affected employees. This expense is reflected in the Condensed Statements of
Consolidated Operations and Comprehensive Income as part of Selling, General,
and Administrative expense.
Year 2000 Matters
During 1997 and 1998, the Company assessed the steps necessary to
address issues raised by the coming of Year 2000. The steps to be taken included
reviews of the Company's hardware and software requirements worldwide, including
processors embedded in its manufacturing equipment, as well as vendors of goods
and services. Based on this review, the Company developed a strategy for
attaining Year 2000 compliance that includes modifying and replacing software,
acquiring new hardware, educating its dealers and distributors and working with
vendors of both goods and services. With the assessment phase of the strategy
completed, the Company is in the process of implementing and testing remedies of
issues identified during the assessment phase. To date, all applications on the
Company's mainframe and mid-range computer platforms have been reprogrammed and
testing was completed in the second quarter of calendar 1999. Issues raised
relative to personal computers and local and wide area networks are in the
process of being remedied through the acquisition of new software and hardware.
The Company has found very few embedded processors contained in its
manufacturing equipment that would be affected by the Year 2000 and corrective
actions are being taken for those identified. Most of the Company's
telecommunications equipment is currently Year 2000 compliant and in cases where
it is not, the equipment has either been replaced or appropriation requests for
the replacement have been prepared and are being processed. The Company has
completed 90% of implementation and testing of internal remedies as of June 30,
1999.
As part of the Company's Year 2000 compliance efforts, it has
substantially reviewed all vendors of goods and is currently reviewing vendors
providing services and prioritized them as either critical (i.e., vendors whose
goods or services are necessary for the Company's continued operation) or
non-critical (i.e., suppliers whose products were either not critical to the
continued operation of the Company or whose goods or services could otherwise be
readily obtained from alternate sources) providers. These vendors range from
service providers, such as banks, utility companies and benefit plan service
providers to suppliers of goods required for the manufacture of the Company's
products. Following this initial vendor review, the Company established a
strategy to determine the readiness of those vendors for Year 2000. This
initially involved sending a letter notifying the vendor of the potential Year
2000 issues, which was followed by a questionnaire to be completed by the
vendor. In the event a non-critical supplier either did not respond or responded
inadequately, follow-up questionnaires were sent and calls made in order to
further clarify the vendor situation. In the event that a critical vendor did
not respond or responded inadequately, the Company not only followed up with
additional questionnaires and telephone calls but also scheduled on-site
meetings with the vendor in order to satisfy itself that the vendor is or will
be prepared to operate into the Year 2000. The Company believes that the
unresponsive critical vendors create the most uncertainty in the Company's Year
2000 compliance efforts. In the event that the Company is not satisfied that a
critical vendor will be able to provide its goods or services into the Year
2000, the Company will review alternate suppliers who are in a position to
assure the Company that they are or will be Year 2000 ready. The timing of the
Company's decision to change vendors will depend on what type of goods or
service the non-responsive or non-compliant vendor provides and the lead time
required for an alternate vendor to begin supplying. The Company has reviewed
those critical vendors that have not responded adequately and has been reviewing
the timing of replacing, if necessary, any such non-compliant vendor. In
connection with the Company's initiative to outsource non-core capabilities, a
potential vendor's Year 2000 readiness is one criteria the Company will consider
in selecting the vendor for such outsourcing activity.
26
<PAGE>
In addition, the Company has reviewed the outboard motors, stern drives
and parts and accessories, including trolling motors, which it previously
manufactured and currently manufactures for sale to its dealers, distributors
and original equipment manufacturers and has determined that those products are
Year 2000 compliant.
In preparing for the advent of the Year 2000, the Company has taken
steps to heighten the awareness among its dealer and distributor network of the
issues associated with the Year 2000. The issue is covered in monthly
publications which are distributed to the dealers and also by the sales force
that is responsible for the regular communications with the dealer and
distributor network.
To date, the Company has spent a total of approximately $10.4 million
($4.2 million capitalized) on personal computer and network, mainframe and
telecommunication solutions for issues related with the Year 2000 and estimates
that it will spend up to a total of $12.6 million ($5 million capital),
approximately half of which is associated with personal computers and networks,
to remedy all of the issues associated with ensuring that its hardware and
software worldwide,and the systems associated therewith, are able to operate
into the Year 2000. The Company has expensed these items, except for hardware
costs incurred in the normal course of business and certain software costs,
which have been capitalized, in the Company's Condensed Statements of
Consolidated Operations and Comprehensive Income for the applicable period.
The Company believes that its owned or licensed hardware and software
will be able to operate into the Year 2000. However, the Company relies on the
goods and services of other companies in order to manufacture and deliver its
goods to the market. Although the Company is taking every reasonable step to
determine that these vendors will be able to continue to provide their goods or
services, there can be no assurance that, even upon assurance of their ability
to do so, the Company's vendors will be able to provide their goods and services
to the Company in a manner that satisfactorily addresses the Year 2000 issues.
If, on or near January 1, 2000, the Company discovers that a non-critical
vendor, which previously assured the Company that it would be Year 2000
compliant, is in-fact not compliant, an alternate supplier will be used by the
Company and there should be no material effect on the Company's business. If, on
or near January 1, 2000, the Company discovers that a critical vendor, such as a
utility company or a supplier of a part, component, or other goods or service
that is not readily available from an alternate supplier, which previously
assured the Company that it would be Year 2000 compliant, the Company may not be
able to produce, on a timely basis, finished goods for sale to its dealers. If
this should occur, the Company will either wait for such vendor to become Year
2000 compliant or seek an alternate vendor who can provide the applicable goods
or services in a more timely manner. In the event that the vendor is critical
and either no alternate vendor is available or is able to operate into the Year
2000, this event could have a negative impact on the Company's business, results
of operations, or financial condition.
Euro Currency Conversion
January 1, 1999, eleven of the fifteen member countries of the European
Union adopted the "euro" as their common legal currency. The euro trades on
currency exchanges and is available for non-cash transactions. From January 1,
1999 through January 1, 2002, each of the participating countries are scheduled
to maintain their national ("legacy") currencies as legal tender for goods and
services. Beginning January 1, 2002, new euro-denominated bills and coins will
be issued, and legacy currencies will be withdrawn from circulation no later
than July 1, 2002. The Company's foreign operating subsidiaries that will be
affected by the euro conversion have established plans to address any business
issues raised, including the competitive impact of cross-border price
transparency. It is not anticipated that there will be any near term business
ramifications; however, the long-term implications, including any changes or
modifications that will need to be made to business and financial strategies are
still being reviewed. From an accounting, treasury and computer system
standpoint, the impact from the euro currency conversion
27
<PAGE>
is not expected to have a material impact on the financial position or results
of operations of the Company.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement
133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS 133 establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting. SFAS 133 is effective for fiscal years and quarters beginning
in fiscal 2001. The Company has not yet quantified the impacts of adopting SFAS
133 on its financial statements and has not determined the timing of or method
of its adoption of SFAS 133.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest and
foreign exchange rates and commodity prices. From time to time, the Company
enters into financial arrangements in the ordinary course of business to hedge
these exposures. The Company uses forward and option contracts to reduce the
earnings and cash flow impact of nonfunctional currency denominated receivables
and payables. The contract maturities are matched with the settlement dates of
the related transactions. As of June 30, 1999, there were net unrealized gains
on forward contracts of $0.6 million, calculated as the difference between the
contract rate and the rate available to terminate the contracts. As these
contracts are used for hedging purposes, management believes that these
potential gains/losses would be largely offset by gains/losses on the underlying
firm commitments or anticipated transactions. The Company's exposure to
commodity price changes relates to certain manufacturing operations that utilize
various commodity-based components, primarily for aluminum. The Company manages
its exposure to changes in prices through the terms of its supply and
procurement contracts and the use of exchange-traded and over-the-counter
commodity contracts. As of June 30, 1999, there was no material unrealized loss
on aluminum futures.
Forward-Looking Statements
This report on Form 10-Q contains forward-looking statements, which may
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company wishes to ensure that all
such forward-looking statements are accompanied by meaningful cautionary
statements pursuant to the safe harbor established in such act. All statements
other than statements of historical facts included in this Form 10-Q may
constitute forward-looking statements. Forward-looking statements include the
intent, belief or current expectations of the Company and members of its senior
management team. All forward-looking statements are inherently uncertain as they
are based on various expectations and assumptions concerning future events and
they are subject to numerous known and unknown risks and uncertainties that
could cause actual events or results to differ materially from those projected
and which include, but are not limited to, the impact of competitive products
and pricing, successful implementation of turnaround strategies and strategic
initiatives, product demand and market acceptance, new product development, Year
2000 issues, availability of raw materials, the availability of adequate
financing on terms and conditions acceptable to the Company, and general
economic conditions including interest rates and consumer confidence. Investors
are also directed to other risks discussed in this report on
28
<PAGE>
Form 10-Q and documents filed by the Company with the Securities and Exchange
Commission.
29
<PAGE>
Part II-OTHER INFORMATION
Item 1. Legal Proceedings
The information required under Item 1 Part II is included in Note 3 to
the financial statements set forth in Part 1 hereof and is specifically
incorporated herein by reference thereto.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits reference is made to the Exhibit Index on Page 32
b. Reports on Form 8-K. On April 16, 1999, the Company filed a report
on Form 8-K announcing a change in its certifying accountant to KPMG
Peat Marwick LLP from Arthur Andersen LLP.
30
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OUTBOARD MARINE CORPORATION
Signature Title Date
--------- ----- ----
By /s/ ANDREW P. HINES Executive Vice President & August 5, 1999
ANDREW P. HINES Chief Financial Officer
31
<PAGE>
Exhibit Number Description
- -------------- -----------
3.1(a) Restated Certificate of Incorporation of the Company (filed as
Exhibit 3(a) to the Company's Annual Report on Form 10-K/A for
the year ended September 30, 1997 (the 1997 10-K"))*
3.2(a) Amended and Restated bylaws of the Company (filed as Exhibit
3(B) to the 1997 10-K)*
(a)(1) Amended and Restated bylaws of the Company (adopted July 23,
1998)(filed as Exhibit 3.2(a)(1) to the Company's Registration
Statement on Form S-4 (Registration No. 333-57949)(the "Form
S-4"))*
4.1 Indenture for the 10 3/4 % Senior Notes due 2008, Series A
(the "Old Notes") and 10 3/4% Senior Notes due 2008, Series B
(the "Exchange Notes"), dated as of May a27, 1998 among the
Company, the Subsidiary Guarantors and State Street Bank and
Trust Company, as trustee (filed as Exhibit 4.1 to the Form
S-4)*
4.2 Form of Exchange Note (filed as Exhibit 4.2 to the Form S-4)*
4.3 Form of Subsidiary guarantee of the Old Notes and the Exchange
Notes (included in Exhibit 4.1)(filed as Exhibit 4.1 to the
Form S-4)*
4.4 Registration Rights Agreement dated as of May 27, 1998 among
the Company, the Subsidiary Guarantors and Donaldson, Lufkin &
Jenrette Securities Corporation and Bear, Stearns & Co., Inc.
(filed as Exhibit 4.5 to the Form S-4)*
4.5 Depository Agreement dated as of May 27, 1998 among the
Company, State Street Bank and Trust Company, as trustee,
NationsBank, N.A., as administrator agent, and State Street
Bank and Trust Company, as depositary agent (filed as Exhibit
4.6 to the Form S-4)*
4.6 With respect to rights of holders of the Company's 9 1/8%
Sinking Fund Debentures due 2017, reference is made to Exhibit
4(A) to the Company's Registration Statement Number 33-12759
filed on March 20, 1987*
4.7 With respect to rights of holders of the Company's 7%
Convertible Subordinated Debentures due 2002, reference is
made to the Company's Registration Statement Number 33-47354
filed on April 28, 1992*
4.8 With respect to the Supplemental Indenture dated September 30,
1997 related to the Company's 7% Convertible Subordinated
Debentures due 2002, reference is made to Exhibit 4(c) to the
1997 10-K*
10.1 With respect to Severance Agreement between the Company and
certain elected and appointed officers and certain other
executives of the Company, reference is made to Exhibit 99.3
and 99.4 of the Company's Schedule 14D-9 filed with the
Securities and Exchange Commission on July 15, 1997*
10.2 With respect to the Employment Agreement of Mr. Hines dated
October 6, 1997, reference is made to Exhibit 10(J) to the
1997 10-K*
10.3 With respect to the Amended and Restated Loan and Security
Agreement between the Company and NationsBank of Texas, N.A.
dated January 6, 1998, reference is made to Exhibit 10(E) to
the
32
<PAGE>
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1997*
10.4 First Amendment to Amended and Restated Loan and Security
Agreement between the Company and NationsBank of Texas, N.A.
dated May 21, 1998 (filed as Exhibit 10.5 to the Form S-4)*
10.5 With respect to the Employment Agreement of Mr. Jones dated
March 10, 1998, reference is made to Exhibit 10(F) to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998*
10.6 With respect to the Personal Rewards and Opportunity Program,
reference is made to Exhibit 10(G) to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
1998*
10.7 Employment Agreement of Robert Gowens dated October 1, 1998
(filed as Exhibit 10.8 to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1998 (the "1998
10-K"))*
10.8 Second Amendment to Amended and Restated Loan and Security
Agreement between the Company and NationsBank of Texas, N.A.
dated effective as of August 31, 1998 (filed as Exhibit 10.9
to the 1998 10-K)*
10.9 Third Amendment to Amended and Restated Loan and Security
Agreement between the Company and NationsBank of Texas, N.A.
dated effective as of December 21, 1998 (filed as Exhibit
10.10 to the 1998 10-K)*
10.10 Fourth Amendment to Amended and Restated Loan and Security
Agreement between the Company and NationsBank of Texas, N.A.
dated effective as of February 1, 1999 (filed as Exhibit 10.11
to the Transition Report on Form 10-K for the transition
period ended December 31, 1998)*
10.11 Fifth Amendment to Amended and Restated Loan and Security
Agreement between the Company and NationsBank of Texas, N.A.
dated effective as of February 25, 1999 (filed as Exhibit
10.12 to the Transition Report on Form 10-K for the transition
period December 31, 1998)*
10.12 Promissory Note dated December 4, 1998 with Robert Gowens, Jr.
and Donna Gowens, as Maker, and the Company, as Payee (filed
as Exhibit 10.16 to the Transition Report on Form 10-K for the
transition period ended December 31, 1998)*
10.13 Second Mortgage dated December 4, 1998 with Robert Gowens, Jr.
and Donna Gowens, as Mortgagor, and the Company, as Mortgagee
(filed as Exhibit 10.17 to the Transition Report on Form 10-K
for the transition period ended December 31, 1998)*
10.14 Nonqualified Stock Option Agreement dated October 1, 1998
between the Company and Robert B. Gowens (filed as Exhibit
10.18 to the Transition Report on Form 10-K for the transition
period ended December 31, 1998)*
10.15 Secured Promissory Note dated October 6, 1997 with Andrew
Hines, as Maker, and the Company, as Maker (filed as Exhibit
10.19 to the Transition Report on Form 10-K for the transition
period ended December 31, 1998)*
10.16 Sixth Amendment to Amended and Restated Loan and Security
Agreement between the Company and Bank of America, N.A., dated
effective as
33
<PAGE>
of July 30, 1999, attached hereto and incorporated herein as
Exhibit 10.19.
10.17 Pledge and Security Agreement dated October 6, 1997 between
the Company and Andrew Hines (filed as Exhibit 10.20 to the
Transition Report on Form 10-K for the transition period ended
December 31, 1998)*
10.18 Nonqualified Stock Option Grant Agreement dated October 6,
1997 between the Company and Andrew Hines (filed as Exhibit
10.21 to the Transition Report on Form 10-K for the transition
period ended December 31, 1998)*
10.19 Incentive Stock Option Grant Agreement dated December 30, 1997
between the Company and David Jones (filed as Exhibit 10.22 to
the Transition Report on Form 10-K for the transition period
ended December 31, 1998)*
10.20 Nonqualified Stock Option Grant Agreement dated March 10, 1998
between the Company and David Jones (filed as Exhibit 10.23 to
the Transition Report on Form 10-K for the transition period
ended December 31, 1998)*
10.21 Nonqualified Stock Option Grant Agreement dated march 10, 1998
between the Company and David Jones (filed as Exhibit 10.24 to
the Transition Report on Form 10-K for the transition period
ended December 31, 1998)*
11. Computation of per share earnings (loss)
21. Subsidiaries of Registrant (filed as Exhibit 21 to the 1997
10-K)*
27. Financial Data Schedule
- --------------------------------------------------------------------------------
*Incorporated herein by reference.
34
Exhibit 10.16
- --------------------------------------------------------------------------------
SIXTH AMENDMENT TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
among
OUTBOARD MARINE CORPORATION,
OMC ALUMINUM BOAT GROUP, INC.,
OMC FISHING BOAT GROUP, INC.,
OMC LATIN AMERICA/CARIBBEAN, INC.,
and
RECREATIONAL BOAT GROUP LIMITED PARTNERSHIP
as Borrowers and Guarantors,
and
OMC RECREATIONAL BOAT GROUP, INC.,
and
(and the other Borrowers and/or Guarantors, if any,
from time to time party hereto),
BANK OF AMERICA, N.A.
as Agent and a Lender,
(and the other Lenders, if any, from time to time party hereto),
as Lenders
Dated effective as of July 30, 1999
<PAGE>
SIXTH AMENDMENT TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS SIXTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
("Amendment"), dated effective as of July 30, 1999 (the "Amendment Effective
Date"), is executed and entered into by and among OUTBOARD MARINE CORPORATION, a
Delaware corporation ("OMC"), OMC ALUMINUM BOAT GROUP, INC., a Delaware
corporation OMC FISHING BOAT GROUP, INC., a Delaware corporation, OMC LATIN
AMERICA/CARIBBEAN, INC., a Delaware corporation, RECREATIONAL BOAT GROUP LIMITED
PARTNERSHIP, a Delaware limited partnership, OMC RECREATIONAL BOAT GROUP, INC.,
a Delaware corporation (collectively all of the "Loan Parties," as of the
Amendment Effective Date, under the Amended and Restated Loan and Security
Agreement referenced under the Recitals hereinbelow; herein called the "Loan
Parties"), each of the lending institutions signatory hereto (collectively all
of the "Lenders," as of the Amendment Effective Date, under the Amended and
Restated Loan and Security Agreement referenced under the Recitals hereinbelow;
herein called the "Lenders") and BANK OF AMERICA, N.A., (a national banking
association and successor in interest to Bank of America, N.A., formerly
NationsBank, N.A., successor in interest to NationsBank of Texas, N.A.), in its
capacity as agent for itself and the other Lenders (in such capacity, together
with its successors and assigns in such capacity, herein called "Agent").
RECITALS:
A. The Loan Parties, the Lenders and Agent are parties to the certain
Amended and Restated Loan and Security Agreement dated effective as of January
6, 1998, as amended by the certain First Amendment to Loan and Security
Agreement dated effective as of May 21, 1998, the Second Amendment to Amended
and Restated Loan and Security Agreement dated effective as of August 31, 1998,
the Third Amendment to Amended and Restated Loan and Security Agreement dated
effective as of December 21, 1998, the Fourth Amendment to Amended and Restated
Loan and Security Agreement dated effective as of February 1, 1999, and the
Fifth Amendment to Amended and Restated Loan and Security Agreement dated
effective as of February 25, 1999 (hereinafter called the "Agreement"). Unless
otherwise defined in this Amendment, terms defined by the Agreement, where used
in this Amendment, shall have the same meanings as are prescribed by the
Agreement, as amended by this Amendment.
B. The Loan Parties, the Lenders and Agent have agreed to amend the
Agreement as provided hereinbelow.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE 1
Definitions
Section 1.1 Definitions. Unless otherwise defined in this Amendment,
each capitalized term used in this Amendment, shall have the same meaning given
to such term in the Agreement, as amended by this Amendment.
ARTICLE 2
Amendments
Section 2.1 Amendment to Definitions in Article 1 of the Agreement.
Effective as of the date hereof, the following definitions in Article 1 of the
Agreement are hereby amended and restated in their entirety to read as follows:
"Applicable Margin" means, for the period through the end of the
fiscal quarter of OMC in which Agent receives OMC's financial statements
dated December 31, 1999, pursuant to Section 11.1(a), two percent (2%)
with respect to Eurodollar Loans and one-half percent (0.5%) with
respect to Base Rate Loans, subject to adjustment from time to time
thereafter to the percentage specified for each Type of Loan,
corresponding to the Leverage Ratio, as set forth below, respectively:
================================================================================
Leverage Ratio Eurodollar Loans Base Rate Loans
================================================================================
Greater than or equal to 3.5 to 1.0 2.00% 0.50%
- --------------------------------------------------------------------------------
Less than 3.5 to 1.0 but greater 1.75% 0.00%
than or equal to 2.5 to 1.0
- --------------------------------------------------------------------------------
Less than 2.5 to 1.0 1.25% 0.00%
================================================================================
provided, however, that notwithstanding the forgoing, on any day on
which the unpaid balance of Loans exceeds the aggregate amount
determined under paragraph (b) of the definition of "Borrowing Base"
without giving effect to subparagraph (vii) thereof, with respect to
that portion of the balance of the Loans which is up to, but does not
exceed, $30,000,000, "Applicable Margin" means the Applicable Margin
determined as provided above plus three-quarters of one percent
(0.75%)). For the purpose of determining the Applicable Margin, OMC's
Leverage Ratio shall be determined based upon OMC's Consolidated
financial statements for the months of March, June, September and
December delivered to Agent as required by Section 11.1, and any
resulting change, if any, in the Applicable Margin, shall become
effective (i) as to Base Rate Loans, as of the first day of the calendar
month following the month in which such financial statements are
delivered to Agent and (ii) as to Eurodollar Loans, as of the date (on
or after the effective date as referenced
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in clause (i) preceding) when any such Eurodollar Loan is made,
Continued or Converted, as the case may be.
"Borrowing Base" means, at any time, an amount equal to the
lesser of:
(a) the maximum principal amount of the Revolving Credit
Facility, minus the sum of return
(i) the Letter of Credit Reserve, plus return
(ii) the Reserve, or
(b) an amount equal to the sum of
(i) 85% (or such lesser percentage as Agent may
determine pursuant to Section 2.5) of the face
value of Eligible Receivables that are
determined by Agent in its discretion to be
Qualified L/C Supported Receivables at such
time, plus
(ii) 85% (or such lesser percentage as Agent may
determine pursuant to Section 2.5) of the face
value of Eligible Receivables that are
determined by Agent in its discretion to be
Qualified Guaranteed Receivables at such time,
plus
(iii) 85% (or such lesser percentage as Agent may
determine pursuant to Section 2.5) of the face
value of Eligible Domestic Receivables (other
than Qualified L/C Supported Receivables or
Qualified Guaranteed Receivables) at such
time, plus
(iv) 75% (or such lesser percentage as Agent may
determine pursuant to Section 2.5) of the
Dollar Equivalent face value of Eligible
Foreign Receivables (other than Qualified L/C
Supported Receivables or Qualified Guaranteed
Receivables) at such time,
plus
(v) the lesser of
(A) 60% with respect to Eligible Domestic
Inventory and 50% with respect to Eligible
Foreign Inventory (or such lesser
percentage as Agent may determine pursuant
to Section 2.5) of the lesser of cost
determined on a FIFO (or first-in-first-
out) accounting basis or fair market value
of such Eligible Inventory, as applicable,
net of the Loan Parties' reserve for
obsolescence (if any), at such time, plus,
the following percentage, as applicable
(or such lesser percentage as Agent may in
its discretion determine from time to
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time) of the lesser of cost determined on
a FIFO (or first-in-first-out) accounting
basis or fair market value of Eligible
Work-In-Process Inventory, net of the
Loan Parties' reserve for obsolescence
(if any): (i) 35% during the period of
January 1, 1998 through April 30, 1998,
(ii) 35% during the period of January 1,
1999 through June 30, 1999, (iii) 35%
during the period July 30, 1999 through
August 31, 1999, (iv) 17.5% during the
period September 1, 1999 through
September 30, 1999 and (v) 35% during the
period of January 1 through April 30 of
any calendar year thereafter, or
(B) $75,000,000, minus
(vi) the Letter of Credit Reserve; plus
(vii) provided that the representations of Borrowers
under Section 7.1(z) are and remain true and
correct, with respect to any period commencing
during any calendar year, determined as
provided hereinbelow (each such period herein
called a "Designated Period") (i) $30,000,000
at any time during any portion of any single
Designated Period that occurs from the
Agreement Date through December 30, 1998, (ii)
$20,000,000 at any time during any portion of
any single Designated Period that occurs
during the period from December 31, 1998
through January 31, 1999, (iii) $30,000,000 at
any time during any portion of any two
Designated Periods that occur during the
period February 1, 1999 through October 31,
1999, (iv) $10,000,000 at any time during any
portion of any single Designated Period that
occurs during the period from December 31,
1999 through December 30, 2000 and (v) $0.00
on and at all times after December 31, 2000;
provided, that any such Designated Period for
any calendar year shall begin on the first
Business Day, if any, occurring during such
year (or, with respect to the second of the
Designated Periods referenced in clause (iii),
on the first Business Day, if any, occurring
after expiration of the first of such
Designated Periods) on which the aggregate
outstanding balance of Loans first exceeds an
amount equal to the aggregate amount
determined under paragraph (b) of this
definition without regard to this subparagraph
(vii), and shall terminate on the earlier of
(x) the expiration of one hundred eighty
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(180) days thereafter or (y) October 31, 1999
with respect to the calendar year 1999 or
December 31 of any other calendar year,
provided, that with respect to clause (b) preceding,
Agent may deduct any Reserve prior to application of the
relevant percentages used to calculate the Borrowing Base
as set forth herein.
"Indebtedness" of any Person means, without duplication, all
Liabilities of such Person, and to the extent not otherwise included in
Liabilities, the following:
(a) all obligations for Money Borrowed or for the deferred
purchase price of property or services;
(b) all obligations (including, during the noncancellable term of
any lease in the nature of a title retention agreement, all future
payment obligations under such lease discounted to their present value
in accordance with GAAP) secured by any Lien to which any property or
asset owned or held by such Person is subject, whether or not the
obligation secured thereby shall have been assumed by such Person;
(c) all obligations of other Persons which such Person has
Guaranteed, including, but not limited to, all obligations of such
Person consisting of recourse liability with respect to accounts
receivable sold or otherwise disposed of by such Person;
(d) the mark to market settlement amount of all obligations of
such Person in respect of Interest Rate Protection Agreements to the
extent that such Person would suffer a loss thereunder; and
(e) in the case of any Borrower (without duplication) all
obligations of such Borrower under the Revolving Credit Loans.
"Leverage Ratio" means, at any time, the ratio of (i) the sum of
Indebtedness for Money Borrowed, determined as of such time, to (ii)
EBITDA, determined for the preceding four (4) completed fiscal quarters.
"Termination Date" means December 31, 2001, such earlier date as
all Secured Obligations shall have been irrevocably paid in full and the
Revolving Credit Facility shall have been terminated, or such later date
as to which the same may be extended pursuant to the provisions of
Section 2.7.
Section 2.2 Amendment Section 11.1. Section 11.1 of the Loan and
Security Agreement hereby is amended and restated to read as follows:
Section 11.1 Financial Statements.
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a. Audited Year-End Statements. As soon as available, but in any
event within one hundred twenty (120) days after the end of each of its
fiscal years OMC and each other Loan Party (to the extent its financial
statements are not reported on a consolidated basis with OMC) will
provide Agent with copies of the consolidating and consolidated balance
sheets of such Person and its Consolidated Subsidiaries as at the end of
such fiscal year and the related statements of earnings, shareholders'
equity and statement of cash flows for such fiscal year, in each case
setting forth in comparative form the figures for the previous fiscal
year of such Person, reported on, as to such consolidated statements,
without qualification (provided that OMC's financial statements for the
fiscal year ended September 30, 1997, may be qualified solely as to the
future maturity of its $150,000,000 loan facility provided pursuant to
that certain Credit Agreement, dated August 13, 1997, as amended, by and
among Greenmarine Acquisition Corp., as borrower, and American Annuity
Group, Inc. and Great American Insurance Company, as lenders, which
matures in June 1998) as to the scope of the audit or the status of such
Person as a "going concern", by independent certified public accountants
of nationally recognized standing.
b. Monthly Financial Statements. As soon as available after the
end of each month, but in any event within thirty (30) days after the
end of each month, each Loan Party will provide Agent with copies of the
unaudited consolidated balance sheet of such Loan Party and its
Consolidated Subsidiaries as at the end of such month and the related
unaudited consolidated statements of earnings and cash flows for such
Loan Party and its Consolidated Subsidiaries for such month and for the
portion of the fiscal year of such Loan Party and its Consolidated
Subsidiaries through such month, certified by a Financial Officer as
presenting fairly the financial condition and results of operations of
such Loan Party (subject to normal year-end audit adjustments).
c. Quarterly Financial Statements. As soon as available after the
end of each fiscal quarter, but in any event within forty-five (45) days
after the end of each fiscal quarter, each Loan Party will provide Agent
with copies of the unaudited consolidated and consolidating balance
sheets of such Loan Party and its Consolidated Subsidiaries as at the
end of such quarter and the related unaudited consolidated and
consolidating statements of earnings and cash flows for such Loan Party
and its Consolidated Subsidiaries for such quarter and for the portion
of the fiscal year of such Loan Party and its Consolidated Subsidiaries
through such quarter, certified by a Financial Officer as presenting
fairly the financial condition and results of operations of such Loan
Party (subject to normal year-end audit adjustments).
All of the financial statements referenced in this Section 11.1 are to be
complete and correct in all material respects and prepared in accordance with
GAAP (except, with respect to the monthly financial statements referred to in
clause (b), for the omission of footnotes and for the effect of normal year-end
audit adjustments) applied consistently throughout the periods reflected
therein.
Section 2.3 Amendment Section 11.3. In Section 11.3 of the Loan and
Security Agreement the reference to "Section 11.1(b)" hereby is amended and
restated to read "Section 11.1(c)".
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ARTICLE 3
Miscellaneous
Section 3.1 Conditions Precedent. The effectiveness of this Amendment
is subject to the satisfaction of each of the following conditions precedent:
(a) Agent shall have received all of the following, each dated
the date of this Amendment (unless otherwise indicated), in form and
substance satisfactory to Agent:
(i) Amendment Documents. This Amendment and any other
instrument, document or certificate required by Agent to be
executed or delivered by any of the Loan Parties, Agent or the
Lenders in connection with this Amendment, in each case duly
executed (the "Amendment Documents");
(ii) Fees and Expenses. Evidence that the costs and expenses
(including, without limitation, reasonable attorneys' fees and
expenses) incurred by Agent incident to this Amendment or
otherwise required to be paid in accordance with Section 16.2 of
the Agreement, to the extent incurred and submitted to the Loan
Parties, shall have been paid in full;
(iii) Additional Information. Agent shall have received such
additional documents, instruments and information as Agent may
reasonably request to effect the transactions contemplated
hereby; and
(iv) Consents. All consents required by Section 16.9 of the
Agreement shall have been obtained (it being understood that,
pursuant to Section 16.9 of the Agreement, consent of Agent and
all Lenders shall be required for effectiveness of Section 2.1 of
this Amendment and consent of Agent and Required Lenders shall be
required for effectiveness of all other provisions of this
Agreement.
(v) Amendment Fee. Payment of an amendment fee in an amount
agreed upon among the Loan Parties, Agent and the Lenders.
(c) The representations and warranties contained herein, in the
Agreement and in all other Loan Documents, as amended hereby, shall be
true and correct as of the date hereof as if made on the date hereof
(except those, if any, which by their terms specifically relate only to
a different date).
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all other agreements,
documents and instruments executed and/or delivered pursuant hereto, and
all legal matters incident thereto, shall be satisfactory to Agent.
(e) No Default or Event of Default shall have occurred and be
continuing.
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Section 3.2 Representations and Warranties. The Loan Parties hereby
represent and warrant to, and agree with, Agent, for the benefit of the Lenders,
that, as of the date of and after giving effect to this Amendment, (a) the
execution, delivery and performance of this Amendment and any and all other
Amendment Documents executed and/or delivered in connection herewith have been
authorized by all requisite corporate action on the part of each of the Loan
Parties (as applicable) and will not violate any of such Loan Party's
certificate of incorporation or bylaws (or, in the case of Recreational Boat
Group Limited Partnership, its certificate of limited partnership or its limited
partnership agreement), (b) all representations and warranties set forth in the
Agreement and in any other Loan Document are true and correct as if made again
on and as of such date (except those, if any, which by their terms specifically
relate only to a different date) in the Agreement), (d) no Default or Event of
Default has occurred and is continuing, (e) the Agreement (as amended by this
Amendment), and all other Loan Documents are and remain legal, valid, binding
and enforceable obligations in accordance with the terms thereof, and (f) the
certifications delivered to Agent under clause (i), clause (ii) and clause (iii)
of Section 6.1(c) of the Agreement (in the case of the certification required by
such clause (iii), as subsequently modified pursuant to Section 6.2(b) of the
Agreement) remain true, correct and complete as of the Amendment Effective Date.
Section 3.3 Survival of Representations and Warranties. All
representations and warranties made in this Amendment or any other Loan Document
shall survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by Agent or any Lender, or any closing, shall
affect the representations and warranties or the right of Agent and the Lenders
to rely upon them.
Section 3.4 Reference to Agreement. Each of the Loan Documents,
including the Agreement, the Amendment Documents and any and all other
agreements, documents or instruments now or hereafter executed and/or delivered
pursuant to the terms hereof or pursuant to the terms of the Agreement as
amended hereby, are hereby amended so that any reference in such Loan Documents
to the Agreement, whether direct or indirect, shall mean a reference to the
Agreement as amended hereby.
Section 3.5 Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 3.6 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of the Credit Parties and the Loan Parties and their
respective successors and assigns, except each of the Loan Parties may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of Agent and the Lenders.
Section 3.7 General. This Amendment, when signed by each signatory as
provided hereinbelow (i) shall be deemed effective prospectively as of the
Amendment Effective Date, (ii) contains the entire agreement among the parties
and may not be amended or modified except in writing signed by all parties,
(iii) shall be governed and construed according to the laws of the State
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of Texas, and (iv) may be executed in any number of counterparts, each of which
shall be valid as an original and all of which shall be one and the same
agreement. A telecopy or other electronic transmission of any executed
counterpart shall be deemed valid as an original.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their duly authorized officers in several counterparts
effective as of the date specified in the preamble hereof.
BORROWERS:
OUTBOARD MARINE CORPORATION
By: /s/ Andrew P. Hines
-------------------------------
Name: Andrew P. Hines
-----------------------------
Title: Executive Vice President and
Chief Financial Officer
----------------------------
By: /s/ Gordon G. Repp
-------------------------------
Name: Gordon G. Repp
-----------------------------
Title: Senior Counsel and
Assistant Secretary
----------------------------
OMC ALUMINUM BOAT GROUP, INC.
By: /s/ Andrew P. Hines
-------------------------------
Name: Andrew P. Hines
-----------------------------
Title: Chief Financial Officer
----------------------------
By: /s/ Gordon G. Repp
-------------------------------
Name: Gordon G. Repp
-----------------------------
Title: Assistant Secretary and
Treasurer
----------------------------
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OMC FISHING BOAT GROUP, INC.
By: /s/ Andrew P. Hines
-------------------------------
Name: Andrew P. Hines
-----------------------------
Title: Chief Financial Officer
----------------------------
By: /s/ Gordon G. Repp
-------------------------------
Name: Gordon G. Repp
-----------------------------
Title: Assistant Secretary and
Treasurer
----------------------------
OMC LATIN AMERICA/CARIBBEAN, INC.
By: /s/ Andrew P. Hines
-------------------------------
Name: Andrew P. Hines
-----------------------------
Title: Chief Financial Officer
----------------------------
By: /s/ Gordon G. Repp
-------------------------------
Name: Gordon G. Repp
-----------------------------
Title: Assistant Secretary
----------------------------
RECREATIONAL BOAT GROUP
LIMITED PARTNERSHIP
By: OMC Recreational Boat Group, Inc.,
General Partner
By: /s/ Andrew P. Hines
-------------------------------
Name: Andrew P. Hines
-----------------------------
Title: Chief Financial Officer
----------------------------
By: /s/ Gordon G. Repp
-------------------------------
Name: Gordon G. Repp
-----------------------------
Title: Assistant Secretary and
Treasurer
----------------------------
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GUARANTOR:
OMC RECREATIONAL BOAT GROUP, INC.
By: /s/ Andrew P. Hines
-------------------------------
Name: Andrew P. Hines
-----------------------------
Title: Chief Financial Officer
----------------------------
By: /s/ Gordon G. Repp
-------------------------------
Name: Gordon G. Repp
-----------------------------
Title: Assistant Secretary and
Treasurer
----------------------------
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AGENT:
BANK OF AMERICA, N.A.
In its capacity as Agent
By: /s/ Stacey Wills
-------------------------------
Name: Stacey Wills
-----------------------------
Title: Vice President
----------------------------
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LENDERS:
BANK OF AMERICA, N.A.
In its capacity as Agent
By: /s/ Stacey Wills
-------------------------------
Name: Stacey Wills
-----------------------------
Title: Vice President
----------------------------
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AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: /s/ Donna H. Evans
-------------------------------
Name: Donna H. Evans
-----------------------------
Title: Vice President
----------------------------
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FLEET CAPITAL CORPORATION
By: /s/ Thomas Maiale
-------------------------------
Name: Thomas Maiale
-----------------------------
Title: Vice President
----------------------------
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THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Neal T. Legan
-------------------------------
Name: Neal T. Legan
-----------------------------
Title: Vice President
----------------------------
16
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TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ R.L. Heinl
-------------------------------
Name: R.L. Heinl
-----------------------------
Title: Senior Vice President
----------------------------
17
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FLEET BUSINESS CREDIT CORPORATION
By: /s/ Thomas Maiale
-------------------------------
Name: Thomas Maiale
-----------------------------
Title: Vice President
----------------------------
18
OUTBOARD MARINE CORPORATION
EXHIBIT 11: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
(Dollars and Shares in Millions Except per Share Data) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic Earnings per Share:
Net Income (Loss) $33.8 ($3.8) $21.9 ($12.1)
Weighted Average Number of Shares 20.4 20.4 20.4 20.4
---- ---- ---- ----
Basic Earnings (Loss) Per Share $1.66 ($0.19) $1.07 ($0.59)
==== ==== ==== ====
Diluted Earnings Per Share:
Net Income (Loss) $33.8 ($3.8) $21.9 ($12.1)
Weighted Average Number of Shares 20.4 20.4 20.4 20.4
Common Stock Equivalents (Stock Options) 0.2 -- 0.2 --
---- ---- ---- ----
Average Shares Outstanding 20.6 20.4 20.6 20.4
---- ---- ---- ----
Diluted Earnings (Loss) Per Share $1.64 ($0.19) $1.06 ($0.59)
==== ==== ==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 30,700
<SECURITIES> 0
<RECEIVABLES> 126,900
<ALLOWANCES> 0
<INVENTORY> 171,300
<CURRENT-ASSETS> 352,600
<PP&E> 232,400
<DEPRECIATION> 33,700
<TOTAL-ASSETS> 909,300
<CURRENT-LIABILITIES> 342,300
<BONDS> 241,200
0
0
<COMMON> 200
<OTHER-SE> 93,500
<TOTAL-LIABILITY-AND-EQUITY> 909,300
<SALES> 315,600
<TOTAL-REVENUES> 315,600
<CGS> 245,400
<TOTAL-COSTS> 245,400
<OTHER-EXPENSES> 28,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,200
<INCOME-PRETAX> 34,900
<INCOME-TAX> 1,100
<INCOME-CONTINUING> 33,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,800
<EPS-BASIC> 1.66
<EPS-DILUTED> 1.64
</TABLE>
