-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FxCSWT3Els1iGolt7dyBGGako6a+19MlT3uySNFXRP8CImAVTgb0bj3F3stpUCA3 E0B6IfSrjNFD5RkaaYrdSQ== 0000950124-94-000247.txt : 19940207 0000950124-94-000247.hdr.sgml : 19940207 ACCESSION NUMBER: 0000950124-94-000247 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931226 FILED AS OF DATE: 19940204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRIGGS & STRATTON CORP CENTRAL INDEX KEY: 0000014195 STANDARD INDUSTRIAL CLASSIFICATION: 3510 IRS NUMBER: 390182330 STATE OF INCORPORATION: WI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 001-01370 FILM NUMBER: 94504680 BUSINESS ADDRESS: STREET 1: 12301 W WIRTH ST CITY: WAUWATOSA STATE: WI ZIP: 53222 BUSINESS PHONE: 4142595333 MAIL ADDRESS: STREET 1: P.O. BOX 702 CITY: MILWAUKEE STATE: WI ZIP: 53201 10-Q 1 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 26, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_______________ to _______________ Commission file number 1-1370 BRIGGS & STRATTON CORPORATION (Exact name of registrant as specified in its charter) A Wisconsin Corporation 39-0182330 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12301 West Wirth Street, Wauwatosa, Wisconsin 53222 (Address of Principal Executive Offices) (Zip Code) 414/259-5333 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Outstanding at Class February 2, 1994 - ---------------------------------------------------------------------------------- COMMON STOCK, par value $0.01 per share 14,463,500 Shares
-1- 2 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES INDEX
Page No. -------- PART I - FINANCIAL INFORMATION Financial Statements: Consolidated Condensed Balance Sheets - December 26, 1993, June 27, 1993 and December 27, 1992 3 Consolidated Condensed Statements of Income - Three Months and Six Months Ended December 26, 1993 and December 27, 1992 4 Consolidated Condensed Statements of Cash Flows - Six Months Ended December 26, 1993 and December 27, 1992 5 Notes to Consolidated Condensed Financial Statements 6 Management's Discussion and Analysis of Results of Operations and Financial Condition 8 PART II - OTHER INFORMATION 12
-2- 3 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands of dollars) ASSETS ------
December 26 June 27 December 27 1993 1993 1992 ----------- ------- ----------- CURRENT ASSETS: (Unaudited) (Unaudited) Cash and cash equivalents $ 7,765 $ 39,501 $ 17,613 Short-term investments - 70,422 - Receivables, net 261,617 124,981 221,810 Inventories - Finished products and parts 72,213 46,061 75,923 Work in process 25,154 25,320 28,762 Raw materials 3,988 2,684 4,103 ---------------------------------- Total inventories $101,355 $ 74,065 $108,788 Future income tax benefits 28,732 27,457 24,196 Prepaid expenses 15,535 16,537 19,461 ---------------------------------- Total current assets $415,004 $352,963 $391,868 ---------------------------------- PREPAID PENSION COST $ 8,069 $ 7,602 $ 7,376 ---------------------------------- PLANT AND EQUIPMENT, at cost: $663,563 $658,120 $654,967 Less - Accumulated depreciation and unamortized investment tax credit 372,669 362,578 349,889 ---------------------------------- Total plant and equipment, net $290,894 $295,542 $305,078 ---------------------------------- $713,967 $656,107 $704,322 ---------------------------------- ---------------------------------- LIABILITIES & SHAREHOLDERS' INVESTMENT -------------------------------------- CURRENT LIABILITIES: Accounts payable $ 54,539 $ 39,357 $ 42,170 Domestic notes payable - - 70,831 Foreign loans 20,043 15,927 25,413 Accrued liabilities 103,655 92,068 87,647 Dividends payable 6,364 - 6,076 Federal and state income taxes 12,190 10,592 11,006 ---------------------------------- Total current liabilities $196,791 $157,944 $243,143 ---------------------------------- DEFERRED INCOME TAXES $ 14,834 $ 49,900 $ 51,850 ---------------------------------- ACCRUED EMPLOYEE BENEFITS $ 14,625 $ 13,305 $ 13,280 ---------------------------------- ACCRUED POSTRETIREMENT HEALTH CARE OBLIGATION $ 63,008 $ - $ - ---------------------------------- LONG-TERM DEBT $ 75,000 $ 75,000 $ 75,000 ---------------------------------- SHAREHOLDERS' INVESTMENT: Common stock- Authorized 30,000,000 shares, $.01 par value Issued and outstanding 14,463,500 shares $ 145 $ 145 $ 145 Additional paid-in capital 42,883 42,883 43,246 Retained earnings 308,019 318,247 281,772 Cumulative translation adjustments (1,338) (1,317) (4,114) ---------------------------------- Total shareholders' investment $349,709 $359,958 $321,049 ---------------------------------- $713,967 $656,107 $704,322 ---------------------------------- ----------------------------------
The accompanying notes are an integral part of these statements. -3- 4 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In thousands of dollars except amounts per share) (Unaudited)
Three Months Ended Six Months Ended ------------------ ------------------ Dec.26 Dec.27 Dec.26 Dec.27 1993 1992 1993 1992 ------ ------ ------ ------ NET SALES $328,937 $305,174 $527,509 $476,947 COST OF GOODS SOLD 256,556 243,840 426,932 397,890 -------- -------- -------- -------- Gross profit on sales $ 72,381 $ 61,334 $100,577 $ 79,057 ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 23,792 20,825 43,639 39,925 -------- -------- -------- -------- Income from operations $ 48,589 $ 40,509 $ 56,938 $ 39,132 INTEREST EXPENSE (2,161) (3,040) (4,187) (5,571) OTHER INCOME(EXPENSE), net 539 (317) 4,737 460 -------- -------- -------- -------- Income before provision for income taxes $ 46,967 $ 37,152 $ 57,488 $ 34,021 PROVISION FOR INCOME TAXES 18,330 13,750 22,430 12,590 -------- -------- -------- -------- Net income before cumulative effect of accounting changes $ 28,637 $ 23,402 $ 35,058 $ 21,431 -------- -------- -------- -------- -------- -------- -------- -------- CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR: Postretirement health care, net of income taxes $ - $ - $(40,232) $ - Postemployment benefits, net of income taxes - - (672) - Deferred income taxes - - 8,346 - -------- -------- -------- -------- $ - $ - $(32,558) $ - -------- -------- -------- -------- Net income $ 28,637 $ 23,402 2,500 $ 21,431 -------- -------- -------- -------- -------- -------- -------- -------- PER SHARE DATA* Net income before cumulative effect of accounting changes $ 1.98 $ 1.62 $ 2.42 $ 1.48 Cumulative effect of accounting changes - - (2.25) - ------ ------ ------ ------ Net income $ 1.98 $ 1.62 $ .17 $ 1.48 ------ ------ ------ ------ ------ ------ ------ ------ Cash dividends $ .44 $ .42 $ .88 $ .84 ------ ------ ------ ------ ------ ------ ------ ------
*Based on 14,463,500 shares outstanding. The accompanying notes are an integral part of these statements. -4- 5 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Increase(Decrease) in Cash and Cash Equivalents (In thousands of dollars) (Unaudited)
Six Months Ended --------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Dec. 26, 1993 Dec. 27, 1992 ------------- ------------- Net income $ 2,500 $ 21,431 Adjustments to reconcile net income to net cash provided by operating activities - Cumulative effect of accounting changes, net of taxes 32,558 - Depreciation 20,132 19,455 (Gain)Loss on disposition of plant and equipment (2,493) 1,088 (Increase) in operating assets - Accounts receivable (136,636) (118,195) Inventories (27,290) (36,299) Other current assets (1,444) (1,556) Other assets (467) (368) Increase(decrease) in liabilities - Accounts payable and accrued liabilities 29,459 18,613 Other liabilities 3,147 (1,180) -------- -------- Net cash used in operating activities $(80,534) $(97,011) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to plant and equipment $(20,351) $(16,350) Proceeds received on sale of plant and equipment 7,075 199 Sale of short-term investments 70,422 - -------- -------- Net cash provided by (used in) investing activities $ 57,146 $(16,151) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings on domestic and foreign loans $ 4,116 $ 64,391 Dividends (12,728) (12,149) -------- -------- Net cash provided by (used in) financing activities $ (8,612) $ 52,242 -------- -------- EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS $ 264 $ (409) -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS $(31,736) $(61,329) CASH AND CASH EQUIVALENTS, beginning 39,501 78,942 -------- -------- CASH AND CASH EQUIVALENTS, ending $ 7,765 $ 17,613 -------- -------- -------- -------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 4,187 $ 5,403 -------- -------- -------- -------- Income taxes paid $ 22,704 $ 17,054 -------- -------- -------- --------
The accompanying notes are an integral part of these statements. -5- 6 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. However, in the opinion of the Company, adequate disclosures have been presented to make the information not misleading, and all adjustments necessary to present fair statements of the results of operations and financial position have been included. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. At the beginning of fiscal year 1994, the Company adopted three Statements of Financial Accounting Standards (FAS) as follows: FAS 106 - Postretirement Benefits Other Than Pensions - This new standard requires that the Company record the expected cost of health care and life insurance benefits during the years that the employees render service--a significant change from the preceding method which recognized health care benefits on a cash basis. Postretirement life insurance benefits were previously being accounted for in a manner substantially emulating the new standards, so no adjustment was necessary. The cumulative effect of this change in accounting for postretirement health care benefits was a charge totaling $65,954,000 on a before tax basis or $40,232,000 on an after tax basis ($2.78 per share). The additional annual cost of accruing this cost over the former method will be approximately $2,000,000. For measurement purposes, a 10.5% annual rate of increase in the per capita cost of covered health care claims was assumed for the years 1995 through 1997, decreasing gradually to 6% for the year 2007. The health care cost trend rate assumption has a significant effect on the amounts reported. The rates, if increased by 1%, would add $6,806,000 to the accumulated post retirement benefit at the beginning of the 1994 fiscal year. The discount rate used in determining the accumulated postretirement benefit obligation is 7.75% compounded annually. Both the health care and life insurance plans are unfunded. The components of the postretirement health care benefit obligation at the beginning of the 1994 fiscal year are: Retirees $21,778,000 Fully Eligible Plan Participants 34,742,000 Other Active Participants 9,434,000 ----------- $65,954,000 ----------- -----------
-6- 7 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited - Continued) The actual health insurance benefit payments which are expected to be paid within the next twelve months are included in the caption Accrued Liabilities in the accompanying balance sheet. All amounts expected to be paid beyond one year are included in the caption Accrued Postretirement Health Care Obligation. FAS 112 - Postemployment Benefits - This new standard requires that the Company record the expected cost of postemployment benefits (not to be confused with the postretirement benefits described in the preceding paragraphs), also over the years that employees render service. These benefits are substantially smaller amounts because they apply only to employees who permanently terminate employment prior to retirement. The cumulative effect of this change was a charge totaling $1,102,000 or $672,000 after taxes ($.05 per share). There will be no significant increase in the annual costs of these plans. The items included in this amount are disability payments, life insurance and medical benefits. These amounts are also discounted using a 7.75% interest rate. FAS 109 - Accounting for Income Taxes - The implementation of this standard results in the change in the recording of deferred income taxes from the former method which emphasized the provisions made in the income statement to a method which emphasizes the amounts to be paid out being recorded on the balance sheet. The adoption of this standard resulted in a cumulative adjustment which was recorded as income totaling $8,346,000 or $.58 per share. The components of deferred tax assets (future income tax benefits) and liabilities (deferred income taxes) at the date of adoption at the beginning of the first quarter of fiscal 1994 were: Future Income Tax Benefits: Inventory $ 2,425,000 Prepaid Expenses 2,032,000 Payroll Related Accruals 4,685,000 Warranty Reserves 10,761,000 Other Accrued Liabilities 4,291,000 Miscellaneous 2,092,000 ----------- $26,286,000 ----------- -----------
-7- 8 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited - Continued) Deferred Income Taxes: Difference between book and tax methods applied to maintenance and supply inventories $(3,220,000) Prepaid Pension Cost 2,901,000 Accumulated Depreciation 44,931,000 Accrued Employee Benefits (3,704,000) Miscellaneous (1,275,000) ----------- $39,633,000 ----------- -----------
The above amounts do not include the income tax effects arising from the adoption of FAS 106 and FAS 112 described in the preceding paragraphs. PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following is Management's discussion and analysis of certain significant factors which have affected the Company's results of operations and financial condition during the periods included in the accompanying consolidated condensed financial statements. RESULTS OF OPERATIONS SALES Net sales for the second quarter of the current fiscal year increased 8% or $23,763,000 when compared to the same period last year. Nearly one-half of the Engine Division increase is the result of a change in sales mix to higher selling price engines. The remaining amount is equally divided between a 3% unit volume increase and a small price increase in the engines being sold. Lock dollar sales were up 26%, whereas lock unit sales were up 22%, reflecting the trend to higher unit price lock sets. The increase in unit sales reflects the upswing in the sales of the U.S. car and truck industry. -8- 9 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION (Continued) Engine service sales went against the overall sales increase trend for this quarter, reflecting an 8% decrease between years. Management believes this reduction to be a result of a timing change only and will be made up in the second half of the fiscal year. Sales for the six months ended December 1993 showed an 11% increase of $50,562,000 between years. Engine unit shipments were up 5%, lock unit shipments were up 16%. The same factors described in the preceding paragraphs affected the six-month figures. Inventories of lawn and garden equipment in the industry distribution channels at the end of the previous summer selling season were as low as they were the year before. Economic forecasts are more favorable now than they were a year ago. Equipment manufacturers and retailers are optimistic that retail sales will be higher in the last half of the fiscal year than they were during the same period last year. Company management believes engine orders reflect that optimism. Therefore, if the weather cooperates, the third and fourth fiscal quarters should be somewhat better than last year. GROSS PROFIT Gross profit for the second fiscal quarter increased $11,047,000 or 18% when compared to the same quarter last year. The gross profit rate (when taken as a ratio to net sales) improved from 20% in the preceding year to 22% in the current year. This is accounted for by two of the three factors mentioned previously, namely the change in sales mix to higher selling price engines which also have higher margins, and the small selling price increases. The change in unit volume also contributed to the improvement in gross profit by spreading fixed overhead over a larger number of engine units. The gross profit increase of $21,520,000 or 27% for the six-month comparative periods resulted from the same factors as described in the preceding paragraph. The Company expects continued improvement from all three factors to carry into the remaining two quarters of the fiscal year. ENGINEERING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Expenses in this category increased $2,967,000 or 14% when comparing the two second fiscal quarters. This was primarily due to increased costs related to the Company's projected Profit Sharing Plan payout and increases in professional services. These same factors contributed to the increase in the six-month comparison. -9- 10 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION (Continued) INTEREST EXPENSE This category decreased in both the December quarter comparison and the year-to-date comparison. They were both due to a reduction in debt used by the Company to finance its working capital needs in the second quarter of the current fiscal year versus that used in the same period the previous fiscal year. There were also reductions in the foreign debt used between years for the entire first six months of the current fiscal year. Company management expects the conditions described above will exist in the third quarter, and the fourth quarter should be similar to the prior year. OTHER INCOME(EXPENSE) This category had a substantial change between years, both in the three-month comparison and the six-month comparison. The three-month comparison reflected an improvement in investment income in the current fiscal year due to having more funds available for short-term investment. The six-month comparison had this same benefit plus a $2,800,000 gain on the sale of the Company's German subsidiary facility in the first quarter of the year. Management also believes investment income should continue favorable to last year in both the third and fourth quarters due to greater funds being available for investment. PROVISION FOR INCOME TAXES The effective tax rate of 39% is management's estimate of what this rate will be for the full fiscal year and includes a 1% increase in the federal statutory rate resulting from the Revenue Reconciliation Act of 1993. CUMULATIVE EFFECT OF ACCOUNTING CHANGES At the beginning of this first quarter of the fiscal year, the Company adopted the provisions of three accounting standards as prescribed by the Financial Accounting Standards Board. When adopting these standards, a cumulative catch-up adjustment must be made and must be reflected on the statement of income in the period of change. These provisions are referred to as Financial Accounting Standards (FAS) and are as follows: FAS 106 - Employers' Accounting For Postretirement Benefits Other Than Pensions and FAS 112 - Employers' Accounting For Postemployment Benefits: The amounts recorded and a description of these items is in the accompanying notes. See that section. -10- 11 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION (Continued) FAS 109 - Accounting For Income Taxes: The amount recorded and a description of this item is in the accompanying notes. This new method will have no significant effect on the Company's ongoing annual income tax provision unless there are changes in the statutory tax rates. FINANCIAL CONDITION The following comments apply to the change in the financial condition of the Company since the preceding fiscal year-end in June 1993. Short-term investments were not in existence on the Company's balance sheet at the end of December in either of the years being compared here. The previous year's balance sheet contained $70,831,000 of short-term domestic notes payable, which were not in existence on the current balance sheet. This improvement in the Company's liquidity is a result of the working capital generated by profitable operations in the last twelve months. The Company's investment in accounts receivable increased $136,636,000. This is a normal seasonal change in this asset. However, this increase is larger than that of the preceding year because of increased sales volume late in the current year quarter. Inventories increased $27,290,000 since the end of the previous fiscal year. This increase is a normal seasonal change but is less than the increase experienced the preceding fiscal year. This reflects an increase in sales activity between years. The Company expects both the accounts receivable and inventory levels to return to levels comparable to last year by the end of the fiscal year. Accounts payable and accrued liabilities increased $29,459,000 since the end of the fiscal year. This increase was larger than last year due to higher production activity in the current year causing an increase in accounts payable, and a larger accrual of unpaid profit sharing. The changes for six months also include a dividend payable at the end of December not present at the end of the fiscal year. Additions to plant and equipment are running ahead of the previous year. The Company expects to make additions at a level somewhat higher than in the preceding year. The deferred income taxes were substantially reduced in the quarter ended December 1993 due to the tax effects of the cumulative changes in accounting. The quarterly dividend rate was increased from $.42 per share to $.44 per share in the fourth quarter of the preceding year. -11- 12 BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (b) Reports on Form 8-K. There were no reports on Form 8-K for the second quarter ended December 26, 1993. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BRIGGS & STRATTON CORPORATION (Registrant) Date: February 2, 1994 /s/ F. P. Stratton, Jr. F. P. Stratton, Jr. Chairman and Chief Executive Officer Date: February 2, 1994 /s/ R. H. Eldridge R. H. Eldridge Secretary-Treasurer -12- -----END PRIVACY-ENHANCED MESSAGE-----