EX-99.1 2 pressrelease-q1fy20.htm EXHIBIT 99.1 Exhibit


Investor Relations Contact:
Mark A. Schwertfeger, Senior VP and Chief Financial Officer
(800) 365-2759

BRIGGS & STRATTON CORPORATION REPORTS
FISCAL 2020 FIRST QUARTER RESULTS


MILWAUKEE, November 1, 2019/PRNewswire/ -- Briggs & Stratton Corporation (NYSE: BGG), a recognized global leader in providing power to get work done, today announced financial results for its first quarter of fiscal 2020, which ended September 29, 2019.


•
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.

“Our first quarter results were solid relative to our plan and we made meaningful progress on our key focus areas to drive better overall business performance,” stated Todd J. Teske, Chairman, President and Chief Executive Officer. “We are particularly pleased with the improved fulfillment levels in our service parts business, which is returning to industry-leading parts delivery and performance. We also saw further operational improvements in Vanguard commercial engines with quarterly production exceeding planned rates. There remains more work to be done, but our performance during the quarter has us encouraged that we are making the right progress to meet customer expectations and drive the planned efficiency improvements.” Teske continued, “Managing working capital is an important focus. Despite having seasonally elevated inventory levels, we are tracking to plan to deliver a meaningful reduction in inventory by the end of the fiscal year. This, combined with the refinancing of our revolving credit facility, is an important first step in strengthening the balance sheet.”


Fiscal 2020 Outlook:

The Company is maintaining its previous financial guidance for fiscal 2020. Net sales are expected to be within a range of $1.91 billion to $1.97 billion, which contemplates midpoint growth of approximately 5.5% over fiscal 2019’s performance. Adjusted net income is expected within a range of $9 million to $17 million, or $0.20 to $0.40 per diluted share, prior to the impact of costs related to the Company’s business optimization program and the engine manufacturing consolidation project. Storm-related generator sales in the first quarter drove modest upside to our planned results, which helps support the achievement of the outlook for the year. The outlook does not contemplate potential incremental demand related to power outages in California.








Conference Call Information:

The Company will host a conference call today, November 1, 2019, at 10:00 AM (ET) to review the first quarter financial results. A live webcast of the conference call will be available on the Company’s corporate website: http://investors.basco.com.

Also available is a dial-in number to access the call real-time. To join, dial (877) 233-9136 and enter Conference ID 7182588. A replay will be offered beginning approximately two hours after the call ends and will be available for one week. Dial (855) 859-2056 and enter the Conference ID to access the replay.

Non-GAAP Financial Measures:

This release refers to non-GAAP financial measures including “adjusted gross profit”, “adjusted engineering, selling, general, and administrative expenses”, “adjusted segment income (loss)”, “adjusted net income (loss)”, and “adjusted diluted earnings (loss) per share.” Refer to the accompanying financial schedules for supplemental financial data and corresponding reconciliations of these non-GAAP financial measures to certain GAAP financial measures.

Safe Harbor Statement:

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”, “estimate”, “expect”, “forecast”, “intend”, “plan”, “project”, 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 its products; changes in interest rates and foreign exchange rates; the effects of weather on the purchasing patterns of consumers and original equipment manufacturers (OEMs); actions of engine manufacturers and OEMs with whom the Company competes; changes in laws and regulations, including U.S. tax reform, changes in tax rates, laws and regulations as well as related guidance; imposition of new, or changes in existing, duties, tariffs and trade agreements; changes in customer and OEM demand; changes in prices of raw materials and parts that the Company purchases; changes in domestic and foreign economic conditions (including effects from the U.K.’s decision to exit the European Union); the ability to bring new productive capacity on line efficiently and with good quality; outcomes of legal proceedings and claims; the ability to realize anticipated savings from the business optimization program and restructuring actions; and other factors disclosed from time to time in the Company’s 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. The Company undertakes no obligation to update forward-looking statements made in this release to reflect events or circumstances after the date of this release.

About Briggs & Stratton Corporation:

Briggs & Stratton Corporation (NYSE: BGG), headquartered in Milwaukee, Wisconsin, is focused on providing power to get work done and make people's lives better. Briggs & Stratton is the world’s largest producer of gasoline engines for outdoor power equipment, and is a leading designer, manufacturer and marketer of power generation, pressure washer, lawn and garden, turf care and job site products through its Briggs & Stratton®, Simplicity®, Snapper®, Ferris®, Vanguard®, Allmand®, Billy Goat®, Murray®, Branco®, and Victa® brands. Briggs & Stratton products are designed, manufactured, marketed and serviced in over 100 countries on six continents. For additional information, please visit www.basco.com and www.briggsandstratton.com.















BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations for the Periods Ended September
(In Thousands, except per share data)

 
 
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



Supplemental International Sales Information
(In Thousands)


 
 
Three Months Ended September
 
 
FY2020
 
FY2019
International sales based on product shipment destination
 
$
102,616

 
$
88,526








BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets as of the End of September
(In Thousands)


 
 
 
 
 
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






BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
 
 
 
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

 
 
 
 
 
 
(1) 1 Included within Beginning Cash, Cash Equivalents, and Restricted Cash is approximately $0.8 million and $4.3 of restricted cash as of June 30, 2019 and July 1, 2018, respectively.
(2) Included within Ending Cash, Cash Equivalents, and Restricted Cash is approximately $0.7 million and $2.3 million of restricted cash as of September 29, 2019 and September 30, 2018, respectively.




SUPPLEMENTAL SEGMENT INFORMATION

Engines Segment:
 
 
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
)%

First Quarter Highlights

•
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.














Products Segment:
 
 
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
 %

First Quarter Highlights

•
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.


Non-GAAP Financial Measures
Briggs & Stratton Corporation prepares its financial statements using Generally Accepted Accounting Principles (GAAP). When a company discloses material information containing non-GAAP financial measures, SEC regulations require that the disclosure include a presentation of the most directly comparable GAAP measure and a reconciliation of the GAAP and non-GAAP financial measures. Management’s inclusion of non-GAAP financial measures in this release is intended to supplement, not replace, the presentation of the financial results in accordance with GAAP. Briggs & Stratton Corporation management believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. Management also believes that these non-GAAP financial measures enhance the ability of investors to analyze the Company’s business trends and to understand the Company’s performance. In addition, management may utilize non-GAAP financial measures as a guide in the Company’s forecasting, budgeting and long-term planning process. Non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures presented in accordance with GAAP. The following tables are reconciliations of the non-GAAP financial measures:




BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES
Adjusted Segment Information for the Three Month Periods Ended September
(In Thousands, except per share data)


 
 
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
)

(1) For the first quarter of fiscal 2020, engine manufacturing consolidation charges include $2.0 million ($1.9 million after tax) of cash charges and $2.8 million ($2.7 million after tax) of non-cash charges related to the closure of the engine plant in Murray, Kentucky. Business optimization expenses include $1.1 million ($0.9 million after tax) of cash charges and $0.5 million ($0.4 million after tax) of non-cash charges related to the warehouse optimization program and the plan to onshore Commercial engine production.