<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
(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, 2000.
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)
<TABLE>
<S> <C>
Delaware 36-1589715
<CAPTION>
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
<S> <C>
100 Sea Horse Drive
Waukegan, Illinois 60085
(Address of principal executive offices) (Zip Code)
</TABLE>
847-689-6200
(Registrant's telephone number, including area code)
----------------
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,
2000 was 20,439,531 shares.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
OUTBOARD MARINE CORPORATION
FORM 10-Q PART I
FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Three Months Ended Ended June
June 30, 30,
-------------------- --------------
2000 1999 2000 1999
--------- --------- ------ ------
(Dollars in millions except
amounts per share)
<S> <C> <C> <C> <C>
Net sales................................ $ 296.6 $ 315.6 $565.7 $570.8
Costs of goods sold...................... 251.5 245.4 477.2 447.3
--------- --------- ------ ------
Gross earnings......................... 45.1 70.2 88.5 123.5
Selling, general, and administrative
expense................................. 59.9 43.3 124.3 100.4
Restructuring income..................... -- (14.0) -- (14.0)
--------- --------- ------ ------
Earnings (loss) from operations........ (14.8) 40.9 (35.8) 37.1
Interest expense......................... 9.6 7.9 17.9 16.0
Other income, net........................ (0.8) (1.9) (1.5) (3.0)
--------- --------- ------ ------
Earnings (loss) before provision for
income taxes.......................... (23.6) 34.9 (52.2) 24.1
Provision for income taxes............... 1.5 1.1 2.6 2.2
--------- --------- ------ ------
Earnings (loss) before preferred
dividends............................. (25.1) 33.8 (54.8) 21.9
Preferred dividends...................... 2.9 -- 4.7 --
--------- --------- ------ ------
Net earnings (loss) of common
shareholders.......................... $ (28.0) $ 33.8 $(59.5) $ 21.9
========= ========= ====== ======
Net earnings (loss) of common
shareholders............................ $ (28.0) $ 33.8 $(59.5) $ 21.9
Other comprehensive income (expense)
Foreign currency translation
adjustments........................... (1.3) 0.7 (2.8) (0.9)
Minimum pension liability.............. -- 15.5 -- 15.5
--------- --------- ------ ------
Other comprehensive income
(expense)........................... (1.3) 16.2 (2.8) 14.6
--------- --------- ------ ------
Comprehensive income (loss).......... $ (29.3) $ 50.0 $(62.3) $ 36.5
========= ========= ====== ======
Net earnings (loss) per share of common
stock
Basic.................................. $ (1.37) $ 1.66 $(2.92) $ 1.07
========= ========= ====== ======
Diluted................................ $ (1.37) $ 1.64 $(2.92) $ 1.06
========= ========= ====== ======
Average shares of common stock
outstanding
Basic.................................. 20.4 20.4 20.4 20.4
Diluted................................ 20.4 20.6 20.4 20.6
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
(Dollars in millions)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 42.8 $ 25.0
Receivables, net..................................... 123.8 104.9
Inventories, net..................................... 191.6 188.6
Other current assets................................. 22.5 17.2
------- -------
Total current assets............................... 380.7 335.7
Restricted cash........................................ 22.3 30.6
Property, plant and equipment, net..................... 190.9 200.5
Product tooling, net................................... 28.9 29.5
Goodwill, net.......................................... 105.7 107.2
Trademarks, patents and other intangibles, net......... 78.3 79.3
Other assets........................................... 70.3 65.6
------- -------
Total assets....................................... $ 877.1 $ 848.4
======= =======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Loans payable........................................ $ 66.4 $ 58.0
Accounts payable..................................... 100.1 99.2
Accrued and other.................................... 181.2 183.2
Current maturities of long-term debt................. 7.0 8.4
------- -------
Total current liabilities.......................... 354.7 348.8
Long-term debt......................................... 235.7 241.4
Postretirement benefits other than pensions............ 97.9 99.1
Other non-current liabilities.......................... 79.7 78.8
Preferred stock........................................ 49.6 --
Shareholders' investment
Common stock and capital surplus..................... 318.9 277.5
Accumulated deficit.................................. (248.6) (189.2)
Accumulated other comprehensive income............... (10.8) (8.0)
------- -------
Total shareholders' investment..................... 59.5 80.3
------- -------
Total liabilities and shareholders' investment..... $ 877.1 $ 848.4
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June
30,
----------------------
2000 1999
---------- ----------
(Dollars in Millions)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss) of common shareholders........... $ (59.5) $ 21.9
Adjustments to reconcile net earnings (loss) of
common shareholders to net cash provided by (used
for) operations:
Depreciation and amortization...................... 27.0 24.6
Curtailment gain................................... -- (7.1)
Restructuring income............................... -- (14.0)
Changes in current accounts excluding the effects
of noncash transactions:
Increase in receivables.......................... (18.9) (0.3)
(Increase) decrease in inventories............... (3.0) 22.2
(Increase) decrease in other current assets...... (5.3) 0.1
(Decrease) increase in accounts payable and
accrued liabilities............................. (1.1) 5.3
Other, net....................................... (5.4) (0.3)
---------- ----------
Net cash provided by (used for) operating
activities.................................... (66.2) 52.4
---------- ----------
Cash Flows from Investing Activities:
Expenditures for plant and equipment, and tooling.... (17.3) (22.1)
Proceeds from sale of plant and equipment............ 4.8 1.3
---------- ----------
Net cash used for investing activities......... (12.5) (20.8)
---------- ----------
Cash Flows from Financing Activities:
Net increase (decrease) in short-term debt........... 8.4 (3.4)
Payments of long-term debt, including current
maturities.......................................... (6.1) (10.9)
Proceeds from issuance of preferred stock and
warrants............................................ 86.6 --
Decrease (increase) in restricted cash............... 8.3 (0.7)
Other, net........................................... -- (0.2)
---------- ----------
Net cash provided by (used for) financing
activities.................................... 97.2 (15.2)
---------- ----------
Exchange rate effect on cash........................... (0.7) 0.7
---------- ----------
Net increase in cash and cash equivalents.............. 17.8 17.1
Cash and cash equivalents at beginning of period....... 25.0 13.6
---------- ----------
Cash and cash equivalents at end of period............. $ 42.8 $ 30.7
========== ==========
Supplemental Cash Flow Disclosures:
Interest paid........................................ $ 19.2 $ 15.9
========== ==========
Income taxes paid.................................... $ 2.8 $ 1.9
========== ==========
Preferred dividends accrued.......................... $ 4.7 $ --
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
OUTBOARD MARINE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Unless the context otherwise requires, all references herein to the
"Company" or "OMC" shall mean Outboard Marine Corporation, a Delaware
corporation, and its consolidated subsidiaries. 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 are of a normal recurring nature.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1999. The 2000 interim results are not
necessarily indicative of the results which may be expected for the remainder
of the year. Certain amounts in 1999 have been reclassified to conform to the
2000 presentation.
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, which
is in effect to December 31, 2001, 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 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. As
of June 30, 2000, the Company was in compliance with all of its covenants
except its minimum earnings before interest, taxes, depreciation and
amortization ("EBITDA") covenant. On August 9, 2000 the Company entered into a
Ninth Amendment to the Amended and Restated Loan and Security Agreement which
among other things (i) waived compliance with the June 30, 2000 EBITDA covenant
test and (ii) established new EBITDA covenant tests for the quarters ending
September 30 and December 31 of 2000. The Company's ability to comply with its
covenants will depend upon several factors, including its ability to generate
sales and maintain costs at acceptable levels. Factors outside the Company's
control, including but not limited to third-party supplier issues, may also
affect the Company's compliance.
On May 2, 2000, the Company sold a $15.0 million Subordinated Note (the
"Sub-note") and warrants (the "May 2, 2000 Warrants") to purchase 330,000
shares of the Company's Common Stock, par value $0.01, to Quantum Industrial
Partners LDC. The Sub-note bears an interest rate of 15% and has an initial
maturity date of May 31, 2000, which can be extended for four additional 30-day
periods upon 5 days written notice by the Company. The Sub-note is convertible
into shares of the Company's Series B Convertible Preferred Stock, which if
issued, would have terms and conditions similar in nature to the Series A
Preferred Stock (See Note 6 of the Notes to Condensed Consolidated Financial
Statements). The conversion price of the Series B Convertible Preferred Stock
has not yet been set. The Company has extended the term of the Sub-note and
anticipates that the Sub-note will be extended to September 30, 2000 at which
time it may be converted into shares of the Company's Series B Convertible
Preferred Stock. The May 2, 2000 Warrants are excercisable at any time until
May 2, 2010, at an exercise price of $0.01 per share of Common Stock, payable
in cash or in shares of Common Stock.
Upon the sale of the Sub-note and the May 2, 2000 Warrants, the Company
recorded the value of each instrument in the Statement of Consolidated
Financial Position based upon the fair market value of each instrument at the
time of issuance. The fair value per May 2, 2000 Warrant on the date of
issuance using the
5
<PAGE>
OUTBOARD MARINE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Black-Scholes option-pricing model was $4.94 for an aggregate fair value of
$1.6 million. The fair value of the May 2, 2000 Warrants was estimated on the
date of issuance using the following assumptions: risk-free interest rate of
6.3% and an expected life of approximately 8 years. The fair value of the Sub-
note was determined as the difference between the aggregate amount of $15.0
million and the value of the May 2, 2000 Warrants, or $13.4 million.
The third-party supplier issues, which arose earlier in the year, have
persisted longer than previously anticipated. As a result, the cash flow
consequences have been more severe. If the Company's performance does not
improve and it is not able to refinance existing debt or obtain additional
financing, its cash flow from operations together with available cash from (i)
the previous sales of Preferred Stock and Warrants, (ii) the Sub-note and May
2, 2000 Warrants, (iii) the available borrowing capacity under the Credit
Agreement, and (iv) the interest reserve accounts and its other sources of
liquidity, may not be adequate to meet its presently anticipated requirements
for working capital and accrued liabilities, capital expenditures, interest
payments, and scheduled principal payments for the remainder of the year. The
Company is currently exploring various options to raise additional cash which
may take the form of refinancing all or a portion of its existing debt, selling
assets or obtaining additional financing. There can be no assurance that any
such refinancing or asset sales would be possible or permitted under existing
debt instruments or that any additional financing could be obtained on
attractive terms, particularly in view of the Company's high level of debt. In
such an event, the Company could be forced to dispose of assets under
circumstances that might not be favorable to realizing the best prices for such
assets. Furthermore, there can be no assurances that assets could be sold
quickly enough or for proceeds sufficient enough to enable the Company to meet
its obligations. The Company's ability to remain in compliance with the
requirements of its financial instruments will depend upon several factors,
including its ability to generate sales and maintain costs at acceptable
levels. Factors outside the Company's control, including but not limited to
third-party supplier issues, may also affect the Company's compliance. A
failure to comply with the conditions of the various financial instruments, if
not cured or waived, could permit acceleration of the relevant indebtedness and
acceleration of indebtedness under other instruments that may contain cross-
default or cross-acceleration provisions.
3. Contingent Liabilities
The Company is engaged in a 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 consolidated financial position or the consolidated earnings of the
Company.
Under the requirements of Superfund and certain other laws, the Company is
potentially liable for the cost of clean-up at various contaminated sites
identified by the United States Environmental Protection Agency and other
agencies. The Company has been notified that it is named 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.
As a general rule, 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 closedown costs associated with discontinued
operations or facilities, including the environmental costs of operation and
maintenance until disposition. At June 30, 2000 the Company has accrued
approximately $23 million for costs related to remediation at contaminated
sites
6
<PAGE>
OUTBOARD MARINE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
including operation and maintenance for continuing and closed-down operations.
The possible recovery of insurance proceeds has not been considered in
estimating contingent environmental 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 $34 million for a period not to exceed 18 months from the date of
invoice. The Company resells any repurchased products at a discount. Losses
incurred under this program have not been material. For the six month periods
ended June 30, 2000 and 1999, the Company repurchased approximately $0.4
million and $2.5 million of products, respectively. 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, financial position, or cash flows.
4. Restructuring Charges
During the fiscal year ended September 30, 1998, the Company finalized a
restructuring plan for the closure of its Milwaukee, WI and Waukegan, IL engine
facilities. The Company recorded a $98.5 million restructuring charge related
to these closures. During the second quarter of 2000, the Company completed the
closure of the Milwaukee, WI plant by outsourcing a majority of the sub-
assembly production previously performed in this facility and transferring the
balance of production to other facilities within the Company. The Company plans
to do the same for the Waukegan, IL facility, but anticipates that this will
not occur until sometime during 2001. Previously the Company had anticipated
that substantial completion of this plan would occur by the end of fiscal year
2000. The Company had been in negotiations with a third party to supply the
components that are currently manufactured in the Waukegan, IL facility, but
these negotiations ended unsuccessfully during the second quarter of 2000.
As of June 30, 2000, the Company has made payments approximating $9.1 million
against the restructuring reserve established in fiscal year 1998. The remaining
$14.7 million restructuring reserve (excluding curtailment gains/losses) will be
substantially spent in the remainder of fiscal years 2000 and 2001 as the plants
are closed and prepared for sale.
5. Inventories
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
Raw materials, work-in-process and service parts..... $124.8 $122.0
Finished goods....................................... 66.8 66.6
------ ------
Total inventories.................................. $191.6 $188.6
====== ======
</TABLE>
6. Preferred Stock and Warrants Issuance
On January 28, 2000, the Company sold an aggregate of 650,000 shares of
Series A Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"), and warrants (the "January 28, 2000 Warrants") to purchase
an aggregate of 5,750,000 shares of its Common Stock, par value $.01 per share
(the "Common Stock"), for an aggregate consideration of $65.0 million in a
private placement transaction with Quantum Industrial Partners, LDC and
Greenlake Holdings II, LLC. Approximately $15.0 million of the Series A
Preferred Stock was issued in exchange for certain subordinated notes
previously issued by the Company to the purchasers. The Series A Preferred
Stock has an initial liquidation preference of $100 per share and an initial
conversion price of $14 per share (in each case, subject to adjustment upon
occurrence of certain events). The Series A Preferred Stock is convertible into
Common Stock at any time. The Series A Preferred Stock has an annual dividend
rate of 15% of the then current liquidation preference, and is entitled to
share ratably in any
7
<PAGE>
OUTBOARD MARINE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
dividends paid on the Common Stock. Dividends will accrue if not paid in cash,
and the liquidation preference will be increased by the amount of any accrued
but unpaid dividends. The Series A Preferred Stock may be redeemed at any time
after October 1, 2008, upon written request of the holders of at least 75% of
the then outstanding shares. The Company may redeem all outstanding shares of
the Series A Preferred Stock if, at any time, less than 10% of the total Series
A Preferred Stock originally sold on January 28, 2000 remains outstanding. The
January 28, 2000 Warrants are exercisable at any time until January 28, 2010,
at an exercise price of $.01 per share of Common Stock, payable in cash or in
shares of Common Stock.
Upon issuance of the Series A Preferred Stock and January 28, 2000 Warrants,
the Company recorded the value of each instrument in the Statement of
Consolidated Financial Position based upon the fair market value of each
instrument at the time of issuance. The fair value per January 28, 2000 Warrant
on the date of issuance using the Black-Scholes option-pricing model was $6.25
for an aggregate fair value of $35.9 million. The fair value of the January 28,
2000 Warrants was estimated on the date of issuance using the following
assumptions: risk-free interest rate of 6.3% and an expected life of
approximately 8 years. The fair value of the Series A Preferred Stock was
determined as the difference between the aggregate amount of $65 million and
the value of the January 28, 2000 Warrants, or $29.1 million.
On May 2, 2000 the Company sold the Sub-note and the May 2, 2000 Warrants to
Quantum Industrial Partners LDC. See Note 2 of the Notes to Condensed
Consolidated Financial Statements.
On May 31, 2000, the Company sold an aggregate of 200,000 shares of Series C
Convertible Preferred Stock, par value $.01 per share (the "Series C Preferred
Stock"), and warrants (the "May 31, 2000 Warrants") to purchase an aggregate of
846,154 shares of its Common Stock, par value $.01 per share (the "Common
Stock"), for an aggregate consideration of $20.0 million in a private placement
transaction with Quantum Industrial Partners, LDC. The Series C Preferred Stock
has an initial liquidation preference of $100 per share and an initial
conversion price of $6.25 per share (in each case, subject to adjustment upon
occurrence of certain events). The Series C Preferred Stock is convertible into
Common Stock at any time. The Series C Preferred Stock has an annual dividend
rate of 15% of the then current liquidation preference, and is entitled to
share ratably in any dividends paid on the Common Stock. Dividends will accrue
if not paid in cash, and the liquidation preference will be increased by the
amount of any accrued but unpaid dividends. The Series C Preferred Stock may be
redeemed at any time after October 1, 2008, upon written request of the holders
of at least 75% of the then outstanding shares. The Company may redeem all
outstanding shares of the Series C Preferred Stock if, at any time, less than
10% of the total Series C Preferred Stock originally sold on May 31, 2000
remains outstanding. The May 31, 2000 Warrants are exercisable at any time
until May 31, 2010, at an exercise price of $.01 per share of Common Stock,
payable in cash or in shares of Common Stock.
Upon issuance of the Series C Preferred Stock and May 31, 2000 Warrants, the
Company recorded the value of each instrument in the Statement of Consolidated
Financial Position based upon the fair market value of each instrument at the
time of issuance. The fair value per May 31, 2000 Warrant on the date of
issuance using the Black-Scholes option-pricing model was $4.94 for an
aggregate fair value of $4.2 million. The fair value of the May 31, 2000
Warrants was estimated on the date of issuance using the following assumptions:
risk-free interest rate of 6.3% and an expected life of approximately 8 years.
The fair value of the Series C Preferred Stock was determined as the difference
between the aggregate amount of $20.0 million and the value of the May 31, 2000
Warrants, or $15.8 million.
In the three months ended June 30, 2000, the Company has accrued $2.7
million in total preferred dividend expense and $0.2 million in total
amortization expense related to the discounts on the preferred stock. In the
six months ended June 30, 2000, the Company has accrued $4.3 million in total
preferred dividend expense and $0.4 million in total amortization expense
related to the discounts on the preferred stock. These amounts have been
recorded in the Company's Statement of Consolidated Operations and
Comprehensive Income as Preferred dividends.
8
<PAGE>
OUTBOARD MARINE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. 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 a curtailment gain and
restructuring income.
<TABLE>
<CAPTION>
Marine
Engines Boats Other Total
------- ------ ------ ------
(Dollars in millions)
<S> <C> <C> <C> <C>
Three Months Ended June 30, 2000
Revenues................................... $155.7 $140.9 $ -- $296.6
Intersegment revenues...................... 13.2 -- -- 13.2
Earnings (loss) from operations............ (14.4) 5.0 (5.4) (14.8)
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
Six Months Ended June 30, 2000
Revenues................................... $294.2 $271.5 $ -- $565.7
Intersegment revenues...................... 28.3 -- -- 28.3
Earnings (loss) from operations............ (29.0) 6.1 (12.9) (35.8)
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
</TABLE>
A reconciliation of loss from operations for combined reportable segments to
consolidated loss before provision for income taxes is as follows:
<TABLE>
<CAPTION>
Three Six
Months Ended Months Ended
June 30, June 30,
------------- -------------
2000 1999 2000 1999
------ ----- ------ -----
(Dollars in millions)
<S> <C> <C> <C> <C>
Earnings (loss) from operations for
reportable segments........................ $(14.8) $40.9 $(35.8) $37.1
Interest expense............................ 9.6 7.2 17.9 14.5
Other income, net........................... (0.8) (1.2) (1.5) (1.5)
------ ----- ------ -----
Earnings (loss) before provision for income
taxes...................................... $(23.6) $34.9 $(52.2) $24.1
====== ===== ====== =====
</TABLE>
8. Subsequent Events
On July 19, 2000, the Company sold 200,000 shares of Series D Convertible
Preferred Stock, par value $.01 per share (the "Series D Preferred Stock"), and
warrants (the "July 19, 2000 Warrants") to purchase 846,154 shares of its
Common Stock, par value $.01 per share (the "Common Stock"), for an aggregate
consideration of $20.0 million in a private placement transaction to Quantum
Industrial Partners, LDC. The Series D Preferred Stock has an initial
liquidation preference of $100 per share and an initial conversion price of
$6.25 per share (in each case, subject to adjustment upon occurrence of certain
events). The Series D
9
<PAGE>
OUTBOARD MARINE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Preferred Stock is convertible into Common Stock at any time. The Series D
Preferred Stock has an annual dividend rate of 15% of the then current
liquidation preference, and is entitled to share ratably in any dividends paid
on the Common Stock. Dividends will accrue if not paid in cash, and the
liquidation preference will be increased by the amount of any accrued but
unpaid dividends. The Series D Preferred Stock may be redeemed at any time
after October 1, 2008, upon written request of the holders of at least 75% of
the then outstanding shares. The Company may redeem all outstanding shares of
the Series D Preferred Stock if, at any time, less than 10% of the total Series
D Preferred Stock originally sold on July 19, 2000 remains outstanding. The
July 19, 2000 Warrants are exercisable at any time until July 19, 2010, at an
exercise price of $.01 per share of common stock, payable in cash or in shares
of Common Stock. The Company intends to use the proceeds from the sale of the
Series D Preferred Stock and July 19, 2000 Warrants for general corporate
purposes, including funding its operations, working capital and making capital
expenditures.
As discussed in Note 2 of the Notes to Condensed Consolidated Financial
Statements, on August 9, 2000 the Company entered into a Ninth Amendment to the
Amended and Restated Loan and Security Agreement.
9. Subsidiary Guarantor Information
On May 21, 1998, the Company issued $160.0 million of 10 3/4% Senior Notes
due 2008 ("Notes"). 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. As of and through June 30, 2000, the Guarantor Subsidiaries were
wholly-owned, but not the only wholly-owned, subsidiaries of the Company. 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 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 Holdings LLC during 1997.
10
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
ASSETS
------
Current Assets:
Cash and cash
equivalents.......... $ 26.4 $ -- $ 16.4 $ -- $ 42.8
Receivables, net...... 57.9 22.2 43.7 -- 123.8
Intercompany
receivables
(payables)........... 5.2 7.9 (13.1) -- --
Inventories, net...... 103.9 51.2 39.1 (2.6) 191.6
Other current assets.. 13.9 1.5 7.1 -- 22.5
------- ------- ------- -------- -------
Total current
assets............. 207.3 82.8 93.2 (2.6) 380.7
Restricted cash......... 22.3 -- -- -- 22.3
Property, plant and
equipment, net......... 141.5 31.9 17.5 -- 190.9
Product tooling, net.... 23.3 5.4 0.2 -- 28.9
Goodwill and other
intangibles, net....... 179.4 -- 4.6 -- 184.0
Other assets............ 62.8 0.5 7.0 -- 70.3
Intercompany notes,
net.................... (125.2) -- 125.2 -- --
Investment in
subsidiaries........... 268.3 -- -- (268.3) --
------- ------- ------- -------- -------
Total assets........ $ 779.7 $ 120.6 $ 247.7 $ (270.9) $ 877.1
======= ======= ======= ======== =======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
Current Liabilities:
Loan payable.......... $ 66.4 $ -- $ -- $ -- $ 66.4
Accounts payable...... 72.5 18.8 8.8 -- 100.1
Accrued and other..... 126.3 33.2 21.7 -- 181.2
Current maturities of
long-term debt....... 6.6 0.4 -- -- 7.0
------- ------- ------- -------- -------
Total current
liabilities........ 271.8 52.4 30.5 -- 354.7
Long-term debt.......... 233.8 1.9 -- -- 235.7
Other non-current
liabilities............ 162.4 7.7 7.5 -- 177.6
Preferred stock......... 49.6 -- -- -- 49.6
Shareholders'
investment............. 62.1 58.6 209.7 (270.9) 59.5
------- ------- ------- -------- -------
Total liabilities
and shareholders'
investment......... $ 779.7 $ 120.6 $ 247.7 $ (270.9) $ 877.1
======= ======= ======= ======== =======
</TABLE>
11
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
ASSETS
------
Current Assets:
Cash and cash
equivalents.......... $ 9.3 $ 0.5 $ 15.2 $ -- $ 25.0
Receivables, net...... 58.1 16.8 30.0 -- 104.9
Intercompany
receivables
(payables)........... (34.3) 1.2 33.1 -- 0.0
Inventories, net...... 102.6 46.7 41.1 (1.8) 188.6
Other current assets.. 9.6 2.0 5.6 -- 17.2
------ ------ ------ ------- ------
Total current
assets............. 145.3 67.2 125.0 (1.8) 335.7
Restricted cash......... 30.6 -- -- -- 30.6
Property, plant and
equipment, net......... 150.1 32.4 18.1 (0.1) 200.5
Product tooling......... 24.3 5.0 0.2 -- 29.5
Goodwill and other
intangibles, net....... 181.3 -- 5.2 -- 186.5
Other assets............ 56.0 2.5 7.1 -- 65.6
Intercompany notes,
net.................... (88.3) -- 88.3 -- --
Investment in
subsidiaries........... 256.5 -- -- (256.5) --
------ ------ ------ ------- ------
Total assets........ $755.8 $107.1 $243.9 $(258.4) $848.4
====== ====== ====== ======= ======
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
Current Liabilities:
Loan payable.......... $ 58.0 $ -- $ -- $ -- $ 58.0
Accounts payable...... 73.6 16.4 9.2 -- 99.2
Accrued and other..... 133.5 29.6 21.7 (1.6) 183.2
Current maturities of
long-term debt....... 8.2 0.2 -- -- 8.4
------ ------ ------ ------- ------
Total current
liabilities........ 273.3 46.2 30.9 (1.6) 348.8
Long-term debt.......... 239.3 2.1 -- -- 241.4
Other non-current
liabilities............ 162.6 7.7 7.6 -- 177.9
Shareholders'
investment............. 80.6 51.1 205.4 (256.8) 80.3
------ ------ ------ ------- ------
Total liabilities
and shareholders'
investment......... $755.8 $107.1 $243.9 $(258.4) $848.4
====== ====== ====== ======= ======
</TABLE>
12
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
THREE MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Net sales............... $161.3 $138.9 $79.2 $(82.8) $296.6
Cost of goods sold...... 144.6 121.0 68.2 (82.3) 251.5
------ ------ ----- ------ ------
Gross earnings........ 16.7 17.9 11.0 (0.5) 45.1
Selling, general and
administrative
expense................ 38.8 13.6 7.5 -- 59.9
------ ------ ----- ------ ------
Earnings (loss) from
operations........... (22.1) 4.3 3.5 (0.5) (14.8)
Non-operating expense
(income)............... 11.6 (0.1) (2.7) -- 8.8
Equity earnings (loss)
in subsidiaries........ 9.2 -- -- (9.2) 0.0
------ ------ ----- ------ ------
Earnings (loss) before
provision for income
taxes................ (24.5) 4.4 6.2 (9.7) (23.6)
Provision for income
taxes.................. -- -- 1.5 -- 1.5
------ ------ ----- ------ ------
Net earnings (loss)
before preferred
dividends............ (24.5) 4.4 4.7 (9.7) (25.1)
Preferred dividends..... 2.9 -- -- -- 2.9
------ ------ ----- ------ ------
Net earnings (loss) of
common shareholders.. $(27.4) $ 4.4 $ 4.7 $ (9.7) $(28.0)
====== ====== ===== ====== ======
Net earnings (loss) of
common shareholders.... $(27.4) $ 4.4 $ 4.7 $ (9.7) $(28.0)
Other comprehensive
expense
Foreign currency
translation
adjustment........... -- -- (1.3) -- (1.3)
------ ------ ----- ------ ------
Other comprehensive
expense............ -- -- (1.3) -- (1.3)
------ ------ ----- ------ ------
Comprehensive
income (loss).... $(27.4) $ 4.4 $ 3.4 $ (9.7) $(29.3)
====== ====== ===== ====== ======
</TABLE>
13
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
THREE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in Millions)
<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 -- 43.3
Restructuring income.... (14.0) -- -- -- (14.0)
------ ------ ----- ------ ------
Earnings (loss) from
operations........... 33.6 3.2 4.2 (0.1) 40.9
Non-operating expense
(income)............... 8.9 -- (2.9) -- 6.0
Equity earnings (loss)
in subsidiaries........ 9.2 -- -- (9.2) --
------ ------ ----- ------ ------
Earnings (loss) before
provision for income
taxes................ 33.9 3.2 7.1 (9.3) 34.9
Provision for income
taxes.................. -- -- 1.1 -- 1.1
------ ------ ----- ------ ------
Net earnings (loss)
before preferred
dividends............ 33.9 3.2 6.0 (9.3) 33.8
Preferred dividends..... -- -- -- -- --
------ ------ ----- ------ ------
Net earnings (loss) of
common shareholders.. $ 33.9 $ 3.2 $ 6.0 $ (9.3) $ 33.8
====== ====== ===== ====== ======
Net earnings (loss) of
common shareholders.... $ 33.9 $ 3.2 $ 6.0 $ (9.3) $ 33.8
Other comprehensive
expense
Foreign currency
translation
adjustment........... (0.4) -- 1.1 -- 0.7
Minimum pension
liability.......... 15.5 -- -- -- 15.5
------ ------ ----- ------ ------
Other comprehensive
expense............ 15.1 -- 1.1 -- 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
SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Net sales............... $305.8 $270.9 $141.4 $(152.4) $565.7
Cost of goods sold...... 270.0 236.4 121.5 (150.7) 477.2
------ ------ ------ ------- ------
Gross earnings........ 35.8 34.5 19.9 (1.7) 88.5
Selling, general and
administrative
expense................ 81.1 28.4 14.8 -- 124.3
------ ------ ------ ------- ------
Earnings (loss) from
operations........... (45.3) 6.1 5.1 (1.7) (35.8)
Non-operating expense
(income)............... 20.3 (0.2) (3.7) -- 16.4
Equity earnings (loss)
in subsidiaries........ 12.5 -- -- (12.5) --
------ ------ ------ ------- ------
Earnings (loss) before
provision for income
taxes................ (53.1) 6.3 8.8 (14.2) (52.2)
Provision for income
taxes.................. -- -- 2.6 -- 2.6
------ ------ ------ ------- ------
Net earnings (loss)
before preferred
dividends............ (53.1) 6.3 6.2 (14.2) (54.8)
Preferred dividends..... 4.7 -- -- -- 4.7
------ ------ ------ ------- ------
Net earnings (loss) of
common shareholders.. $(57.8) $ 6.3 $ 6.2 $ (14.2) $(59.5)
====== ====== ====== ======= ======
Net earnings (loss) of
common shareholders.... $(57.8) $ 6.3 $ 6.2 $ (14.2) $(59.5)
Other comprehensive
expense
Foreign currency
translation
adjustment........... (0.1) -- (2.7) -- (2.8)
------ ------ ------ ------- ------
Other comprehensive
expense............ (0.1) -- (2.7) -- (2.8)
------ ------ ------ ------- ------
Comprehensive
income (loss).... $(57.9) $ 6.3 $ 3.5 $ (14.2) $(62.3)
====== ====== ====== ======= ======
</TABLE>
15
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in Millions)
<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 income.... (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)
in 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)
before preferred
dividends............ 22.6 4.9 11.3 (16.9) 21.9
Preferred dividends..... 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------- ------
Net earnings (loss) of
common shareholders.. $ 22.6 $ 4.9 $ 11.3 $ (16.9) $ 21.9
====== ====== ====== ======= ======
Net earnings (loss) of
common shareholders.... $ 22.6 $ 4.9 $ 11.3 $ (16.9) $ 21.9
Other comprehensive
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
expense............ 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 CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net earnings (loss) of
common shareholders... $(57.8) $6.3 $ 6.2 $(14.2) $(59.5)
Adjustments to
reconcile net earnings
(loss) of common
shareholders to net
cash provided by (used
for) operations:
Depreciation and
amortization........ 23.6 2.4 1.0 -- 27.0
Changes in current
accounts excluding
the effects of
noncash
transactions:
Decrease (increase)
in receivables.... 0.2 (5.4) (13.7) -- (18.9)
Decrease (increase)
in intercompany
receivables and
payables, and
intercompany note
receivables and
note payables..... (2.6) (6.7) 9.3 -- --
Decrease (increase)
in inventories.... (1.3) (4.5) 2.0 0.8 (3.0)
Decrease (increase)
in other current
assets............ (4.3) 0.5 (1.5) -- (5.3)
Increase (decrease)
in accounts
payable, accrued
liabilities and
income taxes...... (8.3) 6.0 (0.4) 1.6 (1.1)
Other, net........... (5.9) 2.2 (1.0) (0.7) (5.4)
------ ---- ----- ------ ------
Net cash provided
by (used for)
operating
activities....... (56.4) 0.8 1.9 (12.5) (66.2)
------ ---- ----- ------ ------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Expenditures for plant
and equipment, and
tooling............... (13.8) (3.2) (0.3) -- (17.3)
Proceeds from sale of
plant and equipment... 2.8 2.0 -- -- 4.8
Equity earnings
(loss)................ (12.5) -- -- 12.5 --
Change in subsidiary
investment............ -- -- -- -- --
Other, net............. -- -- -- -- --
------ ---- ----- ------ ------
Net cash provided
by (used for)
investing
activities....... (23.5) (1.2) (0.3) 12.5 (12.5)
------ ---- ----- ------ ------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net increase in short-
term debt............. 8.4 -- -- -- 8.4
Payments of long-term
debt, including
current maturities.... (6.0) (0.1) -- -- (6.1)
Issuance of preferred
stock and warrants.... 86.6 -- -- -- 86.6
Change in subsidiary
capital............... -- -- -- -- --
Change in restricted
cash.................. 8.3 -- -- -- 8.3
Other, net............. -- -- -- -- --
------ ---- ----- ------ ------
Net cash provided
by (used for)
financing
activities....... 97.3 (0.1) -- -- 97.2
------ ---- ----- ------ ------
Exchange Rate Effect on
Cash................... (0.3) -- (0.4) -- (0.7)
------ ---- ----- ------ ------
Net increase (decrease)
in Cash and Cash
Equivalents............ 17.1 (0.5) 1.2 -- 17.8
Cash and Cash
Equivalents at
Beginning of Period.... 9.3 0.5 15.2 -- 25.0
------ ---- ----- ------ ------
Cash and Cash
Equivalents at End of
Period................. $ 26.4 $-- $16.4 $ -- $ 42.8
====== ==== ===== ====== ======
</TABLE>
17
<PAGE>
OUTBOARD MARINE CORPORATION
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net earnings (loss) of
common shareholders... $ 22.6 $ 4.9 $ 11.3 $(16.9) $ 21.9
Adjustments to
reconcile net earnings
(loss) of common
shareholders to net
cash provided by (used
for) operations:
Depreciation and
amortization........ 15.9 7.5 1.2 -- 24.6
Curtailment (gain)... (7.1) -- -- -- (7.1)
Restructuring
income.............. (14.0) -- -- -- (14.0)
Changes in current
accounts excluding
the effects of
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, accrued
liabilities and
income taxes...... 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)
Payments of long-term
debt, including
current maturities.... (13.3) 2.4 -- -- (10.9)
Change in subsidiary
capital............... 0.1 4.2 0.3 (4.6) --
Change in 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 (decrease)
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
FORM 10-Q
PART 1, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
JUNE 30, 2000
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements of the Company, together with the notes
thereto, included elsewhere herein.
General
Market Share. Based on third-party information, as of June 30, 2000, the
Company's twelve-month rolling North American outboard engine market share was
28%. This is down from the December 31, 1999 level of 31%. Boat market share,
as of June 30, 2000, has remained at its December 31, 1999 level of
approximately 9%.
Results of Operations
Periods Ended June 30, 2000 Compared to Periods Ended June 30, 1999
Net Sales. Net sales decreased to $296.6 million in the three months ended
June 30, 2000, from $315.6 million in the three months ended June 30, 1999, a
decrease of $19.0 million or 6.0%. Net sales decreased to $565.7 million in the
six months ended June 30, 2000, from $570.8 million in the six months ended
June 30, 1999, a decrease of $5.1 million or 0.9%. The decreased sales were a
result of lower marine engine segment sales which decreased $36.0 million and
$37.7 million in the quarter and year-to-date periods versus the comparable
periods in the prior year. This decrease occurred as worldwide engine unit
sales were negatively affected by third-party supplier problems. Boat segment
sales increased $17.0 million and $32.6 million in the quarter and year-to-date
periods versus the comparable periods in the prior year as a result of
continued higher unit sales of recreational and fishing boats.
Cost of Goods Sold. Cost of goods sold increased to $251.5 million in the
three months ended June 30, 2000 from $245.4 million in the three months ended
June 30, 1999, an increase of $6.1 million or 2.5%. Gross earnings in the three
months ended June 30, 2000 was 15.2% of net sales as compared with 22.2% of net
sales for the comparable period in 1999. Cost of goods sold increased to $477.2
million in the six months ended June 30, 2000 from $447.3 million in the six
months ended June 30, 1999, an increase of $29.9 million or 6.7%. Gross
earnings in the six months ended June 30, 2000 was 15.6% of net sales as
compared with 21.6% of net sales for the comparable period in 1999. The
reduction in gross earnings percent for the quarter and year-to-date periods
was attributable mainly to the marine engine segment which had higher
manufacturing costs versus the comparable periods in the prior years. The
increased manufacturing costs were primarily driven by spending related to
productivity and quality improvement initiatives at each engine facility and
manufacturing inefficiency and disruption costs incurred as a result of third-
party supplier problems.
Selling, General and Administrative ("SG&A") Expense. SG&A expense increased
to $59.9 million in the three months ended June 30, 2000 from $43.3 million in
the three months ended June 30, 1999, an increase of $16.6 million or 38.3%.
SG&A expense as a percentage of net sales increased to 20.2% in the three
months ended June 30, 2000 from 13.7% in the three months ended June 30, 1999.
SG&A expense increased to $124.3 million in the six months ended June 30, 2000
from $100.4 million in the six months ended June 30, 1999, an increase of $23.9
million or 23.8%. SG&A expense as a percentage of net sales increased to 22.0%
in the six months ended June 30, 2000 from 17.6% in the six months ended June
30, 1999. The SG&A expense increase for both the quarter and year-to-date
periods was primarily due to (i) the prior-year periods including a $7.1
million curtailment gain to reflect changes made to the pension and
postretirement plans and (ii) the prior-year
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<PAGE>
periods including a favorable legal settlement. In addition, the year-to-date
period for 2000, as compared to the prior year, was negatively impacted by
increased marketing expense for promotional programs.
Restructuring Charge. During the three months ended June 30, 1999, the
Company recorded a $14.0 million reversal of a previously recorded
restructuring charge. The adjustment resulted from the Company completing its
negotiations of the closing agreements with the unions representing workers in
the Milwaukee, WI and Waukegan, IL manufacturing plants.
Earnings (Loss) from Operations. The loss from operations was $14.8 million
in the three months ended June 30, 2000 compared with earnings of $40.9 million
in the three months ended June 30, 1999, a decrease of $55.7 million. The loss
from operations was $35.8 million in the six months ended June 30, 2000
compared with earnings of $37.1 million in the six months ended June 30, 1999,
a decrease of $72.9 million. The decreases were attributable to higher cost of
goods sold and SG&A expense, as discussed above, along with the non-recurring
restructuring income in 1999.
Non-Operating Expense (Income). Interest expense increased to $9.6 million
in the three months ended June 30, 2000 from $7.9 million in the three months
ended June 30, 1999. Interest expense increased to $17.9 million in the six
months ended June 30, 2000 from $16.0 million in the six months ended June 30,
1999. The increased interest expense resulted from increased debt levels as
compared to those in the prior year. Other non-operating income was $0.8
million in the three months ended June 30, 2000 compared to $1.9 million in the
three months ended June 30, 1999. Other non-operating income was $1.5 million
in the six months ended June 30, 2000 compared to $3.0 million in the six
months ended June 30, 1999.
Provision for Income Taxes. The provision for income taxes was $1.5 million
in the three months ended June 30, 2000 as compared to $1.1 million in the
three months ended June 30, 1999. The provision for income taxes was $2.6
million in the six months ended June 30, 2000 as compared to $2.2 million in
the six months ended June 30, 1999. The income tax provisions 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."
Preferred Dividends. Preferred dividend expense, related to the Company's
Convertible Preferred Stock (see Note 6 of the Notes to the Condensed
Consolidated Financial Statements), was $2.9 million in the three months ended
June 30, 2000 reflecting an accrual of $2.7 million in preferred dividend
expense and $0.2 million in amortization expense related to the discount on the
preferred stock. Preferred dividend expense was $4.7 million in the six months
ended June 30, 2000 reflecting an accrual of $4.3 million in preferred dividend
expense and $0.4 million in amortization expense related to the discount on the
preferred stock.
Financial Condition; Liquidity and Capital Resources
The Company's business is seasonal in nature with receivables, inventory,
and short-term borrowings usually at their peak levels in the Company's fiscal
quarter ending March 31 and declining thereafter as the Company's products
enter the consumer buying season. Current assets at June 30, 2000 increased
$45.0 million from December 31, 1999 due primarily to increases in receivables
and cash and cash equivalents balances. Receivables at June 30, 2000 increased
$18.9 million due primarily to the seasonal nature of the Company's business
(i.e., increased sales volume during the summer season). Cash and cash
equivalents increased by $17.8 million due primarily to the Company's issuance
of preferred stock and warrants in May 2000 (see Note 6 of the Notes to
Condensed Consolidated Financial Statements). The Company had $22.3 million in
restricted cash at June 30, 2000, which cash is held in interest reserve
accounts, as required, for the benefit of the Company's senior lenders, as
discussed in more detail below.
Cash used for operations was $66.2 million for the six months ended June 30,
2000 compared with cash provided by operations of $52.4 million for the six
months ended June 30, 1999. This increase in cash used
20
<PAGE>
was driven primarily by the increased net loss as well as the increase in
accounts receivable. Expenditures for plant and equipment and tooling were
$17.3 million for the six months ended June 30, 2000 compared to $22.1 million
for the six months ended June 30, 1999. The lower level of expenditures is
primarily due to the timing of implementing certain capital projects in 2000.
The $17.3 million was used primarily for production enhancements, information
technology projects, and new model development.
Total short-term debt was $66.4 million at June 30, 2000, and was composed
of (i) borrowings under the Company's Revolving Credit Facility of $53.0
million and (ii) a Subordinated Note payable to Quantum Industrial Partners LDC
of $13.4 million. These borrowings were used to fund operations (as discussed
above), pay $5.8 million of the Company's Medium-Term Notes Series A which came
due in March 2000, and fund capital expenditures.
On July 19, 2000, the Company sold 200,000 shares of Series D Convertible
Preferred Stock, par value $.01 per share, and warrants to purchase 846,154
shares of its Common Stock, par value $.01 per share, for an aggregate
consideration of $20.0 million in a private placement transaction to Quantum
Industrial Partners, LDC. (See Note 8 of the Notes to Condensed Consolidated
Financial Statements).
On May 31, 2000, the Company sold an aggregate of 200,000 shares of Series C
Convertible Preferred Stock, par value $.01 per share, and warrants to purchase
846,154 shares of its Common Stock, par value $.01 per share, for an aggregate
consideration of $20.0 million in a private placement transaction with Quantum
Industrial Partners, LDC. (See Note 6 of the Notes to Condensed Consolidated
Financial Statements).
On May 2, 2000 the Company sold a $15.0 million Subordinated Note (the "Sub-
note") and warrants to purchase 330,000 shares of the Company's Common Stock,
par value $0.01, to Quantum Industrial Partners LDC. The Sub-note bears an
interest rate of 15% and has an initial maturity date of May 31, 2000, which
can be extended for four additional 30-day periods upon 5 days written notice
by the Company. The Sub-note is convertible into shares of the Company's Series
B Convertible Preferred Stock, which if issued, would have terms and conditions
similar in nature to the Series A Preferred Stock. The conversion price of the
Series B Convertible Preferred Stock has not yet been set. The Company has
extended the term of the Sub-note and anticipates that the Sub-note will be
extended to September 30, 2000 at which time it may be converted into shares of
the Company's Series B Convertible Preferred Stock. (See Notes 2 and 6 of the
Notes to Consolidated Financial Statements).
On January 28, 2000, the Company sold an aggregate of 650,000 shares of
Series A Convertible Preferred Stock, par value $.01 per share, and warrants to
purchase an aggregate of 5,750,000 shares of its Common Stock, par value $.01
per share, for an aggregate consideration of $65.0 million, in a private
placement transaction to Quantum Industrial Partners, LDC and Greenlake
Holdings II, LLC. Approximately $15.0 million of the Series A Preferred Stock
was issued in exchange for certain subordinated notes previously issued by the
Company to the purchasers. (See Note 6 of the Notes to Condensed Consolidated
Financial Statements).
The Company intends to use the proceeds from the various sales of
convertible Preferred Stock and Warrants for general corporate purposes,
including funding its working capital and making capital expenditures.
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, which
is in effect to December 31, 2001, 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. As of June 30, 2000, the Company had $53.0 million of
borrowings outstanding and $41.8 million of letters of credit outstanding under
the Revolving Credit Agreement. This resulted in the Company having $1.6
million of unused borrowing capacity under the Revolving Credit Agreement after
considering borrowing base limitations and minimum availability requirements.
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,
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<PAGE>
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. As of June 30, 2000,
the Company was in compliance with all of its covenants except its minimum
earnings before interest, taxes, depreciation and amortization ("EBITDA")
covenant. On August 9, 2000 the Company entered into a Ninth Amendment to the
Amended and Restated Loan and Security Agreement which among other things (i)
waived compliance with the June 30, 2000 EBITDA covenant test and (ii)
established new EBITDA covenant tests for the quarters ending September 30 and
December 31 of 2000. The Company's ability to comply with its covenants will
depend upon several factors, including its ability to generate sales and
maintain costs at acceptable levels. Factors outside the Company's control,
including but not limited to third party supplier issues, may also affect the
Company's compliance.
On May 27, 1998, the Company issued $160.0 million of 10 3/4% Senior Notes
due 2008 ("Notes"), with interest payable semiannually on June 1 and December 1
of each year. The net proceeds from the issuance of the Notes totaled $155.2
million, of which $150.0 million was used to repay debt assumed by the Company
following the merger.
Concurrently with the issuance of the 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 Notes and 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. At June 30, 2000, the "Restricted Cash" held in these interest
reserve accounts totaled $22.3 million. The "Restricted Cash" must remain in
such accounts until at least May 27, 2001. These accounts may be accessed by
the Company for the payment of the respective interest only, provided certain
criteria are met by the Company. In June 2000, the Company accessed $8.6
million of "Restricted Cash" to make its semi-annual interest payments for the
Notes.
At June 30, 2000, $62.9 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. As of June 20, 2000, 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.
At June 30, 2000, an aggregate of $5.0 million principal amount of the
Company's Medium-Term Notes Series A (the "Medium-Term Notes") was outstanding.
The Medium-Term Notes bear interest at a rate of 8.625%. The maturity date of
the Medium-Term Notes are March 15, 2001. Interest on the outstanding Medium-
Term Notes is payable semi-annually each March 30 and September 30 and at
maturity.
At June 30, 2000, $6.7 million principal amount of the Company's 7%
Convertible Subordinated Debentures due 2002 (the "Convertible Debentures") was
outstanding. Following the Merger, the Company 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 $6.7 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 $22.25 per share) such holder's Convertible
Debentures and receive cash in an amount equal to what each holder would 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.
22
<PAGE>
The Company has various Industrial Revenue Bonds outstanding in an aggregate
principal amount of approximately $10.6 million as of June 30, 2000. 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%.
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 $34 million for a period not to exceed 18 months from the date of
invoice. The Company resells any repurchased products at a discount. Losses
incurred under this program have not been material. For the six-month periods
ended June 30, 2000 and 1999, the Company repurchased approximately $0.4
million and $2.5 million of products, respectively. 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, financial position, or cash flows.
The third-party supplier issues, which arose earlier in the year, have
persisted longer than previously anticipated. As a result, the cash flow
consequences have been more severe. The Company believes that its (i) available
cash (ii) the available borrowing capacity under the Credit Agreement (iii) the
interest reserve accounts and (iv) some or all of its other sources of
liquidity, including asset sales, equity infusions and amendment to current
debt, all of which are currently being negotiated should be adequate to meet its
presently anticipated requirements for working capital and accrued liabilities,
capital expenditures, interest payments, and scheduled principal payments
through the remainder of the year. In order to continue to meet its obligations
after such time, the Company will need to significantly improve its operating
performance, refinance its indebtedness, or obtain additional financing. There
can be no assurance that any of these other sources of liquidity would be
consummated or that any additional financing could be obtained on attractive
terms, particularly in view of the Company's high level of debt. In such an
event, the Company could be forced to dispose of assets under circumstances that
might not be favorable to realizing the best prices for such assets.
Furthermore, there can be no assurances that assets could be sold quickly enough
or for proceeds sufficient enough to enable the Company to continue to meet its
obligations. The Company's ability to improve its operating performance and
remain in compliance with the requirements of its financial instruments will
depend upon several factors, including its ability to generate product sales and
maintain costs at acceptable levels. Factors outside the Company's control,
including but not limited to third party supplier issues, may also affect the
Company's compliance. A failure to comply with the conditions of the various
financial instruments, if not cured or waived, could permit acceleration of the
relevant indebtedness and acceleration of indebtedness under other instruments
that may contain cross-default or cross-acceleration provisions.
Third-Party Suppliers
As part of the closure of the Company's Milwaukee, WI engine component
facility, the Company outsourced products manufactured at that facility to
third-party suppliers. In anticipation of the outsourcing of these components,
the Company manufactured an incremental amount of inventory that it, and the
chosen supplier, believed would be adequate to provide the Company with enough
inventory to continue manufacturing through the period necessary to relocate,
validate and begin production of the components. For the most part, incremental
inventory was adequate to allow the Company to manufacture finished outboard
engines until the chosen supplier was able to supply the quantity and quality
of these components required by the Company. However, as a result of various
issues, validation and full production capabilities for some of the components
have taken longer than anticipated and production of finished outboard engines
has been constrained during the first and second quarters of 2000. As
previously stated, these third-party supplier issues have persisted longer than
previously anticipated, and it appears that these supply issues will continue
to affect the Company's production into the second half of 2000. The Company
has dedicated significant resources, in
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<PAGE>
the form of manpower, to help resolve these issues. However, there can be no
assurances that such efforts will be successful.
Euro Currency Conversion
On 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 is 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 is not expected to
have a material impact on the financial position or results of operations of
the Company.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (as amended) and SFAS No.
138 "Accounting for Certain Derivative Instruments and Certain Hedging
Activities" are effective for financial statements for fiscal years beginning
after June 15, 2000, but may be adopted in earlier periods. The Company is
evaluating the new standards' provisions and has not yet determined what the
effect of SFAS Nos. 133 and 138 will be on the earnings and the financial
position of the Company. The Company intends to adopt the standards on January
1, 2001.
Inflation
Inflation may cause or may be accompanied by increased interest rates. Such
increases may adversely affect the sales of the Company's products. Because of
the low level of inflation, inflation did not have a significant impact on
operating results during the quarter ended June 30, 2000.
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 changes in this market risk related to the Company have not
significantly changed in the quarter ended June 30, 2000.
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, product demand
and market acceptance, new product development, availability of raw materials,
the availability
24
<PAGE>
of adequate financing on terms and conditions acceptable to the Company,
adequate supply of third party components, and general economic conditions
including interest rates and consumer confidence. Investors are also directed
to other risks discussed in this report on Form 10-Q and documents filed by the
Company with the Securities and Exchange Commission.
PART 1, ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the information provided at the end
of the Company's 1999 fiscal year.
Part II--OTHER INFORMATION
Item 1. Legal Proceedings
During the three months ended June 30, 2000, no reportable events or
material developments occurred regarding the legal proceedings of the Company.
Item 2. Changes in securities and use of Proceeds:
During the three months ended June 30, 2000, the Company issued the
following securities to Quantum Industrial Partners, LDC: (i) a placement of $15
million convertible subordinated notes and warrants to purchase 330,000 shares
of common stock completed on May 2, 2000, and (ii) a placement of 200,000
shares of convertible Series C Preferred Stock and warrants to purchase 846,154
shares of common stock, completed on May 31, 2000 for an aggregate
consideration of $20 million. The placements were exempt from registration
pursuant to section 4(2) of the Securities Act. Terms of the securities are
further described in Notes 2 and 6 of the Notes to Condensed Consolidated
Financial Statements.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits. Reference is made to the Exhibit Index on page 27.
b. Reports on Form 8-K. On June 5, 2000 the Company filed a Report on Form
8-K announcing that it had sold an aggregate of 200,000 shares of Series C
Convertible Preferred Stock, par value $.01 per share, and warrants to purchase
an aggregate of 846,154 shares of its common stock, par value $.01 per share,
for an aggregate consideration of $20.0 million in a private placement
transaction with Quantum Industrial Partners, LDC.
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<PAGE>
SIGNATURES
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
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Eric T. Martinez Chief Financial Officer August 14, 2000
______________________________________ (Principal Financial
Eric T. Martinez Officer)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
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"))*
3.1(a)(1) Amendement to Restated Certificate of Incorporation of the Company,
(filed as Exhibit 3.1(a)(1) to the 1999 10K)*
3.1(a)(2) Amendment to Restated Certificate of Incorporation of the Company,
attached hereto and incorporated herein as Exhibit 3.1(a)(2)
3.1(a)(3) Amendment to Restated Certificate of Incorporation of the Company,
attached hereto and incorporated herein as Exhibit 3.1(a)(3)
3.2(a) Amended and Restated bylaws of the Company (filed as Exhibit 3(B)
to 3.2(a) 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 27, 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 Depositary 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)*
4.5 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*
4.6 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*
4.7 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*
4.8 Outboard Marine Corporation Certificate of the Powers,
Designations, Preferences and Rights of the Series A Convertible
Preferred Stock, Par Value $.01 Per Share (filed as Exhibit 4.8 to
the 1999 10-K)*
4.9 Series A Convertible Preferred Stock and Warrant Purchase Agreement
(filed as Exhibit 4.9 to the 1999 10-K)*
4.10 Stockholder Agreement between Outboard Marine Corporation, Quantum
Industrial Partners LDC and Greenlake Holdings II LLC (filed as
Exhibit 4.10 to the 1999 10-K)*
4.11 Warrant to Purchase Shares of Common Stock of Outboard Marine
Corporation by Quantum Industrial Partners LDC (filed as Exhibit
4.11 to the 1999 10-K)*
4.12 Warrant to Purchase Shares of Common Stock of Outboard Marine
Corporation by Greenlake Holdings II LLC (filed as Exhibit 4.12 to
the 1999 10-K)*
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.13 Registration Rights Agreement between Outboard Marine Corporation,
Quantum Industrial Partners LDC, Greenlake Holdings II LLC and
Greenmarine Holdings LLC (filed as Exhibit 4.13 to the 1999 10-K)*
4.14 Subordinated Note and Warrant Purchase Agreement between Outboard
Marine Corporation, Greenlake Holdings III LLC and Quantum Industrial
Partners LDC (filed as Exhibit 4.14 to the March 31, 2000 10-Q)*
4.15 Certificate of Amendment of Certificate of Powers, Designations,
Preferences and Rights of the Series A Convertible Preferred Stock Par
Value $.01 per share of Outboard Marine Corporations (filed as Exhibit
4.15 to the March 31, 2000 10-Q)*
4.16 First Amendment to Stockholder Agreement between Outboard Marine
Corporation, Quantum Industrial Partners LDC, Greenlake Holdings II
LLC & Greenlake Holdings III LLC (filed as Exhibit 4.16 to the March
31, 2000 10-Q)*
4.17 First Amendment to Registration Rights Agreement between Outboard
Marine Corporation, Quantum Industrial Partners LDC, Greenlake
Holdings II LLC, Greenlake Holdings III LLC and Greenmarine Holdings
LLC (filed as Exhibit 4.17 to the March 31, 2000 10-Q)*
4.18 Warrant to purchase Shares of Common Stock of Outboard Marine
Corporation by Quantum Industrial Partners LDC (filed as Exhibit 4.18
to the March 31, 2000 10-Q)*
4.19 Series C Convertible Preferred Stock and Warrant Purchase Agreement,
attached hereto and incorporated herein as Exhibit 4.19
4.20 Second Amendment to Stockholder Agreement between Outboard Marine
Corporation, Quantum Industrial Partners LDC, Greenlake Holdings II
LLC and Greenlake Holdings III LLC, attached hereto and incorporated
herein as Exhibit 4.20
4.21 Warrant to Purchase Shares of Common Stock of Outboard Marine
Corporation by Quantum Industrial Partners LDC, attached hereto and
incorporated herein as Exhibit 4.21
4.22 Second Amendment to Registration Rights Agreement between Outboard
Marine Corporation, Quantum Industrial Partners LDC, Greenlake
Holdings II LLC, Greenlake Holdings III LLC and Greenmarine Holdings
LLC, attached hereto and incorporated herein as Exhibit 4.22
4.23 Certificate of Amendment of Certificate of Powers, Designations,
Preferences and Rights of the Series A Convertible Preferred Stock Par
Value $.01 per share of Outboard Marine Corporations, attached hereto
and incorporated herein as Exhibit 4.23
4.24 Certificate of Powers, Designations, Preferences and Rights of the
Series C Convertible Preferred Stock Par Value $.01 per share of
Outboard Marine Corporations, attached hereto and incorporated herein
as Exhibit 4.24
4.25 Series D Convertible Preferred Stock and Warrant Purchase Agreement,
attached hereto and incorporated herein as Exhibit 4.25
4.26 Third Amendment to Stockholder Agreement between Outboard Marine
Corporation, Quantum Industrial Partners LDC, Greenlake Holdings II
LLC, Greenlake Holdings III LLC and Greenlake Holdings IV LLC,
attached hereto and incorporated herein as Exhibit 4.26
4.27 Warrant to Purchase Shares of Common Stock of Outboard Marine
Corporation by Quantum Industrial Partners LDC, attached hereto and
incorporated herein as Exhibit 4.27
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.28 Third Amendment to Registration Rights Agreement between Outboard
Marine Corporation, Quantum Industrial Partners LDC, Greenlake
Holdings II LLC, Greenlake Holdings III LLC, Greenlake Holdings IV LLC
and Greenmarine Holdings LLC, attached hereto and incorporated herein
as Exhibit 4.28
4.29 Certificate of Amendment of Certificate of Powers, Designations,
Preferences and Rights of the Series A Convertible Preferred Stock Par
Value $.01 per share of Outboard Marine Corporations, attached hereto
and incorporated herein as Exhibit 4.29
4.30 Certificate of Amendment of Certificate of Powers, Designations,
Preferences and Rights of the Series C Convertible Preferred Stock Par
Value $.01 per share of Outboard Marine Corporations, attached hereto
and incorporated herein as Exhibit 4.30
4.31 Certificate of Powers, Designations, Preferences and Rights of the
Series D Convertible Preferred Stock Par Value $.01 per share of
Outboard Marine Corporations, attached hereto and incorporated herein
as Exhibit 4.31
10.1 Severance Agreements 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 Employment Agreement of Mr. Hines dated October 6, 1997, reference is
made to Exhibit 10(J) to the 1997 10-K*
10.3 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 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 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)*
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
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 Payee (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 of
July 30, 1999 (filed as Exhibit 10.16 to the Company's Quarterly
Report on form 10-Q for the fiscal quarter ended June 30, 1999)*
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)*
10.22 Seventh Amendment to Amended and Restated Loan and Security Agreement
between the Company and Bank of America, N.A., dated effective as of
October 27, 1999 (filed as Exhibit 10.22 to the Form 10-Q for the
period ended September 30, 1999)*
10.23 Eighth Amendment to Amended and Restated Loan and Security Agreement
between the Company and Bank of America, N.A., dated effective as of
January 31, 2000 (filed as Exhibit 10.23 to the 1999 10-K)*
10.24 Subordinated Note dated May 2, 2000 issued by Outboard Marine
Corporation to Quantum Industrial Partners LDC as lender (filed as
Exhibit 10.24 to the March 31, 2000 10-Q)*
10.25 Employment Agreement of Mr. Fix dated May 26, 2000, attached hereto
and incorporated herein as Exhibit 10.25
10.26 Ninth Amendment to Amended and Restated Loan and Security Agreement
between the Company and Bank of America, N.A., dated effective as of
August 9, 2000, attached hereto and incorporated herein as Exhibit
10.26
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
11. Computation of per share earnings (loss)
21. Subsidiaries of Registrant (filed as Exhibit 21 to the 1999 10-K)*.
27. Financial Data Schedule
</TABLE>
--------
* Incorporated herein by reference.
31
