Briggs & Stratton Corporation Reports Results for the Second Quarter of Fiscal 2010

Jan 14, 2010, 07:51 ET from Briggs & Stratton Corporation

MILWAUKEE, Jan. 14 /PRNewswire-FirstCall/ -- Briggs & Stratton Corporation (NYSE: BGG)

Briggs & Stratton today announced second quarter fiscal 2010 consolidated net sales of $393.0 million and consolidated net income of $3.0 million or $0.06 per diluted share.  The second quarter of fiscal 2009 had consolidated net sales of $477.5 million and consolidated net income of $3.2 million or $0.06 per diluted share.  Consolidated net sales decreased $84.5 million between years, with both reporting segments experiencing lower sales, primarily the result of lower unit volumes.  Consolidated net income was fairly consistent between years despite the sales decline. This result reflects better margins caused by lower manufacturing costs and lower engineering, selling, general and administrative costs.

For the first six months of fiscal 2010, the company had consolidated net sales of $717.7 million and a consolidated net loss of $5.7 million or $0.12 per diluted share.  For the same period a year ago, consolidated net sales were $935.6 million and consolidated net income was $1.2 million or $0.02 per diluted share.  The decrease in the first six months' consolidated net sales of $217.9 million was attributable to both reporting segments experiencing lower sales, primarily the result of lower unit volumes.  Consolidated net income declined by $6.9 million between years resulting from lower volumes of product both shipped and manufactured, offset in part by manufacturing and operating costs that were lower than in the same period a year ago.  

Engines:

Fiscal 2010 second quarter net sales were $274.3 million versus $339.3 million for the same period a year ago, a decrease of 19%.  The decrease resulted primarily from a 15% decrease in engine unit shipments between quarters driven by lower shipments for lawn and garden applications as some OEMs are delaying deliveries of engines to control their inventory investment ahead of an uncertain market environment for the spring of 2010.  In addition, engine requirements for portable generators were down due to the lack of any significant weather events and engine shipments for snow thrower applications were down because of shifts in placement.  

Net sales for the first half of fiscal 2010 were $484.7 million versus $597.9 million in the prior year, a 19% decrease. This decrease reflects an 18% decrease in engine unit shipments between years.   The first six months sales decline in engine unit volume resulted from primarily the same reasons discussed for the second quarter in addition to light first quarter sales of engines because 2009 summer retail demand for lawn and garden equipment was soft and did not generate the same level of engine reorders that occurred in the prior year.

The second quarter of fiscal 2010 had income from operations of $18.0 million versus $22.0 million from the same period a year ago. The decrease of $4.0 million in income from operations reflects the impact of a 19% revenue decrease and a 6% decrease in production volume offset by lower manufacturing and operating costs, resulting primarily from lower commodity costs and planned cost savings initiatives.  

Income from operations for the first half of fiscal 2010 was $12.1 million, a $4.4 million decrease from income from operations of $16.5 million for the same period a year ago. The decrease of $4.4 million in income from operations was the result of a 19% revenue decrease and a 10% decrease in production volume offset by the same factors described in the quarter.  

Power Products:

Fiscal 2010 second quarter net sales were $156.6 million, a $35.4 million decrease from the $192.0 million in the same period a year ago.  The lower net sales were primarily the result of a decrease in shipments of portable generator product.  Replenishment demand that occurred because of major weather events last year was not required in the current year due to a lack of weather events.  In general, all lawn and garden product volumes were less than those in the same period a year ago, except for stronger snow thrower shipments. All levels of the lawn and garden distribution channel appear to be managing to lower inventory levels ahead of the spring of 2010 retail season.  

Net sales for the first six months of fiscal 2010 were $320.2 million, a $127.4 million decrease over the same period a year ago.  The sales decline was primarily the result of a decrease in sales of portable generators due to no hurricanes making landfall in the United States in the first half of fiscal 2010.  Other than a small increase in pressure washer shipments, the other product offerings in this reporting segment had volume declines between years.      

The loss from operations for the second quarter of fiscal 2010 was $4.5 million, an improvement of $4.1 million over the loss for the same period a year ago.  The improvement in the loss from operations for the quarter was the result of lower manufacturing costs, primarily related to lower commodity costs and planned cost saving initiatives.  These improvements were partially offset by lower sales, lower production volumes and $1.7 million of expenses associated with the previously announced closing of the Jefferson, Wisconsin manufacturing facility.  

The loss from operations for the first six months of fiscal 2010 was $0.9 million, a $5.1 million improvement over the loss from operations for the same period a year ago.  The improvement in the loss from operations between years resulted from the same factors as described for the quarter and was also offset year to date by an unfavorable mix of lawn and garden product shipments.  Through the first six months of fiscal 2010, costs related to the closure of the Jefferson, Wisconsin facility were $3.1 million.

General:

Interest expense was lower in the second quarter and first six months of fiscal 2010 because of lower average borrowings.  The second quarter and year to date fiscal 2010 effective tax rates are at 29% and 39%, respectively, versus the 30% and 155% used in the same respective periods last year.  The difference between the effective tax rates for the six month periods was due to the impact of higher levels of discrete items related to foreign dividends in fiscal 2009 compared to fiscal 2010.  

Outlook:

The company continues to project that fiscal 2010 net income will be in the range of $40 to $50 million or $0.80 to $1.01 per diluted share.  Consolidated net sales are projected to be approximately 6% lower between years primarily due to the absence of hurricane related sales of portable generators, selected price reductions to reflect projected lower commodity costs and lower engine shipments to Europe for lawn and garden applications.  Production levels for substantially all products are planned to be lower in fiscal 2010 to decrease our investment in working capital. Operating income margins are projected to be in the range of 4.0% to 5.0%, and interest expense and other income are forecasted at $27 million and $5 million, respectively.  The effective tax rate for the full year is projected to be in a range of 31% to 34%.  

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) 281-4322. A replay will be offered beginning approximately two hours after the call ends and will be available for one week. Dial (703) 925-2533 to access the replay. The pass code will be 1420930.

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; the ability of ourselves and our customers to secure adequate working capital funding and meet related covenants; 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 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


2009


2008


2009


2008

NET SALES

$      393,049 


$      477,481 


$      717,656 


$      935,632 

COST OF GOODS SOLD

322,399 


401,584 


594,616 


795,016 

Gross Profit on Sales

70,650 


75,897 


123,040 


140,616 









ENGINEERING, SELLING, GENERAL








AND ADMINISTRATIVE EXPENSES

60,339 


63,302 


121,132 


128,153 

Income from Operations

10,311 


12,595 


1,908 


12,463 









INTEREST EXPENSE

(7,179)


(8,714)


(13,655)


(16,611)

OTHER INCOME, Net

1,137 


687 


2,427 


1,886 

Income (Loss) before Income Taxes

4,269 


4,568 


(9,320)


(2,262)









PROVISION (CREDIT) FOR INCOME TAXES

1,244 


1,376 


(3,658)


(3,498)

Net Income (Loss)

$           3,025 


$           3,192 


$         (5,662)


$           1,236 









Average Shares Outstanding

49,595 


49,571 


49,594 


49,567 

BASIC EARNINGS (LOSS) PER SHARE

$             0.06 


$             0.06 


$           (0.12)


$             0.02 









Diluted Average Shares Outstanding

50,040 


49,707 


49,594 


49,664 

DILUTED EARNINGS (LOSS) PER SHARE

$             0.06 


$             0.06 


$           (0.12)


$             0.02 




Segment Information

(In Thousands)

(Unaudited)



Second Quarter


Six Months


2009


2008


2009


2008

NET SALES:








Engines

$      274,332 


$      339,287 


$      484,735 


$      597,908 

Power Products

156,576 


192,012 


320,182 


447,543 

Inter-Segment Eliminations

(37,859)


(53,818)


(87,261)


(109,819)

Total *

$      393,049 


$      477,481 


$      717,656 


$      935,632 









* International sales based on product shipment destination included in net sales

$      147,374 


$      164,930 


$      232,812 


$      276,797 









GROSS PROFIT ON SALES:








Engines

$        59,909 


$        65,697 


$        96,309 


$      106,124 

Power Products

14,014 


10,953 


36,044 


32,484 

Inter-Segment Eliminations

(3,273)


(753)


(9,313)


2,008 

Total

$        70,650 


$        75,897 


$      123,040 


$      140,616 









INCOME (LOSS) FROM OPERATIONS:








Engines

$        18,043 


$        21,970 


$        12,129 


$        16,459 

Power Products

(4,459)


(8,622)


(908)


(6,004)

Inter-Segment Eliminations

(3,273)


(753)


(9,313)


2,008 

Total

$        10,311 


$        12,595 


$           1,908 


$        12,463 




BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES


Consolidated Balance Sheets as of the End of Fiscal December

(In Thousands)

(Unaudited)


CURRENT ASSETS:

2009


2008

Cash and Cash Equivalents

$      22,909 


$      19,036 

Accounts Receivable, Net

218,915 


329,593 

Inventories

596,064 


608,220 

Deferred Income Tax Asset

57,285 


54,608 

Other

27,223 


45,707 

Total Current Assets

922,396 


1,057,164 









OTHER ASSETS:




Goodwill

254,844 


248,546 

Investments

16,673 


16,968 

Prepaid Pension


97,119 

Other Intangible Assets, Net

91,343 


98,518 

Deferred Income Tax Asset

23,964 


Other Long-Term Assets, Net

11,951 


11,006 

Total Other Assets

398,775 


472,157 













PLANT AND EQUIPMENT:




At Cost

981,162 


1,017,261 

Less - Accumulated Depreciation

632,399 


637,334 

Plant and Equipment, Net

348,763 

#

379,927 


$ 1,669,934 


$ 1,909,248 





CURRENT LIABILITIES:

2009 


2008 

Accounts Payable

$    135,580 


$    194,223 

Short-Term Debt

106,415 


204,894 

Accrued Liabilities

163,881 


169,631 

Total Current Liabilities

405,876 


568,748 





OTHER LIABILITIES:




Deferred Income Tax Liability

3,280 


50,833 

Accrued Pension Cost

133,137 


36,936 

Accrued Employee Benefits

19,512 


18,685 

Accrued Postretirement Health




Care Obligation

150,238 


156,406 

Other Long-Term Liabilities

28,686 


32,936 

Long-Term Debt

230,924 


246,848 

Total Other Liabilities

565,777 


542,644 





SHAREHOLDERS' INVESTMENT:




Common Stock and Additional




Paid-in Capital

80,034 


76,732 

Retained Earnings

1,059,632 


1,061,978 

Accumulated Other




Comprehensive Income (Loss)

(237,355)


(131,793)

Treasury Stock, at Cost

(204,030)


(209,061)

Total Shareholders' Investment

698,281 


797,856 


$ 1,669,934 


$ 1,909,248 




BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES


Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)



Six Months Ended Fiscal December





CASH FLOWS FROM OPERATING ACTIVITIES:

2009


2008

Net Income (Loss)

$                    (5,662)


$                      1,236 

Depreciation and Amortization

32,265 


34,580 

Stock Compensation Expense

5,359 


2,560 

Loss on Disposition of Plant and Equipment

1,013 


641 

Provision for Deferred Income Taxes

(6,216)


(Increase) Decrease in Accounts Receivable

44,779 


(8,344)

Increase in Inventories

(118,127)


(68,125)

(Increase) Decrease in Other Current Assets

10,271 


(355)

Increase in Accounts Payable and Accrued Liabilities

10,296 


4,958 

Other, Net

743 


(5,896)

Net Cash Used by Operating Activities

(25,279)


(38,741)





CASH FLOWS FROM INVESTING ACTIVITIES:




Additions to Plant and Equipment

(15,592)


(21,140)

Cash Paid for Acquisition, Net of Cash Acquired


(24,757)

Proceeds Received on Disposition of Plant and Equipment

172 


2,211 

Other, Net

(144)


Net Cash Used by Investing Activities

(15,564)


(43,686)





CASH FLOWS FROM FINANCING ACTIVITIES:




Net Borrowings on Loans, Notes Payable, and Long-Term Debt

52,932 


81,650 

Dividends

(5,500)


(10,906)

Net Cash Provided by Financing Activities

47,432 


70,744 





EFFECT OF EXCHANGE RATE CHANGES

328 


(1,749)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

6,917 


(13,432)

CASH AND CASH EQUIVALENTS, Beginning

15,992 


32,468 

CASH AND CASH EQUIVALENTS, Ending

$                    22,909 


$                    19,036 


SOURCE Briggs & Stratton Corporation



RELATED LINKS

http://www.briggsandstratton.com