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Outboard Marine Corporation |
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Outboard Marine Corporation |
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Newsclips covering OMC's April 1997 financial problems are provided below:
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Note the bottom was dropping out of the bucket till the Friday April 25th announcement began to take effect Monday 27th and those hoping to profit from a takeover moved in. |
Outboard Marine Eliminates
Dividend, Seeks New Capital
Wall Street Journal 28 April 1997 By Richard Gibson, Staff Reporter
Faced with mounting losses and a need for more capital, Outboard Marine Corp. omitted its quarterly dividend and disclosed that its investment banker is exploring strategic options for the company.
Those options include finding a major investor, creating a joint venture or perhaps even securing new ownership that would strengthen its financial footing and give the company more time to implement a likely restructuring. A recommendation from Salomon Brothers Inc. is expected within 60 to 90 days.
The marine-engine and boat maker announced the developments as it reported a fiscal second-quarter loss of $7.3 million, or 36 cents a share, compared with earnings of $1.1 million, or five cents a share, in the year-earlier period. Sales for the latest quarter ended March 31 fell 17%, to $237 million from $285.5 million, as demand for its recreational products slipped world-wide.
The quarterly loss, which follows a $14.3 million loss in the fiscal first quarter, would have been larger but for asset sales and other factors that contributed $8.8 million in nonoperating income. In the first quarter, the company sold its corporate jet.
Suspending the quarter's 10 cents-per-common-share dividend will save the company about $2 million. There was no indication when the board might reinstate the dividend.
Outboard Marine also acknowledged that while it is in compliance with lending covenants, a significant loss in the current quarter could trigger a default on its $200 million revolving credit agreement.
Given those problems, the Waukegan, Ill., concern said it asked Salomon Brothers, its financial adviser, several weeks ago to "explore strategic alternatives as a means of maximizing shareholder value.
"The company's board of directors believes the capital base ... must be strengthened in order to allow it to accelerate the operational and strategic changes underway," Outboard Marine said. Those changes are flowing from a comprehensive review ordered by the company's chairman, president and chief executive officer, Harry W. Bowman, recruited from Whirlpool Corp. two years ago.
Shares of Outboard Marine, which have lost nearly a third of their value already this year, closed Friday at $12, down 25 cents, in composite New York Stock Exchange trading.
Outboard weighs a sale or merger
Reuters 25 April 1997
CHICAGO, Reuters: Outboard Marine Corp said Friday it is exploring strategic options that could include a sale of the company, a merger, joint venture or equity offer.
Salomon Brothers has been hired as financial adviser for an exploration process that the boat and boat engines maker hopes to complete within 60 to 90 days, said Stan Main, Outboard director of strategic planning.
"It could mean anything from an infusion of capital to the sale of the company. We hope to complete this within 60 to 90 days," Main said in an interview with Reuters.
"We have proactively gone out and solicited companies. We have already begun that process ... It could be a possible joint venture. It could be a merger. It could be, again, anything," Main said.
Shares in Outboard were off 1/2, to 11-3/4, after falling sharply on the opening bell to as low as 10-3/4.
The company early Friday reported a fiscal second quarter net loss of $7.3 million on revenues of $237 million, versus a year-ago profit of $1.1 million on revenues of $285.5 million.
Second-quarter earnings included non-recurring gains of $8.8 million on a legal settlement and asset sales, Main said.
Outboard also said it canceled its regular quarterly dividend of $0.10 per share for the second quarter.
"The board will re-address that issue for Q3," Main said.
The company's recently launched FICHT fuel injection engine technology has been well received and the company is boosting marketing expenses to support it, Main said.
"That whole rollout has gone extremely well. We planned all along to increase our marketing expenses," Main said.
He added that Outboard has made progress toward its goal of moving the FICHT technology into non-marine markets.
"We've sold at least two licenses, but we can't reveal the names of those companies at this point. They were companies outside of the marine industry," Main said.
Outboard derived little upfront income from the license sales, but sees long-term potential from them, he said.
Finally, Main said that the market for large boats and large marine engine sales seems to be holding up, but small boat and engine sales continue to be weak.
"We expect sales in the industry should continue to improve from here. Retail sales are not doing nearly as badly as our shipments because we did reduce dealer inventories significantly in the quarter, as was our plan," he said.
[04-25-97 at 11:28 EDT, Copyright 1997, Reuters America Inc.]
Outboard tack leaves Wall Street wondering
Reuters 25 April 1997
CHICAGO, Reuters: Wall Street was puzzled by the new course charted Friday at Outboard Marine Corp, the largest U.S. maker of outboard engines and the second-largest maker of recreational powerboats.
The Waukegan, Ill.-based company has been stuck in low gear lately, but analysts said its low-debt balance sheet is too ship-shape to justify the sort of announcement just made.
Outboard said it had hired Salomon Brothers to help it explore strategic alternatives, possibly including an equity offering, merger, joint venture or sale of the company.
Outboard also reported a $7.3 million loss for its fiscal second quarter ended March 31 on sales of $237 million, compared to a $1.1 million profit on sales of $285.5 million in the same three-month period a year ago.
Outboard said it needs an infusion of capital to fund various efforts aimed at getting back to full-speed ahead, but analysts and investors were somewhat skeptical.
Shares in the company hit a new low of 10-3/4 Friday after results were posted. Issuing new equity at this point would dilute present holdings at record low levels, investors said.
Moreover, it may be a bad time to seek a buyer, they said.
"When you're flat on the canvas, somebody might come in and buy you, but you're not going to get the value for the stockholder," said industry analyst and investor James Schmitt of Westcountry Financial, a California investment bank.
Mentioned by analysts as potential suitors for Outboard were stern drive joint-venture partner AB Volvo arch-rival marine products maker Brunswick Corp and Milwaukee motorcycle maker Harley-Davidson Inc whose chief executive Richard Teerlink is an Outboard director.
Harley could not be reached for comment. Brunswick and Volvo declined comment.
Anti-trust obstacles would likely impede any match with Brunswick. Harley has been shedding non-core businesses, so may not be in the mood for diversifying, analysts said.
Sweden's Volvo seems the most sensible partner for Outboard, but analysts have their doubts.
Schmitt said Outboard would be better off focusing on righting its core businesses than on pursuing a deal.
The idea of splitting off the boat building business from the engine business was raised again by analysts, although some on Wall Street question what that would achieve.
The powerboat industry suffered a surprise slump last year after consecutive sales gains in 1994 and 1995.
Analysts said the market's only bright spot was in the big-boat end, where Outboard is weak and market leader Brunswick, of Lake Forest, Ill., is dominant.
"My feeling is the industry is not going to turn around quickly," said S&P Equity Group analyst Michael Pizzi.
As a result, Outboard will likely report a loss for the year, he said.
[04-25-97 at 17:51 EDT, Copyright 1997, Reuters America Inc.]
Outboard Marine seeking investor, merger or new owner
Milwaukee Journal Sentinel Online Main Page Business Main Page From the Bloomberg Business News April 26, 1997 Waukegan, Ill.Outboard Marine Corp. said it hired investment banker Salomon Brothers Inc. to seek a major investor, merger partner or new owner to get sorely needed capital and protect shareholder value.
Copyright 1997, Milwaukee Journal Sentinel. All rights reserved.
Milwaukee Journal Sentinel Online Main Page Business Main Page From Journal Sentinel wires April 26, 1997OMC drops dividend - Outboard Marine Corp. said Friday it would not pay a second-quarter dividend and would hire Salomon Brothers Inc. to explore options for maximizing shareholder value. The company also reported a loss for the quarter ended March 31 of $7.3 million, or 36 cents a share, compared with profits of $1.1 million, or 5 cents a share, in the same period a year ago. It blamed the loss on reduced demand both in the United States and abroad. Sales fell to $237 million, from $285.5 million a year ago. The company makes marine engines, boats and accessories. The company has a plant at 6101 N. 64th St. in Milwaukee, as well as a plant in Delavan and a research and development center in Waukesha.
MOODY'S DOWNGRADES
OUTBOARD MARINE CORPORATION'S DEBT RATINGS (SENIOR TO B1); UPDATES THE COMPANY'S RATING OUTLOOK
Moody's Press Release
28 April 1997
Ratings lowered are:
The company's rating for its $200 million revolving credit agreement, expiring on December 31, 1999, to B1 from Ba3
The company's rating for senior unsecured and industrial revenue bonds to B1 from Ba3
The company's subordinated debt rating to B3 from B2
Moody's said that continuing softness in OMC's market for marine engine and boats, lower sales associated with the reduction of inventory overhang, and unabsorbed costs, resulted in weaker operating cash flow generation and an overall reduction in the company's financial flexibility. OMC's management has embarked on a significant program of operational streamlining, tight working capital management, cost reduction, better distribution, as well as faster reaction to market and demand changes. Nevertheless, market fundamentals are evolving, and they are unlikely to result in demand trends reminiscent of the strong market dynamics of the 1980s.
OMC has announced that, given the significant financial resources needed to maintain a strong competitive profile and introduce new products, and to complete the company's operational and marketing turnaround, it is exploring strategic alternatives as a means of maximizing shareholder value. In addition, the board has elected not to declare a dividend for the third quarter.
Moody's updated its outlook on Outboard Marine Corporation's debt ratings as follows:
"The nature of any strategic alternative undertaken by the company and its impact on OMC's credit protection measurements, the fundamentals in the company's marine segment market, as well as progress in the company's turnaround efforts, will be key rating factors going forward. Failure to increase OMC's operational and financial flexibility could result in further weakening of the company's credit profile".
Based in Waukegan, Illinois, Outboard Marine Corporation is a leading manufacturer and marketer of marine engines, boats and accessories.
Copyright © 1997 Moody's Investors Service
Moodys Rating Explanation
By RBBI 30 April 1997
For those interested in better understanding the Moody's ratings and the significance of the new ratings please visit Moody Investors Service web site's ratings explanation page.
Outboard Marine Sr Debt Downgraded To B1 By Moody's
AP-Dow Jones News Service 28 April 1997
NEW YORK -- Moody's Investors Service said it lowered Outboard Marine Corporation's (OMC) long-term debt ratings (senior unsecured to B1 from Ba3). The downgrade reflects the impact of the challenging outboard engine and boat markets on OMC's earnings and cash flow generation, as well as the uncertainty regarding the future shape of the company.
Ratings lowered are:
The company's rating for its $200 million revolving credit agreement, expiring on December 31, 1999, to B1 from Ba3
The company's rating for senior unsecured and industrial revenue bonds to B1 from Ba3
The company's subordinated debt rating to B3 from B2
Moody's said: 'Continuing softness in OMC's market for marine engine and boats, lower sales associated with the reduction of inventory overhang, and unabsorbed costs, resulted in weaker operating cash flow generation and an overall reduction in the company's financial flexibility.
'OMC has announced that, given the significant financial resources needed to maintain a strong competitive profile and introduce new products, and to complete the company's operational and marketing turnaround, it is exploring strategic alternatives as a means of maximizing shareholder value. In addition, the board has elected not to declare a dividend for the third quarter.
'The nature of any strategic alternative undertaken by the company and its impact on OMC's credit protection measurements, the fundamentals in the company's marine segment market, as well as progress in the company's turnaround efforts, will be key rating factors going forward. Failure to increase OMC's operational and financial flexibility could result in further weakening of the company's credit profile,' Moody's said.
Copyright © 1997 Dow Jones & Company, Inc. All Rights Reserved.
Outboard Marine Bd Doesn't Declare Quarterly Dividend
Dow Jones News Services 25 April 1997
WAUKEGAN, Ill. -- Outboard Marine Corp. (OM) said Friday it will not pay a second quarter dividend and will hire Salomon Brothers Inc. to explore strategic options for maximizing shareholder value.
As reported earlier Friday, OutboardMarine posted a second quarter loss of 36 cents a share compared with net income of 5 cents a share a year ago.
In a press release, Outboard said its board wants to strengthen the company's capital base to accelerate operational and strategic changes already underway and to fund a more rapid development of its fuel-injection technology.
The company, which manufactures and markets marine engines, boats and accessories, last paid a dividend of 10 cents on March 28.
Outboard Marine Reports Second Quarter Results
Pr Newswire 25 April 1997
WAUKEGAN, Ill., April 25 /PRNewswire/ -- Outboard Marine Corporation
(NYSE: OM) today reported a net loss of $7.3 million, or 36 cents per share
(primary and fully diluted), on sales of $237.0 million for this year's second
quarter. During the second quarter of 1996, the company reported net earnings
of $1.1 million, or five cents per share (primary and fully diluted), on sales
of $285.5 million. The sales decline for the quarter of $48.5 million
represented a 17.0% decrease.
For the first six months of its current fiscal year, the company reported
sales of $434.1 million compared to $517.6 million in the similar period in
its fiscal 1996 year, a decrease of $83.5 million or 16.1%. A net loss of
$21.6 million for the six months ended March 31, 1997, compares to a net loss
of $11.3 million in the comparable period in 1996, and resulted in a net loss
per share of $1.07 for the first six months of 1997 compared to a net loss per
share of $0.56 in the comparable period of 1996.
According to Harry W. Bowman, Chairman, President and Chief Executive
Officer, "OMC's sales decrease was due primarily to reduced market demand,
both domestically and internationally, coupled with a managed effort to assist
dealers in reducing field inventories." The company estimates that, on a
year-to-year basis, dealer inventories of OMC outboard engines were down
approximately 16% while dealer inventories of boats were down about 1%.
Bowman went on to say, "The company's retail consumer programs were very
successful in the field inventory reduction effort, although they resulted in
higher sales discounts for the quarter."
The earnings decrease, both for the quarter and year-to-date, was
principally a function of the sales decrease, but was also affected by
unabsorbed manufacturing expenses arising from reduced production schedules as
well as costs associated with the company's earnings improvement programs. As
a result of the reduced sales and production schedules, the company was able
to reduce working capital in the quarter by $42.5 million compared to the
second quarter of 1996. Earnings were also impacted by increased marketing
expenses related to the introduction of the company's new FICHT fuel injection
engines.
Other operating expenses were down, both for the quarter and year-to-date.
Non-recurring income of $8.8 million partially offset the operating decline in
the second quarter. This, coupled with similar gains of $7.7 million in the
first quarter, resulted in $16.5 million of non-recurring income in the first
six months of 1997.
OMC also reported that the Board of Directors elected not to declare a
dividend this quarter. The company further stated that the Board of Directors
has directed management to engage the services of the investment banking firm
of Salomon Brothers Inc. as its financial advisor to explore strategic
alternatives as a means of maximizing shareholder value. The company's Board
of Directors believes the capital base of the company must be strengthened in
order to allow it to accelerate the operational and strategic changes underway
at OMC, and to fund a more rapid development of the company's FICHT fuel
injection technology and other product development initiatives.
Outboard Marine Corporation is a leading manufacturing and marketer of
marine engines, boats and accessories.
OUTBOARD MARINE CORPORATION
Statements of Consolidated Earnings
(Unaudited)
(In millions except amounts per share)
Three Months Ended Six Months Ended
March 31 March 31
1997 1996 1997 1996
Net Sales $237.0 $285.5 $434.1 $517.6
Cost of Goods Sold 200.5 224.2 374.9 416.9
Gross Earnings 36.5 61.3 59.2 100.7
Selling, General & Administrative 49.5 54.5 91.9 100.2
Expense
Earnings (Loss) from Operations (13.0) 6.8 (32.7) 0.5
Non-Operating Expense (Income)
Interest Expense 4.0 4.1 8.4 9.5
Other, Net (10.7) (0.2) (21.3) (0.5)
(6.7) 3.9 (12.9) 9.0
Earnings (Loss) Before Provision
for Income Taxes (6.3) 2.9 (19.8) (8.5)
Provision for Income Taxes 1.0 1.8 1.8 2.8
Net Earnings (Loss) $(7.3) $ 1.1 $ (21.6) $(11.3)
Net Earnings (Loss) Per
Share of Common Stock
Primary $(0.36) $ 0.05 $(1.07)$(0.56)
Fully Diluted $(0.36) $ 0.05 $(1.07)$(0.56)
Dividends Declared Per Share $ 0.10 $ 0.10 $ 0.20 $0.20
Average Shares of Common Stock and Common
Stock Equivalents Outstanding
(if applicable) 20.2 20.2 20.2 20.1
OUTBOARD MARINE CORPORATION
Condensed Statements of Consolidated Financial Position
(In millions) (Unaudited)
March 31 March 31 September 30
Assets 1997 1996 1996
Current Assets
Cash & Cash Equivalents $ 69.5 $ 35.1 $ 95.5
Receivables 161.7 168.1 167.6
Inventories
Finished Products 64.5 92.1 62.6
Raw Material, Work In Process
and Service Parts 108.9 125.5 102.5
Total Inventories 173.4 217.6 165.1
Other Current Assets 38.2 49.6 39.3
Total Current Assets 442.8 470.4 467.5
Product Tooling, Net 49.4 53.0 51.6
Intangibles 36.7 39.4 38.3
Other Assets 97.8 90.7 97.4
Plant & Equipment, at Cost 552.2 567.2 565.1
Less-Accumulated Depreciation (343.5) (343.4) (346.2)
Plant & Equipment, Net 208.7 223.8 218.9
Total Assets $ 835.4 $ 877.3 $ 873.7
Liabilities & Shareholders' Investment
Current Liabilities
Accounts Payable $ 83.3 $ 86.7 $ 90.0
Accrued and Other 162.3 144.0 163.3
Total Current Liabilities 245.6 230.7 253.3
Long-Term Debt 172.6 177.5 177.6
Postretirement Benefits
Other Than Pensions 100.3 101.0 100.7
Other Non-Current Liabilities 106.7 126.6 104.5
Shareholders' Investment
Common Stock & Capital Surplus 115.2 113.8 114.8
Retained Earnings 105.7 134.4 131.3
Cumulative Translation Adjustments (10.7) (6.7) (8.5)
Total Shareholders' Investment 210.2 241.5 237.6
Total Liabilities and
Shareholders' Investment $ 835.4 $ 877.3 $ 873.7
SOURCE Outboard Marine Corporation
CONTACT: Marlena C. Cannon, Director, Public Affairs, and
Communications, 847-689-5492, or Stan R. Main, Director,
Strategic Planning and Investor Relations, 847-689-5246, both for
Outboard Marine
Outboard Marine Corporation Continues Strategic Realignment of Boat Group
Management Team
PR Newswire 03/04/97WAUKEGAN, Ill., March 4 /PRNewswire/ via Individual Inc. -- Outboard Marine Corporation (NYSE: OM) Chairman, President and Chief Executive Officer, Harry W. Bowman announced the appointment of three senior executives to the management team for the Nashville based OMC Boat Group. The new functional division heads will report to Clark J. Vitulli, whom Bowman named as president of the OMC Boat Group in 1996.
Named to the new posts are:
-- Rick Reyenger, formerly president of the Aluminum Boat Group, is now Vice President of Sales, heading sales and customer service for all OMC boat brands.
-- Paula Rummage, previously president of the Fishing Boat Group, is now Vice President of Finance in charge of finance and administration for the Boat Group.
-- Rick Fulmer, former president of Four Winns, now heads marketing for all OMC boat brands as Vice President of Marketing and Communications.
"Integrating sales, finance and marketing under a single OMC Boat Group banner helps to strengthen these areas and give our dealers the products and services needed to meet marketplace demands," Bowman said.
The new OMC Boat Group organization consolidates the operations of six boat groups and their associated brands: Chris Craft, Four Winns, Seaswirl, Sunbird, the Aluminum Boat Group (Grumman, Lowe, Roughneck and Sea Nymph brands) and the Fishing Boat Group (Hydra Sports, Javelin, Quest and Stratos brands).
"With these changes, we believe the Boat Group will be able to move rapidly to position its multiple brands and meet the changing demands of the consumer marketplace," Bowman said.
Bowman appointed Vitulli head of the Boat Group last summer as the first step in the company's strategic plan to adjust to market-driven issues in the boating industry. In December 1996, the manufacturing and engineering functions of all OMC boat companies were consolidated under newly named executives reporting to Vitulli. They include Peter VanLancker, Vice President-Design; Dan Crose, Vice President Manufacturing; and Charles Vincent, Vice President-Quality Assurance.
Outboard Marine Corporation is a leading manufacturer and marketer of marine engines, boats and accessories. SOURCE Outboard Marine Corporation
/CONTACT: Stanley R. Main, director - Investor Relations and Strategic Planning, 847-689-5246, or Jodi R. VanOever, Public Affairs and Communications, 847-689-5483, both of OMC/ (OM) CO: Outboard Marine Corporation ST: Illinois
[03-04-97 at 12:00 EST, PR Newswire]
RBBI Comments
I notice one source listed Harley Davidson as a possible suitor. How about somebody trying to make a major entry into
the U.S. boating market that needs a dealer / distributor operation, Toyota? How about Bombardier?, Yamaha?, Volvo?, Honda ? How about a Big U.S. car maker? How about a major company in Seattle? How's Roger Penske doing?
We would like to point out that the instant this kind of news starts circulating, your suppliers really toughen up delivery terms (C.O.D. or a very strict payment plan) and if your already down that really kills you. Those who owe you tend to slack off hoping you will crash and they never have to pay you. Accounts Payable (must pay now to get components) vs. collected sales dollars gets tough.
Best Wishes to OMC in these difficult times. They have been, and still are a great asset to the industry.
OMC Web Site Postings
By RBBI 30 April 1997
Hoping to find them posting some information about their recently announced financial problems we tried to check their popular internet web site, OMC ONLINE, April 29 and found it is was not operational. Now, April 30, it is up again.
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