Wisconsin | 1-1370 | 39-0182330 | ||
(State or other jurisdiction | (Commission | (I.R.S. Employer | ||
of incorporation) | File Number) | Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(a) | Not applicable |
(b) | Not applicable |
(c) | Not applicable |
(d) | Exhibits. The following exhibit is being furnished herewith: |
Exhibit No. | Description | |
99.1 | Press Release dated April 20, 2017 announcing results for the third quarter of fiscal 2017. |
BRIGGS & STRATTON CORPORATION | ||||
(Registrant) | ||||
Date: | April 20, 2017 | /s/ Mark A. Schwertfeger | ||
Mark A. Schwertfeger | ||||
Senior Vice President and Chief Financial Officer Duly Authorized Officer |
Exhibit No. | Description | |
99.1 | Press Release dated April 20, 2017 announcing results for the third quarter of fiscal 2017. |
• | Fiscal third quarter net sales were $597 million, a decrease of $7 million or 1.1% compared to last year. Strong sales growth in commercial engines and products was offset by a sales decline in small engines due to OEM customers producing closer to the season, as anticipated. |
• | Fiscal third quarter gross profit margin of 22.6% increased from GAAP gross profit margin of 21.1% and adjusted gross profit margin of 21.2%, principally on a more favorable product mix, including a higher proportion of commercial engines and commercial products, the positive impact of innovative new engines, and improvements in manufacturing efficiencies. |
• | Third quarter net income was $35.8 million, an increase from GAAP net income of $26.8 million and adjusted net income of $34.9 million last year. |
• | Third quarter diluted earnings per share were $0.83, an increase from $0.61 (GAAP) and $0.80 (adjusted) last year. |
• | Repurchased $2.8 million in shares under the share repurchase program during the quarter. |
• | Net sales are expected to be in a range of $1.86 billion to $1.90 billion. We continue to expect that the U.S. residential lawn and garden market will improve by 1% to 4% over the course of the season. Customers have taken a more cautious approach to building inventory for the season as we anticipated. It is possible engine sales may shift beyond the fourth quarter of fiscal 2017 depending on the pace with which the season breaks. |
• | Net income is expected to be in a range of $57 million to $64 million or $1.31 to $1.46 per diluted share (prior to the impact of any share repurchases). |
• | Operating margins are expected to be approximately 5.5% to 5.8%. |
• | The effective tax rate is expected to be in a range of 31% to 33%. |
Three Months Ended March | Nine Months Ended March | |||||||||||||||
FY2017 | FY2016 | FY2017 | FY2016 | |||||||||||||
NET SALES | $ | 596,965 | $ | 603,750 | $ | 1,311,998 | $ | 1,306,587 | ||||||||
COST OF GOODS SOLD | 462,194 | 476,075 | 1,029,299 | 1,032,398 | ||||||||||||
RESTRUCTURING CHARGES | — | 580 | — | 5,686 | ||||||||||||
Gross Profit | 134,771 | 127,095 | 282,699 | 268,503 | ||||||||||||
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 78,279 | 75,288 | 223,373 | 219,980 | ||||||||||||
RESTRUCTURING CHARGES | — | 144 | — | 1,430 | ||||||||||||
GOODWILL IMPAIRMENT | — | 7,651 | — | 7,651 | ||||||||||||
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES (1) | 1,079 | 1,105 | 7,318 | 1,105 | ||||||||||||
Income from Operations | 57,571 | 45,117 | 66,644 | 40,547 | ||||||||||||
INTEREST EXPENSE | (5,521 | ) | (5,593 | ) | (15,159 | ) | (15,142 | ) | ||||||||
OTHER INCOME | 844 | 511 | 1,679 | 4,348 | ||||||||||||
Income before Income Taxes | 52,894 | 40,035 | 53,164 | 29,753 | ||||||||||||
PROVISION FOR INCOME TAXES | 17,075 | 13,212 | 16,242 | 8,541 | ||||||||||||
Net Income | $ | 35,819 | $ | 26,823 | $ | 36,922 | $ | 21,212 | ||||||||
EARNINGS PER SHARE | ||||||||||||||||
Basic | $ | 0.83 | $ | 0.62 | $ | 0.86 | $ | 0.48 | ||||||||
Diluted | 0.83 | 0.61 | 0.86 | 0.48 | ||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||||||||||
Basic | 42,076 | 42,621 | 42,217 | 43,158 | ||||||||||||
Diluted | 42,175 | 42,889 | 42,271 | 43,377 |
Three Months Ended March | Nine Months Ended March | |||||||||||||||
FY2017 | FY2016 | FY2017 | FY2016 | |||||||||||||
International sales based on product shipment destination | $ | 171,565 | $ | 160,277 | $ | 440,179 | $ | 404,493 |
CURRENT ASSETS: | FY2017 | FY2016 | ||||||
Cash and Cash Equivalents | $ | 52,097 | $ | 43,716 | ||||
Accounts Receivable, Net | 298,990 | 279,127 | ||||||
Inventories | 413,572 | 419,537 | ||||||
Deferred Income Tax Asset | 45,914 | 47,902 | ||||||
Prepaid Expenses and Other Current Assets | 22,178 | 29,993 | ||||||
Total Current Assets | 832,751 | 820,275 | ||||||
OTHER ASSETS: | ||||||||
Goodwill | 161,823 | 160,998 | ||||||
Investments | 49,535 | 56,715 | ||||||
Other Intangible Assets, Net | 101,847 | 106,544 | ||||||
Deferred Income Tax Asset | 39,093 | 14,393 | ||||||
Other Long-Term Assets, Net | 19,182 | 15,122 | ||||||
Total Other Assets | 371,480 | 353,772 | ||||||
PLANT AND EQUIPMENT: | ||||||||
At Cost | 1,086,778 | 1,038,994 | ||||||
Less - Accumulated Depreciation | 742,240 | 724,611 | ||||||
Plant and Equipment, Net | 344,538 | 314,383 | ||||||
$ | 1,548,769 | $ | 1,488,430 | |||||
CURRENT LIABILITIES: | ||||||||
Accounts Payable | $ | 212,974 | $ | 212,372 | ||||
Short-Term Debt | 62,300 | 32,443 | ||||||
Accrued Liabilities | 144,023 | 155,965 | ||||||
Total Current Liabilities | 419,297 | 400,780 | ||||||
OTHER LIABILITIES: | ||||||||
Accrued Pension Cost | 297,170 | 194,542 | ||||||
Accrued Employee Benefits | 22,649 | 22,778 | ||||||
Accrued Postretirement Health Care Obligation | 31,126 | 41,165 | ||||||
Other Long-Term Liabilities | 43,320 | 52,305 | ||||||
Long-Term Debt | 221,682 | 221,221 | ||||||
Total Other Liabilities | 615,947 | 532,011 | ||||||
SHAREHOLDERS' INVESTMENT: | ||||||||
Common Stock | 579 | 579 | ||||||
Additional Paid-In Capital | 73,269 | 73,072 | ||||||
Retained Earnings | 1,093,323 | 1,074,959 | ||||||
Accumulated Other Comprehensive Loss | (330,293 | ) | (280,940 | ) | ||||
Treasury Stock, at Cost | (323,353 | ) | (312,031 | ) | ||||
Total Shareholders' Investment | 513,525 | 555,639 | ||||||
$ | 1,548,769 | $ | 1,488,430 | |||||
Nine Months Ended March | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | FY2017 | FY2016 | |||||||
Net Income | $ | 36,922 | $ | 21,212 | |||||
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities: | |||||||||
Depreciation and Amortization | 42,177 | 40,579 | |||||||
Stock Compensation Expense | 4,560 | 4,792 | |||||||
Goodwill Impairment | — | 7,651 | |||||||
Loss on Disposition of Plant and Equipment | 610 | 454 | |||||||
Provision for Deferred Income Taxes | 7,574 | 3,656 | |||||||
Equity in Earnings of Unconsolidated Affiliates | (7,318 | ) | (4,292 | ) | |||||
Dividends Received from Unconsolidated Affiliates | 8,186 | 5,039 | |||||||
Non-Cash Restructuring Charges | — | 1,725 | |||||||
Changes in Operating Assets and Liabilities: | |||||||||
Accounts Receivable | (110,978 | ) | (64,488 | ) | |||||
Inventories | (27,553 | ) | (41,903 | ) | |||||
Other Current Assets | 584 | 1,429 | |||||||
Accounts Payable, Accrued Liabilities and Income Taxes | 30,041 | 25,598 | |||||||
Other, Net | (13,008 | ) | (6,808 | ) | |||||
Net Cash Used in Operating Activities | (28,203 | ) | (5,356 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Capital Expenditures | (48,780 | ) | (41,092 | ) | |||||
Proceeds Received on Disposition of Plant and Equipment | 1,014 | 997 | |||||||
Cash Paid for Acquisitions, Net of Cash Acquired | — | (3,074 | ) | ||||||
Cash Paid for Investment in Unconsolidated Affiliates | — | (19,100 | ) | ||||||
Proceeds on Sale of Investment in Marketable Securities | 3,343 | — | |||||||
Other, Net | — | (750 | ) | ||||||
Net Cash Used in Investing Activities | (44,423 | ) | (63,019 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Net Borrowings on Revolver | 62,300 | 32,443 | |||||||
Repayments on Long-Term Debt | — | (1,851 | ) | ||||||
Debt Issuance Costs | — | (932 | ) | ||||||
Treasury Stock Purchases | (17,924 | ) | (33,394 | ) | |||||
Payment of Acquisition Contingent Liability | (1,625 | ) | — | ||||||
Stock Option Exercise Proceeds and Tax Benefits | 4,751 | 11,165 | |||||||
Cash Dividends Paid | (12,028 | ) | (11,885 | ) | |||||
Net Cash Provided by (Used in) Financing Activities | 35,474 | (4,454 | ) | ||||||
EFFECT OF EXCHANGE RATE CHANGES | (590 | ) | (1,845 | ) | |||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (37,742 | ) | (74,674 | ) | |||||
CASH AND CASH EQUIVALENTS, Beginning | 89,839 | 118,390 | |||||||
CASH AND CASH EQUIVALENTS, Ending | $ | 52,097 | $ | 43,716 | |||||
Three Months Ended March | Nine Months Ended March | |||||||||||||||
(In Thousands) | FY2017 | FY2016 | FY2017 | FY2016 | ||||||||||||
Net Sales | $ | 391,063 | $ | 415,680 | $ | 806,298 | $ | 827,770 | ||||||||
Gross Profit as Reported | $ | 98,814 | $ | 99,371 | $ | 191,373 | $ | 188,783 | ||||||||
Restructuring Charges | — | — | — | 464 | ||||||||||||
Adjusted Gross Profit | $ | 98,814 | $ | 99,371 | $ | 191,373 | $ | 189,247 | ||||||||
Gross Profit % as Reported | 25.3 | % | 23.9 | % | 23.7 | % | 22.8 | % | ||||||||
Adjusted Gross Profit % | 25.3 | % | 23.9 | % | 23.7 | % | 22.9 | % | ||||||||
Segment Income as Reported | $ | 50,946 | $ | 52,166 | $ | 57,216 | $ | 52,195 | ||||||||
Restructuring Charges | — | — | — | 1,354 | ||||||||||||
Litigation Charges | — | — | — | 2,825 | ||||||||||||
Adjusted Segment Income | $ | 50,946 | $ | 52,166 | $ | 57,216 | $ | 56,374 | ||||||||
Segment Income % as Reported | 13.0 | % | 12.5 | % | 7.1 | % | 6.3 | % | ||||||||
Adjusted Segment Income % | 13.0 | % | 12.5 | % | 7.1 | % | 6.8 | % |
• | Starting in fiscal 2017, we implemented new sales terms for engines shipped to overseas customers, resulting in earlier revenue recognition compared to the terms we used during previous fiscal years. The change in terms caused units sold and net sales to be higher in the first half of the fiscal year compared to the second half. As a result of the change, units sold and net sales were lower in the third quarter of fiscal 2017 by approximately 100,000 units and $10 million, respectively. |
• | Using comparable sales terms, engine volumes sold decreased by 5% or approximately 160,000 engines in the third quarter of fiscal 2017. The decrease is due to a more cautious approach by our U.S. customers in building inventory for the season following the delayed start to the season last year. Offsetting the decrease were higher sales of Vanguard commercial engines and higher European engine sales. |
• | Gross profit percentage increased due to favorable sales mix including a higher proportion of commercial engine sales and margin lift on new products as well as manufacturing efficiency improvements. |
• | Investment in our ERP system upgrade and higher pension expense were the primary drivers for the $0.7 million increase in ESG&A expenses compared to last year. |
Three Months Ended March | Nine Months Ended March | |||||||||||||||
(In Thousands) | FY2017 | FY2016 | FY2017 | FY2016 | ||||||||||||
Net Sales | $ | 233,510 | $ | 220,845 | $ | 575,007 | $ | 555,883 | ||||||||
Gross Profit as Reported | $ | 34,946 | $ | 27,527 | $ | 91,075 | $ | 81,414 | ||||||||
Restructuring Charges | — | 580 | — | 5,222 | ||||||||||||
Acquisition Related Charges | — | — | — | 250 | ||||||||||||
Adjusted Gross Profit | $ | 34,946 | $ | 28,107 | $ | 91,075 | $ | 86,886 | ||||||||
Gross Profit % as Reported | 15.0 | % | 12.5 | % | 15.8 | % | 14.6 | % | ||||||||
Adjusted Gross Profit % | 15.0 | % | 12.7 | % | 15.8 | % | 15.6 | % | ||||||||
Segment Income (Loss) as Reported | $ | 5,614 | $ | (7,246 | ) | $ | 9,177 | $ | (6,767 | ) | ||||||
Restructuring Charges | — | 724 | — | 5,762 | ||||||||||||
Goodwill Impairment | — | 7,651 | — | 7,651 | ||||||||||||
Acquisition Related Charges | — | — | — | 276 | ||||||||||||
Adjusted Segment Income | $ | 5,614 | $ | 1,129 | $ | 9,177 | $ | 6,922 | ||||||||
Segment Income (Loss) % as Reported | 2.4 | % | (3.3 | )% | 1.6 | % | (1.2 | )% | ||||||||
Adjusted Segment Income % | 2.4 | % | 0.5 | % | 1.6 | % | 1.2 | % |
• | Net sales increased by $12.7 million, primarily due to higher sales of commercial mowers, turf care equipment and job site equipment. |
• | Gross profit percentage increased by 250 basis points. Adjusted gross profit percentage increased 230 basis points, primarily due to manufacturing efficiency improvements and favorable sales mix, which includes higher sales of commercial products. |
• | Higher new product promotional expenses and the investment in our ERP system upgrade were the primary drivers for the $2.3 million increase in ESG&A expenses compared to last year. |
Three Months Ended March | ||||||||||||||||||||||||
FY2017 Reported | Adjustments | FY2017 Adjusted | FY2016 Reported | Adjustments(1) | FY2016 Adjusted | |||||||||||||||||||
Gross Profit | ||||||||||||||||||||||||
Engines | $ | 98,814 | $ | — | $ | 98,814 | $ | 99,371 | $ | — | 99,371 | |||||||||||||
Products | 34,946 | — | 34,946 | 27,527 | 580 | 28,107 | ||||||||||||||||||
Inter-Segment Eliminations | 1,011 | — | 1,011 | 197 | — | $ | 197 | |||||||||||||||||
Total | $ | 134,771 | $ | — | $ | 134,771 | $ | 127,095 | $ | 580 | $ | 127,675 | ||||||||||||
Engineering, Selling, General and Administrative Expenses | ||||||||||||||||||||||||
Engines | $ | 48,450 | $ | — | $ | 48,450 | $ | 47,759 | $ | — | $ | 47,759 | ||||||||||||
Products | 29,829 | — | 29,829 | 27,529 | — | 27,529 | ||||||||||||||||||
Total | $ | 78,279 | $ | — | $ | 78,279 | $ | 75,288 | $ | — | $ | 75,288 | ||||||||||||
Segment Income (Loss) (2) | ||||||||||||||||||||||||
Engines | $ | 50,946 | $ | — | $ | 50,946 | $ | 52,166 | $ | — | $ | 52,166 | ||||||||||||
Products | 5,614 | — | 5,614 | (7,246 | ) | 8,375 | 1,129 | |||||||||||||||||
Inter-Segment Eliminations | 1,011 | — | 1,011 | 197 | — | 197 | ||||||||||||||||||
Total | $ | 57,571 | $ | — | $ | 57,571 | $ | 45,117 | $ | 8,375 | $ | 53,492 | ||||||||||||
Reconciliation from Segment Income (Loss) to Income before Income Taxes: | ||||||||||||||||||||||||
Equity in Earnings of Unconsolidated Affiliates (2) | — | — | — | — | — | — | ||||||||||||||||||
Income from Operations | $ | 57,571 | $ | — | $ | 57,571 | $ | 45,117 | $ | 8,375 | $ | 53,492 | ||||||||||||
Income before Income Taxes | 52,894 | — | 52,894 | 40,035 | 8,375 | 48,410 | ||||||||||||||||||
Provision for Income Taxes | 17,075 | — | 17,075 | 13,212 | 254 | 13,466 | ||||||||||||||||||
Net Income | $ | 35,819 | $ | — | $ | 35,819 | $ | 26,823 | $ | 8,121 | $ | 34,944 | ||||||||||||
Earnings Per Share | ||||||||||||||||||||||||
Basic | $ | 0.83 | $ | — | $ | 0.83 | $ | 0.62 | $ | 0.18 | $ | 0.80 | ||||||||||||
Diluted | 0.83 | — | 0.83 | 0.61 | 0.19 | 0.80 |
Nine Months Ended March | ||||||||||||||||||||||||
FY2017 Reported | Adjustments | FY2017 Adjusted | FY2016 Reported | Adjustments(1) | FY2016 Adjusted | |||||||||||||||||||
Gross Profit | ||||||||||||||||||||||||
Engines | $ | 191,373 | $ | — | $ | 191,373 | $ | 188,783 | $ | 464 | $ | 189,247 | ||||||||||||
Products | 91,075 | — | 91,075 | 81,414 | 5,472 | 86,886 | ||||||||||||||||||
Inter-Segment Eliminations | 251 | — | 251 | (1,694 | ) | — | (1,694 | ) | ||||||||||||||||
Total | $ | 282,699 | $ | — | $ | 282,699 | $ | 268,503 | $ | 5,936 | $ | 274,439 | ||||||||||||
Engineering, Selling, General and Administrative Expenses | ||||||||||||||||||||||||
Engines | $ | 138,610 | $ | — | $ | 138,610 | $ | 138,273 | $ | 2,825 | $ | 135,448 | ||||||||||||
Products | 84,763 | — | 84,763 | 81,707 | 26 | 81,681 | ||||||||||||||||||
Total | $ | 223,373 | $ | — | $ | 223,373 | $ | 219,980 | $ | 2,851 | $ | 217,129 | ||||||||||||
Segment Income (Loss) (2) | ||||||||||||||||||||||||
Engines | $ | 57,216 | $ | — | $ | 57,216 | $ | 52,195 | $ | 4,179 | $ | 56,374 | ||||||||||||
Products | 9,177 | — | 9,177 | (6,767 | ) | 13,689 | 6,922 | |||||||||||||||||
Inter-Segment Eliminations | 251 | — | 251 | (1,694 | ) | — | (1,694 | ) | ||||||||||||||||
Total | $ | 66,644 | $ | — | $ | 66,644 | $ | 43,734 | $ | 17,868 | $ | 61,602 | ||||||||||||
Reconciliation from Segment Income (Loss) to Income before Income Taxes: | ||||||||||||||||||||||||
Equity in Earnings of Unconsolidated Affiliates (2) | — | — | — | 3,187 | — | 3,187 | ||||||||||||||||||
Income from Operations | $ | 66,644 | $ | — | $ | 66,644 | $ | 40,547 | $ | 17,868 | $ | 58,415 | ||||||||||||
Income before Income Taxes | 53,164 | — | 53,164 | 29,753 | 17,868 | 47,621 | ||||||||||||||||||
Provision for Income Taxes | 16,242 | — | 16,242 | 8,541 | 4,199 | 12,740 | ||||||||||||||||||
Net Income | $ | 36,922 | $ | — | $ | 36,922 | $ | 21,212 | $ | 13,669 | $ | 34,881 | ||||||||||||
Earnings Per Share | ||||||||||||||||||||||||
Basic | $ | 0.86 | $ | — | $ | 0.86 | $ | 0.48 | $ | 0.31 | $ | 0.79 | ||||||||||||
Diluted | 0.86 | — | 0.86 | 0.48 | 0.31 | 0.79 |