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)) |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock (par value $0.01 per share) | BGG | New York Stock Exchange |
(a) | Not applicable |
(b) | Not applicable |
(c) | Not applicable |
(d) | Exhibits. The following exhibits are being furnished herewith: |
Exhibit No. | Description | |
99.1 |
BRIGGS & STRATTON CORPORATION | ||||
(Registrant) | ||||
Date: | November 1, 2019 | /s/ Mark A. Schwertfeger | ||
Mark A. Schwertfeger | ||||
Senior Vice President and Chief Financial Officer Duly Authorized Officer |
• | Fiscal 2020 first quarter net sales were $314 million, up $35 million or 12% from $279 million for the prior year. Both engines and products segments drove the sales growth, including higher revenue in service parts, as expected, on improved throughput. Sales of engines and turf products serving commercial applications increased by double digits, partially offset by lower job site sales due to timing of certain shipments. Storm-related generator shipments declined from a year-ago due to the relatively low amount of power outages caused by Hurricane Dorian. |
• | As expected, quarterly GAAP gross profit margin of 13.8% and adjusted gross profit margin of 15.6% declined from GAAP gross profit margin of 15.7% and adjusted gross profit margin of 16.9% from the first quarter of fiscal 2019, principally from unfavorable sales mix within the products segment, tariff costs and residual inefficiencies from last year’s implementation of the business optimization program. This was partially offset by strong margin improvement in the engines segment. |
• | First quarter GAAP net loss of $33.6 million, or $0.81 per share, included $6.4 million in pre-tax charges for business optimization and engine manufacturing consolidation. Excluding these items, the adjusted net loss for the fiscal 2020 first quarter was $27.6 million, or $0.67 per share, compared to adjusted net loss of $21.0 million, or $0.51 per share, for the fiscal first quarter of the prior year. |
• | The Company refinanced its revolving credit facility with a new credit facility which provides up to $625 million in borrowing capacity, subject to a borrowing base. |
Three Months Ended September | ||||||||
FY2020 | FY2019 | |||||||
NET SALES | $ | 313,719 | $ | 278,997 | ||||
COST OF GOODS SOLD | 270,472 | 235,243 | ||||||
Gross Profit | 43,247 | 43,754 | ||||||
ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 78,737 | 100,858 | ||||||
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES | 1,263 | 2,973 | ||||||
Loss from Operations | (34,227 | ) | (54,131 | ) | ||||
INTEREST EXPENSE | (6,905 | ) | (5,161 | ) | ||||
OTHER INCOME (EXPENSE) | (743 | ) | 343 | |||||
Loss before Income Taxes | (41,875 | ) | (58,949 | ) | ||||
CREDIT FOR INCOME TAXES | (8,238 | ) | (17,963 | ) | ||||
Net Loss | $ | (33,637 | ) | $ | (40,986 | ) | ||
EARNINGS (LOSS) PER SHARE | ||||||||
Basic | $ | (0.81 | ) | $ | (0.98 | ) | ||
Diluted | $ | (0.81 | ) | $ | (0.98 | ) | ||
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||
Basic | 41,603 | 41,858 | ||||||
Diluted | 41,603 | 41,858 |
Three Months Ended September | ||||||||
FY2020 | FY2019 | |||||||
International sales based on product shipment destination | $ | 102,616 | $ | 88,526 |
CURRENT ASSETS: | FY2020 | FY2019 | ||||||
Cash and Cash Equivalents | $ | 48,740 | $ | 29,012 | ||||
Accounts Receivable, Net | 198,021 | 185,188 | ||||||
Inventories | 612,401 | 544,848 | ||||||
Prepaid Expenses and Other Current Assets | 38,887 | 34,811 | ||||||
Total Current Assets | 898,049 | 793,859 | ||||||
OTHER ASSETS: | ||||||||
Goodwill | 169,131 | 169,162 | ||||||
Investments | 47,333 | 44,324 | ||||||
Other Intangible Assets, Net | 95,396 | 99,263 | ||||||
Deferred Income Tax Asset | 52,159 | 31,463 | ||||||
Other Long-Term Assets, Net | 21,743 | 22,166 | ||||||
Right of Use Asset | 91,285 | — | ||||||
Total Other Assets | 477,047 | 366,378 | ||||||
PLANT AND EQUIPMENT: | ||||||||
At Cost | 1,228,401 | 1,183,485 | ||||||
Less - Accumulated Depreciation | 826,239 | 766,515 | ||||||
Plant and Equipment, Net | 402,162 | 416,970 | ||||||
$ | 1,777,258 | $ | 1,577,207 | |||||
CURRENT LIABILITIES: | ||||||||
Accounts Payable | $ | 247,338 | $ | 240,489 | ||||
Short-Term Debt | — | 201,406 | ||||||
Accrued Liabilities | 134,982 | 128,265 | ||||||
Short-Term Lease Obligation | 11,968 | — | ||||||
Total Current Liabilities | 394,288 | 570,160 | ||||||
OTHER LIABILITIES: | ||||||||
Accrued Pension Cost | 217,154 | 186,455 | ||||||
Accrued Employee Benefits | 21,329 | 20,138 | ||||||
Accrued Postretirement Health Care Obligation | 24,691 | 28,705 | ||||||
Other Long-Term Liabilities | 66,791 | 51,523 | ||||||
Long-Term Lease Obligation | 79,317 | — | ||||||
Long-Term Debt | 565,863 | 200,888 | ||||||
Total Other Liabilities | 975,145 | 487,709 | ||||||
SHAREHOLDERS' INVESTMENT: | ||||||||
Common Stock | 579 | 579 | ||||||
Additional Paid-In Capital | 69,873 | 75,437 | ||||||
Retained Earnings | 958,222 | 1,024,875 | ||||||
Accumulated Other Comprehensive Loss | (297,363 | ) | (253,934 | ) | ||||
Treasury Stock, at Cost | (323,486 | ) | (327,619 | ) | ||||
Total Shareholders' Investment | 407,825 | 519,338 | ||||||
$ | 1,777,258 | $ | 1,577,207 |
Three Months Ended September | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | FY2020 | FY2019 | |||||||
Net Loss | $ | (33,637 | ) | $ | (40,986 | ) | |||
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | |||||||||
Depreciation and Amortization | 19,657 | 16,003 | |||||||
Stock Compensation Expense | 2,319 | 2,632 | |||||||
Loss on Disposition of Plant and Equipment | 1,421 | — | |||||||
Provision for Deferred Income Taxes | (9,148 | ) | (20,482 | ) | |||||
Equity in Earnings of Unconsolidated Affiliates | (1,745 | ) | (3,910 | ) | |||||
Dividends Received from Unconsolidated Affiliates | 3,453 | 3,101 | |||||||
Changes in Operating Assets and Liabilities: | |||||||||
Accounts Receivable | 36 | (1,465 | ) | ||||||
Inventories | (112,759 | ) | (127,597 | ) | |||||
Other Current Assets | (6,974 | ) | 8,014 | ||||||
Accounts Payable, Accrued Liabilities and Income Taxes | (25,052 | ) | 27,374 | ||||||
Other, Net | 735 | 629 | |||||||
Net Cash Used in Operating Activities | (161,694 | ) | (136,687 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Capital Expenditures | (18,825 | ) | (21,246 | ) | |||||
Cash Paid for Acquisitions, Net of Cash Acquired | — | (8,865 | ) | ||||||
Net Cash Used in Investing Activities | (18,825 | ) | (30,111 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Net Borrowings on Credit Facilities | 210,250 | 153,371 | |||||||
Debt Issuance Costs | (4,350 | ) | — | ||||||
Treasury Stock Purchases | — | (5,082 | ) | ||||||
Stock Option Exercise Proceeds and Tax Benefits | — | 1,823 | |||||||
Payments Related to Shares Withheld for Taxes for Stock Compensation | (55 | ) | (232 | ) | |||||
Cash Dividends Paid | (5,888 | ) | — | ||||||
Net Cash Provided by Financing Activities | 199,957 | 149,880 | |||||||
EFFECT OF EXCHANGE RATE CHANGES | (300 | ) | (940 | ) | |||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | 19,138 | (17,858 | ) | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, Beginning (1) | 30,342 | 49,218 | |||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, Ending (2) | $ | 49,480 | $ | 31,360 | |||||
Three Months Ended September | ||||||||
(In Thousands) | FY2020 | FY2019 | ||||||
Net Sales | $ | 133,354 | $ | 119,090 | ||||
Gross Profit as Reported | $ | 19,143 | $ | 16,042 | ||||
Engine Manufacturing Consolidation Project | 4,827 | — | ||||||
Business Optimization | 161 | 423 | ||||||
Adjusted Gross Profit | $ | 24,131 | $ | 16,465 | ||||
Gross Profit % as Reported | 14.4 | % | 13.5 | % | ||||
Adjusted Gross Profit % | 18.1 | % | 13.8 | % | ||||
Segment Loss as Reported | $ | (27,903 | ) | $ | (44,408 | ) | ||
Engine Manufacturing Consolidation Project | 5,309 | — | ||||||
Business Optimization | 409 | 14,488 | ||||||
Adjusted Segment Loss | $ | (22,185 | ) | $ | (29,920 | ) | ||
Segment Loss % as Reported | (20.9 | )% | (37.3 | )% | ||||
Adjusted Segment Loss % | (16.6 | )% | (25.1 | )% |
• | Engine sales unit volumes increased by 12%, or approximately 90,000 engines. Last year’s first quarter sales were low for engines and service parts sales due to shipments made in advance of the ERP go-live. This caused Australia and North America residential engines sales to increase compared to the first quarter of the prior year, but Europe sales declined due to elevated channel inventories. Service parts sales further benefitted this year by improved throughput of our distribution centers. The engines segment also achieved 10% growth in Vanguard commercial engines. Modestly unfavorable foreign currency impacts offset increased pricing to help offset tariff costs. |
• | GAAP gross profit percentage compared to last year increased 90 basis points and adjusted gross profit margins advanced 430 basis points on favorable sales mix (410bps) driven largely by a higher proportion of service parts revenue and growth in commercial engines as well as business optimization program savings (90bps). This improvement was partially offset by unfavorable foreign currency impacts (70bps). |
• | GAAP engineering, selling, general and administrative expenses (ESG&A) declined by $14.9 million. Adjusted ESG&A decreased $2.0 million from last year primarily related to pacing of expenses. |
Three Months Ended September | ||||||||
(In Thousands) | FY2020 | FY2019 | ||||||
Net Sales | $ | 195,641 | $ | 173,042 | ||||
Gross Profit as Reported | $ | 24,818 | $ | 27,556 | ||||
Business Optimization | 649 | 2,880 | ||||||
Adjusted Gross Profit | $ | 25,467 | $ | 30,436 | ||||
Gross Profit % as Reported | 12.7 | % | 15.9 | % | ||||
Adjusted Gross Profit % | 13.0 | % | 17.6 | % | ||||
Segment Income (Loss) as Reported | $ | (5,610 | ) | $ | (9,880 | ) | ||
Business Optimization | 707 | 11,641 | ||||||
Adjusted Segment Income (Loss) | $ | (4,903 | ) | $ | 1,761 | |||
Segment Income (Loss) % as Reported | (2.9 | )% | (5.7 | )% | ||||
Adjusted Segment Income (Loss) % | (2.5 | )% | 1.0 | % |
• | Net sales increased by over $22 million, primarily on higher shipments of non-storm related generators, Ferris commercial mowers, Victa mowers in Australia and higher service parts. This growth was partially offset by lower sales of job site products and storm-related generator sales. Price increases to help offset tariffs and other product inflation costs were partly mitigated by unfavorable foreign currency impacts. |
• | Gross profit percentage decreased by 320 basis points from a year ago. The adjusted gross profit percentage decreased 460 basis points, primarily due to residual inefficiencies (140bps) from the business optimization program go-live, unfavorable sales mix (160bps) primarily related to efforts to reduce inventories and higher product costs net of pricing (160bps), predominantly driven by tariffs. Additional price increases and product cost reductions are expected to be implemented to help mitigate the impact of tariffs on a full year basis. |
• | GAAP ESG&A declined $7.3 million from a year ago. Adjusted ESG&A increased by $1.4 million, as anticipated, largely due to higher marketing activity and compensation costs. |
Three Months Ended September | ||||||||||||||||||||||||
FY2020 Reported | Adjustments (1) | FY2020 Adjusted | FY2019 Reported | Adjustments | FY2019 Adjusted | |||||||||||||||||||
Gross Profit | ||||||||||||||||||||||||
Engines | $ | 19,143 | $ | 4,988 | $ | 24,131 | $ | 16,042 | $ | 423 | $ | 16,465 | ||||||||||||
Products | 24,818 | 649 | 25,467 | 27,556 | 2,880 | 30,436 | ||||||||||||||||||
Inter-Segment Eliminations | (714 | ) | — | (714 | ) | 156 | — | 156 | ||||||||||||||||
Total | $ | 43,247 | $ | 5,637 | $ | 48,884 | $ | 43,754 | $ | 3,303 | $ | 47,057 | ||||||||||||
Engineering, Selling, General and Administrative Expenses | ||||||||||||||||||||||||
Engines | $ | 47,326 | $ | 248 | $ | 47,078 | $ | 62,189 | $ | 13,128 | $ | 49,061 | ||||||||||||
Products | 31,411 | 58 | 31,353 | 38,670 | 8,761 | 29,909 | ||||||||||||||||||
Total | $ | 78,737 | $ | 306 | $ | 78,431 | $ | 100,859 | $ | 21,889 | $ | 78,970 | ||||||||||||
Equity in Earnings of Unconsolidated Affiliates | ||||||||||||||||||||||||
Engines | $ | 280 | $ | 482 | $ | 762 | $ | 1,739 | $ | 937 | $ | 2,676 | ||||||||||||
Products | 983 | — | 983 | 1,234 | — | 1,234 | ||||||||||||||||||
Total | $ | 1,263 | $ | 482 | $ | 1,745 | $ | 2,973 | $ | 937 | $ | 3,910 | ||||||||||||
Segment Income (Loss) | ||||||||||||||||||||||||
Engines | $ | (27,903 | ) | $ | 5,718 | $ | (22,185 | ) | $ | (44,408 | ) | $ | 14,488 | $ | (29,920 | ) | ||||||||
Products | (5,610 | ) | 707 | (4,903 | ) | (9,880 | ) | 11,641 | 1,761 | |||||||||||||||
Inter-Segment Eliminations | (714 | ) | — | (714 | ) | 156 | — | 156 | ||||||||||||||||
Total | $ | (34,227 | ) | $ | 6,424 | $ | (27,802 | ) | $ | (54,132 | ) | $ | 26,129 | $ | (28,003 | ) | ||||||||
Income (Loss) before Income Taxes | (41,875 | ) | 6,425 | (35,450 | ) | (58,949 | ) | 26,129 | (32,820 | ) | ||||||||||||||
Provision (Benefit) for Income Taxes | (8,238 | ) | 421 | (7,817 | ) | (17,963 | ) | 6,154 | (11,809 | ) | ||||||||||||||
Net Income (Loss) | $ | (33,637 | ) | $ | 6,004 | $ | (27,633 | ) | $ | (40,986 | ) | $ | 19,975 | $ | (21,011 | ) | ||||||||
Earnings (Loss) Per Share | ||||||||||||||||||||||||
Basic | $ | (0.81 | ) | $ | 0.14 | $ | (0.67 | ) | $ | (0.98 | ) | $ | 0.47 | $ | (0.51 | ) | ||||||||
Diluted | (0.81 | ) | 0.14 | (0.67 | ) | (0.98 | ) | 0.47 | (0.51 | ) |