MILWAUKEE, Jan. 15 /PRNewswire-FirstCall/ — Briggs & Stratton Corporation
(NYSE: BGG)
Briggs & Stratton today announced second quarter fiscal 2009 consolidated
net sales of $477.5 million and consolidated net income of $3.2 million or
$0.06 per diluted share. The second quarter of fiscal 2008 had consolidated
net sales of $477.5 million and consolidated net income of $4.1 million or
$0.08 per diluted share. Consolidated net sales were essentially the same
between years; however, the Engines Segment sales were greater than last year
and the Power Products Segment sales were lower. The prior year’s second
quarter results included two significant items, a $37.0 million gain ($25.0
million after tax) resulting from the sale of an investment in preferred stock
including the final dividend paid on the preferred stock, offset by a $17.7
million warranty expense ($12.7 million after tax) for a snow engine recall.
Excluding these items, net income improved $11.4 million from last year
resulting from a more favorable mix of product both shipped and manufactured,
offset in part by commodity costs that were higher than in the same period a
year ago.
For the first six months of fiscal 2009, the company had consolidated net
sales of $935.6 million and consolidated net income of $1.2 million or $0.02
per diluted share. For the same period a year ago, consolidated net sales
were $844.6 million and there was a consolidated net loss of $16.7 million or
$0.34 per diluted share. The increase in the first six months’ consolidated
net sales of $91.0 million, or 11%, was attributable to stronger shipments of
both engines and portable generators. Excluding the preferred stock event and
snow engine recall, net income improved $29.4 million reflecting improved
sales results and higher production volumes in both operating segments, offset
in part by commodity costs that were higher than in the same period a year
ago.
Engines:
Fiscal 2009 second quarter net sales were $339.3 million versus $315.5
million for the same period a year ago, an increase of 8%. The increase
resulted primarily from an 11% increase in engine unit shipments between
quarters driven by increased engine requirements for portable generator and
snow removal equipment.
Net sales for the first half of fiscal 2009 were $597.9 million versus
$524.0 million in the prior year, a 14% increase. This improvement reflects a
16% increase in engine unit shipments between years. The first six months
sales improvement in engine unit volume resulted from strong demand for
engines for portable generators due to weather events, and snow removal
product for the current snow season. In addition, engine demand resulted from
low channel inventories of lawn and garden equipment that needed to be
replenished because of retail demand during the first fiscal quarter.
The second quarter of fiscal 2009 had income from operations of $22.0
million, up $27.9 million from the same period a year ago. The year over year
increase in income from operations was positively impacted by the absence of
the $17.7 million warranty expense associated with the snow engine recall in
fiscal 2008. The remainder of the improved income from operations resulted
from an 11% increase in shipments, production volumes that were 3% greater
than the prior year and planned reductions of selected operating expenses.
The improvements to income from operations were offset by commodity costs that
continue to be higher than they were in the previous year.
Income from operations for the first half of fiscal 2009 was $16.5
million, a $33.6 million increase over the loss from operations of $17.1
million for the same period a year ago. For the six-month period, the absence
of $19.8 million of warranty expense associated with the snow engine recall in
the same period in fiscal 2008 contributed positively to the improvement in
income from operations. Additionally, the improved income from operations
resulted primarily from the 16% increase in sales volume, with 3% greater
production volumes and planned reductions of selected operating expenses.
Again, a major offset to the improvement in income from operations was
commodity costs that were higher than they were in the previous year. In
addition, pricing on engines sold to Europe was less favorable than last year
due to currency fluctuations.
Power Products:
Fiscal 2009 second quarter net sales were $192.0 million, a $3.7 million
decrease from the same period a year ago. The lower net sales were primarily
the result of decreased shipments of pressure washer product. Demand for this
product softened between years as consumer sentiment weakened. An offset to
the net sales decrease was $12.0 million of sales related to our June 30, 2008
acquisition of Victa Lawncare Pty. Ltd. (“Victa”).
Net sales for the first six months of fiscal 2009 were $447.5 million, a
$64.4 million increase over the same period a year ago. The sales improvement
was the result of the Victa acquisition ($25.2 million) and increased sales of
portable generators due to a number of hurricanes making landfall in the
United States in our first quarter of fiscal 2009. The strong portable
generator demand was partially offset by the weaker pressure washer product
demand in the second quarter.
The loss from operations for the second quarter of fiscal 2009 was $8.6
million, an improvement of $8.3 million over the loss for the same period a
year ago. The improvement was primarily the result of a favorable mix of
portable generator unit shipments and better plant utilization caused by
ongoing portable generator demand. Pricing improvement experienced in the
quarter was offset by the increased cost of commodities and components.
The loss from operations for the first six months of fiscal 2009 was $6.0
million, a $21.1 million improvement over the loss from operations for the
same period a year ago. The improvement in income from operations between
years resulted in part from higher sales and production volumes combined with
an improvement year over year in margins resulting from a favorable product
mix and lower engineering, selling and administrative expenses.
General:
Interest expense was lower in the second quarter of fiscal 2009 because of
lower average borrowings and interest rates. The second quarter and year to
date fiscal 2009 effective tax rates are at 30% and 155%, respectively versus
the 23% and 33% used in the same respective periods last year. The effective
tax rate fluctuation between the second quarters was due to the difference in
dividends. The difference between the year to date rates was due to the
resolution of federal tax matters.
Other income in the second quarter and first six months of fiscal 2008
reflects the gain on the redemption of an investment in preferred stock and
the associated dividends.
Other Matters:
On December 1, 2008, a fire destroyed inventory and equipment in a leased
warehouse facility in Dyersburg, TN. The destroyed facility supported our
lawn and garden manufacturing operations in Newbern, TN where production was
temporarily suspended as replacement parts and components were expedited.
Production at the Newbern plant has since resumed to normal levels. We
believe the property losses incurred are covered under our property insurance
policies subject to customary incurred loss deductibles.
Outlook:
The company continues to estimate net income in a range from $40 to $50
million or $0.81 to $1.01 per diluted share for the full year. This range
reflects our belief that channel inventories of lawn and garden products are
at normal levels after the 2008 season and our projections related to our
product placement for fiscal 2009 are still valid. The forecast continues to
reflect the uncertainty of the upcoming spring selling season for outdoor
power equipment given the current economic conditions. The company also
projects that the third quarter’s results will lag the comparable period from
a year ago because major retailers will control their working capital
commitment to the category and be more comfortable with chasing demand this
year while they assess the strength of consumer demand during the spring.
The company will host a conference call today at 10:00 AM (EST) to review
this information. A live web cast of the conference call will be available on
our corporate website: http://www.briggsandstratton.com/shareholders. Also
available is a dial-in number to access the call real-time at (866) 814-1917.
A replay will be offered beginning approximately two hours after the call ends
and will be available for one week. Dial (888) 266-2081 to access the replay.
The pass code will be 1317462.
This release contains certain forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially
from those projected in the forward-looking statements. The words
“anticipate”, “believe”, “could”, “estimate”, “expect”, “forecast”, “intend”,
“may”, “objective”, “plan”, “project”, “seek”, “think”, “will”, and similar
expressions are intended to identify forward-looking statements. The forward-
looking statements are based on the company’s current views and assumptions
and involve risks and uncertainties that include, among other things, the
ability to successfully forecast demand for our products and appropriately
adjust our manufacturing and inventory levels; changes in our operating
expenses; changes in interest rates; the effects of weather on the purchasing
patterns of consumers and original equipment manufacturers (OEMs); actions of
engine manufacturers and OEMs with whom we compete; the seasonal nature of our
business; changes in laws and regulations, including environmental, tax,
pension funding and accounting standards; work stoppages or other consequences
of any deterioration in our employee relations; work stoppages by other unions
that affect the ability of suppliers or customers to manufacture; acts of war
or terrorism that may disrupt our business operations or those of our
customers and suppliers; changes in customer and OEM demand; changes in prices
of raw materials and parts that we purchase; changes in domestic economic
conditions, including housing starts and changes in consumer confidence;
changes in the market value of the assets in our defined benefit pension plan
and any related funding requirements; changes in foreign economic conditions,
including currency rate fluctuations; the actions of customers of our OEM
customers; the ability to bring new productive capacity on line efficiently
and with good quality; the ability to successfully realize the maximum market
value of assets that may require disposal if products or production methods
change; new facts that come to light in the future course of litigation
proceedings which could affect our assessment of those matters; and other
factors that may be disclosed from time to time in our SEC filings or
otherwise, including the factors discussed in Item 1A, Risk Factors, of the
company’s Annual Report on Form 10-K and in its periodic reports on Form 10-Q.
Some or all of the factors may be beyond our control. We caution you that any
forward-looking statement reflects only our belief at the time the statement
is made. We undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which the statement is made.
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings for the Fiscal Periods Ended December
(In Thousands, except per share data)
(Unaudited)
Second Quarter Six Months
2008 2007 2008 2007
NET SALES $477,481 $477,537 $935,632 $844,606
COST OF GOODS SOLD 401,584 433,220 795,016 757,445
Gross Profit on Sales 75,897 44,317 140,616 87,161
ENGINEERING, SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES 63,302 66,430 128,153 130,570
Income (Loss) from Operations 12,595 (22,113) 12,463 (43,409)
INTEREST EXPENSE (8,714) (10,610) (16,611) (19,583)
OTHER INCOME, Net 687 37,995 1,886 38,017
Income (Loss) before Provision for
Income Taxes 4,568 5,272 (2,262) (24,975)
PROVISION (CREDIT) FOR INCOME TAXES 1,376 1,209 (3,498) (8,226)
Net Income (Loss) $3,192 $4,063 $1,236 $(16,749)
Average Shares Outstanding 49,571 49,536 49,567 49,543
BASIC EARNINGS (LOSS) PER SHARE $0.06 $0.08 $0.02 $(0.34)
Diluted Average Shares Outstanding 49,707 49,637 49,664 49,543
DILUTED EARNINGS (LOSS) PER SHARE $0.06 $0.08 $0.02 $(0.34)
Segment Information
(In Thousands)
(Unaudited)
Second Quarter Six Months
2008 2007 2008 2007
NET SALES:
Engines $339,287 $315,537 $597,908 $523,953
Power Products 192,012 195,695 447,543 383,086
Inter-Segment Eliminations (53,818) (33,695) (109,819) (62,433)
Total * $477,481 $477,537 $935,632 $844,606
* Includes international sales
based on product shipment
destination of $165,225 $152,019 $276,394 $255,437
GROSS PROFIT ON SALES:
Engines $65,697 $42,421 $106,124 $76,675
Power Products 10,953 1,236 32,484 9,661
Inter-Segment Eliminations (753) 660 2,008 825
Total $75,897 $44,317 $140,616 $87,161
INCOME (LOSS) FROM OPERATIONS:
Engines $21,970 $(5,857) $16,459 $(17,085)
Power Products (8,622) (16,916) (6,004) (27,149)
Inter-Segment Eliminations (753) 660 2,008 825
Total $12,595 $(22,113) $12,463 $(43,409)
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets as of the End of Fiscal December
(In Thousands)
(Unaudited)
CURRENT ASSETS: 2008 2007
Cash and Cash Equivalents $19,036 $48,921
Accounts Receivable, Net 329,593 342,410
Inventories 608,220 631,581
Deferred Income Tax Asset 54,608 52,695
Other 45,707 38,726
Total Current Assets 1,057,164 1,114,333
OTHER ASSETS:
Goodwill 248,546 250,107
Investments 16,968 18,170
Prepaid Pension 97,119 105,032
Deferred Loan Costs, Net 2,360 3,748
Other Intangible Assets, Net 98,518 91,621
Other Long-Term Assets, Net 8,646 6,921
Total Other Assets 472,157 475,599
PLANT AND EQUIPMENT:
At Cost 1,017,261 1,008,428
Less - Accumulated Depreciation 637,334 614,959
Plant and Equipment, Net 379,927 393,469
$1,909,248 $1,983,401
CURRENT LIABILITIES: 2008 2007
Accounts Payable $194,223 $139,305
Short-Term Borrowings 204,894 281,059
Accrued Liabilities 169,631 168,274
Total Current Liabilities 568,748 588,638
OTHER LIABILITIES:
Deferred Income Tax Liability 50,833 38,942
Accrued Pension Cost 36,936 40,176
Accrued Employee Benefits 18,685 20,293
Accrued Postretirement Health Care Obligation 156,406 185,997
Other Long-Term Liabilities 32,936 36,307
Long-Term Debt 246,848 266,197
Total Other Liabilities 542,644 587,912
SHAREHOLDERS' INVESTMENT:
Common Stock and Additional Paid-in Capital 76,732 76,100
Retained Earnings 1,061,978 1,064,979
Accumulated Other Comprehensive Loss (131,793) (122,349)
Treasury Stock, at Cost (209,061) (211,879)
Total Shareholders' Investment 797,856 806,851
$1,909,248 $1,983,401
BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Six Months Ended Fiscal December
CASH FLOWS FROM OPERATING ACTIVITIES: 2008 2007
Net Income (Loss) $1,236 $(16,749)
Depreciation and Amortization 34,580 34,930
Stock Compensation Expense 2,560 3,261
Loss (Gain) on Disposition of Plant
and Equipment 641 (404)
Gain on Sale of Investment - (36,960)
(Provision) Credit for Deferred
Income Taxes 4 (701)
Increase in Accounts Receivable (8,344) (14,933)
Increase in Inventories (68,125) (81,498)
Decrease (Increase) in Other Current Assets (355) 8,797
Increase (Decrease) in Accounts
Payable and Accrued Liabilities 4,958 (51,429)
Other, Net (5,896) (6,957)
Net Cash Used by Operating Activities (38,741) (162,643)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Plant and Equipment (21,140) (34,177)
Cash Paid for Acquisition, Net of
Cash Acquired (24,757) -
Proceeds Received on Disposition of
Plant and Equipment 2,211 523
Proceeds Received on Sale of Investment - 66,011
Other, Net - (503)
Net Cash Provided (Used) by Investing
Activities (43,686) 31,854
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings on Loans, Notes
Payable and Long-Term Debt 81,650 159,920
Issuance Cost of Amended Revolver - (1,286)
Dividends (10,906) (10,901)
Stock Option Exercise Proceeds and
Tax Benefits - 991
Net Cash Provided by Financing
Activities 70,744 148,724
EFFECT OF EXCHANGE RATE CHANGES (1,749) 1,517
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (13,432) 19,452
CASH AND CASH EQUIVALENTS, Beginning 32,468 29,469
CASH AND CASH EQUIVALENTS, Ending $19,036 $48,921
